Sam Woo Construction Group Limited - Capital/Financing Update 2014

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof.

APPLICATION PROOF OF

SAM WOO CONSTRUCTION GROUP LIMITED 三和建築集團有限公司

(the “ Company ”)

(incorporated under the laws of the Cayman Islands with limited liability)

WARNING

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

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

(a) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document;
(b) the publication of this document or any supplemental, revised or replacement pages on the Exchange’s website does not give rise to any obligation of the Company, its sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering;
(c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document;
(d) the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the 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 Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing.

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

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE 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 [REDACTED], you should seek independent professional advice.

SAM WOO CONSTRUCTION GROUP LIMITED 三和建築集團有限公司

(Incorporated in the Cayman Islands with limited liability)

[REDACTED]

Total number of [REDACTED] : [REDACTED] Shares under the [REDACTED] Number of [REDACTED] : [REDACTED] Shares (subject to adjustment) Number of [REDACTED] Shares : [REDACTED] Shares (subject to adjustment) [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 0.003% and Hong Kong Stock Exchange trading fee of 0.005% (payable in full on application and subject to refund on final pricing) Nominal value : HK$0.01 per Share Stock code : [REDACTED] SPONSOR

BOOKRUNNER AND LEAD MANAGER [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 [REDACTED] , 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 [REDACTED] .

A copy of this [REDACTED] , together with the documents specified under the paragraph headed “Documents Delivered to the Registrar of Companies and Available for Inspection” in Appendix V to this [REDACTED] , has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance. The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this [REDACTED] or any other documents referred to above.

The [REDACTED] is expected to be fixed by agreement between the Lead Manager, for itself and on behalf of the Underwriters, and our Company on or around [REDACTED] or such later time as may be agreed between the parties, but in any event, no later than [REDACTED] . If, for any reason, the Lead Manager, for itself and on behalf of the Underwriters, and our Company are unable to reach an agreement on the [REDACTED] by [REDACTED] , the [REDACTED] will not proceed and will lapse immediately. The [REDACTED] will be not more than HK$ [REDACTED] per [REDACTED] and is currently expected to be not less than HK$ [REDACTED] per [REDACTED] unless otherwise announced. The Lead Manager, for itself and on behalf of the Underwriters, may, with the consent of our Company, reduce the number of [REDACTED] being offered and/or the indicative [REDACTED] range below that stated in this [REDACTED] (being HK$ [REDACTED] per [REDACTED] to HK$ [REDACTED] per [REDACTED] ) at any time on or prior to the morning of the last date for lodging applications under the [REDACTED] . In such a case, notices of the reduction in the number of [REDACTED] and/or the indicative [REDACTED] range will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and on the websites of the Stock Exchange at www.hkexnews.hk and our Company at www.samwoo-group.com as soon as practicable but in any event not later than the morning of the day which is the last day for lodging applications under the [REDACTED] . For further information, please refer to the sections headed “Structure and Conditions of the [REDACTED] ” and “How to apply for the [REDACTED] and Employee Reserved Shares” in this [REDACTED] .

Prior to making investment decisions, prospective investors should consider carefully all of the information set out in this [REDACTED] , including but not limited to the risk factors set out in the section headed “Risk Factors” of this [REDACTED] .

Pursuant to the termination provisions contained in the [REDACTED] Agreement in respect of the [REDACTED] , the Lead Manager, for itself and on behalf of the [REDACTED] Underwriters, have the right in certain circumstances, in its absolute discretion, to terminate the obligations of the [REDACTED] Underwriters pursuant to the [REDACTED] Agreement at any time prior to [REDACTED] on the [REDACTED] . Further details of the terms of the termination provisions are set out in the paragraph headed “Grounds for termination” of the section headed “Underwriting” in this [REDACTED] . It is important that you refer to that section for further details.

[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]

[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]

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]

iii

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 NOTICE TO INVESTORS

This [REDACTED] is issued by our Company solely in connection with the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] offered by this [REDACTED]. This [REDACTED] may not be used for the purpose of and does not constitute an offer to sell or a solicitation of an offer in any jurisdiction other than Hong Kong or in any other circumstances.

You should rely only on the information contained in this [REDACTED] to make your investment decision. Our Company, the Sponsor, the Bookrunner, the Lead Manager and the Underwriters have not authorised anyone to provide you with information that is different from what is contained in this [REDACTED]. Any information or representation not contained in this [REDACTED] must not be relied on by you as having been authorised by our Company, the Sponsor, the Bookrunner, the Lead Manager, the Underwriters, any of their respective directors, officers, employees, agents or representatives or any other person or party involved in the [REDACTED].

	Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Information about this[REDACTED]and the[REDACTED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Directors and Parties Involved in the[REDACTED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

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.

	Page
Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
History and Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Connected Transactions and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Directors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Controlling Shareholders and Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Future Plans and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Structure and Conditions of the[REDACTED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
How to apply for the[REDACTED]and[REDACTED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
Appendix I – Accountant’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Appendix III – Summary of the Constitution of our Company and
Cayman Islands Companies Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Appendix IV – Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
Appendix V – Documents Delivered to the Registrar of Companies and
Available for Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1

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

This summary aims to give you an overview of the information contained in this [REDACTED]. As it is a summary, it does not contain all the information that may be important to you. You should read this [REDACTED] 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 [REDACTED]. You should read that section carefully before you decide to invest in the [REDACTED]. Various expressions used in this summary are defined in the sections headed “Definitions” and “Glossary of technical terms” of this [REDACTED].

OVERVIEW

Through SW Bore Pile, a principal operating subsidiary, our Group is (i) an approved supplier of materials and specialist contractor for public works – land piling (Group II), large diameter bored pile (with bell-out) with the Development Bureau; (ii) a piling contractor under the large diameter bored piling category with the Housing Authority; and (iii) a registered specialist contractor under the foundation works category with the Buildings Department. SW Foundation (Macau), the operating subsidiary of our Group in Macau, is approved by the DSSOPT as a construction contractor in Macau.

Historically and up until the year ended 31 March 2012, our Group undertook foundation works and ancillary services for construction projects in Hong Kong only. Subsequently in December 2012, our Group entered into the Macau construction market and was awarded a contract for foundation works and ancillary services based in Macau, namely the Hotel Tower Project.

Since the commencement of the Track Record Period and up to the Latest Practicable Date, we have been awarded and/or undertaken a total of 16 projects involving foundation works and ancillary services, which consisted of 13 Hong Kong based projects and three Macau based projects. As at the Latest Practicable Date, the awarded contract sum for the contracts on hand (including contracts in progress and contracts of which our work is yet to commence) amounted to approximately HK$1,348.6 million. For details of our contracts on hand as at the Latest Practicable Date, please refer to the section headed “Business – Contracts on Hand” of this [REDACTED] . Furthermore, from time to time, our Group is also engaged in the business of leasing machinery and equipment.

According to the Ipsos Report, Government policies and its public expenditure on infrastructure projects, including the “Ten Major Infrastructure Projects”, macroeconomic factors such as demand for residential buildings, commercial and retail space will affect the level of construction activities in Hong Kong. Similarly, the level of construction activities in Macau are driven by the investment in infrastructure and demand for residential accommodation as well as private projects in Macau, such as casino and hotel development projects. Please refer to the section headed “Industry overview” in this [REDACTED] for further details.

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

The following table sets out a breakdown of our Group’s revenue by geographic locations for the Track Record Period: –

Revenue(Note) Foundation works and ancillary services – Hong Kong – Macau	For the year ended 31 March 2012 2013 2014 HK$’000 % HK$’000 % HK$’000 % 98,428 100.0 334,807 89.2 37,335 7.6 – – 40,340 10.8 455,399 92.4 98,428 100.0 375,147 100.0 492,734 100.0	For the year ended 31 March 2012 2013 2014 HK$’000 % HK$’000 % HK$’000 % 98,428 100.0 334,807 89.2 37,335 7.6 – – 40,340 10.8 455,399 92.4 98,428 100.0 375,147 100.0 492,734 100.0
		100.0

Note: Revenue from foundation works and ancillary services is recognised based on the stage of completion of the contracts. The stage of completion is measured by reference to the work performed to date as a percentage of total contract value.

OUR LICENCE / REGISTRATION

The foundation industry in Hong Kong and Macau are regulated by various rules and regulations, details of which are set out in the section headed “Laws and Regulations” in this [REDACTED] . The following table sets out the relevant licences and registrations in Hong Kong which our Group is approved for and the number of approved contractors so approved in each of these categories as at the Latest Practicable Date:

Registration/Listing Period of validity Development Bureau Specialist List (Group II) Note 1 in large diameter bored pile (with bell-out) Housing Authority List of Piling Contractors Note 2 (large diameter bored piling category) Buildings Department Registered Specialist Contractor 7 June 2012 to 7 June 2015 – Foundation Category

Notes:

(1) Listing with the Development Bureau does not have any expiry date.

(2) Listing with the Housing Authority is subject to annual review for retention.

In Macau, contractors undertaking construction works are required to be registered as a construction contractor with the DSSOPT. Our registration with the DSSOPT is valid until 31 December 2014, when we intend to renew for the subsequent year.

COMPETITIVE STRENGTHS

Our Directors believe that our competitive strengths are as follows, each of which is discussed in more details in the paragraph headed “Business – Competitive Strengths” of this [REDACTED] :

We are an established foundation works contractor
We have an experienced management team
We have a broad range of machinery and equipment to carry out foundation works and ancillary services and the ability to modify these machinery and equipment, where required
We have an experienced in-house maintenance team
We possess patented techniques

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

BUSINESS STRATEGIES

The business strategies of our Group are as follows, (i) continue to enhance our competitiveness in the foundation industry; (ii) compete for sizeable and profitable foundation works and ancillary services projects; (iii) maintain an acceptable profit margin in our tenders and quotations; (iv) continue to expand our business operations in Hong Kong; (v) continue to expand our business operations in Macau; and (vi) keep abreast of developments in the construction industry of Hong Kong and Macau.

We also intend to (i) expand our fleet of machinery and equipment; and (ii) expand our workforce to grow our business and create value for our Shareholders.

FINANCIAL INFORMATION

The following is a summary of our Group’s combined financial information derived from the combined statements of comprehensive income and combined balance sheets from the Accountant’s Report for the years ended and as at 31 March 2012, 2013 and 2014, which is included in Appendix I to this [REDACTED] . The summary below should be read in conjunction with the financial information included in the Accountant’s Report in Appendix I to this [REDACTED] , together with the accompanying notes.

Summary of Combined Statements of Comprehensive Income

Revenue Gross profit Operating profit Profit before income tax Profit and total comprehensive income attributable to the equity holders of the Company Summary of Combined Balance Sheets Non-current assets Current assets Current liabilities Net current liabilities Total assets less current liabilities Non-current liabilities Net assets Total equity		2012 HK$’000 98,428 32,692 27,796 25,996 24,208 2012 HK$’000 206,978 61,852 (134,668) (72,816) 134,162 (48,151) 86,011 86,011	Year ended 31 March 2013 2014 HK$’000 HK$’000 375,147 492,734 102,590 165,634 71,411 139,054 68,271 129,895 55,622 127,086 As at 31 March 2013 2014 HK$’000 HK$’000 315,897 403,802 138,951 223,670 (227,734) (339,101) (88,783) (115,431) 227,114 288,371 (85,481) (69,652) 141,633 218,719 141,633 218,719

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

Revenue

Revenue from our foundation works and ancillary services contracts is recognised based on the stage of completion. Our Group uses the “percentage-of-completion method” to determine the appropriate amount of revenue to recognise in a given period. The stage of completion is measured by reference to work performed to date as a percentage of total contract value.

During the Track Record Period, our Group recorded revenue of approximately HK$98.4 million, HK$375.1 million and HK$492.7 million, respectively, representing year-on-year increases of approximately 281.2% and 31.4%, respectively. Our Group recorded a net profit of approximately HK$24.2 million, HK$55.6 million and HK$127.1 million during the Track Record Period, representing year-on-year increases of approximately 129.8% and 128.6%, respectively.

Our Group provides foundation works and ancillary services to both the private sector and public sector. Our Group classifies public sector contracts as contracts in which the ultimate employer is a government department, statutory body or related organisation, or institutional body. During the Track Record Period, our Group generated approximately 5.4%, 98.7% and 100.0% of our revenue from foundation works and ancillary services in the private sector, respectively, with the remaining revenue of approximately 94.6%, 1.3% and nil from foundation works and ancillary services in the public sector, respectively.

Revenue of our Group has increased during the Track Record Period due to the increased contract value of foundation works and ancillary services awarded to our Group during the years ended 31 March 2013 and 2014, which corresponded to the increase in construction activities in Hong Kong and Macau during the same period.

Please refer to the paragraph headed “Business – Foundation works and ancillary services projects” in this [REDACTED] for details in respect of the foundation works and ancillary services projects completed during the Track Record Period and our Group’s contracts on hand as at the Latest Practicable Date.

Concentration of customers

The number of foundation works and ancillary services projects that can be executed by our Group simultaneously is limited by our resources including the capacity of our machinery and equipment. Our strategy has therefore been to focus on deploying our resources towards competing for sizeable and profitable projects which has, in turn, inevitably resulted in a concentration of customers during the Track Record Period, in particular, our Group derived approximately 88.2% of our revenue for the year ended 31 March 2014 from one project, namely the Hotel Tower Project. For information on our major customers during the Track Record Period, please refer to paragraph headed “Business – Customers” in this [REDACTED] .

As at the Latest Practicable Date, our Group has five contracts on hand, the awarded contract sum for these contracts on hand (including contracts in progress and contracts of which our work is yet to commence) amounted to approximately HK$1,348.6 million. The largest contract sum out of the five contracts on hand, not taking into account contingent and/or provisional contract amounts, is approximately HK$462.8 million, representing approximately 34.3% of the aggregate awarded contract sum for contracts on hand as at the Latest Practicable Date.

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

Notwithstanding the above, our Group has demonstrated over the Track Record Period that we have the ability to source and compete for foundation works and ancillary services contracts from new customers. Provided that we have sufficient capacity in the future, we intend to serve a larger number of customers and projects. In this regard, we plan to expand our capacity by (i) continuing to acquire additional foundation works related machinery and equipment; and (ii) increasing staff headcount.

Cost of sales

Cost of sales mainly includes costs of construction materials, staff costs, consultancy fees, parts and consumables, subcontracting charges, transportation and others expenses, which is recognised and transferred from work-in-progress to the income statement based on the percentage of completion of the contract. Our most significant costs of sales are construction materials and staff costs. During the Track Record Period, construction material costs accounted for approximately 26.5%, 38.0% and 33.4% of the cost of sales respectively, and staff costs accounted for approximately 28.6%, 24.4% and 34.1% of the cost of sales respectively. The proportion of construction materials and staff costs in cost of sales depends on, among other factors, the design and requirements of foundation works and ancillary services projects and varies from project to project.

Income tax expenses

For the year ended 31 March 2014, our Group derived revenue from both Hong Kong and Macau and recorded income tax expenses of approximately HK$2.8 million, of which (i) approximately HK$3.0 million of tax expenses related to Macau profits tax; and (ii) approximately HK$0.3 million of tax credits related to Hong Kong profits tax, represented an effective tax rate of approximately 2.2%. Please refer to the paragraph headed “Financial information – Income tax expenses” in this [REDACTED] for further details.

In addition, the Controlling Shareholders have entered the Deed of Indemnity with and in favour of our Company, to provide indemnities to our Group in relation to, among others, taxation which might be payable by any member of our Group in respect of any income, profits or gains earned, accrued or received on or before the date on which the [REDACTED] becomes unconditional, save for tax liabilities which have already been provided for in the audited accounts of our Company and our subsidiaries as at and up to 31 March 2014.

Net current liabilities

As at 31 March 2014, we had net current liabilities of approximately HK$115.4 million, which was largely attributable to the increase in long-term bank loans due after one year to approximately HK$110.1 million for the acquisition of machinery and equipment. Such loans contain repayment on demand clauses, which in accordance to the relevant accounting standards are classified under current liabilities. In addition, the current liabilities as at 31 March 2014 also consisted of obligations under finance leases due after one year of approximately HK$8.4 million, as they contain repayment on demand clause, and such balance has also been classified under current liabilities as required under the relevant accounting standards.

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

Our net current liabilities position in the past exposes us to liquidity risks, details of which are set out in the paragraph headed “Risk Factors – Liquidity and net current liabilities” in this [REDACTED] . Our future liquidity and the repayment of our outstanding debt obligations when they become due will primarily depend on our ability to maintain adequate cash inflows from operating activities and our ability to obtain adequate external financing.

In light of our net current liabilities position as at 31 March 2014, subsequent to the Track Record Period and up to the Latest Practicable Date, our Group has (i) repaid approximately HK$48.2 million of our bank borrowings, which was classified as current liabilities, in June 2014; and (ii) agreed with one of our financiers to remove the repayment on demand clause in relation to certain outstanding borrowings of approximately HK$42.7 million as at 31 May 2014, to reduce our Group’s overall net current liabilities position. For details of our loan facilities as at 30 June 2014, please refer to the paragraph headed “Financial Information – Expected financial resources of our Group” in this [REDACTED] .

In addition, our Group had undrawn facilities of approximately HK$127.7 million as at 30 June 2014. Our Directors believe that with the available facilities and the cash generated from our operating activities, we will be able to further improve our liquidity position in the future.

For further details, including reasons for our net current liabilities position and measures to improve our net current liabilities position, please refer to the paragraph headed “Financial information – Net current liabilities” in this [REDACTED] .

In addition, our Directors intend to apply 10% of the net proceeds from the [REDACTED] , for general working capital. Our Group’s future plans and use of proceeds are set out in the section headed “Future Plans and Use of Proceeds” in this [REDACTED] .

Selected financial ratios

The following table sets forth the selected financial ratios of our Group for the years and as at the dates as indicated:

		As	at/for the year ended	31 March
Selected Ratios	Formulae	2012	2013	2014
Return on assets	Net profit/total assets x 100%	9.0%	12.2%	20.3%
Return on equity	Net profit/total equity x 100%	28.1%	39.3%	58.1%
Net profit margin	Net profit/revenue x 100%	24.6%	14.8%	25.8%
Gearing ratio	Net debt/total equity_(Note)_	1.65 times	1.23 times	0.98 times
Current ratio	Current assets/current liabilities	0.46 times	0.61 times	0.66 times
Quick ratio	(Current assets – inventories)/current	0.43 times	0.61 times	0.66 times
	liabilities
Interest coverage	Operating profit/finance costs	15.44 times	22.74 times	14.27 times

Note: Net debt is calculated as total borrowings less cash and bank balances. Total borrowings included bank overdrafts, bank loans, obligations under finance leases and amount due to a Director. Cash and bank balances included cash and cash equivalents and restricted bank balances.

For analysis, please refer to the paragraph headed “Financial Information – Analysis of selected financial ratios” in this [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.

SUMMARY

RECENT DEVELOPMENT OF OUR GROUP SUBSEQUENT TO THE TRACK RECORD PERIOD

Our Group has continued to develop its foundation works and ancillary services operation after the Track Record Period. As at the Latest Practicable Date, the awarded contract sum for the contracts on hand (including contracts in progress and contracts of which our work is yet to commence) amounted to approximately HK$1,348.6 million. Further details of these contracts are set out in the paragraph headed “Business – Contracts on hand” in this [REDACTED] .

Based on our unaudited management accounts, the unaudited monthly average revenue for the two months ended 31 May 2014 was higher than the monthly average revenue for the year ended 31 March 2014, which was mainly due to revenue derived in April and May 2014 from the multi-storey logistics centre project at Tsing Yi and the Hotel Casino Project. The aggregate contract sum (excluding contingent and provisional contract amounts) of these two projects is approximately HK$646.8 million.

As at the Latest Practicable Date, our Group was engaged in two arbitration proceedings in Hong Kong. Owing to the relevant terms of the contracts between us and the counter parties of the arbitration proceedings, the Arbitration Ordinance (Chapter 609, Laws of Hong Kong) and the relevant arbitral rule, all information about the arbitrations must remain confidential.

Save for the two arbitration proceedings, as at the Latest Practicable Date, no member of our Group nor any of our Directors were a party to any claim, litigation, arbitration, bankruptcy, receivership proceedings of material importance and no claim, litigation, arbitration, bankruptcy, receivership proceeding of material importance is threatened against our Group or our Directors.

The total indebtedness of our Group as at 31 May 2014, being the latest practicable date for determining the amount of indebtedness in this [REDACTED] , totalled to approximately HK$355.2 million.

CONTROLLING SHAREHOLDERS

Immediately after completion of the [REDACTED] but without taking into account any Shares which may be allotted and issued pursuant to the exercise of options which may be granted under the Share Option Scheme, our Controlling Shareholders will together control the exercise of [REDACTED] % of the voting rights at general meetings of our Company.

Actiease Assets is 100% owned by Silver Bright which is a company [REDACTED] held by Managecorp Limited as trustee of the Unit Trust. The [REDACTED] issued units of the Unit Trust are held by Nautilus Trustees as trustee of the Family Trust (of which Mr. Lau is the settlor). The Family Trust is a discretionary trust established by Mr. Lau and the beneficiary of which is a family member of Mr. Lau.

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

As at the Latest Practicable Date, apart from the business operated by members of our Group, our Controlling Shareholders and their respective associates and/or companies controlled by them do not have any interests in any form of business that competes or is likely to compete, directly or indirectly with the business of our Group.

[REDACTED]

[REDACTED] EXPENSES

The total amount of [REDACTED] expenses and commissions will be borne by us in connection with the [REDACTED] is estimated to be approximately HK$ [REDACTED] .

We incurred approximately HK$ [REDACTED] of [REDACTED] expenses during the Track Record Period, which was recorded under administrative expenses. We expect to incur additional [REDACTED] expenses of approximately HK$ [REDACTED] after the Track Record Period, of which approximately HK$ [REDACTED] is expected to be recognised as administrative expenses in the consolidated statements of comprehensive income for the year ending 31 March 2015 and the remaining balance is expected to be capitalised after [REDACTED] .

[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.

SUMMARY

USE OF PROCEEDS

We intend to implement the following future plans to grow our business and create value for our Shareholders by applying the aggregate net proceeds from the [REDACTED] (after deducting underwriting fees and estimated total expenses paid and payable by us in connection thereto) estimated to be approximately HK$ [REDACTED] million in the following manner:

[REDACTED]

The above is based on the [REDACTED] of HK$ [REDACTED] per Share, being the mid-point of the proposed [REDACTED] range.

DIVIDENDS

No dividend has been paid or declared by the Company since its incorporation up to and including the Latest Practicable Date. Notwithstanding the above, SW (BVI) declared a non-recurring final dividend of HK$50.0 million out of its distributable reserves to its shareholder for each of the years ended 31 March 2013 and 2014 respectively, namely Actiease Assets. SW (BVI) made full payment of the final dividend for each of the years ended 31 March 2013 and 2014 of HK$50.0 million in August 2013 and [•••] 2014 respectively from its internal resources.

After completion of the [REDACTED] , our Shareholders will be entitled to receive dividends declared by us. However, our Group currently does not have a fixed dividend policy and the declaration of, payment of and amount of, dividends will be subject to the discretion of our Directors in accordance with our Articles of Association and will be dependent upon our future operations and earnings, financial condition, capital requirements and surplus, payments by subsidiaries of cash dividends to us and other factors that our Directors deem relevant. In addition, our Controlling Shareholders may, subject to the Articles of Association, influence our dividend policy.

Prospective investors should note that historical dividend distributions are not indicative of our future dividend distribution policy and there is no guarantee that dividends will be paid in the future. After completion of the [REDACTED] , our Directors’ priority will be to retain earnings in order to facilitate capital growth and expansion of our Group.

LEGAL AND ADMINISTRATIVE PROCEEDINGS

During the Track Record Period and as at the Latest Practicable Date, our Group had been and is involved in a number of claims, litigations and arbitrations. The details of which are set out under the paragraph headed “Business – Legal and administrative proceedings” in this [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.

SUMMARY

RISK FACTORS

There are certain risks involved in our operations which are beyond our control. They can be broadly categorised into risks relating to our business, the foundation industry, doing business in Hong Kong and Macau, and the [REDACTED] . Prospective investors should refer to the risk factors, as set out under the section headed “Risk Factors” of this [REDACTED] , prior to making a decision to invest in the [REDACTED] .

While any of the risks and uncertainties could have a material adverse effect on our business, financial condition and results of operations or the trading price of the Shares and could cause our Shareholders to lose all or a portion of their investment. Prospective investors should be aware of the major risk factors in relation to our operations, including that (i) our performance is dependent on the general economic conditions of the markets in which we operate which are cyclical in nature; (ii) award of our foundation works and ancillary services contracts are subject to successful tenders or acceptable quotations; (iii) we had a concentration of customers during the Track Record Period; (iv) our Group was in a net current liabilities position as at 31 March 2014 which exposed us to liquidity risk; (v) the costs estimated by us for a particular contract at the tender or quotation stage may differ from actual costs incurred due to various factors including cost overruns, underestimates and other construction risks related to our projects; and (vi) our operations are heavily dependent upon the use of our machinery and equipment to carry out foundation works and ancillary services, they may succumb to breakdown and where a replacement is not readily available when required, such would temporarily reduce our capacity.

A detailed discussion of the risk factors set forth in the section headed “Risk Factors” in this [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.

DEFINITIONS

In this [REDACTED] , unless the context otherwise requires, the following expressions have the following meanings:

“Actiease Assets”

Actiease Assets Limited, a company incorporated in BVI with limited liability on 16 March 2001, the entire issued share capital of which is owned by Silver Bright, which is a company 100% held by Managecorp Limited as trustee of the Unit Trust whereby the entire issued units of which are held by Nautilus Trustees as trustee of the Family Trust

“Affiliate”

in relation to a director of any member of the Group means:

(i) a close associate (as defined in Rule 1.01 of the Listing Rules) of such director;
(ii) any person whose acquisition of Shares has been financed directly or indirectly by such director or the close associate of such director; or
(iii) any person who is accustomed to take instructions from such director or close associate of such director in relation to the acquisition, disposal, voting or other disposition of Shares registered in that person’s name or otherwise held by that person

[REDACTED]

“Appropriation Bill”

a bill which contains the estimated financial requirements for expenditure on all the services of the Government for the current or succeeding financial year

“Articles” or “Articles of Association”
the articles of association of our Company adopted on [•••] 2014 with effect from [REDACTED] and as amended from time to time, a summary of which is set out in the paragraph headed “Summary of the Constitution of our Company and Cayman Islands Companies Law – 2. Articles of Association” in Appendix III to this [REDACTED]
“ASD” Architectural Services Department, one of the departments of the Development Bureau, which provides professional and technical advice on all matters relating to public buildings (except public housing)
“associate(s)”
has the meaning ascribed thereto under the Listing Rules
“Best Captain” Best Captain Holdings Limited, a company incorporated in BVI with limited liability on 2 June 2010 and is wholly-owned by Mr. Lau

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 MUST BE READ IN COVER OF THIS DOCUMENT.	CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE
	DEFINITIONS
“Board”	the board of Directors as at the date of this[REDACTED]
[REDACTED]
“Building Ordinance”	the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong)
	as amended, supplemented or otherwise modified from time to
	time
“Buildings Department”	the Buildings Department of the Government
“Business Day”	a day on which banks in Hong Kong are generally open for
	business to the public and which is not a Saturday, Sunday or
	public holiday in Hong Kong
“BVI”	the British Virgin Islands
“CAGR”	compound annual growth rate
“Capitalisation Issue”	the issue of new Shares to be made upon the capitalisation
	of certain sums standing to the credit of the share premium
	account of our Company referred to under the paragraph headed
	“Statutory and General Information – Further information about
	our Company – Written resolutions of the sole Shareholder” in
	Appendix IV to this[REDACTED]
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC
“CCASS Clearing Participant”	a person admitted to participate in CCASS as a direct clearing
	participant or general clearing participant
“CCASS Custodian Participant”	a person admitted to participate in CCASS as a custodian
	participant
“CCASS Investor Participant”	a person admitted to participate in CCASS as an investor
	participant who may be an individual or joint individuals or a
	corporation
“CCASS Participant”	a CCASS Clearing Participant, a CCASS Custodian Participant or
	a CCASS Investor Participant
“Cheer Crown”	Cheer Crown Limited (嘉勳有限公司), a company incorporated
	in Hong Kong with limited liability on 7 October 1983 and is
	beneficially owned as to 100% by Mr. Lau
“Cheer Profit”	Cheer Profit International Enterprise Limited (置利國際企業有
	限公司), a company incorporated in Hong Kong with limited
	liability on 26 November 2003 and is owned as to 50% by Mr. Lau,
	as to 25% by Ms. Leung and as to 25% by Ms. Lau Pui Shan

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.

COVER OF THIS DOCUMENT.
	DEFINITIONS
“Cheer Wealth”	Cheer Wealth International Development Limited (富怡國際發展
	有限公司), a company incorporated in Hong Kong with limited
	liability on 18 August 2004 and is owned approximately as to
	99.99996% by Mr. Lau, as to 0.00002% by Ms. Leung and as to
	0.00002% by Ms. Lau Pui Shan
“CKL”	CKL Development Limited, a company incorporated in BVI with
	limited liability on 5 November 2002 and is wholly-owned by Mr.
	Lau Chun Kwok, an executive Director and a brother of Mr. Lau
“close associate(s)”	has the meaning ascribed thereto under the Listing Rules
“Companies Law”	the Companies Law (2013 Revision) of the Cayman Islands as
	amended, supplemented or otherwise modified from time to time
“Companies Ordinance”	the Companies Ordinance (Chapter 622 of the Laws of Hong
	Kong), as amended, supplemented or otherwise modified from
	time to time
“Companies (Winding Up and	the Companies (Winding Up and Miscellaneous Provisions)
Miscellaneous Provisions)	Ordinance (Chapter 32 of the Laws of Hong Kong), as amended,
Ordinance”	supplemented or modified from time to time
“Company”	Sam Woo Construction Group Limited (三和建築集團有限公司),
	(formerly known as AA Foundation Group Limited (亞洲地基集
	團有限公司)) an exempted company incorporated in the Cayman
	Islands with limited liability on 17 September 2012
“Composite Development	the composite property development piling works project, being a
Project”	private sector project based in Novos Aterros da Areia Preta,
	Macau, of which the Group was engaged as a sub-contractor
“connected person(s)”	has the meaning ascribed thereto under the Listing Rules
“Controlling Shareholder(s)”	has the meaning ascribed thereto in the Listing Rules and unless
	the context requires otherwise, refers to Mr. Lau, Ms. Leung,
	Silver Bright and Actiease Assets, who, together, will control
	the exercise of 30% or more of the voting rights in the general
	meeting of our Company immediately after the[REDACTED]
“core connected person(s)”	has the meaning ascribed thereto under the Listing Rules
“Deed of Indemnity”	a deed of indemnity dated[REDACTED]2014 entered into
	between each of the Controlling Shareholders and our Company,
	pursuant to which each of the Controlling Shareholders has given
	certain tax and estates duty indemnities and other indemnities
	in favour of our Company (for itself and as trustee for each of
	its subsidiaries) subject to and in accordance with the terms
	and conditions of the Deed of Indemnity, further particulars of
	which are set out in the paragraph headed “Statutory and General
	Information – Other Information – Estate duty, tax indemnity and
	other indemnities” in Appendix IV to this[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.

DEFINITIONS
“Deed of Non-competition the deed of non-competition undertaking dated [REDACTED] Undertaking” 2014 executed by our Controlling Shareholders (as covenantors) and our Company, particulars of which are set out in the paragraph “Controlling Shareholders and Substantial Shareholders – Non-competition Undertaking” in this [REDACTED]
“Development Bureau” the Development Bureau of the Government
“Director(s)” the director(s) of our Company as at the date of this [REDACTED]
“DSSOPT” the Land, Public Works and Transport Bureau* of the Macau Government (in Portuguese, the “Direcção dos Serviços de Solos, Obras Públicas e Transportes”, and, in Chinese, the “澳門特別行政區土地工務運輸局”)
“East Ascent” East Ascent Enterprise Limited (東升企業有限公司), a company incorporated in Hong Kong with limited liability on 22 December 2003 and is owned as to 50% by Mr. Lau, as to 25% by Ms. Leung and as to 25% by Ms. Lau Pui Shan
“Eligible Employees” all full-time employee(s) of our Group who joined our Group on or before [31 May] 2014 and who (a) is at least 18 years of age; (b) has a Hong Kong address and is a holder of a Hong Kong Identity Card; (c) remains as a full-time employee of our Company or any of our subsidiaries, and is not on probation, as at [31 May] 2014; (d) has not tendered resignation or been given notice of termination of employment for any reason other than redundancy or retirement on or before [31 May] 2014; (e) is not the chief executive or directors of our Company or our subsidiaries; (f) is neither an, nor a close associate of an, existing beneficial owner of Shares or of shares of any of our subsidiaries; and (g) is not any other core connected persons of our Company

[REDACTED] [REDACTED]

“Family Trust”

a discretionary trust set up by Mr. Lau on 3 March 2003 of which Nautilus Trustees acts as the trustee and the beneficiary of which is a family member of Mr. Lau

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.

COVER OF THIS DOCUMENT.
	DEFINITIONS
“First Previous Project”	a foundation works and ancillary services project carried out by
	our Group which was completed in 2003, which was prior to the
	Track Record Period
“Government”	the government of Hong Kong
[REDACTED]
“Group”	our Company and our subsidiaries or, where the context so
	requires or permits, in respect of the period prior to our Company
	becoming the holding company of our present subsidiaries, the
	present subsidiaries of our Company
“Healthy World”	Healthy World Investment Limited (健匯投資有限公司), a
	company incorporated in Hong Kong with limited liability on
	18 November 1998 and is owned as to 50% by Mr. Lau and as to
	50% by Mr. Lau Chun Ka
“Highways Department”	the Highways Department of the Government
[REDACTED]
“HKFRS(s)”	Hong Kong Financial Reporting Standard(s)
“HKSCC”	Hong Kong Securities Clearing Company Limited
“HKSCC Nominees”	HKSCC Nominees Limited, a wholly-owned subsidiary of
	HKSCC
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Hong Kong Legal Adviser”	TC & Co., legal adviser of our Company as to Hong Kong laws in
	connection with the[REDACTED]
“Hong Kong Share Registrar”	[REDACTED]
“Hotel Casino Project”	the hotel casino complex piling works project, being a private
	sector project based in Cotai, Macau, of which the Group was
	engaged as a sub-contractor
“Hotel Tower Project”	the hotel tower bored piling works project, being a private sector
	project based in Cotai, Macau, of which the Group was engaged as
	a main contractor

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.

COVER OF THIS DOCUMENT.
	DEFINITIONS
“Housing Authority”	the Hong Kong Housing Authority of the Government
“Independent Third Party(ies)”	a person(s) or company(ies) which is/are not connected persons
	(within the meaning of the Listing Rules) of any directors, chief
	executive or substantial shareholders of our Group, its subsidiaries
	or any of their respective associates
“Investec”	Investec Capital Asia Limited, a licensed corporation to carry
	on type 1 (dealing in securities), type 4 (advising on securities),
	type 6 (advising on corporate finance) and type 9 (asset
	management) regulated activities under the SFO, being the
	sponsor to the[REDACTED]
“Ipsos Report”	an industry report dated[REDACTED]2014 prepared by Ipsos
	Hong Kong Limited which was commissioned by us in relation
	to, among other things, the foundation industry in Hong Kong and
	Macau
“Latest Practicable Date”	[30 June] 2014, being the latest practicable date for the
	ascertaining certain information prior to the printing of this
	[REDACTED]
“laws”	include all laws, rules, regulations, guidelines, opinions (whether
	formally published or not), notices, circulars, orders, judgements,
	decrees or rulings of any court, government, governmental or
	regulatory authority whether or not ejusdem generis with any of
	the foregoing (including, without limitation, the Stock Exchange)
	and “law” shall be construed accordingly

[REDACTED] [REDACTED]

“Listing Committee” the Listing Committee of the Stock Exchange
[REDACTED] [REDACTED]
“Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange (as amended, supplemented or otherwise modified from time to time)
“Long Ascent” Long Ascent Development Limited (長升發展有限公司), a company incorporated in Hong Kong with limited liability on 3 December 2003 and is owned as to 50% by Mr. Lau, as to 49% by Mr. Lau Chun Kwok and as to 1% by Ms. Leung
“Macau” the Macau Special Administrative Region of the PRC “Macau Government” the government of Macau “Macau Legal Adviser” Rato, Ling, Vong, Lei & Cortés - Advogados, legal adviser of our Company as to Macau laws in connection with the [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.

INFORMATION MUST BE READ IN COVER OF THIS DOCUMENT.	CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE
	DEFINITIONS
“Macau Projects”	the Composite Development Project, the Hotel Casino Project and
	the Hotel Tower Project
“Main Board”	the stock market (excluding the option market) operated by the
	Stock Exchange which is independent from and operated in
	parallel with the Growth Enterprise Market of the Stock Exchange
“Memorandum” or	the memorandum of association of our Company, as amended
“Memorandum of Association”	from time to time
“Nautilus Trustees”	Nautilus Trustees Asia Limited (formerly known as DBS Trustee
	H.K. (Jersey) Limited)
“Mr. Lau”	Mr. Lau Chun Ming, an executive Director, our Chairman and
	founder of our Group
“Ms. Leung”	Ms. Leung Lai So, an executive Director and the spouse of
	Mr. Lau
“Nice Fair”	Nice Fair Group Limited, a company incorporated in BVI with
	limited liability on 23 May 2002, and is wholly-owned by Mr. Lau
	Chun Ka, an executive Director and a brother of Mr. Lau
“[REDACTED]”	the final Hong Kong dollar price per[REDACTED](before
	brokerage of 1%, SFC transaction levy of 0.003% and Stock
	Exchange trading fee of 0.005%) at which Shares are to be
	subscribed pursuant to the[REDACTED], which will not be more
	than HK$[REDACTED]and is currently expected to be not less
	than HK$[REDACTED], to be determined as described under the
	paragraph headed “Structure and Conditions of the[REDACTED]
	– Determining the[REDACTED]” in this[REDACTED]
“[REDACTED]”	the[REDACTED]and the[REDACTED]Shares
[REDACTED]	[REDACTED]
“[REDACTED]”	the conditional[REDACTED]by the[REDACTED]
	Underwriters of the[REDACTED]Shares for cash at the
	[REDACTED](plus brokerage of 1%, SFC transaction levy
	of 0.003% and Stock Exchange trading fee of 0.005%), details
	of which are described in the section headed “Structure and
	Conditions of the[REDACTED]” in this[REDACTED]on
	and subject to the terms and conditions stated herein and in the
	[REDACTED]Agreement

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

[REDACTED]

“ [REDACTED] Underwriters” the group of underwriters led by the Lead Manager, who are expected to enter into the [REDACTED] Agreement

“ [REDACTED] the conditional [REDACTED] agreement relating to the Agreement” [REDACTED] and to be entered into by, among others, our Company and the Lead Manager for itself and on behalf of the [REDACTED] Underwriter(s) on or about the Price Determination Date , as further described in the paragraph headed “Underwriting – [REDACTED] Agreement” in this [REDACTED]

“PRC” or “China” the People’s Republic of China excluding, for the purpose of this [REDACTED] , Hong Kong, Macau and Taiwan

“PRC Government” the government of the PRC
“Predecessor Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) as in force from time to time before 3 March 2014
“Previous Projects” First Previous Project and Second Previous Project
[REDACTED] [REDACTED]

[REDACTED] [REDACTED] “Promissory Note” a promissory note dated 21 February 2011 of HK$92,000,000 issued by Actiease Assets to SW Holdings as settlement of part of the consideration for the transfer of shares of SW (BVI) from SW Holdings to Actiease Assets

[REDACTED] [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.

COVER OF THIS DOCUMENT.
	DEFINITIONS
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
[REDACTED]	[REDACTED]
“QSEM”	Quality, Safety and Environmental Manager
“Redland Contractors”	Redland Contractors Limited (中威營造有限公司), a company
	incorporated in Hong Kong with limited liability on 18 May 2011
	and an indirect wholly-owned subsidiary of our Company
“Reorganisation”	the reorganisation of the corporate structure of our Group in
	preparation for the[REDACTED]as described in the section
	headed “History and Corporate Structure” in this[REDACTED]
“Reorganisation Agreement”	the reorganisation agreement dated [•••] 2014 entered into among
	our Company, Actiease Assets, Silver Bright and Mr. Lau,
	particulars of which are set out in the paragraph headed “History
	and Corporate Structure – Reorganisation” in this[REDACTED]
“Second Previous Project”	a foundation works and ancillary services project carried out by
	our Group which was completed in 2007, which was prior to the
	Track Record Period
“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 a nominal value of HK$0.01 each in the
	capital of our Company (or in such other nominal value as adopted
	by the Company from time to time)
“Shareholder(s)”	shareholder(s) of our Company from time to time
[REDACTED]	[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.

COVER OF THIS DOCUMENT.
	DEFINITIONS
“Share Option Scheme”	the share option scheme conditionally approved and adopted by
	our Company on [•••] 2014, the principal terms of which are
	summarised in the paragraph headed “Statutory and General
	Information – Share Option Scheme” in Appendix IV to this
	[REDACTED]
“Silver Bright”	Silver Bright Holdings Limited, a company incorporated in BVI
	on 17 October 2002, the entire issued share capital of which is
	held by Managecorp Limited acting as trustee of the Unit Trust
“Sponsor”	Investec
“Stock Exchange”	the Stock Exchange of Hong Kong Limited
“subsidiary(ies)”	has the meaning ascribed thereto in section 2 of the Companies
	Ordinance
“SW AA Construction	SW AA Construction Group Limited (三和亞洲建築集團有限公
Group”	司) (formerly known as Sam Woo Construction Group Limited
	(三和建築集團有限公司), a company incorporated in Hong Kong
	with limited liability on 22 March 2012 and an indirect wholly-
	owned subsidiary of our Company
“SW Bore Pile”	Sam Woo Bore Pile Foundation Limited (三和地基有限公司),
	a company incorporated in Hong Kong with limited liability on
	7 September 1990 and an indirect wholly-owned subsidiary of our
	Company
“SW (BVI)”	Sam Woo Group Limited (formerly known as Active Best
	Securities Limited), a company incorporated in the BVI with
	limited liability on 22 February 2001 and a wholly-owned
	subsidiary of our Company
“SW Civil Contractors”	Sam Woo Civil Contractors Limited (三和土木工程有限公司),
	a company incorporated in Hong Kong with limited liability on
	5 August 2002 and an indirect wholly-owned subsidiary of our
	Company
“SW Civil Works”	Sam Woo Civil Works Limited (三和土木有限公司), a company
	incorporated in Hong Kong with limited liability on 25 July 2003
	and an indirect wholly-owned subsidiary of our Company
“SW Construction”	Sam Woo Construction Limited (三和營造有限公司), a company
	incorporated in Hong Kong with limited liability on 5 August
	2002 and an indirect wholly-owned subsidiary of our Company
“SW Construction & Engineering”	Sam Woo Construction & Engineering Limited (三和建設機械有
	限公司) (formerly known as Rich Keen Asia Limited (裕建亞洲
	有限公司)), a company incorporated in Hong Kong with limited
	liability on 11 May 1995 and an indirect wholly-owned subsidiary
	of our Company

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.

COVER OF THIS DOCUMENT.
	DEFINITIONS
“SW Engineering Equipment”	Sam Woo Engineering Equipment Limited (三和機械有限公司),
	a company incorporated in Hong Kong with limited liability on
	7 October 1980 and an indirect wholly-owned subsidiary of our
	Company
“SW Finance”	Sam Woo Finance Limited (三和財務有限公司), a company
	incorporated in Hong Kong with limited liability on 28 January
	2004 and an indirect wholly-owned subsidiary of our Company
“SW Foundation”	Sam Woo Foundation Limited (三和地基工程有限公司), a
	company incorporated in Hong Kong with limited liability on
	25 July 2003 and an indirect wholly-owned subsidiary of our
	Company
“SW Foundation Group”	Sam Woo Foundation Group Limited (三和地基集團有限公司),
	a company incorporated in Hong Kong with limited liability on
	22 March 2012 and an indirect wholly-owned subsidiary of our
	Company
“SW Foundation (Macau)”	Sam Woo Foundation Limited (in Chinese, SAM WOO地基有
	限公司and, in Portuguese, Sam Woo Companhia de Fundação
	Limitada), a company by quotas incorporated in Macau with
	limited liability on 23 August 2011 and an indirect wholly-owned
	subsidiary of our Company
“SW Group (Holdings)”	Sam Woo Group (Holdings) Limited (三和集團（控股）有限公司),
	a company incorporated in Hong Kong with limited liability on
	16 December 2002 and is wholly-owned by Mr. Lau
“SW Holdings”	Noble Century Investment Holdings Limited (仁瑞投資控股有限
	公司) (formerly known as Sam Woo Holdings Limited (三和集團
	有限公司)), an exempted company incorporated in Bermuda with
	limited liability on 26 June 2002 and the issued shares of which
	are listed on the Stock Exchange under stock code: 2322.

“SW Offshore Engineering” Sam Woo Offshore Engineering Limited (三和海洋工程有限公司 a company incorporated in Hong Kong with limited liability on 25 May 2006 and an indirect wholly-owned subsidiary of our Company
“SW Ship Management” Sam Woo Ship Management Limited (三和船舶管理有限公司 a company incorporated in Hong Kong with limited liability on 15 June 2005 and is wholly-owned by Mr. Lau
“Track Record Period” the three financial years ended 31 March 2014
“Underwriters” the [REDACTED] Underwriters and the [REDACTED] Underwriters
“Underwriting Agreements” the [REDACTED] Agreement and the [REDACTED] Agreement

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.

COVER OF THIS DOCUMENT.
	DEFINITIONS
“Unit Trust”	a unit trust set up by Mr. Lau on 4 March 2003 of which
	Managecorp Limited acts as the trustee. The[REDACTED]
	issued units of the Unit Trust are held by Nautilus Trustees as
	trustee of the Family Trust
“United Kingdom”	the United Kingdom of Great Britain and Northern Ireland
[REDACTED]
“Worldwide Profit”	Worldwide Profit International Investment Limited (宏利國際投
	資有限公司), a company incorporated in Hong Kong with limited
	liability on 3 November 1995, and is owned as to 25% each by
	Mr. Lau, Ms. Leung, Mr. Lau Chun Kwok and Mr. Lau Chun Ka
[REDACTED]
“三和集團”	三和集團有限公司, a company incorporated in Hong Kong with
	limited liability on 13 October 2004 and is wholly-owned by Mr.
	Lau
“we”, “us” or “our”	our Company or our Group (as the context may require)
“HK$” or “HK dollar(s)”	Hong Kong dollar(s) and cent(s), respectively, the lawful currency
and “HK cents”	of Hong Kong
“MOP” or “Pataca”	Macau Pataca, the lawful currency of Macau
“US$” or “US dollar(s)”	United States dollar(s), the lawful currency of the United States of
	America
“sq. ft.”	square feet
“sq. m.”	square metres
“%”	per cent.

Certain amounts and percentage figures included in this [REDACTED] have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

Unless otherwise specified, for the purpose of this [REDACTED] , amounts denominated in MOP are translated into HK$ at the rate of MOP1.00 = HK$0.97. No representation is made that any amounts in HK$ or MOP were or could have been converted at the such rate or at any other exchange rates.

The English language names of certain entities which are marked with “*” are provided for identification purposes and for your convenience only. Some of these entities do not have registered English language names and, accordingly, in the event of any inconsistency, the Chinese names or Portuguese names (as the case may be) shall prevail.

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.

GLOSSARY OF TECHNICAL TERMS

This glossary contains explanations of certain terms used in this [REDACTED] . These terms and their meanings may or may not correspond to standard industry meaning or usage of these terms.

“bell-out”	an enlargement of the base area of a pile, formed in situ by
	undercutting (under-reaming) the soil or rock at the base of a
	bored pile
“bored pile”	a type of pile installed by machine boring to the required level and
	subsequently filling the hole with concrete
“ISO”	acronym for a series of standards including quality management
	and environmental management standards published by
	International Organisation for Standardisation, a non-governmental
	organisation that has a central secretariat in Geneva, Switzerland
“ISO 9001”	an international standard that gives requirements for an
	organisation’s quality management system
“ISO 14001”	an international standard that gives a framework for an
	environmental management system
“large diameter bored pile”	a type of bored pile which is greater than 750 mm in diameter
“non-percussive piling”	a type of construction activity by methods other than those
	prescribed under percussive piling
“OHSAS”	acronym for Occupational Health and Safety Management System,
	which provides a framework for organisations to identify and
	control its health
“OHSAS 18001”	an international standard that gives a framework for an
	occupational health and safety management system
“percussive piling”	a type of construction activity by sinking or driving a pile by
	direct or indirect hammering or other percussive means, including
	piling by the use of a drop hammer, diesel hammer, double acting
	hammer, single acting hammer, internal drop hammer, pneumatic
	hammer, steam hammer or other percussive device, other than a
	device that is portable and designed for operation while held by
	hand without any other form of support
“pile cap”	a concrete structure built on the head of a pile or a group of piles
	for transmission of loads from the structure above to the pile or
	group of piles

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.

GLOSSARY OF TECHNICAL TERMS

“piling” any work in connection with or for the sinking or forming of a pile in the ground by hammering, jacking, screwing, augering, boring, jetting, vibrating, casting or any other means and also means the driving or sinking of any casing or tube into the ground to form a well or shaft for foundation purposes, whether or not the casing or tube is later extracted “rock socketed H-pile” or a type of pile in which a steel H-section is installed within a “rock socketed steel H-pile” pre-bored hole formed into the bedrock and then grouted with cement grout “Specialist List” the List of Approved Suppliers of Material and Specialist Contractors for Public Works published by the Development Bureau

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 [REDACTED] contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These forward-looking statements include, without limitation, statements relation to:

our operations and business prospects;
our business strategies and plan to achieve these strategies;
our contracts on hand;
our future debt levels and capital needs;
the regulatory environment of our industry in general;
our financial conditions and performance;
the nature of, and potential for, future development of our business;
future development in our industry; and
our dividend policy.

The words “aim”, “anticipate”, “believe”, “can”, “could”, “expect”, “going forward”, “intend”, “may”, “might”, “plan”, “project”, “seek”, “should”, “will”, “would” and the negative forms of these words with similar expressions, as they relate to us, are intended to identify a number of these forwardlooking statements. These forward-looking statements reflecting our current views with respect to future events are not a guarantee of future performance and are subject to certain risks, uncertainties and assumptions, including the risk factors described in the section headed “Risk Factors” in this [REDACTED] . One or more of these risks or uncertainties may materialise.

Subject to the requirements of the Listing Rules, our Company does not have any obligation and does not undertake to update or otherwise revise the forward-looking statements in this [REDACTED] , whether as a result of new information, future events or developments or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this [REDACTED] might not occur in the way our Company expects, or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements in this [REDACTED] are qualified by reference to the cautionary statement set out in this section.

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 to other information in this [REDACTED] , you should carefully consider the following risk factors before making an investment in the [REDACTED] . Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. If any of the possible events described below occur, our business, financial condition or results of operations could be materially and adversely affected and the market price of the [REDACTED] could fall significantly and you may lose all or part of your investment.

There are certain risks relating to an investment in our Shares. These risks can be broadly categorized into: (i) risks relating to our business; (ii) risks relating to the foundation industry; (iii) risks relating to doing business in Hong Kong; (iv) risks relating to doing business in Macau; and (v) risks relating to the [REDACTED] . Additional risks and uncertainties not presently known to us, or not expressed or implied below, or that are presently deemed immaterial, could also harm our business, financial condition and operating results.

RISKS RELATING TO OUR BUSINESS

Our performance is dependent on the general economic conditions of the markets in which we operate, especially the construction and infrastructure sectors which are cyclical in nature

During the Track Record Period, we derived all of our revenue from the provision of foundation works and ancillary services in Hong Kong and Macau. The demand for our services is closely related to the level of construction activities, in particular those related to property and infrastructure projects, in Hong Kong and Macau. We believe that the construction and infrastructure sectors are cyclical in nature and any downturn in the construction sector and/or reduction in the overall value and number of infrastructure projects due to, amongst other reasons, economic downturn and/or government policies, may reduce the demand for our foundation works and ancillary services accordingly. As such, our performance and profitability may be adversely impacted.

Our business operates under various registrations and certifications and the loss of or failure to obtain or renew any or all of these registrations and/or certifications could materially and adversely affect our business

Our business is subject to various government regulations. In accordance with the laws of Hong Kong and Macau, our Group is required to obtain/maintain certain registrations and/or certifications to operate our business. Please refer to the section headed “Laws and regulations” in this [REDACTED] for details.

These registrations and/or certificates are granted/renewed and maintained upon our satisfactory compliance with, amongst others, the applicable criteria set by the relevant governmental departments or organisations. Such criteria may include the maintenance of certain financial criteria including our working capital level. These registrations and/or certificates may only be valid for a limited period of time and may be subject to periodic reviews and renewal by governmental authorities or relevant organisations. In addition, the standards of compliance required in relation thereto may from time to time be subject to changes without substantial advance notice. We cannot provide any assurance that all these required registrations and/or certificates can be maintained or obtained/renewed in a timely manner or at all. Any changes in the existing policies by the governmental authorities in relation to the construction/foundation industries to which we provide our services may result in our failure to obtain or maintain such relevant registrations and/or certificates. If we operate our business without the required registrations and/or certificates, we may be required to suspend our operations, which would have a material adverse effect on our business and results of operations.

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

Award of our foundation works and ancillary services contracts are subject to successful tenders or acceptable quotations

During the Track Record Period, we derived all of our revenue from the provision of foundation works and ancillary services. Our Group’s ability to compete for and secure foundation works and ancillary services contracts is one of the main contributors to our success as well as ongoing growth and future profitability. Our foundation business operates on a non-recurring and project-by-project basis and our customers may vary from year to year. Upon the completion of our contracts on hand, in the event that our Group is unable to secure new contracts or has not commenced work for any of our new contracts, our revenue and financial performance may be adversely affected.

We cannot ascertain whether we will be able to secure contracts from our customers and/or new potential customers. There is also no assurance over whether our ongoing customers will continue to develop projects that require our services or continue to engage us in the future. In the event our Group is unable to secure new contracts or gain new business from recent, ongoing or potential customers, we may experience slow growth or no growth of our foundation business or a material reduction in the value and volume of our foundation contracts and our business and financial performance may be adversely affected. Thus, the financial results of our Group for the Track Record Period should not be taken as an indication of our future performance. Prospective investors should be aware of the risk of our Group failing to secure future contracts when considering our Group’s financial results.

We have a concentration of customers during the Track Record Period

A significant portion of our revenue was derived from a small number of customers during the Track Record Period. During the Track Record Period, our five largest customers accounted for approximately 97.4%, 97.9% and 98.7% of our revenue respectively, while the single largest customer during the same period accounted for approximately 38.5%, 42.6% and 88.2% of our revenue respectively.

We may continue to have a concentration of customers in the future. Any deterioration in the businesses of our major customers could lead to delay and/or default in their payments to us. If our major customers fail to make timely payments to us, our cash flows and financial position may be adversely affected.

Liquidity and net current liabilities

Our Group had net current liabilities of approximately HK$115.4 million as at 31 March 2014, which was primarily due to (i) the balance of long-term bank loans due after one year of approximately HK$110.1 million and obligations under finance leases due after one year of approximately HK$8.4 million, both of which also contain repayment on demand clause; (ii) short term bank loans of approximately HK$92.6 million; and (iii) the comparatively smaller current asset base which largely consisted of cash and cash equivalents of approximately HK$85.9 million. Please refer to the paragraph headed “Financial information – Net current liabilities” in this [REDACTED] for further details.

Our Group may continue to record net current liabilities in the future. Having significant net current liabilities could constrain our operational flexibility and adversely affect our ability to expand our business. If we do not generate sufficient cash flow from our operations to meet our present and future financial needs, we may need to rely on additional external borrowings for funding. If adequate funds are not available, whether on satisfactory terms or at all, we may be forced to delay or abandon our development and expansion plans, and our business, financial condition and results of operations may be materially and adversely affected.

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 indebtedness could have an adverse effect on our financial position, increase the difficulty of raising capital to fund our operations and limit our ability to explore future business opportunities

During the Track Record Period, we incurred a certain level of indebtedness in order to finance our operations. As at 31 May 2014, the total amount of indebtedness of our Group was approximately HK$355.2 million. This debt could have an adverse effect on our business operations and financial position.

For example, it will:

limit or impair our ability to raise additional funds, either through debt or equity markets, which may in turn increase the cost of such funding;
increase our vulnerability in adverse general economic conditions; and
require us to maintain an adequate level of cash flow from operations in order to satisfy our debt obligations as they become due. This may in turn reduce the available capital for other business prospects.

Our borrowings are denominated in Hong Kong dollars and Pataca. The interest rates on some of our outstanding Hong Kong dollar and Pataca denominated borrowings are under variable interest rates. Any change in the interest rates will have a direct impact on our financing costs and, in turn, our results of operations and our financial position. For the three years ended 31 March 2014, the weighted average interest rates on (i) our long-term bank loans were approximately 3.8%, 4.0% and 2.9%, respectively; and (ii) our obligations under finance leases were approximately 3.9%, 3.8% and 3.1%, respectively. As for our short-term bank loan, the weighted average interest rate were approximately 3.1% and 5.0% for each of the year ended 31 March 2013 and 2014, respectively. We had no short-term bank loan as at 31 March 2012. As for our bank overdraft, the weighted average interest rate was approximately 1.4% for the year ended 31 March 2014. We had no bank overdraft outstanding as at 31 March 2012 and 2013, respectively. Finance costs related to our outstanding bank loans, obligations under finance leases and bank overdraft for the three years ended 31 March 2014 were approximately HK$1.8 million, HK$3.1 million and HK$9.7 million, respectively.

We may not be able to sustain growth rate and profit margin similar to those we achieved during the Track Record Period, or maintain our financial performance in the future

We experienced significant growth over the Track Record Period. Our revenue increased from approximately HK$98.4 million for the year ended 31 March 2012 to approximately HK$375.1 million for the year ended 31 March 2013 and further to approximately HK$492.7 million for the year ended 31 March 2014, representing a CAGR of approximately 123.7%. As of the Latest Practicable Date, the awarded contract sum for the contracts on hand (including contracts in progress and contracts of which our work has yet to commence) amounted to approximately HK$1,348.6 million. We may experience delays in the commencement or progress of our work due to factors outside our control such as change in foundation design by our customers, adverse weather conditions and delays in obtaining governmental approvals for commencement of works.

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, for the three years ended 31 March 2014, our Group recorded gross profit margin of approximately 33.2%, 27.3% and 33.6%, respectively; and net profit margin of approximately 24.6%, 14.8% and 25.8%, respectively. Given the ongoing competition faced by our Group, compounded with possible increases in construction materials and labour costs, there is no assurance that our Group will be able to maintain the gross profit margin, net profit margin and other financial results in the future at a similar level achieved during the Track Record Period.

We cannot assure you that we will be able to maintain our current revenue and profit levels in the future or attain growth rates and profit margins similar to those achieved during the Track Record Period. You should not rely on our results of operations for any prior period as an indication of our future financial or operating performance.

Reliance on key management personnel

Our Group’s success is, to a large extent, attributable to the continued commitment of our executive Directors and our senior management team.

Details of our Directors and our senior management team are set out in the section headed “Directors and senior management” of this [REDACTED] . Our Directors and senior management team are responsible for our business strategies and development, daily management and operations. Furthermore, they have established relationships with our Group’s customers, subcontractors, suppliers and our Group’s business associates. They have extensive experience in the construction industry, possess knowledge of the foundation and construction market and technical skills. Any unanticipated departure of members of the Board and/or our senior management team without appropriate replacement may have a material adverse impact on our business operations and profitability.

Our ability to compete for foundation works and ancillary services projects is limited by our machinery and equipment

Our capacity to carry out foundation works and ancillary services for our customers depends on the availability of our machinery and equipment, which mainly consists of crawler cranes, oscillators, rotators, reverse circulation drills, boring rigs, down-the-hole hammers and air compressors.

Accordingly, the number of foundation works and ancillary services projects that can be executed by our Group simultaneously at any given time is limited by the capacity of our machinery and equipment to carry out foundation works and ancillary services. In addition, our machinery and equipment may succumb to breakdown and a replacement of such machinery and equipment may not be readily available, if required. Repair and maintenance of these machinery and equipment is typically provided by (i) external vendors during the guaranteed period; and (ii) our in-house maintenance team, who may or may not be able to provide timely maintenance services.

We cannot ascertain whether we will be able to maintain the capacity of our machinery and equipment, if our machinery and equipment are damaged or cease to operate, it would temporarily reduce our capacity and in turn affect our ability to carry out foundation works and ancillary services for our customers which could adversely affect our business, financial conditions and results of operations.

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 details on our machinery and equipment, please refer to the paragraph headed “Business – Machinery and equipment to carry out foundation works and ancillary services”.

Project risk

The size of our foundation works and ancillary services projects may vary significantly. The significant variation in the size of projects that we can secure may affect our allocation of resources and business performance. In the event that we fail to allocate our resources effectively and/or are unable to secure projects with acceptable profit margin, our profitability would be adversely affected.

In addition, there is no assurance that the construction period set out in our foundation works and ancillary services contracts would not change or be subject to material delay as we have experienced under the Composite Development Project. In the event the Composite Development Project experiences further delay, our business and financial performance may be adversely affected.

If we fail to accurately estimate our costs or fail to complete projects within our cost estimates, the

results of our operations would be adversely affected

We prepare our tenders or quotations based on our estimates and available information taking into consideration, the deployment of our resources including, our machinery and equipment to carry out foundation works and ancillary services, the relevant construction materials and labour costs, as well as the complexity and length of the relevant project. Should there be any cost overruns or underestimates, we may suffer from losses. Our tender or quotation may carry inherent risks, including risks of losses from underestimating costs and unforeseen difficulties in operating projects and other unexpected circumstances or incidents that may occur during the contract period that may cause the cost of the operations to increase unexpectedly.

In addition, the revenue, operating costs and gross profit on our contracts can sometimes vary substantially from our original estimates due to the following factors:

failure to properly estimate the cost of engineering, construction materials, machinery and equipment or labour (including sub-contractors);
difficult sub-soil conditions which may make pile construction more technically complex than initially anticipated;
unanticipated technical problems which may require us to incur additional and unexpected costs which we cannot recoup;
our subcontractors’ failure to perform which will require us to replace such subcontractors at additional costs;
failure to properly estimate the repair and/or maintenance costs; and
exacerbation of any or most of the aforementioned factors as projects grow in size and complexity.

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

These risks increase where projects have a longer duration because there is an increased probability that the circumstances on which we based our estimates of the original tender or quotation may vary which would, in turn, increase our costs.

We rely on a stable supply of labour to carry out our foundation works and ancillary services projects

The provision of our foundation works and ancillary services generally require labour input. For any given project, a large number of workers with different skills may be required. However, there is no guarantee that the supply of labour and average labour costs will be stable. In the event that we fail to retain our existing labour and/or recruit sufficient skilled labour in a timely manner to cope with the demand of our existing or future projects and/or there is a significant increase in the costs of labour, we may not be able to complete our projects on schedule and within budget and our operations and profitability may be adversely affected.

During the Track Record Period, our staff costs, as part of cost of sales, amounted to approximately HK$18.8 million, HK$66.5 million and HK$111.4 million respectively, representing approximately 28.6%, 24.4% and 34.1% of our total costs of sales, respectively.

We may be involved in legal and other proceedings arising from our operations

We may be involved in disputes arising from our business operations, which may lead to legal and other proceedings. Disputes may arise due to material delay preventing our Group from completing our obligation under a contract in accordance with its terms, our management will inform the customer and seek an extension to the completion of the contract in accordance with its terms, which may or may not be granted depending on the cause of the delay. Where such extension is not granted by the relevant customer, our Group may face claims for losses and damages which may lead to legal and other proceedings.

In addition, as our foundation works and ancillary services generally involve the operation of tools, machinery and equipment, industrial accidents resulting in employee injuries or even deaths may occur. In such event, we may be liable for personal injury or death, monetary losses or fines or subject to other legal liability as well as business interruptions caused by machinery and equipment shutdowns for investigations and imposition of safety measures.

We may have to incur costs to defend our Group in legal and other proceedings. If we are not successful in defending our Group in any proceedings, we may be liable to pay for the damages. Such payments may be significant which may adversely affect our business operations and financial position.

Legal fees in relation to legal proceedings recorded by our Group totalled to approximately HK$1.1 million, HK$1.3 million and HK$0.2 million during the Track Record Period respectively. As at 31 May 2014, our Group estimated that we have incurred an outstanding legal fees in the sum of approximately HK$3.6 million.

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 are exposed to our customers’ credit risks

The credit terms in relation to the settlement of amounts due from our customers arising from foundation works and ancillary services carried out by our Group vary from contract to contract. Such credit terms may make reference to the payment certificate date, settlement typically ranging from 14 days to 30 days from such date, depending on the terms and conditions of the contracts.

Our trade receivables were approximately HK$3.6 million, HK$70.3 million and HK$27.8 million as at 31 March 2012, 2013 and 2014, respectively. We have not written off any receivables as uncollectible during the Track Record Period. However, there is no assurance that the financial position of our customers will remain healthy in the future.

In addition, retention monies are generally required by our customer to secure our Group’s due performance of the contract. Typically, the amount of retention money is subject to negotiation between the parties and ranges from 1.0% to 10.0% of the value of the works certified, subject to a maximum retention of 1.0% to 5.0% of the total original contract value or a monetary cap. Our retention receivables amounted to approximately HK$4.6 million, HK$26.5 million and HK$50.8 million as at 31 March 2012, 2013 and 2014, respectively.

Our Group may, from time to time, be engaged in prolonged negotiation of the settlement of payment applications, which is not uncommon in the construction industry.

If our customers experience financial distress or are unable to settle their payments due to us or release the retention monies to us in a timely manner or at all, the financial condition and results of operations of our Group could be materially and adversely affected.

Increases in construction material costs and sub-standard construction materials may have an adverse impact on our financial results

Our principal construction materials include concrete and steel. During the Track Record Period, the costs of construction materials amounted to approximately HK$17.4 million, HK$103.5 million and HK$109.2 million respectively, representing approximately 26.5%, 38.0% and 33.4% of our total cost of sales, respectively.

There is no guarantee that the quality of construction materials supplied to our Group meets our required standards for reasons which are beyond our control, and we may be forced to replace these construction materials from other suppliers at additional costs or be subject to time delay. Furthermore, we cannot guarantee the cost of construction materials will be stable. If we are unable to factor in these potential fluctuations into each of our tenders or quotations and pass on part or the whole of such increases to our customers or reduce other costs, our financial results and position may be materially and negatively affected.

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

Most of our contracts with our construction material suppliers are not long-term contracts

Most of our contracts with our construction material suppliers are not long-term contracts. We normally enter into contracts with our suppliers for construction materials, which mainly consists of concrete and steel, on a project-by-project basis. During the Track Record Period, our five largest suppliers of construction materials accounted for approximately 99.1%, 83.1% and 91.9% of our total purchases for the same periods, respectively.

There is no assurance that our suppliers will continue to provide construction materials at prices acceptable to our Group. In the event that any of our major suppliers is unable to provide the required construction materials to our Group and we are unable to source these required construction materials from alternative providers on similar or more favourable term to us, our business, results of operations, profitability and liquidity may be adversely affected.

The net book value of our machinery and equipment may be different from the actual realisable value and is subject to change

The net book value of our machinery and equipment as at 31 March 2014 was approximately HK$397.8 million, such is based on their respective estimated useful lives and estimated residual values. The actual useful lives of our machinery and equipment may differ from their estimated useful lives and their actual realisable values may differ from their estimated residual values, subject to market conditions that are beyond our control.

There may also be technical advances in respect of the machinery and equipment in the future. As technology advances, any technological developments in methodology, machinery and equipment and any other factors related to foundation works and ancillary services may have an adverse effect on our business operations. Our machinery and equipment may become obsolete and our competitive advantages may disappear. There is no assurance that there will not be any technological developments in the future that will not adversely affect our business operations and financial position.

Reliance on subcontractors

Our Group may from time to time subcontract parts of our works which may require skilled workers and/or equipment in various areas, such as site surveying, ground investigation, utility connection, steel fixing, proof drilling and grouting, to third party contractors. For further details, please refer to the paragraph headed “Business – Subcontracting arrangements” in this [REDACTED] . In order to control and ensure the quality and progress of the works of our subcontractors, our Group selects subcontractors based on, among others, their past performance, credit-worthiness, competitiveness in pricing as well as their health and safety, quality and environmental records. We may be affected by the non-performance, inappropriate or poor sub-contracted works rendered by our sub-contractors.

For the three years ended 31 March 2014, our subcontracting charges amounted to approximately HK$2.5 million, HK$17.6 million and HK$11.7 million, respectively, representing approximately 3.8%, 6.5% and 3.6% of our total costs of sales, respectively.

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 the event that our Group is unable to secure a suitable subcontractor when needed, or if subcontracting fees are excessive, the financial performance of our Group may be adversely affected. Furthermore, there may be circumstances where the subcontractors are late in delivering the relevant works or the quality of the relevant works do not meet our Group’s requirements. In such event, the operations, profitability and reputation of our Group may be adversely affected.

Defect liability claims

As a provider of foundation works and ancillary services for the construction industry, we may be subject to claims due to defects in relation to our foundation works and ancillary services that are existing but not yet found, developed or visible at the time of completion. Our customers would normally require a defect liability period, during which we are responsible for rectifying construction defects. In the event that there are any significant claims against us for defect liability or any default or failure in relation to our foundation works and ancillary services by our customers or other parties, our profitability would be adversely affected.

Our Group may be unable to detect, deter and prevent all instances of fraud or other misconduct committed by our employees or other third parties

There is no assurance that instances of fraud or other misconduct committed by our employees or other third parties will not take place in the future. We may be unable to detect, deter and prevent all such instances. Any of such fraud or other misconducts committed at the expense of our Group’s interests, which may include past acts that have gone undetected or future acts, may have a material adverse effect on our Group’s business operations, results and financial condition.

Our insurance may not fully cover all the potential losses arising from our foundation works and ancillary services

Our insurance plans may not fully cover all the potential losses incurred from damages or liabilities in relation to our foundation works and ancillary services. There are certain exposures which are generally excluded for commercial reasons. Such exposures may include potential losses due to war, terrorism, pollution, fraud, professional negligence and acts of God. Our insurers may become impaired and find themselves financially unable to meet claims. For a more detailed description, please refer to the paragraphs headed “Business – Insurance – machinery and equipment” and “Business – Insurance – employees” set out in this [REDACTED] .

In the event that we suffer from any losses, damages or liabilities in the course of our business operations which our insurance does not cover, we may not have sufficient funds to cover such losses, damages or liabilities. The resulting payment to cover such losses, damages or liabilities may have a material adverse effect on our business, results of operations and financial position.

Our cash flows may be affected by payment terms

Given the nature of our projects, net cash outflows are normally recorded at the early stages of our foundation works and ancillary services projects when we are typically required to pay for the set up expenditures and deposit for performance bond in respect of some of our foundation works and ancillary services projects. Our Group submits payment applications to our customers usually on a monthly basis. Normally, the cash flows for a project will turn into cumulative net cash inflows as the project progresses and our works are certified.

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 cash flow position may be adversely affected in the event that our Group takes up too many significant projects at a particular period of time, which require substantial initial set up costs without cash inflow from other projects during such period.

Furthermore, a portion of the contract value, typically subject to a maximum retention of 1.0% to 5.0% of the total original contract value or monetary cap, is withheld by our customers as retention money. Please refer to the paragraph headed “Business – Contract payments and certification” in this [REDACTED] for further details. As at 31 March 2012, 2013 and 2014, retention receivables of approximately HK$4.6 million, HK$26.5 million and HK$50.8 million, respectively was retained by our customers.

There is no assurance that progress payment would be paid to us on time and in full, or the retention money or any future retention money will be remitted by our customers to us on a timely basis and in full or that the level of bad debt arising from such payment practice can be maintained at the same level as in the Track Record Period. Any failure by our customers to make remittance on time and/or in full may have an adverse effect on our future cash flow and liquidity position.

Our growth strategy may require additional capital, which may not be available on favourable terms or at all

We may require additional funding due to changes in business conditions, expansion in our existing fleet of machinery and equipment or potential investments or acquisitions that we may pursue. To meet our capital needs, we may sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution of our Shareholder’s holdings in our Company. The incurrence of further indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favourable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Labour disputes

Owing to the nature of our business, there is a possibility that our Group may face claims arising from labour disputes. There can be no assurance that disputes, work stoppages or strikes will not arise in the future. Furthermore, there can be no assurance that there will not be new labour laws, rules and regulations which may lead to potential and future disputes with our employees or increases in our labour costs. Where such events occur, our business, financial condition and results of operations may be adversely affected.

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

RISKS RELATING TO THE FOUNDATION INDUSTRY

Weather conditions, natural disasters, other acts of God, political unrest and other events may have negative impact on the foundation industry

Weather conditions, natural disasters and other acts of God which are beyond our control may materially and adversely affect the economy, the foundation industry and our business. Our operations and financial condition may be adversely affected.

Political unrest may cause damage or disruption to our business, our employees and our markets, any of which could materially and adversely affect our overall results of operations and financial condition.

In addition, power failures, fire or explosions or other natural disasters could cause disruptions in our Group’s operations or cause delays in its delivery schedules.

Furthermore, Hong Kong has in recent years encountered different types of epidemics, which have caused various degrees of damage to the economy of Hong Kong and, in turn, the foundation industry. If an epidemic outbreak occurs in Hong Kong and/or Macau, the economy of Hong Kong and/or Macau may suffer which will in turn adversely affect our results of operations.

Failure to comply with our health and safety and environmental responsibilities may adversely

affect our operations and profitability

Under the relevant laws of Hong Kong and Macau, construction and foundation works are required to fulfil certain health and safety and environmental responsibilities. Failure to comply with and satisfy such health and safety and environmental responsibilities may lead to the suspension of relevant licences to operate and, in turn, adversely affect our business operations and financial conditions.

Competition in the foundation industry in which we operate could reduce our market share and business results

We believe that the operation of a business which undertakes foundation works and ancillary services, in particular, large diameter bored piling works, is machinery orientated and capital intensive. In addition, we are of the view that a thorough understanding and knowledge of the ground conditions is essential to produce a competitive foundation design and an effective and efficient construction method. The foundation industry in Hong Kong and Macau have a number of participants, including (i) 131 Buildings Department Registered Specialist Contractors for the Foundation Category; and (ii) [773] construction contractors registered with the DSSOPT, as at the Latest Practicable Date. Occasionally, new participants may wish to enter the industry if they have the appropriate skills, experience, necessary machinery and equipment, capital and are granted the requisite licences by the relevant regulatory bodies. If there is a relaxation of requirements for the grant of requisite licences and an increase in the number of participants in the foundation industry without a corresponding increase in foundation works, competition within the foundation industry would intensify.

With intensified competition, we may have to compete for projects by reducing our prices. In addition, there is no assurance that our competitors will not have the necessary technical expertise and resources to provide more competitive services than ours. Failure to maintain or enhance our competitiveness within the foundation industry and maintain our client base may result in a reduction of profit, which would adversely affect our financial performance.

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

RISKS RELATING TO DOING BUSINESS IN HONG KONG

Our operations are principally dependent on the general economic and political conditions in Hong Kong, and policies adopted by the Government, especially policies related to the Hong Kong property market and infrastructure development

During the Track Record Period, our Group derived approximately 100.0%, 89.2% and 7.6% of our revenue from Hong Kong. Our business and prospects principally depend on the general economic conditions of Hong Kong, especially the building and construction activities in the Hong Kong property market and infrastructure development activities. Any downturn in building and construction activities in the Hong Kong property market and/or reduction in infrastructure development activities may reduce the demand of our customers and consequently adversely affect the profitability and financial performance of our business operations.

The building and construction activities are also influenced by Government policies. Our operations and financial results may be adversely affected by changes in political and economic conditions or the relevant policies adopted by the Government. Such changes may include fiscal policies, taxation policies, legal regulations and other relevant changes. There is no assurance that Government policies and market environment in Hong Kong would not change and changes may adversely affect our business operations.

