LUEN WONG GROUP HOLDINGS LIMITED 聯旺集團控股有限公司 · THE STOCK EXCHANGE OF HONG KONG LIMITED BY WAY OF PLACING Number of Placing Shares : 312,000,000 Shares (comprising

Sponsor

Joint Bookrunners and Joint Lead Managers

PLACING

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 8217

LUEN WONG GROUP HOLDINGS LIMITED

聯旺集團控股有限公司

LU

EN

WO

NG

GR

OU

P HO

LD

ING

S LIM

ITE

D




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

LUEN WONG GROUP HOLDINGS LIMITED聯旺集團控股有限公司


LISTING ON THE GROWTH ENTERPRISE MARKET OFTHE STOCK EXCHANGE OF HONG KONG LIMITED

BY WAY OF PLACING

Number of Placing Shares : 312,000,000 Shares (comprising208,000,000 New Shares to be offeredby our Company and 104,000,000 SaleShares to be offered by the SellingShareholder)

Placing Price : HK$0.26 per Placing Share, plusbrokerage of 1%, SFC transaction levyof 0.0027% and Stock Exchangetrading fee of 0.005% (payable in fullon application in Hong Kong dollars)

Nominal value : HK$0.01 per ShareStock code : 8217

Sponsor

TC Capital Asia LimitedJoint Bookrunners and Joint Lead Managers

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong KongSecurities Clearing Company Limited take no responsibility for the contents of this prospectus, make norepresentation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any losshowsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.

A copy of this prospectus, having attached thereto the documents specified in the section headed “DocumentsDelivered to the Registrar of Companies and Available for Inspection” in Appendix VI to this prospectus, has beenregistered with the Registrar of Companies as required by Section 342C of the Companies (Winding Up andMiscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Registrar of Companies inHong Kong and the Securities and Futures Commission of Hong Kong take no responsibility as to the contents ofthis prospectus or any of the other documents referred to above.

Prior to making an investment decision, prospective investors should consider carefully all of the information setout in this prospectus, including but not limited to the risk factors set out in the section headed “Risk Factors” inthis prospectus.

Prospective investors of the Placing Shares should note that the Sponsor and/or the Joint Bookrunners (forthemselves and on behalf of the Underwriters) are entitled to terminate the obligations of the Underwriters underthe Underwriting Agreement by means of a notice in writing to our Company (for itself and on behalf of theSelling Shareholder) given by the Sponsor and/or the Joint Bookrunners (for themselves and on behalf of theUnderwriters) upon the occurrence of any of the events set out in the section headed “Underwriting –Underwriting Arrangements and Expenses – Grounds for termination” in this prospectus, at any time prior to 8:00a.m. (Hong Kong time) on the Listing Date. Should the Sponsor and/or the Joint Bookrunners (for themselves andon behalf of the Underwriters) terminate the Underwriting Agreement, the Placing will not proceed and will lapse.

IMPORTANT

31 March 2016

GEM has been positioned as a market designed to accommodate companies towhich a higher investment risk may be attached than other companies listed on the StockExchange. Prospective investors should be aware of the potential risks of investing insuch companies and should make the decision to invest only after due and carefulconsideration. The greater risk profile and other characteristics of GEM mean that it is amarket more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk thatsecurities traded on GEM may be more susceptible to high market volatility thansecurities traded on the Main Board and no assurance is given that there will be a liquidmarket in the securities traded on GEM.

CHARACTERISTICS OF GEM

– i –

2016(Note 1)

Announcement of the level of indication of interestin the Placing to be published on

(i) the Stock Exchange’s website at www.hkexnews.hk; and

(ii) our Company’s website at www.luenwong.hkon or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 11 April

Allotment of Placing Shares to placees on or about . . . . . . . . . . . . . . . . Monday, 11 April

Deposit of share certificates forthe Placing Shares into CCASS on or about (Note 2) . . . . . . . . . . . . . . Monday, 11 April

Dealings in the Shares on GEM tocommence at 9:00 a.m. on (Notes 3 & 4) . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 12 April

Notes:

1. All times and dates refer to Hong Kong local times and dates.

2. Share certificates for the Placing Shares allotted and issued to the placees are expected to be depositeddirectly into CCASS on or about Monday, 11 April 2016 for credit to the respective CCASS participants’ orthe CCASS investor participants’ stock accounts designated by the Underwriter), the placees or their agents(as the case may be). No temporary documents or evidence of title will be issued by our Company.