Should there be a decrease in the level of public spending due to any adverse changes in Government policies such as the deferment of implementation of any infrastructure projects or should our Group be unable to obtain substantial private sector projects in view of the then prevailing economic conditions in Hong Kong, our Group’s business and results would be adversely affected. Furthermore, any economic downturn or downward pressure on the Hong Kong property market and/or reduction in infrastructure development activities could bring an adverse effect on our operations in the future.

Political consideration of Hong Kong

As Hong Kong is a special administrative region of the PRC, the PRC may, by its political and economic policies, exert influence on the foregoing aspects of Hong Kong. The PRC economy features a high degree of government involvement. In recent years, the PRC Government has implemented various measures to guide the allocation of resources so as to narrow the gaps between economic developments in different regions in the country. We cannot foresee or give any assurance that the PRC Government will not in the near future adopt policies that will adversely affect the political, legal and economic conditions of Hong Kong which may in turn materially affect our business.

The annual budget of the Government, including its estimates of expenditure, is subject to the passing of the Appropriation Bill by the Legislative Council of Hong Kong. Upon the enactment of the Appropriation Ordinance, the estimates of expenditure are deemed to be approved. However, the passing of such bill may from time to time experience undue delay caused by prolonged discussion within the Legislative Council of Hong Kong which could in turn delay the implementation of Government funded projects and thereby may adversely affect our business.

During the Track Record Period, our Group derived revenue of approximately HK$93.1 million, HK$5.0 million and nil from public sector projects, respectively. As at the Latest Practicable Date, two of five of our contracts on hand are public sector projects, the aggregate contract sum (excluding contingent and provisional contract amounts) of these two public sector projects totalled to approximately HK$239.0 million.

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

Currency peg system in Hong Kong

Since 1983, Hong Kong dollars have been pegged to the US dollars at the rate of approximately HK$7.80 to US$1.00. There is no assurance that this policy will not be changed in the near future. If the pegging system collapses and the Hong Kong dollars suffer devaluation, the Hong Kong dollars cost of our Group’s foreign currency expenditures may increase. This would in turn adversely affect the operations and profitability of our Group’s business.

RISKS RELATING TO DOING BUSINESS IN MACAU

Possible difficulty in staffing for foundation works and ancillary services in Macau

Our projects based in Macau are dependent on foreign workers as the local construction labour is limited. In the event that our existing projects based in Macau are required to be partly or wholly staffed by foreign workers, we will be subject to labour quota restrictions in relation to foreign workers imposed by the Macau Government and we may have difficulties in obtaining or renewing the necessary working visas and documentations for some or all of our workers. In the event that we are also unable to recruit suitably skilled staff in Macau, this may reduce our service capabilities and efficiency, as well as adversely affect our business operations.

Please refer to the paragraph headed “Business – Employees” in this [REDACTED] for details on staffing arrangements for our projects in Macau.

A cyclical fluctuation in the Macau market, in particularly the construction industry, will affect our financial performance

Despite deriving nil and approximately 10.8% of our Group’s revenue from project based in Macau for the two years ended 31 March 2013, approximately 92.4% of our revenue from foundation works and ancillary services was derived from our project based in Macau for the year ended 31 March 2014. Furthermore, our Group was awarded two additional Macau based projects, namely the Composite Development Project and the Hotel Casino Project in January 2014 and February 2014, respectively. The aggregated contract sum (excluding all contingent and/or provisional contract amounts) of the Composite Development Project and the Hotel Casino Project is estimated to be approximately HK$816.9 million.

Therefore, a downturn in the Macau construction industry is likely to have an adverse impact on our business and profitability due to the possibility of postponement, delay or cancellation of construction projects and delay in recovery of receivables.

Conducting business in Macau involves certain economic and political risks

Conducting foundation works and ancillary services business in Macau involves certain risks not typically associated with investments in companies with operations outside of Macau. Such risks include those relating to changes in Macau’s economic and political conditions, changes in the policies of the Macau Government, changes in laws of Macau or regulations or their interpretation, changes in exchange control regulations, potential restrictions on foreign investment and repatriation of capital, measures that may be introduced to control inflation such as interest rate increases, and changes in the rates or method of taxation.

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

Unfavourable changes in currency exchange rates

During the Track Record Period, our Group generated revenues of approximately nil, MOP41.6 million and MOP469.5 million in Pataca, respectively.

Although our revenues are expressed in Hong Kong dollars, the revenue generated in Macau may be in Patacas. The Pataca is linked to the Hong Kong dollar, and in many cases the two are used interchangeably in Macau. The exchange linkages of the Hong Kong dollar and Pataca, and the Hong Kong dollar and the US dollar, may be subject to potential changes due to, among other things, the policies of Hong Kong and Macau and international economic and political developments.

We cannot provide assurance that the Hong Kong dollar will continue to be pegged to the US dollar, or that the Pataca will continue to be linked to the Hong Kong dollar. Any delinkage may result in severe fluctuations in the exchange rates for these currencies. We also cannot assure you that the current rate of exchange fixed by the applicable monetary authorities for these currencies will remain at the same level.

RISKS RELATING TO THE [REDACTED]

An active trading market for our Shares may not develop

Prior to the [REDACTED] , there was no public market for our Shares. The [REDACTED] is the result of negotiations between our Company and the Lead Manager (on behalf of the Underwriters), and may differ from the market prices of the Shares after the [REDACTED] . However, there is no assurance that the [REDACTED] will result in the development of an active and liquid public trading market for the Shares.

The trading volume and share price of our Shares may be volatile

The price and trading volume of our Shares may be volatile. Factors such as variations in our earnings, turnover and cash flows and announcements of new investments, strategic alliances and/ or acquisitions, fluctuations in prices for our foundation works and ancillary services or fluctuations in market prices for comparable companies could cause the market price of our Shares to change substantially. In addition, the market price of the Shares may also fluctuate significantly and rapidly as a result of factors which are beyond our control.

Furthermore, stock markets and the shares of some listed companies in Hong Kong have experienced increasing price and volume fluctuations in recent years, some of which may have been unrelated or disproportionate to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the market price of the Shares.

Investors of our Shares may experience dilution if we issue additional Shares in the future

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

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

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

The Shares held by certain of our existing Shareholders are subject to lock-up commencing on the date on which trading of our Shares commences on the Stock Exchange. While we are not aware of any intentions of our existing Shareholders to dispose of a significant amount of their Shares upon expiry of the relevant lock-up periods, there is no assurance that they would not dispose of the Shares held by them. We cannot predict the subsequent effect on the market price of our Shares after any of such disposal. Sale of substantial amounts of the Shares by any of our existing Shareholders, or the market perception that such sales may occur, could have a material and adverse effect on the prevailing market price of our Shares.

Our plans for future dividend policy and payments are subject to the discretion of our Board

The amount of dividends that we may declare and pay to our Shareholders in the future will be subject to the discretion of our Board and depends on our earnings, cash flow, financial position, distributable reserves, capital requirements, working capital and other conditions that our Directors deem relevant. The amount of distributions that any company within our Group has paid in the past may not be used as an indication to the dividends that we will pay in the future.

No undue reliance should be placed by prospective investors on industry and market overview and statistics derived from official government publications contained in this [REDACTED]

Certain statistics, facts, data and forecasts presented in the section headed “Industry Overview” and elsewhere in this [REDACTED] including those relating to Hong Kong and Macau, the Hong Kong economy, the Macau economy and the foundation industry have been derived, in part, from various publications and industry-related sources prepared by governmental officials or Independent Third Parties. Such statistics, facts, data and forecasts have not been independently verified by us, the Sponsor, the Bookrunner, the Lead Manager, the Underwriters or any of their respective affiliates or advisers or any other party involved in the [REDACTED] and no representation is given as to their accuracy and completeness. Therefore our Group makes no representation as to the accuracy of such statistics, facts, data, forecasts and other information, which may not be consistent with other information compiled within or outside Hong Kong or Macau. Due to the possible flawed or ineffective collection methods or discrepancies in the published information, market practice and other problems, the statistics from official government publications referred to or contained in this [REDACTED] may be inaccurate or may not be comparable to statistics produced for other economies. In addition, there is no assurance and guarantee that they were stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere.

In all cases, prospective investors should consider how much weight or importance they would put into, or place on, such statistics, facts, data, forecasts and other information.

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 [REDACTED] AND THE [REDACTED]

[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.

INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED]

[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.

INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED]

[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.

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

DIRECTORS

Name	Address	Nationality
Executive Directors
Mr. Lau Chun Ming_(Chairman)_	Simplex 1 (also known as Simplex A)	Chinese
	29th Floor (including the flat roof(s)
	of Block 1)
	Block 1, Parc Palais
	18 Wylie Road
	Ho Man Tin, Kowloon
	Hong Kong
Mr. Lau Chun Kwok	Flat C, 16th Floor	Chinese
(Chief Executive Officer)	Block 2, Parc Palais
	18 Wylie Road
	Ho Man Tin, Kowloon
	Hong Kong
Mr. Lau Chun Ka	Flat C, 15th Floor	Chinese
	Block 2, Parc Palais
	18 Wylie Road
	Ho Man Tin, Kowloon
	Hong Kong
Ms. Leung Lai So	Simplex 1 (also known as Simplex A)	Chinese
	29th Floor (including the flat roof(s)
	of Block 1)
	Block 1, Parc Palais
	18 Wylie Road
	Ho Man Tin, Kowloon
	Hong Kong
Independent non-executive Directors
Mr. Chu Tak Sum	Flat A, 14th Floor	Chinese
	Billion Court
	63-69 Wuhu Street
	Hunghom, Kowloon
	Hong Kong
Mr. Ip Tin Chee, Arnold	A1 Brewin Court	British
	5 Brewin Path
	Hong Kong
Professor Wong Sue Cheun,	Flat A, 7th Floor	Canadian
Roderick	Village Gardens
	19 Fa Po Street
	Kowloon Tong, Kowloon
	Hong Kong

Further information is disclosed in the “Directors and Senior Management” section.

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.

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

PARTIES INVOLVED IN THE [REDACTED]

Sponsor

Investec Capital Asia Limited 3609, 36th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

Bookrunner and Lead Manager [REDACTED] Underwriters [REDACTED]

[•••]

Legal adviser to our Company

As to Hong Kong law: TC & Co. Unit 2201-3, 22nd Floor Tai Tung Building 8 Fleming Road Wanchai Hong Kong

As to Macau law:

Rato, Ling, Vong, Lei & Cortés - Advogados Avenida da Amizade No. 555 Macau Landmark Office Tower 23°, 2301-2302 Macau

As to PRC law: Hills & Co. 11th Floor, Central Tower No. 88 Fu Hua 1st Road Fu Tian District Shenzhen PRC

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.

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

As to Cayman Islands law:

Conyers Dill & Pearman (Cayman) Limited Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Legal adviser to the Sponsor, [REDACTED] the Lead Manager and the Underwriters

Reporting accountant PricewaterhouseCoopers

Certified Public Accountants 22nd Floor, Prince’s Building Central Hong Kong

Property valuer Asset Appraisal Limited Room 901, 9th Floor On Hong Commercial Building No. 145 Hennessy Road Wanchai Hong Kong

[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.

CORPORATE INFORMATION

Registered office	Codan Trust Company (Cayman) Limited
	Cricket Square
	Hutchins Drive
	P. O. Box 2681
	Grand Cayman
	KY1-1111
	Cayman Islands
Headquarters, head office and principal	Unit 1310-13, 13thFloor
place of business in Hong Kong	113 Argyle Street
	Mongkok
	Kowloon
	Hong Kong
Company’s website	www.samwoo-group.com
	*(Note: contents in this website do not form*
	*part of this [REDACTED])*
Company secretary	Mr. Chan Sun Kwong
Audit Committee	Mr. Ip Tin Chee, Arnold_(Chairman)_
	Mr. Chu Tak Sum
	Professor Wong Sue Cheun, Roderick
Remuneration Committee	Mr. Chu Tak Sum_(Chairman)_
	Professor Wong Sue Cheun, Roderick
	Mr. Ip Tin Chee, Arnold
	Mr. Lau Chun Ming
Nomination Committee	Professor Wong Sue Cheun, Roderick_(Chairman)_
	Mr. Ip Tin Chee, Arnold
	Mr. Chu Tak Sum
	Mr. Lau Chun Ming
Authorised representatives	Mr. Lau Chun Ming
	Simplex 1 (also known as Simplex A)
	29th Floor (including the flat roof(s) of Block 1)
	Block 1, Parc Palais
	18 Wylie Road
	Ho Man Tin, Kowloon
	Hong Kong
	Mr. Chan Sun Kwong
	Flat B1, 9th Floor
	Pak On Building
	105 Austin Road
	Tsim Sha Tsui, Kowloon
	Hong Kong

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.

CORPORATE INFORMATION

Compliance adviser	Investec Capital Asia Limited
	3609, 36th Floor
	Two International Finance Centre
	8 Finance Street
	Central
	Hong Kong
Principal banker(s)	The Hong Kong and Shanghai
	Banking Corporation Limited
	HSBC Main Building
	1 Queen’s Road
	Central
	Hong Kong
	Luso International Banking Limited
	Avenida Dr. Mário Soares
	No. 47, Macau
	The Bank of East Asia, Limited
	Bank of East Asia Building
	10 Des Voeux Road
	Central
	Hong Kong
	DBS Bank (Hong Kong) Limited
	G/F., The Center
	99 Queen’s Road Central
	Central
	Hong Kong
	Chong Hing Bank Limited
	G/F., Chong Hing Bank Centre
	24 Des Voeux Road
	Central
	Hong Kong
Principal share registrar and transfer office	[REDACTED]
Hong Kong branch share registrar	[REDACTED]
and transfer office

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

Certain facts, statistics and data presented in this section and elsewhere in this [REDACTED] have been derived, in part, from government official publications that we believe to be reliable and appropriate for such information. However, we cannot guarantee the quality or reliability of such source materials. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information is false or misleading. Whilst our Directors have taken all reasonable care to ensure that the relevant facts and statistics are accurately reproduced from the government official publications, such facts and statistics have not been independently verified by us, the Sponsor, the Bookrunner, the Lead Manager, the Underwriters, their respective affiliates, directors and advisers or any other parties involved in the [REDACTED] , and none of them makes any representation as to the accuracy or completeness of such information, which may not be consistent with other information available and may not be accurate and should not unduly relied upon.

Certain information and statistics are extracted from the Ipsos Report. The information extracted from the Ipsos Report reflects an estimate of market conditions based on Ipsos Hong Kong Limited’s research and analysis. The information extracted from the Ipsos Report should not be viewed as a basis for investments provided by Ipsos Hong Kong Limited and references to the Ipsos Report should not be considered as Ipsos Hong Kong Limited’s opinion as to the value of any security or the advisability of investing in our Company. While reasonable care has been taken in the extraction, compilation and reproduction of such information and statistics by us, neither we, the Sponsor, the Bookrunner, the Lead Manager, the Underwriters, their respective affiliates, directors or advisers, nor any party involved in the [REDACTED] have independently verified such information and statistics directly or indirectly derived from official government publications, and such parties do not make any representation as to their accuracy. The information and statistics may not be consistent with other information and statistics compiled by other parties.

SOURCES OF INFORMATION

In connection with the [REDACTED] , we have engaged Ipsos Hong Kong Limited (“ Ipsos ”), an independent third party, to conduct an analysis of, and to report on, the foundation industry in Hong Kong and Macau. Ipsos, being one of the worldwide offices of the Ipsos group, a global consulting group, publicly listed on the New York Stock Exchange and Euronext Paris, has experience in conducting market research for various industries in initial public offerings of companies listed on the Stock Exchange, including but not limited to, infrastructure construction contracting, foundation and comprehensive architecture service.

Ipsos has conducted research and data gathering based on (i) client consultation; (ii) desk research; and (iii) primary research, including face-to-face / phone interviews with key stakeholders and industry experts such as foundation work companies, main contractors, developers, architects, industry experts and association etc. in Hong Kong and Macau to understand and test data collected from secondary source, to build industry consensus data, and to rank competitors. In addition, intelligence gathered was analysed, assessed and validated using Ipsos’ in-house analysis models and techniques.

The information and analysis set out in the Ipsos Report was assessed independently by Ipsos and Ipsos, including all its subsidiaries, divisions and units, is not connected to our Group. We agreed to pay Ipsos a fee of HK$368,000 for the preparation of the Ipsos Report, which had been paid as of the date of this [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.

INDUSTRY OVERVIEW

The following assumptions are used in the Ipsos Report:

The global economy is assumed to maintain steady growth throughout the forecast period
It is assumed that there are no external shocks such as a financial crisis or the wide outbreak of diseases to affect the demand and supply of foundation services in Hong Kong and Macau during the forecast period
The demand for foundation services in Hong Kong and Macau is expected to grow due to increasing government investment in infrastructure projects, coupled with increasing demand for residential and commercial buildings in both Hong Kong and Macau

The following parameters are considered in the market sizing and forecast model of the Ipsos Report:

GDP growth rate in Hong Kong and Macau from 2006 to 2018
Growth in the number of enterprises in Hong Kong and Macau from 2006 to 2013
Growth in the number of tourists in Hong Kong and Macau from 2006 to 2013
Growth in the public expenditure on infrastructure in Hong Kong and Macau from 2006 to 2013
Construction costs including raw materials and labour wages in Hong Kong and Macau from 2009 to 2013
Hong Kong Government’s outlined “Five-Year Plan” to reserve approximately 150 sites for residential use, which would potentially provide about 210,000 public and private units. In addition, the redevelopment of public housing estates could provide approximately 11,900 additional public rental housing and Home Ownership Scheme units
The Macau Government policies to improve infrastructure by upgrading the city’s drainage systems and medical facilities. Furthermore, the Macau Government is dedicated to improving connectivity with the PRC by building bridges and crossings that connect Macau to the PRC and Hong Kong.

Our Group provides foundation works and ancillary services in Hong Kong and Macau to both the private and public sectors. During the Track Record Period, projects completed by our Group included foundation works of building projects in the private sector and foundation works of infrastructure projects in the public sector in Hong Kong. In addition, our Group has also generated revenue from foundation works and ancillary services for a construction project based in Macau in each of the two years ended 31 March 2013 and 2014.

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INDUSTRY OVERVIEW

Introduction

Construction projects can broadly be divided into public sector projects and private sector projects. Our Group classifies public sector works as those contracts in which the ultimate employer is a government department, statutory body or related organisations, or institutional body, and private sector works as those contracts whose the ultimate employer are other than those mentioned above. The public sector market is affected by Government policies and budget, while the private sector market is influenced by factors such as economic prospect, land supply and the market demand for properties.

MARKET OVERVIEW OF THE CONSTRUCTION INDUSTRY IN HONG KONG

Hong Kong economy

The state of the economy in Hong Kong has an influence on the construction and foundation industry. Historically, during periods of strong economic growth, the construction industry experienced investment from both the public and private sector. Save for 2009, Hong Kong recorded growth in its GDP between 2006 and 2014, largely due to or influenced by economic growth in the PRC. GDP increased from approximately HK$1,659 billion in 2009 to approximately HK$2,125 billion in 2013, representing a CAGR of approximately 6.4%. The growth momentum experienced since 2010 is forecast to continue as the PRC’s stimulus and moderate expansionary fiscal policy are expected to positively influence Hong Kong’s economy. Taking into account the ongoing demographic and external challenges, the economy of Hong Kong is expected to attain a trend growth rate of 3.5% per annum from 2015 to 2018.

The chart below sets out the GDP and GDP growth rates in Hong Kong from 2006 to 2013:

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Source: Hong Kong Census and Statistics Department

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INDUSTRY OVERVIEW

The Hong Kong construction industry’s role in the economy

The Hong Kong construction industry accounted for approximately 3.0% to 3.5% of total GDP from 2009 to 2012 and has experienced substantial growth during this period. The total gross output value of construction works performed by major construction contracting work companies in Hong Kong increased from approximately HK$52.3 billion in 2009 to HK$111.8 billion in 2013, representing a CAGR of approximately 20.9%. This was primarily attributable to the increase in the total value of construction projects commissioned by the public sector between 2009 and 2013. The gross value of private construction works performed by main contractors in Hong Kong increased from approximately HK$33.6 billion in 2009 to approximately HK$49.5 billion in 2013, representing a CAGR of approximately 10.2%. The gross value of public construction works performed by main contractors in Hong Kong increased from approximately HK$18.7 billion in 2009 to approximately HK$62.3 billion in 2013, representing a CAGR of approximately 35.1%. The contribution from the private sector to Hong Kong’s total construction works has decreased from approximately 64.2% in 2009 to 44.3% in 2013. On the other hand, the contribution from the public sector increased from approximately 35.8% in 2009 to approximately 55.7% in 2013.

The chart below sets out the gross value of construction works performed by main contractors in Hong Kong from 2006 to 2013:

Gross Value of Construction Works Performed by Main Contractors in Hong Kong HK$ billion

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

120
100
80 54.7 62.3
60
42.1
31.2
40 15.3 18.7
17.1 14.5
20 49.4 49.5
33.5 33.6 35.3
29.0 30.3
24.9
0
2006 2007 2008 2009 2010 2011 2012 2013
Private sector sites Public sector sites
----- End of picture text -----

Source: Hong Kong Census and Statistics Department

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INDUSTRY OVERVIEW

Macroeconomic factors influencing the construction industry in Hong Kong

Demand for commercial buildings and retail space

Hong Kong’s economic policy of free enterprise, free trade, low tax rates, high connectivity to global markets and highly regulated financial systems has made Hong Kong an attractive location for the PRC and overseas companies. This should continue to drive demand for commercial office and retail space from 2015 to 2020. Furthermore, retail trade is one of the main pillars of Hong Kong’s economy which is primarily driven by tourists from the PRC and other parts of the world. The gross private office and commercial space completed in 2013 was approximately 161,100 sq. m., representing a year-on-year decrease of approximately 28.6% from 2012 to 2013. Purchase prices of retail space per sq. m. increased by approximately 3.0% and retail rentals per sq. m. increased by approximately 6.0% between 2012 and 2013 as a result of growth in tourism and the limited availability of retail space.

The chart below sets out the area of private office and commercial space completed in Hong Kong from 2006 to 2013:

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Source: Ratings and Valuation Department, Hong Kong

Demand for residential buildings

Public and private sector demand for residential buildings is a key driver of the construction industry in Hong Kong. As of the end of December 2013, there were approximately 121,100 general applicants and 122,200 non-elderly one-person applicants under the Quota and Points System on the Waiting List for Public Rental Housing, with an average waiting time of approximately 2.7 years and 1.5 years, respectively. The supply of residential buildings is expected to increase due to the implementation of a Government initiative to reduce the average waiting time for public rental housing applicants.

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INDUSTRY OVERVIEW

The Housing Authority provides public residential housing in order to satisfy the housing needs of low income families. In fiscal year 2011/12 the Housing Authority put in place a five-year rolling public housing construction program to produce 75,000 public residential units. The number of public residential property units completed increased from approximately 11,200 in fiscal year 2011/12 to 14,100 in fiscal year 2013/14, representing a CAGR of approximately 12.2%.

The chart below sets out the completion of public residential units from fiscal year 2006/07 to fiscal year 2013/14:

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2006/07 2007/08 2008/09 2009/10 2010/01 2011/12 2012/13 2013/14
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Source: Housing Authority, Hong Kong

The private property sector has benefited from the low interest rate environment and sound economic fundamentals in Hong Kong and the PRC. As a result of demand for private residential housing, the mean price per sq. m. increased from approximately HK$80,000 in 2009 to HK$130,000 in 2013, representing a CAGR of approximately 12.9%. The number of private residential units completed increased from approximately 7,200 units in 2009 to 8,300 units in 2013, representing a CAGR of approximately 3.6%.

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INDUSTRY OVERVIEW

The chart below sets out the completion of private residential units during the period from 2006 to

2013:

Number of Private Residential Property Units Completed in Hong Kong

Source: Rating and Valuation Department, Hong Kong

Government policies and regulations affecting the construction industry in Hong Kong

Investment in infrastructure by the Government

Public expenditure on infrastructure in Hong Kong has increased from approximately HK$47.7 billion in 2009 to HK$74.6 billion in 2013, representing a CAGR of approximately 11.8%. For instance, the “Ten Major Infrastructure Projects” alone accounted for a gross value of approximately HK$41.6 billion in 2013, an increase from approximately HK$30.5 billion in 2012, a year-on-year increase of approximately 36.4% from 2012 to 2013. Government spending on infrastructure in 2015 is anticipated to be approximately HK$78.2 billion, a forecast year-on-year increase of approximately 4.8% from 2014 to 2015.

The “Ten Major Infrastructure Projects” are expected to increase the connectivity between Hong Kong and the western Pearl River Delta, as well as driving Hong Kong’s economy through construction demand and creation of jobs.

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INDUSTRY OVERVIEW

The scheduled completion and estimated cost of the “Ten Major Infrastructure Projects” in Hong Kong as at April 2014 is as follows:

Infrastructure Project	Scheduled Completion	Estimated Cost
Kai Tak Development	2020	HK$40.1 billion
South Island Line (East)	2015	HK$0.9 billion
Hong Kong section of the	2015	HK$66.8 billion
Guangzhou-Shenzhen-Hong Kong
Express Rail Link
Hong Kong-ZhuHai-Macao Bridge	2016	HK$64.8 billion
Shatin to Central Link	2020	HK$79.8 billion
Hong Kong-Shenzhen Western Express Line	Under planning	Not available
Lok Ma Chau Loop	Under planning	Not available
New Development Areas	Under planning	Not available
Tuen Mun-Chek Lap Kok Link and	Under planning	HK$46.7 billion
Tuen Mun Western Bypass
West Kowloon Cultural District	2015	HK$21.6 billion

Source: Secretary for Development, Mr Paul Chan dated 30 April 2014, Legislative Council, Hong Kong

Resumption of the Land Sale Program

The Land Sale Program has contributed towards the growth of the construction and foundation industries in Hong Kong since 2010. The Government established the program to increase land supply for housing with a view to maintaining a stable property market. The Government increased the total land sale area from approximately 24,600 sq. m. in fiscal year 2008/09 to 301,500 sq. m. in fiscal year 2012/13, representing a CAGR of approximately 87.1%. According to the 2014/15 Land Sale Program, 34 residential sites will be made available for sale, which should provide approximately 15,500 housing units as well as seven sites for commercial or business use, representing a total of approximately 230,000 sq. m. of floor space and approximately 1,100 hotel rooms.

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INDUSTRY OVERVIEW

The chart below illustrates the total land sale area from fiscal year 2006/07 to fiscal year 2012/13:

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2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
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Source: Government Budget, Hong Kong

Supplementary Labour Scheme

There are a number of factors contributing to a labour shortage in the construction industry in Hong Kong. This shortage is primarily attributable to a decrease in the number of people entering the construction industry as workers, the retirement of current workers and the increase in demand brought about by the scale and number of construction projects being undertaken in Hong Kong. Due to the ongoing skilled labour shortage, the Government introduced the Supplementary Labour Scheme for foundation and construction employers which experienced difficulties in recruiting suitable workers locally. Under the Supplementary Labour Scheme, if a company is unable to employ adequate labour after advertising for four weeks, they are permitted to recruit labour at technician level or below from outside Hong Kong. This scheme is expected to reduce the number of vacancies and increase the supply of labour for Hong Kong’s construction industries, including that of foundation works.

MARKET OVERVIEW OF THE FOUNDATION INDUSTRY IN HONG KONG

The foundation industry is a significant component of the construction industry in Hong Kong. Bored piles, socketed H-piles, precast pre-stressed concrete piles and mini-piles are commonly used in foundations. Substructures as well as superstructure works are supported by foundation works. Substructures range from a simple foundation, basement or subfloor to more complex structures such as subways or underground tunnels, whereas a superstructure is that which is built above the substructure. The quality of the foundation work is vital to a building’s safety. Therefore, the demand for foundation works has a positive correlation with the demand for construction projects.

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INDUSTRY OVERVIEW

Subcontracting is common throughout Hong Kong’s construction and foundation industries. Main contractors outsource various construction tasks to subcontractors. A typical construction project involves four major works areas, namely, (i) site formation and clearance; (ii) piling and related foundation works; (iii) erection of architectural superstructure; and (iv) civil engineering construction.

The following chart illustrates the respective share of the gross value of construction works at construction sites in Hong Kong in 2013 of the abovementioned four major works areas:

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Source: Census and Statistics Department, Hong Kong

Piling and related foundation works accounted for approximately 13.8% of the gross value of construction works at construction sites in Hong Kong for 2013.

Recent developments

Raw material prices

The principal materials utilised in the foundation works industry are concrete and steel. As cement is a major ingredient used in producing concrete, the market price of cement is related to the market price of concrete. We believe the prices generally represent the overall market price trend of cement and steel in Hong Kong as the pricing for cement and steel is not affected by the sector category of the projects.

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INDUSTRY OVERVIEW

The chart below sets out the prices of portland cement (ordinary) and steel reinforcement in Hong Kong for public sector construction projects from 2009 to 2013:

Prices of Portland Cement (Ordinary) and Steel Reinforcement in Hong Kong

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Source: Census and Statistics Department, Hong Kong

The price of portland cement (ordinary) increased from approximately HK$579 per metric tonne in January 2009 to HK$698 per metric tonne in December 2013, representing an increase of approximately 20.6%. The price of steel reinforcement, however, decreased from approximately HK$5,536 per metric tonne in January 2009 to HK$5,118 per metric tonne in December 2013, representing a decrease of approximately 7.6%.

Labour

Although the number of workers registered with the Buildings Department has increased from approximately 268,000 in 2009 to 322,000 in 2013, only approximately 21.9% of those registered workers were actively in the market as of May 2014. In addition, the construction industry is suffering from a shortage of new entrants and an ageing workforce. In 2013, of the 5,500 trainees who enrolled for various construction courses organised by the Construction Industry Council only approximately 58.2% graduated. Such graduates also require time to develop the essential skills and gain experience within the industry. Furthermore, the proportion of workers over the age of 50 has increased from approximately 36.6% in 2009 to approximately 44.8% in 2013. Consequently, Hong Kong is suffering from a shortage of skilled labour which is placing pressure on wages in the construction industry.

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INDUSTRY OVERVIEW

The chart below sets out the average daily labour wages for civil engineering contracts in Hong Kong from 2009 to 2013:

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Source: Hong Kong Census and Statistics Department

The average daily labour wage for workers in the construction industry increased from approximately HK$867 during 2009 to HK$1,178 during 2013, representing a CAGR of approximately 8.0%. Our Directors have noted the increase in wages of construction workers in recent years which corresponded to the increase in gross value of construction works in Hong Kong in recent years.

Key Growth Drivers

Housing policies in response to the growing population

Hong Kong’s population is expected to reach approximately 8.6 million by 2036. Such population growth is expected to drive the demand for residential housing in Hong Kong. The Government has set out a five-year plan to accommodate the increase in population by supplying Government land for the Urban Renewal Authority (URA) and Mass Transit Railway (MTR) projects, as well as identifying approximately 150 sites for future residential use. These are estimated to provide approximately 210,000 public and private units.

Strong demand for public infrastructure

The “Ten Major Infrastructure Projects”, commissioned by the Government, will continue to be a driver of growth in the foundation industry in Hong Kong going forward. In the 2014/15 budget announcements, the Government reiterated its commitment to further infrastructure investment.

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INDUSTRY OVERVIEW

Increase in demand for residential and commercial properties

The PRC Government launched measures to cool down the property market by placing limits on multiple-home ownership and by raising interest rates. Such measures have driven PRC investors to develop and buy properties overseas. Hong Kong is a popular destination for these investors due to its close proximity and status as a recognised international finance centre. In addition, the appreciation of the RMB has generated a favourable investment environment for property investments in Hong Kong. PRC investors contributed approximately HK$247.8 billion to the Hong Kong property market in 2012 through development and purchases.

COMPETITIVE LANDSCAPE OF THE FOUNDATION INDUSTRY IN HONG KONG

Supply of foundation services

In 2013, the five major players within the Hong Kong foundation industry had a market share by total industry revenue of approximately 41.0%. As at the Latest Practicable Date, there were [132] contractors registered with the Buildings Department to perform private foundation works, [41] companies registered as piling specialists with the Development Bureau and [13] companies registered with the Housing Authority as piling contractors.

Factors Influencing Competition

Mandatory registration, and listing

It is mandatory for contractors who wish to perform private sector foundation works in Hong Kong to be registered as a specialist contractor of foundation works under the Buildings Department. Whilst contractors who wish to perform public foundation works must be listed under the land piling category with the Development Bureau or as foundation contractors with the Housing Authority, depending on the specific project to be undertaken.

Registered specialist contractors

The table below summarises the number of specialist contractors registered with the Buildings Department for the various types of works as at the Latest Practicable Date:

Category of specialist contractors registered	Number of registered
with the Buildings Department	contractors:
Foundation	132
Demolition	100
Site Formation	171
Ventilation	174
Ground investigation field works	40

Note: Contractors are registered with the Buildings Department to provide the types of works listed above. Certain contractors are registered to provide multiple types of works.

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INDUSTRY OVERVIEW

Reputation and track record

A contractor’s reputation and credibility is a direct result of its track record with respect to timeliness of project delivery, quality of work and fulfillment of safety and environmental requirements. Therefore, quality of work is an important aspect in the foundation industry. It is important for contractors to have a good reputation within the industry in order to successfully compete for foundation contracts in Hong Kong.

Price

Price is an important concern for customers in the construction industry. Typically, those contractors that can effectively offer competitive prices and maintain a high standard of work will enhance their competitive advantage.

Market barriers to entry

Capital

Contractors in Hong Kong’s foundation industry need sufficient capital to be able to meet various expenses, such as construction materials, leasing of machinery, wages of specialists as well as payments to subcontractors. Furthermore, any delay in payment might have a negative impact on a company’s reputation. New entrants will find it difficult to compete in the market if they lack sufficient capital.

Specialised machinery

Although most machinery and equipment can be leased, having ownership or control of specialised machinery allows foundation works to be carried out in a more flexible manner whilst achieving the required deadlines and standards. However, purchasing specialised machinery such as crawler cranes, oscillators, rotators, reverse circulation drills, boring rigs, down-the-hole hammers and other related equipment needed for foundation works is capital intensive. Such significant investment needed to acquire the required specialised machinery will make it difficult for new participants to compete for contracts which require such specialised machinery to carry out the necessary foundation works.

Relationships with customers

Within Hong Kong’s construction industry, relationships play an important role in winning contracts for both main contractors and subcontractors. Customers are more likely to award projects to contractors with whom they have successfully worked on projects together. Moreover, it is important to develop good relationships with customers through performance as many tenders are introduced through referrals. Another important aspect is that many upcoming projects are known to the majority of the foundation contractors in the industry. Therefore it is important to have good relationships from which referrals, recommendations, as well as invitations to tender may result.

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INDUSTRY OVERVIEW

Specialist knowledge

In order to enter the foundation industry in Hong Kong, contractors need to possess, among other things, specialist knowledge of geology, piling methods and structural engineering. Individuals that possess the aforementioned knowledge are highly marketable and tend to be employed by established contractors in the industry as they are in short supply and command higher salaries. Furthermore, foundation contractors should possess specialist knowledge to provide ongoing supervision and professional work in accordance with the Buildings Ordinance. Foundation contractors which are unable to hire staff with the requisite technical skills or lack specialist knowledge may struggle to compete effectively.

Top five largest foundation contractors in Hong Kong

The top five foundation work contractors in Hong Kong accounted for approximately 41.0% of the total market share, while the remaining foundation contracting work companies accounted for approximately 59.0% of the total market share of total foundation business by revenue in Hong Kong in 2013.

The table below presents the top five foundation contracting companies in Hong Kong in 2013:

				Share of total	Number
			Revenue in	industry	of projects
Rank	Name of company	Headquarters	2013	revenue (%)	in 2013
			(HK$ million)
1	Competitor A	Hong Kong	2,284	12.3	10
2	Competitor B	Beijing	1,855	10.0	15
3	Competitor C	Hong Kong	1,534	8.2	11
4	Competitor D	Hong Kong	1,056	5.7	9
5	Competitor E	Hong Kong	900	4.8	7
Others			10,974	59.0
Total			18,603	100.0

Source: Ipsos Report

Notes:

(1) This table aims to show the competition between foundation contractors in the market which have a similar business model, nature of work and customers as our Group.
(2) The total revenue figure, HK$18,603 million, refers to the total revenue generated by the entire foundation industry in Hong Kong in 2013, such includes the total revenue generated by both main contractors and subcontractors.

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INDUSTRY OVERVIEW

MARKET OVERVIEW OF THE CONSTRUCTION INDUSTRY IN MACAU

The construction industry in Macau is related to the development of the gaming and hospitality industry in Macau as well as Macau Government’s investment in infrastructure to accommodate the growth in the gaming and hospitality industry as well as growing tourism.

The liberalisation of the gaming industry in Macau in 1999 prompted the development of multiple luxury resorts and casinos from 2002 to 2009, including Wynn Macau, City of Dreams, Grand Lisboa and Galaxy Macau Phase I. These developments generated strong growth in the construction industry in Macau from 2002 to 2009. During the same period a number of luxury apartments were built to cater to high-end property buyers and investors, such as The Waterside, The Manhattan, and One Central. The private sector was the primary growth driver in the Macau construction industry between 2002 and 2009.

The Macau Government has been increasing investment in the development of infrastructure from 2009 to 2014 to complement the increase in private sector spending described above. GDP increased from approximately MOP170 billion in 2009 to MOP413 billion in 2013, representing a CAGR of approximately 24.8% between 2009 and 2013. The Macau Government carried out more than 80 infrastructure improvement projects each year between 2009 and 2013, such as the construction of a comprehensive sewage and drainage system throughout Macau, the Cotai Strip, the Macau Light Rapid Transit System, a capacity upgrade of Macau International Airport, the ferry terminal in Taipa island, the new Hengqin area connecting China to Macau and the Hong Kong-Zhuhai-Macau Bridge. Macau’s GDP experienced a CAGR of approximately 19.8% from 2006 to 2013.

The chart below sets out the GDP and GDP growth rates in Macau from 2006 to 2013:

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Source: Statistics and Census Service, Government of Macao Special Administrative Region

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INDUSTRY OVERVIEW

The Macau construction industry’s role in the economy

The construction industry contributed approximately 4.7% of Macau’s GDP in 2013. The total gross output value of construction works performed by major construction contracting work companies decreased from approximately MOP30.9 billion in 2009 to approximately MOP30.5 billion in 2012, representing a negative CAGR of approximately 0.4%. The gross value of private construction works performed by main contractors in Macau decreased from approximately MOP26.3 billion in 2009 to approximately MOP18.8 billion in 2012, representing a negative CAGR of approximately 10.6%. The gross value of public construction works performed by main contractors in Macau increased from approximately MOP4.6 billion in 2009 to approximately MOP11.7 billion in 2012, representing a CAGR of approximately 36.5%. The contribution from the private sector to Macau’s total construction works has decreased from approximately 85.1% in 2009 to approximately 61.6% in 2013. On the other hand, the contribution from the public sector increased from approximately 14.9% in 2009 to approximately 38.4% in 2013.

The chart below sets out the gross value of construction works performed by main contractors in Macau from 2006 to 2012:

Gross Value of Construction Works Performed by Main Contractors in Macau

MOP billion

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

60
4.4
2.7
50
40
4.9
30 4.6
50.4 49.9 11.7
5.4
20 4.4
35.2
26.3
10
18.8
17.8 19.2
0
2006 2007 2008 2009 2010 2011 2012
Private Sector Public Sector
----- End of picture text -----

Source: Statistics and Census Service, Government of Macao Special Administrative Region

Future Trends

The total gross output value of construction works performed by contractors at construction sites in Macau is forecast to grow from 2015 to 2019. The privately funded construction of major luxury hotels including the Parisian by Sands China and the hotel project for MGM China Holdings Limited, the Macau Government’s investment in new infrastructure, such as the Guangdong-Macao border-crossing as well as its policies to increase public housing development north of Taipai will continue to drive the growth of the construction industry in Macau.

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INDUSTRY OVERVIEW

The table below sets out the primary planned and ongoing private development projects in Macau:

			(Estimated)
			Completion
Project Name	Owner	Start Date	Date
The Parisian	Sands China Limited	2012	2015
Galaxy Phase 2	Galaxy Entertainment Group Limited	2012	2015
Galaxy Phase 3 & 4	Galaxy Entertainment Group Limited	2014	2018
MGM Cotai	MGM China Holdings Limited	2012	2016
Wynn Palace	Wynn Resorts, Limited	2012	2016
Wynn Diamond	Wynn Resorts, Limited	2013	2016
(Cotai Phase II)
Studio City	Melco Crown Entertainment Limited	2012	2015
City of Dreams (fifth	Melco Crown Entertainment Limited	2013	2017
hotel Cotai)
Louis XIII Hotel Casino	Louis XIII Holdings Limited	2013	2016
Jai Alai Palace building	SJM Holdings Limited	2013	2014
Lisboa Palace	SJM Holdings Limited	2014	2017

Sources: Ipsos research and analysis

The demand for private luxury apartments has risen in Macau due to the increase in the disposable income of Macau residents. The per capita GDP in Macau increased from approximately HK$308,000 in 2009 to HK$677,000 in 2013, representing a CAGR of approximately 21.8%. The average price per sq. m. of residential units by usable area in Macau grew from approximately HK$21,000 in 2009 to HK$78,000 in 2013, representing a CAGR of approximately 38.8%. This growth in the average price per sq. m. of residential units in Macau indicates that the demand for luxury apartments has increased.

Macau Government policies and regulations

Public Housing Program

In 2008 the Macau Government announced a scheme to build up to 19,000 housing units. The “19,000 Units” construction program was completed at the end of 2013. In its 2014 policy address the Macau Government announced that it would execute the planning phase of its “Post-19,000 Units” program. This program also requires significant improvements to areas such as transportation, education and healthcare facilities, amongst others.

Healthcare system

According to Macau’s 2014 policy address, in order to strengthen existing services and enhance support for the elderly, the Macau Government plans to speed up the construction of new senior homes as well as expand existing senior homes. Additionally, Phase I and Phase II of the second public hospital and the Islands District Medical Complex, is expected to be completed by 2017.

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INDUSTRY OVERVIEW

Infrastructure development

The Macau Government is determined to develop the city’s infrastructure to accommodate the future growth of the economy. Between 2009 and 2013 multiple construction projects including the building of community centers, roads, prisons, fire stations, temples, sewage systems, slopes and hospitals were completed. Further developments are currently being initiated. For example, The Macau Light Rapid Transit System, a large scale infrastructure project first proposed in 2003, aims to provide more transport links between the Macau Peninsula, Taipa and Cotai, with a total of 21 stations completed over two phases. Furthermore, the commencement of the first stage of construction of the new Guangdong-Macao border-crossing project is expected in 2015. The Macau Government continues to improve cooperation with the PRC through several cross-border infrastructure projects.

The Macau Government increased gross infrastructure investment from approximately MOP1.6 billion in 2009 to MOP2.9 billion in 2012, representing a CAGR of approximately 21.9%. Future infrastructure development initiated by the Macau Government will continue to drive construction industry growth.

The chart below sets out the gross value of infrastructure investment made by the Macau Government from 2006 to 2012:

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Source: Statistics and Census Service, Government of Macao Special Administrative Region

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INDUSTRY OVERVIEW

MARKET OVERVIEW OF THE FOUNDATION INDUSTRY IN MACAU

The foundation industry in Macau has been supported by the growth of the gaming and hospitality industry. Casinos and hotels, such as those that exist on the Cotai Strip, have been the key focus of the foundation industry. Urban renewal and redevelopment of the western parts of the Macau Peninsula as well as the urban development in Taipa and Coloane has driven demand for residential buildings and infrastructure in those areas. The total gross output value of the foundation industry in Macau increased from approximately HK$4.1 billion in 2009 to approximately HK$4.8 billion in 2013, at a CAGR of approximately 4.0%.

Driven concrete piles, prestressed concrete piles, and H-piles, were the traditional primary foundations used in the foundation industry in Macau. However, between 2005 and 2014, more environmentally friendly foundations aimed at minimising noise pollution have been adopted by the industry, such as drilled piles and bored piles.

There were approximately 800 construction contractors registered with the DSSOPT with a portion of them headquartered in Hong Kong. Large scale Macau construction projects have been undertaken by Hong Kong contractors. These contractors are typically staffed by a combination of Macau and Hong Kong workers.

The following chart illustrates the respective share of the gross value of construction works at construction sites in Macau in 2012 of each of the four primary works areas, namely:

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Source: Statistics and Census Service, Government of Macao Special Administrative Region

Other specialised construction works including foundation works accounted for approximately 13.5% of the gross value of construction works at construction sites in Macau for 2013.

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INDUSTRY OVERVIEW

Licenses and qualifications

In order to perform construction and foundation works in Macau, contractors are required to obtain a business license from the Commercial Registry Office and the Macau Finances Services Bureau as well as register with the DSSOPT. Foundation contractors require the same license or qualification as that of construction contractors since there is no specific license or qualification for carrying out foundation works.

Recent Developments

Raw material prices

The PRC, a key market for iron ore, has maintained a significant demand for steel since the financial crisis of 2008. However, since 2011 a slowdown in demand from the PRC has reduced the price of steel in the PRC and in turn Macau. Portland cement (ordinary) has experienced similar price pressures to those experienced in Hong Kong. The average price of portland cement (ordinary) has increased from approximately MOP649 per metric tonne in 2009 to approximately MOP755 per metric tonne in 2013, representing a CAGR of approximately 3.9%. The average price of round reinforcing steel bar has increased from approximately MOP4,429 per metric tonne in 2009 to approximately MOP5,151 per metric tonne in 2013, representing a CAGR of approximately 3.8%.

The chart below sets out the average price of steel reinforcement and portland cement (ordinary) in Macau from 2009 to 2013:

Average Price of Portland Cement (Ordinary) and Steel Reinforcement in Macau

Source: Statistics and Census Survey, Government of Macao Special Administrative Region

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INDUSTRY OVERVIEW

Labour

The construction industry in Macau has recently experienced increased competition for both skilled and unskilled labour due to the growth of the construction sector. The average daily wage of construction workers in Macau increased from approximately MOP535 in 2009 to approximately MOP624 in 2013, representing a CAGR of approximately 3.9%.

The chart below sets out the index of average labour wages of construction workers in Macau from 2009 to 2013:

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Source: Statistics and Census Survey, Government of Macao Special Administrative Region

Key Growth Drivers

Tourism

The total number of visitors travelling to Macau increased from approximately 21.8 million in 2009 to approximately 29.3 million in 2013, representing a CAGR of approximately 7.7%. This increase was primarily attributable to the expansion of the Individual Visit Scheme implemented in July 2003, under which PRC residents of certain cities can visit Hong Kong and Macau. Since April 2009, Shenzhen residents have been allowed to apply for multi-entry permits to visit Hong Kong and Macau. Since March 2010, residents of all 21 cities in Guangdong Province and 28 other cities, including amongst others, Beijing, Shanghai, Tianjin, Chongqing, Nanjing, Suzhou, Wuxi, Hangzhou, Ningbo and Taizhou, have been able to visit Hong Kong and Macau on an individual basis. As a result of the expansion of the geographical coverage of the Individual Visit Scheme, the number of PRC tourists visiting Macau increased from approximately 11.0 million in 2009 to approximately 18.6 million in 2013, representing a CAGR of approximately 14.0%.

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INDUSTRY OVERVIEW

Population expansion

The construction of residential buildings has traditionally been one of the primary segments in the construction industry in Macau. As a result of population expansion, the demand for residential buildings has further increased. The number of residents in Macau grew from approximately 542,200 in 2009 to 607,500 in 2013, representing a CAGR of approximately 2.9%. This increase was primarily due to the rising number of immigrants from the PRC to Macau during this period. The population increase should continue to drive the demand for residential buildings and in turn the foundation industry in Macau.

The chart below sets out the completion of private residential units during the period from 2006 to 2013:

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Sources: Statistics and Census Service, Government of Macao Special Administrative Region, Ipsos Research and analysis

The number of newly completed private residential housing units in Macau decreased from approximately 3,096 units in 2009 to 1,055 units in 2013, representing a negative CAGR of approximately 23.6%. Such decrease was primarily a result of the measures implemented by the Macau Government in order to cool down the property market.

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INDUSTRY OVERVIEW

The chart below sets out the completion of public residential units during the fiscal years from 2008/09 to 2012/13:

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Sources: Statistics and Census Service, Government of Macao Special Administrative Region, Ipsos Research and analysis

The total number of the public housing units in Macau increased from approximately 1,136 units in 2009 to 9,515 units in 2013, representing a CAGR of approximately 70.1%. Such increase was due to the Macau Government’s determination to increasing the housing supply in Macau. The large increase in public housing was a result of the “19,000 Units” program set out above in the paragraph headed “Industry Overview - Macau Government policies and regulations: Public Housing Program”.

COMPETITIVE LANDSCAPE OF THE FOUNDATION INDUSTRY IN MACAU

Factors Influencing Competition

Necessary licenses for conducting public foundation works

In order to perform foundation works in Macau, contractors are required to obtain business licenses from the Commercial Registry Office and the Macau Finances Services Bureau, and to be registered under the DSSOPT. Contractors are divided into three categories based on the value of the public construction works which one is permitted to undertake. Competition is therefore limited to licensed construction companies.

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INDUSTRY OVERVIEW

Reputation and track record

A key factor to compete for foundation projects in Macau is the ability to deliver projects in a timely manner, since delays could result in losses to contractors and customer’s. As there are no specific licenses or qualifications to indicate the quality and capability of a contractors work, customers evaluate a contractor’s capabilities based on their track record. Other aspects of consideration include the quality of work, price, safety and environmental impact. A successful track record can increase the likelihood of securing projects.

Market barriers to entry

Specialised machinery

Various piling machines are needed for different piling works. As piling works differ according to soil and the geological conditions relevant to each project, significant investment in various types of specialised machines increases the amount of initial capital required to adequately compete for tenders. Furthermore, contractors would require sufficient capital in order to maintain sufficient machinery to fulfill the requirements and timelines of various projects. This can pose barriers for new foundation contractors to enter the industry.

Maintenance costs

The foundation industry requires specialised machinery and equipment. Machine manufacturers are primarily from Europe, the United States of America and Japan. The ongoing maintenance, replacement or repairing of machines to ensure the timely meeting of deadlines is a capital intensive exercise. The capital requirements for newly established foundation companies can be a barrier to entry.

Relationships with customers in Macau

No specific license or qualification is needed for contractors to carry out foundation works in Macau, contractors only require a business license from the Commercial Registry and be registered with the DSSOPT, as set out above under the paragraph headed “Industry Overview – Competitive Landscape of the Foundation Industry in Macau – Factors Influencing of Competition: Necessary licenses for conducting public foundation works”. As a result, having well-established relationships with customers is beneficial for foundation contractors to compete for projects. The top five foundation contractors in Macau accounted for over 35% of the market in 2013. Moreover, private developers invite contractors to bid for tenders. A number of main contractors are affiliated with major property developers. This increases the likelihood of theses contractors and property developers working together in the future. New entrants have difficulty competing for contracts as a result of weak or no relationships when they first enter the market.

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INDUSTRY OVERVIEW

Market Opportunities and Threats

Investment in infrastructure

The Macau Government has increased infrastructure spending from approximately MOP1.6 billion in 2009 to approximately MOP2.9 billion in 2012, representing a CAGR of approximately 21.9%. Given the data set out above in the section headed “Industry Overview – Market Overview of the Construction Industry in Macau” and the growth experienced by the economy of Macau, infrastructure investment by the Macau Government should continue to increase in future.

Number of residents in Macau

The demand for residential accommodation is being driven by the increase in the number of residents in Macau due to the natural growth of the local population, new immigrants and foreign workers. With the increasing number of hotels and casinos, job opportunities are being created, attracting foreign workers to Macau. The increase in foreign workers, together with the increase in immigrants and the local population should continue to drive the demand for housing, prompting both the Macau Government and private developers to build more accommodation in Macau, benefitting the construction industry in Macau.

Labour supply

As of early 2013, the number of migrant workers employed in the construction industry in Macau was over 15,000. Inadequate supply of construction labour has been a concern for the construction industry in Macau since 2011, rising demand for construction services, including piling and related foundation services, continues to put pressure on construction costs as set out above in the paragraph headed “Industry Overview- Market Overview of the Foundation Industry in Macau - Recent Developments: Labour”.

Dependence on private projects in the Macau construction industry

The current construction projects in the Cotai Strip, such as the Parisian, MGM hotel project and the Lisboa Palace are expected to be completed by 2019. Upon completion of these large-scale private construction projects, the construction industry in Macau would likely depend on public construction projects to sustain growth.

Top five foundation contracting work companies in Macau

The top five foundation contracting companies in Macau, which are licensed with Commercial Registry Office and the Macau Finances Services Bureau, and registered under the DSSOPT account for approximately 38.1% of the total market share by revenue in 2013, whilst the remaining foundation contracting work companies account for the remaining 61.9% of the total market share in 2013.

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INDUSTRY OVERVIEW

The table below presents the top five foundation contracting work companies in Macau in 2013:

Top five Foundation Contracting Work Companies in Macau

				Share of total	Number
	Name of		Revenue	industry	of projects
Rank	Company	Headquarters	in 2013	revenue (%)	in 2013
			(HK$ million)
1	Competitor A	Hong Kong	595	12.4	3
2	Our Group	Hong Kong	426_(Note 2)_	8.9	1
3	Competitor F	Hong Kong	389	8.1	2
4	Competitor G	Hong Kong	211	4.4	2
5	Competitor H	Hong Kong	204	4.3	1
Others			2,958	61.9
Total			4,783_(Note 3)_	100.0

Source: Ipsos Report

Notes:

(1) This table aims to show the competition between foundation contractors in the market which have a similar business model, nature of work and customers as our Group.
(2) The revenue figure is base on a calendar year (i.e. 1 January to 31 December), which is different from our Group’s financial year (i.e. 1 April to 31 March).
(3) The total revenue figure, HK$4,783 million, refers to the total revenue generated by the entire foundation industry in Macau in 2013, this includes the total revenue generated by both main contractors and subcontractors.

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LAWS AND REGULATIONS

OVERVIEW

Our Group is principally engaged in the provision of (i) foundation works, including the construction of bored piles, rock socketed H-piles and excavation and lateral support works; and (ii) ancillary services, including site investigation and removal of installed piles. Historically and up until the year ended 31 March 2012, our Group undertook foundation works and ancillary services for construction projects in Hong Kong only. Subsequently, in December 2012, our Group entered into the Macau construction market and was awarded a contract for foundation works and ancillary services based in Macau, namely the Hotel Tower Project. We are therefore principally subject to the relevant laws, rules and regulations of both Hong Kong and Macau. This section sets out summaries of certain aspects of Hong Kong and Macau laws, rules and regulations which are relevant to our operations and business.

HONG KONG LAWS AND REGULATIONS

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 the industrial sector. Under the Factories and Industrial Undertakings Ordinance, it is the duty of the proprietor of an industrial undertaking to ensure, 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 in particular:

providing and maintaining plant and work systems that do not endanger safety or health;
making arrangements for ensuring safety and health in connection with the use, handling, storage or transport of articles and substances;
providing all necessary information, instructions, training and supervision for ensuring safety and health;
providing and maintaining safe access to and egress from the workplaces; and
providing and maintaining a safe and healthy working environment.

A proprietor who contravenes any of these requirements commits an offence and is liable to a fine of HK$500,000. A proprietor who contravenes any of these requirements wilfully and without reasonable excuse commits an offence and is liable to a fine of HK$500,000 and to imprisonment for six months.

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LAWS AND REGULATIONS

Matters regulated under the subsidiary regulations of the Factories and Industrial Undertakings Ordinance, including the Construction Sites (Safety) Regulations (Chapter 59I of the Laws of Hong Kong), include (i) the prohibition of employment of persons under 18 years of age (save for certain exceptions); (ii) the maintenance, inspection and operation of hoists; (iii) the duty of contractors responsible for construction site to ensure safety of places of work; (iv) prevention of falls; (v) safety of excavations; (vi) the duty of contractors responsible for construction site to comply with miscellaneous safety requirements; and (vii) provision of first aid facilities. Non-compliance with any of these rules commits an offence and different levels of penalty will be imposed. A contractor guilty of the relevant offence could be liable to a fine up to HK$200,000 and to imprisonment up to 12 months.

Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong)

The Occupational Safety and Health Ordinance provides for the protection of safety and health to employees in workplaces, both industrial and non-industrial.

Employers must as far as reasonably practicable, ensure the safety and health at work of all their employees by (including but without limitation):

providing and maintaining plant and systems of work that are safe and without risks to health;
making arrangements for ensuring safety and absence of risks to health in connection with the use, handling, storage or transport of plant or substances;
providing all necessary information, instructions, training and supervision for ensuring safety and health;
as regards any workplace under the employer’s control:
maintenance of the workplace in a condition that is safe and without risks to health; and
provision and maintenance of means of access to and egress from the workplace that are safe and without any such risks; and
providing and maintaining a working environment for their employees that is safe and without risks to health.

Failure to comply with any of the above provisions constitutes an offence and the employer is liable on conviction to a fine of HK$200,000. An employer who fails to do so intentionally, knowingly or recklessly commits an offence and is liable on conviction to a fine of HK$200,000 and to imprisonment for 6 months.

The Commissioner for Labour may also issue (i) an improvement notice against any noncompliance of this Ordinance or the Factories and Industrial Undertakings Ordinance; or (ii) a suspension notice against an employer if in general an activity is undertaken at the workplace which may create an imminent hazard to the employees. Failure to comply with such notice without reasonable excuse constitutes an offence punishable by a fine of HK$200,000 and HK$500,000, respectively and imprisonment of up to 12 months.

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LAWS AND REGULATIONS

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

The Employees’ Compensation Ordinance establishes a no-fault and non-contributory employee compensation system for work injuries and lays down the rights and obligations of employees and employers respectively in respect of accidents arising out of and in the course of employment, or in respect of prescribed occupational diseases suffered by the employees.

Under the Employees’ Compensation Ordinance, an employee who suffers incapacity or death arising from an occupational disease and is due to the nature of his employment in which the employee was employed at any time within the prescribed period is entitled to compensation.

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

Pursuant to section 40 of the Employees’ Compensation Ordinance, all employers (including principal contractors and sub-contractors) 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). Where a principal 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 his sub-contractor(s) under the Employees’ Compensation Ordinance and at common law.

An employer who fails to comply with this Ordinance to secure an insurance cover commits an offence and is liable on conviction upon indictment to a fine at level 6 and to imprisonment for 2 years.

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

A principal contractor shall be subject to the provisions on sub-contractor’s employees’ wages under the Employment Ordinance. According to section 43C of the Employment Ordinance, (i) a principal contractor is, or (ii) a principal contractor and every superior sub-contractor are jointly and severally, liable to pay any wages that become due to an employee who is employed by a sub-contractor on any work which the sub-contractor has contracted to perform, and such wages are not paid within the period specified in the Employment Ordinance. Such liability shall be limited to (a) the wages of an employee whose employment relates wholly to the work which the principal contractor has contracted to perform and whose place of employment is wholly on the site of the building works; and (b) the wages due to such an employee for two months (such months shall be the first two months of the period in respect of which the wages are due). According to section 43D of the Employment Ordinance, an employee who has outstanding wage payments from the sub-contractor must serve notice in writing on the principal contractor within 60 days after the wage due date. A principal contractor and superior sub-contractor (where applicable) shall not be liable to pay any wages to the employee of the sub-contractor if that employee fails to serve the required notice on the principal contractor.

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LAWS AND REGULATIONS

Upon receipt of such notice from the relevant employee, a principal contractor shall, within 14 days after receipt of notice, serve a copy of the notice on every superior sub-contractor to that sub-contractor (where applicable) of whom he is aware. A principal contractor who, without reasonable excuse, fails to serve notice on every superior sub-contractor shall be guilty of an offence and shall be liable on conviction to a fine at level 5.

Pursuant to section 43F of the Employment Ordinance, if a principal contractor or superior subcontractor pays to an employee any wages under section 43C of the Employment Ordinance, the wages so paid shall be a debt due by the employer of that employee to the principal contractor or superior sub-contractor, as the case may be. The principal contractor or superior sub-contractor may either (i) claim contribution from every superior sub-contractor to the employee’s employer or from the principal contractor and every other such superior sub-contractor as the case may be; or (ii) deduct by way of setoff the amount paid by him from any sum due or may become due to the sub-contractor in respect of the work that he has sub-contracted.

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

The Occupiers Liability Ordinance regulates the liability of persons occupying or having control of premises for injury or damages resulting to persons or goods lawfully on the land or other property from dangers.

The Occupiers Liability Ordinance imposes a common duty of care on an occupier of premises to take such care as in all the circumstances, it is reasonable to see that visitor will be reasonably safe in using 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)

According to section 38A of the Immigration Ordinance, a construction site controller (i.e. the principal or main contractor and includes a sub-contractor, owner, occupier or other person who has control over or is in charge of a construction site) shall take all practicable steps to (i) prevent 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 commits an offence and is liable to a fine of HK$350,000.

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 managing air quality. Subsidiary regulations of the Air Pollution Control Ordinance impose control on air pollutant emissions from certain operations through the issue of licences and permits.

A contractor shall observe and comply with the Air Pollution Control Ordinance and its subsidiary regulations, including without limitation 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). For instance, 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.

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LAWS AND REGULATIONS

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

Under the Air Pollution Control (Construction Dust) Regulation, “construction work” includes but not limited to the construction, demolition and reconstruction of the whole or any part of any building or other structure and site formation. 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” includes site formation, reclamation, demolition of a building; work carried out in any part of a tunnel that is within 100 m of any exit to the open air, construction of the foundation of a building, construction of the superstructure of a building or road construction work.

Under section 4 of the Air Pollution Control (Construction Dust) Regulation, the contractor responsible for a 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.

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

The Noise Control Ordinance regulates, among others, the noise from construction 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 Noise Control Authority in advance. The carrying out of percussive piling is prohibited between 7:00 p.m. and 7:00 a.m. or at any time on general holidays.

Under the Noise Control Ordinance, construction works that use powered mechanical equipment (other than percussive piling) 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 Noise Control Authority 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 Noise Control Authority.

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 a second or 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.

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LAWS AND REGULATIONS

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

The Water Pollution Control Ordinance provides the main statutory framework for the declaration of water control zones to cover the whole of Hong Kong and the establishment of water quality objectives. For any industry/trade generating wastewater discharge (except domestic sewage that is discharged into communal sewers or unpolluted water into stormwater drains, river courses and water bodies), they are subject to licensing control by the Director of the Environmental Protection Department.

The licence specifies the requirements relevant to the discharge, e.g. the effluent standards and the discharge location.

According to the Water Pollution Control Ordinance, unless being licensed 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 in addition, if the offence is a continuing offence, to 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 regulates 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 into and from Hong Kong is generally controlled through a permit system.

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 prescribed charges for the construction waste generated from the construction work under that contract.

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.

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LAWS AND REGULATIONS

Dumping at Sea Ordinance (Chapter 466 of the Laws of Hong Kong)

Under the Dumping at Sea Ordinance, anyone involved in marine dumping and related loading operations are required to obtain permits from the Director of the Environmental Protection Department.

Under the Dumping at Sea Ordinance, a person who except under and in accordance with a permit, does anything or causes or allows another person to do anything for which a permit is needed commits an offence and is liable on conviction to a fine of HK$200,000 and to imprisonment for 6 months on a first conviction; and to a fine of HK$500,000 and to imprisonment for 2 years on a second or subsequent conviction; and in addition, to a further fine of HK$10,000 for each day that the court is satisfied that the operation has continued.

Environmental Impact Assessment Ordinance (Chapter 499 of the Laws of Hong Kong)

The Environmental Impact Assessment Ordinance is to avoid, minimise and control the adverse environmental impacts from designated projects as specified in Schedule 2 of the Environmental Impact Assessment Ordinance (for example, public utility facilities, certain large-scale industrial activities, community facilities, etc.) through the application of the environmental impact assessment process and the environmental permit system prior to their construction and operation (and decommissioning, if applicable), unless otherwise exempted.

According to the Environmental Impact Assessment Ordinance, a person commits an offence if he constructs or operates a designated project as listed in Part I of Schedule 2 of the Environmental Impact Assessment Ordinance (which includes roads, railways and depots, dredging operation, residential and other developments, etc.) or decommissions a designated project listed in Part II of Schedule 2 of the Ordinance without an environmental permit for the project; or contrary to the conditions, if any, set out in the permit. The offender is liable (a) on a first conviction on indictment to a fine of HK$2,000,000 and to imprisonment for 6 months; (b) on a second or subsequent conviction on indictment to a fine of HK$5,000,000 and to imprisonment for 2 years; (c) on a first summary conviction to a fine at level 6 and to imprisonment for 6 months; (d) on a second or subsequent summary conviction to a fine of HK$1,000,000 and to imprisonment for one year, and in any case where the offence is of a continuing nature, the court or magistrate may impose a fine of HK$10,000 for each day on which he is satisfied the offence continued.

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LAWS AND REGULATIONS

Laws and Regulation in relation to Contractions Work in Hong Kong

Building Ordinance (Chapter 123 of the Laws of Hong Kong)

Under the Buildings Ordinance, “building works” includes any kind of building construction, site formation works, ground investigation in the scheduled areas, foundation works, repairs, demolition, alteration, addition and every kind of building operation, and includes drainage works. Section 8A(2) of the Buildings Ordinance empowers the Directors of Buildings to specify, by notice in the Gazette, different categories of building works as specialised works that are required to be carried out by registered specialist contractors and to maintain sub-registers in the register of specialist contractors for the different categories. Currently, there are five categories of works designated as specialised works, namely, demolition works; foundation works; ground investigation field works; site formation works; and ventilation works. Under section 8B(2) of the Buildings Ordinance, an applicant for registration as a registered specialist contractor must satisfy the Directors of Buildings on the following aspects: (i) if it is a corporation, the adequacy of its management structure; (ii) the appropriate experience and qualifications of its personnel; (iii) its ability to have access to plant and resources; and (iv) the ability of the person appointed to act for the applicant for the purposes of the Buildings Ordinance to understand building works and street works through relevant experience and a general knowledge of the basic statutory requirements. At the same time, an applicant for registration as a specialist contractor must satisfy the Directors of Buildings that he has the necessary experience and, where appropriate, professional and academic qualifications, to undertake work in the specialist category.

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

Construction Workers Registration Ordinance requires construction workers to be registered for carrying out construction work on a construction site.

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 prior to 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 work is, or is to be, carried out. Under section 40 of the Construction Workers Registration Ordinance, no person shall be registered as a registered construction worker unless the Registrar of Construction Workers is satisfied, inter alia, that the person has attended the relevant construction work-related safety training course. Further, under section 44 of the Construction Workers Registration Ordinance, the Registrar of Construction Workers shall not renew the registration of a person unless the Registrar of Construction Workers is satisfied that, amongst others, (i) the person has attended the relevant construction work-related safety training course and (ii) if the registration will, on the date of its expiry, have been in effect for not less than 2 years, the person has attended and completed, during the period of 1 year immediately before the date of application for renewal of the registration, such development courses applicable to his registration as the Construction Industry Council may specify.

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LAWS AND REGULATIONS

Requirements for contractor registration/listing in Hong Kong

In order to be eligible to carry out foundation works in Hong Kong, contractors must obtain registrations/listings from relevant Government bodies/public organisations. Each relevant Government body/public organisation has its own requirements that contractors must comply with. The relevant requirements that are applicable to our Group’s foundation business and our Group’s registration/listing status as at the Latest Practicable Date are set forth below:

	Month and
	year of first		Size of project which
Government department/	registration/listing	Level/category	our Group is
organisation	by the organisation	of listing	eligible to undertake	Registered entity
Buildings Department	June 2000	Registered Specialist	Unlimited	SW Bore Pile
(Note 1)	(Note 3)	Contractors – Foundation	(Note 4)
		Category
Development Bureau	November 2001	Approved Suppliers of	Unlimited	SW Bore Pile
(Note 2)	(Note 3)	Materials and Specialist
		Contractors for Public
		Works – Land Piling
		(Group II)-Large
		Diameter Bored Pile
		(with bell-out)
Housing Authority	April 2002	Piling Contractors – Large	Unlimited	SW Bore Pile
	(Note 3)	Diameter Bored Piling
		Category

Notes

Under the Buildings Ordinance, foundation works is a category of building works which is designated as specialised works required to be carried out by registered specialist contractors.
Listing with the Development Bureau is required for carrying out public works
Listing with the Development Bureau does not have any expiry date. Listing with the Housing Authority is subject to annual review for retention, which will normally be conducted in March or April each year. Registration under the Buildings Department has an expiry date and a registration renewed normally expires on the expiry of 3 years beginning on the date of the expiry of the previous registration. The current registration of SW Bore Pile with the Buildings Department will be due for renewal on 7 June 2015.
The relevant registration with the Buildings Department does not specify any tender limit.

Private sector construction projects in Hong Kong

Private sector construction projects cover projects launched by private developers as well as any other entities not being Government and its related organizations and institutional bodies.

In order to undertake private sector foundation works as a main contractor, a foundation contractor must be registered under the Buildings Ordinance with the Buildings Department as a registered specialist contractor – foundation works category, unless the main contractor subcontracts those works to a registered specialist contractor – foundation works category.

The registration requirements mentioned above are the basic statutory requirements for undertaking private sector foundation construction projects. In addition to these, other requirements on the main contractors or subcontractors may be imposed by the developers, main contractors, or other entities, as the case may be.

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LAWS AND REGULATIONS

The Buildings Department imposes specific requirements on the qualifications and experience of the key personnel of a registered specialist contractor. The contractor must assign a technical director who must fulfill one of the five alternative sets of requirements as to qualification and experience. For new applicants, where the technical director does not possess relevant university degree or equivalent qualification, he must have at least eight years of experience in managing a building contractor company. For new applicants, the authorised signatory appointed by the contractor to act for it for the purposes of the Buildings Ordinance should have a minimum of five years’ experience in foundation works. He must have worked on at least seven foundation projects in Hong Kong for an aggregate period of not less than 18 months, with the endorsement by an authorised person (being those persons who are qualified to perform the duties and functions of an authorised person in accordance with the Buildings Ordinance), registered structural engineer, registered contractor, government architects, engineers or surveyor of the foundation projects. He must also possess at least a higher certificate, diploma or equivalent qualification relevant to construction technology such as architecture, building studies, building surveying, civil engineering and structural engineering.

SW Bore Pile has satisfied the above-mentioned requirements during the Track Record Period and up to the Latest Practicable Date.

Public sector construction projects in Hong Kong

Buildings Department

Similar to the private sector, registration with the Buildings Department is a requirement for contractors to undertake foundation works in the public sector. In order to undertake public sector foundation works as main contractor, a contractor must be registered with the Buildings Department as a registered specialist contractor under the categories of foundation works, unless the main contractor subcontracts those works to a registered specialist contractor as described below.

Where the main contractor engages a registered specialist contractor under the categories of foundation works to undertake foundation works, irrespective of whether such foundation works form the whole or part of the contract works, the main contractor itself would not be required to be a registered specialist contractor under the relevant category.

Subcontractors undertaking foundation works are required to be registered specialist contractors under the categories of foundation works.

The registration requirements mentioned above are the basic requirements for undertaking public sector foundation works projects.

As at the Latest Practicable Date, the number of “Registered Specialist Contractors (Foundation Works)” registered with the Buildings Department totalled to [132].

In order to undertake public sector foundation works under the Development Bureau and the Housing Authority, a foundation contractor must be further registered with the following organisations:

Development Bureau

The ASD, Buildings Department, Civil Engineering and Development Department, Drainage Services Department, Electrical & Mechanical Services Department, Lands Department, Land Registry, Planning Department and Water Supplies Department fall under the administration of the Development Bureau. As at the Latest Practicable Date, the number of contractors included in the Development Bureau’s “List of Approved Suppliers of Materials and Specialist Contractors for Public Works” for land

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LAWS AND REGULATIONS

piling works was [41]. The requirements to tender for projects of these departments normally include the listing of the contractor with the Development Bureau.

If a contractor wishes to carry out foundation works of unlimited value in the public sector, it must be included in the “List of Approved Suppliers of Materials and Specialist Contractors for Public Works” which is administered by the Development Bureau under the category of “Land Piling, Group II” in respect of the relevant piling system. The scope of work covers design, supply and installation of registered piling systems on land. As at the Latest Practicable Date, the number of contractors included under Group II of the “Land Piling” category for large diameter bored piles (with bell-out) was [13].

Registration under “Land Piling, Group II” of the “List of Approved Suppliers of Materials and Specialist Contractors for Public Works” covers 11 kinds of piling system: Barrette Pile, Hand Dug Caisson, Precast Concrete Pile, Large Diameter Bored Pile, Minipile, Non-Percussion Cast-in-situ Concrete Pile, Percussion Cast-in-situ Concrete Pile, Precast Prestressed Tubular Pile, Rock socketed Steel H-pile in Pre-bored Hole, Steel H-Pile and Steel Tubular Pile. The requirements for registration under each kind of piling system are basically the same except that the contractor seeking registration will have to provide the method statement, typical calculations, acceptable references and satisfactory demonstration on site in respect of that particular kind of piling system.

1. Contractor’s requirement

In approving a listing application by a foundation contractor, the Development Bureau takes into consideration the contractor’s financial strength, technical experience and management capability.

All Land Piling Group II Specialist Contractors under the “List of Approved Suppliers of Materials and Specialist Contractors for Public Works” are required to obtain a quality management systems certification, such as ISO 9001 certification, in order to remain on the list. Certification should cover the design and construction of the relevant foundation works. SW Bore Pile possesses the requisite qualification.

2. Employee’s requirement

At least one member of the resident top management (the president, chairman, director, managing director, executive director or general manager) of the contractor shall have a minimum of five years’ local experience in managing a construction firm obtained in the past eight years.

Moreover, at least two persons of the technical staff of the contractor must hold a relevant degree from a Hong Kong university or equivalent with at least five years post-graduate local experience in piling works.

SW Bore Pile has satisfied the above-mentioned requirements during the Track Record Period and as at the Latest Practicable Date.

3. Job experience of contractor

The contractor must have at least completed (within the past 5 years) three medium size or large size local projects (over HK$3.0 million each) for each of the relevant registered piling systems and experience as main contractor.

The admission and retention on the approved lists depends on meeting the above-mentioned criteria.

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LAWS AND REGULATIONS

Housing Authority

The Housing Department is the works department for the Housing Authority and therefore the registration requirement for the Housing Department projects follows that of the Housing Authority.

If a contractor wishes to tender for large diameter bored piling works administered by the Housing Authority, it is normally a prerequisite that the contractor is included in the “Housing Authority List of Piling Contractors” under the Large Diameter Bored Piling Category. Contractors on the list are eligible to tender for contracts of unlimited values. As at the Latest Practicable Date, the number of contractors registered with the Housing Authority under “Housing Authority List of Piling Contractors” was 13 (out of which six contractors were registered under both Large Diameter Bored Piling and Percussive Piling Category, four contractors were registered under the Large Diameter Bored Piling Category only and three contractors were registered under the Percussive Piling Category only.

1. Contractor’s requirement

In order to be admitted and retained on the list, a contractor shall be a registered specialist contractor – foundation category under the Buildings Ordinance. The contractor is required, among other things, to own at least nine crawler cranes (each of capacity not less than 70 tons), six oscillators/rotators (each of size not less than 2.5 metre diameter), six hammer grabs, six rock chisels and three reverse circulation drills (each of size not less than 2.5 metre diameter), and to hold current ISO 9001, ISO 14001 and OHSAS 18001 certificates and to have a management team with specified qualification and experience. SW Bore Pile possesses the requisite qualifications.

2. Employee’s requirement

A contractor shall run a team with at least one technical director registered in Buildings Department, one project manager registered with the Buildings Department as authorised signatory, four technically competent persons (two of grades T4 and two of grades T2), four piling operatives and five piling equipment operators. SW Bore Pile possesses the requisite team.

3. Job experience of contractor

For a contractor applying for listing in the large diameter bored piling category, amongst others, its work records should show completion of at least two contracts of such category in the preceding three years and the value of each of these contracts shall not be less than HK$40.0 million.

Listing under the Housing Authority is subject to annual review for retention, which will normally be conducted in March or April each year.

In addition to the Large Diameter Bored Piling category, the “Housing Authority List of Piling Contractors” has a second works category, the Percussion Piling category. The listing requirements in respect of machinery and equipment, employees and experience for this second category are different from those set forth above, and are specific to the nature of this second category of works.

Since SW Bore Pile obtained its listing with the Buildings Department, the Development Bureau and the Housing Authority and up to the Latest Practicable Date, SW Bore Pile has never been de-listed from the said governmental departments or authorities.

Save as disclosed in this section, our Group has not been registered with any other public authorities or the MTR Corporation Limited.

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LAWS AND REGULATIONS

ISO 9001, ISO 14001 and OHSAS 18001 certification

Each of ISO 9001, ISO 14001 and OHSAS 18001 certification currently carries a duration of three years within which period surveillance audits are conducted by the certification body twice every year to review the implementation of the relevant quality system for compliance. After such three year period, each of the ISO 9001, ISO 14001 and OHSAS 18001 certification is to be further certified subject to successful implementation of a renewal audit by the certification body.

The scope of the certificates of SW Bore Pile cover the below standard:

ISO 9001:2008 Management system of SW Bore Pile for the design and construction of large diameter bored pile (with bell out) and rock-socketed steel H-pile in pre-bored hole ISO 14001:2004 Management system of SW Bore Pile for the design and construction of large diameter bored pile (with bell out) and rock-socketed steel H-pile in pre-bored hole OHSAS 18001:2007 Management system of SW Bore Pile for the design and construction of large diameter bored pile (with bell out) and rock-socketed steel H-pile in pre-bored hole]

Others

We have maintained compliance with the respective requirements under the relevant registrations and certifications in respect of health and safety, environmental and insurance in the construction industry. In our experience, the expected time to complete the renewal process is generally one to two months and our Group intends to renew all existing registrations and certifications accordingly prior their respective expiry dates and we have not experienced any refusal of renewal of the registrations and certifications necessary for our operations during the Track Record Period and up to the Latest Practicable Date. Our Directors also do not expect any difficulties or legal impediment in the renewal process.

MACAU LAWS AND REGULATIONS

Laws and Regulations in relation to Construction/Foundation Works and Safety

The Construction/Foundation Works regime in Macau is mostly based on the General Construction Works Regulation, the Fire Safety Regulation, the Foundation Works Regulation, and the Safety and Action in Building Structures and Bridges Regulation.

The General Construction Works Regulation establishes administrative rules governing the process of approval of projects, licensing and supervision of construction works to be carried out in Macau. For the purposes of this Regulation, the construction of new buildings, as well as reconstructions, restorations, repairs, modifications or expansions in existing buildings, demolitions of buildings and any further works that determine a change in topography and soil application infrastructures are considered “construction works”. Pursuant to the said regulation, a constructor, individual or corporate, must register with the DSSOPT, in order to carry out construction works in Macau.

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LAWS AND REGULATIONS

The Fire Safety Regulation provides a set of rules aimed at preventing and controlling fires. Under the said regulation, buildings should be compartmentalised by walls and floors that are fire resistant and hinder the spread of fire. Moreover, the construction material must have sufficient fire resistance in order to minimise the risk of collapse, particularly during the period of time required for the evacuation of people and the operations of fire fighting.

The Foundation Works Regulation applies to the geotechnical aspects of foundation projects of buildings and other structures, taking into account requirements of strength, stability, functionality and durability of geotechnical structures. The Foundation Works Regulation should be interpreted in conjunction with the Safety and Actions in Building Structures and Bridges Regulation, which establishes the general criteria for safety and the methodologies used for its verification. Under the Foundation Works Regulation, the following basic rules are of particular importance:

(a) the necessary data for the implementation of the project must be collected, recorded and interpreted appropriately;
(b) the foundation works must be designed by professionals with appropriate qualifications and experience;
(c) there must be continuity and adequate communication between those involved in the data collection, the project and the construction;
(d) there must be suitable supervision and quality control in factories, shipyards and construction sites;
(e) the construction must be performed in accordance with the relevant specifications, and by personnel with appropriate knowledge and experience;
(f) construction materials must be used as recommended in the regulation or other normative documents and relevant specifications;
(g) the work must be adequately maintained;
(h) the work must be used for the purpose defined in the project.

The Safety and Action in Building Structure and Bridges Regulation establishes specific rules for verifying the safety of building structures, road bridges and footbridges, as well as other types of structures. The verification of the security of structures must be made in relation to limit states, by comparing them to the states to which the structure is driven by the performance of the actions to which it is subject. Limit states is defined as the state at which a structure is fully or partially impaired in its ability to perform the functions for which it was designed.

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LAWS AND REGULATIONS

Laws and Regulations in relation to Labour, Health and Safety

The Macau Labour Relations Law of 2008 establishes the general regime of labour relations, containing various rules concerning employment contracts that range from, but are not limited to, general principles applicable to employment relationships, duties and obligations of the employer and the employee, probation period, employment contract requirements, employment contract for a fixed period, working hours, overtime, weekly time-off, annual leave, and compensation in case of contract termination without justifiable cause. The regulatory authority in charge of monitoring compliance with the labour, safety and insurance regime is the Labour Department, in general, and the DSSOPT with respect to construction sites, in particular.

Regarding the employment of non-residents, it is important to note that non-residents of Macau are generally not permitted to work unless a proper work permit has been obtained. The employment of such workers is subject to strict regulations included in Law no. 21/2009, which sets forth the terms for granting and renewing work permits for non-resident workers, determines measures to ensure the equal treatment of Macau resident and non-resident workers and establishes minimum contract terms and limits on the duration of employment contracts with non-resident employees.

Non compliance with the rules included in Law no. 21/2009 may constitute administrative offenses, sanctioned with fines and accessory sanctions of revocation of all or part of the authorisations to employ non-resident workers along with the prohibition to request new authorisations for a period of 6 months to 2 years, and or criminal offenses related to illegal employment, sanctioned with effective incarceration periods, fines and/or accessory sanctions of (i) revocation of all or part of the authorisations to employ non-resident workers and the prohibition for a period of 6 months to 2 years to request new authorisations; (ii) prohibition, for a period of 6 months to 2 years, to participate in public tenders related to public works or public concessions; and (iii) prohibition, for the period of 6 months to 2 years, to receive any subsidies or benefits conferred by Macau public entities.

Regarding the working environment, an employer must comply with the rules provided under the General Regulation of Work Safety and Hygiene of Offices, Services and Commercial Establishments, in order to provide a safe and clean working environment for its employees. Failure to comply with those rules may result in the application of fines to the employer, according to the provisions set out by Decree Law no. 13/91/M (sanctions for the non compliance with the General Regulation of working safety and hygiene of office, service and commercial establishments).

Moreover, our Group must comply with the rules provided under Decree Law no. 44/91/M (General Regulation of Working Safety and Hygiene in the Construction Industry) and Decree Law no. 34/93/M (Legal Regime of Noise at Work), in order to provide a safe, clean and environmentally friendly working conditions for the employees. Failure to comply with those rules may result in the application of fines, according to the provisions set out by Decree Law no. 67/92/M and Decree Law no. 48/94/M.

Pursuant to the Legal Regime of Compensation of Damages Caused by Industrial Accidents and Occupational Diseases, our group must provide industrial accident insurance for its employees. In case the employer fails to provide such insurance, fines may be charged as legal sanction.

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LAWS AND REGULATIONS

Laws and Regulations in relation to Environmental Protection

The guidelines and fundamental principles governing environmental policy in Macau are set out in Law no. 2/91/M, dated 11 March 1991 (the Macau Environmental Law), which seeks to enhance the protection and sustainable development of the environment. As a general principle, the Macau Environmental Law prescribes that everyone has the right to an ecologically balanced environment, as well as the duty to collectively promote an improved quality of life.

In order to achieve this goal, all projects and constructions which may affect the environment or the health of citizens must be subject to a preliminary study of environmental impact. Moreover, the Macau Environmental Law prescribes that violations of the environmental legislation will be punished with civil liability, administrative fines or criminal liability (Article 268 of the Macau Criminal Code prescribes pollution-related crimes), depending on the degree of the violation in question. Also injunctions may be granted in order to cease environmental infringements. The regulatory authority in charge of monitoring environmental protection matters is the Environment Protection Services Bureau. However, police authorities are also legally entitled to impose preventive measures with respect to time period restrictions.

Concerning noise pollution in particular, Decree Law no. 54/94/M establishes rules on prevention and control of environmental noise pollution and sets noise limits. Pursuant to this Decree Law, the use of pile-driving hammers is not allowed on Sundays and on holidays, as well as between 8 p.m. and 8 a.m. on weekdays. Moreover, the use of mechanical equipment, fixed or mobile, in construction works less than 200 metres from residential buildings and hospitals is prohibited on Sundays and on holidays, as well as between 8 p.m. and 8 a.m. on weekdays.

Regarding water and marine pollution, in particular, Decree Law no. 46/96/M defines the technical conditions that must be satisfied in order to ensure the global functioning of the public water distribution system, the preservation of public health, and the safety fire fighting water installations, whereas Decree Law no 35/97/M provides for the protection of the marine environment from pollution. The latter further prohibits the discharge of any solid or liquid residues, in particular petroleum or chemical substances, which may contaminate marine water, beaches or coastal areas and affect their flora and fauna wildlife.

Requirements for Constructor Registration in Macau

According to the General Construction Works Regulation, in order to legally carry out construction works in Macau, a constructor, individual or corporate, must register with the DSSOPT. Moreover, the direction of any works carried out in Macau must be done by a technician also duly registered with the DSSOPT.

The DSSOPT is one of the public organisations under the Macau Government, providing technical support and giving suggestions for policy making related to Macau’s physical development in the areas of land management and utilization, urban planning, infrastructures, and basic services. Concerning construction work, the DSSOPT promotes coast protection, conservation and maintenance, infrastructure and sanitation network development, public building and monument construction, and licensing for urban buildings and the utilization of electrical installations.

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LAWS AND REGULATIONS

1. Registration Procedure

The procedure for the registration of a constructor with the DSSOPT, provided for in Articles 8 ff. of the General Construction Works Regulation, is as follows:

A written request for the registration of a constructor must be submitted to the Director of the DSSOPT, accompanied by a list of the technical means at the constructor’s disposal, as well as by a list of the construction works previously carried out, and also a declaration made by a technician registered with the DSSOPT, who declares to be the responsible technician of the constructor. The qualifications of the constructor shall be assessed based on the documents submitted to the DSSOPT.
In case the registration request is accepted, a registration fee, currently in the amount of MOP6,600.00 (six thousand and six hundred Patacas), must be paid within 10 (ten) days of the date of the notification of acceptance of the registration.

The registration as a constructor with the DSSOPT is valid for a period of one year, i.e., until the end of the civil year in which it was requested, and its renewal must be requested during the month of January of each subsequent civil year. Failure to comply with this deadline will result in the expiration of the registration as constructor with the DSSOPT.

The process of renewal of a registration with the DSSOPT normally takes around 15 (fifteen) working days counted from the submission by the applicant of all the required documents for that purpose, which are the same as those submitted upon registration as a constructor.

The DSSOPT will maintain an updated individual file of every registered entity which will include (a) the individual’s full name and respective domicile or, if a corporate entity, its business name and articles of association and or registered address; (b) the documentation revealing professional qualifications and expertise; (c) specimen signatures containing the full and abbreviated names adopted, which, in the case of corporate entities, will be those of the directors who have legal capacity to bind the company; and (d) the indication of occurrences relating to projects directed by technicians, or occurrences relating to works carried out by construction companies.

The change of domicile or registered address of an entity registered with the DSSOPT must be communicated to DSSOPT within 8 days counting from said change.

2. Constructor’s requirement

There are no specific requirements for a company to be registered as a constructor with the DSSOPT. The qualifications of the applicant company shall be assessed based on the documents submitted to the DSSOPT, namely the list of the technical means at the constructor’s disposal, as well as the list of the construction works previously carried out.

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LAWS AND REGULATIONS

3. Employee’s requirement

For each project, the constructor should have a technician responsible for the works, who must also be registered as such with the DSSOPT. The qualifications of the applicant technician shall be assessed based on the documents submitted to the DSSOPT at the time of registration, namely a professional certificate and a declaration under oath regarding the observation and fulfilment of regulatory and technical provisions applicable to technicians responsible for works.

The technician in charge of a project may renounce to its direction at any time, as long as he/she communicates that fact in writing to the DSSOPT. However, such technician will be responsible and liable for the works carried out until the date of the resignation.

4. Job experience of constructor

There are no specific requirements for the job experience of a constructor.

Remittance of profits or repatriation of capital into Hong Kong from Macau

There are no currency control regulations, no currency control restrictions or approval requirements applicable to any outbound foreign currency transfers, nor are there any restrictions affecting the remittance of profits or repatriation of capital into Hong Kong from Macau.

COMPLIANCE

Our Directors confirmed that during the Track Record Period and up to the Latest Practicable Date, our Group has obtained all the registrations and certifications required for our business and operations in Hong Kong and Macau, and all of them are in force as at the Latest Practicable Date. Based on the advice of the Hong Kong Legal Adviser as to the applicable laws and regulations related to provision of foundation works and ancillary services in Hong Kong, our Directors confirm that the operation mode of the construction projects to be carried out by our Group in Hong Kong is valid and complies with the laws in Hong Kong. Based on the advice of the Macau Legal Adviser, our Directors confirm that the operation made of the construction projects to be carried out by our Group in Macau is valid and complies with the laws of Macau.

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HISTORY AND CORPORATE STRUCTURE

BUSINESS AND CORPORATE DEVELOPMENT

Overview

Our Company was incorporated in the Cayman Islands with limited liability on 17 September 2012 and is the holding company of our Group. Our Group comprises subsidiaries incorporated in BVI, Hong Kong and Macau. Details of the subsidiaries of our Company and our corporate structure are set out in the paragraph headed “History and corporate structure – Corporate history” in this [REDACTED] .

Immediately following completion of the Capitalisation Issue and the [REDACTED] , Actiease Assets, our Controlling Shareholder, will own [REDACTED] of the voting rights in our Company (without taking into account any Shares which may be allotted and issued upon any exercise of the options which may be granted under the Share Option Scheme).

Business Development

The history of our Group can be traced back to the 1970s when Mr. Lau, the Chairman and founder of our Group, was principally engaged as a sole proprietor in, amongst others, trading of machinery and equipment in the name of Sam Woo Engineering Works with his own resources.

In 1980, Mr. Lau set up SW Engineering Equipment to carry out the trading and leasing of mainly construction machinery and equipment. With the rapid growth in the building and construction industry in Hong Kong which led to an increase in demand for bored piling works, Mr. Lau expanded his business in the foundation industry and set up SW Bore Pile in 1990. Over the years, Mr. Lau has accumulated valuable experience in the trading and leasing of construction machinery and equipment and carrying out land and marine foundation works.

After the establishment of SW Bore Pile in 1990, SW Bore Pile and its associated group companies successfully completed various foundation projects for both the private and public sectors in Hong Kong and their success led to their listing on the Main Board of the Stock Exchange in 2003 with SW Holdings as their holding company (collectively, the “ SW Holdings Group ”) under stock code 2322.

The demand for foundation works in Hong Kong closely correlates to the expenditure on infrastructure projects and building construction projects in Hong Kong as execution of foundation works is generally regarded as an essential construction process in such projects. As set out in the section headed “Industry Overview” of this [REDACTED] , the gross value of construction works in Hong Kong was approximately HK$42.0 billion in 2006. In light of the then economic environment, SW Holdings Group strategically re-positioned its business by diversifying and expanding into vessel chartering in 2006.

Though the construction market had showed signs of gradual recovery in 2006, competition in the foundation industry had been intense mainly due to (i) competitive pricing; and (ii) escalating project costs (including but not limited to labour costs, finance costs, diesel and steel prices). Taking into account the above factors, in the course of tendering for foundation works and ancillary services contracts, SW Holdings Group took measures to ensure that the profitability would commensurate with project risk.

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HISTORY AND CORPORATE STRUCTURE

Although SW Holdings Group had tendered for a number of projects in Hong Kong during 2007 to 2009, its success rate was comparatively low as the competitive environment at that time had led to pricing tension among foundation works contractors whereby some of our competitors would bid for projects at a price which was far below SW Holdings Group’s then bidding price or its estimated project costs. For this reason, during such period, the SW Holdings Group’s business in foundation works, ancillary services and trading of foundation works related machinery and equipment (collectively the “ SW Foundation Segment ”) suffered a decrease in revenue and resulted in a loss in the financial year ended 31 March 2009.

In 2009, SW Holdings Group submitted tenders for more than 100 projects in Hong Kong, but was only successful in securing three foundation works and ancillary services contracts. The SW Foundation Segment recorded revenue of approximately HK$4,000 for the year ended 31 March 2009 which was related to an adjustment of a contract income receivables from foundation works projects completed in prior years. Furthermore, as the foundation works and ancillary services under the aforesaid three awarded contracts had not commenced for the year ended 31 March 2009, no revenue was recognised during the corresponding year. SW Foundation Segment recorded an unaudited segment loss of approximately HK$16.0 million for the year ended 31 March 2009.

Although the revenue generated from the SW Foundation Segment for the year ended 31 March 2010 increased to approximately HK$57.2 million and the SW Foundation Segment recorded unaudited segment profit of approximately HK$13.4 million, SW Holdings Group had not secured any foundation works and ancillary services projects despite its submission of more than 70 tenders/quotations during January to September 2010.

In view of the weak economic environment, continued price pressure and intense competition, the then directors of SW Holdings Group made a strategic decision to discontinue such foundation works and ancillary services business and disposed of this business in October 2010 at a consideration of HK$140 million and focused instead on its vessel chartering business. Mr. Lau, through Actiease Assets, took up the SW Foundation Segment and continued to support the business by his own resources. The disposal of the SW (BVI), being the investment holding which owned the entire interest in the principal operating subsidiaries under the SW Foundation Segment, had resulted in a gain to SW Holdings Group.

Upon completion of the acquisition of the entire interest of SW (BVI) by Actiease Assets, our Group continued to carry out foundation works and ancillary services and occasionally, leased out machinery and equipment.

For the year ended 31 March 2012, our Group undertook foundation works and ancillary services for construction projects in Hong Kong only. Subsequently in December 2012, our Group entered into the Macau construction market and was awarded our first Macau based foundation works and ancillary services contract (namely the Hotel Tower Project) for the contract sum of approximately HK$537.3 million. In February 2013, the registration of our wholly-owned subsidiary, SW Foundation (Macau), as a construction contractor in Macau was successfully approved by DSSOPT. In January and February 2014, our Group was awarded a contract for foundation works and ancillary services from the Composite Development Project and Hotel Casino Project in Macau respectively.

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HISTORY AND CORPORATE STRUCTURE

During the Track Record Period, our Group completed 11 foundation works and ancillary services projects and expanded our business to the Macau construction market. As at the Latest Practicable Date, our Group has five contracts on hand with an aggregate contract sum (including contracts in progress and contracts of which our work is yet to commence) of approximately HK$1,348.6 million.

Milestones of our Group

The key events of the development of our Group following the completion of the acquisition of the entire interest of SW (BVI) by Actiease Assets are as follows:

Date Milestones

August 2011 SW Foundation (Macau) was incorporated
February 2012 A piling works project of a logistics centre in Tsing Yi, Hong Kong, for a contract sum of approximately HK$148.7 million was awarded to us
April 2012 The foundation work and basement excavation piling works project in Wong Tai Sin, Hong Kong, for a contract sum of approximately HK$161.4 million was awarded to us
December 2012 Entered into the Macau construction market and was awarded the Hotel Tower Project for a contract sum of approximately HK$537.3 million, being the first project of our Group based in Macau
February 2013 The registration of SW Foundation (Macau) as a construction contractor in Macau was approved by the DSSOPT
December 2013 The Hotel Tower Project was completed
January 2014 The Composite Development Project in Macau for a contract sum of approximately HK$462.8 million was awarded to us
February 2014 The Hotel Casino Project in Macau for a contract sum of approximately HK$354.1 million and the multi-storey logistics centre piling works project in Tsing Yi, Hong Kong, for a contract sum of approximately HK$292.7 million were awarded to us

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.

HISTORY AND CORPORATE STRUCTURE

Corporate History

All the direct and indirect subsidiaries of our Company are listed below:

					Attributable	Attributable
				Issued and	equity interest
				fully paid	as at the	Latest
				share capital	Practicable Date		Principal activities
	Place of	Date of	Type of	as at the Latest	Directly Indirectly		as at the Latest
Company name	incorporation	incorporation	legal entity	Practicable Date	held	held	Practicable Date
SW (BVI)	British Virgin	22 February 2001	Limited liability	US$10,000	100%	–	Investment holding
	Islands		company
SW Bore Pile	Hong Kong	7 September 1990	Limited liability	HK$10,000,000	–	100%	Foundation works
			company				in Hong Kong
SW Construction	Hong Kong	11 May 1995	Limited liability	HK$100,000	–	100%	Trading and leasing
& Engineering			company				of machinery
							and equipment
							in Hong Kong
SW Engineering	Hong Kong	7 October 1980	Limited liability	HK$500,000	–	100%	Leasing of machinery
Equipment			company				and equipment
							in Hong Kong
SW Foundation	Macau	23 August 2011	Limited liability	MOP$30,000	–	100%	Foundation works
(Macau)			company				in Macau
			by quotas
SW Construction	Hong Kong	5 August 2002	Limited liability	HK$10,000	–	100%	Foundation works
			company				and leasing of
							machinery and
							equipment for
							foundation works
							in Hong Kong
SW Civil Contractors	Hong Kong	5 August 2002	Limited liability	HK$10,000	–	100%	Inactive
			company
SW Civil Works	Hong Kong	25 July 2003	Limited liability	HK$2	–	100%	Inactive
			company

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.

HISTORY AND CORPORATE STRUCTURE

					Attributable	Attributable
				Issued and	equity interest
				fully paid	as at the	Latest
				share capital	Practicable Date		Principal activities
	Place of	Date of	Type of	as at the Latest	Directly Indirectly		as at the Latest
Company name	incorporation	incorporation	legal entity	Practicable Date	held	held	Practicable Date
SW Foundation	Hong Kong	25 July 2003	Limited liability	HK$2	–	100%	Foundation works
			company				in Hong Kong
SW Finance	Hong Kong	28 January 2004	Limited liability	HK$2	–	100%	Provision of financial
			company				services to group
							companies
SW Offshore	Hong Kong	25 May 2006	Limited liability	HK$1	–	100%	Inactive
Engineering			company
SW AA Construction	Hong Kong	22 March 2012	Limited liability	HK$1	–	100%	Inactive_(Note)_
Group			company
SW Foundation	Hong Kong	22 March 2012	Limited liability	HK$1	–	100%	Inactive_(Note)_
Group			company
Redland Contractors	Hong Kong	18 May 2011	Limited liability	HK$2	–	100%	Foundation works
			company				in Hong Kong

Note: Apart from holding certain trademarks and a patent and applying for registration of certain patents, SW AA Construction Group and SW Foundation Group had not carried on any business as at the Latest Practicable Date. For more details about the trademarks and patents, please see the paragraph headed “Statutory and General Information – Further information about the business of our Group – Intellectual property rights of our Group” in Appendix IV to [REDACTED] .

The following sets forth the corporate development of our operating subsidiaries since their respective date of incorporation:

SW (BVI)

SW (BVI) was incorporated and commenced business on 22 February 2001 under the name of Active Best Securities Limited. In order to maintain consistency with the name of other members of our Group, its name was changed to its current name on 22 May 2002. SW (BVI) is an investment holding company and the beneficial owner of the entire issued share capital of each of (i) SW Engineering Equipment (which in turn beneficially holds the entire issued share capital of SW Construction & Engineering); (ii) SW Bore Pile (which in turn beneficially holds the entire registered capital of SW Foundation (Macau)); (iii) SW Construction; (iv) SW Civil Contractors; (v) SW Civil Works; (vi) SW Foundation; (vii) SW Finance, (viii) SW Offshore Engineering; (ix) SW AA Construction Group; (x) SW Foundation Group; and (xi) Redland Contractors.

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.

HISTORY AND CORPORATE STRUCTURE

On 3 April 2001, 5,639 shares, 1,934 shares, 1,889 shares and 538 shares of US$1.00 each were allotted and issued to each of Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung, respectively, and SW (BVI) was then owned by Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung as to 56.39%, 19.34%, 18.89% and 5.38%, respectively.

On 4 April 2001, Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung respectively transferred their entire 56.39%, 9.34%, 8.89% and 5.38% interest in SW (BVI) to Actiease Assets at the consideration of US$5,639, US$934, US$889 and US$538, respectively. The consideration was based on the par value of the Shares and was settled by cash. As such, SW (BVI) was owned as to 80%, 10% and 10% by Actiease Assets, Mr. Lau Chun Kwok and Mr. Lau Chun Ka.

On 28 March 2003, Actiease Assets, Mr. Lau Chun Kwok and Mr. Lau Chun Ka together transferred the entire issued share capital of SW (BVI) to SW Holdings for the purpose of facilitating the listing of SW Holding Group’s foundation business on the Main Board of the Stock Exchange and in consideration thereof (i) SW Holdings crediting as fully paid at par (a) the 1,000,000 shares of HK$0.10 each in the share capital of SW Holdings which had already been allotted and issued nil-paid to Mr. Lau on 9 August 2002 and had subsequently been transferred to Actiease Assets on 28 March 2003; and (b) the one nil-paid share of SW Holdings which had already been allotted and issued to each of CKL and Nice Fair on 28 March 2003 and (ii) the issue of 124,999 shares and 124,999 shares in SW Holdings credited as fully paid to CKL and Nice Fair, respectively.

On 21 February 2011, for the purpose of effectuating SW Holdings Group’s disposal of the SW Foundation Segment, SW Holdings transferred the entire issued share capital of SW (BVI) to Actiease Assets, its then substantial shareholder, at a total consideration of HK$140.0 million.

The consideration for the transfer of HK$140.0 million was settled partly by cash of HK$48.0 million paid by Actiease Assets and partly by the Promissory Note, which was fully paid up and discharged by Actiease Assets, CKL (on behalf of Actiease Assets as directed by Mr. Lau) and Nice Fair (on behalf of Actiease Assets as directed by Mr. Lau) by applying the entire sum of their respective entitlement of a special dividend declared by SW Holdings on 21 February 2011 in the amount of HK$71.3 million, HK$10.35 million and HK$10.35 million, respectively. Hence, the transfer of the entire issued share capital of SW (BVI) from SW Holdings to Actiease Assets was properly and legally completed and settled.

On [•••] and pursuant to the Reorganisation, Actiease Assets transferred its entire shareholding interest in SW (BVI) to our Company at the consideration set out under the paragraph headed “Reorganisation” in this section.

SW Engineering Equipment

SW Engineering Equipment was incorporated on 7 October 1980 and its principal activities involved the leasing of machinery and equipment in Hong Kong.

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HISTORY AND CORPORATE STRUCTURE

As at the date of its incorporation, SW Engineering Equipment was owned by Ms. Leung and Mr. Lau Chun Kwok in equal shares. On 5 June 1981, an additional 59,999 shares and 39,999 shares of HK$1.00 each were allotted and issued to Ms. Leung and Mr. Lau Chun Kwok, respectively at par value. On 25 January 1995, an additional 400,000 shares of HK$1.00 each were allotted and issued to Mr. Lau at par value and SW Engineering Equipment was then owned by Mr. Lau, Ms. Leung and Mr. Lau Chun Kwok as to 80%, 12% and 8%, respectively. On 3 April 2001, Mr. Lau, Ms. Leung and Mr. Lau Chun Kwok together transferred the entire issued share capital of SW Engineering Equipment to SW (BVI) in consideration for 443 shares, 66 shares and 45 shares in SW (BVI), which are in proportion to their respective shareholding in SW Engineering Equipment and at the same time, Mr. Lau held one share on trust for SW (BVI) pursuant to a declaration of trust dated 3 April 2001 as a company incorporated in Hong Kong should have a minimum of two shareholders at that time. The consideration for the transfer was based on the value of the shares of SW Engineering Equipment at the time of the transfers and was settled by the exchange of shares of SW (BVI) with SW (BVI). On 30 July 2012, Mr. Lau transferred the one share held on trust by him for SW (BVI) in SW Engineering Equipment to SW AA Construction Group at nil consideration as this represents a mere replacement of the old trustee by a new one. Pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it was holding the one share in SW Engineering Equipment on trust for SW (BVI). Hence, SW Engineering Equipment is wholly and beneficially owned by SW (BVI).

SW Construction & Engineering

SW Construction & Engineering was incorporated on 11 May 1995 and its principal activities involved the trading and leasing of machinery and equipment in Hong Kong. SW Construction & Engineering was formerly known as Rich Keen Asia Limited on incorporation. To be in line with the name of other members of our Group, the former name was changed to its current name on 7 June 1999.

As at the date of its incorporation, SW Construction & Engineering was owned by two nominee subscribers. On 5 January 1996, 2,499 shares, 2,499 shares, 2,500 shares and 2,500 shares of HK$1.00 each were allotted and issued to each of Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung, respectively at par value. On 13 January, 1996, the two nominee subscribers transferred their respective subscriber shares of HK$1.00 each to Mr. Lau Chun Kwok and Mr. Lau, respectively at par value, and SW Construction & Engineering was then owned by Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung as to 25% each. On 15 May 1998, SW Construction & Engineering issued and allotted 90,000 shares to SW Engineering Equipment at par and on the same day, Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung together transferred the entire issued share capital of SW Construction & Engineering to SW Engineering Equipment at the consideration of HK$2,500, HK$2,500, HK$2,500 and HK$2,500, respectively, being the par value of the shares and was subsequently settled by cash with Mr. Lau holding one share on trust for SW Engineering Equipment pursuant to a declaration of trust dated 15 May 1998. On 30 July 2012, Mr. Lau transferred the one share held by him on trust for SW Engineering Equipment in SW Construction & Engineering to SW AA Construction Group at nil consideration as this represented a mere replacement of the old trustee by a new one and pursuant to a declaration of trust dated 31 July 2012, SW AA Construction Group declared that it was holding the one share in SW Construction & Engineering on trust for SW Engineering Equipment. Hence, SW Construction & Engineering is wholly and beneficially owned by SW Engineering Equipment.

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HISTORY AND CORPORATE STRUCTURE

SW Bore Pile

SW Bore Pile was incorporated on 7 September 1990 and its principal activities involved foundation works in Hong Kong.

As at the date of its incorporation, SW Bore Pile was owned by Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung in equal shares. On 17 December 1994, an additional 5,499,999 shares, 1,999,999 shares, 1,999,999 shares and 499,999 shares of HK$1.00 each were allotted and issued to each of Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung at their par value, respectively, and SW Bore Pile was then owned by Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung as to 55%, 20%, 20% and 5%, respectively. On 3 April 2001, Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung together transferred the entire issued share capital of SW Bore Pile to SW (BVI) in consideration for 5,196 shares, 1,889 shares, 1,889 shares and 472 shares of US$1.00 each in SW (BVI), which are in the same proportion to their respective shareholding in SW Bore Pile and at the same time, Mr. Lau also held one share in SW Bore Pile on trust for SW (BVI) pursuant to a declaration of trust dated 3 April 2001 as a company incorporated in Hong Kong should have a minimum of two shareholders at that time. The consideration for the transfer was based on the value of the shares of SW Bore Pile at the time of the transfers and was subsequently settled by exchange for shares in SW (BVI). On 30 July 2012, Mr. Lau transferred his one share in SW Bore Pile held on trust for SW (BVI) in SW Bore Pile to SW AA Construction Group at nil consideration as this represents a mere replacement of the old trustee by a new one and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it was holding the one share in SW Bore Pile on trust for SW (BVI). Hence, SW Bore Pile is wholly and beneficially owned by SW (BVI).

SW Foundation (Macau)

SW Foundation (Macau) was incorporated on 23 August 2011 with a registered capital of MOP30,000 and its principal activities involved foundation works in Macau.

As at the date of its incorporation, SW Foundation (Macau) was owned by Mr. Lau and Mr. Lau Chun Kwok as to 96.67% and 3.33%, respectively. On 8 November 2011, the registered capital of MOP29,000 was transferred to SW Bore Pile at a total consideration of MOP29,000, which was settled by cash, with the remaining registered capital of MOP1,000 held by Mr. Lau. Pursuant to a power of attorney dated 18 October 2012 executed by Mr. Lau as the holder of the quota of MOP1,000, Mr. Lau granted all his powers relating to (a) the social rights and (b) his quota of MOP1,000 in SW Foundation (Macau), including the powers to enable the attorney to assign his quota of MOP1,000 into its own name, in favour of SW Bore Pile. Based on the advice of the Macau Legal Adviser, our Directors confirm that such power of attorney forms an irrevocable act and cannot be revoked by Mr. Lau without the consent of SW Bore Pile. SW Bore Pile beneficially owns the entire registered capital of SW Foundation (Macau). Hence, SW Foundation (Macau) is wholly and beneficially owned by SW Bore Pile.

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HISTORY AND CORPORATE STRUCTURE

SW Construction

SW Construction was incorporated on 5 August 2002 and it is principally carrying on the business of foundation works and leasing of machinery and equipment for foundation works in Hong Kong.

As at the date of its incorporation, SW Construction was owned as to 99.99% by SW (BVI) and 0.01% by Mr. Lau where Mr. Lau held one share on trust for SW (BVI) pursuant to a declaration of trust dated 19 August 2002. On 30 July 2012, Mr. Lau transferred his one share held on trust for SW (BVI) in SW Construction to SW AA Construction Group at nil consideration as this represented a mere replacement of the old trustee by a new one. Pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it was holding the one share in SW Construction on trust for SW (BVI). Hence, SW Construction is wholly and beneficially owned by SW (BVI).

SW Foundation

SW Foundation was incorporated on 25 July 2003 and is principally engaged in carrying on the business of foundation works in Hong Kong. As at the date of its incorporation, SW Foundation was owned by SW (BVI) and SW Group (Holdings), which held one share in SW Foundation on trust for SW (BVI) pursuant to a declaration of trust dated 25 July 2003. On 30 July 2012, SW Group (Holdings) transferred its one share held on trust for SW (BVI) in SW Foundation to SW AA Construction Group at nil consideration as this represented a mere replacement of the old trustee by a new one. Pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it was holding the one share in SW Foundation on trust for SW (BVI). Hence, SW Foundation is wholly and beneficially owned by SW (BVI).

SW Finance

SW Finance was incorporated on 28 January 2004 and its principal activities involved the provision of financial services to the companies of our Group.

As at the date of its incorporation, SW Finance was owned by SW (BVI) and SW Group (Holdings), which held one share on trust for SW (BVI) pursuant to a declaration of trust dated 6 February 2004. On 30 July 2012, SW Group (Holdings) transferred its one share in SW Finance to SW AA Construction Group at nil consideration as this represented a mere replacement of the old trustee by a new one. Pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it was holding the one share in SW Finance on trust for SW (BVI). Hence, SW Finance is wholly and beneficially owned by SW (BVI).

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HISTORY AND CORPORATE STRUCTURE

Redland Contractors

Redland Contractors was incorporated on 18 May 2011 and its principal activities involved carrying on foundation works in Hong Kong. As at the date of its incorporation, Redland Contractors was wholly owned by Best Captain, which held the two shares on trust for SW (BVI) between 18 May 2011 to 30 July 2012. On 30 July 2012, Best Captain was directed by SW (BVI) to transfer the entire issued share capital of Redland Contractors to SW (BVI) at the consideration of HK$2.00, which had been settled by cash.

Each of the share transfers mentioned above was properly and legally completed and settled.

Subsidiaries disposed of by our Group during the Track Record Period

During the Track Record Period, our Group had disposed of the following subsidiaries with a view to streamlining the corporate structure of our Group as these subsidiaries had not carried on any business activities since their respective date of incorporation:

SW Group (Holdings)

SW Group (Holdings) was incorporated on 16 December 2002 and the entire issued share capital of which was transferred to Mr. Lau at the consideration of HK$2.00 on 30 July 2012, based on the par value of such share capital and was settled by cash. After the transfer, SW Group (Holdings) ceased to be a subsidiary of our Group.

SW Ship Management

SW Ship Management was incorporated on 15 June 2005 and the entire issued share capital of which was transferred to Mr. Lau at the consideration of HK$1.00 on 30 July 2012, based on the par value of the share capital and was settled by cash. After the transfer, SW Ship Management ceased to be a subsidiary of our Group.

三和集團

三和集團 was incorporated on 13 October 2004 and the entire issued share capital of which was transferred to Mr. Lau at the consideration of HK$1.00 on 30 July 2012, based on the par value of the share capital and was settled by cash. After the transfer, 三和集團 ceased to be a subsidiary of our Group.

Each of the share transfers mentioned above was properly and legally completed and settled.

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HISTORY AND CORPORATE STRUCTURE

The Family Trust

On 3 March 2003, Mr. Lau (as settlor) established the Family Trust as a discretionary trust with Nautilus Trustees as trustee.

On 4 March 2003, Mr. Lau (as settlor) established the Unit Trust with Managecorp Limited as trustee. The entire issued units of the Unit Trust are held by Nautilus Trustees as trustee of the Family Trust. Subsequently, on 28 March 2003, Mr. Lau and Ms. Leung transferred 56 shares and five shares of Actiease Assets, respectively, to Silver Bright, which is 100% held by Managecorp Limited as trustee of the Unit Trust, representing the entire issued share capital of Actiease Assets at the consideration of US$10,557,193 and US$942,607, respectively, which was based on the value of the shares of Actiease Assets at the time of transfers and was settled by a deed of indebtedness issued by Nautilus Trustees as trustee of the Family Trust.

Upon completion of the abovementioned transfers by Mr. Lau and Ms. Leung, Actiease Assets was 100% owned by Silver Bright, which is in turn wholly owned by Managecorp Limited as trustee of the Unit Trust. In light of the above, upon completion of the Reorganisation, the Shares held by Actiease Assets are indirectly owned by the Family Trust. The beneficiary of the Family Trust is a family member of Mr. Lau.

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HISTORY AND CORPORATE STRUCTURE

REORGANISATION

The following chart shows the shareholding structure of our Group immediately prior to the Reorganisation and the [REDACTED] :

==> picture [450 x 300] intentionally omitted <==

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

Silver Bright
(BVI)
100%
Actiease Assets
(BVI)
100%
SW (BVI)
(BVI)
100% 100% 100% 100% 100% 100% 100%
SW
SW SW Civil SW Offshore SW Foundation Redland
Engineering Bore Pile Works SW Finance Engineering Group Contractors
Equipment (HK)
(HK) (HK) (HK) (HK) (HK)
(HK)
100% 100% 100% 100%
SW SW SW AA
Construction & Foundation SW Civil Construction
Engineering (Macau) Contractors Group
(HK) (Macau) (HK) (HK)
100% 100%
SW SW
Construction Foundation
(HK) (HK)
----- End of picture text -----

Our Group underwent the Reorganisation in preparation for [REDACTED] . The principal steps involved in the Reorganisation are summarised below:

(a) On 17 September 2012, our Company was incorporated in the Cayman Islands as an exempted company with limited liability with an authorised share capital of HK$380,000 divided into 38,000,000 shares with par value of HK$0.01 each. On the same day, one subscriber Share was allotted and issued nil-paid to Codan Trust Company (Cayman) Limited. Subsequently, Codan Trust Company (Cayman) Limited transferred the one subscriber Share to Mr. Lau, which was held on trust for Actiease Assets. On 30 June 2014, the one subscriber Share was transferred to Actiease Assets;
(b) On [•••] 2014, pursuant to the Reorganisation Agreement, our Company acquired the entire issued share capital of SW (BVI) from Actiease Assets, in consideration of and in exchange for which, (i) the one nil-paid Share held by Actiease Assets was credited as fully paid; and (ii) [999] Shares were allotted and issued, credited as fully paid, to Actiease Assets. After completion of the Reorganisation Agreement, our Company became the holding company of our Group.

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HISTORY AND CORPORATE STRUCTURE

Upon completion of the Reorganisation, our Company became the holding company of our Group. The following chart sets out the shareholding structure of our Group immediately after the Reorganisation but prior to completion of the [REDACTED] and the Capitalisation Issue:

==> picture [430 x 370] intentionally omitted <==

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

Silver Bright
(BVI)
100%
Actiease Assets
(BVI)
100%
the Company
(Cayman Islands)
100%
SW (BVI)
(BVI)
100% 100% 100% 100% 100%
SW
SW SW Civil SW Offshore Redland
Engineering Bore Pile Works Engineering Contractors
Equipment
(HK) (HK) (HK) (HK)
(HK)
100% 100% 100% 100% 100% 100%
SW SW SW AA SW
SW Civil
Construction & Foundation SW Finance Construction Foundation
Contractors
Engineering (Macau) (HK) (HK) Group Group
(HK) (Macau) (HK) (HK)
100% 100%
SW SW
Construction Foundation
(HK) (HK)
----- End of picture text -----

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HISTORY AND CORPORATE STRUCTURE

The following chart sets forth the shareholding structure of our Group after the Reorganisation and immediately following the [REDACTED] and the Capitalisation Issue:

==> picture [430 x 375] intentionally omitted <==

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

Silver Bright
(BVI)
100%
Actiease Assets
Public
(BVI)
[REDACTED] [REDACTED]
100%
the Company
(Cayman Islands)
100%
SW (BVI)
(BVI)
100% 100% 100% 100% 100%
SW
SW SW Civil SW Offshore Redland
Engineering Bore Pile Works Engineering Contractors
Equipment
(HK) (HK) (HK) (HK)
(HK)
100% 100% 100% 100% 100% 100%
SW SW SW AA SW
SW Civil
Construction & Foundation SW Finance Construction Foundation
Contractors
Engineering (Macau) (HK) (HK) Group Group
(HK) (Macau) (HK) (HK)
100% 100%
SW SW
Construction Foundation
(HK) (HK)
----- End of picture text -----

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BUSINESS

COMPANY OVERVIEW

Since the commencement of the Track Record Period and up to the Latest Practicable Date, we have been awarded and/or undertaken a total of 16 projects involving foundation works and ancillary services, which consisted of 13 Hong Kong based projects and three Macau based projects. As at the Latest Practicable Date, the awarded contract sum for the contracts on hand (including contracts in progress and contracts of which our work has yet to commence) amounted to approximately HK$1,348.6 million. Furthermore, from time to time our Group is also engaged in the business of leasing machinery and equipment.

During the Track Record Period, our Group derived revenue of approximately HK$98.4 million, HK$375.1 million and HK$492.7 million respectively from our foundation works and ancillary services.

Save for the hotel development project in Central, details of which are set out under the paragraph headed “Business – Foundation works and ancillary services Projects” in this [REDACTED] , the duration of our Group’s projects completed during the Track Record Period ranged from six months to 12 months, depending on the size of the contract and the complexity of the works undertaken by our Group.

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BUSINESS

Our Group relies on the use of machinery and equipment to enable us to carry out our foundation works and ancillary services. As at 31 March 2014, the aggregate net book value of our machinery and equipment recorded on the combined balance sheets of our Group totalled approximately HK$397.8 million. During the Track Record Period, our Group acquired machinery and equipment of approximately HK$9.8 million, HK$119.6 million and HK$95.2 million, respectively.

According to the Ipsos Report, the Government has set out a five-year plan to accommodate the expected increase in population in Hong Kong, together with the “Ten Major Infrastructure Projects”, commissioned by the Government, will continue to be a driver of growth in the foundation industry in Hong Kong. We also noted from the Ipsos Report that the level of construction activities in Macau are similarly driven by the investment in infrastructure and demand for residential accommodation as well as private projects in Macau, such as casino and hotel development projects. Please refer to the section headed “Industry overview” in this [REDACTED] for further details.

Our Directors expect the number of foundation works and ancillary services related projects based in Hong Kong and Macau will increase. To the extent that our Group is successful in securing these contracts, our business should grow accordingly.

COMPETITIVE STRENGTHS

Our Directors believe the following competitive strengths enable our Group to compete effectively in the foundation industry in Hong Kong and Macau:

We are an established foundation works contractor

Our Group has over 20 years of experience in the Hong Kong foundation industry. Our Directors believe that our Group has a good reputation within the industry and always strives to complete our jobs on time and to the satisfaction of our customers. SW Bore Pile received a letter of appreciation from the MTR Corporation Limited in January 2012 after the completion of the Express rail link project 2. Since the commencement of the Track Record Period and up to the Latest Practicable Date, we have been awarded and/or undertaken a total of 16 projects involving foundation works and ancillary services, which consisted of 13 Hong Kong based projects and three Macau based projects.

We have an experienced management team

Besides Mr. Lau, the Chairman of our Group, who has been responsible for building our Group’s business in the foundation industry, our Group also employs a management team with members having over 20 years of experience and expertise in the foundation industry. Members of our executive Board have on average served our Group for approximately 20 years.

Our senior management has a thorough understanding and knowledge of the geological conditions of Hong Kong and the necessary capabilities to produce effective and efficient construction methods for foundation works in different ground conditions.

With the depth of the experience of the management team and its enthusiasm for the industry, our Directors consider that our Group has achieved notable success and developed a professional reputation in the foundation industry. Our Directors believe that our skilled employees are valuable assets to our Group.

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BUSINESS

Our Directors are confident that our Group’s strengths will enable us to remain competitive and well positioned not only in competing for and securing contracts in the future, but also to be effective and reliable in its execution of foundation works and ancillary services.

We have a broad range of machinery and equipment to carry out foundation works and ancillary services and the ability to modify these machinery and equipment, where required

Our Group owns a broad range of machinery and equipment to carry out foundation works and ancillary services. As at 31 March 2014, our machinery and equipment had an aggregate net book value of approximately HK$397.8 million. This fleet of machinery and equipment mainly consisted of crawler cranes, oscillators, rotators, reverse circulation drills, boring rigs, down-the-hole hammers and air compressors of a large variety of size or capacity. Please refer to the paragraph headed “Business – Machinery and equipment to carry out foundation works and ancillary services” in this [REDACTED] for further details.

Our Directors believe that our Group’s ongoing investment in machinery and equipment will enable us to access and deploy more machinery and equipment to our projects, which in turn would improve our project execution effectiveness and efficiency. Our Directors also believe that our readily deployable broad range of machinery and equipment, coupled with our capability to modify machinery and equipment to enhance their functionality, where required, in adapting to the specific requirements of the individual projects, would enhance our ability to compete for and carry out sizeable and technically complicated foundation works and ancillary services projects, such as those involving complex subsoil condition. Our Group also has the flexibility to execute projects involving the construction of a broad range of large diameter bored piles and rock socketed H-piles.

Given our broad range of machinery and equipment and our ability to modify them to enhance their functionalities to suit our required needs, where required, we have limited our need to lease machinery and equipment from external parties, which in turn minimised our costs and reliance on external parties in this respect.

We have an experienced in-house maintenance team

As at the Latest Practicable Date, our Group had a maintenance team of [27] staff members with relevant skills to ensure that our Group is able to respond to and handle any breakdown of machinery and equipment and to effect appropriate modifications necessary to meet contract requirements. Please refer to the paragraph headed “Business – Machinery and equipment to carry out foundation works and ancillary services” in this [REDACTED] for further details.

We possess patented techniques

We have patented our technical developments and findings. In 2002, the patent “Water-absent Concreting Apparatus and its Method” developed by Mr. Lau with the support of his technical team was granted. More recently in 2010, Worldwide Profit patented the “Concreting Equipment and Method Thereof” developed by Mr. Lau. Subsequently on 25 July 2012, such patent was assigned to SW Foundation Group, an indirect wholly-owned subsidiary of the Company. Our Directors believe that these methods can ensure that our Group’s products and work quality are consistently maintained. Please refer to the paragraphs headed “Business – Technical developments” and “Business – Concreting Equipment and Method Thereof and Concreting Apparatus and its Method” for further details.

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BUSINESS

BUSINESS OVERVIEW

Foundation works and ancillary services

The following table sets out a breakdown of our Group’s revenue by geographic locations during the Track Record Period:

Revenue(Note): Foundation works and ancillary services – Hong Kong – Macau	2012 HK$’000 98,428 – 98,428	For the year ended 31 March 2013 2014 % HK$’000 % HK$’000 % 100.0 334,807 89.2 37,335 7.6 – 40,340 10.8 455,399 92.4 100.0 375,147 100.0 492,734 100.0	For the year ended 31 March 2013 2014 % HK$’000 % HK$’000 % 100.0 334,807 89.2 37,335 7.6 – 40,340 10.8 455,399 92.4 100.0 375,147 100.0 492,734 100.0
			100.0

During the Track Record Period, our Group has undertaken and/or has been engaged to undertake (i) foundation works, including the construction of bored piles, rock socketed H-piles and excavation and lateral support works; and (ii) ancillary services, including site investigation and removal of installed piles.

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Foundation works and ancillary services projects

Our Group has undertaken foundation works and ancillary services in the public and private sectors during the Track Record Period. The details of these projects are set out below:

Contracts in respect of which our foundation works and ancillary services were completed during the Track Record Period

Foundation works Period(Note 1) Type of contract Contract sum and ancillary (approx. number (Design & (approx. HK$M) services project Location Category Role Types of work of months) Build/Build) (Note 2) Design and Central Private Main contractor bored piles July 2009 to Design and build 32.0 construction of (Note 5) September 2013 (Note 7) foundation system (51 months) for hotel (Note 6) development Express rail link Yuen Long Public Sub-contractor bored piles January 2011 to Build only 42.3 project 1 November 2011 (11 months) Express rail link Lai Chi Kok Public Sub-contractor removal of installed July 2011 to n/a 23.0 project 2 piles December 2011 (6 months) Road improvement Yuen Long Public Sub-subcontractor lateral support works October 2011 to Build only 21.6 and extension September 2012 (12 months) Redevelopment project Causeway Bay Private Sub-contractor bored piles March 2012 to Build only 12.9 September 2012 (7 months) Logistics centre Tsing Yi Private Sub-contractor bored piles February 2012 to Build only 148.7 January 2013 (12 months) Foundation work and Wong Tai Sin Private Main contractor bored piles, April 2012 to Build only 161.4 basement excavation and pre-bored February 2013 (Note 4) socketed H piles (11 months) Large diameter Cheung Sha Wan Private Sub-subcontractor bored piles January 2013 to Build only 4.2 bored piles June 2013 installation works (6 months) Hotel tower bored Cotai, Macau Private Main contractor bored piles January 2013 to Build only 537.3 piling works (i.e. the (Note 5) December 2013 (MOP 553.9) Hotel Tower Project) (12 months)(Note 8) (Note 9) New building bored Kowloon City Private Sub-contractor bored piles January 2013 Build only 9.7 piling works to June 2013 (6 months) Residential building Kowloon City Private Sub-contractor bored piles April 2013 to Build only 16.3 bored piling works February 2014 (11 months) 1,009.4	Revenue recognised during the Track Record Period (approx. HK$M) 5.9 (Note 7) 37.9 27.2 15.4 (Note 3) 12.7 149.5 162.2 4.2 474.9 8.5 17.3
	915.7

Foundation works
Period(Note 1)
Type of contract
Contract sum
and ancillary
(approx. number
(Design &
(approx. HK$M)
services project
Location
Category
Role
Types of work
of months)
Build/Build)
(Note 2)
Design and
Central
Private
Main contractor
bored piles
July 2009 to
Design and build
32.0
construction of
(Note 5)
September 2013
(Note 7)
foundation system
(51 months)
for hotel
(Note 6)
development
Express rail link
Yuen Long
Public
Sub-contractor
bored piles
January 2011 to
Build only
42.3
project 1
November 2011
(11 months)
Express rail link
Lai Chi Kok
Public
Sub-contractor
removal of installed
July 2011 to
n/a
23.0
project 2
piles
December 2011
(6 months)
Road improvement
Yuen Long
Public
Sub-subcontractor
lateral support works
October 2011 to
Build only
21.6
and extension
September 2012
(12 months)
Redevelopment project
Causeway Bay
Private
Sub-contractor
bored piles
March 2012 to
Build only
12.9
September 2012
(7 months)
Logistics centre
Tsing Yi
Private
Sub-contractor
bored piles
February 2012 to
Build only
148.7
January 2013
(12 months)
Foundation work and
Wong Tai Sin
Private
Main contractor
bored piles,
April 2012 to
Build only
161.4
basement excavation
and pre-bored
February 2013
(Note 4)
socketed H piles
(11 months)
Large diameter
Cheung Sha Wan Private
Sub-subcontractor
bored piles
January 2013 to
Build only
4.2
bored piles

June 2013
installation works
(6 months)
Hotel tower bored
Cotai, Macau
Private
Main contractor
bored piles
January 2013 to
Build only
537.3
piling works (i.e. the
(Note 5)
December 2013
(MOP 553.9)
Hotel Tower Project)
(12 months)(Note 8)
(Note 9)
New building bored
Kowloon City
Private
Sub-contractor
bored piles
January 2013
Build only
9.7
piling works
to June 2013
(6 months)
Residential building
Kowloon City
Private
Sub-contractor
bored piles
April 2013 to
Build only
16.3
bored piling works
February 2014
(11 months)
1,009.4

Revenue recognised
during the Track
Record Period
(approx. HK$M)
5.9
(Note 7)
37.9
27.2
15.4
(Note 3)
12.7
149.5
162.2
4.2
474.9
8.5
17.3

915.7

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Notes:

(1) The period covers the respective month in which our works commenced and were completed based on the payment certificate issued by our customers or authorised persons employed by our customers or the submission of payment application of the relevant project by our Group.
(2) Contract sum excludes all contingent and/or provisional contract amounts set out in the respective contracts, if any.
(3) The ultimate employer changed the foundation design during the course of our engagement which reduced the scope of our foundation works and ancillary services. Accordingly, our revenue derived from this project was reduced.
(4) This project involves a number of phases which is at the discretion of the customer to proceed. The contract sum represents the contract value of the completed phase of this project.
(5) Our Group was engaged as a main contractor for the foundation works and ancillary services under this project.
(6) Our Group was engaged in prolonged negotiation with our customer in respect of the foundation design of this project, thus the long duration of this project.
(7) The original contract sum (excluding provisional contract sum) based on the letter of acceptance is HK$32.0 million and there is a provisional sum of another HK$1.0 million for contingencies. Our customer and our Group agreed in September 2013 that the pile cap works and all associated excavation and lateral support system shall be excluded from the original scope of our main contract and the final contract sum shall be approximately HK$22.0 million.
(8) Prior to the approval of the registration of SW Foundation (Macau) by the DSSOPT in February 2013, our Group engaged sub-contractors to perform pre-drilling works for the Hotel Tower Project.
(9) The original contract sum was approximately MOP693.9 million (equivalent to approximately HK$673.1 million), which included a provisional contract sum of MOP140.0 million (equivalent to approximately HK$135.8 million). As such, the contract sum excluding the contingent and/or provisional contract amount was approximately MOP553.9 million (equivalent to approximately HK$537.3 million). Subsequent to our appointment as the main contractor for the foundation works and ancillary project in respect of the Hotel Tower Project but prior to our commencement] of foundation works, the ultimate employer of this project altered the foundation design, which changed the scope of our foundation works and ancillary services. As such, our revenue derived from this project was reduced.

Save for the hotel development project in Central , details of which are set out under paragraph headed “Business – Foundation works and ancillary services projects” in this [REDACTED] above, the duration of our Group’s foundation works and ancillary services projects completed during the Track Record Period ranged from six months to 12 months.

Contracts on hand

As at the Latest Practicable Date, the awarded contract sum for the contracts on hand (including contracts in progress and contracts of which our work has yet to commence) amounted to approximately HK$1,348.6 million.

Based on our unaudited management accounts for the two months ended 31 May 2014, the unaudited monthly average revenue was higher than the monthly average revenue for the year ended 31 March 2014, which was mainly due to revenue derived in April and May 2014 from the multi-storey logistics centre project at Tsing Yi and the Hotel Casino Project. The aggregate contract sum (excluding contingent and provisional contract amounts) of these two projects amounted to approximately HK$646.8 million.

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BUSINESS

The following table sets forth our Group’s contracts on hand as at 31 May 2014:

									Outstanding
					Estimated	Percentage of			contract sum as
					duration(Note 1)	work certified		Contract sum	of 31 May 2014
					(approx. number	as at 31 May 2014	Type of	(Note 3)	(Note 3)
Project	Location	Category	Role	Types of work	of months)	(Note 2)	contract	(approx. HK$M)	(approx. HK$M)
Composite	Novos	Private	Sub-contractor	bored piles	commenced work	0.2%	Build only	462.8	462.6
Development	Aterros da				in February 2014			(MOP 477.1)
Project	Areia Preta,				and the estimated			(Note 5)
	Macau				completion date is
					to be determined
					(Note 4)
Multi-storey	Tsing Yi	Private	Main contractor	bored piles, pile	February 2014 to	23.5%	Design and	292.7	269.2
logistic centre				cap and lateral	October 2014		build
				support works	(9 months)
Hotel Casino	Cotai, Macau	Private	Sub-subcontractor	bored piles	February 2014 to	26.2%	Build only	354.1	327.9
Project					December 2014			(MOP365.0)
					(10 months)
Shatin to Central	Diamond	Public	Sub-contractor	bored piles	May 2014 to	nil	Build only	58.0	58.0
rail link project	Hill				December 2014
					(8 months)
Hong Kong	Lantau	Public	Sub-contractor	bored piles	August 2014 to	nil	Build only	181.0	181.0
boundary crossing	Island				April 2015
facilities					(9 months)
1,348.6									1,298.7

Notes:

(1) The commencement of estimated duration of the respective projects are based on letter of award, payment or valuation certificate issued by authorised persons employed by our customers.
(2) The percentage of work certified is based on the certificates issued by our customer on the respective projects. It represents the amount of works certified as a percentage of the original contract sum.
(3) Contract sum and outstanding contract sum as of 31 May 2014 exclude all contingent and/or provisional contract amounts set out in the respective contracts, if any.
(4) In June 2014, our Group and the main contractor of the Composite Development Project mutually agreed that the completion date for our foundation works and ancillary services under the Composite Development Project contract is subject to the granting of (i) the construction licence for the Composite Development Project by the Macau Government; and (ii) quotas for non-Macau resident construction workers by the Human Resources Office of the Macau Government to the ultimate employer. As set out in the letter issued to us by the main contractor of the Composite Development Project in June 2014, the main contractor of the Composite Development Project expected the construction licence to be granted by the Macau Government in October 2014.
(5) The relevant foundation works and ancillary services for the Composite Development Project were divided into two phases. Phase 1 of the Composite Development Project has been awarded to our Group and the main contractor of the Composite Development Project has the option to award our Group with Phase 2 of the Composite Development Project on or before two months after the commencement of our piling works. The contract sum (excluding contingencies) for Phase 1 is approximately MOP477.1 million (equivalent to approximately HK$462.8 million) and related contingencies for Phase 1 has been set at MOP65.0 million (equivalent to approximately HK$63.1 million). The contract sum (excluding contingencies) for Phase 2 is approximately MOP429.6 million (equivalent to approximately HK$416.7 million) and related contingencies for Phase 2 has been set at MOP55.0 million (equivalent to approximately HK$53.4 million). For the status of the Composite Development Project, please refer to the paragraph headed “Business - The Composite Development Project” in this [REDACTED] below.

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BUSINESS

Having considered (i) the capacity of our existing fleet of machinery and equipment to carry out foundation works and ancillary services, which our Directors believe are sufficient to complete our contracts on hand; (ii) our ability, where necessary to sub-contract part of our preparation work, such as pre-drilling and steel fixing works to our approved sub-contractors; and (iii) our plan to recruit local workers in respect of our projects in Macau and to deploy certain workers and professional staff from Hong Kong to Macau, our Directors take the view that our Group has sufficient capacity to complete all contracts on hand. For further details on each of the contracts on hand, please refer to the paragraphs headed “Business – Continue to expand our business operations in Hong Kong “ and “Business - Continue to expand our business operations in Macau” set out in this [REDACTED] below, respectively.

BUSINESS STRATEGIES

Continue to enhance our competitiveness in the foundation industry

Our long history of operation and experience together with our broad range of machinery and equipment allow our Group to effectively compete for and secure contracts for foundation works and ancillary services projects. Our ability to compete, together with our project management skills and expertise, are the main contributors to our ongoing growth and future profitability. We shall continue to build our track record and reputation in the foundation industry by securing and completing projects on time and to the satisfaction of our customers. In addition, our Group shall continue to enhance our cost control and operational efficiency by following the controls and procedures relating to our material procurement and sub-contractors engagement, which allow us to obtain competitive offers and maintain a stringent standard in the selection of our suppliers and sub-contractors.

Compete for sizeable and profitable foundation works and ancillary services projects

Foundation works and ancillary services projects, regardless of their size and complexity, require the involvement and expertise of our Directors and senior management at various stages of the project, such as identify potential projects, submission of tender and quotation related procedures, project planning and administration, and project implementation. In addition, our capacity to carry out foundation works and ancillary services for our customers also depends on the availability of our machinery and equipment. Accordingly, the number of foundation works and ancillary services projects that can be executed by our Group simultaneously at any given time is limited by our resources including the capacity of our machinery and equipment. Thus, our Directors believe that our Group should focus on deploying our resources towards competing for sizeable and profitable foundation works and ancillary services contracts in both Hong Kong and Macau. Nonetheless, our Directors will also consider competing for and taking on smaller contracts under circumstances where (i) our Group has unutilised capacity and resources; (ii) the estimated gross profit margin is attractive to our Group; and (iii) the execution of such contracts will not impair the ability of our Group to execute awarded or potential contracts which our Group has tendered or provided quotation for.

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Maintain an acceptable profit margin in our tenders and quotations

Our Directors believe that our ability to secure contracts primarily depends on the availability of the requisite machinery and equipment, our competitiveness in price, our experience and past job references.

In deciding whether to submit a tender or quotation and in preparing a competitive tender or quotation, we consider various factors, including the type of foundation works, the location of the works, site conditions, price of construction materials, labour, duration, counterparty risks and availability of machinery and equipment.

Subject to the scope, complexity, duration, particular specifications of the project and the prevailing market conditions, our profit margin incorporated into each of our tenders or quotations may vary from project to project. However, when the foundation industry experiences a downturn and the competition for price intensifies, our tenders or quotations may become less competitive compared to tenders or quotations provided by other contractors. In the event that another contractor offers a more competitive price than our tendered price or quotation for the same contract, such contract may be awarded to another contractor. Further details of risks of our business are set out in the section headed “Risk Factors” in this [REDACTED] .

Continue to expand our business operations in Hong Kong

As at the Latest Practicable Date, our Group has three contracts on hand which are related to projects based in Hong Kong, namely (i) the multi-storey logistics centre at Tsing Yi; (ii) the Shatin to Central rail link project; and (iii) the Hong Kong boundary crossing facilities. Details of which are set out below:

(i) Multi-storey logistics centre at Tsing Yi

In February 2014, our Group was awarded the foundation works and ancillary services contract for the multi-storey logistic centre project with a contract sum of approximately HK$292.7 million (without taking into account any contingent and/or provisional contract amounts) and commenced our work in the same month.

Our scope of works under the multi-storey logistics centre project include the construction of bored piles and pile cap as well as lateral support works.

Based on payment certificate issued to our Group, we have recorded revenue of approximately HK$12.2 million during the Track Record Period. Based on the progress of the multi-storey logistic centre project as at the Latest Practicable Date, barring any unforeseen circumstances, our Directors anticipate that the remaining contract sum of approximately HK$280.5 million (without taking into account any contingent and/or provisional contract amounts) will be recognised as revenue by our Group during the year ending 31 March 2015.

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(ii) Shatin to Central rail link project

In April 2014, our Group was awarded the foundation works and ancillary services contract for the Shatin to Central rail link project with a contract sum of approximately HK$58.0 million (without taking into account any contingent and/or provisional contract amounts), and we commenced our works in May 2014.

Our scope of works under the Shatin to Central rail link project primarily involved the construction of bored piles.

Based on the progress of the Shatin to Central rail link project as at the Latest Practicable Date, barring any unforeseen circumstances, our Directors anticipate that the entire contract sum of approximately HK$58.0 million (without taking into account any contingent and/or provisional contract amounts) will be recognised as revenue by our Group during the year ending 31 March 2015.

(iii) Hong Kong boundary crossing facilities

In May 2014, our Group was awarded the foundation works and ancillary services contract for the Hong Kong boundary crossing facilities project with a contract sum of approximately HK$181.0 million (without taking into account any contingent and/or provisional contract amounts), and we target to commence our works in August 2014.

Our scope of works under the Hong Kong boundary crossing facilities project mainly involved the construction of bored piles.

Based on the current timeframe of the Hong Kong boundary crossing facilities project as at the Latest Practicable Date, barring any unforeseen circumstances, our Directors anticipate that substantial portion of the contract sum of approximately HK$181.0 million (without taking into account any contingent and/or provisional contract amounts) will be recognised as revenue by our Group during the year ending 31 March 2015.

For details relating to the project administration and project implementation of the aforesaid Hong Kong based foundation works and ancillary services projects, please refer to the paragraphs headed “Business – Project planning and administration” and “Business – Project implementation” in this [REDACTED] .

Continue to expand our business operations in Macau

Our Group was awarded the contract for the Hotel Tower Project in December 2012 and the practical completion took place in December 2013. The Hotel Tower Project was the first project based in Macau undertaken by our Group and was successfully completed during the Track Record Period. Subsequently, our Group was awarded two additional contracts in Macau, namely (i) the Composite Development Project; and (ii) the Hotel Casino Project.

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Based on our knowledge accumulated from foundation works and ancillary services projects in Macau undertaken by our Group, our Directors believe that our Group has gained the experience and possesses the necessary resources and technical ability to compete for future foundation works and ancillary services contracts in Macau.

As at the Latest Practicable Date, in respect of contracts on hand, our Group has two foundation works and ancillary services projects based in Macau:

(i) The Hotel Casino Project

Our Group commenced foundation works and ancillary services for the Hotel Casino Project in February 2014 with an understanding between us and our customer on the scope of work and contract sum, which was subsequently agreed in writing in March 2014. The contract sum of the Hotel Casino Project is approximately HK$354.1 million (without taking into account any contingent and/or provisional contract amounts).

Our scope of works in respect of the Hotel Casino Project includes pre-drilling, construction of bored piles and testing of the bored piles.

Similar to other foundation works and ancillary services projects undertaken to our Group, prior to submission of our tender for the Hotel Casino Project, we reviewed the site investigation report to understand the geology and underground physical properties of the work site. In addition, our Group engaged sub-contractors to undertake pre-drilling work prior to the commencement of our piling work which enabled us to assess the sub-soil condition and the suitability of the type and extent of the piles to be constructed for the superstructure to be developed as well as to identify and resolve any technical issues in advance.

Our Group financed the requisite working capital for the Hotel Casino Project through a combination of external bank borrowings and internal resources.

Based on payment certificates issued to our Group, we have recorded revenue of approximately HK$20.0 million during the Track Record Period. Based on the progress of the Hotel Casino Project as at the Latest Practicable Date, barring any unforeseen circumstances, our Directors anticipate that the remaining contract sum of approximately HK$334.1 million (without taking into account any contingent or provisional contract amounts) will be recognised as revenue by our Group during the year ending 31 March 2015.

In connection with the Hotel Casino Project, our Group deployed a range of our machinery and equipment in Macau including crawler cranes, oscillators and reverse circulation drills.

For details relating to the procurement of subcontractors, construction materials and other aspects of project administration and project implementation of the Hotel Casino Project, please refer to the paragraphs headed “Business – Project planning and administration” and “Business – Project implementation” in this [REDACTED] below. For details in respect of the staffing arrangement of the Hotel Casino Project, please refer to the paragraph headed “Business – Employees” in this [REDACTED] below.

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(ii) The Composite Development Project

In January 2014, our Group was awarded with the foundation works and ancillary services contract for the Composite Development Project with a contract sum of approximately HK$462.8 million (without taking into account any contingent and/or provisional contract amounts).

As part of our preparation work for the Composite Development Project, our Group has engaged sub-contractors to perform pre-drilling works on the relevant work site since February 2014. Based on payment certificates issued to our Group, we recorded revenue of approximately HK$0.8 million during the Track Record Period.

The relevant foundation works and ancillary services for the Composite Development Project were divided into two phases. Phase 1 of the Composite Development Project has been awarded to our Group. Furthermore, the main contractor of the Composite Development Project has an option to award our Group with Phase 2 of the Composite Development Project on or before two months after the commencement of our piling works. As at the Latest Practicable Date, the aforesaid option has not been exercised by the main contractor of the Composite Development Project.

In June 2014, our Group and the main contractor of the Composite Development Project mutually agreed that the completion date for our foundation works and ancillary services under Phase 1 of the Composite Development Project contract was subject to the granting of (i) the construction licence for the Composite Development Project by the Macau Government; and (ii) quotas for non-Macau resident construction workers by the Human Resources Office of the Macau Government to the ultimate employer. As set out in the letter issued to us by the main contractor of the Composite Development Project in June 2014, the main contractor of the Composite Development Project expected the construction licence to be granted by the Macau Government in October 2014.

Up to and including the Latest Practicable Date, in absence of the requisite construction licence, our Group has not carried out any construction work on the work site of Phase 1 of the Composite Development Project. Given the uncertainties around the timing of the grant of the construction licence and the quotas for non-Macau resident construction workers, our Group is unable to reliably estimate the completion date of our foundation works and ancillary services in respect of Phase 1 of the Composite Development Project.

In light of the uncertainties as set out above, we are unable to reliably estimate the revenue to be derived from the Composite Development Project for the year ending 31 March 2015.

As at the Latest Practicable Date, the Composite Development Project, excluding phase 2, is our largest contract on hand by contract sum. Our foundation works and ancillary services under the scope of Phase 1 of the Composite Development Project included site clearance, construction of piles, demolition or removal of underground structure.

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Keep abreast of developments in the construction industry of Hong Kong and Macau

Our Directors will continue to keep abreast of the development of foundation works and ancillary services contracts and opportunities in Hong Kong, particularly those tenders related to the scheduled “Ten Major Infrastructure Projects”. Our Directors believe that our Group is well positioned to secure contracts for part of the foundation works and ancillary services available under those construction projects. As at the Latest Practicable Date, our Group has submitted tenders for four foundation works and ancillary services contracts related to (i) the Liantong / Heung Yuen Wai boundary control point project; (ii) the Hong Kong-Zhuhai-Macau bridge – Hong Kong boundary crossing facilities project; (iii) the M+ Museum project at West Kowloon cultural district and; (iv) a redevelopment project in Wan Chai, all of which are projects based in Hong Kong.

The foundation works and ancillary services under each of the abovementioned tenders is primarily related to the construction of bored piles. Our Directors believe that our Group possesses both the expertise and the requisite machinery and equipment to carry out the related foundation works under the aforesaid submitted tenders set out above.

In addition to the abovementioned tenders, with the expected increase in expenditure by the Government on public works projects in Hong Kong and the fact that through SW Bore Pile, a principal operating subsidiary, our Group is (i) an approved supplier of materials and specialist contractor for public works – land piling (Group II), large diameter bored pile (with bell-out) with the Development Bureau; (ii) a piling contractor under the large diameter bored piling category with the Housing Authority; and (iii) a registered specialist contractor under the foundation works category with the Buildings Department, our Directors believe there will be opportunities for our Group to tender and be awarded additional contracts in the public sector in Hong Kong. Furthermore, our Group will also monitor opportunities in the private sector in Hong Kong.

Our Directors are of the view that our involvement in the Hotel Tower Project and the award of contract for the Composite Development Project and the Hotel Casino Project has enhanced our Group’s profile as a capable and experienced foundation works and ancillary services provider in Macau. Going forward, our Group will continue to compete for commercially viable foundation works and ancillary services contracts based in Macau.

As set out under paragraph headed “Business – Compete for sizeable and profitable foundation works and ancillary services projects” in this [REDACTED] , the number of foundation works and ancillary services projects that can be executed by our Group simultaneously at any given time is limited by our resources including the capacity of our machinery and equipment. Thus, it is our Group’s strategy to primarily focus on deploying our resources towards competing for sizeable and profitable foundation works and ancillary services contracts in both Hong Kong and Macau.

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Plans to grow our business

We also intend to implement the following plans to grow our business and create value for our Shareholders.

(i) Expand our fleet of machinery and equipment

In order to enhance our operational capability going forward, we intend to utilise part of the proceeds from the [REDACTED] to acquire and/or partly finance the expansion of our fleet of machinery and equipment including four crawler cranes and other ancillary machinery and equipment to carry out foundation works and ancillary services on or before 31 March 2016. Our intention is to deploy such machinery and equipment to the ongoing project(s). These crawler cranes can also be deployed and used for other foundation work and ancillary services projects which involve the construction of bored piles, after the completion of the above mentioned project(s).

(ii) Expand our workforce

To cope with our business expansion, we intend to continue with our recruitment of construction workers, maintenance workers and project managers, who possess suitable experience and qualifications.

Our Directors believe that by expanding our construction capacity and workforce, we will be able to better compete for sizeable foundation works and ancillary services projects and broaden our customer base.

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OUR FOUNDATION WORKS AND ANCILLARY SERVICES

Piling

A pile is a columnar foundation element that is either manufactured and inserted into the ground or cast-in-place in a shaft formed in the ground by boring or excavation.

The choice of piles depends on the superstructure’s loading characteristics, ground conditions and environmental issues and the cost effectiveness for adopting a certain pile type. For “design and build” contracts, subject to customers’ specific requests, the contractor can decide on the type of piling system to be adopted for the project. For “build only” contracts, the customer specifies the type of piling system to be used in the project.

During the Track Record Period, the majority of our Group’s piling projects involved the construction of bored piles. Our Group has also been engaged to construct rock socketed steel H-piles and to carry out excavation and lateral support works during the Track Record Period.

Bored pile

A typical bored pile

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The construction of large diameter bored piles involves the excavation (inside a steel casing) of a circular hole in the ground by a grab or reverse circulation drill, insertion of a reinforcement cage into the circular hole and the filling of concrete by tremie method. The following diagrams illustrate the typical process for construction of a large diameter bored pile:

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Soil
Concrete
Rock
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Typically, bored piles are used to support tall buildings or structures which have heavy vertical loads. A bored pile is a cast-in-place concrete pile cast on construction sites. The bored piling works undertaken by our Group are mainly large diameter bored piles with diameters ranging from 1.0 metre to 3.0 metres. Given that there are a large variety of pile diameters and construction techniques, large diameter bored piles can be tailored and adapted to various superstructure loading requirements and bearing capacity of the bedrock. In addition, the construction of a bell-out at the base of a large diameter bored pile can further increase the pile load bearing capacity.

All of the bored piling related foundation work projects undertaken by our Group during the Track Record Period involved the construction of large diameter bored piles.

The reasons for the use of bored piles to support superstructures include (i) its high load bearing capacity; (ii) little vibration; and (iii) low noise level, thus reducing disturbance to the surrounding population, notwithstanding that the construction of bored piles requires a wide range of specialised machinery and equipment.

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Rock socketed steel H-pile

A typical rock socketed steel H-pile

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Soil
Rock
----- End of picture text -----

The construction of a rock socketed steel H-pile involves the excavation (with a steel casing) of a circular hole in the ground (including the rock socket), the placement of a steel H-pile into the hole which is subsequently filled with cement grout. The following diagrams illustrate the typical construction process of a rock socketed steel H-pile:

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

Concrete
Drilling truck
rig
Steel casing
(down-the-hole Soil
hammer inside)
Rock
Rock Socket
Excavate by down-the-hole hammar Fill with cement grout
(including the rock socket) with casing Install steel H-pile and withdraw steel
down to rockhead casing
----- End of picture text -----

The reasons for the use of rock socketed steel H-piles to support superstructures include, among others, its ability to accommodate sloping and congested sites. Rock socketed steel H piles are typically used to support buildings or structures comparatively lighter than those building or structures supported by bored piles. The machinery and equipment required for the construction of rock socketed steel H-piles are typically smaller in size.