3. If there is any change to the above expected timetable, we will make an appropriate announcement on theStock Exchange’s website at www.hkexnews.hk and on our Company’s website at www.luenwong.hk toinform investors accordingly.

4. All share certificates for the Placing Shares will only become valid certificates of title when the Placing hasbecome unconditional in all respects and the Underwriting Agreement has not been terminated inaccordance with its terms at any time prior to 8:00 a.m. on the Listing Date. If the Placing does not becomeunconditional or the Underwriting Agreement is terminated in accordance with its terms, we will make anannouncement on the Stock Exchange’s website at www.hkexnews.hk and on our Company’s website atwww.luenwong.hk as soon as possible.

EXPECTED TIMETABLE

– ii –

You should rely only on the information contained in this prospectus to make yourinvestment decision. Our Company has not authorised anyone to provide you withinformation that is different from what is contained in this prospectus. Any information orrepresentation not contained or made in this prospectus must not be relied on by you ashaving been authorised by our Company, the Selling Shareholder, the Sponsor, the JointBookrunners, the Joint Lead Managers, any of the Underwriters, any of their respectivedirectors, affiliates, employees or representatives or any other person or party involved inthe Placing.

Page

CHARACTERISTICS OF GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING . . . . . . . . . . 41

DIRECTORS AND PARTIES INVOLVED IN THE PLACING . . . . . . . . . . . . . . . . 45

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

REGULATORY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

HISTORY AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS . . . . . . . . . . . 193

CONTENTS

– iii –

Page

SUBSTANTIAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

STATEMENT OF BUSINESS OBJECTIVE AND USE OF PROCEEDS . . . . . . . . 260

UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

STRUCTURE AND CONDITIONS OF THE PLACING . . . . . . . . . . . . . . . . . . . . . 276

APPENDIX I – ACCOUNTANTS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

APPENDIX II – UNAUDITED PRO FORMA FINANCIAL INFORMATION . . II-1

APPENDIX III – PROPERTY VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

APPENDIX IV – SUMMARY OF THE CONSTITUTION OFOUR COMPANY ANDCAYMAN ISLANDS COMPANY LAW . . . . . . . . . . . . . . . . . IV-1

APPENDIX V – STATUTORY AND GENERAL INFORMATION . . . . . . . . . . . V-1

APPENDIX VI – DOCUMENTS DELIVERED TOTHE REGISTRAR OF COMPANIES ANDAVAILABLE FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . VI-1

CONTENTS

– iv –

This summary aims to give you an overview of the information contained in thisprospectus. As this is a summary, it does not contain all the information that may beimportant to you. You should read the whole prospectus before you decide to invest in thePlacing Shares. There are risks associated with any investment. Some of the particularrisks in investing in the Placing Shares are set forth in the section headed “Risk factors”in this prospectus. You should read that section carefully before you decide to invest inthe Placing Shares.

Various expressions used in this summary are defined in the sections headed“Definitions” and “Glossary” in this prospectus.

OUR BUSINESS

We are an established subcontractor engaged in civil engineering works. We have over16 years of experience in providing civil engineering works as a subcontractor and areflexible in deploying resources to meet our customers’ demand.

The civil engineering works undertaken by us are mainly related to (i) roads anddrainage works (including construction and improvement of local road, carriageway withjunction improvement and the associated footpaths, planting areas, drains, sewers, watermains and utilities diversion); (ii) structural works (including construction of reinforcedconcrete structures for bridges and retaining walls); and (iii) site formation works (includingexcavation and/or filling works for forming a new site or achieving designed formation levelfor later development). During the Track Record Period, the average duration of completedprojects (from the date of engagement to the date of completion) was approximately 2.2years. Depending on the nature and complexity of a project as well as the existence of anyunforeseen circumstances (such as bad weather conditions, industrial accidents, variationorders requested by customers, etc., if any), the duration of a contract generally ranges fromapproximately 2 years to 4 years.