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Excavation and lateral support works

A typical excavation and lateral support works

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Sheet pile
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The construction of excavation and lateral support works involves the installation of sheet piles, excavation, installation of waling and strut, and further excavation. The following diagrams illustrate the typical construction process of excavation and lateral support works:

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Sheet pile)
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Typically, excavation and lateral support works are used to provide support for excavation of the existing ground for the purpose of construction of pile caps, basement and underground utilities.

The lateral support works carried out or engaged to be carried out by our Group during the Track Record Period involved the use of sheet piles, pipe piles and soldier piles with steel waling and struts as a temporary support system.

The design of lateral support works is governed by, among others, the soil and ground-water conditions, and by the depth and width of the excavated area.

Ancillary Services

Site investigation

Typically, site investigation works, including documentary studies, site survey and ground investigation which may include exploratory drilling, excavating and probing of land are conducted on site prior to the commencement of foundation works to enable foundation works contractors to assess the subsoil conditions and select the type and extent of piles required for the superstructure to be developed. At dense urban development sites, investigations may be extended to cover factors that may affect adjacent properties including slopes, pipes conveying water, gas or sewage.

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During the Track Record Period, our Group engaged specialist subcontractors to undertake site investigation, where necessary, to obtain data for the design and construction of foundations, including the identification of risks and relevant remedies. Further details of subcontracting arrangements are set out under the paragraph headed “Business – Subcontracting arrangements” in this [REDACTED] below.

Removal of installed piles

During the Track Record Period, our Group undertook one project where we were specifically engaged to remove previously installed piles. Such works were performed to clear and prepare the work site for future development.

Machinery and equipment to carry out foundation works and ancillary services

Our Group relies on the use of machinery and equipment to enable us to carry out our foundation works and ancillary services. Accordingly, we maintain a broad range of machinery and equipment which mainly consists of crawler cranes, oscillators and reverse circulation drills for the construction of bored piles; boring rigs, down-the-hole hammers and air compressors for the construction of rock socketed steel H-piles. Our machinery and equipment is of different sizes/capacities. Our Directors believe our fleet of machinery and equipment enhances our ability to compete for and carry out sizeable and more complex foundation works and ancillary services contracts in Hong Kong and Macau as well as projects that may require certain specialised type of machinery and equipment.

Prior to committing ourselves to any significant investment in machinery and equipment, our Directors would evaluate the costs and benefits of such investment and alternative options, including leasing machinery and equipment from external parties. In this connection, our Directors confirm that our Group may occasionally lease a particular machinery and equipment from an economic point of view when this machinery and equipment is available for lease at a favourable price; or when our use of such machinery and equipment is for an ad hoc task or project and/or for testing of the functionality of such machinery and equipment before we acquire the same for long term use. We incurred costs for machinery leasing of approximately HK$0.6 million, HK$5.5 million and HK$6.5 million during the Track Record Period.

During the Track Record Period, our Group acquired machinery and equipment in the sum of approximately HK$9.8 million, HK$119.6 million and HK$95.2 million, respectively.

As at 31 March 2014, the aggregate net book value of our machinery and equipment recorded in the combined balance sheets of our Group totalled approximately HK$397.8 million. Our used machinery and equipment is recorded as non-current assets in the combined balance sheets of our Group. Our Group normally performs a stock take on our machinery and equipment once a year.

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The table below sets out the function and usage of our principal machinery as at 31 March 2014:

	Number		Countries
Machinery	of units	Capacity	of origin	Type of work	Function and usage
Crawler cranes	26	80 to 275	Germany and	bored piles	used for grabbing, chiseling
		tonnes	Japan		and lifting
Oscillators	50	0.9 to 3.3	Germany and	bored piles	used in the construction
		metres	Italy		process of large diameter
					bored piling in conjunction
					with crawler cranes to
					form large diameter bores
					in the ground and as a tool
					to withdraw casing during
					concreting
Rotators	12	1.5 to 3.0	Germany and	bored piles	similar to an oscillator except
		metres	Japan		that the casing is “rotated”
					fully during the driving
					and extraction of the
					casing
Reverse circulation	21	1.37 to 3.0	Germany and	bored piles	used to drill/cut through
drills		metres	South Korea		obstructions and/or into
					the bedrock and used in
					conjunction with a bell out
					bit to form a bell out
Boring rigs and down-	7 and 17	16 to 22	Hong Kong,	rock socketed	used together to drill/cut
the-hole hammers		inches and 85	Italy, Japan,	steel H-piles	through obstructions and/or
		to 120 tonnes	South Korea,		into the bedrock
			United
			Kingdom and
			United States
			of America
Air compressors	16	750 to 1078	Japan, Sweden	bored piles	used in conjunction with a
		cubic feet per	and United	and rock	reverse circulation drill
		minute	States of	socketed steel	or boring rigs to remove
			America	H-piles	the remaining fine soil
					and rock fragments in the
					pre-bored hole after the
					excavation process

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As per the applicable accounting policies adopted by our Group, depreciation of our machinery and equipment is calculated using the straight line method to allocate their costs to their residual values over the estimated useful lives of the machinery and equipment, which ranges from 10 to 15 years. The residual values and useful lives of the machinery and equipment are reviewed and adjusted if appropriate, at each balance sheet date.

Due to the nature of our operations, it is not feasible or practicable to accurately quantify the utilisation rates of our machinery and equipment for the following reasons:

(i) our machinery and equipment may from time to time be left unused at active construction sites pending completion of other construction steps and/or may sometimes be left unused pending repair, assembly or disassembly at construction sites. Accordingly, the utilisation rate of each individual machine cannot be accurately determined as it is not practicable to record the time at which a particular machinery/equipment is used or left unused in an active construction site;
(ii) our Group worked on a range of foundation works and ancillary services projects over the Track Record Period. Each of these projects undertaken by our Group involved a number of construction steps. A construction step may involve several procedures and each procedure may require the use of various types of machinery and equipment. Accordingly, it would be difficult to reliably measure the actual utilisation of each individual machine/equipment on a daily or hourly basis as these procedures may vary depending on, among others, the complexity of the project and sub-soil condition of the construction site; and
(iii) as set out in the fixed asset register of our Group as at 31 March 2014, our fleet of machinery is in excess of 220 items of machinery and over 10 types of machinery of various of sizes and capacity. Given the number of machinery owned by our Group, it is impracticable for our Group to track in detail the usage of each individual machinery.

In view of the above, the collection of reliable and accurate data, including the hourly usage rate of each individual machinery and equipment, required for the calculation of the utilisation rates is therefore not feasible in practice.

During the Track Record Period, when our machinery and equipment was not deployed to a particular project or located at the relevant construction site, they would be placed at a site leased by the Company situated in Yuen Long, New Territories.

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As at the Latest Practicable Date, our Group deployed a range of our machinery and equipment in Macau including crawler cranes, oscillators and reverse circulation drills for the Hotel Casino Project. The deployment of our machinery and equipment is subject to project requirements and progress. Our machinery and equipment is transported between Hong Kong and Macau by freight and such transportation arrangements can be arranged at short notice.

Our Group has a broad range of machinery and equipment to cater for different project requirements and their deployment during the Track Record Period is subject to project requirements and progress. The quantity and quality of the machinery and equipment as well as an experienced team of maintenance staff are crucial to ensuring our Group’s ability to compete cost effectively for those projects which are technically complex in nature and/or are subject to time constraints.

Leasing of machinery and equipment

During the Track Record Period, our Group derived other income from our business of leasing machinery and equipment to third parties in Hong Kong which amounted to approximately HK$14.8 million, nil and HK$0.2 million, respectively.

Our Group leased our machinery and equipment to four customers during the Track Record Period. Our Group has not actively promoted this business during the Track Record Period. Our Directors evaluate enquiries and where appropriate, enter into leasing transactions of our machinery and equipment with due care to ensure any leasing arrangements would not impair our Group’s ability to compete for future foundation works and ancillary services.

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SALES AND MARKETING AND CUSTOMERS

During the Track Record Period, our Group has undertaken projects as a main contractor, subcontractor or sub-subcontractor on private and public sector projects located in Hong Kong and Macau.

The foundation works and ancillary services contracts undertaken by our Group are normally awarded to us by way of tender or quotation requested by the customers or the main contractors. Referrals to tender for projects or requests for price quotation in the foundation industry are largely from wordof-mouth, expertise in foundation works, reputation, established track record and past job references, rather than by advertising and/or promotion. We focus our efforts on the execution of projects and on maintaining existing relationships with market participants and our customers in the construction industry to explore potential business opportunities, further details of which are set out below.

Sales and marketing

During the Track Record Period, all of the foundation works and ancillary services contracts undertaken by our Group were awarded by way of tender or quotation requested by the customers or the main contractors. Notwithstanding the fact that our Group does not maintain a full time team of sales and marketing staff, our management team maintains frequent contact with private sector participants in the construction industry in Hong Kong and in Macau and attends regular meetings organised by The Hong Kong Construction Association Limited, of which SW Bore Pile is a member, to keep abreast of market developments and potential business opportunities. Furthermore, our Group also monitors the development of private sector companies through our business contacts and their corporate websites.

In addition, we monitor Government works forecasts and public tender notices by searching tender notices and other relevant information published on the websites of various governmental departments.

From time to time, we receive letters of invitation to participate as potential tenderers for construction projects of the Housing Authority and private sector projects as we are on their approved list of foundation contractors.

There have also been occasions where a potential customer or architects contacted members of our management team directly to discuss potential foundation works and ancillary services opportunities. In such circumstances, our management team then followed up and developed such opportunities.

Since works undertaken by our Group during the Track Record Period were awarded to us by way of tender or through acceptable price quotation, we are of the view that past job references, relationships with customers and our network in the industry are valuable assets which will assist us to secure future contracts. With a view to increasing our Group’s publicity, we also display the name and logo of Sam Woo at construction sites.

Customers

During the Track Record Period, our Group’s largest customer accounted for approximately HK$37.9 million, HK$159.9 million and HK$434.6 million, representing approximately 38.5%, 42.6% and 88.2% of the revenue of our Group, respectively. Sales to our Group’s five largest customers for the Track Record Period amounted to approximately HK$95.9 million, HK$367.1 million and HK$486.4 million, representing approximately 97.4%, 97.9% and 98.7% of the revenue of our Group, respectively.

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The following information sets out the profile of the top five customers for the Track Record

Period:

Year ended 31 March 2012

Name of		Approximate percentage	Principal business	Business with our
our direct	Public/Private sector	to the revenue of	of our	direct customer
customer(Note 1&2)	project	our Group (%)	direct customer	commenced since
Customer D	Public sector project	38.5%	Building and	2011
			civil engineering
Customer E	Public sector project	27.6%	Construction	2011
Customer F (Note 3)	Public sector project	15.3%	Construction	2004
Customer G	Public sector project	10.6%	Construction	2011
Customer H	Private sector project	5.4%	Property investment	2010

Notes:

Our direct customer is the contractual party to our contract, further explanation is set out under the paragraphs headed “Business – Public sector” and “Business – Private sector” in this [REDACTED] below.
Customer A to G are consistent with note 5(b) to the financial information set out in the Accountant’s Report in Appendix I to this [REDACTED] .
During the year ended 31 March 2012, our Group generated revenue of approximately HK$15.1 million from settlement of outstanding sums in connection with the Second Previous Project, of which our works had been completed prior to the Track Record Period.

Year ended 31 March 2013

Name of		Approximate percentage	Principal business	Business with our
our direct	Public/Private sector	to the revenue of	of our	direct customer
customer(Note 1&2)	project	our Group (%)	direct customer	commenced since
Customer B	Private sector project	42.6%	Accommodations and	2012
			entertainment
Customer C	Private sector project	39.7%	Construction	2012
			and piling
Customer A	Private sector project	10.8%	Property investment	2012
			and development
Customer I	Private sector project	3.1%	Construction	2009
Customer J	Private sector project	1.7%	Construction and	2012
			transportation

Notes:

Our direct customer is the contractual party to our contract, further explanation is set out under the paragraphs headed “Business – Public sector” and “Business – Private sector” in this [REDACTED] below.
Customer A to G are consistent with note 5(b) to the financial information set out in the Accountant’s Report in Appendix I to this [REDACTED] .

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Year ended 31 March 2014

Name of		Approximate percentage	Principal business	Business with our
our direct	Public/Private sector	to the revenue of	of our	direct customer
customer(Note 1&2)	projects	our Group (%)	direct customer	commenced since
Customer A	Private sector project	88.2%	Property investment	2012
			and development
Customer K	Private sector project	4.1%	Construction	2014
Customer L	Private sector project	3.5%	Construction and piling	2013
Customer M	Private sector project	2.5%	Real estate development	2014
Customer B	Private sector project	0.5%	Accommodations and	2012
			entertainment

Notes:

Our direct customer is the contractual party to our contract, further explanation is set out under the paragraphs headed “Business – Public Sector” and “Business – Private sector” in this [REDACTED] below.
Customer A to G are consistent with note 5(b) to the financial information set out in the Accountant’s Report in Appendix I to this [REDACTED] .

As set out under the paragraph headed “Business – Business strategies” in this [REDACTED] above, the number of foundation works and ancillary services projects that can be executed by our Group simultaneously is limited by our resources including the capacity of our machinery and equipment. Thus our strategy has been to primarily focus on deploying our resources towards competing for sizeable and profitable projects which has, in turn, inevitably resulted in a concentration of customers during the Track Record Period.

Notwithstanding the above, our Group has demonstrated over the Track Record Period that we have the ability to compete for foundation works and ancillary services contracts from new customers. Provided that we have sufficient operation capacity in the future, we intend to serve a larger number of customers and projects. In this regard, we plan to expand our capacity by continuing to acquire foundation works related machinery and equipment, and by expanding our workforce.

As at the Latest Practicable Date, our Group has five contracts on hand, the awarded contract sum for these contracts on hand (including contracts in progress and contracts of which our work has yet to commence) amounted to approximately HK$1,348.6 million. The largest contract sum out of the five contracts on hand, not taking into account contingent and/or provisional contract amounts, is approximately HK$462.8 million, representing approximately 34.3% of the aggregate awarded contract sum as at the Latest Practicable Date.

Our Directors consider that our Group has established good relationship with our customers.

As our foundation business operates on a non-recurring and project-by-project basis, we have not entered into any long-term master contract with any of our major customers.

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None of our Directors, nor our Shareholders (who or which to the knowledge of our Directors or their respective associates own more than 5% of the issued share capital of the Company) had any interests in the five largest customers of our Group for the Track Record Period.

Our ultimate employer are generally divided into two categories, (i) the public sector including the government departments, statutory bodies and their related organisations, and institutional bodies; and (ii) the private sector.

Public sector

Our Group classifies public sector contracts as contracts of which the ultimate employer is a government department, statutory body or related organisation, or institutional body.

During the Track Record Period, our Group undertook three public sector projects as a sub-contractor or sub-subcontractor for foundation works and ancillary services, namely the Express rail link project 1, Express rail link project 2 and Road improvement and extension project in Yuen Long.

Our Group may also act as a subcontractor/sub-subcontractor under the administration of a main contractor. Under such contracts, the main contractor would enter into contracts with the public sector employer. The main contractor, who is normally responsible for (i) supervising the progress of the entire construction project (usually including foundation works and other construction works); (ii) delegating specific works of the construction project to different sub-contractors; and (iii) engaging and supervising the sub-contractors, which may be designated by the ultimate employer. In light of the above, the main contractor would enter into a subcontract directly with a specialist contractor with the requisite licences registrations/listings for foundation related works who may in turn subcontract such work to a subsubcontractor. In this connection, our Group would enter into a subcontract with the main contractor or the subcontractor (as the case may be) and accordingly, the relevant government departments, statutory bodies or related organisations, or institutional bodies will be the ultimate employer of the project, while the main contractor or the subcontractor (as the case may be) will be our direct customer.

Private sector

Our Group is also engaged in private sector projects in Hong Kong and Macau, of which our customers include property developers, construction companies, their main contractors and subcontractors.

Similar to the arrangement in the public sector, the main contractor appointed by the ultimate employer for typical construction project is normally responsible for (i) supervising the progress of the entire construction project (usually including both foundation works and other construction works); (ii) delegating specific works of the construction project to different sub-contractors; and (iii) engaging and supervising the sub-contractors, which may be designated by the ultimate employer.

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OPERATIONS

For illustration purpose, a simplified flow diagram of the key operational procedures of our Group is outlined as below:

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

Marketing Research
Invitation to tender
Tender notice
or provide quotation
Unsuitable
Evaluate suitability of contract Terminate project
Suitable
Prepare and submit tender/
Contract not awarded
quotation
Contract awarded
projects
Identify potential
Tender and procedures
quotation related
----- End of picture text -----

Project planning and administration & implementation

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

Health and
safety quality and Deployment of labour
report to
environmental control
Procurement of
Quantity surveying
subcontractors
Customer
Procurement of Procurement of
machinery and equipment construction materials
Contract payments and feedback
Insurance
certifications
Completion of project
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Operational Procedures

The following sets out the key operational procedures as illustrated in the above simplified flow diagram:

Identify potential projects

Sales and marketing activities of our Group are set out under the paragraph headed “Business – Sales and marketing” above.

Once an opportunity has been identified, our management team will evaluate the commercial viability of a contract, in particular, the areas and issues such as (i) the availability of our Group’s resources at the relevant time and whether additional resources are required; (ii) whether the required foundation works and ancillary services are within our Group’s relevant expertise and technical knowledge; (iii) the prevailing market conditions; (iv) the scope, complexity and profitability of the project; and (v) the achievability of the specified timetable, as the case may be and decide on whether to pursue such opportunity or not.

In addition, members of our management team communicate with our customers on a regular basis during the course of a project to better understand and respond to our customers’ specific requirements. Through this continued relationship development, our Group aims to attract further business from these customers and referrals from these customers.

Tender and quotation related procedure

In preparing tenders or quotations, our Group will take into account various factors, including the project specifications and requirements, the location, site conditions, the construction materials, labour and sub-contracting costs, human resources, schedule of works, availability of machinery and equipment.

Our Group may either tender for the relevant foundation works and ancillary services via a main contractor who is eligible to tender for the overall contract works, or directly submit tenders/provide quotation for the foundation works and ancillary services as a main contractor, a sub-contractor or a subsubcontractor to the potential customer. In the former case, our Group may enter into a pre-bid agreement with a main contractor so that the relevant subcontract can be secured by our Group in the event such main contractor is successful with its bid. There were also circumstances where we entered pre-bid agreements with several potential main contractors in respect of the tender for the same contract.

We generally tender or provide quotation for two types of contract, namely (i) “build only” contracts; and (ii) “design and build” contracts:

1. A “build only” contract

Normally, tenders are submitted on the basis that a foundation design would be provided by the customer of the relevant construction projects.

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A tender or quotation is prepared after reviewing the project specifications and requirements set out in the invitation to tender and analysing the risks and benefits of the foundation works and ancillary services to be undertaken. Our management team plays an important role in all tendering activities. They are responsible for reviewing tender documents, considering the capacity of our machinery and equipment and our Group’s competence in performing the contract formulating bidding strategies and ensuring that the bids are competitive in price yet profitable.

2. A “design and build” contract

A “design and build” contract generally involves the preparation of a foundation design by a foundation contractor in accordance with the specifications set out in the relevant invitation to tender or provide quotation. Our Directors believe that an effective and economic foundation design is an important aspect in the tendering process as it directly influence the price competitiveness of our tender sum which in turn affects our chances of being awarded the contracts. Through leveraging on the experience of our management team, our Directors believe that we are positioned to produce designs which meet our customers’ requirements after taking into account all factors which are essential to a foundation design including the superstructure loading requirements, the building, health and safety, quality and environmental issues.

Other than where a foundation design is provided by the customer, the procedures as set out under the paragraph headed “Business – 1. A “build only” contract” above also apply to “design and build” contracts.

Common terms of our foundation works and ancillary services contracts

Given the nature of our business, we do not utilise a standard form of contracts. However, some of the common terms set out in our foundation works and ancillary services contracts awarded and undertaken by our Group during the Track Record Period are generalised below:

Location	The location of the work site at which our foundation works and
	ancillary services are to be carried out.
Contract Period	The time allowed for us to carry out the foundation works and ancillary
	services are specified in individual contract. We shall follow the
	pre-determined construction work schedule as specified by our
	customers, which may be extended from time to time pursuant to the
	terms of the contract.
Types and scope of works	Irrespective of the type of foundation works and ancillary services
	contract we were engaged in, i.e. a “build only” or a “design and build”
	contract, the type of piling works together with the foundation layout
	plan is specified in the contract.
Payment Terms	The basis for receiving payment from our customer, further details
	of which have been set out under the paragraph headed “Business –
	Contract payments and certification” in this[REDACTED]below.

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Variation Orders/ An amount specified in the contract to allow for additional works or Contingencies modification to the foundation works by our customer to be carried out by us. Payment made to us by our customer for our work under the variation orders/contingencies are based on the valuation by the architect or civil engineer of the construction project on our work performed.

Liquidated Damages The amount of liquidated damages payable by us per day if we fail to complete the contractual work within the stated contract period is specified. The contract period may be extended from time to time pursuant to the terms of the contract. Further details have been set out under the paragraph headed “Business – Performance bonds/liquidated damages” in this [REDACTED] below.
Defect Liability Period The defect liability period is normally twelve months after practical completion of our contractual works or for such other period as our customer may specify, depending on the scale of the entire construction project. Further details have been set out under the paragraph headed “Business – Defect liability period” in this [REDACTED] below.

Retention Monies Retention monies are generally required by our customer to secure our Group’s due performance of the contract. Typically, the amount of retention money is subject to negotiation between the parties and ranges from 1.0% to 10.0% of the value of the works certified, subject to a maximum retention of 1.0% to 5.0% of the total original contract value or a monetary cap. Further details have been set out under the paragraph headed “Business – Contract payments and certification” in this [REDACTED] below.

Default We may be held in default of the contract if we:

(i) fail to complete the foundation works and such other ancillary works within the specified contract period or the extended contract period (where applicable);
(ii) fail to remedy or make good the defective works, if any, as requested by our customer;
(iii) assign or sub-contract the works without prior consent from our customer; or
(iv) go into liquidation or enter into any repayment scheme or arrangement with any of our creditors.

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Project planning and administration

Once our Group has been awarded a foundation works and ancillary services contract, whether such project is based in Hong Kong or Macau, our Group will follow our internal planning and administrative procedures to ensure that each contract is executed effectively and efficiently. Project planning and administration requires the following considerations:

Health and safety, quality and environmental

Our Group will implement a management system which is in accordance with the requirements of ISO 9001, ISO 14001 and OHSAS 18001 relating to the design and construction of large diameter bored piles (with bell out) and rock socketed steel H-piles in pre-bored holes to ensure that our services meet the requisite health and safety, quality and environmental requirements.

Deployment of labour

Our Group will assign adequate and qualified personnel to individual projects as appropriate. Our Group will ensure that they are licenced to engage in such jobs.

For further details, please refer to the paragraph headed “Business – Employees” in this [REDACTED] .

Procurement of subcontractors

Our Group may subcontract part of our works to subcontractors or sub-subcontractors. In order to control and ensure the quality and progress of subcontractors/sub-subcontractors, our Group selects subcontractors/sub-subcontractors based on their past performance, creditworthiness, pricing competitiveness as well as their health and safety records.

Quantity surveying

Our quantity surveying and purchasing manager will be responsible for quantity surveying matters (including certification of payments to our sub-contractors for works completed) and preparation of tenders and quotations for our Group.

Project implementation

As part of our project implementation process, our management will form a project management team to be led by a project manager.

Our project management team is responsible for general project management, administration, overseeing works schedule and procurement of workers, machinery and equipment and construction materials.

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For “design and build” projects, our project management team will normally consider, among other things, the relevant codes of practice, specifications, regulations, loading plans and loading schedules provided by the customer’s architects/engineers and prepare a design for submission to the architects/ engineers for approval.

Project meetings between our project management team and our customers/architects/engineers are held to assess and review the progress of the project and to resolve any problems which may arise. During such meetings, we will submit progress reports to the customers/architects/engineers.

At the same time, we will deploy our Group’s resources, including human resources, quantity surveying, procurement, machinery and equipment, health and safety, quality and environmental personnel, to ensure smooth execution of works.

Once a project is launched, our project management team will monitor the progress, costs incurred and performance of the project in all respects to ensure that it meets the customer’s requirements and is completed in accordance with the time schedule and in compliance with all statutory requirements in connection with foundation works and ancillary services, health and safety, quality and environmental and other related legislation.

The procedures and arrangements in relation to project implementation set out below, including but not limited to, subcontracting arrangements and procurement of construction materials, will apply to our business operations in both Hong Kong and Macau.

In respect of our Macau Projects, our Group has engaged various professional parties for the provision of related services including tax advice and company secretarial services as well as Macau legal advice so as to ensure that our foundation works and ancillary services under the Macau Projects are carried out in compliance with the applicable laws and regulation in Macau in all respects.

Subcontracting arrangements

Our Group may act as the main contractor for a foundation works and ancillary services project, whereby we will be accountable to the ultimate employer for the execution of the foundation works and ancillary services contract and the overall management of the project. On most occasions, our Group is appointed as a subcontractor or a sub-subcontractor to the main contractor, whereby the main contractor, rather than our Group, will be accountable to the employer for the foundation works and ancillary services carried out by our Group as a subcontractor or a sub-subcontractor.

With the consent of our customers (who may be the ultimate employer or a main contractor), our Group may subcontract parts of our works which may require specialist subcontractors and/or equipment, such as site surveying, ground investigation, utility connection, steel fixing, proof drilling and grouting. In order to control and ensure the quality and progress of the works of subcontractors, our Group typically engages subcontractors from our approved list, which is reviewed and updated by us from time to time. Selection of the subcontractors is normally based on, among other things, their past performance, creditworthiness, pricing competitiveness as well as their health and safety, quality and environmental records. The performance of the subcontractors is monitored by our project management team, on a regular basis who supervises the progress and inspects the quality of works carried out.

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Although our Group has not taken out any insurance policy to protect ourselves from losses and claims caused by the substandard performance of our subcontractors, under the terms of the subcontract we can claim against our subcontractors for losses attributable to their substandard performance. Based on the above and the fact that only those subcontractors who are on our approved list are engaged, our Directors are of the view that the risk of losses or claims caused by the substandard performance of works of or delay caused by the subcontractors is low.

Our Directors are of the view that we have maintained good working relationships with our subcontractors. Our subcontractors normally grant 30 days credit after the issuance of progress certificates or interim invoices to us.

During the Track Record Period, (i) our largest subcontractor accounted for approximately 36.6%, 25.5% and 52.7% of our total expenses incurred from subcontractors, respectively; and (ii) our five largest subcontractors accounted for approximately 90.1%, 86.9% and 82.6% of our total expenses incurred from subcontractors, respectively. We have maintained business relationships between 11 months to four years with the aforesaid subcontractors.

None of our Directors, nor our Shareholders (who or which to the knowledge of our Directors own more than 5% of the issued share capital of the Company) or their respective associates had any interest in any of our Group’s five largest subcontractors for the Track Record Period.

Procurement of construction materials

Construction materials used by our Group for foundation works and ancillary services consist mainly of concrete and steel. During the Track Record Period, construction materials accounted for approximately 26.5%, 38.0% and 33.4% of the cost of sales incurred by our Group, respectively.

During the course of performing foundation works and ancillary services as a main contractor, unless specified by our customer, our Group sourced all the construction materials from our pre-approved suppliers.

During the course of performing foundation works and ancillary services as a sub-contractor or a sub-subcontractor, our Group, when required, procures construction materials through our customers and/ or main contractors. If the customer and/or the main contractor do not specify a supplier from which our Group is required to source construction materials, our Group will independently source the construction materials from our pre-approved suppliers.

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The admission of suppliers onto our pre-approved list is subject to assessment of their background (including track record, pricing, market reputation, timely delivery, financial conditions and after-sales service) and the satisfactory quality of their construction materials. The pre-approved list is reviewed and updated from time to time. Usually, our Group will obtain quotations from at least three suppliers from the pre-approved list and suppliers are selected based on a combination of factors, including their past performance, credit-worthiness, pricing competitiveness as well as their health and safety records.

For contracts undertaken by our Group as a subcontractor or a sub-subcontractor, if the contract entered into between our Group and our customer and/or the main contractor so provides, the customer and/or main contractor may be responsible for purchasing the required construction materials for us to carry out the subcontracted works concerned.

During the Track Record Period, (i) our largest suppliers of construction materials accounted for approximately 47.9%, 49.2% and 56.1% of our total purchases, respectively; and (ii) our five largest suppliers of construction materials accounted for approximately 99.1%, 83.1% and 91.9% of our total purchases, respectively. We have maintained business relationships between one year to 21 years with the aforesaid suppliers of construction materials. During the Track Record Period, we entered into contracts with our suppliers for construction materials on a project-by-project basis and we have not experienced any significant delay in delivery of construction materials by our suppliers causing disruption to our works.

For the Macau Projects, our Group procured construction materials from suppliers based in both Hong Kong and Macau.

As at the Latest Practicable Date, none of our Directors, nor our Shareholders (who to the knowledge of our Directors own more than 5% of the issued share capital of the Company) or their respective associates had any interest in any of our Group’s five largest suppliers for the Track Record Period. Our Directors believe that our Group has established good working relationships with our suppliers.

Construction materials purchased are normally settled by cheque payments in Hong Kong dollars or Macau Patacas, where applicable, save for construction materials which are purchased via the customer and/or the main contractor of the project which are settled by way of contra-charge to the account with such customer and/or main contractor whereby the payments due to our Group from our customer and/ or the main contractor will be settled after netting off the cost of construction materials purchased via the customer and/or the main contractor of the project. For the avoidance of doubt, the settlement by way of contra-charge will not alter the contract sum of the project. For construction materials purchases, our suppliers normally grant 30 days credit period to our Group.

Procurement of machinery and equipment

Our Group requires machinery and equipment to carry out foundation works and ancillary services. Furthermore, we may acquire additional machinery and equipment to meet project requirements. During the Track Record Period, we acquired machinery and equipment, including crawler cranes, oscillators, reverse circulation drills, down-the-hole hammers and air compressors, from Asian and European manufacturers. Our machinery and equipment suppliers normally do not grant a credit period to us. Certain purchases were financed by finance leases and the duration of the lease term of finance leases is usually four years.

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Work-in-progress

Our Group implements a work-in-progress management policy. Our quantity surveying and purchasing manager and project manager are responsible for administering the policy. They review the work-in-progress of our Group on a monthly basis and determine whether the contract works have been properly certified in accordance with the actual works done under a contract programme. Our Group regularly monitors work-in-progress.

Management of construction materials on site

Our Group implements an inventory management system which aims at achieving effective inventory control and adopts an inventory management policy which is administered by our project management team.

Upon receipt of construction materials, the designated personnel on site, normally being our quantity surveying and purchasing manager, will inspect and conduct sampling tests on the incoming construction materials against applicable specifications to verify that construction materials delivered by our suppliers meet, as the case may be, our specifications, technical requirements, quality standards and agreed specifications in the relevant contracts.

When the construction materials are delivered from the suppliers to sites, the site records will be updated by the site staff simultaneously upon receipt of the delivery notices from the suppliers.

We monitor and compare the project budget against the actual construction materials consumed. Any material discrepancies will be investigated and followed up.

Inventory

During the Track Record Period, our Group’s inventories comprised of machinery and equipment for sale, materials and consumables for construction works. Our Group does not make general provision for our inventory. It is our policy to make specific provision/write-off for our obsolete inventory, which is determined on a case-by-case basis.

Our Group did not make any specific provision/write-off of inventories during the Track Record Period. As at 31 March 2014, our Group no longer had any machinery and equipment for sale.

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Defect liability period

Our customers normally require a defect liability period, during which we are responsible for rectifying construction defects. The defect liability period, if any, is normally 12 months after the practical completion of the contract works or for such other period as our customer may specify depending on the nature and the scale of the entire construction project.

Under the usual terms of our construction contracts, we are liable for rectifying all defective works during the defect liability period, if any. During the Track Record Period, we did not experienced any material claims by our customers in respect of any defective works, and therefore we have not made any provision for repair and maintenance costs in respect of defective works during the defect liability period.

Contract payments and certification

Our Group recognises revenue derived from foundation works and ancillary services contracts based on the stage of completion of the contracts. Our Group usually submits payment applications to our customers on a monthly basis. The monthly cut-off date of such payment applications are normally specified in the contracts. Where we act as a main contractor for foundation works and ancillary services projects, authorised persons employed by our customers certify the value of the works completed. Where we act as a sub-contractor or sub-subcontractor, the main contractor or sub-contractors, as the case may be, certify the value of the works completed. Subsequent to the certification, our customers arrange settlement in respect of the portion of foundation works and ancillary services completed.

The credit terms in relation to the settlement of amounts due from our customers vary from contract to contract. Credit terms may make reference to the payment certificate date, with settlement typically ranging from 14 days to 30 days from such date, depending on the terms and conditions of the contracts.

In general, retention monies are required by our customer to secure our Group’s due performance of the contract. Typically, the amount of retention money is subject to negotiation between the parties and ranges from 1.0% to 10.0% of the value of the works certified, subject to a maximum retention of 1.0% to 5.0% of the total original contract value or a monetary cap.

The terms and conditions in relation to the release of retention monies also varies from contract to contract, and which may be subject to, practical completion, the expiry of the defect liability period or a pre-agreed time period.

As at 31 March 2014, the retention monies held by the customers for contracted works included in our retention receivables amounted to approximately HK$50.8 million. We expect all these retention monies to be released according to the respective contracts and work done. As at the Latest Practicable Date, the expected release dates of these retention monies should fall between July 2014 and December 2016.

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For works which require our subcontractors to submit an interim payment application to us on a monthly basis, payment is normally subject to a pre-agreed portion being held as retention monies and our verification of the subcontractor’s request against the actual works conducted. Our subcontractors normally grant 15 to 30 days credit period to our Group. The retention monies from subcontractors, if required, is usually 5.0% of the total subcontract sum. As at 31 March 2014, retention money payable to our subcontractors held by us included in trade and retention payables amounted to approximately HK$0.3 million.

Performance bonds/liquidated damages

In the event that our works are not completed on time, we may be liable to the customer for breach of contract and required to pay liquidated damages. In order to secure due and timely performance by us, our customers normally request that we take out performance bonds issued by a bank or an insurance company or a bondsman in favour of our customer. To provide for certain circumstances, including (i) unforeseen circumstances beyond the control of our Group; and (ii) variation orders, being additional works beyond the scope of the original contract and performed at the request of the customers, which may cause the completion date to be deferred beyond the scheduled date, a clause may be included in our contracts providing for an “extension of time”. Such clause may enable our Group to extend the completion date beyond the scheduled completion date. In the event that “extension of time” entitlements are not granted by our customers, our Group may then be subject to liquidated damages claims from our customers when there is a delay to the completion date.

During the Track Record Period, our Group has been involved in claims from our customers in relation to liquidated damages against our Group for two projects which were completed prior to the Track Record Period (the “ Liquidated Damages Claims ”). With regard to the Liquidated Damages Claims, our Group commenced legal actions against our customers for our “extension of time” entitlement.

During the Track Record Period, our Group has reached settlement with our customers over the Liquidated Damages Claims and the settlement amount to our Group in each case was in excess of the relevant contract amount. As at the Latest Practicable Date, there were no claims in relation to liquidated damages against our Group which were under negotiation or unsettled. Our Directors confirm that the negotiation of the final settlement between our Group and our customers is often a prolonged process which is not uncommon in the construction industry. Therefore, it is possible that our Group would only receive settlement of the final sum of a contract after a lengthy period subsequent to the completion of the relevant projects.

Generally, the amount of performance bond required for a project undertaken by us does not exceed 10% of the total contract sum and the performance bond normally expires after completion of the project. As at 31 March 2014, our Group has provided counter indemnities of approximately HK$67.3 million, representing our guarantee on the performance bonds which relates to the performance bond issued by a financial institution on behalf of our Group in the amount of approximately MOP69.4 million (equivalent to approximately HK$67.3 million) required for the Hotel Tower Project.

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HEALTH AND SAFETY, QUALITY ASSURANCE AND ENVIRONMENT

Our Directors believe that our Group’s health and safety, quality assurance and environmental management systems are important attributes to our Group’s success in the foundation works industry.

Health and safety

Our Group places emphasis on health and safety during the delivery of our foundation works and ancillary services. In recognition of the policies and procedures undertaken by our Group to address potential health and safety issues on our sites, in particular, large diameter bored piles (with bell out) and rock socketed steel H-piles in pre-bored holes, SW Bore Pile was awarded OHSAS 18001:2007 (occupational health and safety management system accreditation) certificates in 2008. The current OHSAS 18001:2007 certificate is valid from 4 November 2011 until 4 November 2014.

Prior to the submission of any relevant tender document or quotation, we will review the relevant contracts to ensure that all of the potential customer’s health and safety requirements are identified in order to assess whether our Group has the capability to meet such requirements.

Due to the nature of works in the construction industry, risks of accidents or injuries to workers are inherent. As such, our Group has formulated a safety plan for all our staff.

During the Track Record Period, we recorded accidents involving nil, three and two workers who were employed by our Group, respectively. Based on the above, the accident rate per 1,000 workers for the Track Record Period, was approximately nil, 20.0 and 12.3, respectively. In spite of these accidents and work related injuries, none of the employees of our Group has filed claims to the courts against our Group during the Track Record Period. As at the Latest Practicable Date, there was one unsettled employee case relating to an accident that occurred in July 2004. For details, please refer to the legal proceedings among Chung Yuen Yee, the Administratrix of the estate of Lai Wing Kee, deceased (as Plaintiff), SW Bore Pile (as 1[st] Defendant), SW Engineering Equipment (as 2[nd] Defendant), SW Construction (as 3[rd] Defendant) and Sam Woo Ship Building Limited (as 4[th] Defendant) set out under paragraph headed “Business – Legal and administrative proceedings” in this [REDACTED] .

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A comparison of the accident rate per 1,000 workers and fatality rate per 1,000 workers of our Group against the industry average in Hong Kong is set out below:

	Industry average
	in Hong Kong
	(construction industry)	Our Group
	(Note 1)	(Note 2)
Calendar year 2011
accident rate per 1,000 workers	49.7	14.3
fatality rate per 1,000 workers	0.367	nil
Calendar year 2012
accident rate per 1,000 workers	44.3	28.0
fatality rate per 1,000 workers	0.337	nil
Calendar year 2013
accident rate per 1,000 workers	Not available	6.1
fatality rate per 1,000 workers	Not available	nil

Note 1: This information is based on the Occupational Safety and Health Statistics Bulletin Issue No. 13 (June 2013) published by Occupational Safety and Health Branch, Labour Department. Data for 2013 has not been published as at the Latest Practicable Date.

Note 2: Our Group’s accident rate is calculated as the occurrence of accidents divided by the daily average construction site workers in our Group’s construction sites during the year. The daily average construction site workers only consisted of employees of our Group.

For the calendar years 2011, 2012 and 2013, our Group recorded no fatal injuries at our construction sites. In each of the calendar year 2011 and 2012, the accident rate at our construction sites was lower than the industry average in Hong Kong. Our Directors have confirmed that during the Track Record Period, our Group has complied in all material aspects with all laws, rules and regulations relating to health and safety and that the Group has not been investigated or received any official complaints or sanctions by any relevant authorities, in respect of any violation of applicable laws or regulations in respect of health and safety.

Staff training

Our staff receive training to enable them to acquire the prerequisite skills and knowledge on health and safety related procedures before they are assigned to carry out foundation works and ancillary services on sites. During the course of a project, our QSEM will supervise, instruct and provide training to the site workers, as and when considered necessary, to ensure that they comply with all health and safety regulations.

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Work sites and machinery and equipment

Our QSEM is responsible for ensuring that all the relevant health and safety requirements as contained in the regulations and legislations are met, and that the health and safety policies designed by our Group are properly implemented and complied with. Our QSEM will report to our management team on any health and safety issues identified.

In addition, all potential and actual suppliers and subcontractors are evaluated to assess their abilities to meet our Company’s health and safety requirements.

Our Group also performs regular maintenance checks on the machinery and equipment since our Group regards regular maintenance as an important element to ensuring safety at the works sites. We conduct safety tests on our machinery and equipment periodically.

Insurance – machinery and equipment

For machinery and equipment acquired under finance leases or under mortgages, the financiers typically require us to maintain insurance coverage over those machinery and equipment.

Insurance – employees

It is a legal requirement for the employer or main contractor of a construction project to take out employees’ compensation insurance and employer’s/contractor’s all risks insurance for the entire construction project, which covers employees of the main contractor and subcontractors of all tiers, and works performed by them.

All projects undertaken by us and the relevant employees are respectively protected by contractors’ all risks and employees’ compensation insurances which, depending on the terms of the relevant contracts, are taken out either by the main contractors or us.

During the Track Record Period, when acting as a subcontractor or a sub-subcontractor, we did not take out separate insurance policies but relied on the insurance policies taken out and maintained by the relevant main contractors. Our reliance on the main contractors’ insurance policies was explicitly provided for in the relevant subcontracting agreements.

Taking into account the industry practice and the insurances taken out by our Group as stated above, our Directors believe that we have obtained adequate insurance coverage for the operation of our business.

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Quality assurance

Our Group emphasises our ability to deliver quality work on time and within our pre-determined project budget. To execute the quality assurance policy of our Group, we have maintained a quality management system which follows the ISO 9001 standards, and in particular, SW Bore Pile, our whollyowned subsidiary, has been ISO 9001 certified since 2004 for the design and the construction of large diameter bored piles (with bell out) and rock socketed steel H-piles in pre-bored holes. The current ISO 9001:2008 certificate (as revised and amended from ISO 9001:2000) is valid from 25 October 2011 until 25 October 2014.

Our Group implements a quality management system which covers the design and construction of large diameter bored piles (with bell out) and rock socketed steel H-piles in pre-bored holes.

Quality assurance functions are performed throughout the foundation works process from the construction materials procurement stage to the completion stage to ensure that the foundation works and ancillary services meet the standards required by each customer.

Foundation works and ancillary services quality control

The deployment of machinery and equipment as well as the qualification of personnel involved in a particular project is subject to the project site, the nature and complexity of the project and the availability of the resources at the time. Prior to the commencement of our onsite foundation works, a project team will be formed to formulate an inspection and test plan based on our scope of works under the foundation works and ancillary services contract. The project team will review the contractual specifications against the pre-set criteria in the inspection and test the plan throughout the stages of each project. We also conduct various tests on all piles to ensure that they are in compliance with the relevant contractual requirements.

Upon completion of pile construction, our Group will conduct various applicable tests on all piles based on the relevant contractual requirements and ensure full compliance with customer requirements. Our Group may also be required to submit piling records and record plans, setting out the details of each pile constructed, to our customers for their testing and inspection, subject to, among others, the terms and conditions of the contracts.

Environment

Our Group also places an emphasis on environmental protection when undertaking our foundation works and ancillary services. In recognition of the policies and procedures undertaken by our Group to address potential environmental issues with its foundation works and ancillary services, in particular, large diameter bored piles (with bell out) and rock socketed steel H-piles in pre-bored holes, our Group was awarded the ISO 14001:2004 (environment management system accreditation) in 2008. The current ISO 14001:2004 certificate is valid from 4 November 2011 until 4 November 2014.

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Prior to the submission of tender document or quotation for foundation works and ancillary services projects, we will review the relevant contracts to ensure that all of the potential customer’s environmental protection requirements are identified and assess whether our Group has the capability to meet such requirements. In addition, our business is also subject to certain laws and regulations in relation to environmental protection. Please refer to the section headed “Laws and Regulations” in this [REDACTED] .

During the Track Record Period, the aggregate annual cost of compliance with applicable environmental laws and regulations in Hong Kong and Macau was approximately HK$1.0 million, HK$3.7 million and HK$3.3 million respectively, and primarily consisted of transportation costs and dumping charges. Our Group expects that the costs to be incurred for compliance with applicable environmental laws, rules and regulations will increase for the year ending 31 March 2015 primarily due to the size of our foundation works and ancillary services contracts on hand. During the Track Record Period, our Group has not been prosecuted by any governmental authority for any purported breach of any applicable environmental laws and regulations.

Our QSEM is responsible for identifying and reporting on environmental issues to our management team as well as ensuring that our Group satisfies all the relevant environmental statutory requirements.

Technical developments

In order to improve our Group’s existing products and to develop new methods to capture more market share in the industry, our Group is dedicated to conducting research to develop better foundation construction methods. Mr. Lau, with the support of members of our management team, has been involved in the technical development of our Group. They will first identify the areas in the foundation construction processes that require improvement and subsequently conduct research on and seek to develop new methods of carrying out that part of the work or process.

For example, in September 2001, Mr. Lau with the support of members of our management team developed a new method known as the “Water-absent Concreting Apparatus and its Method”. The patent was granted by the Patents Registry in Hong Kong on 15 March 2002. We believe it has enabled our Group to consistently maintain its product quality and has strengthened our Group’s competitiveness and strategic position within the industry. The patent has since expired.

Mr. Lau, with the support of members of our management team, continued to research and develop new foundation construction methods. Subsequently, (i) on 25 January 2010, Worldwide Profit filed a short-term patent application on “Concreting Equipment and Method Thereof” with the Patents Registry in Hong Kong, which was granted on 7 May 2010; and (ii) on 25 January 2010, 16 December 2011 and 28 January 2013, Worldwide Profit filed a standard patent application on “Concreting Apparatus and its Method” with the Patent Office of the PRC, Patents Registry in Hong Kong, and Macao Economic Services in Macau, respectively.

On 25 July 2012, Worldwide Profit assigned the short-term patent of the “Concreting Equipment and Method Thereof” to SW Foundation Group, an indirect wholly-owned subsidiary of the Company, at HK$10.0 consideration. Such short-term patent was renewed on 25 October 2013 and will be due for renewal on 25 January 2018. Details of the short-term patent are set out in the paragraph headed “Statutory and General Information – Further information about the business of our Group – Intellectual property rights of our Group” in Appendix IV to this [REDACTED] .

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In relation to the standard patent application on “Concreting Apparatus and its Method”, Worldwide Profit entered into an assignment on each of 28 December 2012, 25 July 2012 and 30 April 2013, pursuant to which, the patent application on “Concreting Apparatus and its Method” filed in the PRC, Hong Kong and Macau were assigned to SW Foundation Group at a consideration of nil, HK$10.0 and HK$10.0, respectively.

By a letter from the State Intellectual Property Office of the PRC (the “ SIPO ”), the SIPO indicated, inter alia, that there was insufficient evidence which could demonstrate that the invention under the PRC Patent application had the creativity which would entitle the invention to have a patent right. We had submitted our reply and provide additional information in response to SIPO’s letter. SIPO’s final decision to our PRC Patent application was still pending as at the Latest Practicable Date.

Concreting Equipment and Method Thereof and Concreting Apparatus and its Method

Concrete is the major component of a bored pile apart from steel. It follows that the quality of concrete is crucial to the ultimate performance of a bored pile. Our Directors are of the view that since concrete has to be placed in an underwater condition in the bored pile construction process, the method of placing of concrete is critical. Our Directors consider that one of the common causes of defective concrete in a bored pile is caused by water mixing into the concrete during the placing of the concrete, which is detrimental to the strength of the concrete. In view of the above, Mr. Lau, with the support of members of our management team researched the methodology of placing concrete and developed the “Concreting Equipment and Method Thereof” as a suitable method to ensure the quality of the concrete for construction of bored piles.

The “Concreting Equipment and Method Thereof” and the “Concreting Apparatus and its Method” were developed with the aim to prevent water from flowing into the conduit when concrete is initially poured. Both methods involve the use of various items of equipment, including a conduit used for concrete pouring, a funnel-shaped device connected to one end of the said conduit, an opening-sealing device and another device to control the upward and downward movement of the conduit, thus mitigating the problem of defective concrete in a bored pile as detailed above.

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INTELLECTUAL PROPERTY

Trademarks

We own registered trademarks for each of our logo and our brand name in Hong Kong. We consider our logo and brand name to be important to our business since they develop brand identification and awareness. We believe that the name recognition, reputation and image that we have developed is attractive to our customers and business partners. It is our intent to maintain our trademark registration.

Patent

As at the Latest Practicable Date, our Group owned one short-term patent in relation to our operations in Hong Kong, namely the “Concreting Equipment and Method Thereof” patent. The registration of the standard patent on “Concreting Apparatus and its Method” has been applied in the PRC, Hong Kong and Macau, respectively and was pending approval as at the Latest Practicable Date. For further details, please refer to information set out under “Business – Technical developments” above and the paragraph headed “Statutory and General Information – Further information about the business of our Group – Intellectual property rights of our Group” in Appendix IV to this [REDACTED] .

Domain name

As at the Latest Practicable Date, we had registered the following domain name, details of which are set out below:

samwoo-group.com

Save as disclosed under the paragraph headed “Business – Intellectual Property” in this [REDACTED] above, our business or profitability is not dependent on any patent or licence or other intellectual property rights. As at the Latest Practicable Date, we had not engaged in, and were not aware of, any litigation or legal proceedings for violation of intellectual property rights or any material violation.

EMPLOYEES

Set out below is the number of full-time employees by type of our Group as at the end of each financial year:

Number of staff Management (excluding Directors) Project management Construction workers Maintenance personnel Administration and operations Total	2012 5 8 53 31 13 110	As at 31 March 2013 2014 5 6 9 14 69 186 20 27 17 19 120 252	As at 31 March 2013 2014 5 6 9 14 69 186 20 27 17 19 120 252
			252

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Our Directors believe that the relationship and co-operation between our management team and our employees has been good and we have not experienced any incidence of work stoppage or labor disputes during the Track Record Period.

We believe that our employees are important assets to our Group. They are normally subject to a three-month probation period. At the end of the probation period, they will be confirmed as full-time employees if their respective supervisors are satisfied with their performance during the probationary period.

We also place an emphasis on the continuing education and training of our staff. In particular, we focus on training our management and key personnel to develop their management and decision-making abilities to enhance their work performance. We encourage a culture of learning and education in our Group and provide our site workers with on the job training.

The remuneration package we offer to our employees includes salary, discretionary bonuses and allowances. In general, we determine employee salaries based on the individual’s qualifications, position and performance (where applicable). We have designed an appraisal system to assess the performance of our employees, which forms the basis of our decisions with respect to salary raises, bonuses and promotions. During the Track Record Period, our Directors’ emoluments (including salaries, Directors’ quarters and employer’s contribution to pension scheme) amounted to approximately HK$2.8 million, HK$4.4 million and HK$4.7 million, respectively.

In relation to the staffing arrangements of the Hotel Tower Project, our Group entered into an agreement with our customer, pursuant to which our Group managed, for and on behalf of our customer, the construction workers for such project. These construction workers consisted of a combination of Macau and non-Macau residents. Each of the non-Macau residents has obtained a work permit issued by the Human Resources Office of the Macau Government. Based on the advice of the Macau Legal Adviser, our Directors confirm that the staffing arrangements in connection with the Hotel Tower Project were conducted on the basis of full compliance with the applicable employment laws or regulations of Macau.

The Hotel Casino Project is staffed through a combination of Macau and non-Macau residents. During the course of the Hotel Casino Project and where required by the laws of Macau, the construction workers who are non-Macau residents obtained the relevant work permits issued by the Human Resources Office of the Macau Government.

In connection with the Composite Development Project, we intend to staff such project through a combination of Macau and non-Macau residents, which is similar to the staff arrangements under the Hotel Casino Project as set out above.

We prohibit the recruitment of illegal workers in our offices or at the sites for which we are responsible by checking the identification documents provided by the candidates. We will report to the police when we come across any candidate with suspicious identity. During the Track Record Period, no illegal workers have been reported in the sites for which we are responsible for workers’ arrangement. We require our subcontractors to check the identification documents of their workers to ensure that no illegal workers are hired to work in the sites for which we are responsible.

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Based on the advice of our Hong Kong Legal Adviser and Macau Legal Adviser as to the employment law in Hong Kong and Macau, our Directors confirm that our Group has complied with all the applicable employment laws, rules and regulations in Hong Kong and Macau as of the Latest Practicable Date respectively.

PROPERTIES

We do not own any property and lease all of the premises occupied by us. As at the Latest Practicable Date, we had seven and [29] leased properties located in Hong Kong and Macau, respectively.

In connection with the seven leased properties in Hong Kong, one of these properties is occupied by us as our office, five of these properties (including four car parking spaces) are leased by our Group as Directors’ quarters, while the remaining one is occupied by us for storage of machinery and equipment. Save for the property occupied by us as our office, the other six leased properties are leased from connected persons of our Group, the details of which are set out under the section headed “Connected transactions and waiver” in this [REDACTED] .

In connection with the [29] leased properties located in Macau, save for one property which is used as our office in Macau, all of which are occupied by construction workers of our Group for our projects in Macau.

COMPLIANCE

Based on the advice of our Hong Kong Legal Adviser as to the applicable laws and regulations related to provision of foundation works and ancillary services in Hong Kong, our Directors confirm that our Group has obtained all the registrations and certifications required for the projects undertaken by our Group in Hong Kong during the Track Record Period. Based on the advice of the Macau Legal Adviser, our Directors confirm that our Group has obtained all the registrations and certifications required for the projects undertaken by our Group in Macau during the Track Record Period.

NON-COMPLIANCE WITH THE PREDECESSOR COMPANIES ORDINANCE

Pursuant to section 122 of the Predecessor Companies Ordinance, the directors of a Hong Kong company must cause the profit and loss account and balance sheet to be made up and laid before the company and its shareholders at each of its annual general meetings. Such accounts shall be made up to a date falling not more than nine months before the date of the meeting or six months if such company belongs to a listed group.

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A number of our subsidiaries incorporated in Hong Kong have inadvertently failed to comply with the aforementioned statutory requirements on various occasions, details of which are summarised in the following table:

			Maximum penalty
Name(s) of	Details of the	Relevant period of	for each instance of	Reasons for the
our subsidiaries	non-compliance	the non-compliance	non-compliance	non-compliance
SW Construction	Failure to lay audited	SW Construction	Fine of HK$300,000	The directors of the
	accounts made up to a	(2007-2010)	and 12 months	relevant subsidiaries had
	date falling not more		imprisonment	overlooked the relevant
SW Civil Contractors	than nine months/six	SW Civil Contractors		requirements for
	months (as the case	(2007-2010)		financial statements to
	maybe) under section			be laid and approved in
SW Foundation	122 of the Predecessor	SW Foundation		annual general meeting
	Companies Ordinance	(2007-2010)		within the prescribed
	(now Section 431			time frame under the
SW Offshore	of the Companies	SW Offshore		Predecessor Companies
Engineering	Ordinance) (the	Engineering (2007-		Ordinance. This was an
	“Accounts-related	2010)		inadvertent oversight
	Non-compliance			on the part of the
SW Finance	Matters”)	SW Finance (2007-		management
		2010)
SW Civil Works		SW Civil Works
		(2007-2010)
SW Construction &		SW Construction &
Engineering		Engineering (1995-
		1999, 2007-2010)
SW Bore Pile		SW Bore Pile (1990-
		1992, 1994, 2007)
SW Engineering		SW Engineering
Equipment		Equipment (1994,
		2007-2010)

Upon identification of the aforementioned instances of non-compliances, the directors of the relevant subsidiaries have on 17 January 2013 applied to the Court of First Instance of the High Court of Hong Kong (the “ Court of First Instance ”) for an order to extend the time of financial statements already laid by our relevant subsidiaries in the annual general meetings beyond the six months or nine months period (as the case maybe) of the respective accounting year end pursuant to section 122 of the Predecessor Companies Ordinance. On 14 March, 25 March and 10 July 2013, the Court of First Instance granted orders pursuant to section 122 of the Predecessor Companies Ordinance as referred to above. Following the granting of the Court orders, all the non-compliances within section 122 of the Predecessor Companies Ordinance had been rectified as at the Latest Practicable Date.

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Preventive Measures

We have adopted/will adopt the following measures to avoid future occurrences of the Accountsrelated Non-compliance Matters:

(1) upon [REDACTED] , we will establish an audit committee for ensuring compliances with the relevant statutory and regulatory requirements. The audit committee will be empowered under its terms of reference to review any arrangement which may raise concerns about possible improprieties in financial reporting, internal control and/or other matters;
(2) when necessary, we will engage external professionals, including auditors, external legal adviser and other advisers to render professional advice as to compliances with statutory and regulatory requirements as applicable to our Group from time to time. Upon [REDACTED] , we will also appoint a compliance adviser to advise our Group on compliance matters in accordance with the Listing Rules; and
(3) our Directors and other members of the senior management of our Group have attended training conducted by our Company’s Hong Kong legal adviser on the on-going obligations, duties and responsibilities of directors of publicly listed companies under the Companies Ordinance and the Listing Rules.

Our Directors are of the view that the internal control measures adopted by our Group are adequate and effective in significantly reducing the risk of future non-compliance with the legal and regulatory requirements in Hong Kong and consider that the non-compliance incidents do not have any material impact on the suitability of our Directors under Rules 3.08 and 3.09 of the Listing Rules and our suitability for [REDACTED] under Rule 8.04 of the Listing Rules. Having considered the above preventive measures, the Sponsor concurred with our Directors’ view that our internal control measures are adequate and effective and the non-compliance incidents do not have any material impact on the suitability of our Directors under Rules 3.08 and 3.09 of the Listing Rules and our suitability for [REDACTED] under Rule 8.04 of the Listing Rules.

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LEGAL AND ADMINISTRATIVE PROCEEDINGS

We out below a summary of litigation and arbitration proceedings against our Group which took place during the Track Record Period and up to the Latest Practicable Date:

Legal actions among Chung Yuen Yee, the Administratrix of the estate of Lai Wing Kee, deceased (as Plaintiff), SW Bore Pile (as 1[st] Defendant), SW Engineering Equipment (as 2[nd] Defendant), SW Construction (as 3[rd] Defendant) and Sam Woo Ship Building Limited (as 4[th] Defendant) (the 1[st] Defendant, 2[nd] Defendant, 3[rd] Defendant and 4[th] Defendant are collectively referred to as the “ Defendants ”)

Chung Yuen Yee (“ Plaintiff Chung ”) is the widow and administratrix of Lai Wing Kee (the “ Deceased ”) who passed away in an industrial accident (the “ Industrial Accident ”) in July 2004 when the Deceased was employed by SW Engineering Equipment as a crane operator and engaged in helping a crane driver to lift a heavy forklift truck onto the back of a lorry. The forklift truck subsequently fell and the Deceased was crushed under the weight of the falling truck. Our Group owned the forklift truck and the lorry at the material time.

On 4 July 2005, Plaintiff Chung instituted legal proceedings to the District Court of Hong Kong (the “ District Court Application ”) against SW Bore Pile and SW Engineering Equipment for, inter alia , compensation pursuant to the Employees’ Compensation Ordinance (Cap. 282 of the Laws of Hong Kong).

The legal proceedings have escalated to the Court of First Instance of the High Court of Hong Kong (the “ Court of First Instance ”), the Court of Appeal of HKSAR (the “ Court of Appeal ”) and the Court of Final Appeal of HKSAR (the “ Court of Final Appeal ”) with respect to mainly (i) the liability of each Defendant; (ii) the Deceased’s contributory negligence; and (iii) the apportionment of liability amongst the four Defendants. The Defendants were successful before the Court of First Instance on their allegation of contributory negligence on the part of the Deceased but such finding was subsequently overturned by the Court of Appeal. The Court of Final Appeal allowed the appeals of SW Bore Pile, SW Construction and Sam Woo Ship Building Limited and had therefore dismissed all claims against them by Plaintiff Chung.

As concern the Court of Final Appeal’s judgment on costs handed down on 3 June 2014, it was ordered, inter alia , that SW Engineering Equipment, being the 2nd Defendant in the proceedings, shall pay (i) Plaintiff Chung’s costs of her appeal to the Court of Final Appeal and in the courts below; (ii) SW Bore Pile, SW Construction and Sam Woo Ship Building Limited (a) two thirds of their costs in defending Plaintiff Chung’s claim in the courts below (i.e. the District Court, the Court of First Instance and the Court of Appeal); (b) their costs of the appeal before the Court of Final Appeal; and (c) their cost in the courts below on the issue of apportionment of liability amongst the Defendants. On the other hand, SW Bore Pile, SW Construction and Sam Woo Ship Building Limited are ordered to pay the costs of Plaintiff Chung and SW Engineering Equipment on their cost applications in the Court of Final Appeal.

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As at the Latest Practicable Date, our Group cannot ascertain the amount of costs payable by SW Engineering Equipment to Plaintiff Chung, SW Bore Pile, SW Construction and Sam Woo Ship Building Limited. Our Directors take the view that all the costs to be borne by SW Engineering Equipment in the Court of Final Appeal and the courts below in these proceedings shall be covered by the relevant insurance maintained by SW Engineering Equipment and SW Engineering Equipment’s entire conduct of its defence against Plaintiff Chung’s claims in these proceedings was taken up by the insurer. Notwithstanding the insurance cover maintained by SW Engineering Equipment, pursuant to the Deed of Indemnity, if (i) there is any shortfall between the indemnity payment by the insurer and the actual amount of costs liable by SW Engineering Equipment in these proceedings; and (ii) the outstanding costs liable by our Group before the [REDACTED] exceeds the amount specified in the Deed of Indemnity, our Controlling Shareholders have, among others, irrevocably and unconditionally undertaken to make up such shortfall on demand. Details of the Deed of Indemnity are set out in the paragraph headed “Statutory And General Information – Other Information – Estate duty, tax indemnity and other indemnities” in Appendix IV to this [REDACTED] .

Legal actions between SW Bore Pile (as Plaintiff) and Chun Wo Foundations Limited (as Defendant)

On 12 November 2008, SW Bore Pile commenced legal action in the High Court of Hong Kong against Chun Wo Foundations Limited (the “ SW Case ”) claiming relief for circumstances arising out of a piling subcontract associated with the redevelopment and expansion of Pok Oi Hospital, Hong Kong.

On 11 November 2011, SW Bore Pile, Chun Wo Foundations Limited and SW Holdings entered into a settlement agreement for full and final settlement of the SW Case.

Ongoing arbitration proceedings

During the Track Record Period and as at the Latest Practicable Date, our Group was engaged in two arbitration proceedings in Hong Kong. Owing to the relevant terms of the contracts between us and the counter parties in the arbitration proceedings, the Arbitration Ordinance (Chapter 609, Laws of Hong Kong) and the relevant arbitral rule, all information about the arbitrations must remain confidential.

Potential claims and litigations against our Group as at the Latest Practicable Date

Our Directors confirmed that a total of five employees had been injured in the course of their employment with our Group during the Track Record Period and up to the Latest Practicable Date, three of them had settled their claims with the insurers of the relevant foundation works projects.

Our Directors also confirmed that as at the Latest Practicable Date, the two employees who had suffered work injuries (one of them was working at one of our Group’s project in Hong Kong and the other was working at one of our Group’s projects in Macau) had not yet reached any term of settlement with the insurer concerned or filed any claim against our Group with any court in Hong Kong or Macau (as the case may be). One of them had referred the case to the Legal Aid Department in Hong Kong. As opined by our Hong Kong Legal Advisers, our Group’s potential liabilities in the industrial accidents causing injuries to our employees in Hong Kong would include liabilities related to (i) claims of employee compensation under the Employees Compensation Ordinance (which gives the employees the right to compensation for, among others, injuries caused by accidents arising in the course of employment); and (ii) claims of personal injury under common law (which gives employees the right to sue for damages

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for injuries caused by an employer’s negligence, breach of statutory duty or other wrongful act or omission). As opined by our Macau Legal Adviser, our Group’s potential liabilities in the industrial accidents causing injuries to our employees in Macau would include liabilities related to (i) claims of employee compensation under Decree-Law n.º 40/95/M (which gives employees the right to compensation for, among others, injuries caused by accidents arising in the course of employment); and (ii) claims of compensation for personal injury under the Macau Civil Code (which gives employees the right to sue for moral damages for injuries caused by an employer’s negligence or wrongful act or omission).

As these two injured employees had not filed any claim against our Group with any court in Hong Kong or Macau as at the Latest Practicable Date, and even if there is any claim against us, the claim will be handled by the lawyer appointed by the relevant insurer. Thus, our Group is not in a position to assess the likely quantum of such potential claims. In any event, our Group has insurance cover (consisting of both employee compensation insurance and contractor’s all-risks insurance) maintained either by the main contractor or ourselves to cover our liabilities in respect of any claim for personal injuries suffered by our employees (including the above-mentioned two employees who were injured at work) or the employees of our sub-contractors and as at the Latest Practicable Date, such insurance policies are valid and subsisting and the respective insurers have been notified of the above-mentioned accidents.

Save for the two arbitration proceedings, as at the Latest Practicable Date, no member of our Group nor any of our Directors was subject to any claim, litigation, arbitration, bankruptcy or receivership proceedings, which is of material importance to our Group. Save for those potential claims set out above, our Group or any of our Directors is not threatened by any potential claim, litigation, arbitration, bankruptcy or receivership proceeding, which is of material importance.

COMPETITION

Our Directors believe that competition in the foundation industry is not as intensive as that in other parts of the construction industry as the barrier of entry is relatively high due to the requirement of specialist knowledge and specialised machinery and equipment. Notwithstanding the above, the foundation industry in Hong Kong and Macau host a number of participants, including (i) 131 Buildings Department Registered Specialist Contractors for the Foundation Category; and (ii) 773 construction contractors registered with the DSSOPT, as at the Latest Practicable Date. In addition to the abovementioned registrations, there are also other relevant registrations, as set out below.

Requirements for contractor registration

Hong Kong

Foundation contractors are required to be registered with the Buildings Department as registered specialist contractors under the foundation category if the foundation contractors are to undertake private sector foundation works. If the registered specialist contractor intends to carry out foundation works in the public sector, in addition to the registration with the Buildings Department as a registered specialist contractor under the foundation category, the foundation contractor must also be registered with the relevant Hong Kong government departments or public organisations.

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Please refer to the section headed “Laws and regulations – Public Sector Construction Projects in Hong Kong” in this [REDACTED] for further details.

The following table sets out the relevant licence or registration in Hong Kong which our Group, through SW Bore Pile, is approved for and the number of approved contractors in each of these categories as at the Latest Practicable Date:

Registration/Listing	Number of approved contractors
Development Bureau Specialist List (Group II)
in large diameter bored pile
(with bell-out)(Note 1)	[13]
Housing Authority List of Piling Contractors
(large diameter bored piling category)(Note 2)	[10]
Buildings Department Registered Specialist Contractor
– Foundation Category_(Note 3)_	[132]

Notes:

(1) [REDACTED] with the Development Bureau does not have any expiry date.
(2) [REDACTED] with the Housing Authority is subject to annual review for retention.
(3) this registration is valid until 7 June 2015, of which we intend to renew on or before such expiry date.

During the Track Record Period, approximately 100.0%, 89.2% and 7.6% of our foundation works and ancillary services related revenue were derived from projects based in Hong Kong, respectively. Based on the information set out in the Ipsos Report which has been summarised in section headed “Industry Overview” in this [REDACTED] , our Group’s market share of the piling and related foundation works in Hong Kong for 2013 was insignificant.

Macau

In Macau, contractors undertaking construction works are required to be registered as a construction contractor with the DSSOPT. Our registration, through SW Foundation (Macau), with the DSSOPT will expire on 31 December 2014. According to the Macau Legal Adviser, there were no legal impediment for SW Foundation (Macau) to renew its registration with the DSSOPT as at the Latest Practicable Date. As at Latest Practicable Date, including our Group, there were [773] construction contractors on the list published on the website of DSSOPT.

According to the Ipsos Report, our Group’s market share of the piling and related foundation works in Macau for 2013 was approximately 8.9%.

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Entry barriers

According to the Ipsos Report that the foundation works and ancillary services business, is capital intensive. Accordingly, it requires substantial initial and continual capital for setting up and maintaining machinery and equipment, thus creating a barrier to entry in the foundation industry. With our own machinery and equipment and specialist knowledge, our Directors believe that our Group is in a competitive position in the Hong Kong and Macau foundation industry.

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CONNECTED TRANSACTIONS AND WAIVER

Following the [REDACTED] , the following transactions will continue between our Group and the relevant connected persons, which will constitute continuing connected transactions for our Company under the Listing Rules.

CONTINUING CONNECTED TRANSACTIONS SUBJECT TO REPORTING AND ANNOUNCEMENT REQUIREMENTS BUT EXEMPT FROM INDEPENDENT SHAREHOLDERS’ APPROVAL

Tenancy Agreements

Leasing of storage property

On 16 September 2009, SW Bore Pile as tenant and Cheer Crown as landlord entered into a tenancy agreement (the “ First CC Tenancy Agreement ”) for the leasing of a property situated at The Remaining Portion of Lot Nos. 1313 and 1317 in Demarcation District No. 106, Yuen Long, New Territories, Hong Kong (the “ Storage Property ”) for use as open storage and service depot for our Group for a term of 24 months from 1 August 2009 to 31 July 2011 (both days inclusive) at a monthly rent of HK$90,000. The management fees, rates, Government rent and property tax in respect of the Storage Property were borne by Cheer Crown as the landlord as stipulated in the First CC Tenancy Agreement.

Upon expiry of the First CC Tenancy Agreement and from 1 August 2011 to 31 July 2012, Cheer Crown continued to lease the Storage Property to SW Bore Pile at a monthly rent of HK$90,000 but no written tenancy agreement was entered into between the parties.

On 25 July 2012, SW Bore Pile as tenant and Cheer Crown as landlord entered into another tenancy agreement (the “ Second CC Tenancy Agreement ”) for the leasing of the Storage Property for a term of 24 months from 1 August 2012 to 31 July 2014 (both days inclusive) at a monthly rent of HK$150,000.

On 16 June 2014, SW Bore Pile as tenant and Cheer Crown as landlord entered into a new tenancy agreement (the “ Third CC Tenancy Agreement ”, together with the First CC Tenancy Agreement and the Second CC Tenancy Agreement, the “ CC Tenancy Agreements ”) for the leasing of the Storage Property with a site area of approximately 119,698 sq.ft., for a term of three years from 1 August 2014 to 31 July 2017 (both days inclusive) at a monthly rent of HK$180,000.

Leasing of residential properties and car parking spaces

Property at Simplex 1 (also known as Simplex A), 29th Floor (including the flat roof(s) of Block I), Block 1, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong

On 16 September 2009, SW Holdings as tenant and Cheer Wealth as landlord entered into a tenancy agreement (the “ First CW Tenancy Agreement ”) for the leasing of a property located at Simplex 1 (also known as Simplex A), 29th Floor (including the flat roof(s) of Block I), Block 1, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong (the “ 29A Property ”) for a term of 24 months from 1 April 2009 to 31 March 2011 (both days inclusive) at a monthly rent of HK$66,000. The management fees, rates, Government rent and property tax in respect of the 29A Property were borne by Cheer Wealth as landlord as stipulated in the First CW Tenancy Agreement.

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CONNECTED TRANSACTIONS AND WAIVER

Upon expiry of the First CW Tenancy Agreement and from 1 April 2011 to 30 June 2011, Cheer Wealth leased the 29A Property to Mr. Lau at a monthly rent of HK$66,000 but no written tenancy agreement was entered into between the parties. From 1 July 2011 to 30 September 2012, Cheer Wealth leased the 29A Property to SW Bore Pile at a monthly rent of HK$66,000 but no written tenancy agreement was entered into between the parties.

On 8 December 2012, SW Bore Pile as tenant and Cheer Wealth as landlord entered into a tenancy agreement (the “ Second CW Tenancy Agreement ”) for the leasing of the 29A Property for use as quarter for Mr. Lau and Ms. Leung for a term of 24 months from 1 October 2012 to 30 September 2014 (both days inclusive) at a monthly rent of HK$73,000. It was effectively terminated and superseded by the Third CW Tenancy Agreement (as defined below) with effect from 1 August 2014.

On 16 June 2014, SW Bore Pile as tenant and Cheer Wealth as landlord entered into a new tenancy agreement (the “ Third CW Tenancy Agreement ”, together with the First CW Tenancy Agreement and the Second CW Tenancy Agreement, the “ CW Tenancy Agreements ”) for the leasing of the 29A Property with a saleable area of approximately 2,031 sq. ft., for use as quarter for Mr. Lau and Ms. Leung for a term of three years from 1 August 2014 to 31 July 2017 (both days inclusive) at a monthly rent of HK$73,000.

Private Car Parking Space No. 62, Level 6, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong

On 16 September 2009, SW Holdings as tenant and East Ascent as landlord entered into a tenancy agreement (the “ First EA Tenancy Agreement ”) for the leasing of a private car parking space No. 62 located at Level 6, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong (the “ Carparking No. 62 ”) for a term of 24 months from 1 April 2009 to 31 March 2011 (both days inclusive) at a monthly rent of HK$3,000. The management fees, rates, Government rent and property tax in respect of the Carparking No. 62 were borne by East Ascent as landlord as stipulated in the First EA Tenancy Agreement.

Upon expiry of the First EA Tenancy Agreement and from 1 April 2011 to 30 June 2011, East Ascent leased the Carparking No. 62 to Mr. Lau at a monthly rent of HK$3,000 but no written tenancy agreement was entered into between the parties. From 1 July 2011 to 30 September 2012, East Ascent leased the Carparking No. 62 to SW Bore Pile at the monthly rent of HK$3,000 but no written tenancy agreement was entered into between the parties.

On 8 December 2012, SW Bore Pile as tenant and East Ascent as landlord entered into a tenancy agreement (the “ Second EA Tenancy Agreement ”) for the leasing of the Carparking No. 62 for use as private carparking space for Mr. Lau and Ms. Leung for a term of 24 months from 1 October 2012 to 30 September 2014 (both days inclusive) at a monthly rent of HK$3,800. It was effectively terminated and superseded by the Third EA Tenancy Agreement (as defined below) with effect from 1 August 2014.

On 16 June 2014, SW Bore Pile as tenant and East Ascent as landlord entered into a new tenancy agreement (the “ Third EA Tenancy Agreement ”, together with the First EA Tenancy Agreement and the Second EA Tenancy Agreement, the “ EA Tenancy Agreements ”) for the leasing of the Carparking No. 62 for use as private car parking space for Mr. Lau and Ms. Leung for a term of three years from 1 August 2014 to 31 July 2017 (both days inclusive) at a monthly rent of HK$3,800.

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CONNECTED TRANSACTIONS AND WAIVER

Private Car Parking Space No. 63, Level 6, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong

On 16 September 2009, SW Holdings as tenant and Cheer Profit as landlord entered into a tenancy agreement (the “ First CP Tenancy Agreement ”) for the leasing of a private car parking space No. 63 located at Level 6, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong (the “ Carparking No. 63 ”) for a term of 24 months from 1 April 2009 to 31 March 2011 (both days inclusive) at a monthly rent of HK$3,000. The management fees, rates, Government rent and property tax in respect of the Carparking No. 63 were borne by Cheer Profit as landlord as stipulated in the First CP Tenancy Agreement.

Upon expiry of the First CP Tenancy Agreement and from 1 April 2011 to 30 June 2011, Cheer Profit leased the Carparking No. 63 to Mr. Lau at a monthly rent of HK$3,000 but no written tenancy agreement was entered into between the parties. From 1 July 2011 to 30 September 2012, Cheer Profit leased the Carparking No. 63 to SW Bore Pile at a monthly rent of HK$3,000 but no written tenancy agreement was entered into between the parties.

On 8 December 2012, SW Bore Pile as tenant and Cheer Profit as landlord entered into a tenancy agreement (the “ Second CP Tenancy Agreement ”) for the leasing of the Carparking No. 63 for use as a private car parking for Mr. Lau and Ms. Leung for a term of 24 months from 1 October 2012 to 30 September 2014 (both days inclusive) at a monthly rent of HK$3,800. It was effectively terminated and superseded by the Third CP Tenancy Agreement (as defined below) with effect from 1 August 2014.

On 16 June 2014, SW Bore Pile as tenant and Cheer Profit as landlord entered into a new tenancy agreement (the “ Third CP Tenancy Agreement ”, together with the First CP Tenancy Agreement and the Second CP Tenancy Agreement, the “ CP Tenancy Agreements ”) for the leasing of the Carparking No. 63 for use as private car parking space for Mr. Lau and Ms. Leung for a term of three years from 1 August 2014 to 31 July 2017 (both days inclusive) at a monthly rent of HK$3,800.

Property at Flat C, 16[th] Floor, Block 2 and Private Car Parking Space No. 61, Level 6, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong

On 16 September 2009, SW Holdings as tenant and Long Ascent as landlord entered into a tenancy agreement (the “ First LA Tenancy Agreement ”) for the leasing of (i) a property Flat C, 16[th] Floor, Block 2 and (ii) a private car parking space No. 61, located at Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong (the “ 16C Property ”) for a term of 24 months from 1 April 2009 to 31 March 2011 (both days inclusive) at a monthly rent of HK$43,000. The management fees, rates, property tax and Government rent in respect of the 16C Property were borne by Long Ascent as landlord as stipulated in the First LA Tenancy Agreement.

Upon expiry of the First LA Tenancy Agreement and from 1 April 2011 to 30 April 2011, Long Ascent leased the 16C Property to Mr. Lau Chun Kwok at a monthly rent of HK$43,000 but no written tenancy agreement was entered into between the parties. From 1 May 2011 to 31 March 2012, Long Ascent leased the 16C Property to Redland Contractors at a monthly rent of HK$43,000 but no written tenancy agreement was entered into between the parties. From 1 April 2012 to 30 September 2012, Long Ascent leased the 16C Property to SW Engineering Equipment at the monthly rent of HK$43,000 but no written tenancy agreement was entered into between the parties.

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CONNECTED TRANSACTIONS AND WAIVER

On 8 December 2012, SW Engineering Equipment as tenant and Long Ascent as landlord entered into a tenancy agreement (the “ Second LA Tenancy Agreement ”) for the leasing of the 16C Property for use as quarter and private car parking space for Mr. Lau Chun Kwok for a term of 24 months from 1 October 2012 to 30 September 2014 (both days inclusive) at a monthly rent of HK$50,000. It was effectively terminated and superseded by the Third LA Tenancy Agreement (as defined below) with effect from 1 August 2014.

On 16 June 2014, SW Engineering Equipment as tenant and Long Ascent as landlord entered into a new tenancy agreement (the “ Third LA Tenancy Agreement ”, together with the First LA Tenancy Agreement and the Second LA Tenancy Agreement, the “ LA Tenancy Agreements ”) for the leasing of the 16C Property with a saleable area of approximately 1,330 sq. ft., for use as quarter and private car parking space for Mr. Lau Chun Kwok for a term of three years from 1 August 2014 to 31 July 2017 (both days inclusive) at a monthly rent of HK$50,000.

Property at Flat C, 15[th] Floor, Block 2 and Private Car Parking Space No. 60, Level 6, Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong

On 16 September 2009, SW Holdings as tenant and Healthy World as landlord entered into a tenancy agreement (the “ First HW Tenancy Agreement ”) for the leasing of (i) a property Flat C, 15[th] Floor, Block 2 and (ii) a private car parking space No. 60, located at Parc Palais, 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong (the “ 15C Property ”) for a term of 24 months from 1 April 2009 to 31 March 2011 (both days inclusive) at a monthly rent of HK$43,000. The management fees, rates, Government rent and property tax in respect of the 15C Property were borne by Healthy World as landlord as stipulated in the First HW Tenancy Agreement.

Upon expiry of the First HW Tenancy Agreement and from 1 April 2011 to 30 April 2011, Healthy World leased the 15C Property to Mr. Lau Chun Ka at a monthly rent of HK$43,000 but no written tenancy agreement was entered into between the parties. From 1 May 2011 to 31 March 2012, Healthy World leased the 15C Property to Sam Woo Ship Building Limited at a monthly rent of HK$43,000 but no written tenancy agreement was entered into between the parties. From 1 April 2012 to 30 September 2012, Healthy World leased the 15C Property to SW Engineering Equipment at a monthly rent of HK$43,000 but no written tenancy agreement was entered into between the parties.

On 8 December 2012, SW Engineering Equipment as tenant and Healthy World as landlord entered into a tenancy agreement (the “ Second HW Tenancy Agreement ”) for the leasing of the 15C Property for use as quarter and private car parking space for Mr. Lau Chun Ka for a term of 24 months from 1 October 2012 to 30 September 2014 (both days inclusive) at a monthly rent of HK$50,000. It was effectively terminated and superseded by the Third HW Tenancy Agreement (as defined below) with effect from 1 August 2014.

On 16 June 2014, SW Engineering Equipment as tenant and Healthy World as landlord entered into a new tenancy agreement (the “ Third HW Tenancy Agreement ”, together with the First HW Tenancy Agreement and the Second HW Tenancy Agreement, the “ HW Tenancy Agreements ”) for the leasing of the 15C Property with a saleable area of approximately 1,330 sq. ft., for use as quarter and private car parking space for Mr. Lau Chun Ka for a term of three years from 1 August 2014 to 31 July 2017 (both days inclusive) at a monthly rent of HK$50,000.

(The CC Tenancy Agreements, the CW Tenancy Agreements, the EA Tenancy Agreements, the CP Tenancy Agreements, the LA Tenancy Agreements and the HW Tenancy Agreements, together referred to as the “ Tenancy Agreements ”)

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CONNECTED TRANSACTIONS AND WAIVER

(The Second CC Tenancy Agreement, the Second CW Tenancy Agreement, the Second EA Tenancy Agreement, the Second CP Tenancy Agreement, the Second LA Tenancy Agreement and the Second HW Tenancy Agreement, together referred to as the “ Second Tenancy Agreements ”)

(The Third CC Tenancy Agreement, the Third CW Tenancy Agreement, the Third EA Tenancy Agreement, the Third CP Tenancy Agreement, the Third LA Tenancy Agreement and the Third HW Tenancy Agreement, together referred to as the “ Third Tenancy Agreements ”)

For each of the three years ended 31 March 2014, the total amount of rent paid by our Group to the above landlords, amounted to HK$2,201,000, HK$3,591,600 and HK$3,967,200, respectively.

As Mr. Lau, Mr. Lau Chun Kwok, Mr. Lau Chun Ka and Ms. Leung, each a Director, and Ms. Lau Pui Shan, a daughter of Mr. Lau and Ms. Leung and the chief financial officer of the Group, have the following interests in the above landlords, each of the landlords above is therefore considered as a connected person of our Company under Chapter 14A of the Listing Rules and hence the transactions under the Third Tenancy Agreements referred to above will constitute continuing connected transactions under Chapter 14A of the Listing Rules immediately after the Shares are [REDACTED] on the Stock Exchange:

(a) Cheer Crown is beneficially owned as to 100% by Mr. Lau.
(b) Cheer Wealth is owned as to approximately 99.99996%, 0.00002% and 0.00002% by Mr. Lau, Ms. Leung and Ms. Lau Pui Shan, respectively;
(c) East Ascent is owned as to 50%, 25% and 25% by Mr. Lau, Ms. Leung and Ms. Lau Pui Shan, respectively; and
(d) Cheer Profit is owned as to 50%, 25% and 25% by Mr. Lau, Ms. Leung and Ms. Lau Pui Shan, respectively;
(e) Long Ascent is owned as to 50%, 49% and 1% by Mr. Lau, Mr. Lau Chun Kwok and Ms. Leung, respectively;
(f) Healthy World is owned as to 50% each by Mr. Lau and Mr. Lau Chun Ka, respectively;

The rents paid by our Group to the above landlords were determined on an arm’s length basis and reflected the prevailing market rents at the time. The Second Tenancy Agreements and the Third Tenancy Agreements were entered into by the relevant parties on normal commercial terms.

The leasing of each of the Storage Property, the 29A Property, the Carparking No. 62, the Carparking No. 63, the 16C Property and the 15C Property will continue after the [REDACTED] for the term of the Third Tenancy Agreements. The rentals under the Third Tenancy Agreements were determined with reference to the prevailing market rates. Based on the terms of the Third Tenancy Agreements, the total amount of rent inclusive of Government rent, rates, management fee and property tax payable by our Group to the above landlords for each of the years ending 31 March 2015, 2016 and 2017 will not exceed HK$4,207,200, HK$4,327,200 and HK$4,327,200, respectively (the “ Lease Annual Caps ”).

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CONNECTED TRANSACTIONS AND WAIVER

Our Directors (including the independent non-executive Directors) confirm that the Third Tenancy Agreements were entered into in the ordinary and usual course of business of our Group and the terms of the Third Tenancy Agreements and the Lease Annual Caps are fair and reasonable and on normal commercial terms and are in the interest of our Group and the Shareholders as a whole.

Asset Appraisal Limited has reviewed the rents payable pursuant to the Third Tenancy Agreements and confirmed that the terms of the Third Tenancy Agreements reflect the prevailing market conditions and that the rents payable by our Group to the above landlords reflect the prevailing market rates of similar properties at the vicinity.

The Sponsor has reviewed the relevant documentation provided by Asset Appraisal Limited and our Group, and discussed with the management, the Lease Annual Caps and reasons for the transactions. Based on the above, the Sponsor is of the view that (i) the continuing connected transactions under the Third Tenancy Agreements have been entered into in the ordinary and usual course of business of our Group; (ii) are on normal commercial terms that are fair and reasonable and in the interest of our Company and our Shareholders as a whole; and (iii) the Lease Annual Caps are fair and reasonable and in the interest of our Company and our Shareholders as a whole.

Based on the highest aggregate annual rent payable of HK$4,327,200 under the Third Tenancy Agreements, all applicable percentage ratios are less than 5%. Therefore, pursuant to Rule 14A.76(2) of the Listing Rules, the transactions under the Third Tenancy Agreements are exempt from circular and shareholders’ approval requirement but are subject to announcement and reporting requirements under the Listing Rules.

Our Company has applied to the Stock Exchange for a waiver from strict compliance with the announcement requirements pursuant to Rule 14A.105 of the Listing Rules in respect of the transactions contemplated under the Third Tenancy Agreements [and the Stock Exchange has agreed to grant such wavier to the Company from compliance with the announcement requirements in respect of the Third Tenancy Agreements.] Our Company will comply with all other relevant requirements under Chapter 14A of the Listing Rules.

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DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

The Board consists of four executive Directors and three independent non-executive Directors. Our Directors are supported by our senior management in the day-to-day management of our business. The following table sets forth certain information in respect of our Directors and our senior management:

Name Executive Directors Mr. Lau Chun Ming Mr. Lau Chun Kwok Mr. Lau Chun Ka Ms. Leung Lai So	Age 71 62 60 67	Date of joining our Group December, 1970 December, 1970 December, 1970 October, 1972	Date of appointment as Director September, 2012 January, 2013 January, 2013 January, 2013	Position and responsibilities in our Group Chairman and executive Director, responsible for the overall strategic planning and business development of our Group, overseeing the tendering and quotation process, research and development and formulation of overall corporate policies and a member of each of the remuneration committee and nomination committee Chief executive officer and executive Director, responsible for the overall management of foundation works and ancillary services projects of our Group Executive Director, responsible for the overall management of maintenance and repair of machinery and equipment of our Group Executive Director, responsible for the administrative and human resources matters of our Group	Relationship with Directors and other senior management
					Brother of Mr. Lau Chun Kwok and Mr. Lau Chun Ka, spouse of Ms. Leung Lai So, father of Ms. Lau Pui Shan Brother of Mr. Lau Chun Ming and Mr. Lau Chun Ka, brother-in-law of Ms. Leung Lai So, uncle of Ms. Lau Pui Shan Brother of Mr. Lau Chun Ming and Mr. Lau Chun Kwok, brother-in-law of Ms. Leung Lai So, uncle of Ms. Lau Pui Shan Spouse of Mr. Lau Chun Ming, mother of Ms. Lau Pui Shan and sister-in-law of Mr. Lau Chun Kwok and Mr. Lau Chun Ka

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DIRECTORS AND SENIOR MANAGEMENT

Name Independent Non- Executive Directors Mr. Chu Tak Sum Mr. Ip Tin Chee, Arnold Professor Wong Sue Cheun, Roderick Senior Management Mr. Hsu Kam Yee, Simon Mr. Colin Jesse Ms. Lau Pui Shan Mr. Wan Kwok Choi	Age 66 51 70 59 61 40 47	Date of joining our Group [mth, yr] [mth, yr] [mth, yr] July, 2001 February, 2013 September, 1999 March, 1996	Date of appointment as Director [mth, yr] [mth, yr] [mth, yr] August, 2003 February, 2013 September, 2012 September, 2012	Position and responsibilities in our Group Independent non-executive Director, the chairman of remuneration committee and a member of each of the audit committee and nomination committee Independent non-executive Director, the chairman of audit committee and a member of each of the nomination committee and remuneration committee Independent non-executive Director, the chairman of the nomination committee and a member of each of the audit committee and remuneration committee Director of the foundation division, responsible for business development, tendering and overall management of foundation works and ancillary services projects Adviser to the Board, responsible for advising the Board on overall development strategies in the construction and foundation industries Chief financial officer, responsible for financial, accounting, treasury and banking matters Quantity surveying and purchasing manager, responsible for quantity surveying	Relationship with Directors and other senior management
					N/A N/A N/A N/A N/A Daughter of Mr. Lau Chun Ming and Ms. Leung Lai So, niece of Mr. Lau Chun Kwok and Mr. Lau Chun Ka N/A

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DIRECTORS AND SENIOR MANAGEMENT

Name Mr. Kwok Kan Kuen, Lawrence Mr. Chan Chun Fung, Agnew Mr. Lui Ping Sum	Age 50 56 50	Date of joining our Group July, 2012 February, 2014 January, 2013	Date of appointment as Director July, 2012 February, 2014 January, 2013	Position and responsibilities in our Group Project manager, responsible for the supervision of foundation projects Project manager, responsible for execution of designated projects Plant manager, responsible for the maintenance and repair of machinery and equipment	Relationship with Directors and other senior management
					N/A N/A N/A

Executive Directors

Mr. Lau Chun Ming , aged 71, is an executive Director, the Chairman and founder of our Group. Mr. Lau is responsible for the overall strategic planning and business development of our Group, overseeing the tendering and quotation process, research and development and formulation of overall corporate policies of our Group. Mr. Lau has been involved in the foundation works business since 1990. He was an executive director of SW Holdings (now known as Noble Century Investment Holdings Limited) (stock code: 2322), and was responsible for the overall strategic planning, business development and formulation of overall corporate policies, during the period from 9 August 2002 to 30 June 2011. He is a brother of Mr. Lau Chun Kwok and Mr. Lau Chun Ka and the spouse of Ms. Leung.

Mr. Lau Chun Kwok , aged 62, is our chief executive officer and an executive Director. He joined our Group in the 1970s. He is responsible for the overall management of foundation works and ancillary services projects of our Group. He has been involved in the foundation works business since 1990. He was an executive director of SW Holdings (now known as Noble Century Investment Holdings Limited) (stock code: 2322), and was responsible for the overall deployment of foundation construction machinery and equipment, labour, resources and purchasing activities, during the period from 25 March 2003 to 29 April 2011. He is the brother of Mr. Lau and Mr. Lau Chun Ka, brother-in-law of Ms. Leung and uncle of Ms. Lau Pui Shan.

Mr. Lau Chun Ka , aged 60, is an executive Director. He joined our Group in the 1970s. He is responsible for the overall management of maintenance and repair of machinery and equipment of our Group. He has been involved in the foundation works business since 1990. He was an executive director of SW Holdings (now known as Noble Century Investment Holdings Limited) (stock code: 2322), and was responsible for the maintenance of machinery and equipment, during the period from 25 March 2003 to 29 April 2011. He is the brother of Mr. Lau and Mr. Lau Chun Kwok, brother-in-law of Ms. Leung and uncle of Ms. Lau Pui Shan.

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DIRECTORS AND SENIOR MANAGEMENT

Ms. Leung Lai So , aged 67, is an executive Director. She joined our Group in the 1970s. She is responsible for the administrative and human resources matters of our Group and has been involved in the management of our Group for over 20 years. She obtained a diploma in smaller company management from the Chinese University of Hong Kong in July 1997. She was an executive director of SW Holdings (now known as Noble Century Investment Holdings Limited) (stock code: 2322), and was responsible for administration and human resources, during the period from 9 August 2002 to 29 April 2011. She is the spouse of Mr. Lau, mother of Ms. Lau Pui Shan and sister-in-law of Mr. Lau Chun Kwok and Mr. Lau Chun Ka.

Independent non-executive Directors

Mr. Chu Tak Sum , aged 66, has been appointed as an independent non-executive Director of our Company on [•••]. Mr. Chu is a registered architect in Hong Kong under the provisions of the Architects Registration Ordinance and has been engaged as an architect for about 30 years. Mr. Chu obtained a bachelor’s degree of arts in architecture studies from The University of Hong Kong in 1971. He is also a fellow member of the Hong Kong Institute of Architects and holds Class 1 Registered Architect qualification of the PRC.

Mr. Chu is currently the managing director of T.S. Chu Architects Limited and an independent nonexecutive director of Henry Group Holdings Limited (stock code: 859).

Mr. Ip Tin Chee, Arnold , aged 51, has been appointed as an independent non-executive Director of our Company on [•••]. Mr. Ip obtained a master’s degree of arts from Trinity College, Cambridge University in 1988. Mr. Ip’s work focuses on fund raising for listed and unlisted companies, and management of real estate investment funds. He is a director of Altus Capital Limited where he is involved in the supervision and management of corporate finance and advisory work for companies in Hong Kong.

Mr. Ip is an independent non-executive director of Pioneer Global Group Limited (stock code: 224) and an independent non-executive director of Pak Fah Yeow International Limited (stock code: 239), each of which is a company listed on the main board of the Stock Exchange. He is also the Chairman of Japan Residential Assets Manager Limited, the manager of a real estate investment trust listed in Singapore.

Professor Wong Sue Cheun, Roderick , aged 70, has been appointed as an independent non-executive Director of our Company on [•••]. Professor Wong holds a bachelor’s degree of arts from San Diego State College in the United States of America, and a doctoral’s degree in philosophy in mathematics from the University of Alberta in Canada. He is a Fellow of the Royal Society of Canada, and Chevalier dans l’Ordre National de la Légion d’Honneur of France, and elected as a member of the European Academy of Sciences. Currently, he is the Vice-President (Development & External Relations), the Chair Professor of Mathematics and the Director of the Liu Bie Ju Centre for Mathematical Sciences at City University of Hong Kong.

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DIRECTORS AND SENIOR MANAGEMENT

Save as disclosed, each of our Directors has not been a director of any other publicly listed company during the three years preceding the date of this [REDACTED] .

Save as disclosed above, to the best of the knowledge, information and belief of our Directors having made all reasonable enquiries, there was no information relating to our Directors that is required to be disclosed pursuant to paragraphs (h) to (v) of Rule 13.51(2) of the Listing Rules or any other matters concerning any Director that needs to be brought to the attention of the Shareholders.

Senior Management

Mr. Hsu Kam Yee, Simon , aged 59, has been a director of SW Bore Pile since August 2003. He is responsible for the business development, tendering and overall management of the foundation works and ancillary services projects of our Group. He obtained a master’s degree in business administration from The University of East Asia in Macau in 1989. He has more than 30 years’ experience in the construction industry. He is a member of the Institution of Civil Engineers and Hong Kong Institution of Engineers. He was a director of Tysan Foundation Limited from 1994 to 1996, China Overseas Foundation Limited from 1996 to 2000, Hsin Chong (Foundations) Limited and Hsin Chong (Foundations) Asia Limited from 2000 to 2001. He was an executive director of SW Holdings (now known as Noble Century Investment Holdings Limited), a company listed on the Stock Exchange of Hong Kong Limited (stock code: 2322), during the period from 9 April 2003 to 21 February 2011.

Mr. Colin Jesse , aged 61, is an adviser to the Board. He is responsible for advising the Board on overall development strategies in the construction and foundation industries. He has over 40 years of experience in the construction industry. He has worked for major construction and engineering companies as senior executive including Leighton Bruckner Foundation Engineering Limited from 1984 to 1993, Daido Construction Company Limited from 1993 to 1997, Evans and Peck (Hong Kong) Company Limited from 1997 to 2010 and Bechtel HK Limited from 2010 to 2012.

Ms. Lau Pui Shan , aged 40, is the chief financial officer of our Group and a director of SW Bore Pile since January 2002. She joined our Group in September 1999. She is responsible for financial, accounting, treasury and banking matters, investors’ relation and information technology system of our Group. She obtained a bachelor’s degree of commerce in accounting and finance and a master’s degree of commerce in international business from the University of New South Wales in Australia. She is a certified practicing accountant of CPA Australia and a fellow member of the Hong Kong Institute of Certified Public Accountants. She is the daughter of Mr. Lau and Ms. Leung.

Mr. Wan Kwok Choi , aged 47, is the quantity surveying and purchasing manager of our Group. He is responsible for quantity surveying matters and preparation of tenders and quotations for our Group. He joined our Group in March 1996 and has over 17 years of experience in foundation works.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Kwok Kan Kuen, Lawrence , aged 50, is the project manager of our Group. He is responsible for the supervision of foundation projects of our Group. Prior to joining our Group in July 2012, he has over 20 years of experience in the engineering field. He obtained a bachelor’s degree in civil engineering from the Chu Hai College in July 1987 and a master’s degree of science in international construction management and engineering from the University of Leeds in the United Kingdom in September 1994. He is currently a registered professional engineer under the Engineer Registration Ordinance and a member of each of the Institution of Civil Engineers of the United Kingdom and the Hong Kong Institution of Engineers, respectively.

Mr. Chan Chun Fung, Agnew , aged 56, is the project manager of SW Bore Pile. He worked for our Group from February 2001 to July 2012 and re-joined our Group in February 2014. He is responsible for execution of designated projects of our Group. He has over 24 years of experience in survey and project aspects. He obtained a bachelor’s degree in surveying from The University of New South Wales in Australia in 1991 and a master’s degree in Survey Science from the same university in 1993. In 1993, he qualified as a Graduate Surveyor from the Institute of Surveyors in New South Wales, Australia. He has been a member of The Hong Kong Institution of Engineering Surveyor since 2000.

Mr. Lui Ping Sum , aged 50, is the plant manager of our Group. He worked for our Group from July 2001 to June 2006, and then re-joined our Group in January 2013. He is responsible for the maintenance and repair of our machinery and equipment. He has over 20 years of experience in the maintenance and repair of machinery and equipment.

BOARD COMMITTEES

Audit committee

Our Company has established an audit committee on [•••] with written terms of reference in compliance with the Corporate Governance Code as set out in Appendix 14 of the Listing Rules. The primary duties of the audit committee are to make recommendation to the Board on the appointment and removal of external auditors; review the financial statements and render advice in respect of financial reporting as well as oversee internal control procedures of our Group. At present, the audit committee consists of three members, namely Mr. Ip Tin Chee, Arnold, Mr. Chu Tak Sum and Professor Wong Sue Cheun, Roderick. Mr. Ip Tin Chee, Arnold, is the chairman of the audit committee.

Remuneration committee

Our Company has established a remuneration committee on [•••] with written terms of reference in compliance with the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. The primary duties of the remuneration committee are to make recommendations to the Board on the overall remuneration policy and structure relating to all Directors and senior management of our Group; review performance based remuneration; and ensure none of our Directors determine their own remuneration. The remuneration committee consists of four members, namely Mr. Chu Tak Sum, Professor Wong Sue Cheun, Roderick, Mr. Ip Tin Chee, Arnold and Mr. Lau. Mr. Chu Tak Sum is the chairman of the remuneration committee.

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DIRECTORS AND SENIOR MANAGEMENT

Nomination Committee

Our Company has established a nomination committee on [•••] with written terms of reference with the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. The primary duties of the nomination committee are to make recommendations to the Board on the appointment of Directors and the management of the Board succession. The nomination committee consists of four members, namely Professor Wong Sue Cheun, Roderick, Mr. Ip Tin Chee, Arnold, Mr. Chu Tak Sum and Mr. Lau. Professor Wong Sue Cheun, Roderick is the chairman of the nomination committee.

REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT

Directors and senior management receive compensation in the form of salaries, housing and other benefits in kind and/or discretionary bonuses. Our Group also reimburses them for expenses which are necessarily and reasonably incurred for providing services or executing their functions in relation to our Group’s operations. Our Group regularly reviews and determines the remuneration and compensation packages of our Directors and senior management.

During the Track Record Period, the remuneration payable by our Company to our Directors, such include salaries, housing and other benefits in kind, contributions to defined contribution benefit plans (including pensions) and discretionary bonuses, being approximately HK$2.8 million, HK$4.4 million and HK$4.7 million, respectively. The aggregate remuneration (including salaries, housing and other benefits in kind, contributions to defined contribution benefits plans (including pensions) and discretionary bonus) paid to our five highest paid individuals during the Track Record Period were approximately HK$4.5 million, HK$6.6 million and HK$7.6 million, respectively. Please refer to the paragraph headed “Financial Information – Directors’ remuneration and benefits” for further information.

No remuneration was paid to our Directors or the five highest paid individuals as an inducement to join, or upon joining, our Group. No compensation was paid to, or is receivable by, our Directors or past Directors for the Track Record Period for the loss of office as director of any member of our Group or of any other office in connection with the management of the affairs of any member of our Group. None of our Directors waived any emoluments during the same period.

Save as disclosed above, no other payments have been made or are payable by our Company or any of our subsidiaries to our Directors in respect of the services rendered during the Track Record Period.

It is estimated that remuneration equivalent to approximately HK$5.4 million in aggregate will be paid and granted to our Directors by us in respect of the financial year ending 31 March 2015 under arrangements in force at the date of this [REDACTED] .

Directors’ remuneration is determined with reference to salaries paid by comparable companies, experience, responsibilities and performance of our Group.

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DIRECTORS AND SENIOR MANAGEMENT

COMPANY SECRETARY

Mr. Chan Sun Kwong is the company secretary of our Company and was appointed on 14 June 2014.

He obtained a diploma of business administration from the Hong Kong Shue Yan College (now known as Hong Kong Shue Yan University) in 1990. He has over 20 years company secretarial experience. He served as the company secretary of UDL Holdings Limited (stock code: 620) from January 1992 to September 1997 and the company secretary of KEL Holdings Limited (now known as Chinese People Holdings Company Limited) (stock code: 681) from March 1997 to September 1997. He served as the company secretary of Ming Hing Holdings Limited (now known as Peace Map Holding Limited) (stock code: 402) from November 2005 to October 2006. He was the company secretary and an executive director of SW Holdings (now known as Noble Century Investment Holdings Limited) (stock code: 2322) from March 2003 to June 2011. Mr. Chan is also the company secretary of Powerwell Pacific Holdings Limited (stock code: 8265) since December 2010.

He is a fellow member of the Hong Kong Institute of Chartered Secretaries, the Institute of Chartered Secretaries and Administrators in the United Kingdom, the Association of Chartered Certified Accountants in the United Kingdom and the Hong Kong Institute of Certified Public Accountants. He is an accredited mediator of The Hong Kong Mediation Centre.

COMPLIANCE ADVISER

In accordance with Rule 3A.19 of the Listing Rules, our Company has appointed Investec as our compliance adviser. Our Company has entered into a compliance adviser’s agreement with the compliance adviser, the material terms of which are as follows:

(i) our Company has appointed Investec as its compliance adviser for the purpose of Rule 3A.19 of the Listing Rules for a period commencing on the [REDACTED] and ending on the date on which our Company complies with Rule 13.46 of the Listing Rules in respect of the financial results for the first full financial year of our Group commencing after such [REDACTED] , or until the agreement is terminated, whichever is earlier;
(ii) Investec shall provide our Company with services, including guidance and advice as to compliance with the requirements under the Listing Rules and applicables laws, rules, codes and guidelines;
(iii) our Company shall consult with and, if necessary, seek advice from Investec on a timely basis 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;

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DIRECTORS AND SENIOR MANAGEMENT

(c) where our Group proposes to use the proceeds of the [REDACTED] in a manner different from that detailed in this [REDACTED] or where the business activities, developments or results of the Company deviate from any forecast, estimate, or other information in this [REDACTED] ; and
(d) where the Stock Exchange makes an inquiry of our Company under Rule 13.10 of the Listing Rules.
(iv) our Company undertakes to indemnify Investec for certain actions against it and losses incurred by it arising out of or in connection with the performance by Investec of its duties under the agreement;
(v) our Company may terminate the appointment of Investec as its compliance adviser in the event that there is a material breach of the material provisions under the engagement of the compliance adviser; and
(vi) Investec may terminate its appointment if there is material dispute over fees, which cannot be resolved within 30 days by serving written notice to the Company.

STAFF BENEFITS

All employees of our Group in Hong Kong have joined a mandatory provident fund scheme (the “ MPF Scheme ”) prescribed by the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) and the MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority. Our Group has made the relevant contributions in accordance with the aforesaid laws and regulations. Save as the aforesaid, our Group has not participated in other pension schemes.

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SHARE CAPITAL

Our Company’s share capital immediately following completion of the [REDACTED] will be as follows:

Authorised share capital [1,000,000,000] Shares Shares issued and to be issued, fully paid or credited as fully paid Number of Shares Description of Shares [REDACTED] Shares in issue [REDACTED] Shares to be issued pursuant to the[REDACTED] [REDACTED] Shares to be issued under the[REDACTED] [REDACTED] Total	HK$ [10,000,000]

	HK$ [REDACTED] [REDACTED] [REDACTED]
	[REDACTED]

ASSUMPTIONS

The above table assumes that the [REDACTED] becomes unconditional and the issue of Shares pursuant to the [REDACTED] is made as described herein. It does not take into account any Shares which may be issued upon the exercise of options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by our Company under the general mandates for the allotment and issue or repurchase of Shares granted to our Directors.

RANKING

The [REDACTED] will rank equally in all respects with all Shares in issue, and will qualify and rank equally for all dividends or other distributions declared, made or paid after the date of this [REDACTED] .

SHARE OPTION SCHEME

We have conditionally adopted the Share Option Scheme. The principal terms of the Share Option Scheme are summarised in the paragraph headed “Statutory and General Information – Share Option Scheme” in Appendix IV to this [REDACTED] .

GENERAL MANDATE TO ISSUE SHARES

Subject to the conditions set forth in the paragraph headed “Structure and Conditions of the [REDACTED] – Conditions of the [REDACTED] ” of this [REDACTED] being fulfilled, our Directors have been granted a general unconditional mandate to allot, issue and deal with the Shares and to make or grant offers, agreements or option which might require such Shares to be allotted and issued or dealt with subject to the requirement that the aggregate nominal value of the Shares so allotted and issued or agreed conditionally or unconditionally to be allotted and issued (otherwise than pursuant to a rights issue, or scrip dividend scheme or similar arrangements, issue and allotment of Shares pursuant to exercise of options that may be granted under the Share Option Scheme or a specific authority granted by the Shareholders) shall not exceed:

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SHARE CAPITAL

(i) 20% of the aggregate nominal amount of the share capital of our Company in issue immediately upon completion of the [REDACTED] and the Capitalisation Issue; and
(ii) the aggregate nominal value of share capital of our Company repurchased by our Company (if any) under the “General Mandate to Repurchase Shares” referred to below.

This mandate does not cover Shares to be allotted, issued, or dealt with under a rights issue, scrip dividend or similar arrangement in accordance with the Articles, or the options which may be granted under the Share Option Scheme. This general mandate to issue Shares will expire at the earliest of:

(i) the conclusion of the next annual general meeting of our Company; or
(ii) the expiration of the period within which our Company is required by any applicable law or the Articles to hold our next annual general meeting; or
(iii) the passing of an ordinary resolution by the Shareholders in general meeting revoking or varying the authority given to our Directors by such mandate.

For further details of this general mandate, please refer to the paragraph headed “Statutory and General Information – Further information about our Company – Written resolutions of the sole Shareholder” in Appendix IV to this [REDACTED] .

General Mandate to Repurchase Shares

Subject to the conditions set forth in the paragraph headed “Structure and Conditions of the [REDACTED] – Conditions of the [REDACTED] ” of this [REDACTED] being fulfilled, our Directors have been granted a general unconditional mandate to exercise all our powers to repurchase Shares with an aggregate nominal value of not more than 10% of the aggregate nominal amount of our Company’s share capital in issue immediately upon completion of the [REDACTED] and the Capitalisation Issue (excluding Shares which may be issued upon to the exercise of any options which may be granted under the Share Option Scheme).

This mandate only relates to repurchases made on the Stock Exchange or any other stock exchange(s) on which the Shares are [REDACTED] (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 out under the paragraph headed “Repurchase by our Company of its own securities” in Appendix IV to this [REDACTED] .

This general mandate to issue Shares will expire at the earliest of:

(i) the conclusion of the next annual general meeting of our Company; or
(ii) the expiration of the period within which our Company is required by any applicable law or the Articles to hold our next annual general meeting; or
(iii) the passing of an ordinary resolution by the Shareholders in general meeting revoking or varying the authority given to our Directors by such mandate.

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CONTROLLING SHAREHOLDERS AND SUBSTANTIAL SHAREHOLDERS

NON-COMPETITION UNDERTAKING

Each of the Controlling Shareholders has, under the Deed of Non-competition Undertaking, irrevocably and unconditionally covenanted and undertaken with our Company (for itself and as trustee for and on behalf of each of its subsidiaries) that, during the period from the [REDACTED] and up to the date on which (a) the Shares ceased to be [REDACTED] on the Stock Exchange or (b) he/she/it and/or his/her/its respective associates cease to beneficially own (i) 30% or more of the issued share capital of our Company; or (ii) any interests in the direct or indirect corporate shareholders of our Company which in turn beneficially own 30% or more of the issued share capital of our Company, he/she/it shall not, and shall procure that none of his/her/its associates and/or companies controlled by him/her/it shall, among others:

(a) directly or indirectly, either for his/her/its own account or in conjunction with or on behalf of or for any other person, and shall procure that his/her/its associates and entities or companies controlled by him/her/it or his/her/its associates (other than any member of our Group), be interested in, engaged or otherwise involved in any form of business, including but not limited to joint venture, alliance, cooperation, partnership, which competes or is likely to compete directly or indirectly with our Group’s business (including but not limited to (i) the provision of foundation works, including the construction of bored piles and rock socketed H-piles and excavation and lateral support works; (ii) the provision of ancillary services, including site investigation and removal of installed piles; and (iii) the leasing of machinery and equipment) in Hong Kong, Macau, the PRC, or in any other jurisdiction which any member of our Group is engaged or has invested or is otherwise involved in or carries or may carry on business from time to time (the “ Restricted Activity ”) nor provide support in any form to persons other than our Group to engage in business that constitute or may constitute direct or indirect competition with the businesses that our Group is currently and from time to time carrying on;
(b) solicit or procure any of the suppliers and/or the customers of our Group from time to time to terminate their business relationships or otherwise reduce the amount of business with our Group; and
(c) solicit or procure any of the directors, senior management, other employees or consultants of our Group from time to time to resign or otherwise cease providing services to our Group.

Notwithstanding the aforesaid, the non-competition undertakings do not apply in respect of the holding of or interests in shares or other securities in any company which conducts or is engaged in any Restricted Activity, provided that, in the case of such shares, they are listed on a recognised stock exchange and:

(a) the total number of the shares directly or indirectly held by him/her/it and/or his/her/its associates does not amount to more than 5% of the issued shares of the relevant company or control the exercise of more than 5% of the voting rights thereof or control the composition of the board of directors of such company; and
(b) he/she/it and/or his/her/its associates are not entitled to appoint a majority of the directors or management of that company.

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CONTROLLING SHAREHOLDERS AND SUBSTANTIAL SHAREHOLDERS

As confirmed by our Directors, as at the Latest Practicable Date, apart from the business operated by members of our Group, our Controlling Shareholders and their respective associates and/or companies controlled by them do not have any interests in any form of business that competes or is likely to compete, directly or indirectly with the business of our Group.

CONTROLLING SHAREHOLDERS

Immediately after completion of the [REDACTED] but without taking into account any Shares which may be allotted and issued pursuant to the exercise of options which may be granted under the Share Option Scheme, our Controlling Shareholders will together control the exercise of [REDACTED] of the voting rights at general meetings of our Company. None of our Controlling Shareholders nor our Directors controls or conducts any business which competes, or is likely to compete, with our business.

SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware, immediately following completion of the [REDACTED] but without taking into account any Shares falling to be issued upon exercise of any options which may be granted under the Share Option Scheme, the following persons (i) will have an interest in the Shares or underlying Shares of our Company which would be required to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or (ii) who are expected, directly or indirectly, to 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:

			Percentage of
Name	Capacity	Number of Shares	shareholding
Actiease Assets	Beneficial owner	[REDACTED]	[REDACTED]
Silver Bright_(Note 1)_	Interest of a controlled	[REDACTED]	[REDACTED]
	corporation
Managecorp Limited as	Trustee	[REDACTED]	[REDACTED]
trustee of the Unit Trust
(Note 2)
Nautilus Trustees as trustee	Trustee	[REDACTED]	[REDACTED]
of the Family Trust
(Note 3)
Mr. Lau_(Note 4)_	Settlor of a discretionary	trust[REDACTED]	[REDACTED]
Ms. Leung_(Note 5)_	Interest of spouse	[REDACTED]	[REDACTED]

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CONTROLLING SHAREHOLDERS AND SUBSTANTIAL SHAREHOLDERS

Notes:

Actiease Assets is 100% owned by Silver Bright. Silver Bright is therefore deemed to be interested in the Shares held by Actiease Assets under the SFO.
Actiease Assets is 100% owned by Silver Bright, which is [REDACTED] held by Managecorp Limited as trustee of the Unit Trust. The issued units of the Unit Trust are [REDACTED] held by Nautilus Trustees as trustee of the Family Trust (of which Mr. Lau is the settlor). The beneficiary of the Family Trust is a family member of Mr. Lau. Therefore, Managecorp Limited, being the trustee of the Unit Trust, is deemed to be interested in the Shares held by Actiease Assets under the SFO.
In light of Note 2 above, Nautilus Trustees, being the trustee of the Family Trust, is deemed to be interested in the Shares held by Actiease Assets under the SFO.
In light of Note 2 above, Mr. Lau, being the settlor of the Family Trust, is deemed to be interested in the Shares held by Actiease Assets under the SFO.
Ms. Leung is the spouse of Mr. Lau. Therefore, Ms. Leung is deemed to be interested in the Shares which are interested by Mr. Lau under the SFO.

Save as disclosed herein, our Directors are not aware of any person who will, immediately following completion of the [REDACTED] but without taking into account any Shares falling to be issued upon exercise of any options which may be granted under the Share Option Scheme, have an interest in the Shares or underlying Shares of our Company which would be required to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will, 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 and are therefore regarded as substantial shareholders under the Listing Rules.

COMPETING BUSINESS

Save and except for their respective interests in our Company and our subsidiaries, each of our executive Directors confirms that he/she and his/her respective associates (including Actiease Assets) do not have any competing business with our Group. Moreover, pursuant to their service agreements, our executive Directors shall not at any time during his/her term of service with our Group and for a period of 12 months after the expiry or termination of his/her employment with our Company, without the prior written consent of our Board, be or become a director of any company (other than our Company or any other member of our Group) which competes with or is a competitor of our Group or be engaged, concerned or interested directly or indirectly in any other business, trade or occupation which competes with or is a competitor of our Group.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Having considered the matters as described below, we believe that our Group is capable of carrying on our business independently of our Controlling Shareholders and their respective associates after completion of the [REDACTED] .

Management Independence and Operational Independence

We hold all relevant licences necessary to carry on our businesses, and have the equipment and employees to operate our businesses independently of any of our Controlling Shareholders. We have independent access to our customers and suppliers.

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CONTROLLING SHAREHOLDERS AND SUBSTANTIAL SHAREHOLDERS

Our day-to-day management and operational decisions are made by our executive Directors and senior management, who have served us for a long time and have substantial experience in the industry. Our Group has established the (i) audit committee, (ii) remuneration committee and (iii) nomination committee. Each committee consists of a majority of independent non-executive Directors to monitor the operation of our Group. Further, we believe that all of our independent non-executive Directors will bring independent judgment to the decision making process of our Board. As at the Latest Practicable Date, except as disclosed in the section headed “Connected transactions and waiver” in this [REDACTED] , there were no significant business transactions between us and any of our Controlling Shareholders. Based on the above, our Directors are of the view that we are independent of our Controlling Shareholders in terms of the day-to-day management and business operations.

Financial Independence

Our Group has its own internal control and accounting systems, accounting department and independent treasury functions.

During the Track Record Period, certain bank loans, finance leases and banking facilities were under personal guarantee by certain Controlling Shareholders and such guarantees will be released upon the [REDACTED] . Our Group would seek financing from Independent Third Parties, including, but not limited to, bank borrowings if our Group is unable to secure the transfer of the said guarantees to our Company. In addition, all loans and advances due to our Controlling Shareholders and/or their respective associates will be settled before the [REDACTED] by way of cash.

Having considered the above factors, our Directors consider that we have no financial dependence on our Controlling Shareholders.

CORPORATE GOVERNANCE MEASURES

Our Company will adopt the following measures to manage the conflict of interests arising from competing business and to safeguard the interests of the Shareholders:

(i) our independent non-executive Directors will review, on an annual basis, the compliance with the non-competition undertaking by the Controlling Shareholders under the Deed of Non-competition Undertaking;
(ii) our Controlling Shareholders undertake to provide all information requested by our Company which is necessary for the annual review by our independent non-executive Directors and the enforcement of the Deed of Non-competition Undertaking;
(iii) our Company will disclose decisions on matters reviewed by our independent non-executive Directors relating to compliance and enforcement of the non-competition undertaking of our Controlling Shareholders under the Deed of Non-competition Undertaking in the annual reports of our Company; and
(iv) our Controlling Shareholders will make an annual declaration on compliance with their undertaking under the Deed of Non-competition Undertaking in the annual reports of our Company.

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FINANCIAL INFORMATION

You should read the following discussion and analysis of our Group’s financial condition and results of operations together with our audited combined financial information as at and for each of the three years ended 31 March 2012, 2013 and 2014 and the accompanying notes included in the Accountant’s Report set out in Appendix I to this [REDACTED] . The Accountant’s Report has been prepared in accordance with HKFRS. Prospective investors should read the whole of the Accountant’s Report set out in Appendix I to this [REDACTED] and not rely merely on the information contained in this section. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from those projected in the forwardlooking statements. For additional information regarding these risks and uncertainties, please refer to the section headed “Risk Factors” in this [REDACTED] .

OVERVIEW

Our Group is an established contractor in the Hong Kong foundation industry. Our Group is principally engaged in the provision of (i) foundation works, including the construction of bored piles, rock socketed H-piles and excavation and lateral support works; and (ii) ancillary services, including site investigation and removal of installed piles. Historically and up until the year ended 31 March 2012, our Group undertook foundation works and ancillary services for construction projects in Hong Kong only. Subsequently in December 2012, our Group entered into the Macau construction market and was awarded a contract for foundation works and ancillary services based in Macau, namely the Hotel Tower Project.

Since the commencement of the Track Record Period and up to the Latest Practicable Date, we have been awarded and/or undertaken a total of 16 projects involving foundation works and ancillary services, which consisted of 13 Hong Kong based projects and three Macau based projects. As at the Latest Practicable Date, the awarded contract sum for the contracts on hand (including contracts in progress and contracts of which our work has yet to commence) amounted to approximately HK$1,348.6 million. Furthermore, from time to time our Group is also engaged in the business of leasing machinery and equipment.

RECENT DEVELOPMENTS OF OUR GROUP SUBSEQUENT TO THE TRACK RECORD PERIOD

Based on our unaudited management accounts, the unaudited monthly average revenue for the two months ended 31 May 2014 was higher than the monthly average revenue for the year ended 31 March 2014, which was mainly due to revenue derived in April and May 2014 from the multi-storey logistics centre project at Tsing Yi and the Hotel Casino Project, the aggregate contract sum (excluding contingent and provisional contract amounts) of which amounted to approximately HK$646.8 million.

As at the Latest Practicable Date, our Group was engaged in two arbitration proceedings in Hong Kong. Owing to the relevant terms of the contracts between us and the counter parties in the arbitration proceedings, the Arbitration Ordinance (Chapter 609, Laws of Hong Kong) and the relevant arbitral rules, all information about the arbitrations must remain confidential.

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FINANCIAL INFORMATION

Save for the two arbitration proceedings, as at the Latest Practicable Date, no member of our Group or any of our Directors was a party to any claim, litigation, arbitration, bankruptcy, receivership proceedings of material importance and no claim, litigation, arbitration, bankruptcy, receivership proceeding of material importance is threatened against our Group or our Directors.

The total indebtedness of our Group as at 31 May 2014, being the latest practicable date for determining the amount of indebtedness in this [REDACTED] , was approximately HK$355.2 million. Details of the changes to our Group’s indebtedness since 31 May 2014 are set out under the paragraph headed “Financial information – Net current liabilities” in this [REDACTED] below.

Our Directors confirm that, up to the date of this [REDACTED] , there has been no other material adverse change in our financial or trading position or prospects since 31 March 2014, being the date to which our latest audited financial information were prepared, and there is no event which would materially affect the information shown in our consolidated financial statements included in the Accountant’s Report set forth in Appendix I to this [REDACTED] .

BASIS OF PRESENTATION OF FINANCIAL INFORMATION

Immediately prior to and after the Reorganisation, our Group principally engaged in the provision of our foundation works and ancillary services under SW (BVI). Pursuant to the Reorganisation, our foundation works and ancillary services business was transferred to and held by our Group. The Company has not been involved in any other business prior to the Reorganisation and does not meet the definition of a business. The Reorganisation is merely a reorganisation with no change in management of such business. Accordingly, the financial information in the Accountant’s Report as set out in Appendix I of this [REDACTED] has been prepared in accordance with the principles of the Auditing Guideline 3.340 “ [REDACTED] and the Reporting Accountant” issued by the HKICPA. The combined financial information is presented using the carrying values of the companies now comprising our Group for all periods presented.

FACTORS AFFECTING THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We believe the most significant factors that directly or indirectly affect our financial position and results of operations include:

Our foundation works and ancillary services contracts are subject to tenders or acceptable quotations

Our Group’s ability to compete for and secure sizeable and profitable foundation works and ancillary services contracts is one of the main contributors to our success as well as ongoing growth and future profitability. Our foundation business operates on a non-recurring and project-by-project basis and our customers may vary from year to year. Upon the completion of our contracts on hand, in the event that our Group is unable to secure new contracts or has not commenced work for any of our new contracts, our revenue and financial performance may be adversely affected.

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FINANCIAL INFORMATION

Construction activities in Hong Kong and Macau

During the Track Record Period, we derived all of our revenue from the provision of foundation works and ancillary services in Hong Kong and Macau. The demand for our work is correlated to construction activities, in particular those related to property and infrastructure projects, in Hong Kong and Macau. We believe the property and infrastructure sectors are cyclical in nature. If the overall value and number of property and infrastructure projects decrease, the demand for our foundation works and ancillary services may reduce and our operations and profitability may be adversely impacted.

Fluctuations in cost of sales

Our most significant cost of sales are costs of construction materials, such as steel and concrete, and staff costs. During the Track Record Period, costs of construction material accounted for approximately 26.5%, 38.0% and 33.4% of our cost of sales, respectively, and staff costs accounted for approximately 28.6%, 24.4% and 34.1% of our cost of sales, respectively. Fluctuations in the costs of construction materials and staff costs and our ability to include appropriate cost estimates in the tendering process or preparation of quotations and to pass on any increase in these costs to our customers will affect our profitability.

Maintaining service standards and works quality

As a foundation works contractor, our Directors believe that it is important that our Group provides reliable foundation works and ancillary services to maintain existing customers and attract new customers. Our Directors also believe that our Group’s ability to retain experienced staff, maintain quality of services and maintain quality foundation standard is key to the performance of our Group.

Timely settlement by our customers

In general, for our foundation works and ancillary services contracts, we submit monthly payment applications to our customers and normally require our customers to make progress payments calculated in accordance with the value of works completed, which may include variation works and claim, if any. The billings for each project are made in accordance with the stipulated terms and conditions of the respective contracts. If our customers experience financial distress or are unable to settle their payments due to us in a timely manner or at all, the financial condition and results of operations of our Group could be materially and adversely affected.

CRITICAL ACCOUNTING POLICIES

Our Group’s significant accounting policies, which are relevant for the discussion and analysis of our financial condition and results of operations as included in this [REDACTED] , are set forth in details in note 2 to the Accountant’s Report set out in Appendix I to this [REDACTED] . Critical accounting policies are those that are most important to the portrayal of our Group’s results of operations and financial position and require management to exercise its judgement in the process of applying our Group’s accounting policies. The assumptions and estimates are made based on historical experience

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and various other assumptions that we believe to be reasonable, the results of which form the basis of judgments on our carrying amounts of assets and liabilities and our results. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our Group’s financial statements.

Significant accounting policies

Plant and equipment

Plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to our Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are expensed in the combined statements of comprehensive income during the financial period in which they are incurred.

Depreciation of both owned and leased plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over the estimated useful lives, as follows:

Machinery and equipment	10-15 years
Furniture and fixtures	5 years
Motor vehicles	5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Gains or losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the combined statements of comprehensive income.

Leased assets

Our Group leases certain machinery and equipment. Leases of machinery and equipment where our 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 machinery and equipment and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other short-term and other long-term payables. The interest element of the finance cost is charged to the combined statements of 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. Our machinery and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

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FINANCIAL INFORMATION

Construction contracts

When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract by reference to the stage of completion. Contract costs are recognised as expenses by reference to the stage of completion of the contract activity 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 revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.

Variations in contract work, claims and incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliably measured.

Our Group uses the “percentage-of-completion method” to determine the appropriate amount of revenue to recognise in a given period. The stage of completion is measured by reference to work performed to date as a percentage of total contract value.

On the combined balance sheets, our Group reports the net contract position for each contract as either an asset or a liability. A contract represents an asset where costs incurred plus recognised profits (less recognised losses) exceed progress billings; a contract represents a liability where the opposite is the case. Progress billings not yet paid by the customers and retention receivables are included in current assets as our Group expects to realise these within its normal operating cycle of the business.

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of our Group’s activities. Our Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met. Revenue is shown net of sales tax, returns, rebates and discounts and after eliminating sales within our Group.

Revenue from construction contracts is recognised based on the stage of completion of the contracts.

Rental income from machinery leasing is recognised based on the straight-line basis over the lease terms.

Trade and other receivables

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. A provision for impairment of trade and other receivables is established when there is objective evidence that our Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of a provision account, and the amount of the loss is

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recognised in the combined statements of comprehensive income within “administrative expenses”. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against “administrative expenses” in the combined statements of comprehensive income.

Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets 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 to sell 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 that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

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FINANCIAL INFORMATION

SUMMARY OF COMBINED FINANCIAL AND OPERATING DATA

The following is a summary of our Group’s combined financial and operating information extracted from the audited combined statements of comprehensive income and combined balance sheets from the Accountant’s Report for the years ended and as at 31 March 2012, 2013 and 2014, which is included in Appendix I to this [REDACTED] . Information set out in this section should be read in conjunction with the financial information included in the Accountant’s Report set forth in Appendix I to this [REDACTED] , together with the accompanying notes.

Combined statements of comprehensive income

Revenue
Cost of sales
Gross profit
Other income and gain, net
Administrative expenses
Operating profit
Finance income
Finance costs
Finance costs, net
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Profit and total comprehensive
income attributable to equity
holders of the Company
Dividends

Year ended 31 March
2012
2013
2014
HK$’000
HK$’000
HK$’000
98,428
375,147
492,734
(65,736)
(272,557)
(327,100)
32,692
102,590
165,634
15,742
782
2,867
(20,638)
(31,961)
(29,447)
27,796
71,411
139,054
–
–
583
(1,800)
(3,140)
(9,742)
(1,800)
(3,140)
(9,159)
25,996
68,271
129,895
(1,788)
(12,649)
(2,809)
24,208
55,622
127,086
–
–
–
24,208
55,622
127,086
–
50,000
50,000

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FINANCIAL INFORMATION

Combined balance sheets

ASSETS Non-current assets Plant and equipment Deferred income tax assets Deposits and prepayments Current assets Trade and retention receivables Deposits, prepayments and other receivables Inventories Amounts due from customers for contract work Amounts due from related companies Income tax receivable Restricted bank balances Cash and cash equivalents (excluding bank overdraft) Total assets	2012 HK$’000 202,691 2,927 1,360 206,978 8,223 9,383 3,737 36,373 707 176 – 3,253 61,852 268,830	As at 31 March 2013 2014 HK$’000 HK$’000 314,777 398,832 640 3,602 480 1,368 315,897 403,802 96,749 78,586 8,556 3,115 850 – 9,648 19,481 202 386 440 27 – 36,138 22,506 85,937 138,951 223,670 454,848 627,472	As at 31 March 2013 2014 HK$’000 HK$’000 314,777 398,832 640 3,602 480 1,368 315,897 403,802 96,749 78,586 8,556 3,115 850 – 9,648 19,481 202 386 440 27 – 36,138 22,506 85,937 138,951 223,670 454,848 627,472
			403,802
			78,586 3,115 – 19,481 386 27 36,138 85,937
			223,670
			627,472

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EQUITY Capital and reserves Share capital Reserves Total equity LIABILITIES Non-current liabilities Long-term borrowings Deferred income tax liabilities Amount due to a director Current liabilities Trade and retention payables Accruals and other payables Amounts due to customers for contract work Amount due to a director Borrowings Income tax payable Total liabilities Total equity and liabilities Net current liabilities Total assets less current liabilities	2012 HK$’000 78 85,933 86,011 9,173 18,899 20,079 48,151 8,320 10,198 – 93,067 23,083 – 134,668 182,819 268,830 (72,816) 134,162	As at 31 March 2013 2014 HK$’000 HK$’000 78 78 141,555 218,641 141,633 218,719 56,334 37,806 29,147 31,846 – – 85,481 69,652 30,064 14,873 21,410 22,284 36,281 – – – 139,864 298,876 115 3,068 227,734 339,101 313,215 408,753 454,848 627,472 (88,783) (115,431) 227,114 288,371

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the Track Record Period, our Group recorded revenue of approximately HK$98.4 million, HK$375.1 million and HK$492.7 million respectively, representing year-on-year increase of approximately 281.2% and 31.4%. Our Group recorded a net profit of approximately HK$24.2 million, HK$55.6 million and HK$127.1 million during the Track Record Period, representing a year-on-year increase of approximately 129.8% and 128.6% respectively.

REVENUE

Our Group derived all of our revenue from foundation works and ancillary services during the Track Record Period.

Revenue of our Group from foundation works and ancillary services is recognised based on the stage of completion of the contracts. Our Group submits payment applications to our customers usually on a monthly basis. The monthly cut-off date of such payment applications is normally specified in the contracts. Typically, our customers, or authorised persons employed by our customers in the case of us being a main contractor, certify the value of the works completed, which may include variation works and claims, if any, and our customers arrange settlement in respect of the portion of foundation works and ancillary services completed.

Upon completion of each foundation works and ancillary services project, our Group submits payment applications to our customers which may include the variation works carried out by our Group and claims, if any. Due to the complexity of foundation works and ancillary services, which may be subject to ground conditions, weather and potential additional works to the original contractual terms, thus variation works and differences in the progress of foundation works from the original schedule are common in our industry. The negotiation of the final settlement between our Group and our customer is often a prolonged process which is not uncommon in the construction industry. Therefore, it is possible that our Group receives settlement of the outstanding sum of a contract after a prolonged period subsequent to the completion of the foundation works and ancillary services projects. Such is evidenced by the settlement made by our customer of the respective Previous Projects after negotiation of a prolonged period.

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Our foundation works and ancillary services under the First Previous Project and Second Previous Project were completed in 2003 and 2007, respectively. However, our Group had certain disputes with the respective customer in relation to the value of works performed by our Group under each of the Previous Projects. Following negotiation of a prolonged period and subsequent arbitration between our Group and the respective customer which took place after the completion of the Previous Projects respectively, a settlement agreement was entered into between our Group and our respective customer in respect of each of the Previous Projects. Our Group recognised revenue of approximately HK$2.5 million and HK$15.1 million for the First Previous Project and Second Previous Project respectively during the year ended 31 March 2012 based on the progress of the dispute at the time. Such amounts were not recognised prior to the year ended 31 March 2012 as our Directors believed that there were significant uncertainties around the outcome and amount of claims under dispute, thus such claims cannot be estimated reliably at the time.

Revenue of our Group has increased during the Track Record Period due to the increased contract value of foundation works and ancillary services performed by our Group during the year ended 31 March 2013 and 2014, which corresponded to the increase in construction activities in Hong Kong and Macau during the same period.

Set out below is the revenue of our Group derived from foundation works and ancillary services as classified by sector during the Track Record Period.

Revenue Foundation works and ancillary services – Public sector projects – Private sector projects	For 2012 HK$’000 % 93,078 94.6% 5,350 5.4% 98,428 100.0%	the year ended 31 March 2013 2014 HK$’000 % HK$’000 % 4,972 1.3% – – 370,175 98.7% 492,734 100.0% 375,147 100.0% 492,734 100.0%	the year ended 31 March 2013 2014 HK$’000 % HK$’000 % 4,972 1.3% – – 370,175 98.7% 492,734 100.0% 375,147 100.0% 492,734 100.0%
			100.0%

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FINANCIAL INFORMATION

Save for the year ended 31 March 2012, our Group derived the majority of revenue from private sector foundation works and ancillary services projects, which accounted for approximately 5.4%, 98.7% and 100.0% of our revenue from foundation works and ancillary services during the Track Record Period. Set out below is the list of projects carried out by our Group during the Track Record Period and the percentage of completion measured by revenue recognised as a percentage of the total contract sum as at 31 March 2014:

Project Design and construction of foundation system for hotel development in Central (the “Central Hotel Development Project”) (Note 2) Express rail link project 1 Express rail link project 2 Road improvement and extension in Yuen Long Redevelopment project at Causeway Bay Logistics centre in Tsing Yi (the “Logistics Centre Project”) Foundation work and basement excavation in Wong Tai Sin District (the “Wong Tai Sin Project”) Large diameter bored piles installation works in Cheung Sha Wan Hotel Tower Project New building bored piling works at Kowloon City Residential building bored piling works at Kowloon City Composite Development Project Multi-storey logistics centre at Tsing Yi Hotel Casino Project Revenue from Previous Projects_(Note 3)_	For the year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 5,350 – 500 37,873 – – 27,200 – – 10,416 4,972 – – 11,558 1,183 – 148,832 699 – 159,867 2,289 – 3,032 1,171 – 40,340 434,581 – 6,546 1,996 – – 17,268 – – 778 – – 12,229 – – 20,040 80,839 375,147 492,734 17,589 – – 98,428 375,147 492,734	Total revenue recognised during Completion the Track % Record Period (Note 1) HK$’000 5,850 Completed 37,873 Completed 27,200 Completed 15,388 Completed 12,741 Completed 149,531 Completed 162,156 Completed 4,203 Completed 474,921 Completed 8,542 Completed 17,268 Completed 778 0.2% 12,229 4.2% 20,040 5.7% 948,720 17,589 966,309

Notes:

(1) The percentage of work completed is based on the payment certificate issued by our customers or authorised persons employed by our customers or the submission of payment application of the relevant project by our Group. Percentage of completion represents the amount of works certified as a percentage of the original contract sum (excluding contingent and/or provisional contract amounts).

(2) Our contractual work for the Central Hotel Development Project has ceased at the request of our customer. Approximately HK$0.5 million, being the final settlement of our works as agreed with our customer, was recorded during the year ended 31 March 2014.
(3) Revenue from Previous Projects represents the settlement of outstanding sums of two projects of which our works had been completed prior to the Track Record Period.

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FINANCIAL INFORMATION

During the year ended 31 March 2012, we recognised revenue from Previous Projects of approximately HK$17.6 million. The associated costs of approximately HK$9.8 million had been settled prior to the Track Record Period and recorded under amounts due from customers for contract work on our combined balance sheets. We recognised the associated costs in cost of sales during the year ended 31 March 2012.

Our Group completed 11 projects during the Track Record Period. As at 31 May 2014, our Group has five contracts on hand (including contracts in progress and contracts of which our work has yet to commence) with an aggregate contract sum of approximately HK$1,348.6 million, with percentage of completion ranging from approximately nil to 26.2% based on the revenue recognised as at 31 May 2014 and the original contract sum (excluding contingent and/or provisional contract amounts) of the respective projects. For further details of our contracts on hand, please refer to the paragraph headed “Business – Contracts on hand” in this [REDACTED] .

COST OF SALES

Cost of sales mainly include costs of construction materials, staff costs, consultancy fee, parts and consumables, subcontracting charges, transportation and other expenses, which is primarily recognised and transferred from work-in-progress to the combined statements of comprehensive income based on the percentage of completion. Our cost of sales increased during the Track Record Period due to the increase in foundation works and ancillary services carried out by our Group.

The following table sets out a breakdown of our cost of sales during the Track Record Period:

Cost of sales Costs of construction materials Staff costs Consultancy fee Parts and consumables Subcontracting charges Transportation Depreciation – owned plant and equipment – leased plant and equipment Repair and maintenance Machinery and equipment leasing Staff quarters Survey fee Site management fee Insurance Others	For 2012 HK$’000 17,424 18,779 328 16,296 2,521 914 3,286 1,142 3,440 578 – – 156 132 740 65,736 (Note)	the year ended 31 March 2013 2014 HK$’000 HK$’000 103,455 109,176 66,513 111,379 5,261 24,861 38,770 26,338 17,619 11,669 13,326 11,701 4,720 7,236 1,810 2,519 5,056 5,308 5,474 6,464 751 3,379 568 2,922 1,008 777 3,900 746 4,326 2,625 272,557 327,100	the year ended 31 March 2013 2014 HK$’000 HK$’000 103,455 109,176 66,513 111,379 5,261 24,861 38,770 26,338 17,619 11,669 13,326 11,701 4,720 7,236 1,810 2,519 5,056 5,308 5,474 6,464 751 3,379 568 2,922 1,008 777 3,900 746 4,326 2,625 272,557 327,100
			327,100

Note: inclusive of approximately HK$9.8 million which represents costs associated with the outstanding sums of the Previous Projects of which our works had been completed prior to the Track Record Period.

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Our most significant costs of sales are costs of construction materials and staff costs, which accounted for approximately 26.5% and 28.6%, 38.0% and 24.4%, 33.4% and 34.1% of the cost of sales during the Track Record Period, respectively. The proportion of construction materials and staff costs in cost of sales depends on, among other factors, the design and requirements of foundation works and ancillary services projects and varies from project to project.

During the Track Record Period, the costs of construction materials amounted to approximately HK$17.4 million, HK$103.5 million and HK$109.2 million, respectively, representing a year-on-year increase of approximately 494.8% and 5.5%, respectively. The notable increase in costs of construction materials from the year ended 31 March 2012 to year ended 31 March 2013 is primarily due to the increased foundation works and ancillary services performed by our Group. Such increase in the costs of construction materials was notably higher than the increase in revenue from foundation works and ancillary services of approximately 281.2% during the same period. During the year ended 31 March 2013, our Group carried out the Logistics Centre Project and the Wong Tai Sin Project, together contributed approximately 82.3% of our revenue for the year ended 31 March 2013, involved the construction of piles, the requirements for construction materials input of which are notably higher than the Express rail link project 2 carried out by our Group for the year ended 31 March 2012 which involved the removal of previously installed piles and the clearance of a work site for development.

Costs of construction materials increased from approximately HK$103.5 million for the year ended 31 March 2013 to approximately HK$109.2 million for the year ended 31 March 2014 as our revenue recorded a year-on-year increase of approximately HK$117.6 million. The relatively small year-onyear increase in costs of construction materials was primarily due to majority of the revenue recorded in the year ended 31 March 2014 was derived from the Hotel Tower Project, being our largest completed contract by revenue during the Track Record Period, which incurred more staff costs and less costs of construction materials compared to the relevant costs in aggregate recorded for other projects undertaken in the year ended 31 March 2013 due to the scope of the Hotel Tower Project.

Staff costs increased during the Track Record Period due to the hiring of additional project management staff and construction workers in response to the increase in foundation works and ancillary services carried out by our Group as well as the increase in salary. The number of project management staff increased from eight as at 31 March 2012, to 13 as at 31 March 2013 and further to 14 as at 31 March 2014. The number of construction workers increased from 53 as at 31 March 2012, to 140 as at 31 March 2013 and further to 186 as at 31 March 2014.

Consultancy fee mainly consisted of fees of consultants engaged to advise on commercial, project administration and implementation matters. The increase in consultancy fee over the Track Record Period was mainly attributable to the costs of the Macau consultants engaged to advise on the aforesaid matters for the Hotel Tower Project.

Parts and consumables include lubricants and fuel for machinery and equipment, and other tools and spare parts which are depleted or worn out in foundation works and ancillary services projects. Parts and consumables accounted for approximately 24.8%, 14.2% and 8.1% of the cost of sales during the Track Record Period, respectively. Parts and consumables accounted for a higher percentage of our cost of sales for the year ended 31 March 2013 as the Logistics Centre Project required additional parts during the foundation works process due to geological conditions.

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FINANCIAL INFORMATION

Our Group also engages subcontractors for parts of the works of our contract, such as site surveying, ground investigation, utility connection, steel fixing, proof drilling and grouting. Subcontracting charges accounted for approximately 3.8%, 6.5% and 3.6% of our cost of sales during the Track Record Period, respectively. Subcontracting charges accounted for a relatively high percentage of our cost of sales for the year ended 31 March 2013 as our Group outsourced site surveying ground investigation and certain non-construction works of three sizeable projects, namely the Logistics Centre Project, the Wong Tai Sin Project and the Hotel Tower Project to our subcontractors.

Transportation costs accounted for approximately 1.4%, 4.9% and 3.6% of the cost of sales during the Track Record Period, respectively, which is primarily related to (i) costs arising from the transportation of our machinery and equipment between Hong Kong and Macau by freight for the Hotel Tower Project; and (ii) transportation and dumping charges for soil extracted from construction sites.

GROSS PROFIT

The following table sets out a breakdown of the gross profit and gross profit margin of our Group for the years indicated:

		For	the year ended	31 March	31 March
		2012	2013		2014
		Gross		Gross		Gross
		profit		profit		profit
	HK$’000	margin %	HK$’000 margin %		HK$’000 margin %
Gross profit from
foundation works and
ancillary services	32,692	33.2	102,590	27.3	165,634	33.6

During the Track Record Period, our Group recorded gross profit margin of approximately 33.2%, 27.3% and 33.6%, respectively. As the Hotel Tower Project contributed approximately 88.2% of our total revenue and substantially towards our gross profit recorded for the year ended 31 March 2014, the gross profit margin of approximately 33.6% for the year ended 31 March 2014 were largely attributable to the Hotel Tower Project.

For the year ended 31 March 2013, the gross profit margin of approximately 27.3% was largely attributable to the gross profit margin of the Wong Tai Sin Project and the Logistics Centre Project as these foundation works and ancillary services projects contributed approximately 82.3% of our revenue in aggregate for the year ended 31 March 2013.

The comparatively higher gross profit margin recorded in the year ended 31 March 2012 compared to the year ended 31 March 2013 was mainly attributable to the Express rail link projects 1 and 2, which accounted for approximately 38.5% and 27.6% of our revenue from foundation works and ancillary services for the year ended 31 March 2012.

The Express rail link project 1 commanded a relatively high gross profit margin due to the award of an incentive payment as the project was completed within the agreed schedule. Our Group also completed the Express rail link project 2 during the year ended 31 March 2012, which involved the removal of previously installed piles and commanded a higher gross profit margin compared to other foundation works and ancillary services projects of our Group during Track Record Period. Such project involved relatively more technical expertise and less input of construction materials when compared to other foundation works and ancillary services projects undertaken by our Group during Track Record Period.

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FINANCIAL INFORMATION

In addition, we recorded revenue and cost of sales approximately HK$17.6 million and HK$9.8 million from the Previous Projects respectively.

OTHER INCOME

During the Track Record Period, our other income primarily consisted of (i) machinery and equipment leasing income; (ii) recovery from insurance claim; (iii) gains on disposal of machinery and equipment; and (iv) others.

ADMINISTRATIVE EXPENSES

Administrative expenses mainly include staff costs, Directors’ remuneration and benefits, operating lease rental, professional fees, entertainment expenses, motor vehicle and other administrative expenses. The following table sets out a breakdown of our administrative expenses for the years indicated:

	For the year ended	For the year ended	31 March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Administrative expenses
Staff costs, including Directors’ emoluments	6,062	8,550	11,639
Auditors’ remuneration	690	720	750
Depreciation
– owned plant and equipment	851	652	666
Operating lease rental in respect of
– office and storage premises	2,273	2,956	3,299
– Directors’ quarters	1,121	2,032	2,167
Professional fees
– incurred for[REDACTED]	[REDACTED]	[REDACTED] [REDACTED]
– others	6,242	3,493	3,049
Recovery of bad debt	–	(570)	–
Entertainment expenses	1,357	1,700	2,373
Motor vehicle expenses	1,493	1,999	1,171
Bank charges	41	544	579
Others	508	1,807	2,226
Total	20,638	31,961	29,447

Staff Costs

Staff costs in administrative expenses include Directors’ emoluments, management, administrative and operational staff costs. Staff costs increased over the Track Record Period due to the increase in the number of management, administrative and operational staff as well as the increase in staff salary and Director’s emoluments.

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Directors’ remuneration and benefits

Directors’ remuneration and benefits include Directors’ salary, mandatory provident fund contribution and other benefits which mainly related to rental expenses for Directors’ quarters. During the Track Record Period, Directors’ remuneration and benefits, which amounted to approximately HK$2.8 million, HK$4.4 million and HK$4.7 million respectively, were recorded in administrative expenses under staff costs and operating lease rental in respect of Directors’ quarters.

The increase in Director’s remuneration and benefits since the year ended 31 March 2012 was mainly attributable to the increase in Directors’ fees and rental expenses for Directors’ quarters.

Operating lease rental

Our Group incurred operating lease rental in respect of (i) office and storage premises; and (ii) Directors’ quarters. Operating lease rental in respect of office and storage premises represent the occupancy expenses of our Group’s offices and site for open storage and service depot for machinery and equipment. The site for open storage and service depot for machinery and equipment was leased from a company 100% beneficially owned by Mr. Lau. Please refer to the paragraph headed “Connected transactions and waiver - Tenancy Agreements” in this [REDACTED] for details.

Operating lease rental in respect of Directors’ quarter represent the rental expenses for the quarters and car parking space(s) provided to (i) Mr. Lau and Ms. Leung; (ii) Mr. Lau Chun Kwok; and (iii) Mr. Lau Chun Ka. Please refer to the paragraph headed “Connected transactions and waiver – Tenancy Agreements” in this [REDACTED] for details.

Professional fees

Professional fees include fees of legal and other advisers in connection with (i) the [REDACTED] of our Company; and (ii) commerical matters of our Group. The professional fees recorded in administrative expenses amounted to approximately HK$6.2 million, HK$11.6 million and HK$4.6 million during the Track Record Period. The higher professional fees recorded for the year ended 31 March 2013 compared to the years ended 31 March 2012 and 2014 was largely attributable to the professional fees incurred for the [REDACTED] of approximately HK$ [REDACTED] for the year ended 31 March 2013.

Other administrative expenses

Entertainment expenses and others, which included travelling (local and overseas), stationery, telecommunication charges and other sundry expenses, increased over the Track Record Period primarily due to our business expansion. Motor vehicles expenses, consisted of motor vehicles repair and maintenance costs, fuel costs, vehicle registration licence fees and insurance.

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FINANCIAL INFORMATION

FINANCE COSTS

Finance costs mainly represent interest expenses for bank loans and bank overdraft and interest expenses on obligations under finance leases of machinery and equipment.

For the three years ended 31 March 2014, the weighted average interest rates on (i) our longterm bank loans were approximately 3.8%, 4.0% and 2.9%, respectively; and (ii) our obligations under finance leases were approximately 3.9%, 3.8% and 3.1%, respectively. As for our short-term bank loan, the weighted average interest rate were approximately 3.1% and 5.0% for each of the years ended 31 March 2013 and 2014, respectively. We had no short-term bank loan as at 31 March 2012. As for our bank overdraft, the weighted average interest rate was approximately 1.4% for the year ended 31 March 2014. We had no bank overdraft outstanding as at 31 March 2012 and 2013, respectively. Finance costs related to our outstanding bank loans, obligations under finance leases and bank overdraft for the three years ended 31 March 2014 were approximately HK$1.8 million, HK$3.1 million and HK$9.7 million, respectively. The increase in finance costs over the Track Record Period was mainly attributable to the increase in bank borrowings which in turn increased the interest expenses incurred.

INCOME TAX EXPENSES

Our Group was not subject to any income tax in the Cayman Islands and BVI during the Track Record Period. The provision for Hong Kong profits tax and Macau profits tax was calculated at 16.5% and 12.0% of the relevant estimated assessable profits for the Track Record Period, respectively.

For the two years ended 31 March 2014, our Group, through SW Foundation (Macau), derived revenue of approximately HK$40.3 million and HK$434.6 million from the Hotel Tower Project based in Macau, respectively. In connection with the Hotel Tower Project, SW Engineering Equipment entered into a machinery lease agreement on 7 January 2013 with SW Foundation (Macau) (the “ Machinery Lease Agreement ”) whereby SW Foundation (Macau) was charged a monthly fee for leasing machinery and equipment from SW Engineering Equipment, which is considered to be tax deductible for the purposes of calculating Macau tax.

In addition, based on the Hong Kong tax opinion issued by Lau & Au Yeung C.P.A. Limited, being the tax representative and the auditors of certain subsidiaries of our Group, the aforesaid intra-group leasing income of approximately HK$6.8 million and HK$133.2 million recorded in each of the two years ended 31 March 2014 derived by SW Engineering Equipment from the leasing of machinery and equipment to SW Foundation (Macau) in Macau are considered to be income attributable to services rendered outside Hong Kong and therefore not subject to Hong Kong tax. Furthermore, according to the Macau legal opinion, SW Engineering Equipment is not required to register with the Macau Finance Bureau for the purposes of Industrial Contribution and, according to articles 2 and 3 of the Complementary Income Tax Regulation, SW Engineering Equipment would not be subject to taxation in Macau as it would not be deemed as conducting a commercial or industrial activity in Macau. In connection with the income derived from the Machinery Lease Agreement, SW Engineering Equipment has not provided for any Hong Kong or Macau tax in this respect for each of the years ended 31 March 2013 and 2014 respectively.

Given the above, our Group recorded income tax expenses of approximately HK$2.8 million for the year ended 31 March 2014, which mainly consisted of (i) approximately HK$3.0 million of tax expenses related to Macau profits tax; and (ii) approximately HK$0.3 million of tax credits related to Hong Kong profits tax, represented an effective tax rate of approximately 2.2%. The tax credits of approximately HK$0.3 million related to Hong Kong profits tax was largely attributable to approximately HK$0.3 million of deferred income tax.

The Controlling Shareholders have entered a Deed of Indemnity with and in favour of our Company, to provide indemnities to our Group in relation to, among others, taxation which might be payable by any member of our Group in respect of any income, profits or gains earned, accrued or received on or before the date on which the [REDACTED] becomes unconditional, save for tax liabilities which have already been provided for in the audited accounts of our Company and our subsidiaries as at and up to 31 March 2014. For details, please refer to the paragraph headed “Statutory and General Information – Other Information – Estate duty, tax indemnity and other indemnities” in this [REDACTED] .

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FINANCIAL INFORMATION

For the year ended 31 March 2013, our Group incurred income tax expenses of approximately HK$12.6 million, which was mainly attributable to approximately HK$12.5 million of deferred income tax related to Hong Kong profits tax, representing an effective tax rate of approximately 18.4%. The effective tax rate is higher than the applicable statutory tax rate in Hong Kong and Macau as certain expenses are not deductible for tax purposes.