Our direct customers are primarily main contractors of various different types of civilengineering projects in Hong Kong. During the Track Record Period, the majority of ourrevenue was derived from public sector projects, i.e. projects which the main contractors areemployed by the Government or statutory bodies, representing approximately 93.3%, 93.9%and 87.8% of our revenue for the two years ended 31 March 2015 and the eight monthsended 30 November 2015, respectively. Our civil engineering projects are non-recurring innature. As a subcontractor, we secure our projects from main contractors after a competitivetendering process whereby we are invited to submit our tender.

We possess our own site equipment for carrying out our projects and therefore are notmaterially reliant on third parties for site equipment rental. We believe that our investmentin site equipment has placed us in a position to cater to civil engineering projects ofdifferent scales and complexity and to meet the expected growing demand of our customers.For further information regarding our site equipment, please refer to the section headed“Business – Site equipment” in this prospectus.

During the Track Record Period and up to the Latest Practicable Date, we hadundertaken 51 civil engineering contracts, of which 31 contracts had been completed. As atthe Latest Practicable Date, we had 20 contracts on hand with an aggregate contract sum ofapproximately HK$1,384,140,000, of which (i) approximately HK$234,304,000 of revenuehas been recognised as at 30 November 2015 (with approximately HK$6,241,000 of revenuerecognised exceeding the original contract sum); and (ii) approximately HK$191,737,000 isexpected to be recognised as revenue for the period from 1 December 2015 to 31 March2016 (with approximately HK$3,547,000 of revenue expected to be recognised exceeding theoriginal contract sum) and HK$824,469,000, HK$109,706,000 and HK$33,713,000 areexpected to be recognised as revenue during the three years ending 31 March 2019,respectively. The amount of revenue expected to be recognised is subject to change due tothe actual progress and commencement and completion dates of our projects. Further detailsof our contracts are set out in the section headed “Business – Our civil engineering contracts− Contracts on hand” in this prospectus.

SUMMARY

– 1 –

Customers

During the Track Record Period, our customers primarily include main contractors ofvarious types of civil engineering projects in Hong Kong. For the two years ended 31 March2015 and the eight months ended 30 November 2015, the percentage of our total revenueattributable to our largest customer amounted to approximately 63.2%, 53.1% and 36.7%,respectively, while the percentage of our total revenue attributable to our five largestcustomers combined amounted to approximately 94.1%, 96.0% and 97.5%, respectively.Among our five largest customers (in terms of revenue) during the Track Record Period, wehave been providing services to them for a period ranging from 2 to 16 years. Our Directorsconsider that due to the nature of the civil engineering construction industry in which ourGroup is engaged in, our customer base is relatively concentrated to reputable maincontractors which dominate the civil engineering construction industry in Hong Kong. As aresult, the potential customer base of our Group is limited. Please refer to the section headed“Business – Customers – Customer concentration” in this prospectus for further details.

During the Track Record Period, all of our civil engineering construction contractswere obtained through tendering. The following table sets out the number of contractstendered, number of successfully tendered contracts and our success rate during the TrackRecord Period and from 1 December 2015 up to the Latest Practicable Date:

For the year ended31 March

For theeight

monthsended 30

November2015

From1 December2015 to the

LatestPracticable Date2014 2015

Number of tenders submitted 44 41 33 18Number of tenders won 5 8 5 –Success rate (%) 11.36 19.51 15.15 –

Note: For the eight months ended 30 November 2015, there were 33 tender applications submitted by ourGroup. Out of the said 33 tender applications, we received 25 rejected tender results and the tenderresults of the remaining 3 tender applications are yet to be known. For the period from 1 December2015 to the Latest Practicable Date, there were 18 tender applications submitted by our Group. Outof the said 18 tender applications, we received 8 rejected tender results and the tender results of theremaining 10 tender applications are yet to be known.