For the year ended 31 March 2012, our Group provided for income tax expenses of approximately HK$1.8 million, which was mainly attributable to approximately HK$1.7 million of deferred income tax related to Hong Kong profits tax, representing an effective tax rate of approximately 6.9%. By utilising the accumulated tax credit not recognised in previous years, our Group recorded an effective tax rate lower than the statutory tax rate in Hong Kong.

PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

Year ended 31 March 2014 compared to year ended 31 March 2013

Revenue

Our revenue increased by approximately HK$117.6 million, or 31.4%, from approximately HK$375.1 million for the year ended 31 March 2013 to approximately HK$492.7 million for the year ended 31 March 2014 as a majority of the revenue from the Hotel Tower Project was recorded in the year ended 31 March 2014. The Hotel Tower Project was our largest completed project by revenue during the Track Record Period. The revenue derived from the Hotel Tower Project amounted to approximately HK$474.9 million during the Track Record Period, of which approximately HK$434.6 million was recorded in the year ended 31 March 2014, representing approximately 88.2% of our revenue for the same year.

Cost of sales

Cost of sales increased by approximately HK$54.5 million, or 20.0%, from approximately HK$272.6 million for the year ended 31 March 2013 to approximately HK$327.1 million for the year ended 31 March 2014, due to the increase in the foundation works and ancillary services carried out by our Group. Moreover, our Group employed additional construction workers during the period and the increased wage rates also contributed to the increase in cost of sales.

Other income and gain, net

The balance increased by approximately HK$2.1 million from approximately HK$0.8 million for the year ended 31 March 2013 to approximately HK$2.9 million for the year ended 31 March 2014, which was primarily due to the recovery from insurance claim of approximately HK$2.7 million.

Administrative expenses

Administrative expenses decreased by approximately HK$2.6 million from approximately HK$32.0 million for the year ended 31 March 2013 to approximately HK$29.4 million for the year ended 31 March 2014, primarily due to the net effect of (i) the professional fees incurred in connection with the [REDACTED] totalled to approximately [REDACTED] for the year ended 31 March 2013 compared to approximately [REDACTED] for the year ended 31 March 2014; and (ii) the increase in staff costs from approximately HK$8.6 million for the year ended 31 March 2013 to approximately HK$11.6 million for the year ended 31 March 2014.

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FINANCIAL INFORMATION

Finance costs

Finance costs amounted to approximately HK$9.7 million for the year ended 31 March 2014, which is notably higher than the finance costs of approximately HK$3.1 million for the year ended 31 March 2013. Such increase was largely attributable to the increase in borrowings of approximately HK$140.5 million, which in turn increased the interest expenses incurred.

Income tax expenses

Our income tax expenses decreased from approximately HK$12.6 million of income tax expenses for the year ended 31 March 2013 to approximately HK$2.8 million of income tax expenses for the year ended 31 March 2014. Details of the income tax expenses for each of the years ended 31 March 2013 and 2014 have been set out under the paragraph under “Financial information – Income tax expenses” in this [REDACTED] above.

Profit and total comprehensive income attributable to equity holders of the Company

As a result of the foregoing, our profit and total comprehensive income attributable to equity holders of the Company increased by approximately HK$71.5 million, from approximately HK$55.6 million for the year ended 31 March 2013 to approximately HK$127.1 million for the year ended 31 March 2014. The increase in profit and total comprehensive income attributable to equity holders of the Company was mainly due to the increase in revenue and gross profit, a substantial portion of which was attributable to the Hotel Tower Project.

Year ended 31 March 2013 compared to year ended 31 March 2012

Revenue

Our revenue increased by approximately HK$276.7 million, or 281.2%, from approximately HK$98.4 million for the year ended 31 March 2012 to approximately HK$375.1 million for the year ended 31 March 2013, primarily attributable to the increased contract value of foundation works and ancillary services projects undertaken during the year ended 31 March 2013. During the year ended 31 March 2013, our Group provided foundation works and ancillary services for two sizeable projects, namely, the Wong Tai Sin Project and the Logistics Centre Project, and derived revenue of approximately HK$159.9 million and HK$148.8 million, respectively.

Cost of sales

Cost of sales increased by approximately HK$206.9 million, or 314.9%, from approximately HK$65.7 million for the year ended 31 March 2012, which included costs associated with Previous Projects of approximately HK$9.8 million, to approximately HK$272.6 million for the year ended 31 March 2013. Such increase was primarily due to larger consumption of construction materials and parts and consumables caused by an increase in foundation works and ancillary services performed by our Group. Moreover, our Group employed additional construction workers during the year ended 31 March 2013 and the increased wage rates also contributed to the increase in cost of sales.

Other income and gain, net

The balance of decreased by approximately HK$14.9 million from approximately HK$15.7 million for the year ended 31 March 2012 to approximately HK$0.8 million for the year ended 31 March 2013, such decrease was primarily attributable to our Group derived approximately HK$14.8 million and nil from the leasing of machinery and equipment during the year ended 31 March 2012 and 2013, respectively.

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FINANCIAL INFORMATION

Administrative expenses

Administrative expenses increased by approximately HK$11.4 million from approximately HK$20.6 million for the year ended 31 March 2012 to approximately HK$32.0 million for the year ended 31 March 2013. Such increase in administrative expenses was primarily related to an increase in professional fees from approximately HK$6.2 million for the year ended 31 March 2012 to approximately HK$11.6 million for the year ended 31 March 2013, of which approximately [REDACTED] was related to professional fees incurred for [REDACTED] .

Finance costs

Finance costs increased by approximately HK$1.3 million from approximately HK$1.8 million for the year ended 31 March 2012 to approximately HK$3.1 million for the year ended 31 March 2013. Such increase was mainly attributable to the increase in bank borrowings and the corresponding increase in interest expense on these bank borrowings.

Income tax expenses

We incurred income tax expenses of approximately HK$12.6 million for the year ended 31 March 2013, as compared to income tax expenses of approximately HK$1.8 million for the year ended 31 March 2012. Such increase was mainly attributable to (i) the utilisation of accumulated tax credit not previously recognised for the year ended 31 March 2012; and (ii) the increase in assessable profits of our Group in Hong Kong during the year ended 31 March 2013.

Profit and total comprehensive income attributable to equity holders of the Company

As a result of the foregoing, our profit and total comprehensive income attributable to equity holders of the Company amounted to approximately HK$55.6 million for the year ended 31 March 2013 as compared to profit and total comprehensive income attributable to equity holders of the Company of approximately HK$24.2 million for the year ended 31 March 2012. Such increase was mainly due to the increase in revenue and gross profit, a substantial portion of which was attributable to the Wong Tai Sin Project and the Logistics Centre Project, as detailed above.

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FINANCIAL INFORMATION

LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth a summary of our cash flows for the years indicated:

Net cash generated from operating activities Net cash used in investing activities Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalent at the beginning of the year Cash and cash equivalent at the end of the year	For the year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 19,532 83,270 105,264 (10,735) (58,132) (85,830) (34,775) (5,885) 15,542 (25,978) 19,253 34,976 29,231 3,253 22,506 3,253 22,506 57,482

Net cash generated from operating activities

Our cash inflow from operating activities is primarily generated from the provision of foundation works and ancillary services. Our cash outflow for operating activities is primarily related to staff costs, purchase of construction materials, subcontracting charges and administrative expenses. Our cash flow from operating activities is affected by a number of factors, which include the progress of foundation works and ancillary services projects and the settlement of trade receivables by our customers and trade payables by our Group.

Our net cash generated from operating activities amounted to approximately HK$105.3 million for the year ended 31 March 2014, while our net cash inflow from operating activities after adjusting for noncash items but before changes in working capital was approximately HK$149.6 million. The difference of approximately HK$44.3 million was mainly attributable to the net effect of (i) the decrease in trade and retention receivables and trade and retention payables of approximately HK$18.2 million and HK$14.2 million respectively; (ii) the increase in amounts due from customers for contract work of approximately HK$9.0 million; and (iii) the decrease in amounts due to customers for contract work of approximately HK$36.3 million, the aforesaid movements are primarily due to the project status of our ongoing projects in March 2014 and a relatively low proportion of revenue for the year ended 31 March 2014 was recorded in the corresponding fourth quarter.

During the year ended 31 March 2013, our net cash generated from operating activities amounted to approximately HK$83.3 million, while our net cash inflow from operating activities after adjusting for non-cash items but before changes in working capital was approximately HK$77.8 million. The difference of approximately HK$5.5 million was primarily due to a combination of (i) the increase in trade and retention receivables and payables of approximately HK$88.5 million and HK$21.7 million respectively,

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FINANCIAL INFORMATION

which is largely attributable to the retention receivables and payables related to the Hotel Tower Project; (ii) the increase in amounts due to customers for contract work of approximately HK$36.3 million which is largely due to early payment for contract works during the year ended 31 March 2013 in connection with the Hotel Tower Project; and (iii) the decrease in amounts due from customers for contract work of approximately HK$27.3 million due to the completion of two sizeable projects, namely the Wong Tai Sin Project and the Logistics Centre Project prior to 31 March 2013.

During the year ended 31 March 2012, our net cash generated from operating activities amounted to approximately HK$19.5 million, while our net cash inflow from operating activities after adjusting for non-cash items but before changes in working capital was approximately HK$32.2 million. The difference of approximately HK$12.7 million was primarily due to the increase in amounts due from customers for contract work of approximately HK$16.8 million.

Net cash used in investing activities

Our cash outflow for investing activities was primarily utilised to acquire machinery and equipment. Our cash inflow from investing activities was primarily derived from the disposal of machinery and equipment.

During the year ended 31 March 2014, our net cash used in investing activities amounted to approximately HK$85.8 million which was mainly attributable to the cash utilised to acquire machinery and equipment of approximately HK$84.8 million.

During the year ended 31 March 2013, our net cash used in investing activities amounted to approximately HK$58.1 million which was mainly related to the cash outflow of approximately HK$58.7 million utilised to acquire machinery and equipment, which was partly offset by the proceeds from the disposal of machinery and equipment of approximately HK$1.1 million.

During the year ended 31 March 2012, our net cash used in investing activities amounted to approximately HK$10.7 million which was mainly related to the cash outflow of approximately HK$10.3 million utilised to acquire machinery and equipment.

Net cash used in/generated from financing activities

Our cash inflow from financing activities was primarily from drawdown of bank loans and drawdown from a Director and an immediate holding company. Our cash outflow for financing activities primarily consists of repayment of principal and interest for bank loans and finance leases and repayment of balances due to a Director and an immediate holding company.

During the year ended 31 March 2014, our net cash generated from financing activities amounted to approximately HK$15.5 million. Cash inflows included the drawdown of long-term and short-term bank loans of approximately HK$103.0 million and HK$280.8 million, respectively. Cash outflow mainly included (i) the repayment of long-term and short-term bank loans of approximately HK$22.8 million and HK$238.1 million; (ii) a dividend payment of HK$50.0 million; (iii) the repayment of capital element of finance lease of approximately HK$21.1 million; and (iv) the increase in restricted bank balances of approximately HK$36.1 million.

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FINANCIAL INFORMATION

During the year ended 31 March 2013, our net cash used in financing activities amounted to approximately HK$5.9 million. Cash inflows mainly included (i) the drawdown from a Director of approximately HK$32.8 million; and (ii) the drawdown of long-term and short-term bank loans of approximately HK$89.0 million and HK$81.8 million, respectively. Cash outflow mainly included (i) the repayment of advances to a Director of approximately HK$142.9 million; (ii) the repayment of long-term and short-term bank loans of approximately HK$11.6 million and HK$31.9 million, respectively; and (iii) the repayment of capital element of finance lease of approximately HK$23.0 million.

During the year ended 31 March 2012, our net cash used in financing activities amounted to approximately HK$34.8 million. Cash inflows mainly included the drawdown from a Director of approximately HK$104.0 million and decrease in restricted bank balance of approximately HK$25.0 million. The cash outflows mainly included the repayment of advances to a Director of approximately HK$119.3 million, the repayment of amount due to an immediate holding company of approximately HK$22.9 million, the repayment of capital element of finance lease of approximately HK$14.8 million, and repayment of long-term bank loans of approximately HK$6.9 million.

SUFFICIENCY OF WORKING CAPITAL

Taking into account the financial resources available to our Group, including the internally generated funds, the available banking facilities and the estimated net proceeds of the [REDACTED] , our Directors are of the opinion that our Group has sufficient funds to meet the working capital and financial requirements, for at least the next twelve months from the date of this [REDACTED] .

COMMITMENTS

The following table sets forth our operating lease commitments and capital commitments contracted but not provided for as of 31 March 2014:

	Contractual obligations	Contractual obligations	Contractual obligations
	Less than
	1 year	1-5 years	Total
	HK$’000	HK$’000	HK$’000
Capital commitments	104,815	–	104,815
Operating lease commitments	3,264	917	4,181

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FINANCIAL INFORMATION

NET CURRENT LIABILITIES

Composition of our net current liabilities position during the Track Record Period

As at 31 March 2012, 2013, 2014 and 31 May 2014, we recorded net current liabilities of approximately HK$72.8 million, HK$88.8 million, HK115.4 million and HK$128.6 million, respectively.

Set out below are details of the composition of our net current liabilities positions as at 31 March 2012, 2013, 2014 and 31 May 2014:

Current assets
Trade and retention receivables
Deposits, prepayments and other receivables
Inventories
Amounts due from customers for
contract work
Amounts due from related companies
Income tax receivable
Restricted bank balances
Cash and cash equivalents
(excluding bank overdraft)
Total current assets
Current liabilities
Trade and retention payables
Accruals and other payables
Amounts due to customers for contract work
Amount due to a director
Borrowings
Income tax payable
Total current liabilities
Net current liabilities

As at
As at 31 March
31 May
2012
2013
2014
2014
HK$’000
HK$’000
HK$’000
HK$’000
(unaudited)
8,223
96,749
78,586
174,597
9,383
8,556
3,115
9,369
3,737
850
–
–
36,373
9,648
19,481
22,689
707
202
386
386
176
440
27
27
–
–
36,138
26,996
3,253
22,506
85,937
41,412
61,852
138,951
223,670
275,476
8,320
30,064
14,873
51,763
10,198
21,410
22,284
19,851

–
36,281
–
12,811
93,067
–
–
–
23,083
139,864
298,876
316,612
–
115
3,068
3,068
134,668
227,734
339,101
404,105
(72,816)
(88,783)
(115,431)
(128,629)

Our net current liabilities position of approximately HK$128.6 million as at 31 May 2014 was mainly comprised of (i) approximately HK$404.1 million of current liabilities, which mainly consisted of approximately HK$117.0 million of long-term bank loans and obligations under finance leases due after one year which contain repayment on demand clause and approximately HK$97.7 of shortterm bank loans; and (ii) approximately HK$275.5 million of current assets, which mainly consisted of approximately HK$174.6 million of trade and retention receivables and approximately HK$41.4 million cash and cash equivalents.

As at 31 March 2014, the net current liabilities of approximately HK$115.4 million comprised of (i) approximately HK$339.1 million of current liabilities, which mainly consisted of approximately HK$118.5 million of long-term bank loans and obligations under finance leases due after one year which contain repayment on demand clause and approximately HK$92.6 million of short-term bank loans; and (ii) approximately HK$223.7 million of current assets, which mainly consisted of approximately HK$85.9 million of cash and cash equivalents, approximately HK$78.6 million of trade and retention receivables and approximately HK$36.1 million of restricted bank balances.

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FINANCIAL INFORMATION

Our net current liabilities position of approximately HK$88.8 million as at 31 March 2013 was primarily attributable to (i) short-term bank loans of approximately HK$49.9 million; (ii) and long-term bank loans and obligations under finance leases due after one year which contain repayment on demand clause and HK$48.1 million, respectively. Other significant components of our current liabilities include amounts due to customers for contract work of approximately HK$36.3 million and trade and retention payables approximately HK$30.1 million, respectively. The key components of our current assets as at 31 March 2013 include trade and retention receivables of approximately HK$96.7 million and cash and cash equivalents (excluding bank overdrafts) of approximately HK$22.5 million.

Of our current liabilities of approximately HK$134.7 million as at 31 March 2012, the amount due to a Director totalled to approximately HK$93.1 million. In addition, approximately HK$12.4 million under current liabilities as at 31 March 2012 was related to obligations under finance leases due for repayment within one year, equivalent to approximately 9.2% of current liabilities. The key components of our current assets of approximately HK$61.9 million as at 31 March 2012 include amounts due from customers for contract work of approximately HK$36.4 million and deposits, prepayments and other receivables of approximately HK$9.4 million.

Reasons for our net current liabilities position during the Track Record Period

Our Directors considered that our net current liabilities position recorded during the Track Record Period were mainly attributable to the following reasons:

(i) Loans repayable more than one year with repayment on demand clause

Our current liabilities of approximately HK$339.1 million as at 31 March 2014 consisted of longterm bank loans due after one year of approximately HK$110.1 million and obligations under finance leases due after one year of approximately HK$8.4 million. The aforesaid borrowings, from commercial banks in Hong Kong and Macau, were classified as current liabilities despite that the balances were repayable in more than one year as the lenders have right to demand for repayment at their discretion before the maturity date of the facility and/or lease as a general and standard term of the relevant agreements. As a result, according to Hong Kong Interpretation 5 Presentation of Financial Statements — Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause (HK Interpretation 5), these borrowings were classified as current liabilities in our combined financial information.

In the event that these balances were excluded from our current liabilities, (i) the net current liabilities of our Group would be approximately HK$68.0 million and HK$40.7 million as at 31 March 2012 and 2013, respectively; and (ii) the net current assets of our Group would be approximately HK$3.1 million for the year ended 31 March 2014.

During the Track Record Period, none of our borrowings have been recalled by our banks before their respective maturity date. The maturity profile of our borrowings, including our bank loans and finance leases, are set out under the paragraph headed “Financial information – Indebtedness” in this [REDACTED] below.

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(ii) Acquisition of machinery and equipment to carry out foundation works and ancillary services

The increase of our net current liabilities of approximately HK$26.6 million from 31 March 2013 to 31 March 2014 was partly attributable to the increase in long-term bank loans due after one year which contain repayment on demand clause and short-term bank loans of approximately HK$68.3 million and HK$42.7 million, respectively. The notable increase in long-term bank loans due after one year which contain repayment on demand clause, classified under current liabilities, was primarily applied towards the expansion of our business, in particular, utilised for the acquisition of machinery and equipment to carry out foundation works and ancillary services. The aforesaid increase in short-term bank loans was primarily for our Group’s working capital.

The increase of our net current liabilities of approximately HK$16.0 million from 31 March 2012 to 31 March 2013 was partly attributable to the increase in long-term bank loans due after one year which contain repayment on demand clause and short-term bank loans of approximately HK$37.0 million and HK$49.9 million which were primarily utilised for the acquisition of machinery and equipment and our Group’s working capital.

Net current liabilities position subsequent to 31 March 2014

Based on our unaudited management accounts, our net current liabilities increased to approximately HK$128.6 million as at 31 May 2014 from approximately HK$115.4 million as at 31 March 2014. The increase was primarily attributable to the net effect of (i) the increase in current borrowings of approximately HK$17.7 million; (ii) the increase in trade and retention receivables of approximately HK$96.0 million; (iii) the decrease in cash and cash equivalents of approximately HK$44.5 million; and (iv) the increase in trade and retention payables of approximately HK$36.9 million.

Subsequent to 31 May 2014 and up to the Latest Practicable Date, our Group has (i) repaid approximately HK$48.2 million of our bank borrowings, which was classified as current liabilities, in June 2014; and (ii) agreed with one of our financiers to remove the repayment on demand clause in relation to certain outstanding borrowings of approximately HK$42.7 million as at 31 May 2014, to reduce our Group’s overall net current liabilities position. In addition, our Group had undrawn facilities of approximately HK$127.7 million as at 30 June 2014. Further details of our loan facilities, including undrawn facilities, as at 30 June 2014 are set out under the paragraph headed “Financial information – Expected financial resources of our Group” in this [REDACTED] below. Our Directors believe that with the available facilities and the cash generated from our operating activities, we will be able to further improve our liquidity position in the future.

Measures to improve our net current liabilities position

During the Track Record Period, we financed our operations by a combination of funds from a Director, bank loans, finance leases and cash inflows generated from our operating activities. In view of our financial position and factors attributable to our net current liabilities position, we have taken and will continue to take the following measures to improve our liquidity and finance our capital requirements:

(i) Manage our bank borrowings

One of the major contributing factors of our net current liabilities position during the Track Record Period was the acquisitions of machinery and equipment, classified under non-current assets, being primarily financed through bank loans and/or finance leases, part of which were classified under current liabilities due to reasons as detailed under the paragraph headed “Financial information – Loans repayable more than one year with repayment on demand clause” in this [REDACTED] above.

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FINANCIAL INFORMATION

Subsequent to 31 May 2014, our Group has (i) repaid approximately HK$48.2 million of our bank borrowings, which was classified as current liabilities in June 2014; and (ii) agreed with one of our financiers to remove the repayment on demand clause in relation to certain outstanding borrowings of approximately HK$42.7 million as at 31 May 2014, to reduce our Group’s overall net current liabilities position. For details, please refer to the paragraph headed “Financial information – Net current liabilities position subsequent to 31 March 2014” in this [REDACTED] above.

(ii) Maintain stable relationship with our principal banks

We will continue to maintain stable relationship with our principal banks in Hong Kong and Macau with a view to obtain new loan facilities on terms acceptable to our Group and/or refinance our existing short-term loans into long-term facilities and/or finance leases.

(iii) Monitor our cash flow situation

We will continue to monitor our cash flow situation closely and adopt a conservative approach on further capital commitment and/or investments (if any).

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FINANCIAL INFORMATION

Expected financial resources of our Group

Set out below are the details of our loan facilities as at 30 June 2014:

Nature of loan facility Bank overdraft from a commercial bank Short-term loans Short-term loan-subtotal Revolving loan from a commercial bank (Note 1) Revolving loan from a commercial bank (Note 1) Revolving loan from a commercial bank (Note 1) Revolving loan from a commercial bank (Note 1) Revolving loan from a commercial bank (Note 1) Revolving loan from a financial institution (Note 1) Import loan-subtotal Import loan from a commercial bank (Note 2) Import loan from a commercial bank (Note 2) Long-term bank loans Term loan from a commercial bank Term loan from a commercial bank Machine loan from a commercial bank Machine loan from a commercial bank Machine loan from a financial institution Machine loan from a commercial bank Obligations under finance leases Finance lease from a financial institution Finance lease from a financial institution Finance lease from a commercial bank Finance lease from a commercial bank	Facility amount 30/6/2014 Maturity date Repayable on demand clause HK$’million 42.4 N/A Yes 263.6 238.2 20.0 December 2014 Yes 10.0 September 2014 Yes 58.2 May 2015 Yes 50.0 June 2015 Yes 70.0 June 2015 Yes 30.0 June 2015 Yes 25.4 10.8 N/A Yes 14.6 N/A Yes 105.3 0.8 October 2014 Yes 20.7 January 2017 Yes 9.6 March 2018 - April 2018 Yes 21.0 September 2017 - June 2018 Yes 42.0 March 2019 Yes (Note 3) 11.2 Three years from date of drawdown Yes 108.9 11.7 September 2016 - August 2017 No 15.6 March 2018 No 70.2 May 2016 - April 2019 No 11.4 October 2015 - March 2017 No 520.2	Undrawn amount HK$’million 0.6 115.9 100.0 – – – – 70.0 30.0 15.9 1.3 14.6 11.2 – – – – – 11.2 – – – – – 127.7	Drawn amount 30/6/2014 HK$’million 41.8 147.7 138.2 20.0 10.0 58.2 50.0 – – 9.5 9.5 – 94.1 0.8 20.7 9.6 21.0 42.0 – 108.9 11.7 15.6 70.2 11.4 392.5	Without fixed repayment date HK$’million 41.8 – – – – – – – – – – – – – – – – – – – – – – 41.8	Repayable on or before 31/3/2015 HK$’million – 39.5 30.0 20.0 10.0 – – – 9.5 9.5 – 19.0 0.8 6.0 1.8 4.3 6.1 – 26.6 3.4 3.0 15.9 4.3 85.1	Repayable after 31/3/2015 HK$’million –
						108.2
						108.2
						– – 58.2 50.0 – –
						– –
						75.1
						– 14.7 7.8 16.7 35.9 –
						82.3
						8.3 12.6 54.3 7.1
						265.6

Notes:

(1) The facility amount represents the maximum aggregate drawdown amounts. Each drawdown is subject to periodic rollovers over the duration of the facility.

(2) The facility amount represents the maximum aggregate drawdown amounts. Each drawdown is subject to a repayment period of up to 90 days. Notwithstanding the abovementioned repayment period of each drawdown, the facility is repayable on demand with no specified maturity.
(3) The repayable on demand clause has been removed subsequent to 30 June 2014.

As confirmed by our Directors, during the Track Record Period and up to 30 June 2014, we had not encountered any material difficulties in obtaining loan facilities from lenders, such as commercial banks, and renewing loan facilities upon their respective expiry, nor received any notice or demand from our lenders for early payment of outstanding loans.

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FINANCIAL INFORMATION

Trade and retention receivables analysis

Our trade and retention receivables mainly consist of receivables related to foundation works and ancillary services certified by our customers or, in the case of us being a main contractor, authorised persons employed by our customers and retention receivables in relation to completed and on-going projects. In general, our Group submits payment applications to our customers on a monthly basis in accordance with the value of work which may include variation works and claims, if any, undertaken for foundation works and ancillary services projects. For foundation works and ancillary services, the credit terms granted to our customers vary from contract to contract. Such credit terms may make reference to the payment certificate date, settlement typically ranging from 14 days to 30 days from such date, depending on the terms and conditions of the contracts. Retention receivables represent the retention money required by our customers to secure our Group’s due performance of the contracts. Typically, the amount of retention money depends on negotiation between the parties, which ranges from 1.0% to 10.0% of the value of works certified and is subject to a maximum retention of 1.0% to 5.0% of the total original contract value or a monetary cap. The terms and conditions in relation to the release of retention money also vary from contract to contract, which may subject to, practical completion, the expiry of the defect liability period or a pre-agreed time period.

Set out below is the composition of trade and retention receivables at the end of each financial year during the Track Record Period:

Trade and retention receivables Trade receivables Retention receivables Total	2012 HK$’000 3,610 4,613 8,223	As at 31 March 2013 2014 HK$’000 HK$’000 70,290 27,799 26,459 50,787 96,749 78,586	As at 31 March 2013 2014 HK$’000 HK$’000 70,290 27,799 26,459 50,787 96,749 78,586
			78,586

The following table sets out the turnover days of trade receivables for each reporting period during the Track Record Period:

	For the year ended 31 March	For the year ended 31 March	For the year ended 31 March
	2012	2013	2014
Trade receivables (year end)(HK$’000)	3,610	70,290	27,799
Revenue_(HK$’000)_	98,428	375,147	492,734
Turnover days of trade receivables_(Note)_	13.4 days	68.4 days	20.6 days

Note: The trade receivables turnover days for a given year is calculated based on the trade receivables balance as at the year end divided by revenue for that year and multiplied by 365 days.

Whilst our revenue increased from approximately HK$98.4 million for the year ended 31 March 2012 to approximately HK$375.1 million for the year ended 31 March 2013, our trade receivables increased from approximately HK$3.6 million as at 31 March 2012 to approximately HK$70.3 million as at 31 March 2013. Despite our revenue increased further to approximately HK$492.7 million for the year ended 31 March 2014, our trade receivables decreased to approximately HK$27.8 million as at 31 March 2014.

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FINANCIAL INFORMATION

As our foundation business operates on a non-recurring and project-by-project basis, our revenue recognised during the Track Record Period may fluctuate subject to the size and the progress of our foundation works and ancillary service contracts at a given time thereby affecting our trade receivables balance as at the respective year ends and the trade receivables turnover days during the Track Record Period.

The decrease of trade receivables from approximately HK$70.3 million as at 31 March 2013 to approximately HK$27.8 million as at 31 March 2014 and the decrease of trade receivables turnover days from approximately 68.4 days for the year ended 31 March 2013 to approximately 20.6 days for the year ended 31 March 2014 were mainly attributable to a substantial year-on-year increase in revenue for the year ended 31 March 2014 and a relatively low proportion of revenue was recorded in the corresponding fourth quarter. The aforesaid increase in revenue and the revenue profile for the year ended 31 March 2014 were mainly due to (i) our Group derived approximately HK$434.6 million from Hotel Tower Project for the year ended 31 March 2014, but the Hotel Tower Project was completed in December 2013; and (ii) there were only three ongoing projects as at 31 March 2014, one of which was the Composite Development Project which was subject to delays and we only commenced work for the other two foundation works and ancillary projects in February 2014.

The increase of trade receivables of approximately HK$3.6 million as at 31 March 2012 to approximately HK$70.3 million as at 31 March 2013 and the increase of trade receivables turnover days from approximately 13.4 days for the year ended 31 March 2012 to approximately 68.4 days for the year ended 31 March 2013 were mainly attributable to a relatively high proportion of revenue was recorded in the corresponding fourth quarter in particular from the Wong Tai Sin Project.

The following table sets out the ageing analysis of the trade receivables, net of provision for doubtful debt, based on invoice date at the end of each financial year during the Track Record Period:

Trade receivables ageing since invoice date Within 1 month 1 to 2 months 2 to 3 months 3 to 6 months 6 months to 1 year Over 1 year Total trade receivables	2012 HK$’000 1,360 – – – 2,250 – 3,610	As at 31 March 2013 2014 HK$’000 HK$’000 69,824 27,799 466 – – – – – – – – – 70,290 27,799	As at 31 March 2013 2014 HK$’000 HK$’000 69,824 27,799 466 – – – – – – – – – 70,290 27,799
			27,799

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FINANCIAL INFORMATION

As at 31 March 2014, our Group has no trade receivable aged over six months. Notwithstanding the above, due to the capital intensive nature of the foundation industry, it is not uncommon for customers or contractors to delay payments to their contractors or sub-contractors when the projects are delayed or until the contractors have received settlements for works performed. Our customers generally settle amounts due to our Group in accordance with the credit period as set out in the contracts. As at 31 May 2014, approximately HK$9.7 million of the trade receivables outstanding as at 31 March 2014 have been settled.

We have undertaken measures aimed at managing the ageing of our trade receivables. Before submitting tenders and quotations for foundation works and ancillary services projects, we would assess the credit quality of our potential customers and the reputation of our potential customers in the industry. We also monitor the ageing of our trade receivables on a regular basis.

We make specific provision for doubtful debts when there is objective evidence that we will not be able to collect the amounts due. We did not make any provision for doubtful debt in respect of trade and retention receivables during the Track Record Period.

The following table sets out the ageing analysis of the retention receivables based on invoice date at the end of each financial year during the Track Record Period:

Retention receivables ageing since invoice date Within 1 year Between 2 and 5 years Total retention receivables	2012 HK$’000 1,137 3,476 4,613	As at 31 March 2013 2014 HK$’000 HK$’000 25,021 34,442 1,438 16,345 26,459 50,787	As at 31 March 2013 2014 HK$’000 HK$’000 25,021 34,442 1,438 16,345 26,459 50,787
			50,787

Our retention receivables amounted to approximately HK$4.6 million, HK$26.5 million and HK$50.8 million as at 31 March 2012, 2013 and 2014, respectively. As at 31 March 2014, the five largest and the largest retention receivables totaled to approximately HK$47.6 million and HK$33.7 million, respectively. The largest retention receivables as at 31 March 2014 was related to the Hotel Tower Project, being our largest completed project by revenue during the Track Record Period. The release of the retention receivables related to the Hotel Tower Project is subject to (i) the practical completion certificate for foundation works and ancillary services undertaken by our Group; and (ii) the completion of all our obligations in accordance with the contract for Hotel Tower Project or the certificate to be issued by the construction manager in the absence of a final account.

We expect all these retention monies to be released according to the respective contracts and works done. As at 31 May 2014, HK$16.8 million of retention monies recorded as at 31 March 2014 has been released to us and the expected release dates of the remaining retention monies should fall between July 2014 and December 2016.

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Amounts due from customers for contract work

Unlike trade receivables, which represent work performed by us and certified by our customer but not yet settled, amounts due from customers for contract work represent work performed by us, for which the payment certificates have not yet been obtained from our customers as at the end of a financial year. Such amounts include costs incurred plus recognised profit exceed progress billings. Our Group normally submits payment applications to our customers on a monthly basis. The following table sets out the amounts due from customers for contract work as at the end of each financial year as indicated.

		As at 31 March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Amounts due from customers for contract work	36,373	9,648	19,481

Out of the amounts due from customers for contract work of approximately HK$19.5 million as at 31 March 2014, of which (i) approximately HK$9.4 million is related to a foundation works and ancillary services project completed prior to the Track Record Period which is in the process of arbitration; and (ii) the remaining balance of approximately HK$10.1 million represent work performed by us, the payment certificate of which have yet to be obtained from our customers.

The amounts due from customers for contract work are typically affected by the value of works we performed close to the end of each reporting period and the timing of receiving certificates, and thus vary from period to period. Furthermore, considering the vast number of items related to foundation works and ancillary services projects, negotiation with customers for the value of work performed by us set out in the payment certificates is common.

Inventory analysis

Our inventories mainly consist of machinery and equipment for sale and materials and consumables for construction works.

The following table sets out the balance of inventory at the end of each financial year as indicated. Our materials and consumables balance is low during the Track Record Period as we purchased materials and consumables as and when project needs arise.

Inventories Machinery and equipment for sale Materials and consumables for construction works Total	2012 HK$’000 2,455 1,282 3,737	As at 31 March 2013 2014 HK$’000 HK$’000 – – 850 – 850 –	As at 31 March 2013 2014 HK$’000 HK$’000 – – 850 – 850 –
			–

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FINANCIAL INFORMATION

Our Group has no machinery and equipment for sale classified under inventories as at 31 March 2013 and 2014.

As at 31 March 2012, the machinery and equipment for sale balance of approximately HK$2.5 million mainly related to the vessel with a net book value of approximately HK$1.7 million held as inventory which was originally intended for the use of marine piling works. As our Group did not foresee the use of the vessel in any of our foundation works and ancillary services projects at the time, on 17 September 2012, our Group disposed of the vessel to a company 100% beneficially owned by Mr. Lau at its net book value with no gain or loss.

As we purchase materials and consumables as and when project needs arise, our materials and consumables balance under inventories is low and our Directors are of the view that the inventory turnover days analysis, as a comparison between inventory balance and the cost of sales, does not offer a meaningful comparison during the Track Record Period.

Deposits, prepayments and other receivables

Deposits, prepayments and other receivables recorded in current assets, represent receivables from leasing of machinery and equipment, the deposit for the issuance of performance bond, the deposit for the acquisition of machinery and equipment, other miscellaneous deposits and prepayments.

As at 31 March 2014, deposits, prepayments and other receivables in current assets amounted to approximately HK$3.1 million which was primarily related to rental deposits.

Trade and retention payables analysis

Our trade and retention payables are primarily related to the purchase of construction materials and parts and consumables, works performed by subcontractors and retention payables in relation to subcontractors for completed and on-going projects. Set out below is the composition of trade and retention payables at the end of each financial year as indicated:

Trade and retention payables Trade payables Retention payables Total	2012 HK$’000 8,102 218 8,320	As at 31 March 2013 2014 HK$’000 HK$’000 29,828 14,534 236 339 30,064 14,873	As at 31 March 2013 2014 HK$’000 HK$’000 29,828 14,534 236 339 30,064 14,873
			14,873

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FINANCIAL INFORMATION

The following table sets out the turnover days of trade payables for each reporting period during the Track Record Period:

	For the year ended 31 March	For the year ended 31 March	For the year ended 31 March
	2012	2013	2014
Trade payables (year end)(HK$’000)	8,102	29,828	14,534
Cost of sales_(HK$’000)_	65,736	272,557	327,100
Turnover days of trade payables_(Note)_	45.0 days	39.9 days	16.2 days

Note: The trade payables turnover days for a given year is calculated based on the trade payables balance as at the year end divided by the cost of sales for that year and multipled by 365 days.

Whilst our cost of sales increased from approximately HK$65.7 million for the year ended 31 March 2012 to approximately HK$272.6 million for the year ended 31 March 2013, our trade payables increased from approximately HK$8.1 million as at 31 March 2012 to approximately HK$29.8 million as at 31 March 2013. Despite that our cost of sales increased further to approximately HK$327.1 million for the year ended 31 March 2014, our trade payable decreased to approximately HK$14.5 million as at 31 March 2014.

As our foundation business operates on a non-recurring and project-by-project basis, our cost of sales incurred during the Track Record Period may fluctuate subject to the size and the progress of our foundation works and ancillary service contracts at a given time thereby affecting our trade payables balance as at the respective year ends and the trade payables turnover days during the Track Record Period.

The decrease of trade payables of approximately HK$29.8 million as at 31 March 2013 to approximately HK$14.5 million as at 31 March 2014 and the decrease of trade payables turnover days from approximately 39.9 days for the year ended 31 March 2013 to approximately 16.2 days for the year ended 31 March 2014 were mainly attributable to a relatively low proportion of cost of sales was recorded in the corresponding fourth quarter. Such profile of cost of sales was due to (i) the completion of the Hotel Tower Project in December 2013, being our largest completed contract by revenue during the Track Record Period; and (ii) our Group had three ongoing projects as at 31 March 2014, one of which was the Composite Development Project which was subject to delays and we only commenced work for the other two foundation works and ancillary projects in February 2014.

The increase of trade payables from approximately HK$8.1 million as at 31 March 2012 to approximately HK$29.8 million as at 31 March 2013 and the decrease of trade payables turnover days from approximately 45.0 days for the year ended 31 March 2012 to approximately 39.9 days for the year ended 31 March 2013 were mainly attributable to the completion of two sizeable projects, namely the Wong Tai Sin Project and the Logistics Centre Project, before the year ended 31 March 2013, thus the unsettled trade payables as at 31 March 2013 compared to the cost of sales recorded for the same year were relatively low in comparison to the prior financial year. We generally settle our trade payables within 60 days.

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FINANCIAL INFORMATION

Trade payables ageing since invoice date Within 1 month 1 to 2 months 2 to 3 months 3 to 6 months 6 months to 1 year Over 1 year Total trade payables	2012 HK$’000 4,282 1,741 1,006 490 – 583 8,102	As at 31 March 2013 2014 HK$’000 HK$’000 24,181 13,275 2,386 641 2,181 – 497 10 – 196 583 412 29,828 14,534	As at 31 March 2013 2014 HK$’000 HK$’000 24,181 13,275 2,386 641 2,181 – 497 10 – 196 583 412 29,828 14,534
			14,534

Save for approximately HK$11.0 million of trade payables, all of the trade payables as at 31 March 2014 were subsequently settled up as at 31 May 2014. The unsettled trade payables of approximately HK$3.5 million is mainly related to transportation fee for machinery and equipment from Hong Kong to Macau.

Accruals and other payables

Accruals and other payables represent the accrued expenses such as professional fees, wages and other miscellaneous payables. Set out below is the composition of accruals and other payables at the end of each financial year as indicated.

		As at 31 March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Accruals and other payables	10,198	21,410	22,284

As at 31 March 2014, accruals and other payables amounted to approximately HK$22.3 million. Out of such balance, approximately HK$9.3 million was accrued wages payable, approximately HK$12.5 million was accruals for professional fees and miscellaneous expenses accrued for foundation works and ancillary services projects.

Amounts due to customers for contract work

Amounts due to customers for contract work represent the surplus derived when progress billings exceed the contract costs incurred plus recognised profits. The balances were approximately nil, HK$36.3 million and nil as at 31 March 2012, 2013 and 2014, respectively.

Amount due to a Director

The amount due to a Director, Mr. Lau as at 31 March 2012 was utilised for (i) working capital, such as settlement of wages and salaries, trade payables and the acquisition of machinery and equipment; and (ii) the settlement of bank overdrafts and finance leases payments for machinery and equipment to our Group during the year ended 31 March 2012. As the entire amount due to a Director was settled during the year ended 31 March 2013, there was no outstanding amount due to a Director as at 31 March 2013 and 2014, respectively.

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FINANCIAL INFORMATION

INDEBTEDNESS

The table below sets out the indebtedness of our Group as at the respective dates indicated.

Indebtedness Non-current Obligations under finance leases Long-term bank loans Current Bank overdraft Short-term bank loans Current portion of long-term bank loans due for repayment within one year Long-term bank loans due after one year which contain repayment on demand clause Obligations under finance leases due for repayment within one year Obligations under finance leases due after one year which contain repayment on demand clause Total borrowings	As at As at 31 March 31 May 2012 2013 2014 2014 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 9,173 32,146 23,656 26,202 – 24,188 14,150 12,434 9,173 56,334 37,806 38,636 – – 28,455 40,332 – 49,922 92,556 97,704 5,864 22,068 44,023 45,252 4,827 41,829 110,104 109,389 12,392 19,727 15,354 16,295 – 6,318 8,384 7,640 23,083 139,864 298,876 316,612 32,256 196,198 336,682 355,248	As at As at 31 March 31 May 2012 2013 2014 2014 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 9,173 32,146 23,656 26,202 – 24,188 14,150 12,434 9,173 56,334 37,806 38,636 – – 28,455 40,332 – 49,922 92,556 97,704 5,864 22,068 44,023 45,252 4,827 41,829 110,104 109,389 12,392 19,727 15,354 16,295 – 6,318 8,384 7,640 23,083 139,864 298,876 316,612 32,256 196,198 336,682 355,248
		38,636
		40,332 97,704 45,252 109,389 16,295 7,640
		316,612
		355,248

As at 31 May 2014, the latest practicable date of the purpose of indebtedness statement for this [REDACTED] , we had outstanding borrowings of approximately HK$355.2 million, which were denominated in HK$ or MOP.

As at the Latest Practicable Date, we have no material covenants relating to our outstanding debts, save for a term loan of approximately HK$48.2 million, the arrangements of which are being finalised with a financial institution. The granting of such loan is subject to the execution of loan documents.

Our Group raises borrowings to finance the acquisitions of machinery and equipment and fulfil working capital requirements. We expect to repay the borrowings through our cash flows generated from operating activities and financing activities.

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FINANCIAL INFORMATION

Set out below is the maturity profile of our bank overdraft and bank loans as at the respective dates indicated, and ignoring the effect of any repayment on demand clauses.

Indebtedness by due date Bank overdraft on demand Within 1 year Between 1 and 2 years Between 2 and 5 years	As at As at 31 March 31 May 2012 2013 2014 2014 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) – – 28,455 40,332 5,864 71,990 136,579 142,956 3,402 24,112 42,283 43,458 1,425 41,905 81,971 78,365 10,691 138,007 289,288 305,111	As at As at 31 March 31 May 2012 2013 2014 2014 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) – – 28,455 40,332 5,864 71,990 136,579 142,956 3,402 24,112 42,283 43,458 1,425 41,905 81,971 78,365 10,691 138,007 289,288 305,111
		305,111

Bank overdrafts

As at 31 March 2014 and 31 May 2014, our Group had bank overdraft of approximately HK$28.5 million and HK$40.3 million which was secured by a bank deposit of Mr. Lau.

Short-term bank loans

As at 31 March 2013, 2014 and 31 May 2014, our Group had short-term bank loans of approximately HK$49.9 million, HK$92.6 million and HK$97.7 million, respectively, which were primarily utilised for working capital purposes.

Long-term bank loans

The long-term borrowings represent bank loans raised for (i) working capital purposes; and (ii) acquisitions of machinery and equipment. The long-term bank loans classified as non-current liabilities amounted to approximately nil, HK$24.2 million, HK$14.2 million and HK$12.4 million as at 31 March 2012, 2013 and 2014 and 31 May 2014 respectively, and the long-term bank loans (including current portion due for repayment within one year, amounts due after one year which contain repayment on demand clause) classified as current liabilities amounted to approximately HK$10.7 million, HK$63.9 million, HK$154.1 million and HK$154.6 million, respectively. For further details on long term bank loans which contain repayment on demand clause, please refer to the paragraph headed “Financial information – Loans repayable more than one year with repayment on demand clause” in this [REDACTED] above.

Our long-term bank loans increased from approximately HK$10.7 million as at 31 March 2012, to approximately HK$88.1 million as at 31 March 2013, and increased further to approximately HK$168.3 million as at 31 March 2014. Such increase was mainly attributable to the partial settlement of the consideration for the acquisition of additional machinery and equipment, during each of the year ended 31 March 2013 and 2014. Our Group reduced our long-term bank loans to approximately HK$167.1 million as at 31 May 2014 as we have repaid a portion of our long-term bank loans subsequent to 31 March 2014.

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FINANCIAL INFORMATION

The terms for the long-term bank loans ranged from over 2.5 years to 5 years.

Finance leases

Set out below is the maturity profile of our finance leases as at the respective dates indicated and ignoring the effect of any repayment on demand clauses.

Within 1 year Between 1 and 2 years Between 2 and 5 years	As at As at 31 March 31 May 2012 2013 2014 2014 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 12,392 19,727 15,354 16,295 8,602 12,464 15,308 16,706 571 26,000 16,732 17,136 21,565 58,191 47,394 50,137	As at As at 31 March 31 May 2012 2013 2014 2014 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 12,392 19,727 15,354 16,295 8,602 12,464 15,308 16,706 571 26,000 16,732 17,136 21,565 58,191 47,394 50,137
		50,137

Typically, our Group becomes the owner of the machinery and equipment at the end of the relevant lease term upon the payment of a nominal amount. These finance leases are classified as liabilities of our Group and the relevant machinery and equipment are recorded as assets of our Group. As at 31 March 2012, 2013, 2014 and 31 May 2014, the net book value of machinery and equipment of our Group under finance leases amounted to approximately HK$60.3 million, HK$118.2 million, HK$114.1 million and HK$118.3 million, respectively. The duration of the lease term of finance leases are usually 4 years.

Bank overdrafts, bank loans and finance leases under personal guarantee and/or security provided by one or more of our executive Directors as at 31 March 2014 will be released before/upon the [REDACTED] . Our Group would seek additional financing from Independent Third Parties if our Group is unable to secure the transfer of the said guarantees and/or security to our Company.

OFF-BALANCE SHEET COMMITMENTS

Save for (i) the capital commitment in relation to the contracted (but not yet provided for) plant and equipment of approximately HK$104.8 million; and (ii) the operating lease commitment as lessee of approximately HK$4.2 million, our Group has not entered into, nor do we expect to enter into, any offbalance sheet commitments as at 31 March 2014.

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FINANCIAL INFORMATION

CONTINGENT LIABILITIES

As at 31 March 2014, save for guarantee of performance bond relating to a foundation works and ancillary services project of our Group’s of approximately HK$67.3 million, such performance bond is expected to be released in October 2016, we had no material contingent liabilities as set out in Accountant’s Report set forth in Appendix I to this [REDACTED] .

DISCLAIMER

Save as disclosed in this [REDACTED] , we did not have outstanding indebtedness or any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or similar indebtedness, liabilities under acceptances (other than normal trade bills), acceptance credits, debentures, mortgages, charges, finance leases or hire purchase commitments, guarantees or other contingent liabilities as of 31 May 2014, being our indebtedness statement date. Details of changes to our Group’s indebtedness since 31 May 2014 are set out under the paragraph headed “Financial information – Net current liabilities”. Save for the information as disclosed under the paragraph headed “Financial information – Net current liabilities”, our Directors confirm that, as at the Latest Practicable Date, save as disclosed under the paragraph headed “Financial Information – Expected financial resources of our Group”. there is no material change in our Group’s indebtedness since 31 May 2014.

ANALYSIS OF SELECTED FINANCIAL RATIOS

		As at/for the year ended 31 March	As at/for the year ended 31 March	As at/for the year ended 31 March
		2012	2013	2014
Selected Ratios	Formulae
Return on assets	Net profit/total assets x 100%	9.0%	12.2%	20.3%
Return on equity	Net profit/total equity x 100%	28.1%	39.3%	58.1%
Net profit margin	Net profit/revenue x 100%	24.6%	14.8%	25.8%
Gearing ratio	Net debt/total equity_(Note)_	1.65 times	1.23 times	0.98 times
Current ratio	Current assets/current liabilities	0.46 times	0.61 times	0.66 times
Quick ratio	(Current assets – inventories)/current	0.43 times	0.61 times	0.66 times
	liabilities
Interest coverage	Operating profit/finance costs	15.44 times	22.74 times	14.27 times

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FINANCIAL INFORMATION

Return on assets

Our return on assets was approximately 9.0%, 12.2% and 20.3% for the year ended 31 March 2012, 2013 and 2014, respectively. We generated an improved return to assets over the Track Record Period primarily due to the increase in the value of foundation works and ancillary services contracts completed by our Group and certified by our customers which in turn increased our net profit and the rate of increase in our net profit over the Track Record Period exceeds the rate of increase in our total assets over the same period.

Our net profit increased from approximately HK$24.2 million for the year ended 31 March 2012 to approximately HK$55.6 million for the year ended 31 March 2013, and increased further to approximately HK$127.1 million for the year ended 31 March 2014, while our total assets increased from approximately HK$268.8 million for the year ended 31 March 2012 to approximately HK$454.8 million for the year ended 31 March 2013, and increased further to approximately HK$627.5 million for the year ended 31 March 2014.

Return on equity

Our return on equity was approximately 28.1%, 39.3% and 58.1% for the year ended 31 March 2012, 2013 and 2014, respectively. Our return to equity improved over the Track Record Period primarily attributable to the increase in the value of foundation works and ancillary services contracts completed by our Group and certified by our customers which in turn increased our net profit. In addition, such rate of increase in our net profit over the Track Record Period exceeds the rate of increase in our total equity over the Track Record Period.

Our net profit increased from approximately HK$24.2 million for the year ended 31 March 2012 to approximately HK$55.6 million for the year ended 31 March 2013, and increased further to approximately HK$127.1 million for the year ended 31 March 2014, while our total equity increased from approximately HK$86.0 million for the year ended 31 March 2012 to approximately HK$141.6 million for the year ended 31 March 2013, and increased further to approximately HK$218.7 million. For each of the years ended 31 March 2013 and 2014, SW (BVI) declared a non-recurring final dividend of HK$50.0 million out of its distributable reserves.

Net profit margin

The increase in the net profit margin from approximately 14.8% for the year ended 31 March 2013 to approximately 25.8% for the year ended 31 March 2014 was mainly attributable to the combination of the increase in revenue, higher gross profit margin which is primarily attributable to the Hotel Tower Project and a stable level of administrative expenses.

Our net profit margin of approximately 24.6% for the year ended 31 March 2012 decreased to approximately 14.8% for the year ended 31 March 2013 as (i) the Express rail link projects 1 and 2, which together accounted for approximately 66.1% of our revenue derived from foundation works and ancillary services for the year ended 31 March 2012 commanded a higher average gross profit margin than the average gross profit margin of the Wong Tai Sin Project and the Logistics Centre Project which together accounted for approximately 82.3% of our revenue derived from foundation works and ancillary services for the year ended 31 March 2013; and (ii) we derived other income of approximately HK$14.8 million

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FINANCIAL INFORMATION

from our business of leasing machinery and equipment for the year ended 31 March 2012 compared to nil for year ended 31 March 2013, as the leasing of machinery and equipment gave rise to minimal additional operating costs when compared to the operating costs for the foundation works and ancillary services, our Group’s net profit margin improved as a result.

Gearing ratio

Our gearing ratio as at 31 March 2012, 2013 and 2014 was approximately 1.65 times, 1.23 times and 0.98 times respectively.

Our gearing ratio decreased over the Track Record Period as the total equity of our Group increased notably as we have recorded profit and total comprehensive income attributable to equity holders of the Company of approximately HK$24.2 million, HK$55.6 million and HK$127.1 million for each of the year ended 31 March 2012, 2013 and 2014, respectively.

Current ratio and Quick ratio

The current ratio of our Group as at 31 March 2012, 2013 and 2014 was approximately 0.46 times, 0.61 times and 0.66 times respectively, while the quick ratio as at 31 March 2012, 2013 and 2014 was approximately 0.43 times, 0.61 times and 0.66 times, respectively. Our current ratio and quick ratio improved year-on-year from 31 March 2012 to 31 March 2013 and further improved from 31 March 2013 to 31 March 2014. Such was largely attributable to the net movement in our cash and cash equivalents balance, borrowings, trade and our retention receivables, detailed explanation of the aforesaid movement has been set out under the paragraphs headed “Financial information – Liquidity and capital resources”, “Financial information – Trade and retention receivables analysis” and “Financial information – Indebtedness” in this [REDACTED] above.

Mr. Lau provided funding to our Group in the form of amount due to a Director, amounted to approximately HK$93.1 million classified under current liabilities as at 31 March 2012, which were utilised for working capital, settlement of bank overdrafts and finance lease payments for machinery and equipment. The amount due to a Director accounted for approximately 69.1% of current liabilities of our Group as at 31 March 2012. During the year ended 31 March 2013, the entire balance of amount due to a Director has been settled.

As at 31 March 2012, 2013 and 2014, approximately HK$4.8 million, HK$48.1 million and HK$118.5 million recorded under current liabilities was related to finance leases and bank loans with maturity over one year which contain repayable on demand clause, representing approximately 3.6%, 21.1% and 34.9% of the current liabilities as at the respective dates. As these finance leases and bank loans were repayable on demand, they were classified as current liabilities in accordance with the relevant accounting standards.

Our Directors confirm that our Group had no default in payment of trade payables, accruals, bank borrowings and/or breaches of the finance covenants during the Track Record Period.

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FINANCIAL INFORMATION

Interest coverage

The interest coverage ratio of our Group for the year ended 31 March 2012, 2013 and 2014 was approximately 15.44 times, 22.74 times and 14.27 times. Our Group continued to finance the acquisitions of machinery and equipment with finance leases and bank loans. Finance costs increased from approximately HK$1.8 million for the year ended 31 March 2012, to approximately HK$3.1 million for the year ended 31 March 2013 and increased further to approximately HK$9.7 million for the year ended 31 March 2014 as our Group has increased our borrowings from approximately HK$32.3 million as at 31 March 2012 to approximately HK$196.2 million as at 31 March 2013 and increased further to approximately HK$336.7 million as at 31 March 2014.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk

We incur interest expenses on our bank overdrafts, bank loans and finance leases and our Group is exposed to interest rate risk as these borrowings are carried at variable rates. It is our Group’s policy to maintain its borrowings subject to floating rates, and accordingly, our Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

As at 31 March 2012, 2013 and 2014, if the interest rates on borrowings had been 100 basis points higher or lower, assuming all other variables had been held constant, our profit after income tax for the respective year would have been lower or higher by approximately HK$0.3 million, HK$1.6 million and HK$2.8 million, respectively.

Credit risk

We are exposed to credit risk primarily from our cash and cash equivalents, trade and retention receivables, deposits, prepayments and other receivables. Our Group’s exposure to credit risk is the carrying amounts of these financial assets.

For the year ended 31 March 2012, 2013 and 2014, approximately 97.4%, 97.9%, and 98.7% of our revenue was derived from our top five customers.

To manage this risk, our Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, we review regularly the recoverable amount of each individual trade and retention receivable to ensure that adequate impairment provision is made for the irrecoverable amounts.

The credit risk on deposits with bank are limited as deposits are in banks with sound credit ratings.

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FINANCIAL INFORMATION

Liquidity risk

We manage liquidity risk by monitoring and maintaining (i) a level of cash and cash equivalents deemed adequate by our management team to meet operational needs; and (ii) sufficient headroom on our undrawn committed borrowing facilities at all times so that our Group does not breach borrowing limits or covenants (where applicable) on any of our borrowing facilities.

Taking into account the expected cash inflow from operations of our Group and the undrawn banking facilities, our Directors believe that our Group has sufficient resources to meet our debt obligations with banks and working capital needs. Details of our loan facilities as at 30 June 2014 have been set out under paragraph headed “Financial information – Expected financial resources of our Group” in this [REDACTED] above.

Currency risk

Our Group’s transactions are mainly denominated in HK$ or MOP. The majority of our assets and liabilities are denominated in HK$ or MOP, and there are no significant assets and liabilities denominated in other currencies. We considered that the foreign exchange risk for MOP is minimal since exchange rate fluctuation was minimal throughout the Track Record Period.

RELATED PARTY TRANSACTIONS

With respect to the related parties transactions set out in note 27 of the Accountant’s Report in Appendix I to this [REDACTED] , our Directors believe that such transactions were conducted on normal commercial terms and such terms were no less favourable to our Group than terms available to Independent Third Parties and were fair and reasonable and in the interests of our Shareholders as a whole.

DIVIDENDS

No dividend has been paid or declared by the Company since its incorporation up to and including the Latest Practicable Date. Notwithstanding the above, SW (BVI) declared a non-recurring final dividend of HK$50.0 million out of its distributable reserves to its Shareholder for each of the years ended 31 March 2013 and 2014 respectively, namely Actiease Assets. SW (BVI) made full payment of the final dividend for each of the years ended 31 March 2013 and 2014 of HK$50.0 million in August 2013 and [•••] 2014 respectively from its internal resources.

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FINANCIAL INFORMATION

Dividend policy

After completion of the [REDACTED] , our Shareholders will be entitled to receive dividends declared by us. However, our Group current does not have a fixed dividend policy and the declaration of, payment of and amount of dividends will be subject to the discretion of our Directors in accordance with our Articles of Association and will be dependent upon our future operations and earnings, financial condition, capital requirements and surplus, payments by subsidiaries of cash dividends to us and other factors that our Directors deem relevant. In addition, the Controlling Shareholders (as defined in the Listing Rules), subject to the Articles of Association, may influence our dividend policy.

DISTRIBUTABLE RESERVES

As of 31 March 2014, the Company has no reserves available for distribution to our Shareholders. The Companies Law provides that share premium account of a company incorporated in the Cayman Islands, such as our Company, may be applied in such manner as it may from time to time determine, subject to the provisions, if any, of its memorandum and articles of association, provided that no distribution or dividend may be paid to its members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, such company shall be able to pay its debts as they fall due in the ordinary course of business.

[REDACTED] EXPENSES

The total amount of [REDACTED] expenses and commissions will be borne by us in connection with the [REDACTED] is estimated to be approximately [REDACTED] .

We incurred approximately [REDACTED] of [REDACTED] expenses during the Track Record Period, which was recorded under administrative expenses. We expect to incur additional [REDACTED] expenses of approximately [REDACTED] after the Track Record Period, approximately [REDACTED] of which is expected to be recognised as administrative expenses in the consolidated statements of comprehensive income for the year ending 31 March 2015 and the remaining balance is expected to be capitalised after [REDACTED] .

NO MATERIAL ADVERSE CHANGE

[Our Directors confirm that, up to the Latest Practicable Date, there has been no material adverse change in the financial or trading position or prospects of our Group since 31 March 2014 (being the date to which the latest audited combined financial statements of our Group were made up).]

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FINANCIAL INFORMATION

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following is an illustrative unaudited pro forma statement of adjusted net tangible assets of our Group which has been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect of the [REDACTED] on the net tangible assets of our Group attributable to the equity holders of the Company as of 31 March 2014 as if the [REDACTED] had taken place on 31 March 2014. The unaudited pro forma statement of adjusted net tangible assets of our Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the net tangible assets of our Group as at 31 March 2014 or at any future dates following the [REDACTED] . The unaudited pro forma statement of adjusted net tangible assets of our Group is based on the audited combined net tangible assets of our Group attributable to the equity holders of the Company as at 31 March 2014 as set out in the Accountant’s Report of the Company, the text of which is set out in Appendix I to this [REDACTED] , and adjusted as described below.

dix I to this[REDACTED], and adjusted as described below.
Audited Unaudited combined net pro forma tangible assets adjusted net of our Group tangible assets attributable attributable to the equity to the equity holders of the Estimated holders of the Company as at net proceeds Company as at 31 March from the 31 March 2014(Note 1)[REDACTED](Note 2) 2014 HK$’000 HK$’000 HK$’000 Based on an[REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] Based on an[REDACTED] per Share [REDACTED] [REDACTED] [REDACTED]	Unaudited pro forma adjusted net tangible assets per Share(Note 3) HK$ [REDACTED]

	[REDACTED]

Notes:

(1) The audited combined net tangible assets of the Group attributable to the equity holders of the Company as at 31 March 2014 is extracted from the Accountant’s Report of the Company as set out in Appendix I to this [REDACTED] , which is based on the audited combined net assets of the Group attributable to the equity holders of the Company as at 31 March 2014 of HK$218,719,000.
(2) The estimated net proceeds from the [REDACTED] are based on the [REDACTED] of [REDACTED] and [REDACTED] per Share, respectively, after deduction of the underwriting fees and other related expenses (excluding [REDACTED] expenses of approximately [REDACTED] which have been accounted for prior to 31 March 2014) payable by the Company and takes no account of any Shares which may be issued upon the exercise of the options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by the Company pursuant to the general mandate to issue shares and general mandate to repurchase shares as described in the section headed “Share Capital” in this [REDACTED] .
(3) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in note 2 above and on the basis that [REDACTED] Shares were in issue assuming that the [REDACTED] has been completed on 31 March 2014 but takes no account of any Shares which may be issued upon the exercise of the options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by the Company pursuant to the general mandate to issue shares and general mandate to repurchase shares as described in the section headed “Share Capital” in this [REDACTED] .
(4) The unaudited pro forma adjusted net tangible assets does not take into account the final dividend of HK$[50,000,000] proposed on [•••] for the year ended 31 March 2014. Such dividend will be paid before the [REDACTED] . Had such dividend been taken into account, the unaudited combined pro forma adjusted net tangible assets per Share would be approximately [REDACTED] (assuming an [REDACTED] of [REDACTED] per Share) and approximately [REDACTED] (assuming an [REDACTED] of [REDACTED] per Share) respectively.

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FINANCIAL INFORMATION

(5) No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to 31 March 2014.

DISCLOSURE REQUIRED UNDER THE LISTING RULES

Our Directors have confirmed that as at the Latest Practicable Date, they were not aware of any circumstances that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules had the Shares been [REDACTED] on the Stock Exchange.

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FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS

Please refer to the paragraph headed “Business – Business Strategies” in this [REDACTED] for a detailed description of our future plans.

USE OF PROCEEDS

We estimate that the aggregate net proceeds from the [REDACTED] , after deducting underwriting commissions and estimated expenses paid and payable by our Company in connection thereto, to be approximately HK$ [REDACTED] , assuming the [REDACTED] of HK$ [REDACTED] per Share, being the mid-point of the proposed [REDACTED] range of HK$ [REDACTED] to HK$ [REDACTED] per Share. We intend to apply such net proceeds in the following manner:

approximately HK$ [REDACTED] million or approximately [REDACTED] % of the net proceeds to acquire and/or partly finance the expansion of our fleet of machinery and equipment including four crawler cranes and other ancillary machinery and equipment to carry out foundation works and ancillary services on or before 31 March 2016 from Asian and/or European machinery suppliers; and
approximately HK$ [REDACTED] million or approximately [REDACTED] % of the net proceeds will be used as general working capital of our Group.

If the [REDACTED] is set at the high-end or low-end of the proposed [REDACTED] range, the net proceeds of the [REDACTED] will increase or decrease by approximately HK$ [REDACTED] . We will adjust the allocation of the net proceeds for the abovementioned purposes on a pro rata basis.

To the extent that the net proceeds of the [REDACTED] are not immediately applied to the above purposes, it is our present intention that such net proceeds will be deposited into interest-bearing bank accounts with licensed banks and/or financial institutions in Hong Kong.

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UNDERWRITING

UNDERWRITERS

[REDACTED] Underwriters

[REDACTED]

[REDACTED] Underwriters

[REDACTED]

UNDERWRITING ARRANGEMENTS AND EXPENSES

[REDACTED]

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UNDERWRITING

[REDACTED]

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UNDERWRITING

[REDACTED]

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UNDERWRITING

UNDERTAKINGS GIVEN TO THE STOCK EXCHANGE PURSUANT TO THE LISTING RULES

Undertaking by our Company

[REDACTED]

Undertaking by the Controlling Shareholders

[REDACTED]

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UNDERWRITING

[REDACTED]

UNDERTAKINGS PURSUANT TO THE [REDACTED] AGREEMENT

Undertaking by our Company

[REDACTED]

Undertaking by the Controlling Shareholders and executive Directors

[REDACTED]

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UNDERWRITING

[REDACTED]

In connection with [REDACTED] , the Controlling Shareholders, executive Directors and us expect to enter into the [REDACTED] Agreement with the Lead Manager and the [REDACTED] Underwriters, on terms and conditions that are substantially similar to the [REDACTED] Agreement as described above and on the additional terms described below.

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UNDERWRITING

Under the [REDACTED] Agreement, subject to the conditions set forth therein, the [REDACTED] Underwriters are expected to severally, but not jointly, agree to procure subscribers to subscribe for, or failing which they shall subscribe for, the [REDACTED] [REDACTED] Shares initially being offered pursuant to the [REDACTED] . It is expected that the [REDACTED] Agreement may be terminated on similar grounds as the [REDACTED] Agreement. Potential investors shall be reminded that in the event that the [REDACTED] Agreement is not entered into, the [REDACTED] will not proceed. The [REDACTED] Agreement is conditional on and subject to the [REDACTED] Agreement having been executed, becoming unconditional and not having been terminated. It is expected that pursuant to the [REDACTED] Agreement, our Company and the Controlling Shareholders will make similar undertakings as those given pursuant to the [REDACTED] Agreement as described in the paragraph headed “Undertakings pursuant to the [REDACTED] Agreement” above.

EXPENSES

Total commission, fee and expenses

In connection with the [REDACTED] , the Lead Manager and the other Underwriters will receive an underwriting commission of [REDACTED] % of the aggregate [REDACTED] of all the [REDACTED] , out of which they will pay any sub-underwriting commissions and selling concessions.

In connection with the [REDACTED] , the Sponsor will receive a sponsorship and documentation fee.

Assuming the [REDACTED] of HK$ [REDACTED] per Share (being the mid-point of the indicative [REDACTED] range stated in this [REDACTED] ), the total expenses in connection with the [REDACTED] and the [REDACTED] are estimated to be approximately HK$ [REDACTED] million (including underwriting commission, brokerage, the Stock Exchange trading fee, the SFC transaction levy, the sponsorship and documentation fee, the [REDACTED] fee, legal and other professional fees, printing cost and other expenses relating to the [REDACTED] ) which shall be borne by our Company.

Our Company has agreed to indemnify the Lead Manager and the other Underwriters for certain losses which they may suffer, including losses incurred arising from their performance of their obligations under the Underwriting Agreements, and any breach by our Company of the Underwriting Agreements.

Independence of the Sponsor

The Sponsor satisfies the independence criteria applicable to sponsors set forth in Rule 3A.07 of the Listing Rules.

Sponsor’s, Lead Manager’s and Underwriters’ interests in our Company

The Sponsor has been appointed as the compliance adviser of our Company with effect from the [REDACTED] until despatch of the audited consolidated financial results for the second full financial year after the [REDACTED] , and our Company will pay to the Sponsor an agreed fee for its provision of services with the scope required under the Listing Rules.

Save for their interests and obligations under the Underwriting Agreements and the advisory and documentation fee payable to the Sponsor in respect of the [REDACTED] , none of the Sponsor, the Lead Manager and the Underwriters is interested beneficially or non-beneficially in any shares in any member of our Group or has any right (whether legally enforceable or not) or option to subscribe for or to nominate persons to subscribe for any shares in any member of our Group.

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STRUCTURE AND CONDITIONS OF THE [REDACTED]

[REDACTED]

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STRUCTURE AND CONDITIONS OF THE [REDACTED]

[REDACTED]

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STRUCTURE AND CONDITIONS OF THE [REDACTED]

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[REDACTED]

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APPENDIX I

ACCOUNTANT’S REPORT

The following is the text of a report received from the Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this [REDACTED] . It is prepared and addressed to the directors of the Company and to the Sponsor pursuant to the requirements of Auditing Guideline 3.340 “ [REDACTED] and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants.

[PricewaterhouseCoopers letterhead to be inserted]

[DRAFT]

[Date]

The Directors

Sam Woo Construction Group Limited

Investec Capital Asia Limited

Dear Sirs,

We report on the financial information of Sam Woo Construction Group Limited (the “Company”) and its subsidiaries (together, the “Group”), which comprises the combined balance sheets as at 31 March 2012, 2013 and 2014, the balance sheets of the Company as at 31 March 2013 and 2014, and the combined statements of comprehensive income, the combined statements of changes in equity and the combined statements of cash flows for each of the years ended 31 March 2012, 2013 and 2014 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory information. This financial information has been prepared by the directors of the Company and is set out in Sections I to III below for inclusion in Appendix I to the [REDACTED] of the Company dated [•••] (the “ [REDACTED] ”) in connection with the initial [REDACTED] of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.

The Company was incorporated in the Cayman Islands on 17 September 2012 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. Pursuant to a group reorganisation as described in note 1.2 of Section II headed “Reorganisation” below, which was completed on [•••], the Company became the holding company of the subsidiaries now comprising the Group (the “Reorganisation”).

As at the date of this report, the Company has direct and indirect interests in the subsidiaries as set out in note 1.2 of Section II below. All of these companies are private companies or, if incorporated or established outside Hong Kong, have substantially the same characteristics as a Hong Kong incorporated private company.

No audited financial statements have been prepared by the Company as it is not required to issue audited financial statements under the statutory requirements of its place of incorporation. The audited financial statements of the other companies now comprising the Group as at the date of this report for which there are statutory audit requirements have been prepared in accordance with the relevant accounting principles generally accepted in their places of incorporation. The details of the statutory auditors of these companies are set out in note 1.2 of Section II.

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APPENDIX I

ACCOUNTANT’S REPORT

The directors of the Company have prepared the combined financial statements of the Company and its subsidiaries now comprising the Group for the Relevant Periods, in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) (the “Underlying Financial Statements”). The directors of the Company are responsible for the preparation of the Underlying Financial Statements that gives a true and fair view in accordance with HKFRSs. We have audited the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing (the “HKSAs”) issued by the HKICPA pursuant to separate terms of engagement with the Company.

The financial information has been prepared based on the Underlying Financial Statements, with no adjustment made thereon, and on the basis set out in note 1.3 of Section II below.

Directors’ Responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the financial information that gives a true and fair view in accordance with the basis of presentation set out in note 1.3 of Section II below and in accordance with HKFRSs, and for such internal control as the directors determine is necessary to enable the preparation of financial information that is free from material misstatement, whether due to fraud or error.

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion on the financial information and to report our opinion to you. We carried out our procedures in accordance with Auditing Guideline 3.340 “ [REDACTED] and the Reporting Accountant” issued by the HKICPA.

Opinion

In our opinion, the financial information gives, for the purpose of this report and presented on the basis set out in note 1.3 of Section II below, a true and fair view of the state of affairs of the Company as at 31 March 2013 and 2014 and of the combined state of affairs of the Group as at 31 March 2012, 2013 and 2014 and of the Group’s combined results and cash flows for the Relevant Periods.

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ACCOUNTANT’S REPORT

APPENDIX I

I. FINANCIAL INFORMATION OF THE GROUP

The following is the financial information of the Group prepared by the directors of the Company as at 31 March 2012, 2013 and 2014 and for each of the years ended 31 March 2012, 2013 and 2014 (the “Financial Information”), presented on the basis set out in note 1.3 below.

COMBINED STATEMENTS OF COMPREHENSIVE INCOME

Note
Revenue
5
Cost of sales
7
Gross profit
Other income and gain, net
6
Administrative expenses
7
Operating profit
Finance income
8
Finance costs
8
Finance costs, net
8
Profit before income tax
Income tax expense
9
Profit for the year
Other comprehensive income
Profit and total comprehensive
income attributable to equity
holders of the Company
Basic and diluted earnings per share
11
Dividends
10

Year ended 31 March
2012
2013
2014
HK$’000
HK$’000
HK$’000
98,428
375,147
492,734
(65,736)
(272,557)
(327,100)
32,692
102,590
165,634
15,742
782
2,867
(20,638)
(31,961)
(29,447)
27,796
71,411
139,054
–
–
583
(1,800)
(3,140)
(9,742)
(1,800)
(3,140)
(9,159)
25,996
68,271
129,895
(1,788)
(12,649)
(2,809)
24,208
55,622
127,086
–
–
–
24,208
55,622
127,086
N/A
N/A
N/A
–
50,000
[50,000]

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ACCOUNTANT’S REPORT

APPENDIX I

COMBINED BALANCE SHEETS

Note ASSETS Non-current assets Plant and equipment 13 Deferred income tax assets 19 Deposits and prepayments 14 Current assets Trade and retention receivables 14 Deposits, prepayments and other receivables 14 Inventories 15 Amounts due from customers for contract work 16 Amounts due from related companies 27(d) Income tax receivable Restricted bank balances 17 Cash and cash equivalents (excluding bank overdraft) 17 Total assets EQUITY Capital and reserves Share capital 18 Reserves 18 Total equity	As at 31 March 2012 2013 HK$’000 HK$’000 202,691 314,777 2,927 640 1,360 480 206,978 315,897 8,223 96,749 9,383 8,556 3,737 850 36,373 9,648 707 202 176 440 – – 3,253 22,506 61,852 138,951 268,830 454,848 78 78 85,933 141,555 86,011 141,633	2014 HK$’000 398,832 3,602 1,368
		403,802
		78,586 3,115 – 19,481 386 27 36,138 85,937
		223,670
		627,472

		78 218,641
		218,719

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APPENDIX I

ACCOUNTANT’S REPORT

Note LIABILITIES Non-current liabilities Long-term borrowings 22 Deferred income tax liabilities 19 Amount due to a director 21, 27(d) Current liabilities Trade and retention payables 20 Accruals and other payables 20 Amounts due to customers for contract work 16 Amount due to a director 21, 27(d) Borrowings 22 Income tax payable Total liabilities Total equity and liabilities Net current liabilities Total assets less current liabilities	As at 31 March 2012 2013 HK$’000 HK$’000 9,173 56,334 18,899 29,147 20,079 – 48,151 85,481 8,320 30,064 10,198 21,410 – 36,281 93,067 – 23,083 139,864 – 115 134,668 227,734 182,819 313,215 268,830 454,848 (72,816) (88,783) 134,162 227,114	2014 HK$’000 37,806 31,846 – 69,652 14,873 22,284 – – 298,876 3,068 339,101 408,753 627,472 (115,431) 288,371

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APPENDIX I

ACCOUNTANT’S REPORT

BALANCE SHEETS OF THE COMPANY

Note ASSETS Current assets Prepayments Total assets EQUITY Capital and reserve Share capital 18 Reserve 18 Total equity holder’s deficit LIABILITIES Current liabilities Amount due to a fellow subsidiary Accruals Total liabilities Total equity and liabilities Net current liabilities Total assets less current liabilities	As at 31 March 2013 2014 HK$’000 HK$’000 36 453 36 453 – – (8,522) (10,127) (8,522) (10,127) 8,558 9,380 – 1,200 8,558 10,580 36 453 (8,522) (10,127) (8,522) (10,127)

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APPENDIX I

ACCOUNTANT’S REPORT

COMBINED STATEMENTS OF CHANGES IN EQUITY

At 1 April 2011 Comprehensive income Profit for the year At 31 March 2012 At 1 April 2012 Comprehensive income Profit for the year At 31 March 2013 At 1 April 2013 Comprehensive income Profit for the year Contribution by and distribution to owner Dividends relating to the year ended 31 March 2013 paid to the then shareholders At 31 March 2014	Share capital HK$’000 78 – 78 78 – 78 78 – – 78	Merger reserve HK$’000 (note 18(b)) 10,422 – 10,422 10,422 – 10,422 10,422 – – 10,422	Retained earnings HK$’000 51,303 24,208 75,511 75,511 55,622 131,133 131,133 127,086 (50,000) 208,219	Total HK$’000 61,803 24,208 86,011 86,011 55,622 141,633 141,633 127,086 (50,000) 218,719

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ACCOUNTANT’S REPORT

APPENDIX I

COMBINED STATEMENTS OF CASH FLOWS

Note
Cash flows from operating activities
Net cash generated from operations
26(a)
Interest paid
Interest received
Interest element of finance lease
payments
8
Hong Kong profits tax (paid)/refund
Net cash generated from operating
activities
Cash flows from investing activities
Purchase of plant and equipment
Prepayment for purchase of
plant and equipment
Proceeds from sales of plant and
equipment
26(b)
Net cash used in investing activities
Cash flows from financing activities
Capital element of finance lease
payments
Drawdown of long-term bank loans
Repayment of long-term bank loans
Drawdown of short-term bank loans
Repayment of short-term bank loans
Decrease/(increase) in restricted
bank balances
Repayment to an immediate
holding company
Drawdown from a director
Repayment to a director
Dividend paid
Net cash (used in)/generated from
financing activities

Year ended 31 March
2012
2013
2014
HK$’000
HK$’000
HK$’000
21,672
86,298
114,062
(639)
(1,715)
(7,893)
–
–
583
(1,161)
(1,050)
(1,782)
(340)
(263)
294
19,532
83,270
105,264
(10,290)
(58,716)
(84,794)
(1,360)
(480)
(1,036)
915
1,064
–
(10,735)
(58,132)
(85,830)
(14,774)
(23,007)
(21,146)
–
89,015
102,983
(6,865)
(11,621)
(22,791)
–
81,799
280,764
–
(31,877)
(238,130)
25,024
–
(36,138)
(22,851)
–
–
103,996
32,751
–
(119,305)
(142,945)
–
–
–
(50,000)
(34,775)
(5,885)
15,542

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APPENDIX I

ACCOUNTANT’S REPORT

Note Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Analysis of cash and cash equivalents Cash and cash equivalents 17 Bank overdraft 22	Year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 (25,978) 19,253 34,976 29,231 3,253 22,506 3,253 22,506 57,482 3,253 22,506 85,937 – – (28,455) 3,253 22,506 57,482

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ACCOUNTANT’S REPORT

APPENDIX I

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION

1.1 General information

The Company was incorporated in the Cayman Islands on 17 September 2012 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The address of the Company’s registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

The Company is an investment holding company and its subsidiaries are principally engaged in foundation works and ancillary services in Hong Kong and Macau (the “ [REDACTED] Business”).