Suppliers

During the Track Record Period, our suppliers primarily include (i) suppliers ofconstruction materials such as concrete, steel, precast concrete units, timbers and diesel fuel;(ii) site equipment rental service providers; and (iii) suppliers of other miscellaneous goods.For the two years ended 31 March 2015 and the eight months ended 30 November 2015, thepercentage of our total purchases incurred (excluding subcontracting charges incurred) fromour largest supplier amounted to approximately 29.2%, 50.6% and 19.1% of our totalpurchases incurred (excluding subcontracting charges incurred), respectively, while thepercentage of our total purchases incurred (excluding subcontracting charges incurred) fromour five largest suppliers combined amounted to approximately 55.7%, 67.5% and 54.0% ofour total purchases incurred (excluding subcontracting charges incurred), respectively. Wegenerally order the relevant construction materials and services on a project-by-project basisand do not enter into any long-term supply agreements with our suppliers. Some majorcustomers also supply construction materials on our behalf pursuant to the contra-chargearrangement, details of which are set out in the section headed “Business – Suppliers –Contra-charge arrangement with our customers” in this prospectus. Among our five largestsuppliers (in terms of total purchased amounts excluding subcontracting charges) during theTrack Record Period, we have developed business relationship with them for a periodranging from less than 1 year to 16 years.

SUMMARY

– 2 –

Subcontractors

Subject to our capacity, resources level, types of civil engineering works, costeffectiveness, complexity of the projects and customers’ requirements, we may subcontractour works to other subcontractors in a project. During the Track Record Period, oursubcontracted works primarily included steel fixing, formwork erection and drainage works.For each of the two years ended 31 March 2015 and the eight months ended 30 November2015, the percentage of our Group’s total subcontracting charges incurred to our Group’slargest subcontractor amounted to approximately 17.3%, 17.7% and 15.0% of our Group’stotal subcontracting charges incurred, respectively, while the percentage of our Group’s totalsubcontracting charges incurred attributable to our Group’s five largest subcontractorscombined amounted to approximately 61.8%, 53.3% and 55.7% of our Group’s totalsubcontracting charges incurred, respectively, for the same periods. Among our five largestsubcontractors (in terms of subcontracting charges incurred) during the Track Record Period,we have developed business relationship with them for a period ranging from 2 to 10 years.

COMPETITIVE LANDSCAPE

According to the Ipsos Report, the top five civil engineering contractors act as maincontractors in the overall civil engineering construction industry, and they accounted forabout 54.6% of the total revenue of the civil engineering construction industry in 2014.Meanwhile, the civil engineering subcontracting industry in Hong Kong is fragmented. As atthe Latest Practicable Date, there were over 700 structural and civil engineeringsubcontractors registered under the Construction Industry Council. In 2014, our Groupaccounted for approximately 1.8% (or HK$254 million) of the total revenue in the civilengineering construction industry generated by civil engineering subcontractors (HK$14.1billion) in Hong Kong. Our Directors consider that technical expertise, quality of work,relationship with customers, suppliers and subcontractors, site equipment capability, projectpricing and safety records are the determinants of competitiveness of a civil engineeringsubcontractor in Hong Kong, and our Group is well-positioned to capture the growingdemand for civil engineering construction services in Hong Kong.

COMPETITIVE STRENGTHS

We believe the following competitive strengths, details of which are set out in thesection headed “Business – Competitive strengths” in this prospectus, contribute to oursuccess and differentiate us from our competitors:

� Well-established presence in the civil engineering construction industry in HongKong

� Experienced project management team� Possession of a variety of site equipment for performing different types of civil

engineering works� Stable relationship with our major customers, suppliers and subcontractors� Our commitment to maintaining safety standard, quality control and environmental

protection

BUSINESS OBJECTIVES AND STRATEGIES

Our principal business objective is to further strengthen our position as an establishedsubcontractor for roads and drainage works, structural works and site formation works inHong Kong and to create long-term shareholder’s value. We intend to achieve our businessobjective by competing for sizeable and profitable civil engineering projects throughexpanding our scale of operation through pursuing the following key strategies, details ofwhich are set out in the sections headed “Business – Business strategies” and “Statement ofbusiness objective and use of proceeds” of this prospectus:

� Acquisition of additional site equipment� Further strengthening our manpower� Adherence to prudent financial management to ensure sustainable growth and

capital efficiency.

SUMMARY

– 3 –

SUMMARY OF FINANCIAL INFORMATION

The following tables present a summary of our financial information during the TrackRecord Period and should be read in conjunction with our financial information included inthe Accountant’s Report set forth in Appendix I to this prospectus, including the notesthereto.

Highlights of combined statements of comprehensive income

Year ended 31 March Percentagechange

Eight months ended30 November Percentage

change2014 2015 2014 2015HK$’000 HK$’000 % HK$’000 HK$’000 %

(unaudited)

Revenue 159,963 271,949 70.0 186,325 154,641 (17.0)Gross profit 15,020 25,600 70.4 15,421 17,286 12.1Profit for the year/period 9,430 18,079 91.7 11,647 6,392 (45.1)

Our Group’s revenue decreased for the eight months ended 30 November 2015 ascompared to the eight months ended 30 November 2014 due to the completion of 16projects with an aggregate contract sum of approximately HK$137,700,000 during the yearended 31 March 2015. A new project with contract sum of approximately HK$455,319,000was awarded in late August and had only commenced in September 2015 and is expected tobring an increase in revenue for the year ending 31 March 2016. Revenue increased for theyear ended 31 March 2015 as compared to the year ended 31 March 2014 due to theincrease in construction works to speed up the progress of two projects with an aggregatecontract sum of approximately HK$195,541,000 to meet completion deadlines during theyear ended 31 March 2015.

Our Group’s gross profit increased for the eight months ended 30 November 2015 ascompared to the eight months ended 30 November 2014 despite a decrease in revenue due toan increase in gross profit margin, which is determined on a project-by-project basis, mainlyas a result of a variation order received with a relatively higher gross profit margin. Grossprofit increased for the year ended 31 March 2015 as compared to the year ended 31 March2014, in line with our revenue. Our Group’s profit for the eight months ended 30 November2015 decreased as compared to the eight months ended 30 November 2014 primarily due tothe Listing expenses incurred of approximately HK$7,883,000 for the eight months ended 30November 2015. Profit for the year ended 31 March 2015 increased as compared to the yearended 31 March 2014 primarily due to the increase in gross profit and scale.

Highlights of combined statements of financial position

As at 31 March Percentagechange

As at 30November Percentage

change2014 2015 2015HK$’000 HK$’000 % HK$’000 %

Current assets 46,250 70,112 51.6 79,890 13.9Current liabilities 82,446 82,525 0.1 74,650 (9.5)Net current (liabilities)/assets (36,196) (12,413) (65.7) 5,240 (142.2)Net (liabilities)/assets (9,775) 8,304 (185.0) 14,696 77.0Total assets 74,949 93,085 24.2 93,164 0.1

We had a net current liabilities position of approximately HK$36,196,000 andHK$12,413,000 as at 31 March 2014 and 2015, respectively, which are primarily attributableto (i) the amounts due to customers for contract work of approximately HK$39,891,000 andHK$39,980,000 as at 31 March 2014 and 2015, respectively. Such amounts representtemporary differences mainly arising from progress billings exceeding costs incurred plus(less) recognised profit (loss), which will cease to exist at completion of the relevantproject; and (ii) the mortgage loan, which is a current liability, drawn to fund the acquisitionof the investment property, located at Festival City, Tai Wai, a non-current asset as at 31March 2014 and 2015, which was disposed of in October 2015. We recorded a net currentassets of approximately HK$5,240,000 as at 30 November 2015. The improvement in our netcurrent liabilities/assets position is mainly attributable to (i) an increase in our construction

SUMMARY

– 4 –

activities during the year ended 31 March 2015 which in turn lead to an increase in ourtrade and other receivables and amounts due from customers for contract work; and (ii) thedisposal of the aforesaid investment property in October 2015.