The Financial Information is presented in Hong Kong dollars (“HK$”) unless otherwise stated.

1.2 Reorganisation

In preparing for the [REDACTED] of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited, the following reorganisation activities were carried out.

Prior to the incorporation of the Company and the completion of the reorganisation as described below (the “Reorganisation”), the [REDACTED] Business was carried out by companies now comprising the Group (collectively the “Operating Companies”), principally under Sam Woo Group Limited (“SW (BVI)”) throughout the Relevant Periods.

Pursuant to the Reorganisation, the [REDACTED] Business was transferred to the Company through the following steps:

(i) On 30 July 2012, SW (BVI) transferred its entire interest in the issued share capital of one share at HK$1.00 in each of Sam Woo Group (Holdings) Limited (“SW Group (Holdings)”), Sam Woo Ship Management Limited (“SW Ship Management”) and 三和集團有限公司 (“三和集團”) to Mr. Lau Chun Ming, a director of the Company, at a consideration of HK$1.00 each. Thereafter, SW Group (Holdings), SW Ship Management and 三和集團, which were inactive companies with no business activity during the Relevant Periods, ceased to be subsidiaries of SW (BVI).
(ii) Redland Contractors Limited (“Redland Contractors”), a company held on trust by Best Captain Holdings Limited (“Best Captain”) on behalf of SW (BVI), was formally transferred to SW (BVI) on 30 July 2012. Best Captain is a company held by Mr. Lau Chun Ming, a director of the Company.
(iii) The Company was incorporated in the Cayman Islands on 17 September 2012 with an authorised share capital of HK$380,000 divided into 38,000,000 shares with par value of HK$0.01 each, one share of which was allotted and issued nil-paid to Mr. Lau Chun Ming on trust for Actiease Assets Limited (“Actiease Assets”) on 17 September 2012. On [•••], the one share of the Company held by Mr. Lau Chun Ming on trust was formally transferred to Actiease Assets.
(iv) On [•••], Actiease Assets transferred its entire interest in the issued share capital of SW (BVI) to the Company by crediting the existing one nil-paid share in issue as fully paid and allotting and issuing [999] shares, credited as fully paid, to Actiease Assets. Upon completion of the Recognisation, the Company has become the holding company of the companies now comprising the Group.

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APPENDIX I

ACCOUNTANT’S REPORT

Upon completion of the Reorganisation and as at the date of this report, the Company had direct and indirect interests in the following subsidiaries:

			Issued and			Principal
	Place of	Date of	fully paid	Equity interest held		activities and
Name	incorporation	incorporation	share capital	Directly	Indirectly	place of operation	Note
Sam Woo Group Limited	British Virgin Islands	22 February 2001	US$10,000	100%	–	Investment holding	(i)
Sam Woo Bore Pile Foundation	Hong Kong	7 September 1990	HK$10,000,000	–	100%	Foundation works and	(ii)
Limited						ancillary services
						in Hong Kong
Sam Woo Construction &	Hong Kong	11 May 1995	HK$100,000	–	100%	Trading of and leasing	(iii)
Engineering Limited						of machinery and
						equipment
						in Hong Kong
Sam Woo Engineering	Hong Kong	7 October 1980	HK$500,000	–	100%	Leasing of machinery	(iii)
Equipment Limited						and equipment
						in Hong Kong
Sam Woo Foundation Limited	Macau	23 August 2011	MOP30,000	–	100%	Foundation works	(i)
						and ancillary
						services in Macau
Sam Woo Construction Limited	Hong Kong	5 August 2002	HK$10,000	–	100%	Foundation works and	(ii)
						ancillary services,
						and leasing of
						machinery and
						equipment for
						foundation works
						and ancillary
						services in
						Hong Kong
Sam Woo Civil Contractors Limited	Hong Kong	5 August 2002	HK$10,000	–	100%	Inactive	(iii)
Sam Woo Civil Works Limited	Hong Kong	25 July 2003	HK$2	–	100%	Inactive	(iii)
Sam Woo Foundation Limited	Hong Kong	25 July 2003	HK$2	–	100%	Foundation works and	(ii)
						ancillary services
						in Hong Kong
Sam Woo Finance Limited	Hong Kong	28 January 2004	HK$2	–	100%	Provision of financial	(iii)
						services to group
						companies
Sam Woo Offshore Engineering	Hong Kong	25 May 2006	HK$1	–	100%	Inactive	(iii)
Limited
SW AA Construction Group	Hong Kong	22 March 2012	HK$1	–	100%	Inactive	(iv)
Limited (formerly known as
“Sam Woo Construction
Group Limited”)
Sam Woo Foundation Group Limited	Hong Kong	22 March 2012	HK$1	–	100%	Inactive	(iv)
Redland Contractors Limited	Hong Kong	18 May 2011	HK$2	–	100%	Foundation works and	(ii)
						ancillary services
						in Hong Kong

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APPENDIX I

ACCOUNTANT’S REPORT

Notes:

(i) No audited statutory financial statements were issued for these subsidiaries as they are not required to issue audited financial statements under the statutory requirements of their places of incorporation.
(ii) The statutory financial statements of these subsidiaries for the year ended 31 March 2012 and 2013 were audited by PricewaterhouseCoopers.
(iii) The statutory financial statements of these subsidiaries for the years ended 31 March 2012 and 2013 were audited by Lau & Au Yeung C.P.A. Limited.
(iv) The statutory financial statements of these subsidiaries from the date of incorporation to 31 March 2012 and the year ended 31 March 2013 were audited by Lau & Au Yeung C.P.A. Limited.
(v) The statutory financial statements for the year ended 31 March 2014 were yet to be issued as of the date of this report.

1.3 Basis of presentation

Immediately prior to and after the Reorganisation, the [REDACTED] Business has been conducted by the Operating Companies, principally under SW (BVI). Pursuant to the Reorganisation, the [REDACTED] Business were transferred to and held by the Company. The Company has not been involved in any other business prior to the Reorganisation and does not meet the definition of a business. The Reorganisation is merely a reorganisation of the [REDACTED] Business with no change in management of such business. Accordingly, in accordance with the principles of Auditing Guideline 3.340 “ [REDACTED] and the Reporting Accountant” issued by the HKICPA, the Financial Information of the companies now comprising the Group is presented using the carrying values of the [REDACTED] Business for all periods presented.

Inter-company transactions, balances and unrealised gains/losses on transactions between [REDACTED] group companies now comprising the Group are eliminated on combination.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Financial Information are set out below. These policies have been consistently applied during the Relevant Periods, unless otherwise stated.

2.1 Basis of preparation

The principal accounting policies applied in the preparation of the Financial Information which are in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA are set out below. The Financial Information set out in this report has been prepared in accordance with HKFRSs under the historical cost convention.

At 31 March 2012, 2013 and 2014, the Group’s current liabilities exceeded its current assets by approximately HK$72,816,000, HK$88,783,000 and HK$115,431,000, respectively, because of (i) certain bank borrowings contractually due for repayment after one year with a repayment on demand clause amounting to approximately HK$4,827,000, HK$48,147,000 and HK$118,488,000, respectively, have been classified as current liabilities in accordance with the HK Interpretation 5, “Presentation of Financial Statements – Classification by the Borrower of a Term Loan that contains a Repayment on Demand Clause”; and (ii) an increase in the Group’s non-current assets of approximately HK$108,919,000 and HK$87,905,000 as at 31 March 2013 and 2014, respectively, over that of prior year’s, which was partly financed by the borrowings classified under current liabilities.

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ACCOUNTANT’S REPORT

APPENDIX I

The directors closely monitor the Group’s financial performance and liquidity position. They have prepared cash flow projection of the Group for the coming twelve months by taking into account all information that could reasonably be expected to be available and on the basis and assumptions that (i) it is not probable that the relevant banks will exercise its discretion to demand immediate repayment. The directors believe that the bank borrowings will be repaid in accordance with the scheduled dates set out in the relevant loan agreements and that certain banking facilities with principal banks will be renewed when their current terms expire given the good track records and relationship the Group has with the banks; (ii) it has various construction contracts on hand that can generate positive cash flows, and (iii) new banking facilities in addition to those disclosed in note 22(g) have been obtained subsequent to the Relevant Periods. Under these circumstances, the directors are of the opinion that the Group will have adequate financial resources to support its operations and will be able to meet its liabilities as and when they fall due within the next twelve months and therefore have prepared the Financial Information on a going concern basis.

The preparation of 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 Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information, are disclosed in note 4 below.

The following are standards and amendments to existing standards that have been published and are relevant and mandatory for the Group’s accounting periods beginning on or after 1 January 2014 or later periods, but have not been early adopted by the Group.

HKAS 32 (Amendment)	Offsetting Financial Assets and Financial Liabilities1
HKAS 36 (Amendment)	Impairment of Assets – Recoverable amount disclosures for non-financial
	assets1
HKAS 39 (Amendment)	Financial instruments: Recognition and Measurement1
HK(IFRIC) – Int 21	Levies1
HKFRS 7 and HKFRS 9	Financial instruments: Disclosures – Mandatory effective date of
(Amendment)	HKFRS 9 and transition disclosures4
HKFRS 9	Financial Instruments4
HKFRS 9, HKFRS 7 and	Financial Instruments – Hedge Accounting and Amendments to HKFRS 9,
HKAS 39 Amendments	HKFRS 7 and HKAS 394
HKFRS 14	Regulatory Deferral Accounts3
HKFRS 10, HKFRS 12 and	Investment entities1
HKAS 27 (2011)
(Amendment)
HKFRSs (Amendment)	Annual improvements to HKFRSs 2010 – 2012 cycle2
HKFRSs (Amendment)	Annual improvements to HKFRSs 2011 – 2013 cycle2

Notes:

1 Effective for annual periods beginning on or after 1 January 2014

2 Effective for annual periods beginning on or after 1 July 2014

3 Effective for annual periods beginning on or after 1 January 2016

4 The mandatory effective date is yet to be determined

Management is in the process of making an assessment on the impact of these standards, amendments and interpretations to existing HKFRSs and is not yet in a position to state whether they will have a significant impact on the Group’s results of operations and financial position.

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ACCOUNTANT’S REPORT

APPENDIX I

2.2 Subsidiaries

Consolidation

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 consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies merger accounting to account for business combinations under common control, including the Reorganisation described in note 1.2, where all assets and liabilities are recorded at predecessor carrying amounts, as if the combining entities have been consolidated from the date when they first came under the control of the controlling party, and differences between consideration payable and the net assets value are taken to the merger reserve.

Except for the Reorganisation, the Group applies 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 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-byacquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

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, noncontrolling 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 gain or loss.

Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated when necessary, amounts reported by subsidiaries have been adjusted to confirm with the Group’s accounting policies.

Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured 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 the profit or loss.

2.3 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 executive directors that makes strategic decisions.

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ACCOUNTANT’S REPORT

APPENDIX I

2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the Financial Information 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 Financial Information are presented in HK$ which is the Company’s functional and the Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. 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 combined statements of comprehensive income.

(c) Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
income and expenses for each statement of comprehensive income are translated at average exchange rates; and
all resulting exchange differences are recognised as in other comprehensive income.

2.5 Plant and equipment

Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are expensed in the combined statements of comprehensive income during the financial period in which they are incurred.

Depreciation of both owned and leased plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over the estimated useful lives, as follows:

Machinery and equipment 10-15 years Furniture and fixtures 5 years Motor vehicles 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Gains or losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the combined statements of comprehensive income.

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ACCOUNTANT’S REPORT

APPENDIX I

2.6 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets 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 to sell 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). Nonfinancial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.7 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. These are classified as non-current assets.

Regular way purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Loans and receivables are initially recognised at fair value plus transaction costs. They are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

2.8 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, 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 asset is reduced and the amount of the loss is recognised in the combined statements of comprehensive income. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

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 the combined statements of comprehensive income.

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ACCOUNTANT’S REPORT

APPENDIX I

2.9 Leased assets

The Group leases certain machinery and equipment. Leases of machinery 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 machinery and equipment and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other short-term and other long-term payables. The interest element of the finance cost is charged to the combined statements of 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 machinery and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

2.10 Trade and other receivables

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. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of a provision account, and the amount of the loss is recognised in the combined statements of comprehensive income within “administrative expenses”. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against “administrative expenses” in the combined statements of comprehensive income.

2.11 Inventories

Inventories comprise machinery and equipment and construction work materials and consumables and are stated at the lower of cost and net realisable value. Cost is determined using first-in, first-out (FIFO) method.

2.12 Construction contracts

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.

Variations in contract work, claims and incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliably measured.

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ACCOUNTANT’S REPORT

APPENDIX I

The Group uses the “percentage-of-completion method” to determine the appropriate amount of revenue to recognise in a given period. The stage of completion is measured by reference to work performed to date as a percentage of total contract value.

On the combined balance sheets, the Group reports the net contract position for each contract as either an asset or a liability. A contract represents an asset where costs incurred plus recognised profits (less recognised losses) exceed progress billings; a contract represents a liability where the opposite is the case. Progress billings not yet paid by customers and retention receivables are included in current assets as the Group expects to realise these within its normal operating cycle.

2.13 Cash and cash equivalents

In the combined statements of cash flows, cash and cash equivalents include cash on hand and deposits held at call with banks with original maturity of three months or less, and bank overdraft. In the combined balance sheets, bank overdrafts are shown within borrowings in current liabilities.

2.14 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

2.15 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 payables are classified as current liabilities if 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.

2.16 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the combined statements of comprehensive income over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

2.17 Borrowing costs

Borrowing costs are charged to the combined statements of comprehensive income in the period in which they are incurred.

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ACCOUNTANT’S REPORT

APPENDIX I

2.18 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 amount can be 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 obligation. The increase in the provision due to passage of time is recognised as interest expense.

2.19 Current and deferred income tax

The tax expense for the period comprises current and deferred income tax. Tax is recognised in the combined statements of comprehensive income, 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.

(a) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statements of financial position date 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.

(b) Deferred income tax

Inside basis differences

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 combined financial statements. However, the deferred income tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for 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 affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the statements of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

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ACCOUNTANT’S REPORT

APPENDIX I

Outside basis differences

Deferred income tax is provided on taxable temporary differences arising on investments in subsidiaries, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.

(c) Offsetting

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.

2.20 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met. Revenue is shown net of sales tax, returns, rebates and discounts and after eliminating sales within the Group.

Revenue from construction contracts is recognised based on the stage of completion of the contracts as detailed in note 2.12 above.

Rental income from leasing of machinery and equipment is recognised based on the straight-line basis over the lease terms.

2.21 Employee benefits

(a) 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 balance sheet date.

Employee entitlements to sick leave and maternity or paternity leaves are not recognised until the time of leave.

(b) Retirement benefits

The Group operates defined contribution plans and pays contributions to publicly or 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.

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ACCOUNTANT’S REPORT

APPENDIX I

(c) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than twelve months after balance sheet date are discounted to present value.

2.22 Operating 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 comprehensive income on a straight-line basis over the period of the lease.

2.23 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s and Company’s Financial Information in the period in which the dividends are approved by the Company’s shareholders or directors, where appropriate.

2.24 Contingent liabilities

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 resources 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 Financial Information. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

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ACCOUNTANT’S REPORT

APPENDIX I

3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risk: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of the financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Risk management is carried out under policies approved by the directors of the Company. The Directors provide principles for an overall risk management, as well as policies covering specific areas.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities which are denominated in a currency that is not the Company’s functional currency.

The Group’s transactions are mainly denominated in HK$ and Macao Patacas (“MOP”). The majority of assets and liabilities are denominated in HK$ and MOP, and there are no significant assets and liabilities denominated in other currencies. Management considered that the foreign exchange risk for MOP is minimal since exchange rate fluctuation was minimal throughout the years ended 31 March 2012, 2013 and 2014.

(ii) Interest rate risk

The Group is exposed to interest rate risk as borrowings are carried at variable rates. It is the Group’s policy to maintain its borrowings subject to floating rates, and accordingly, the Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

As at 31 March 2012, 2013 and 2014, if the interest rates on borrowings had been 100 basis-points higher/lower with all other variables held constant, post-tax profit for the years would be HK$269,000, HK$1,638,000 and HK$2,811,000 lower/higher, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.

(b) Credit risk

The Group is exposed to credit risk in relation to its cash and cash equivalents, trade and retention receivables, deposits and other receivables, and amounts due from related companies. The Group’s maximum exposure to credit risk is the carrying amounts of these financial assets.

For the year ended 31 March 2012, 2013 and 2014, 97%, 98%, and 99%, respectively, of the Group’s revenue was derived from its top five customers. As at 31 March 2012, 2013 and 2014, the Group had concentration of credit risk as 100%, 93%, and 100% of the total trade receivables due from the Group’s two, two and three customers, respectively.

To manage this risk, management has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, management reviews regularly the recoverable amount of each individual trade and retention receivable to ensure that adequate impairment provision is made for the irrecoverable amounts.

The credit risk on deposits with bank and amounts due from related companies are limited because deposits are in banks with sound credit ratings and management does not expect any loss from nonperformance by related companies.

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ACCOUNTANT’S REPORT

APPENDIX I

(c) Liquidity risk

Liquidity risk refers to the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial assets.

Cash flow forecasting is performed for each operating entity of the Group and aggregated by Management. Management monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements.

The basis of preparing the Financial Information under the going concern assumption have been discussed in note 2.1.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interests payments computed using contractual rates, or if floating, based on the current rates at the year end dates during the Relevant Periods). Where the loan agreement contains a repayable on demand clause which gives the lender the unconditional right to call the loan at any time, the amounts repayable are classified in the earliest time bracket in which the lender could demand repayment. The maturity analysis for other borrowings is prepared based on the scheduled repayment dates. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.

	On demand
	and less than	Between 1	Between 2
	1 year	and 2 years	and 5 years	Total
	HK$’000	HK$’000	HK$’000	HK$’000
As at 31 March 2012
Trade and retention payables	8,320	–	–	8,320
Accruals and other payables	9,707	–	–	9,707
Long-term bank loans	11,130	–	–	11,130
Obligations under finance leases	13,109	8,791	575	22,475
Amount due to a director	93,067	20,079	–	113,146
As at 31 March 2013
Trade and retention payables	30,064	–	–	30,064
Accruals and other payables	20,919	–	–	20,919
Long-term bank loans	69,621	10,869	14,648	95,138
Short-term bank loans	50,168	–	–	50,168
Obligations under finance leases	28,180	11,036	23,158	62,374
As at 31 March 2014
Trade and retention payables	14,873	–	–	14,873
Accruals and other payables	21,793	–	–	21,793
Bank overdraft	28,455	–	–	28,455
Long-term bank loans	166,784	9,438	5,210	181,432
Short-term bank loans	92,923	–	–	92,923
Obligations under finance leases	25,361	11,347	13,273	49,981

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APPENDIX I

3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The capital structure of the Group consists of equity, amount due to a director and borrowings. 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 or sell assets to reduce borrowings. The Group monitors capital on the basis of gearing ratio. The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (including amount due to a director) less cash and cash equivalents and restricted bank balances. The gearing ratio decreases because of the Group’s profit improves over the years. The gearing ratios as at 31 March 2012, 2013 and 2014 were as follows:

Borrowings (including obligations under finance leases and bank overdraft)(note 22) Amount due to a director Less: cash and cash equivalents and restricted bank balances Net debt Total equity Gearing ratio	2012 HK$’000 32,256 113,146 (3,253) 142,149 86,011 165%	As at 31 March 2013 2014 HK$’000 HK$’000 196,198 336,682 – – (22,506) (122,075) 173,692 214,607 141,633 218,719 123% 98%

3.3 Fair value estimation

The carrying amount of the Group’s financial assets and liabilities, including cash and cash equivalents, restricted bank balances, trade and retention receivables, deposits and other receivables and amounts due from related companies, trade and retention payables, other payables, amount due to a director and borrowings approximate their fair values, which either due to their short-term maturities, or that they are subject to floating rates.

The carrying amount of the non-current portion of amount due to a director was a reasonable approximation of its fair value after considering the discounting effect.

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ACCOUNTANT’S REPORT

APPENDIX I

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Fund availability

In order to fund the daily operation and the future expansion of the foundation works and ancillary services business of the Group, significant amounts of capital in the form of borrowing or equity, or a combination of both, is considered to be necessary in the future. Management considers such funding for the future operation and expansion will be available as and when required. The basis of preparing the Financial Information under the going concern assumption has been discussed in note 2.1.

(b) Estimated useful lives and residual values of plant and equipment

Management estimates useful lives of the plant and equipment by reference to the Group’s business model, its assets management policy, the industry practice, expected usage of the assets, expected repair and maintenance, the technical or commercial obsolescence arising from changes or improvements in the market. Residual values of the machinery and equipment are determined based on prevailing market values for equivalent aged assets taking into account the condition of the relevant assets and other economic considerations. Depreciation expense would be significantly affected by the useful lives and residual values of the plant and equipment as estimated by management. If the residual values of plant and equipment had decreased by 10%, the depreciation expenses would increase by HK$1,089,000, HK$1,940,000 and HK$2,284,000 for the years ended 31 March 2012, 2013 and 2014, respectively.

(c) Estimated impairment of plant and equipment

The Group’s major operating assets represent machinery and equipment. Management performs review for impairment of the plant and equipment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable.

Management considered there was no impairment indicator of machinery and equipment during the Relevant Periods as these assets were used for profitable construction projects, and there is a strong demand of these plant and equipment in the second hand market.

(d) Impairment of trade and retention receivables

Management determines the provision for impairment of trade and retention receivables based on the credit history of customers and the current market condition by business segment. Significant judgment is exercised on the assessment of the collectability of receivables from each customer. In making the judgment, management considers a wide range of factors such as results of follow-up procedures, customer payment trends including subsequent payments and customers’ financial positions. If the financial conditions of the customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The final outcome of the recoverability of these receivables will impact the amount of impairment required.

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APPENDIX I

(e) Construction contracts

The Group reviews and revises the estimates of contract revenue, contract costs, variation orders and contract claims prepared for each construction contract as the contract progresses. Budgeted construction costs are prepared by the management on the basis of quotations from time to time provided by the major contractors, suppliers or vendors involved and the experience of the management. In order to keep the budget accurate and up-to-date, management conducts periodic reviews of the budgets of contracts by comparing the budgeted amounts to the actual amounts incurred. Such significant estimate may have impact on the profit recognised in each period.

The Group recognised its contract revenue according to the percentage of work performed to date of the individual contract of construction works as a percentage of total contract value. Because of the nature of the activity undertaken in construction contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different accounting period. The Group reviews and revised the estimates of contract revenue, contract costs, variation orders and contract claims prepared for each construction contract as the contract in progress. Management regularly reviews the progress of the contracts and the corresponding costs of the contract revenue.

(f) Income taxes

The Group is subject to income taxes in Hong Kong and Macau. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred income tax assets relating to certain temporary differences and tax losses are recognised when management considers it is probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. Where the expectation is different from the original estimate, such differences will impact the recognition of deferred income tax assets and income tax expense in the periods in which such estimate is changed.

(g) Provision in respect of litigations and claims

The Group has been engaged in a number of litigations and claims. Contingent liabilities arising from these litigations and claims have been assessed by management with reference to legal advice. Provisions on the possible obligation, if appropriate, are made based on management’s best estimates and judgements. Provision for litigation has been made as at 31 March 2012 and 2013 (note 25).

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APPENDIX I

ACCOUNTANT’S REPORT

5 REVENUE AND SEGMENT INFORMATION

Revenue, which is also the Group’s turnover, represents gross contract receipts on foundation works and ancillary services in the ordinary course of business. Revenue recognised during the Relevant Periods is as follows:

		Year ended 31	March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Turnover
Foundation works and ancillary services	98,428	375,147	492,734

The chief operating decision-maker has been identified as the executive directors of the Company. The executive directors regard the Group’s business as a single operating segment and reviews financial information accordingly.

(a) Segment information

The Group’s revenue from external customers attributable to the countries which the Group derives revenue and information about its non-current assets, excluding deferred income tax assets, located in the country of domicile are detailed below:

Revenue from external customers

Hong Kong Macau Non-current assets (excluding deferred income tax assets) Hong Kong	2012 HK$’000 98,428 – 98,428 2012 HK$’000 204,051	As at 31 March 2013 2014 HK$’000 HK$’000 334,807 37,335 40,340 455,399 375,147 492,734 As at 31 March 2013 2014 HK$’000 HK$’000 315,257 400,200

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APPENDIX I

ACCOUNTANT’S REPORT

(b) Revenue was derived from the following major customers: 2012 HK$’000 Foundation works and ancillary services Customer A – Customer B – Customer C – Customer D 37,873 Customer E 27,200 Customer F 15,089 Customer G 10,416 Others 7,850 98,428 6 OTHER INCOME AND GAIN, NET 2012 HK$’000 Machinery and equipment leasing income 14,800 Gain on disposal of plant and equipment 906 Write-off of plant and equipment – Write-off of trade and retention payables – Recovery from insurance claim – Others 36 15,742	Year ended 31 March 2013 2014 HK$’000 HK$’000 40,340 434,581 159,867 2,289 148,833 699 – – – – – – 4,971 – 21,136 55,165 375,147 492,734 Year ended 31 March 2013 2014 HK$’000 HK$’000 – 230 744 – – (1,147) – 1,015 – 2,680 38 89 782 2,867	Year ended 31 March 2013 2014 HK$’000 HK$’000 40,340 434,581 159,867 2,289 148,833 699 – – – – – – 4,971 – 21,136 55,165 375,147 492,734 Year ended 31 March 2013 2014 HK$’000 HK$’000 – 230 744 – – (1,147) – 1,015 – 2,680 38 89 782 2,867
		2,867

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APPENDIX I

ACCOUNTANT’S REPORT

7 EXPENSES BY NATURE

		Year ended 31	March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Cost of sales
Costs of construction materials	17,424	103,455	109,176
Staff costs_(note)_	18,779	66,513	111,379
Consultancy fee	328	5,261	24,861
Parts and consumables	16,296	38,770	26,338
Subcontracting charges	2,521	17,619	11,669
Transportation	914	13,326	11,701
Depreciation
– owned plant and equipment	3,286	4,720	7,236
– leased plant and equipment	1,142	1,810	2,519
Repair and maintenance	3,440	5,056	5,308
Machinery and equipment leasing expense	578	5,474	6,464
Staff quarters	–	751	3,379
Survey fee	–	568	2,922
Site management fee	156	1,008	777
Insurance	132	3,900	746
Others	740	4,326	2,625
	65,736	272,557	327,100
Administrative expenses
Staff costs, including directors’ emoluments_(note)_	6,062	8,550	11,639
Auditors’ remuneration	690	720	750
Depreciation
– owned plant and equipment	851	652	666
Operating lease rental in respect of
– office and storage premises	2,273	2,956	3,299
– directors’ quarters_(note 12(a))_	1,121	2,032	2,167
Professional fees
– incurred for[REDACTED]	[REDACTED]	[REDACTED] [REDACTED]
– others	6,242	3,493	3,049
Recovery of bad debt	–	(570)	–
Entertainment expenses	1,357	1,700	2,373
Motor vehicle expenses	1,493	1,999	1,171
Bank charges	41	544	579
Others	508	1,807	2,226
	20,638	31,961	29,447
Total cost of sales and administrative expenses	86,374	304,518	356,547

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APPENDIX I

ACCOUNTANT’S REPORT

Note:

Wages and salaries Pension costs – defined contribution plans_(note a)_ Employment benefits Less: amounts charged to cost of sales Less: amounts charged to administrative expenses Amounts capitalised in/(transferred out from) constructing work-in-progress	2012 HK$’000 27,024 925 259 28,208 (18,779) (6,062) 3,367	Year ended 31 March 2013 2014 HK$’000 HK$’000 68,529 116,572 2,210 1,471 761 1,410 71,500 119,453 (66,513) (111,379) (8,550) (11,639) (3,563) (3,565)

(a) The Group participates in a Mandatory Provident Fund scheme (the “MPF Scheme”) in accordance with the Mandatory Provident Fund Scheme Ordinance of Hong Kong. Under the rules of the MPF Scheme, the employer and its employees in Hong Kong are each required to contribute 5% of their gross earnings with a ceiling of HK$1,000 per month on or before 1 June 2012, HK$1,250 per month commencing on 1 June 2013 until 31 May 2014, and HK$1,500 per month commencing on or after 1 June 2014 to the MPF Scheme.

The Group also participates in an employee social security plan (the “Social Security Plan”) and contributes a fixed amount for each employee as required by the regulations in Macau.

The only obligation of the Group with respect to the MPF Scheme and the Social Security Plan is to make the required contributions under the scheme. No forfeited contribution is available to reduce the contribution payable in future year.

8 FINANCE INCOME AND COSTS

Finance income – Interest income on restricted bank balances Finance costs – Interest expense on bank loans wholly repayable within 5 years – Interest expense on obligations under finance leases – Interest expense on bank overdrafts Finance costs, net	2012 HK$’000 – – (572) (1,161) (67) (1,800) (1,800)	Year ended 31 March 2013 2014 HK$’000 HK$’000 – 583 – 583 (2,074) (7,666) (1,050) (1,782) (16) (294) (3,140) (9,742) (3,140) (9,159)

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APPENDIX I

ACCOUNTANT’S REPORT

9 INCOME TAX EXPENSE

The amount of income tax charged to the combined statements of comprehensive income represents:

Hong Kong profits tax Current income tax Over-provision in prior year Deferred income tax_(note 19)_ Macau profits tax Current income tax	2012 HK$’000 132 – 1,656 – 1,788	Year ended 31 March 2013 2014 HK$’000 HK$’000 115 23 (1) (20) 12,535 (263) – 3,069 12,649 2,809	Year ended 31 March 2013 2014 HK$’000 HK$’000 115 23 (1) (20) 12,535 (263) – 3,069 12,649 2,809
			2,809

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profit for the years ended 31 March 2012, 2013 and 2014.

No provision for Macau complementary tax has been made in the Financial Information for the years ended 31 March 2012 and 2013 as the Group had no estimated assessable profit arising in Macau during these years. Macau complementary tax has been provided at the rate of 12% on the estimated assessable profit for the year ended 31 March 2014.

The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the tax rate of Hong Kong as follows:

Profit before income tax Calculated at tax rate of 16.5% Tax effects of: Tax rates of overseas operation Income not subject to tax Expenses not deductible for tax purposes Recognition of previously unrecognised tax losses Utilisation of previously unrecognised tax losses Tax losses for which no deferred income tax asset was recognised Overprovision in prior year Tax concessions Income tax expense	2012 HK$’000 25,996 4,289 – – 733 (2,784) (451) 29 – (28) 1,788	Year ended 31 March 2013 2014 HK$’000 HK$’000 68,271 129,895 11,265 21,433 4 (1,026) (170) (22,623) 1,494 4,975 – – (24) (11) 91 90 (1) (20) (10) (9) 12,649 2,809	Year ended 31 March 2013 2014 HK$’000 HK$’000 68,271 129,895 11,265 21,433 4 (1,026) (170) (22,623) 1,494 4,975 – – (24) (11) 91 90 (1) (20) (10) (9) 12,649 2,809

			21,433 (1,026) (22,623) 4,975 – (11) 90 (20) (9)
			2,809

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ACCOUNTANT’S REPORT

APPENDIX I

10 DIVIDENDS

No dividend has been paid or declared by the Company since its incorporation.

Special dividends of HK$50,000,000 and HK$[50,000,000] were declared [and paid] by the companies now comprising the Group to the then shareholders in August 2013 and [date], respectively. The rates of dividends and the number of shares ranking for dividends are not presented as such information is not considered meaningful for the purpose of this report.

11 EARNINGS PER SHARE

No earnings per share information is presented as its inclusion, for the purpose of the Financial Information, is not considered meaningful due to the group reorganisation and the presentation of the results for the Relevant Periods on a combined basis as disclosed in note 1.3 above.

12 EMOLUMENTS FOR DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS

(a) Directors’ emoluments

The emoluments of individual director of the Company during the Relevant Periods which were included in the staff costs as disclosed in note 7 are set out below:

For the year ended 31 March 2012
Employer’s
contribution
Discretionary
Directors’
to pension
Salaries
bonus
quarters
scheme
HK$’000
HK$’000
HK$’000
HK$’000
Executive directors
Mr. Lau Chun Ming
468
–
432
–
Mr. Lau Chun Kwok
627
–
473
11
Mr. Lau Chun Ka
228
–
–
4
Ms. Leung Lai So
286
–
216
11
Independent non-executive
directors
Mr. Chu Tak Sum
–
–
–
–
Mr. Ip Tin Chee, Arnold
–
–
–
–
Professor Wong Sue Cheun,
Roderick
–
–
–
–
1,609
–
1,121
26

Total
HK$’000
900
1,111
232
513
–
–
–

2,756

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APPENDIX I

ACCOUNTANT’S REPORT

For the year ended 31 March 2013 Employer’s contribution Discretionary Directors’ to pension Salaries bonus quarters scheme HK$’000 HK$’000 HK$’000 HK$’000 Executive directors Mr. Lau Chun Ming 624 – 612 – Mr. Lau Chun Kwok 684 – 558 15 Mr. Lau Chun Ka 684 – 558 15 Ms. Leung Lai So 312 – 304 – Independent non-executive directors Mr. Chu Tak Sum – – – – Mr. Ip Tin Chee, Arnold – – – – Professor Wong Sue Cheun, Roderick – – – – 2,304 – 2,032 30 For the year ended 31 March 2014 Employer’s contribution Discretionary Directors’ to pension Salaries bonus quarters scheme HK$’000 HK$’000 HK$’000 HK$’000 Executive directors Mr. Lau Chun Ming 720 – 600 – Mr. Lau Chun Kwok 720 – 600 15 Mr. Lau Chun Ka 677 – 643 15 Ms. Leung Lai So 336 – 324 – Independent non-executive directors Mr. Chu Tak Sum – – – – Mr. Ip Tin Chee, Arnold – – – – Professor Wong Sue Cheun, Roderick – – – – 2,453 – 2,167 30	Total HK$’000 1,236 1,257 1,257 616 – – –
	4,366

	Total HK$’000 1,320 1,335 1,335 660 – – –
	4,650

The remuneration shown above represents remuneration received from the Group by these directors in their capacity as employees to the Group and/or in their capacity as directors of the companies now comprising the Group during the Relevant Periods.

No directors of the Company waived any emolument during the Relevant Periods.

Mr. Chu Tak Sum, Mr. Ip Tin Chee, Arnold and Professor Wong Sue Cheun, Roderick were appointed as the Company’s independent non-executive directors on [date]. During the Relevant Periods, the independent non-executive directors have not yet been appointed and did not receive any remuneration.

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APPENDIX I

ACCOUNTANT’S REPORT

(b) Five highest paid individuals

For the years ended 31 March 2012, 2013 and 2014, the five individuals whose emoluments were the highest in the Group include 2, 3 and 3 directors, respectively, whose emoluments were reflected in the analysis presented above. The emoluments paid to the remaining 3, 2 and 2 individuals are as follows:

Salaries, bonus, other allowances and benefits in kind Pension costs – defined contribution plans	2012 HK$’000 2,428 88 2,516	Year ended 31 March 2013 2014 HK$’000 HK$’000 2,774 3,492 86 101 2,860 3,593	Year ended 31 March 2013 2014 HK$’000 HK$’000 2,774 3,492 86 101 2,860 3,593
			3,593

The emoluments of the remaining individuals fell within the following bands:

Nil – HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$1,500,001 – HK$2,000,000 HK$2,000,001 – HK$2,500,000	Number of individuals Year ended 31 March 2012 2013 2014 2 1 – 1 – – – – 1 – 1 1 3 2 2	Number of individuals Year ended 31 March 2012 2013 2014 2 1 – 1 – – – – 1 – 1 1 3 2 2
		2

During the Relevant Periods, no emolument was paid by the Group to any of the directors or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for the loss of office.

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APPENDIX I

ACCOUNTANT’S REPORT

13 PLANT AND EQUIPMENT

Machinery and equipment HK$’000 At 1 April 2011 Cost 318,087 Accumulated depreciation (128,142) Net book amount 189,945 Year ended 31 March 2012 Opening net book amount 189,945 Additions 9,805 Transfer from inventories 5,833 Transfer to contracting work-in-progress (398) Disposals – Depreciation (4,428) Closing net book amount 200,757 At 31 March 2012 Cost 331,320 Accumulated depreciation (130,563) Net book amount 200,757 Year ended 31 March 2013 Opening net book amount 200,757 Additions 119,639 Transfer to contracting work-in-progress (121) Disposals (320) Depreciation (6,530) Closing net book amount 313,425 At 31 March 2013 Cost 450,194 Accumulated depreciation (136,769) Net book amount 313,425	Furniture and fixtures HK$’000 1,426 (1,171) 255 255 52 – – (9) (116) 182 1,352 (1,170) 182 182 60 – – (92) 150 1,412 (1,262) 150	Motor vehicles HK$’000 5,884 (3,830) 2,054 2,054 433 – – – (735) 1,752 6,286 (4,534) 1,752 1,752 10 – – (560) 1,202 6,296 (5,094) 1,202	Total HK$’000 325,397 (133,143) 192,254 192,254 10,290 5,833 (398) (9) (5,279) 202,691 338,958 (136,267) 202,691 202,691 119,709 (121) (320) (7,182) 314,777 457,902 (143,125) 314,777

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APPENDIX I

ACCOUNTANT’S REPORT

Machinery and equipment HK$’000 Year ended 31 March 2014 Opening net book amount 313,425 Additions 95,241 Write-off (1,147) Depreciation (9,755) Closing net book amount 397,764 At 31 March 2014 Cost 539,674 Accumulated depreciation (141,910) Net book amount 397,764	Furniture and fixtures HK$’000 150 357 – (105) 402 1,656 (1,254) 402	Motor vehicles HK$’000 1,202 25 – (561) 666 6,181 (5,515) 666	Total HK$’000 314,777 95,623 (1,147) (10,421) 398,832 547,511 (148,679) 398,832

(a) The net book value of plant and equipment held under finance lease obligations comprise:

Cost – Capitalised finance leases Accumulated depreciation Net book amount	2012 HK$’000 62,858 (2,529) 60,329	As at 31 March 2013 2014 HK$’000 HK$’000 122,490 120,429 (4,339) (6,296) 118,151 114,133

(b) As at 31 March 2012, 2013 and 2014, plant and equipment amounting to HK$14,339,000, HK$46,813,000 and HK$99,145,000 were secured for the Group’s bank borrowings (note 22(h)(vi)).

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ACCOUNTANT’S REPORT

APPENDIX I

14 TRADE AND RETENTION RECEIVABLES, AND DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

Trade receivables Retention receivables Trade and retention receivables Deposits, prepayments and other receivables_(note)_ Provision for impairment Less: non-current portion Current portion	2012 HK$’000 3,610 4,613 8,223 16,650 (5,907) 10,743 (1,360) 9,383	As at 31 March 2013 2014 HK$’000 HK$’000 70,290 27,799 26,459 50,787 96,749 78,586 9,036 4,483 – – 9,036 4,483 (480) (1,368) 8,556 3,115	As at 31 March 2013 2014 HK$’000 HK$’000 70,290 27,799 26,459 50,787 96,749 78,586 9,036 4,483 – – 9,036 4,483 (480) (1,368) 8,556 3,115
			78,586

			4,483 –
			4,483 (1,368)
			3,115

note: The balance mainly represents receivables for leasing of machinery and equipment, bond deposit for construction projects, rental deposit, prepayment for plant and equipment and other miscellaneous prepayments.

The credit period granted to trade customers other than for retention receivables was within 45 days. The terms and conditions in relation to the release of retention vary from contract to contract, which may be subject to practical completion, the expiry of the defect liability period or a pre-agreed time period. The Group does not hold any collateral as security.

As at 31 March 2012, 2013 and 2014, the ageing analysis of the trade receivables based on invoice date was as follows:

1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days	2012 HK$’000 1,360 – – – 2,250 3,610	As at 31 March 2013 2014 HK$’000 HK$’000 69,824 27,799 466 – – – – – – – 70,290 27,799	As at 31 March 2013 2014 HK$’000 HK$’000 69,824 27,799 466 – – – – – – – 70,290 27,799
			27,799

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APPENDIX I

ACCOUNTANT’S REPORT

In the combined balance sheets, retention receivables were classified as current assets. The ageing of the retention receivables based on invoice date was as follows:

Within 1 year Between 2 and 5 years	2012 HK$’000 1,137 3,476 4,613	As at 31 March 2013 2014 HK$’000 HK$’000 25,021 34,442 1,438 16,345 26,459 50,787	As at 31 March 2013 2014 HK$’000 HK$’000 25,021 34,442 1,438 16,345 26,459 50,787
			50,787

As at 31 March 2012, 2013 and 2014, trade and retention receivables of HK$5,726,000, HK$18,502,000 and HK$2,072,000 were past due but not impaired. These relate to certain customers with no recent history of default. The ageing analysis of these trade and retention receivables was as follows:

Past due by: 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days	2012 HK$’000 – – – – 2,250 3,476 5,726	As at 31 March 2013 2014 HK$’000 HK$’000 12,558 – 4,684 322 322 – 523 385 – – 415 1,365 18,502 2,072	As at 31 March 2013 2014 HK$’000 HK$’000 12,558 – 4,684 322 322 – 523 385 – – 415 1,365 18,502 2,072
			2,072

As at 31 March 2012, 2013 and 2014, there was no impairment in trade and retention receivables.

The carrying amounts of trade and retention receivables approximated their fair values and were denominated in the following currencies:

HK$ MOP	2012 HK$’000 8,223 – 8,223	As at 31 March 2013 2014 HK$’000 HK$’000 31,892 27,026 64,857 51,560 96,749 78,586	As at 31 March 2013 2014 HK$’000 HK$’000 31,892 27,026 64,857 51,560 96,749 78,586
			78,586

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APPENDIX I

ACCOUNTANT’S REPORT

As at 31 March 2012, HK$5,907,000 of other receivables was impaired and fully provided. As at 31 March 2013 and 2014, there was no impairment in other receivables.

The ageing of these other receivables was as follow:

More than 365 days Movements of provision for impairment of other receivables were as At beginning of the year Receivables written off as uncollectible At end of the year 15 INVENTORIES Machinery and equipment for sale Materials and consumables for construction works	2012 HK$’000 5,907 follows: 2012 HK$’000 8,269 (2,362) 5,907 2012 HK$’000 2,455 1,282 3,737	As at 31 March 2013 2014 HK$’000 HK$’000 – – As at 31 March 2013 2014 HK$’000 HK$’000 5,907 – (5,907) – – – As at 31 March 2013 2014 HK$’000 HK$’000 – – 850 – 850 –	As at 31 March 2013 2014 HK$’000 HK$’000 – – As at 31 March 2013 2014 HK$’000 HK$’000 5,907 – (5,907) – – – As at 31 March 2013 2014 HK$’000 HK$’000 – – 850 – 850 –
			–

note: During the year ended 31 March 2013, the Group disposed of its inventories amounting to HK$2,952,000, to companies beneficially owned by the directors of the Company at carrying value (note 27(b)).

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APPENDIX I

ACCOUNTANT’S REPORT

16 CONTRACTING WORK-IN-PROGRESS

Contract costs incurred plus attributable profits less foreseeable losses to date Progress billings to date Included in current assets/(liabilities) are the following: Due from customers for contract work Due to customers for contract work	2012 HK$’000 196,395 (160,022) 36,373 36,373 – 36,373	As at 31 March 2013 2014 HK$’000 HK$’000 113,541 118,807 (140,174) (99,326) (26,633) 19,481 9,648 19,481 (36,281) – (26,633) 19,481

As at 31 March 2012, 2013 and 2014, amounts due from customers for contract work included a balance of HK$9,374,000 not yet certified by a customer. On 14 November 2013, a subsidiary of the Company served a notice of arbitration to this customer to settle the dispute on the final payment of the contract. Taking into consideration the advice from its legal representative the directors consider that the Group is fully entitled to payment to cover at least the balance on book.

17 CASH AND CASH EQUIVALENTS

Cast at bank Cash on hand Less: restricted bank balances_(note)_ Cash and cash equivalents Maximum exposure to credit risk	2012 HK$’000 3,237 16 – 3,253 3,237	As at 31 March 2013 2014 HK$’000 HK$’000 22,469 122,004 37 71 – (36,138) 22,506 85,937 22,469 122,004

note: Restricted bank balances are funds pledged for banking facilities or guarnatee.

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APPENDIX I

ACCOUNTANT’S REPORT

Cash and cash equivalents include the following for the purposes of the combined statements of cash flows:

Cash and cash equivalents Bank overdraft_(note 22)_	2012 HK$’000 3,253 – 3,253	As at 31 March 2013 2014 HK$’000 HK$’000 22,506 85,937 – (28,455) 22,506 57,482

The carrying amounts of cash and cash equivalents and restricted bank balances were denominated in the following currencies:

HK$ MOP United States dollars (“US$”) SHARE CAPITAL AND RESERVES Group At 31 March 2011 Profit for the year At 31 March 2012 Profit for the year At 31 March 2013 Profit for the year Dividends relating to the year ended 31 March 2013 paid to the then shareholders At 31 March 2014	Share capital HK$’000 (note a) 78 – 78 – 78 – – 78	2012 HK$’000 3,247 – 6 3,253 Merger reserve HK$’000 (note b) 10,422 – 10,422 – 10,422 – – 10,422	As at 31 March 2013 2014 HK$’000 HK$’000 11,904 87,901 10,575 34,151 27 23 22,506 122,075 Retained earnings Total HK$’000 HK$’000 51,303 61,803 24,208 24,208 75,511 86,011 55,622 55,622 131,133 141,633 127,086 127,086 (50,000) (50,000) 208,219 218,719

18 SHARE CAPITAL AND RESERVES

note a: The Financial Information has been prepared as if the current group structure had been in existence throughout each of the years ended 31 March 2012, 2013 and 2014 or since the date when the combining companies first came under the control of SW (BVI), where there is a shorter period. The share capital as presented in the combined balance sheets as at 31 March 2012, 2013 and 2014 represented the share capital of SW (BVI) which is the intermediate holding company of other members of the Group.

note b: Merger reserve as presented in the combined balance sheets during the Relevant Periods represented the difference between the aggregation of the nominal value of the share capital of Sam Woo Bore Pile Foundation Limited and Sam Woo Engineering Equipment Limited acquired over the nominal value of the share capital of SW (BVI) issued in exchange thereof pursuant to the reorganisation completed in 2003.

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APPENDIX I

ACCOUNTANT’S REPORT

Company

At 17 September 2012 (date of incorporation) Issue of ordinary share Loss for the period At 31 March 2013 Loss for the year At 31 March 2014	Share capital HK$’000 (note c) – – – – – –	Accumulated losses HK$’000 – – (8,522) (8,522) (1,605) (10,127)	Total HK$’000 – – (8,522) (8,522) (1,605) (10,127)

note c: The Company was incorporated in the Cayman Islands on 17 September 2012 with an authorised share capital of HK$380,000 divided into 38,000,000 shares with par value of HK$0.01 each, one share of which was allotted and issued nil-paid to Mr. Lau Chun Ming on trust for Actiease Assets since 17 September 2012. On [•••], the share was formally transferred to Actiease Assets.

19 DEFERRED INCOME TAX

The analysis of deferred tax assets and deferred tax liabilities were as follows:

Deferred income tax asset: Recoverable after more than 12 months Recoverable within 12 months Deferred income tax liabilities: Payable or to be settled more than 12 months Deferred income tax liabilities, net The movement on the deferred income tax account was as follows: At beginning of the year Recognised in the combined statements of comprehensive income_(note 9)_ At end of the year	2012 HK$’000 2,447 480 (18,899) (15,972) 2012 HK$’000 (14,316) (1,656) (15,972)	As at 31 March 2013 2014 HK$’000 HK$’000 544 3,517 96 85 (29,147) (31,846) (28,507) (28,244) As at 31 March 2013 2014 HK$’000 HK$’000 (15,972) (28,507) (12,535) 263 (28,507) (28,244)

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APPENDIX I

ACCOUNTANT’S REPORT

The movements in deferred income tax liabilities and assets during the Relevant Periods, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows:

Deferred income tax liabilities – Accelerated tax depreciation

At beginning of the year Recognised in the combined statements of comprehensive income At end of the year Deferred income tax assets – Tax losses At beginning of the year Recognised in the combined statements of comprehensive income At end of the year	2012 HK$’000 26,945 3,795 30,740 2012 HK$’000 12,629 2,139 14,768	As at 31 March 2013 2014 HK$’000 HK$’000 30,740 42,321 11,581 12,584 42,321 54,905 As at 31 March 2013 2014 HK$’000 HK$’000 14,768 13,814 (954) 12,847 13,814 26,661	As at 31 March 2013 2014 HK$’000 HK$’000 30,740 42,321 11,581 12,584 42,321 54,905 As at 31 March 2013 2014 HK$’000 HK$’000 14,768 13,814 (954) 12,847 13,814 26,661
			26,661

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet.

Deferred income tax liabilities Deferred income tax assets	2012 HK$’000 (18,899) 2,927 (15,972)	As at 31 March 2013 2014 HK$’000 HK$’000 (29,147) (31,846) 640 3,602 (28,507) (28,244)	As at 31 March 2013 2014 HK$’000 HK$’000 (29,147) (31,846) 640 3,602 (28,507) (28,244)
			(28,244)

Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through future taxable profits is probable. As at 31 March 2012, 2013 and 2014, the Group had unrecognised tax losses of approximately HK$1,221,000, HK$1,655,000 and HK$2,104,000, respectively, that can be carried forward to offset against future taxable income.

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APPENDIX I

ACCOUNTANT’S REPORT

The expiry of unrecognised tax losses are as follows:

Tax losses without expiry date Tax losses expiring in 3 years	2012 HK$’000 1,221 – 1,221	As at 31 March 2013 2014 HK$’000 HK$’000 1,561 2,104 94 – 1,655 2,104	As at 31 March 2013 2014 HK$’000 HK$’000 1,561 2,104 94 – 1,655 2,104
			2,104

20 TRADE AND RETENTION PAYABLES, ACCRUALS AND OTHER PAYABLES

Trade payables Retention payables Total trade and retention receivables Accruals and other payables_(note)_	2012 HK$’000 8,102 218 8,320 10,198 18,518	As at 31 March 2013 2014 HK$’000 HK$’000 29,828 14,534 236 339 30,064 14,873 21,410 22,284 51,474 37,157	As at 31 March 2013 2014 HK$’000 HK$’000 29,828 14,534 236 339 30,064 14,873 21,410 22,284 51,474 37,157
			14,873 22,284
			37,157

note: The amounts mainly represent advance from a customer, and accruals and other payables for wages, legal and professional fees and transportation costs.

The ageing analysis of the trade payables based on invoice date was as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days	2012 HK$’000 4,282 1,741 1,006 490 – 583 8,102	As at 31 March 2013 2014 HK$’000 HK$’000 24,181 13,275 2,386 641 2,181 – 497 10 – 196 583 412 29,828 14,534	As at 31 March 2013 2014 HK$’000 HK$’000 24,181 13,275 2,386 641 2,181 – 497 10 – 196 583 412 29,828 14,534
			14,534

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APPENDIX I

ACCOUNTANT’S REPORT

In the combined balance sheets, retention payables were classified as current liabilities. The ageing of the retention payables was as follows:

Within 1 year Between 2 and 5 years	2012 HK$’000 83 135 218	As at 31 March 2013 2014 HK$’000 HK$’000 142 331 94 8 236 339	As at 31 March 2013 2014 HK$’000 HK$’000 142 331 94 8 236 339
			339

The carrying amounts of trade and retention payables approximated their fair value and were denominated in the following currencies:

HK$ MOP Euro Singapore dollars	2012 HK$’000 8,288 – 32 – 8,320	As at 31 March 2013 2014 HK$’000 HK$’000 26,727 13,445 2,579 603 758 213 – 612 30,064 14,873	As at 31 March 2013 2014 HK$’000 HK$’000 26,727 13,445 2,579 603 758 213 – 612 30,064 14,873
			14,873

21 AMOUNT DUE TO A DIRECTOR

As at 31 March 2012, amount due to a director was interest free, repayable on demand except for an amount of HK$20,079,000 which was repayable on 31 May 2013 and classified as non-current liabilities.

As at 31 March 2013 and 2014, there was no amount due to a director.

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APPENDIX I

ACCOUNTANT’S REPORT

22 BANK OVERDRAFTS AND BORROWINGS

Non-current Obligations under finance leases Long-term bank loans Current Bank overdraft Short-term bank loans Current portion of long-term bank loans due for repayment within one year Long-term bank loans due after one year which contain repayment on demand clause Obligations under finance leases due for repayment within one year Obligations under finance leases due after one year which contain repayment on demand clause Total borrowings	2012 HK$’000 9,173 – 9,173 – – 5,864 4,827 12,392 – 23,083 32,256	As at 31 March 2013 2014 HK$’000 HK$’000 32,146 23,656 24,188 14,150 56,334 37,806 – 28,455 49,922 92,556 22,068 44,023 41,829 110,104 19,727 15,354 6,318 8,384 139,864 298,876 196,198 336,682	As at 31 March 2013 2014 HK$’000 HK$’000 32,146 23,656 24,188 14,150 56,334 37,806 – 28,455 49,922 92,556 22,068 44,023 41,829 110,104 19,727 15,354 6,318 8,384 139,864 298,876 196,198 336,682
			37,806
			28,455 92,556 44,023 110,104 15,354 8,384
			298,876
			336,682

(a) The maturity of borrowings was as follows:

(i) Bank overdraft and bank loans

In the combined balance sheets, bank loans due for repayment after one year which contain repayment on demand clause were classified as current liabilities.

However, based on the scheduled repayment terms set out in the loan agreements and ignoring the effect of any repayment on demand clause, the maturity of bank overdraft and bank loans was as follows:

Bank overdraft on demand Within 1 year Between 1 and 2 years Between 2 and 5 years	2012 HK$’000 – 5,864 3,402 1,425 10,691	As at 31 March 2013 2014 HK$’000 HK$’000 – 28,455 71,990 136,579 24,112 42,283 41,905 81,971 138,007 289,288	As at 31 March 2013 2014 HK$’000 HK$’000 – 28,455 71,990 136,579 24,112 42,283 41,905 81,971 138,007 289,288
			289,288

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APPENDIX I

ACCOUNTANT’S REPORT

(ii) Obligations under finance leases

In the combined balance sheets, obligations under finance lease due for repayment after one year which contain repayment on demand clause were classified as current liabilities.

However, based on the scheduled repayment terms set out in the finance lease agreements and ignoring the effect of any repayment on demand clause, the maturity of obligations under finance lease was as follows:

Within 1 year Between 1 and 2 years Between 2 and 5 years	2012 HK$’000 12,392 8,602 571 21,565	As at 31 March 2013 2014 HK$’000 HK$’000 19,727 15,354 12,464 15,308 26,000 16,732 58,191 47,394	As at 31 March 2013 2014 HK$’000 HK$’000 19,727 15,354 12,464 15,308 26,000 16,732 58,191 47,394
			47,394

(b) The weighted average interest rate during the Relevant Periods were as follows:

		As at 31 March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Short-term bank loans	–	3.1%	5.0%
Long-term bank loans	3.8%	4.0%	2.9%
Obligations under finance leases	3.9%	3.8%	3.1%
Bank overdraft	–	–	1.4%

HK$ MOP	2012 HK$’000 32,256 – 32,256	As at 31 March 2013 2014 HK$’000 HK$’000 196,198 277,585 – 59,097 196,198 336,682	As at 31 March 2013 2014 HK$’000 HK$’000 196,198 277,585 – 59,097 196,198 336,682
			336,682

(d) The carrying amounts approximated their fair value as the impact of discounting is not significant. The fair values are within level 2 of the fair value hierarchy.

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APPENDIX I

ACCOUNTANT’S REPORT

(e) The obligation under finance leases are as follows:

Gross finance leases – minimum lease payments Within 1 year Between 1 and 2 years Between 2 and 5 years Future finance charges on finance lease Present value of obligations under finance leases	2012 HK$’000 13,109 8,791 575 22,475 (910) 21,565	As at 31 March 2013 2014 HK$’000 HK$’000 28,180 25,361 11,036 11,347 23,158 13,273 62,374 49,981 (4,183) (2,587) 58,191 47,394	As at 31 March 2013 2014 HK$’000 HK$’000 28,180 25,361 11,036 11,347 23,158 13,273 62,374 49,981 (4,183) (2,587) 58,191 47,394
			49,981 (2,587)
			47,394

(f) The finance leases are secured by certain plant and equipment with carrying amounts of HK$60,329,000, HK$118,151,000 and HK$114,133,000 of a subsidiary as at 31 March 2012, 2013 and 2014 and unlimited personal guarantees given by directors as at 31 March 2013 and 2014. The said guarantees given by directors and certain subsidiaries are to be released and replaced by guarantees of the Company before [REDACTED] of the Company.
(g) The Group has the following undrawn borrowing facilities:

				As at 31 March
			2012	2013	2014
			HK$’000	HK$’000	HK$’000
Floating rate
Expiring within	1	year	35,000	86,539	69,717

(h) The Group’s banking facilities are subject to annual review and secured or guaranteed by:

Secured Unsecured	2012 HK$’000 25,431 6,825 32,256	As at 31 March 2013 2014 HK$’000 HK$’000 114,152 196,174 82,046 140,508 196,198 336,682	As at 31 March 2013 2014 HK$’000 HK$’000 114,152 196,174 82,046 140,508 196,198 336,682
			336,682

(i) corporate guarantees jointly granted by certain subsidiaries to the extent of HK$35,000,000, HK$35,000,000 and HK$73,130,000, respectively, as at 31 March 2012, 2013 and 2014.
(ii) personal guarantees provided by directors as at 31 March 2012, 2013 and 2014;
(iii) a guarantee granted by the Government of the Hong Kong Special Administrative Region to the extent of HK$6,825,000 HK$4,125,000 and HK$1,425,000, respectively, as at 31 March 2012, 2013 and 2014;

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APPENDIX I

ACCOUNTANT’S REPORT

(iv) an unlimited guarantee given by certain subsidiaries and related parties as at 31 March 2012, 2013 and 2014;
(v) certain properties held by related parties as at 31 March 2013 and 2014;
(vi) certain plant and equipment amounting to HK$14,339,000, HK$46,813,000 and HK$99,145,000 of a subsidiary, respectively, as at 31 March 2012, 2013 and 2014;
(vii) an assignment of receivable over the proceeds of a construction project as at 31 March 2013;
(viii) an indemnity from a subsidiary for the issuance of guarantee or performance bond of the Company as at 31 March 2013 and 2014; and
(ix) a deposit of not less than HK$30,422,000 executed by Mr. Lau Chun Ming as at 31 March 2013.
(x) a marginal deposit amounting to HK$9,300,000 for letter of credit to a supplier for the purchase of plant and equipment, as at 31 March 2014.
(xi) fixed deposits amounting to HK$17,138,000 and HK$9,700,000 for security of a performance bond and a revolving loan, respectively, as at 31 March 2014.

The above guarantees, securities and deposit given by directors and related parties are to be released and replaced by guarantees of the Company before [REDACTED] of the Company.

23 COMMITMENTS

(a) Capital commitments

Capital expenditure committed at the balance sheet date but not yet incurred is as follows:

		As at 31 March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Contracted but not provided for
Plant and equipment	13,255	36,989	104,815

(b) Operating lease commitments – as lessee

The future aggregate minimum lease rental expenses in respect of hiring equipment, office and storage premises, and quarters for workers and directors under non-cancellable operating leases are payable during the Relevant Periods.

No later than 1 year Later than 1 year and no later than 5 years	2012 HK$’000 961 949 1,910	As at 31 March 2013 2014 HK$’000 HK$’000 5,522 3,264 1,943 917 7,465 4,181	As at 31 March 2013 2014 HK$’000 HK$’000 5,522 3,264 1,943 917 7,465 4,181
			4,181

(c) Operating lease commitments – as lessor

As at 31 March 2012, 2013 and 2014, the Group did not have any operating lease commitments as a lessor.

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ACCOUNTANT’S REPORT

APPENDIX I

24 CONTINGENT LIABILITIES

As at 31 March 2013 and 2014, the Group has given guarantee on performance bond of HK$16,487,000 and HK$67,305,000, respectively, in respect of construction contracts of the Group in its ordinary course of business. The performance bond as at 31 March 2013 was released in June 2013. The performance bond as at 31 March 2014 is expected to be released in October 2016.

25 LITIGATION

There was a fatal accident in 2004 when a worker was performing his work duty under the employment of a subsidiary of the Company. The subsidiary (“Defendant 1”) has been among other defendants which are two other subsidiaries of the Company (“Defendant 2” and “Defendant 3” respectively), and a related party of the Company (“Defendant 4”), (collectively “Defendants”) being sued in relation to the incident. In July 2011, the Court of Appeal judged that the Defendants were jointly and severally liable to make a compensation of HK$2,680,000 to the deceased. The directors were of the opinion that Defendant 2, Defendant 3 and Defendant 4 should not be considered as the general employers of the deceased and should not be required to share the compensation. Defendant 2 and Defendant 3, together with Defendant 4, appealed to the Court of Final Appeal. In May 2013, the Court of Final Appeal allowed the appeal of Defendant 2, Defendant 3 and Defendant 4, and dismissed the claims against them. As at 31 March 2012 and 2013, the Group had provided a total sum of HK$2,680,000 in respect of Defendant 1’s liability. During the year ended 31 March 2014, the Group had recovered the said amount from insurance claim.

Up to the date of this report, management cannot ascertain the amount of legal costs incurred by the plaintiff that should be borne by Defendant 1, pursuant to the Court of Final Appeal’s judgment on costs. The directors take the view that all these legal costs shall be covered by the relevant insurance purchased by Defendant 1. If there is any shortfall between the payment by the insurer and the actual amount of costs incurred by Defendant 1, the controlling shareholders of the Company (i.e. Mr. Lau Chun Ming, Ms. Leung Lai So, Silver Bright Holdings Limited and Actiease Assets) have undertaken to make up such shortfall on demand.

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ACCOUNTANT’S REPORT

APPENDIX I

26 NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS

(a) Reconciliations of profit for the Relevant Periods to net cash generated from operations:

Profit before income tax Depreciation of plant and equipment Gain on disposal of plant and equipment Write-off of plant and equipment Write-off of trade and retention payables Finance income Finance costs Changes in working capital: Increase in inventories Decrease/(increase) in trade and retention receivables (Increase)/decrease in deposits, prepayments and other receivables (Increase)/decrease in amounts due from customers for contract work (Increase)/decrease in amounts due from related companies Increase/(decrease) in trade and retention payables Increase in accruals and other payables (Decrease)/increase in amounts due to customers for contract work Net cash generated from operations	Year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 25,996 68,271 129,895 5,279 7,182 10,421 (906) (744) – – – 1,147 – – (1,015) – – (583) 1,800 3,140 9,742 32,169 77,849 149,607 (433) (497) – 7,953 (88,526) 18,163 (6,026) 827 5,109 (16,836) 27,278 (8,983) (547) 505 (184) 2,985 21,744 (14,176) 4,086 10,837 807 (1,679) 36,281 (36,281) 21,672 86,298 114,062	Year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 25,996 68,271 129,895 5,279 7,182 10,421 (906) (744) – – – 1,147 – – (1,015) – – (583) 1,800 3,140 9,742 32,169 77,849 149,607 (433) (497) – 7,953 (88,526) 18,163 (6,026) 827 5,109 (16,836) 27,278 (8,983) (547) 505 (184) 2,985 21,744 (14,176) 4,086 10,837 807 (1,679) 36,281 (36,281) 21,672 86,298 114,062
		149,607 – 18,163 5,109 (8,983) (184) (14,176) 807 (36,281)
		114,062

(b) In the combined statements of cash flows, proceeds from disposal of plant and equipment comprise:

Net book amount_(note 13) Gain on disposal of plant and equipment(note 6)_ Proceeds from sales of plant and equipment	Year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 9 320 – 906 744 – 915 1,064 –	Year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 9 320 – 906 744 – 915 1,064 –
		–

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APPENDIX I

ACCOUNTANT’S REPORT

(c) Non-cash transactions
(i) During the year ended 31 March 2012, addition of plant and equipment amounting to HK$5,833,000 was reclassified from inventories and plant and equipment of HK$398,000 was reclassified to contracting work-in-progress without any cash paid.
(ii) During the year ended 31 March 2013, (i) finance lease arrangement was entered into by the Group for acquisition of plant and equipment amounting to HK$59,633,000; (ii) disposal of inventories amounting to HK$2,952,000 for the settlement of amount due to a director; and (iii) plant and equipment and inventories of HK$121,000 and HK$432,000, respectively, were reclassified to contracting work-in-progress without any cash paid.
(iii) During the year ended 31 March 2014, (i) finance lease arrangement was entered into by the Group for acquisition of plant and equipment amounting to HK$10,349,000; and (ii) inventories of HK$850,000 was reclassified to contracting work-in-progress without any cash paid.

27 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 holding power over the investee; exposure, or rights, to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the investor’s returns. 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.

(a) The directors of the Company are of the view that the following companies were related parties that had transactions or balances with the Group during the Relevant Periods:

Name of the related party	Relationship with the Group
Mr. Lau Chun Ming	Director of the Company
Asian Giant Limited	A related company wholly owned by certain
	directors of the Group
Cheer Crown Limited	A related company wholly owned by certain
	directors of the Group
Cheer Profit International Enterprise Limited	A related company beneficially wholly owned by
	Mr. Lau Chun Ming
Cheer Wealth International Development Limited	A related company wholly owned by certain
	directors of the Group and their family member
East Ascent Enterprise Limited	A related company wholly owned by certain
	directors of the Group and their family member
Healthy World Investment Limited	A related company wholly owned by certain
	directors of the Group
Kowloon Shipyard Company Limited	A related company wholly owned by certain
	directors of the Group
Long Ascent Development Limited	A related company wholly owned by certain
	directors of the Group
Redland Precast Concrete Products Limited	A related company wholly owned by
	Mr. Lau Chun Ming
Sam Woo Ship Building Limited	A related company wholly owned by certain
	directors of the Group
Sinoking Shipping Limited	A related company wholly owned by
	Mr. Lau Chun Ming
SW Ship Management	A related company wholly owned by certain
	directors of the Group
SW Group (Holdings)	A related company wholly owned by certain
	directors of the Group
三和集團	A related company wholly owned by certain
	directors of the Group

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APPENDIX I

ACCOUNTANT’S REPORT

(b) Transactions

Save as disclosed elsewhere in the Financial Information, during the Relevant Periods, the following transactions were carried out with related parties at terms mutually agreed by both parties:

*Continuing transactions* Paid to related parties: Rental expenses to Cheer Crown Limited_(note i) Rental expenses to East Ascent Enterprise Limited(note ii) Rental expenses to Cheer Profit International Enterprise Limited(note ii) Rental expenses to Long Ascent Development Limited(note ii) Rental expenses to Cheer Wealth International Development Limited(note ii) Rental expenses to Healthy World Investment Limited(note ii) *Discontinued transactions* Disposal of inventories to related parties: Kowloon Shipyard Company Limited(note iii) Sinoking Shipping Limited(note iii) Paid to related parties for: Materials and consumables purchased on behalf of Kowloon Shipyard Company Limited(note iv) Reimbursement of director’s emoluments to Sam Woo Ship Building Limited(note iv) Received from related parties: Reimbursement of administrative expenses from Redland Precast Concrete Products Limited(note v) Reimbursement of staff costs from Kowloon Shipyard Company Limited(note v) Reimbursement of staff costs from Asian Giant Limited(note v)_	Year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,080 1,560 1,800 27 41 46 27 41 46 473 558 600 594 834 875 – 558 600 – 800 – – 2,152 – – 497 – – 349 – 315 238 148 1,314 – – 280 260 2,010	Year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,080 1,560 1,800 27 41 46 27 41 46 473 558 600 594 834 875 – 558 600 – 800 – – 2,152 – – 497 – – 349 – 315 238 148 1,314 – – 280 260 2,010

		– –

		– –

		148 – 2,010

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ACCOUNTANT’S REPORT

APPENDIX I

note i : Rental expenses are paid with reference to market rates of similar properties for storage of machinery and equipment.

note ii: Rental expenses are paid with reference to market rates of similar properties for directors’ quarters.

note iii: Disposal of inventories to these related companies for the settlement of the amount due to a director were made at carrying value.

note iv: Materials and consumables and director’s emoluments were charged at cost.

note v: Reimbursements of staff costs and administrative expenses were charged at cost.

(c)

Key management compensation

Key management includes directors (executive and non-executive) of the Group. The compensation paid or payable to key management for employee services is disclosed in note 12(a).

(d) Balances – non-trade

Group Asian Giant Limited Cheer Crown Limited Redland Precast Concrete Products Limited Sam Woo Ship Building Limited SW Ship Management SW Group (Holdings) 三和集團	As at 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 – – 386 40 40 – – 2 – 583 160 – 20 – – 40 – – 24 – – 707 202 386	Maximum amount outstanding during the year ended 31 March 2012 2013 2014 HK$’000 HK$’000 HK$’000 175 80 732 40 40 40 – 85 39 583 583 160 20 21 – 40 40 – 24 24 –

Receivables from the above related parties were unsecured, interest free and repayable on demand.

Group		As at 31 March
	2012	2013	2014
	HK$’000	HK$’000	HK$’000
Payable to a director:
Mr. Lau Chun Ming (note 21)	113,146	–	–

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ACCOUNTANT’S REPORT

APPENDIX I

28 ULTIMATE HOLDING COMPANY

Management consider that Silver Bright Holdings Limited is the ultimate holding company of the Group, which is a company indirectly owned by a discretionary trust, the beneficiary of which is the family member of Mr. Lau Chun Ming.

29 SUBSEQUENT EVENTS

Save as disclosed in the report, the following significant event took place subsequent to 31 March 2014:

(a) On [•••], SW (BVI) declared and paid final dividend of HK$[50,000,000] to its shareholders.
(b) The Reorganisation was completed on [•••] and the details are summarised on note 1.2.
(c) Pursuant to the written resolution passed by the shareholders on [•••], the authorised share capital of the Company was increase from HK$[•••] to HK$[•••] by the creation of an additional [•••] shares of HK$[•••] each.
(d) Pursuant to the written resolution passed by the shareholders on [•••], conditional on the share premium account of the Company being credited as a result of the offering, the directors were authorised to capitalise an amount of approximately HK$[•••] standing to the credit of the share premium account of the Company by applying such sum in paying up in full at par [•••] shares for allotment and issue the shareholders in proportion to the respective shareholding.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for the Company or any of the companies now comprising the Group in respect of any period subsequent to 31 March 2014 and up to the date of this report. Save as disclosed in this report, no dividend or distribution has been declared, made or paid by the Company or any of the companies now comprising the Group in respect of any period subsequent to 31 March 2014.

Yours faithfully,

[PricewaterhouseCoopers]

Certified Public Accountants 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.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set out in this Appendix does not form part of the Accountant’s Report from the reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, as set out in Appendix I, and is included herein for illustrative purposes only.

The unaudited pro forma financial information should be read in conjunction with the section entitled “Financial Information” in this [REDACTED] and the Accountant’s Report set out in Appendix I to this [REDACTED] .

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following is an illustrative unaudited pro forma statement of adjusted net tangible assets of the Group which has been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect of the [REDACTED] on the net tangible assets of the Group attributable to the equity holders of the Company as of 31 March 2014 as if the [REDACTED] had taken place on 31 March 2014. The unaudited pro forma statement of adjusted 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 as at 31 March 2014 or at any future dates following the [REDACTED] . The unaudited pro forma statement of adjusted net tangible assets of the Group is based on the audited combined net tangible assets of the Group attributable to the equity holders of the Company as at 31 March 2014 as set out in the Accountant’s Report of the Company, the text of which is set out in Appendix I to this [REDACTED] , and adjusted as described below.

Audited Unaudited combined net pro forma tangible assets adjusted net of the Group tangible assets attributable attributable to the equity to the equity holders of holders of Unaudited the Company Estimated the Company pro forma as at net proceeds as at adjusted net 31 March from the 31 March tangible assets 2014[(1)] [REDACTED][(2)] 2014 per Share[(3)] HK$’000 HK$’000 HK$’000 HK$ Based on an [REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED] Based on an [REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Notes:

(1) The audited combined net tangible assets of the Group attributable to the equity holders of the Company as at 31 March 2014 is extracted from the Accountant’s Report of the Company as set out in Appendix I to this [REDACTED] , which is based on the audited combined net assets of the Group attributable to the equity holders of the Company as at 31 March 2014 of HK$218,719,000.

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

(2) The estimated net proceeds from the [REDACTED] are based on the [REDACTED] of [REDACTED] and [REDACTED] per Share, respectively, after deduction of the underwriting fees and other related expenses (excluding [REDACTED] expenses of approximately [REDACTED] which have been accounted for prior to 31 March 2014) payable by the Company and takes no account of any Shares which may be issued upon the exercise of the options 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 mandate to issue shares and general mandate to repurchase shares as described in the section headed “Share Capital” in this [REDACTED] .
(3) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in note 2 above and on the basis that [REDACTED] Shares were in issue assuming that the [REDACTED] has been completed on 31 March 2014 but takes no account of any Shares which may be issued upon the exercise of the options 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 mandate to issue shares and general mandate to repurchase shares as described in the section headed “Share Capital” in this [REDACTED] .
(4) The unaudited pro forma adjusted net tangible assets does not take into account the final dividend of HK$[50,000,000] proposed on [•••] for the year ended 31 March 2014. Such dividend will be paid before the [REDACTED] . Had such dividend been taken into account, the unaudited combined pro forma adjusted net tangible assets per Share would be approximately [REDACTED] (assuming an [REDACTED] of [REDACTED] per Share) and approximately [REDACTED] (assuming an [REDACTED] of [REDACTED] per Share) respectively.
(5) No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to 31 March 2014.

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

B. REPORT FROM THE REPORTING ACCOUNTANT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES 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 17 September 2012 under the Companies Law. The Memorandum of Association and the Articles of Association comprise its constitution.

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 adopted on [•••] conditional on [REDACTED] . The following is a summary of certain provisions of the Articles:

(a) Directors

(i) 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 with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the board may determine). Subject to the Companies Law, the rules of any Designated Stock Exchange (as defined in the Articles) and the Memorandum and Articles, any share may be issued on terms that, at the option of the Company or the holder thereof, they are 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 from time to time determine.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

Subject to the provisions of the Companies Law and the Articles and, where applicable, the rules of any Designated Stock Exchange (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

Neither the Company nor the board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered 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.

(ii) Power to dispose of the assets of the Company or any subsidiary

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.

(iii) 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.

(iv) Loans and provision of security for loans to Directors

There are provisions in the Articles prohibiting the making of loans to Directors.

(v) 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, subject to the Articles, upon such terms as the board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director or other officer of, or otherwise interested in, any company promoted by the Company or any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. Subject as otherwise

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

provided by the Articles, 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.

Subject to the Companies Law and the Articles, 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 shall 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 (as defined in the Articles) is materially interested, but this prohibition shall 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 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;

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(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.

(vi) Remuneration

The ordinary remuneration of the Directors shall from time to time 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 shall also be 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 (whether by way of salary, commission, participation in profits or otherwise) as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/ or gratuity and/or other benefits on retirement) and allowances as the board may from time to time decide. Such remuneration 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.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

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.

(vii) Retirement, appointment 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) will 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 in every year will 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. There are no provisions relating to retirement of Directors upon reaching any age limit.

The Directors shall have the power from time to time and at any time 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. Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification.

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 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:

(aa) if he resigns his office by notice in writing delivered to the Company at the registered office of the Company for the time being or tendered at a meeting of the Board;
(bb) becomes of unsound mind or dies;
(cc) if, without special leave, he is absent from meetings of the board (unless an alternate director appointed by him attends) 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 COMPANIES LAW

(dd) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors;
(ee) if he is prohibited from being a director by law;
(ff) if he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles.

The board may from time to time 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 shall, 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.

(viii) 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 (present and future) 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.

Note: These provisions, in common with the Articles in general, can be varied with the sanction of a special resolution of the Company.

(ix) Proceedings of the Board

The board may meet for the despatch of business, adjourn and otherwise regulate their meetings as they think fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have an additional or casting vote.

(x) Register of Directors and Officers

The Companies Law and the Articles provide that 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 thirty (30) 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 COMPANIES LAW

(b) Alterations to constitutional documents

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.

(c) Alteration of capital

The Company may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Law:

(i) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe;
(ii) consolidate and divide all or any of its capital into shares of larger amount than its existing shares;
(iii) divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares attach thereto respectively any preferential, deferred, qualified or special rights, privileges, conditions or restrictions as the Company in general meeting or as the directors may determine;
(iv) sub divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum, subject nevertheless to the provisions of the Companies Law, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred or other special rights, over, or may have such deferred rights or be subject to any such restrictions as compared with the others as the Company has power to attach to unissued or new shares; or
(v) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may subject to the provisions of the Companies Law reduce its share capital or any capital redemption reserve or other undistributable reserve in any way by special resolution.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Law, 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 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.

The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(e) Special resolution majority required

Pursuant to the Articles, a special resolution of the Company must be passed by a majority of not less than three fourths of the votes cast by such members as, being entitled so to do, vote in person or, 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 of not less than twenty-one (21) clear days and not less than ten (10) clear business days specifying the intention to propose the resolution as a special resolution, has been duly given. Provided that if permitted by the Designated Stock Exchange (as defined in the Articles), except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than ninety-five per cent. (95%) in nominal value of the shares giving that right and, in the case of an annual general meeting, if so agreed by all Members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which notice of less than twenty-one (21) clear days and less than ten (10) clear business days has been given.

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.

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 held in accordance with the Articles.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(f) Voting rights

Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the Articles, 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 Designated Stock Exchange (as defined in the Articles), 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.

(g) Requirements for annual general meetings

An annual general meeting of the Company must be held in each year, other than the year of adoption of the Articles (within a period of not more than fifteen (15) months after the holding of the last preceding annual general meeting or a period of eighteen (18) months from the date of adoption of the Articles, unless a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the Articles)) at such time and place as may be determined by the board.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(h) 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.

The accounting records shall 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 shall 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 (2009 Revision) 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 the Articles; however, subject to compliance with all applicable laws, including the rules of the Designated Stock Exchange (as defined in the Articles), 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.

Auditors shall be appointed and the terms and tenure of such appointment and their duties at all times regulated in accordance with the provisions of the Articles. 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. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the members in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the financial statements and the report of the auditor should disclose this fact and name such country or jurisdiction.

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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 COMPANIES LAW

(i) Notices of meetings and business to be conducted thereat

An annual general meeting shall be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days and any extraordinary general meeting at which it is proposed to pass a special resolution shall (save as set out in sub paragraph (e) above) be called by notice of at least twenty-one (21) clear days and not less than ten (10) clear business days. All other extraordinary general meetings shall be called by notice of at least fourteen (14) clear days and not less than ten (10) clear business days. The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. In addition notice of every general meeting shall be given to all members of the Company other than such 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 the auditors for the time being of the Company.

Notwithstanding that a meeting of the Company is called by shorter notice than that mentioned above if permitted by the rules of the Designated Stock Exchange, it shall be deemed to have been duly called if it is so agreed:

(i) in the case of a meeting called as an annual general meeting, by all members of the Company entitled to attend and vote thereat; and
(ii) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than ninety-five per cent (95%) in nominal value of the issued shares giving that right.

All business shall be deemed special that is transacted at an extraordinary general meeting and also all business shall be deemed special that is transacted at an annual general meeting with the exception of the following, which shall be deemed ordinary business:

(aa) the declaration and sanctioning of dividends;
(bb) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors;
(cc) the election of directors in place of those retiring;
(dd) the appointment of auditors and other officers;
(ee) the fixing of the remuneration of the directors and of the auditors;
(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.

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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.

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SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(j) 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 Designated Stock Exchange (as defined in the Articles) 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 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 in any case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. The board may also resolve either generally or in any particular case, upon request by either the transferor or the transferee, to accept mechanically executed transfers.

The board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to 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.

Unless the board otherwise agrees, no shares on the principal register shall be transferred to any branch register nor may shares on any branch register be transferred to the principal register or any other branch register. All transfers and other documents of title shall be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the registered office in the Cayman Islands or such other place at which the principal register is kept in accordance with the Companies Law.

The board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share incentive scheme for employees upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which the Company has a lien.

The board may decline to recognise any instrument of transfer unless a fee of such maximum sum as any Designated Stock Exchange (as defined in the Articles) may determine to be payable or such lesser sum as the Directors may from time to time require is paid to the Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, 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).

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

The registration of transfers may be suspended and the register closed on giving notice by advertisement in a relevant newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange (as defined in the Articles), at such times and for such periods as the board may determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole thirty (30) days in any year.

(k) Power for 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 any Designated Stock Exchange (as defined in the Articles).

(l) Power for any subsidiary of the Company to own shares in the Company and financial assistance to purchase shares of the Company

There are no provisions in the Articles relating to ownership of shares in the Company by a subsidiary.

Subject to compliance with the rules and regulations of the Designated Stock Exchange (as defined in the Articles) and any other relevant regulatory authority, the Company may give financial assistance for the purpose of or in connection with a purchase made or to be made by any person of any shares in the Company.

(m) Dividends and other methods of distribution

Subject to the Companies Law, 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 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.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

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.

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.

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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 COMPANIES LAW

(n) 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 shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. Votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy.

(o) Call on shares and forfeiture of shares

Subject to the Articles and to the terms of allotment, 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.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

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.

(p) Inspection of register of members

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 Registration Office (as defined in the Articles), unless the register is closed in accordance with the Articles.

(q) 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.

Save as otherwise provided by the Articles 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.

A corporation being a member shall be deemed for the purpose of the Articles to be present in person if represented by its duly authorised representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting of the Company or at any relevant general meeting of any class of members of the Company.

(r) Rights of the 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 law, as summarised in paragraph 3(f) of this Appendix.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(s) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares (i) if the Company shall be wound up and the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively and (ii) if the Company shall be wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, 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 shall be 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.

(t) Untraceable members

Pursuant to the Articles, the Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants in respect of dividends of the shares in question (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, the Company has not during that time received any indication of the existence of the member; and (iii) the Company has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the Articles) giving notice of its intention to sell such shares and a period of three (3) months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the Articles), has elapsed since the date of such advertisement and the Designated Stock Exchange (as defined in the Articles) has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds, it shall become indebted to the former member of the Company for an amount equal to such net proceeds.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(u) 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 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) 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.

(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 business.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

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.

The Articles includes certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. The consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required.

(c) Financial assistance to purchase shares of a company or its holding company

Subject to all applicable laws, the Company may give financial assistance to Directors and employees of the Company, its subsidiaries, its holding company or any subsidiary of such holding company in order that they may buy Shares in the Company or shares in any subsidiary or holding company. Further, subject to all applicable laws, the Company may give financial assistance to a trustee for the acquisition of Shares in the Company or shares in any such subsidiary or holding company to be held for the benefit of employees of the Company, its subsidiaries, any holding company of the Company or any subsidiary of any such holding company (including salaried Directors).

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

Subject to the provisions of the Companies Law, 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 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.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

Shares purchased by a company shall 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 shall not be treated as a member for any purpose and shall 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 shall not be voted, directly or indirectly, at any meeting of the company and shall 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. Further, 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.

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

With the exception of section 34 of the Companies Law, there is 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. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see paragraph 2(m) above for further details).

(f) Protection of minorities

The Cayman Islands 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.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

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) Management

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.

(h) Accounting and auditing requirements

A company shall 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.

(i) Exchange control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(j) Taxation

Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, the Company has obtained an undertaking from the Governor-in-Cabinet:

(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 10 October 2012.

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are not party to any double tax treaties.

(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 will 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.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

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 shall 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 (2009 Revision) of the Cayman Islands.

(n) Winding up

A company may be wound up compulsorily by order of the Court voluntarily; or, under supervision of the Court. The Court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Court, just and equitable to do so.

A company may be wound up voluntarily when the members so resolve in general meeting by special resolution, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum or articles expires, or the event occurs on the occurrence of which the memorandum or articles provides that the company is to be dissolved, or, the company does not commence business for a year from its incorporation (or suspends its business for a year), or, the company is unable to pay its debts. In the case of a voluntary winding up, such company is obliged to cease to carry on its business 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, there may be appointed one or more than one person to be called an official liquidator or official liquidators; and the Court may appoint to such office such qualified person or persons, either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such office, the Court shall declare whether any act hereby required or authorised to be done by the official liquidator is to be done by all or any one or more of such persons. The Court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the Court. A person shall be qualified to accept an appointment as an official liquidator if he is duly qualified in terms of the Insolvency Practitioners Regulations. A foreign practitioner may be appointed to act jointly with a qualified insolvency practitioner.

In the case of a members’ voluntary winding up of a company, the company in general meeting must appoint one or more liquidators for the purpose of winding up the affairs of the company and distributing its assets. A declaration of solvency must be signed by all the directors of a company being voluntarily wound up within twenty-eight (28) days of the commencement of the liquidation, failing which, its liquidator must apply to Court for an order that the liquidation continue under the supervision of the Court.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

Upon the appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his hands and no future executive action may be carried out without his approval. A liquidator’s duties are to collect the assets of the company (including the amount (if any) due from the contributories), settle the list of creditors and, subject to the rights of preferred and secured creditors and to any subordination agreements or rights of set-off or netting of claims, discharge the company’s liability to them (pari passu if insufficient assets exist to discharge the liabilities in full) and to settle the list of contributories (shareholders) and divide the surplus assets (if any) amongst them in accordance with the rights attaching to the shares.

As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. At least twenty-one (21) days before the final meeting, the liquidator shall send a notice specifying the time, place and object of the meeting to each contributory in any manner authorised by the company’s articles of association and published in the Gazette in the Cayman Islands.

(o) 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.

(p) Compulsory acquisition

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.

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APPENDIX III

SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN ISLANDS COMPANIES LAW

(q) 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).

4. GENERAL

Conyers Dill & Pearman (Cayman) Limited, 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 “Documents available for inspection” in Appendix V. 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 17 September 2012. Our Company has established a principal place of business in Hong Kong at Unit 1310-13, 13[th] Floor, 113 Argyle Street, Mongkok, Kowloon, Hong Kong and has been registered as a non-Hong Kong company in Hong Kong under Part XI of the Predecessor Companies Ordinance on 15 February 2013. Mr. Lau and Mr. Chan Sun Kwong have been appointed as the authorised representatives of our Company for the acceptance of service of process and notices on behalf of our Company in Hong Kong. The addresses for service of process and notices in Hong Kong are Simplex 1 (also known as Simplex A), 29th Floor (including the flat roof(s) of Block 1), Block 1, Parc Palais, No. 18 Wylie Road, Ho Man Tin, Kowloon, Hong Kong and Flat B1, 9th Floor, Pak On Building, 105 Austin Road, Tsim Sha Tsui, Kowloon, Hong Kong, respectively.

As our Company was incorporated in the Cayman Islands, it operates subject to the Companies Law and its constitution which comprises the Memorandum and the Articles of Association. A summary of various provisions of our Company’s constitutional documents and relevant aspects of the Companies Law is set out in Appendix III to this [REDACTED] .

2. Changes in share capital of our Company

As at the date of incorporation, the authorised share capital of our Company was HK$380,000 divided into 38,000,000 Shares with a nominal value of HK$0.01 each and one subscriber Share was allotted and issued nil-paid to Codan Trust Company (Cayman) Limited.

On 17 September 2012, the one nil-paid subscriber Share was transferred to Mr. Lau, which was held on trust for Actiease Assets. On 30 June 2014, the one nil-paid subscriber Share was transferred to Actiease Assets.

Pursuant to the written resolutions of the sole Shareholder passed on [•••] 2014, the authorised share capital of our Company was increased from HK$380,000 to HK$[10,000,000] by the creation of an additional [962,000,000] Shares.

On [•••] 2014, pursuant to the Reorganisation Agreement, our Company acquired the entire issued share capital of SW (BVI) and in consideration of which, (i) the one nil-paid Share held by Actiease Assets was credited as fully paid; and (ii) [999] Shares were allotted and issued, credited as fully paid, to Actiease Assets. After completion of the Reorganisation, our Company became the holding Company of our Group.

Immediately following completion of the [REDACTED] but without taking in account any Shares which may be allotted and issued pursuant to any options which may be granted under the Share Option Scheme, the authorised share capital of our Company will be HK$[10,000,000] divided into [1,000,000,000] Shares, of which [REDACTED] Shares will be allotted and issued, fully paid or credited as fully paid, and [REDACTED] Shares will remain unissued.

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

Other than pursuant to the [REDACTED] and the exercise of any options which may be granted under the Share Option Scheme, our Company does not have any present intention to issue any part of the authorised but unissued share capital of our Company and, without prior approval of the Shareholders in a general meeting, no issue of Shares will be made which would effectively alter the control of our Company.

Save as disclosed in this [REDACTED] , there has been no alteration in the share capital of our Company since the date of its incorporation.

3. Written resolutions of the sole Shareholder

Pursuant to the written resolutions passed by the sole Shareholder on [•••] 2014, inter alia:

(a) our Company approved and adopted the Memorandum, with immediate effect, and the Articles, with effect from [REDACTED] , the terms of which are summarised in Appendix III to this [REDACTED] ;
(b) the authorised share capital of our Company was increased from HK$380,000 to HK$[10,000,000] by the creation of an additional [962,000,000] Shares of HK$0.01 each, each ranking pari passu with the existing Shares in all respects;
(c) conditional on the Listing Committee granting [REDACTED] of, and permission to deal in, the Shares in issue and Shares to be issued as mentioned in this [REDACTED] including any Shares which may be issued upon the exercise of options which may be granted under the Share Option Scheme, on the obligations of the Underwriters under the Underwriting Agreements becoming unconditional and not being terminated in accordance with the terms of the Underwriting Agreements or otherwise, in each case on or before the date falling 30 days after the date of this [REDACTED] :
(i) the [REDACTED] was approved and our Directors were authorised to allot and issue the Shares pursuant to the [REDACTED] , to rank pari passu with the then existing Shares in all respects;
(ii) the Share Option Scheme was approved and adopted with such additions, amendments or modifications thereto as may be approved by our Directors or any committee of the Board in their absolute discretion and the Directors or any committee of the Board were authorised, at its absolute discretion, to implement the Share Option Scheme, to grant options thereunder and to allot, issue and deal with the Shares thereunder and to take all such steps as may be necessary, desirable or expedient to carry into effect the Share Option Scheme; and

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(iii) the Capitalisation Issue was approved 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 HK$ [REDACTED] standing to the credit of the Company’s share premium account towards paying up in full at par [REDACTED] Shares for allotment and issue to holder of Shares whose name appeared on the register of members of our Company at the close of business on [•••] 2014 (or as they may direct) in proportion as nearly as may be without involving fractions to its then existing shareholdings in the Company and the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the existing issued Shares (other than the Capitalisation Issue) and our Directors or any committee of the Board were authorised to give effect to the Capitalisation Issue.
(d) a general unconditional mandate was given to our Directors to allot, issue and deal with, otherwise than by way of rights issue, scrip dividend or similar arrangement in accordance with the Articles, or an issue of Shares pursuant to the exercise of options which may be granted under the Share Option Scheme, Shares with an aggregate nominal amount not exceeding 20% of the aggregate nominal amount of the share capital of our Company in issue immediately upon completion of the [REDACTED] and the Capitalisation Issue (taking no account of any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme). Such mandate will expire at the conclusion of the next annual general meeting of our Company; or the expiration of the period within which the next annual general meeting of the Company is required by the Articles or any applicable law of the Cayman Islands to be held; or when revoked, varied or renewed by an ordinary resolution of the Shareholders in a general meeting, whichever occurs first;
(e) a general unconditional mandate (the “ Repurchase Mandate ”) was given to our Directors authorising the repurchase by our Company on the Stock Exchange, or on any other stock exchange on which the securities of our Company may be [REDACTED] and which is recognised by the SFC and the Stock Exchange for this purpose, in accordance with all applicable laws and the requirements of the Listing Rules (or of such other stock exchange), of Shares not exceeding 10% of the aggregate nominal amount of the share capital of the Company in issue and to be issued immediately upon completion of the [REDACTED] and the Capitalisation Issue (taking no account of any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme). Such mandate will expire at the conclusion of the next annual general meeting of the Company; or the expiration of the period within which the next annual general meeting of the Company is required by the Articles or any applicable law of the Cayman Islands to be held; or when revoked, varied or renewed by an ordinary resolution of the Shareholders in a general meeting, whichever occurs first; and

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(f) the general unconditional mandate as mentioned in sub-paragraph (d) above was extended by the addition to the aggregate nominal amount of the share capital of the Company which may be allotted or agreed to be allotted by the Directors pursuant to such general mandate of an amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company pursuant to the mandate to repurchase shares referred to in sub-paragraph (e) above, provided that such extended amount shall not exceed 10% of the aggregate nominal value of the share capital of the Company in issue immediately following completion of the Capitalisation Issue and the [REDACTED] but taking no account of any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme.

4. Reorganisation

The companies comprising our Group underwent a Reorganisation in preparation for the [REDACTED] , details of which are set out in the paragraph headed “History and Corporate Structure – Reorganisation” in this [REDACTED] . Following the Reorganisation, our Company became the holding company of our Group.

A diagram showing our Group structure after the Reorganisation and immediately upon completion of the Capitalisation Issue and the [REDACTED] (assuming that no Share has been allotted and issued pursuant to the exercise of any option which may be granted under the Share Option Scheme) is set out in the paragraph headed “History and Corporate Structure – Reorganisation” in this [REDACTED] .

5. Changes in share capital of subsidiaries

Our Company’s subsidiaries are referred to in the Accountant’s Report, the text of which is set out in Appendix I to this [REDACTED] . The following sets out the changes in share capital made by the subsidiaries of our Company during the two years preceding the date of this [REDACTED] :

(a) SW (BVI)

On 21 February 2011, SW Holdings transferred 10,000 shares representing 100% of the shareholding interests in SW (BVI) to Actiease Assets at the consideration of HK$140,000,000. After such transfer, SW (BVI) is wholly owned by Actiease Assets.

(b) SW Engineering Equipment

On 30 July 2012, Mr. Lau transferred his one share in SW Engineering Equipment which he held on trust for SW (BVI) to SW AA Construction Group and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it is holding the one share in SW Engineering Equipment on trust for SW (BVI). After such transfer, SW Engineering Equipment continues to be wholly owned by SW (BVI).

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(c) SW Construction & Engineering

On 30 July 2012, Mr. Lau transferred his one share in SW Construction & Engineering which he held on trust for SW Engineering Equipment to SW AA Construction Group and pursuant to a declaration of trust dated 31 July 2012, SW AA Construction Group declared that it is holding the one share in SW Construction & Engineering on trust for SW Engineering Equipment. After such transfer, SW Construction & Engineering continues to be wholly owned by SW Engineering Equipment.

(d) SW Bore Pile

On 30 July 2012, Mr. Lau transferred his one share in SW Bore Pile which he held on trust for SW (BVI) to SW AA Construction Group and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it is holding the one share in SW Bore Pile on trust for SW (BVI). After such transfer, SW Bore Pile continues to be wholly owned by SW (BVI).

(e) SW Foundation (Macau)

On 23 August 2011, SW Foundation (Macau) was incorporated in Macau with limited liability with a registered share capital of MOP30,000 and was owned as to MOP29,000 by Mr. Lau and as to MOP1,000 by Mr. Lau Chun Kwok.

On 8 November 2011, Mr. Lau and Mr. Lau Chunk Kwok have respectively transferred quotas of MOP28,000 and MOP1,000 to SW Bore Pile.

Pursuant to a power of attorney dated 18 October 2012 executed by Mr. Lau, Mr. Lau has granted all his powers relating to (a) the social rights and (b) his quota of MOP1,000 in SW Foundation (Macau), including the powers to enable the attorney to assign his quota of MOP1,000 into its own name, in favour of SW Bore Pile. Based on the advice of the Macau Legal Adviser, our Directors confirm that such power of attorney forms an irrevocable act and cannot be revoked by Mr. Lau without the consent of SW Bore Pile. As a result thereof, SW Bore Pile is the beneficial owner of the registered capital of MOP30,000 in SW Foundation (Macau).

(f) SW Construction

On 30 July 2012, Mr. Lau transferred his one share in SW Construction which he held on trust for SW (BVI) to SW AA Construction Group and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it is holding the one share in SW Construction on trust for SW (BVI). After such transfer SW Construction continues to be wholly owned by SW (BVI).

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(g) SW Civil Contractors

On 30 July 2012, Mr. Lau transferred his one share in SW Civil Contractors which he held on trust for SW (BVI) to SW AA Construction Group and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it is holding the one share in SW Civil Contractors on trust for SW (BVI). After such transfer, SW Civil Contractors continues to be wholly owned by SW (BVI).

(h) SW Civil Works

On 30 July 2012, SW Group (Holdings) transferred its one share in SW Civil Works which it held on trust for SW (BVI) to SW AA Construction Group and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it is holding the one share in SW Civil Works on trust for SW (BVI). After such transfer, SW Civil Works continues to be wholly owned by SW (BVI).

(i) SW Foundation

On 30 July 2012, SW Group (Holdings) transferred its one share in SW Foundation which it held on trust for SW (BVI) to SW AA Construction Group and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it is holding the one share in SW Foundation on trust for SW (BVI). After such transfer, SW Foundation continues to be wholly owned by SW (BVI).

(j) SW Finance

On 30 July 2012, SW Group (Holdings) transferred its one share in SW Finance which it held on trust for SW (BVI) to SW AA Construction Group and pursuant to a declaration of trust dated 30 July 2012, SW AA Construction Group declared that it is holding the one share in SW Finance on trust for SW (BVI). After such transfer, SW Finance continues to be wholly owned by SW (BVI).

(k) SW AA Construction Group

On 22 March 2012, SW AA Construction Group was incorporated in Hong Kong with limited liability with an authorised share capital of HK$10,000 divided into 10,000 shares with par value of HK$1.00 each. On the same day, one share with par value of HK$1.00 was allotted and issued as fully-paid to SW (BVI).

(l) SW Foundation Group

On 22 March 2012, SW Foundation Group was incorporated in Hong Kong with limited liability with an authorised share capital of HK$10,000 divided into 10,000 shares with par value of HK$1.00 each. On the same day, one share with par value of HK$1.00 was allotted and issued as fully-paid to SW (BVI).

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(m) Redland Contractors

On 18 May 2011, Redland Contractors was incorporated in Hong Kong with limited liability with an authorised share capital of HK$10,000 divided into 10,000 shares with par value of HK$1.00 each. On the same day, two shares with par value of HK$1.00 were allotted and issued as fully-paid to Best Captain which held the shares on trust for SW (BVI).

On 30 July 2012, Best Captain transferred the two shares representing 100% of the shareholding interests in Redland Contractors to SW (BVI). After such transfer, Redland Contractors is both legally and beneficially owned by SW (BVI).

Save for the subsidiaries mentioned in Appendix I to this [REDACTED] , our Company has no other subsidiaries.

Save as disclosed above and in the paragraph headed “Reorganisaton” of this Appendix, there has been no alteration in the share capital of the subsidiaries of our Company which took place within two years immediately preceding the date of this [REDACTED] .

6. Repurchase by our Company of its own securities

This paragraph includes information relating to the repurchase of the Shares, including information required by the Stock Exchange to be included in this [REDACTED] concerning such the repurchase.

(i) Relevant legal and regulatory requirements

The Listing Rules permit Shareholders to grant the Directors a general mandate to repurchase the Shares that are [REDACTED] on the Stock Exchange.

(ii) Shareholder’s approval

All proposed repurchases of Shares (which must be fully paid up) must be approved in advance by an ordinary resolution of the Shareholders in a general meeting, either by way of general mandate or by specific approval of a particular transaction.

On [•••] 2014, the Directors were granted a general unconditional mandate to repurchase (the “ Repurchase Mandate ”) up to 10% of the aggregate nominal value of the share capital of our Company in issue immediately following completion of the [REDACTED] (excluding any Shares which may be issued upon exercise of any options that may be granted under the Share Option Scheme) on the Stock Exchange or on any other stock exchange on which the securities may be [REDACTED] and which is recognised by the SFC and the Stock Exchange for this purpose. This mandate will expire at the earliest of (i) the conclusion of the next annual general meeting of our Company; (ii) the expiration of the period within which the next annual general meeting of our Company is required by the

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

Articles of Association and applicable laws of the Cayman Islands to be held; or (iii) such mandate being revoked, varied or renewed by resolutions of the Shareholders in a general meeting.

(iii) Source of funds

The repurchase of the Shares [REDACTED] on the Stock Exchange must be funded out of funds legally available for such purpose in accordance with the Memorandum and Articles of Association and the applicable laws of the Cayman Islands and any other laws and regulations applicable to our Company. Our Company may not repurchase Shares on the Stock Exchange for consideration other than cash or for the settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time.

(iv) Trading restrictions

Our Company may repurchase up to 10% of the issued share capital immediately after completion of the [REDACTED] (excluding any Shares which may be issued pursuant to any Shares which may be issued upon exercise of any options that may be granted under the Share Option Scheme).

(v) Core connected persons

A company is prohibited from knowingly repurchasing securities on the Stock Exchange from a “core connected person”, that is, a director, chief executive or substantial shareholder of such company or any of its subsidiaries or any of their close associates (as defined in the Listing Rules) and a core connected person shall not knowingly sell his securities to our Company on the Stock Exchange.

(vi) Reasons for repurchases

The Directors believe that it is in the best interest of our Company and the Shareholders for the Directors to have a general authority from the Shareholders to enable our Company to repurchase the Shares in the market. Repurchase will only be made where the Directors believe that such repurchases will benefit our Company and the Shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of our Company and/or earnings per Share.

(vii) General

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, the Memorandum, the Articles of Association and any other applicable laws of the Cayman Islands.

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

There might be a material adverse impact on the working capital or gearing position of our Company (as compared with the position disclosed in this [REDACTED] ) in the event that the Repurchase Mandate is exercised in full. However, the 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 Company or on its gearing positions which in the opinion of the Directors are from time to time appropriate for our Company.

If, as a result of any repurchase of the Shares, a Shareholder’s proportionate interest in our Company’s voting rights is increased, such increase will be treated as an acquisition for the purposes of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert (within the meaning of the Takeovers Code) could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

None of the Directors nor, to the best of their knowledge, having made all reasonable enquiries, any of their respective close associates, has any present intention to sell any Shares to our Company.

No core connected person of our Company has notified our Company that he has a present intention to sell his Shares to our Company, or has undertaken not to do so, if the Repurchase Mandate is exercised.

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

B. FURTHER INFORMATION ABOUT THE BUSINESS OF OUR GROUP

1. Summary of material contracts

The following contracts (not being contracts in the ordinary course of business of our Group) have been entered into by members of our Group within the two years preceding the date of this [REDACTED] and are or may be material:

(a) the Reorganisation Agreement;
(b) the Deed of Indemnity;
(c) the Deed of Non-competition Undertaking; and
(d) the [REDACTED] Underwriting Agreement.

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

2. Intellectual property rights of our Group

(a) Trademarks

(i) As at the Latest Practicable Date, our Group owned the following registered trademark(s) in Hong Kong:

			Place of	Registration		Registration
Trademark	Registrant	Class	registration	number		date	Expiry date
		(Note)
	SW
	Foundation
	Group	37	Hong Kong	200312117	17 March 2003		17 March 2020
A) Sam Woo	SW AA	37	Hong Kong	302766682 15		October 2013	14 October 2023
Construction	Construction
Group Limited	Group
三和建築集團
有限公司

B) 三和建築集團

有限公司 Sam Woo Construction Group Limited

Note:

The specific services under class 37 include construction engineering, civil engineering services, construction of building and piling services.

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STATUTORY AND GENERAL INFORMATION

(b) Patent
(i) As at the Latest Practicable Date, our Group is the owner of the following patent(s) registered in Hong Kong:

		Owner of	Patent	Validity
Patent description	Type	patent rights	number	period
Concreting equipment	Short-term	SW	HK1134748	7 May 2010 to
and method thereof	patent	Foundation		25 January 2018
混凝土灌注		Group
設備及方法		(Note)

Note: On 25 July 2012, Worldwide Profit assigned the patent to SW Foundation Group for a consideration of HK$10.0.

(ii) As at the Latest Practicable Date, our Group had applied for the registration of the following patent(s):

			Application
Patent description	Applicant	Place of application	number	Application date
Concreting apparatus	SW Foundation	PRC	201010120049.2	25 January 2010
and its method	Group_(Note 1)_
混凝土灌注
設備及方法
Concreting apparatus	SW Foundation	Hong Kong	11113615.5	16 December 2011
and its method	Group_(Note 2)_
混凝土灌注
設備及方法
(the “PRC Patent”)
Concreting apparatus	SW Foundation	Macau	J/985(708)	28 January 2013
and its method	Group_(Note 4)_
混凝土灌注
設備及方法 (Note 3)

Note:

Pursuant to an assignment contract dated 28 December 2012 made between Worldwide Profit and SW Foundation Group, the application was assigned to SW Foundation Group.
Pursuant to an assignment made on 25 July 2012 between Worldwide Profit and SW Foundation Group, the application was assigned to SW Foundation Group. By a letter from the State Intellectual Property Office of the PRC (the “ SIPO ”), the SIPO indicated, inter alia, that there was insufficient evidence which could demonstrate that the invention under the PRC Patent application had the creativity which would entitle the invention to have a patent right. We had submitted our reply and provide additional information in response to SIPO’s letter. SIPO’s final decision to our PRC Patent application was still pending as at the Latest Practicable Date.
This is an application for the extension of the PRC Patent and such is not an autonomous patent.
Pursuant to an assignment made on 30 April 2013 between Worldwide Profit and SW Foundation Group, the application was assigned to SW Foundation Group for a consideration of HK$10.0.

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(c) Domain names

As at the Latest Practicable Date, our Group had registered the following domain names:

Domain name	Registrant	Expiry date
samwoo-group.com	SW Engineering Equipment	30 December 2023

Save as disclosed herein, there are no other trade or service marks, patents, other intellectual or industrial property rights which are material to the business of our Group.

C. DISCLOSURE OF INTERESTS

1. Directors

(a) Interest and short positions of the Directors and the chief executives of our Company in the shares, underlying shares and debentures of our Company and its associated corporations

Immediately following completion of the [REDACTED] (taking no account of Shares which may be issued pursuant to the exercise of options which may be granted under the Share Option Scheme), the interests and short positions of our Directors and chief executives of our Company in the shares, underlying shares and debentures of our Company and its 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 they are taken or deemed to have taken under such provisions of the SFO) or which will be required to be entered in the register kept by our Company pursuant to section 352 of the SFO, 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 [REDACTED] contained in the Listing Rules, will be as follows:

(i) Interest in Shares

				Approximate
	Capacity/Nature	Long/Short	Number of	percentage
Name of Director	of interest	position	Shares held	of shareholding
Mr. Lau_(Note 1)_	Settlor of a	Long	[REDACTED]	[REDACTED]
	discretionary trust
Ms. Leung_(Note 2)_	Interest of spouse	Long	[REDACTED]	[REDACTED]

Notes:

These Shares were held by Actiease Assets. Actiease Assets is 100% owned by Silver Bright, which is [REDACTED] held by Managecorp Limited as trustee of the Unit Trust whereby the [REDACTED] issued units of which are held by Nautilus Trustees as trustee of the Family Trust. Mr. Lau, being the settlor of the Family Trust, is therefore deemed to be interested in the Shares held by Actiease Assets under the SFO.
Ms. Leung is the spouse of Mr. Lau. Therefore Ms. Leung is deemed to be interested in the Shares which are interested by Mr. Lau under the SFO.

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STATUTORY AND GENERAL INFORMATION

(ii) Interest in associated corporations of our Company

	Name of
	associated	Capacity/Nature	Percentage of
Name of Director	corporation	of interest	shareholding
Mr. Lau_(Note 1)_	Actiease Assets	Settlor of a	[REDACTED]
		discretionary trust
Mr. Lau_(Note 1)_	Silver Bright	Settlor of a	[REDACTED]
		discretionary trust

Note:

Actiease Assets is wholly owned by Silver Bright, which is [REDACTED] held by Managecorp Limited as trustee of the Unit Trust whereby the [REDACTED] issued units of which are held by Nautilus Trustees as trustee of the Family Trust. Mr. Lau, being the settlor of the Family Trust, is therefore deemed to be interested in the shares of Actiease Assets and Silver Bright under the SFO.

(b) Particulars of service contracts

Each of the executive Directors [has entered] into a service contract with our Company for a term of three years commencing from the [REDACTED] which may be terminated by either party giving not less than three months’ prior notice in writing and is subject to termination provisions therein and provisions on retirement by rotation of the Directors as set out in the Articles of Association. Particulars of the service contracts of the executive Directors are in all material respects the same. Each of the executive Directors shall be entitled to the annual fee as follows:

Name of Director	Annual Director’s remuneration
	HK$
Mr. Lau	[REDACTED]
Mr. Lau Chun Kwok	[REDACTED]
Mr. Lau Chun Ka	[REDACTED]
Ms. Leung	[REDACTED]

The independent non-executive Directors [have been] appointed for a term of one year commencing from the [REDACTED] renewable automatically for successive terms of one year each commencing from the day next after the expiry of the then current term of appointment subject to retirement by rotation and re-election at annual general meetings of our Company and until terminated by not less than one month’s notice in writing served by either our Company or the respective Director. Our Company intends to pay a director’s fee of [HK$ [REDACTED] ] per annum to each of the independent non-executive Directors. Save for directors’ fees, none of the independent non-executive Directors is expected to receive any other remuneration for holding his office as an independent non-executive Director.

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STATUTORY AND GENERAL INFORMATION

Save as disclosed above, none of the Directors has entered or has proposed to enter into any service agreements with our Company or any members of our Group (other than contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

(c) Remuneration of Directors
(i) approximately HK$2.8 million, approximately HK$4.4 million and approximately HK$4.7 million were paid to the Directors by our Group as remuneration for each of the three years ended 31 March 2014.
(ii) Save as disclosed in the Accountant’s Report in Appendix I to this [REDACTED] , no Directors have received any remuneration or benefits in kind from our Group for each of the three years ended 31 March 2014, respectively.
(iii) None of the Directors or any past directors of any member of our Group has been paid any sum of money for each of the three years ended 31 March 2014 as (1) an inducement to join or upon joining our Company; or (2) for loss of office as a director of any member of our Group or of any other office in connection with the management of the affairs of any member of our Group.
(iv) It is estimated that remuneration equivalent to approximately HK$[5.4] million in aggregate will be paid to our Directors by us in respect of the financial year ending 31 March 2015 under arrangements in force at the date of this [REDACTED] .

2. Substantial Shareholders

Interest discloseable under the SFO and substantial shareholders

So far as our Directors are aware, immediately following completion of the [REDACTED] (taking no account of Shares which may be issued pursuant to the exercise of options which may be granted under the Share Option Scheme), the following persons (not being a Director or chief executive of our Company) are expected to have an interest or short position in the shares and underlying shares of our Company 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 be, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of our Group:

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STATUTORY AND GENERAL INFORMATION

	Long/Short	Capacity/Nature	Number of	Percentage of
Name of Shareholder	position	of interest	Shares held	shareholding
Actiease Assets	Long	Beneficial owner	[REDACTED]	[REDACTED]
Silver Bright_(Note 1)_	Long	Interest of	[REDACTED]	[REDACTED]
		a controlled corporation
Managecorp Limited as	Long	Trustee	[REDACTED]	[REDACTED]
trustee of the Unit Trust
(Note 2)
Nautilus Trustees_(Note 3)_	Long	Trustee	[REDACTED]	[REDACTED]

Notes:

Actiease Assets is 100% owned by Silver Bright. Silver Bright is therefore deemed to be interested in the Shares held by Actiease Assets under the SFO.
Actiease Assets is 100% owned by Silver Bright, which is [REDACTED] held by Managecorp Limited as trustee of the Unit Trust. The issued units of the Unit Trust are [REDACTED] held by Nautilus Trustees as trustee of the Family Trust (of which Mr. Lau is the settlor). The beneficiary of the Family Trust is a family member of Mr. Lau. Therefore, Managecorp Limited, being the trustee of the Unit Trust, is deemed to be interested in the Shares held by Actiease Assets under the SFO.
Nautilus Trustees, being the trustee of the Family Trust, is deemed to be interested in the Shares held by Actiease Assets under the SFO.

3. Related party transactions

Save as disclosed in this [REDACTED] and in the Accountant’s Report set out in Appendix I to this [REDACTED] , during the two years immediately preceding the date of this [REDACTED] , our Company had not engaged in any other material connected transactions or related party transactions.

4. Agency fee and commissions received

Save as disclosed in this [REDACTED] , no commissions, discounts, brokerages or other special terms were granted within the two years immediately preceding the date of this [REDACTED] in connection with the issue or sale of any capital of any member of our Group.

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

D. SHARE OPTION SCHEME

The principal terms of the Share Option Scheme conditionally adopted under the written resolutions of the sole Shareholder passed on [•••] 2014 are set out below:

1. Purpose of the Share Option Scheme

The Share Option Scheme is a share incentive scheme and is established to recognize and motivate the contributions that Eligible Participants (as defined below) have made or may make to our Group.

The Share Option Scheme will provide the Eligible Participants with an opportunity to acquire proprietary interests in our Company with the view to achieving the following principal objectives:

(a) motivate the Eligible Participants to optimize their performance and efficiency for the benefit of our Group; and
(b) attract and retain or otherwise maintain ongoing business relationships with the Eligible Participants whose contributions are, will or expected to be beneficial to our Group.

For the purpose of the Share Option Scheme, “Eligible Participants” means any person who satisfies the eligibility criteria in paragraph 2 below.

2. Who may join and basis of eligibility

The Board may at its discretion grant options to:

(i) any Employees. “ Employees ” means employees (whether full time or part time, including any executive director but excluding any non-executive director) of our Company, any subsidiary or any entity in which our Group holds at least 20% of its issued share capital (“ Invested Entity ”);
(ii) any non-executive directors (including independent non-executive directors) of our Company, any subsidiary or any Invested Entity;
(iii) any supplier of goods or services to any member of our Group or any Invested Entity;
(iv) any customer of any member of our Group or any Invested Entity;
(v) any person or entity that provides research, development or other technological support to any member of our Group or any Invested Entity;
(vi) any shareholder of any member of our Group or any Invested Entity or any holder of any securities issued by any member of our Group or any Invested Entity;

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(vii) any advisor (professional or otherwise) or consultant to any area of business or business development of any member of our Group or any Invested Entity; and
(viii) any other group or classes of participants who have contributed or may contribute by way of joint venture, business alliance or other business arrangement to the development and growth of our Group,

and, for the purposes of the Share Option Scheme, options may be granted to any company wholly owned by one or more Eligible Participants.

The basis of eligibility of any participant to be granted any option shall be determined by the Board (or as the case may be, the independent non-executive Directors) from time to time on the basis of his contribution or potential contribution to the development and growth of our Group.

3. Subscription Price of Shares

The exercise price for any Share under the Share Option Scheme shall be a price determined by the Board and shall not be less than the highest of: (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the offer date of the relevant option, which must be a day on which the Stock Exchange is open for the business of dealing in securities (a “ Trading Day ”); (ii) an amount equivalent to the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the 5 Trading Days immediately preceding the offer date of the relevant option; and (iii) the nominal value of a Share on the offer date. For the purpose of calculating the exercise price where our Company has been [REDACTED] for less than five Trading Days, the [REDACTED] of the Shares shall be used as the closing price of the Shares for any Trading Days falling within the period before the [REDACTED] .

4. Grant of options and acceptance of offers

An offer for the grant of options shall be deemed to have been accepted when our Company receives the letter containing the offer duly signed by the grantee together with a payment of HK$1.00 (or such other nominal sum in any currency as the Board may determine) in favor of our Company as consideration for the grant thereof within such time as may be specified in the offer (which shall not be later than 21 days from the offer date). Such payment shall in no circumstances be refundable. Once accepted, the option is granted as from the date on which it was offered to the relevant Eligible Participant.

5. Maximum number of Shares

(i) Subject to sub-paragraphs (ii) to (iv) below, the maximum number of Shares in respect of which options may be granted under the Share Option Scheme and any other schemes shall not, in aggregate, exceed 10% of the Shares in issue as at the [REDACTED] (i.e. [REDACTED] Shares) (the “ Scheme Mandate Limit ”) unless approved by the shareholders of our Company pursuant to sub-paragraph (iii) below. Options lapsed in accordance with the terms of the scheme(s) will not be counted for the purpose of calculating the Scheme Mandate Limit.

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STATUTORY AND GENERAL INFORMATION

(ii) Subject to sub-paragraphs (iii) and (iv) below, the Scheme Mandate Limit may be renewed by the shareholders of our Company in general meeting from time to time provided always that the Scheme Mandate Limit so renewed must not exceed 10% of the Shares in issue as at the date of approval of such renewal by the Shareholders of our Company. Upon such renewal, all options granted under the Share Option Scheme and any other share option schemes of our Company (including those exercised, outstanding, cancelled, lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of our Company) prior to the approval of such renewal shall not be counted for the purpose of calculating the Scheme Mandate Limit as renewed. A circular must be sent to the shareholders of our Company containing such relevant information from time to time as required by the Listing Rules in connection with the general meeting at which their approval is sought.
(iii) Subject to sub-paragraphs (iv) below, the Board may seek separate shareholders’ approval in general meeting to grant options beyond the Scheme Mandate Limit provided that the options in excess of the Scheme Mandate Limit are granted only to the Eligible Participants specifically identified by our Company before such approval is sought and our Company must issue a circular to the shareholders of our Company containing such relevant information from time to time as required by the Listing Rules in relation to any such proposed grant to such Eligible Participants.
(iv) The maximum number of Shares which may be allotted and issued upon the exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes adopted by our Group must not, in aggregate, exceed 30% of the Shares in issue from time to time. No options may be granted under the Share Option Scheme or any other share option schemes adopted by our Group if such grant will result in the said 30% limit being exceeded.

6. Maximum entitlement of each participant

No option shall be granted to any Eligible Participant which, if exercised in full would result in the total number of the Shares issued and to be issued upon exercise of the options already granted or to be granted to such Eligible Participant under the Share Option Scheme (including exercised, cancelled and outstanding share options) in any 12-month period up to and including the date of such grant exceeding 1% in aggregate of the Shares in issue as at the date of such grant. Any grant of further options above this limit shall be subject to the following requirements:

(i) approval of the Shareholders of our Company at general meeting, with such Eligible Participant and its close associates (or if such Eligible Participants is a connected person, its associates) abstaining from voting;
(ii) a circular in relation to the proposal for such further grant must be sent by our Company to its Shareholders with such information from time to time as required by the Listing Rules;
(iii) the number and terms of the options to be granted to such proposed grantee shall be fixed before the Shareholders’ approval mentioned in (i) above; and

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(iv) for the purpose of calculating the minimum exercise price for the Shares in respect of the further options proposed to be so granted, the date of board meeting for proposing such grant of further options shall be taken as the date of offer of such options.

7. Requirements on granting options to certain connected persons

Any grant of options to any director, chief executive or substantial shareholder of our Company, or any of their respective associates, must be approved by the independent non-executive Directors (excluding an independent non-executive director who or whose associate is a proposed grantee).

Where any grant of options to a substantial shareholder of our Company or an independent non-executive Director or any of their respective associates would result in the total number of the Shares issued and to be issued upon exercise of all options already 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% of the total number of Shares in issue; and
(ii) having an aggregate value, based on the closing price of the Shares at the date of such grant, in excess of HK$5 million,

such further grant of options must be approved by the Shareholders of our Company on a poll in a general meeting where such grantee, his associates and all core connected persons of our Company must abstain from voting in favor at such general meeting. Our Company will send a circular to the shareholders containing the information required under the Listing Rules.

8. Restrictions on the time of grant of options

No option shall be granted after inside information has come to the knowledge of our Company until our Company has announced the information. In particular, it may not grant any option during the period commencing one month immediately before the earlier of (i) the date of the Board meeting (as such date is first notified to the Stock Exchange under the Listing Rules) for approving our Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and (ii) the deadline for our Company to announce its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules), and ending on the date of the results announcement. No option may be granted during any period of delay in publishing a results announcement. “ Inside information ” has the meaning defined in the SFO.

The Board may not make any offer to an Eligible Participant who is a Director during the periods or times in which the Directors are prohibited from dealing in Shares pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers prescribed by the Listing Rules or any corresponding code or securities dealing restrictions adopted by our Company.

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9. Time of exercise of option

An option may be exercised in accordance with the terms of the Share Option Scheme at any time during a period as the Board may determine which shall not exceed 10 years from the offer date subject to the provisions of early termination thereof, and provided that the Board may determine the minimum period for which an option has to be held or other restrictions before its exercise.

The grantee shall not exercise an option to the extent that the public float of our Company will be less than 25% (or such higher percentage as required by the Stock Exchange or the Listing Rules) of the issued share capital of our Company immediately after the issue and allotment of the Shares upon such exercise of the option.

10. Performance targets

Save as determined by the Board and provided in the offer of grant of the options, there is no performance target that must be achieved before the options can be exercised.

11. Ranking of Shares

The Shares to be allotted and issued upon exercise of an option shall be subject to all the provisions of the Articles of our Company for the time being in force and shall rank pari passu in all respects with the then existing fully paid Shares in issue on the allotment date and accordingly shall entitle the holders to participate in all dividends or other distributions paid or made on or after the allotment date other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor shall be before the allotment date. Any Share allotted and issued upon the exercise of an option shall not carry voting rights until the name of the grantee has been duly entered into the register of members of our Company as the holder thereof.

12. Rights are personal to grantee

An option shall be personal to the grantee and shall not be transferable or assignable and no grantee shall in any way sell, transfer, charge, mortgage, encumber or otherwise dispose of or create any interest whatsoever in favor of any third party over or in relation to any option or enter into any agreement so to do.

13. Rights on cessation of employment

(i) In the event of death of the grantee (being an individual) before exercising the option in full, his personal representatives may exercise the option up to the grantee’s entitlement (to the extent exercisable as at the date of his death and not already exercised) within a period of 12 months following his death or such longer period as the Board may determine.
(ii) In the event of the grantee who is an Employee ceasing to be an Employee for any reason other than his death, or the termination of his employment pursuant to paragraph 18(v), the grantee may exercise the option (to the extent exercisable as at the date of such cessation and not already exercised) within 30 days following such cessation or such longer period as the Board may determine.

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14. Effects of alterations to share capital

In the event of any alteration in the capital structure of our Company while an option remains exercisable or this scheme remains in effect, whether by way of capitalisation of profits or reserves, rights issue, consolidation, reclassification, subdivision or reduction of capital of our Company, such corresponding alterations (if any) shall be made in the number or nominal amount of Shares to which the Share Option Scheme or any option(s) relate so far as unexercised; and/or the exercise price; and/or the method of exercise of the options; and/or the maximum number of Shares subject to the Share Option Scheme.

Any adjustments required under this paragraph must be made in compliance with the Listing Rules, give a grantee the same proportion of the equity capital as that to which that grantee was previously entitled and shall be made on the basis that the aggregate exercise price payable by a grantee on the full exercise of any option shall remain as nearly as possible the same (but shall not be greater than) as it was before such event, but no such adjustments may be made to the extent that Shares would be issued at less than nominal value provided that in such circumstance, the exercise price shall be reduced to the nominal value. For the avoidance of doubt, the issue of securities as consideration in a transaction may not be regarded as a circumstance requiring adjustment. In respect of any such adjustments, other than any made on a capitalisation issue, the independent financial advisor of our Company or the auditors of our Company must confirm to the Directors in writing that the adjustments satisfy the requirements of the relevant provisions of the Listing Rules.

15. Rights on a general offer

If a general or partial offer (whether by way of takeover offer, share re-purchase offer, or scheme of arrangement or otherwise in like manner) is made to all the holders of Shares (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in concert with the offeror), our Company shall use all reasonable endeavors to procure that such offer is extended to all the grantees on the same terms, mutatis mutandis, and assuming that they will become, by the exercise in full of the options granted to them, Shareholders. If such offer, having been approved in accordance with applicable laws and regulatory requirements, becomes or is declared unconditional, the grantee shall be entitled to exercise the option (to the extent exercisable as at the date on which the offer becomes or is declared unconditional and not already exercised) in full or in part at any time within 14 days after the date on which the offer becomes or is declared unconditional.

16. Rights on winding-up

In the event notice is given by our Company to its shareholders to convene a shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind up our Company, our Company shall forthwith give notice thereof to the grantee and the grantee shall be entitled to exercise all or any of his/her options (to the extent exercisable as at the date of the notice of meeting and not already exercised) at any time not later than 2 Trading Days (excluding any period(s) of closure of our Company’s share registers) prior to the proposed meeting of our Company to consider the winding-up and our Company shall, as soon as possible and in any event no later than the Trading Day (excluding any period(s) of closure of our Company’s share registers) immediately prior to the date of the proposed shareholders’ meeting, allot and issue such number of Shares to the grantee which falls to be issued on such exercise.

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STATUTORY AND GENERAL INFORMATION

17. Rights on compromise or arrangement

In the event of a compromise or arrangement between our Company and its members or creditors being proposed in connection with a scheme for the restructuring, reconstruction or amalgamation of our Company, our Company shall give notice thereof to all grantees on the same date as it gives notice of the meeting to its members or creditors to consider such a scheme, and thereupon the grantee shall be entitled to exercise all or any of his/her option(s) (to the extent which has become exercisable as at the date of the notice and not already exercised) at any time not later than 2 Trading Days (excluding any period(s) of closure of our Company’s share registers) prior to the proposed meeting and our Company shall, as soon as possible and in any event no later than the Trading Day (excluding any period(s) of closure of our Company’s share registers) immediately prior to the date of the proposed meeting, allot and issue such number of Shares to the grantee which falls to be issued on such exercise.

18. Lapse of options

An option shall automatically lapse and not be exercisable on the earliest of:

(i) the expiry of the option period;
(ii) the expiry of any of the periods referred to in paragraph 13 above;
(iii) subject to paragraph 16 above, the date of the commencement of the winding-up of our Company;
(iv) subject to the scheme becoming effective, the expiry of the period referred to in paragraph 17 above;
(v) the date on which the grantee who is an Employee ceases to be an Employee by reason of summary dismissal or being dismissed for misconduct or other breach of the terms of his employment contract or other contract constituting him an Employee, or the date on which he begins to appear to be unable to pay or has no reasonable prospect of being able to pay his debts or has become insolvent or has made any arrangements or composition with his or her creditors generally or on which he has been convicted of any criminal offence involving his or her integrity or honesty, unless otherwise resolved to the contrary by the Board;
(vi) in respect of a grantee other than an Employee, the date on which the Board shall determine that (i) (aa) such grantee has committed any breach of any contract entered into between such grantee on the one part and our Group or any Invested Entity on the other part; or (bb) such grantee has committed any act of bankruptcy or has become insolvent or is subject to any winding-up, liquidation or analogous proceedings or has made any arrangement or composition with his creditors generally; or (cc) such grantee could no longer make any contribution to the growth and development of our Group by reason of the cessation of its relations with our Group or by any other reason whatsoever; and (ii) the option shall lapse as a result of any event specified in subparagraph (i) (aa), (bb) or (cc) above, unless otherwise resolved to the contrary by the Board;

IV – 23

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(vii) the expiry of the period referred to in paragraph 15 above; and
(viii) the date on which the grantee commits a breach of paragraph 12 or any terms or conditions attached to the grant of the option or an event, in respect to a grantee, referred to in (2) below occurs, unless otherwise resolved to the contrary by the Board.

If the grantee is a company wholly owned by one or more Eligible Participants:

(1) the provisions of paragraphs 13(i) and (ii), 18(v) and (vi) shall apply to the grantee and to the options granted to such grantee, mutatis mutandis, as if such options had been granted to the relevant Eligible Participant, and such options shall accordingly lapse or fall to be exercisable after the event(s) referred to in paragraphs 13(i) and (ii), 18(v) and (vi) shall occur with respect to the relevant Eligible Participant; and
(2) the options granted to the grantee shall lapse and determine on the date the grantee ceases to be wholly owned by the relevant Eligible Participant,

provided that the Board may decide that such options or any part thereof shall not so lapse or determine subject to such conditions or limitations as they may impose.

19. Cancellation of options granted but not yet exercised

The Board shall have the absolute discretion to cancel any options granted at any time if the grantee so agreed provided that where an option is cancelled and a new option is proposed to be issued to the same grantee, the issue of such new option may only be made with available but unissued options (excluding the cancelled options) within the limit approved by the Shareholders as mentioned in the Share Option Scheme from time to time.

20. Period of the Share Option Scheme

Subject to the terms of the Share Option Scheme, the Share Option Scheme shall be valid and effective for a period of 10 years after the adoption date, after which no further options may be issued. Subject to the above, in all other respects, in particular, in respect of Options remaining outstanding, the provisions of the Share Option Scheme shall remain in full force and effect. On and subject to the terms of the Scheme and the Listing Rules, the Board may impose such terms and conditions of the offer of grant either on a case-by-case basis or generally including but not limited to the minimum period for which an option must be held before it can be exercised.

21. Alteration to the Share Option Scheme

The Share Option Scheme may be altered in any respect by resolution of the Board except that the terms and condition of the Share Option Scheme relating to matters set out in Rule 17.03 of the Listing Rules (or any other relevant provisions of the Listing Rules from time to time applicable) cannot be altered to the advantage of grantees or prospective grantees except with the prior approval of the shareholders of our Company in general meeting. No such alteration shall operate to affect adversely the terms of issue of any option granted or agreed to be granted prior

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

to such alterations except with the consent or sanction of such majority of the grantee as would be required of the shareholders of our Company under the Articles for the time being of our Company for a variation of the rights attached to Shares.

Any alterations to the terms and conditions of the Share Option Scheme which are of a material nature or any change to the terms of options granted must be approved by the Shareholders in general meeting, except where such alterations take effect automatically under the existing terms of the Share Option Scheme.

Any change to the authority of the Directors or administrators of the Share Option Scheme in relation to any alterations to the terms of the Share Option Scheme must be approved by the Shareholders in general meeting.

The amended terms of the Share Option Scheme and/or the options must continue to comply with the relevant provisions of the Listing Rules and supplementary guidance on the interpretation of the Listing Rules issued by the Stock Exchange from time to time (including the supplemental guidance attached to the letter from the Stock Exchange dated 5 September 2005 to all issuers relating to Share Option Scheme).

Subject to the above paragraphs, the Board may at any time alter, amend or modify the terms and conditions of the Share Option Scheme such that the provisions of the Share Option Scheme would comply with all relevant legal and regulatory requirements in all relevant jurisdictions to the extent as considered necessary by the Board to implement the terms of the Share Option Scheme.

22. Termination to the Share Option Scheme

Our Company by ordinary resolution in general meeting or the Board may at any time terminate the operation of the Share Option Scheme and in such event, no further options will be offered but the provisions of the Share Option Scheme shall remain in force in all other respects.

Options complying with the provisions of the Listing Rules which are granted during the life of the scheme and remain unexpired immediately prior to the termination of the operation of the Share Option Scheme shall continue to be valid and exercisable in accordance with their terms of issue after the termination of the Share Option Scheme.

23. Conditions of the Share Option Scheme

The Share Option Scheme is conditional upon (i) the passing of the necessary resolution(s) to adopt the Share Option Scheme by the Shareholders at a general meeting; (ii) the Stock Exchange granting the approval of the [REDACTED] of and permission to deal in, the Shares in issue, the [REDACTED] and any Shares which may fall to be issued pursuant to the exercise of any options under the Share Option Scheme in respect of up to 10% of the Shares in issue as at the [REDACTED] ; (iii) the obligations of the Underwriter(s) under the Underwriting Agreements becoming unconditional (including, if relevant, as a result of the waiver of any such condition(s)) and not being terminated in accordance with the terms of the Underwriting Agreements or otherwise; and (iv) the commencement of dealings in the Shares on the Stock Exchange.

IV – 25

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

As at the Latest Practicable Date, no option had been granted by our Company under the Share Option Scheme. An application has been made to the [REDACTED] Committee for the approval of the [REDACTED] of, and permission to deal in the Shares to be issued and allotted by our Company pursuant to the exercise of options that may be granted under the Share Option Scheme in respect of up to 10% of the Shares in issue as at the [REDACTED] .

Our Directors consider it inappropriate to disclose the value of options which may be granted under the Share Option Scheme as if they had been granted as at the Latest Practicable Date. Any such valuation will have to be made on the basis of certain option pricing model or other methodology, which depends on various assumptions including, the exercise price, the exercise period, interest rate, expected volatility and other variables. As no options have been granted, certain variables are not available for calculating the value of options. Our Directors believe that any calculation of the value of options as at the Latest Practicable Date based on a number of speculative assumptions would not be meaningful and would be misleading to prospective investors.

E. OTHER INFORMATION

1. Estate duty, tax indemnity and other indemnities

The Controlling Shareholders (the “ Indemnifiers ”) have entered into the Deed of Indemnity with and in favour of our Company (for itself and as trustee for each of its present subsidiaries) (being the material contract (b) referred to under the paragraph headed “Summary of material contracts” in the section headed “Further information about the business of our Group” in this Appendix) to provide indemnities on a joint and several basis in respect of, among others, (a) any liability for Hong Kong estate duty which might be incurred by any member of our Group by any transfer of property (within the meaning of sections 35 and 43 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong)) or the equivalent thereof under the laws of any jurisdiction outside Hong Kong to any member of our Group on or before the date on which the [REDACTED] becomes unconditional; and (b) tax liabilities (including all fines, penalties, costs, charges, expenses and interests incidental to or relating to taxation) and claims falling on any member of our Group resulting from or by reference to any income, profits, gains earned, accrued or received, or any transactions or events 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 or claims are chargeable against or attributable to any other person, firm, company or corporation.

Under the Deed of Indemnity, the Indemnifiers have also given indemnities to our Group in relation to taxation which might be payable by any member of our Group in respect of any income, profits or gains earned, accrued or received on or before the date on which the [REDACTED] becomes unconditional.

The Directors have been advised that no material liability for estate duty is likely to fall on our Company or any of our subsidiaries in the Cayman Islands, BVI, Hong Kong and Macau.

The Deed of Indemnity does not cover any claim and the Indemnifiers shall be under no liability under the Deed of Indemnity in respect of any taxation:

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(a) to the extent that provision, reserve or allowance has been made for such liability, taxation or taxation claim in the audited accounts of our Company and our subsidiaries as at and up to [31 March 2014] (the “ Accounts ”) ; or
(b) to the extent that such taxation or liability for such taxation falling on any members of our Group in respect of their accounting periods or any accounting period commencing on or after [1 April 2014] and ending on the [REDACTED] , where such taxation or liability would not have arisen but for some act or omission of, or transaction voluntarily effected by, our Group or any of its members (whether alone or in conjunction with some other act, omission or transaction, whenever occurring) without the prior written consent or agreement of the Indemnifiers 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 on or before the [REDACTED] ;
(ii) carried out, made or entered into pursuant to a legally binding commitment created on or before the [REDACTED] or pursuant to any statement of intention made in this [REDACTED] ; or
(iii) consisting of any of the members of our Group ceasing, or being deemed to cease, to be a member of any group of companies for the purposes of any matter of taxation;
(c) to the extent that such taxation claim arises or is incurred as a result of the imposition of taxation as a consequence of any retrospective change in the law or the interpretation or practice thereof by the Inland Revenue Department of Hong Kong or any other relevant authority in Macau or any other jurisdictions coming into force after the date of the Deed of Indemnity or to the extent such taxation claim arises or is increased by an increase in rates of taxation after the date of the Deed of Indemnity with retrospective effect;
(d) to the extent of any provisions or reserve made for taxation in the Accounts which is finally established to be an over-provision or an excessive reserve in which case the Indemnifier’s liability (if any) in respect of such taxation shall be reduced by an amount not exceeding such provision or reserve, provided that the amount of any such provision or reserve applied pursuant to this item (d) to reduce the Indemnifiers’ liability in respect of taxation shall not be available in respect of any such liability arising thereafter; or
(e) to any incomes, profits or gains earned, accrued or received by any member of our Group or any event occurring after the [REDACTED] .

Under the Deed of Indemnity, the Indemnifiers have also undertaken to each member of our Group that they will indemnify and at all times keep each member of our Group fully indemnified, on a joint and several basis, from and against all depletion in or reduction in value of assets, increase in liabilities, losses, claims, actions, proceedings, demands, orders, notices, liabilities, damages, costs (including legal costs), expenses, interest, fines, penalties, payments of whatever

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

nature suffered or incurred by any member of our Group directly or indirectly arising out of or in connection with, mainly, any of the following (collectively, the “ Indemnified Events ”):

(a) any possible or alleged violation, breaches or non-compliance by any member of our Group on or before the [REDACTED] , any applicable laws, rules and regulations in Hong Kong and Macau in relation to all matters;
(b) all claims, penalties, fines and all losses and damages which may be suffered by our Group as a result of any litigation, arbitration, claim and/or legal proceedings, whether of criminal, administrative, contractual, tortious or otherwise nature instituted or threatened against any Group Member and/or any act, non-performance, omission or otherwise of any Group Member accrued or arising before the [REDACTED] , including but not limited to the litigation and arbitration proceedings referred to in the section headed “Business – Legal and administrative proceedings” in this [REDACTED] ;
(c) the implementation of the corporate reorganisation of our Group in the preparation of [REDACTED] as set out in this [REDACTED] , and
(d) the Company’s failure to recover the entire uncertified contract works due from a customer for the three years ended 31 March 2014 in the sum of HK$9,374,000,

PROVIDED THAT the Indemnifiers are under no liability under the Deed of Indemnity in respect of the Indemnified Events:–

(a) to the extent that provision or reserve has been made for the relevant Indemnified Events in the audited accounts of any member of our Group for any accounting period up to the end of the Track Record Period;
(b) to the extent that any provision or reserve made for the Indemnified Events in the audited accounts of any member of our Group for any accounting period up to the end of the Track Record Period which is finally established to be over-provision or an excessive reserve, in which case the Indemnifiers’ liability (if any) in respect of the Indemnified Events shall be reduced by an amount not exceeding such provision or reserve, provided that the amount of any such provision or reserve applied to reduce the Indemnifiers’ liability in respect of the Indemnified Events shall not be available in respect of any such liability arising thereafter; or
(c) to the extent that the outstanding legal costs incurred by all members of our Group in respect of the legal proceedings and two ongoing arbitration proceedings engaged by our Group in Hong Kong for the period before the [REDACTED] is in aggregate equal to or less than HK$3.6 million or in relation to each case, the sum specified in the Deed of Indemnity. In the event that such legal costs exceed HK$3.6 million or the specified amount related to individual case, each of the Indemnifiers hereby irrevocably and unconditionally undertakes to make up such shortfall on demand.

2. Litigation

Save as disclosed in the paragraph headed “Compliance”, “Non-compliance with the Predecessor Companies Ordinance” and “Legal and administrative proceedings” in the “Business” section of this [REDACTED] , no member of our Group 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 Group.

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

3. Sponsor

The Sponsor has made an application on behalf of our Company to the [REDACTED] Division for the [REDACTED] of, and permission to deal in, the Shares in issue and to be issued as mentioned herein (including any Shares falling to be issued pursuant to the exercise of any options which may be granted under the Share Option Scheme).

4. Compliance adviser

In accordance with the requirements of the Listing Rules, our Company has appointed Investec as our compliance adviser to provide advisory services to our Company to ensure compliance with the Listing Rules for a period commencing on the [REDACTED] and ending on the date on which our Company complies with Rule 13.46 of the Listing Rules in respect of its financial results for the first full financial year commencing after the [REDACTED] or until the agreement is terminated, whichever is the earlier.

5. Preliminary expenses

The preliminary expenses relating to the incorporation of our Company are estimated to be approximately HK$42,000 and are payable by our Company.

6. Promoter

Our Company has no promoter as the term is defined under the Listing Rules.

7. Qualifications of experts

The following are the qualifications of the experts who have given opinion or advice which are contained in this [REDACTED] :

Name	Qualification
Investec	A licensed corporation to carry on type 1 (dealing
	in securities), type 4 (advising on securities), type 6
	(advising on corporate finance) and type 9 (asset
	management) regulated activities under the SFO
TC & Co.	Hong Kong legal adviser
Rato, Ling, Vong, Lei & Cortés -	Macau legal adviser
Advogados
Hills & Co.	PRC legal adviser
Conyers Dill & Pearman	Cayman Islands attorneys-at-law
(Cayman) Limited

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

PricewaterhouseCoopers Certified Public Accountants Lau & Au Yeung C.P.A. Limited Certified Public Accountants Asset Appraisal Limited Property valuer Ipsos Hong Kong Limited Independent market research firm

8. Consents of experts

Each of the above named experts has given and has not withdrawn its written consent to the issue of this [REDACTED] with the inclusion of its report and/or letter and/or opinion and/ or valuation certificate and/or summary thereof (as the case may be) the references to its name included herein in the form and context in which they are respectively included.

9. Sponsor’s fees

The Sponsor will be paid by our Company a total fee of HK$ [REDACTED] to act as sponsor to our Company in the [REDACTED] .

10. Binding effect

This [REDACTED] shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance insofar as applicable.

11. Taxation of holders of Shares

(a) Hong Kong

Dealing in Shares registered on our Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty.

(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 advisers

Intending holders of our Shares are recommended to consult their professional advisers if they are in 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.

IV – 30

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

12. Disclaimers

Save as disclosed in this [REDACTED] :

(a) taking no account of any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme, our Directors are not aware of any person, not being a Director of our Company, who will, immediately following completion of the [REDACTED] [REDACTED] and the Capitalisation Issue, be interested in or has short positions in the Shares or underlying shares of our Company which have to be notified to our Company and the Stock Exchange under Divisions 2 and 3 of Part XV of the SFO once the Shares are [REDACTED] , or, who is, 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 members of our Group;
(b) so far as our Directors are aware, none of our Directors or chief executive has any interest or short position in the shares, underlying shares or debentures of our Company or any of its associated corporations (within the meaning of Part XV of the SFO) immediately following the completion of the [REDACTED] and assuming that the options which may be granted under the Share Option Scheme are not exercised, which will have to be notified to our Company and the Stock Exchange under Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he will be taken or deemed to have under the SFO) once the Shares are [REDACTED] , or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein once the Shares are [REDACTED] , or which will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules to be notified to our Company and the Stock Exchange, once the Shares are [REDACTED] ;
(c) none of the Directors nor any of the parties whose names are listed in the paragraph headed “Qualifications of experts” under the section headed “Other information” in this Appendix is interested in the promotion of our Company, or in any assets which have been, within the two years immediately preceding the issue of this [REDACTED] , acquired or disposed of by or leased to any member of our Group, or are proposed to be acquired or disposed of by or leased to any member of our Group;
(d) none of the Directors nor any of the parties whose names are listed in the paragraph headed “Qualifications of experts” under the section headed “Other information” in this Appendix is materially interested in any contract or arrangement subsisting at the date of this [REDACTED] which is significant in relation to the business of our Group;
(e) none of the experts named in the paragraph headed “Qualifications of experts” under the section headed “Other information” in this Appendix has any shareholding in any member of our Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group; and
(f) none of the Controlling Shareholders nor any of the Directors is interested in any business apart from our Group’s business, which competes or is likely to compete, either directly or indirectly, with our Group’s business.

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

13. Miscellaneous

(a) Save as disclosed in this [REDACTED] :
(i) within the two years preceding the date of this [REDACTED] ,
- (aa) no share or loan capital of our Company or any of our subsidiaries has been issued or agreed to be issued fully or partly paid either for cash or for a consideration other than cash;
- (bb) 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;
- (cc) no commission has been paid or payable (except to sub-underwriter) for subscribing or agreeing to subscribe, or procuring or agreeing to procure subscriptions, for any Shares; and
- (dd) no founders, management or deferred shares of our Company or any of its subsidiaries have been issued or agreed to be issued.
(ii) the Directors confirm that since 31 March 2014 (being the date to which the latest audited combined financial statements of our Group were made up), there has been no material adverse change in the financial or trading position or prospects of our Group.
(b) There has not been any interruption in the business of our Group which may have or has had a material adverse effect on the financial position of our Group in the 12 months immediately preceding the date of this [REDACTED] .
(c) Save in connection with the Underwriting Agreement, none of the parties listed in the paragraph headed “Qualifications of experts” under this section headed “Statutory and general information” in this Appendix:
(i) is interested legally or beneficially in any securities of our Group or any of any subsidiaries; or
(ii) has any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities of our Group or any of our subsidiaries.

14. Bilingual [REDACTED]

The English language and Chinese language versions of this [REDACTED] 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). In case of any discrepancies between the English language version and the Chinese language version, the English language version 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.

APPENDIX V

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

The documents attached to the copy of this [REDACTED] delivered to the Registrar of Companies in Hong Kong for registration were (i) copies of the [REDACTED] ; (ii) copies of the written consents referred to in the paragraph headed “Consents of experts” under the section headed “Other information” in Appendix IV to this [REDACTED] and; (iii) copies of the material contracts referred to in the paragraph headed “Summary of material contracts” under the section headed “Further information about the business of our Group” in Appendix IV to this [REDACTED] .

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of TC & Co. at Unit 2201-3, 22nd Floor, Tai Tung Building, 8 Fleming Road, Wanchai, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this [REDACTED] :

(i) the Memorandum and the Articles;
(ii) the Accountant’s Report from PricewaterhouseCoopers, the text of which is set out in Appendix I to this [REDACTED] ;
(iii) the audited combined financial statements of our Group for the three years ended 31 March 2014;
(iv) the report from PricewaterhouseCoopers on the unaudited pro forma financial information, the text of which is set out in Appendix II to this [REDACTED] ;
(v) the letters relating to the property interests of our Group prepared by Asset Appraisal Limited;
(vi) the material contracts referred to in the paragraph headed “Summary of material contracts” under the section headed “Further information about the business of our Group” in Appendix IV to this [REDACTED] ;
(vii) the service contracts with the executive Directors and the appointment letters with the independent non-executive Directors referred to in the paragraph headed “Particulars of service contracts” under the section headed “Disclosure of interests” in Appendix IV to this [REDACTED] ;
(viii) the written consents referred to in the paragraph headed “Consents of experts” under the section headed “Other information” in Appendix IV to this [REDACTED] ;

V – 1

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APPENDIX V

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

(ix) the legal opinion issued by Rato, Ling, Vong, Lei & Cortés - Advogados, the legal adviser to our Company as to Macau law, in respect of certain aspects of our Group;
(x) the legal opinion issued by TC & Co., the legal adviser to our Company as to Hong Kong law, in respect of certain aspects of our Group.
(xi) the letter of advice prepared by Conyers Dill & Pearman (Cayman) Limited summarising certain aspects of the Companies Law referred to in Appendix III to this [REDACTED] ;
(xii) the legal opinion issued by Hills & Co., the legal adviser to our Company as to PRC law, in respect of certain aspects of our Group;
(xiii) the tax opinion issued by Lau & Au Yeung C.P.A. Limited, the tax representative to certain of our subsidiaries in respect of certain aspects of Hong Kong tax;
(xiv) the rules of the Share Option Scheme;
(xv) the Companies Law; and
(xvi) the Ipsos Report.

V – 2

AI assistant

Sam Woo Construction Group Limited — Capital/Financing Update 2014

50893_rns_2014-07-16_8fb88b19-7462-43b6-975a-6e1dd9e28f9e.pdf

APPLICATION PROOF OF

SAM WOO CONSTRUCTION GROUP LIMITED 三和建築集團有限公司

WARNING

IMPORTANT

SAM WOO CONSTRUCTION GROUP LIMITED 三和建築集團有限公司

BOOKRUNNER AND LEAD MANAGER [REDACTED]

EXPECTED TIMETABLE

[REDACTED]

[REDACTED]

EXPECTED TIMETABLE

[REDACTED]

EXPECTED TIMETABLE

[REDACTED]

CONTENTS

IMPORTANT NOTICE TO INVESTORS

CONTENTS

SUMMARY

OVERVIEW

SUMMARY

OUR LICENCE / REGISTRATION

COMPETITIVE STRENGTHS

SUMMARY

BUSINESS STRATEGIES

FINANCIAL INFORMATION

Summary of Combined Statements of Comprehensive Income

SUMMARY

Revenue

Concentration of customers

SUMMARY

Cost of sales

Income tax expenses

Net current liabilities

SUMMARY

Selected financial ratios

SUMMARY

RECENT DEVELOPMENT OF OUR GROUP SUBSEQUENT TO THE TRACK RECORD PERIOD

CONTROLLING SHAREHOLDERS

SUMMARY

[REDACTED]

[REDACTED]

[REDACTED] EXPENSES

[REDACTED]

SUMMARY

USE OF PROCEEDS

[REDACTED]

DIVIDENDS

LEGAL AND ADMINISTRATIVE PROCEEDINGS

SUMMARY

RISK FACTORS

DEFINITIONS

[REDACTED]

[REDACTED] [REDACTED]

[REDACTED] [REDACTED]

[REDACTED] [REDACTED]

DEFINITIONS

[REDACTED]

GLOSSARY OF TECHNICAL TERMS

GLOSSARY OF TECHNICAL TERMS

FORWARD-LOOKING STATEMENTS

RISK FACTORS

RISKS RELATING TO OUR BUSINESS

Our business operates under various registrations and certifications and the loss of or failure to obtain or renew any or all of these registrations and/or certifications could materially and adversely affect our business

RISK FACTORS

Award of our foundation works and ancillary services contracts are subject to successful tenders or acceptable quotations

We have a concentration of customers during the Track Record Period

Liquidity and net current liabilities

RISK FACTORS

Our indebtedness could have an adverse effect on our financial position, increase the difficulty of raising capital to fund our operations and limit our ability to explore future business opportunities

We may not be able to sustain growth rate and profit margin similar to those we achieved during the Track Record Period, or maintain our financial performance in the future

RISK FACTORS

Reliance on key management personnel

Our ability to compete for foundation works and ancillary services projects is limited by our machinery and equipment

RISK FACTORS

Project risk

If we fail to accurately estimate our costs or fail to complete projects within our cost estimates, the

results of our operations would be adversely affected

RISK FACTORS

Sam Woo Construction Group Limited Capital/Financing Update 2014