We had a net liabilities position of approximately HK$9,775,000 as at 31 March 2014due to the accumulated losses incurred prior to the Track Record Period. The accumulatedlosses incurred are mainly attributable to the thin gross profit margins recognised and lossesincurred on several projects due to unforeseen circumstances and/or errors or inaccurateestimations of project duration and costs. During the construction industry downturn in HongKong prior to 2010, such risks were not fully priced into the markups when submittingtenders for several projects in order to remain competitive and increase our revenue streamto pay for our staff costs and fixed overheads and service our debts. Upon the recovery ofthe construction industry construction industry in Hong Kong and during the Track RecordPeriod, we were able to gradually set higher tender prices to take into consideration thelikelihood of uncertainties and material deviations in estimated and actual duration andcosts. As it took several years to gradually set higher tender prices and to complete projectsthat we were awarded during the construction industry downturn, we recorded anaccumulated loss as at 31 March 2014. In addition, to improve our profitability, we had alsoestablished an estimating department since 2013 to review and assess new projects tominimise likelihood of unforeseen circumstances and improve inaccurate estimations onproject duration and costs. Furthermore, we focused on tendering for contracts of the sameinfrastructural projects as our experience with the relevant project and familiarity with theconditions of the relevant site would allow us to make better estimations of project durationand costs and reduce the likelihood of unforeseen circumstances.

Highlights of combined statements of cash flows

Year ended 31 MarchEight months ended

30 November2014 2015 2014 2015

HK$’000 HK$’000 HK$’000 HK$’000(unaudited)

Operating cash flow before workingcapital changes 15,394 25,744 16,194 9,497

Net cash generated from/(used in)operating activities 7,402 (3,687) (1,169) 5,228

Net cash (used in)/generated frominvesting activities (4,478) 209 (383) 11,495

Net cash (used in)/generated fromfinancing activities (894) 477 (1,998) (9,332)

Net increase/(decrease) in cash and cashequivalents 2,030 (3,001) (3,550) 7,391

Major financial ratios

Year ended or as at31 March

Period endedor as at

30 November2014 2015 2015

Gross profit margin (%) 9.4 9.4 11.2Net profit margin (%) 5.9 6.6 4.1Return on assets (%) 12.6 19.4 6.9Return on equity (%) N/A 217.7 43.5Current ratio (times) 0.6 0.8 1.1Quick ratio (times) 0.6 0.8 1.1Debtors’ turnover days (days) 39.6 33.2 50.2Creditors’ turnover days (days) 33.6 20.4 24.5Gearing ratio (%) N/A 265.5 65.6Net debt to equity ratio (%) N/A 194.5 11.3Interest coverage (times) 26.2 47.1 27.8

SUMMARY

– 5 –

Our gross profit margin remained at similar levels of approximately 9.4% for each ofthe years ended 31 March 2014 and 2015 and increased to approximately 11.2% for theeight months ended 30 November 2015. Our Directors consider that our gross profit marginis a result of a combination of our pricing of each project and cost control. Our gross profitmargin was determined on a project-by-project basis and is generally (i) lower for contractswith a larger contract value due to scale as we set our tender prices based on lower expectedprofit margins due to the larger absolute amounts of revenue and gross profit expected to bederived from a project with a larger contract value; and (ii) higher for projects which requiremore project management, greater level of highly skilled construction works and/or a higherstandard of quality and safety. Our other profitability ratios generally increased during theyear ended 31 March 2015 as compared to the year ended 31 March 2014 due to theincrease in revenue and the resulting scale and decreased during the eight months ended 30November 2015 due to the incurring of Listing expenses.

Our current ratio and quick ratio improved during the Track Record Period due to anincrease in construction activities and the disposal of an investment property as furtherdiscussed in the paragraph headed “Financial information – Summary of key financialratios” in this prospectus. The changes in our debtors’ turnover days during the TrackRecord Period is mainly attributable to the amount and timing of revenue recognised duringthe year/period. The changes in our creditors’ turnover days is attributable to thenon-recurring and project-by-project basis of our civil engineering works.

SHAREHOLDER INFORMATION

Immediately following completion of the Placing and the Capitalisation Issue,Blooming Union, which is beneficially owned as to 50% and 50% by Mr. CK Wong and Mr.WW Wong respectively, will hold 75% of the issued Shares of our Company. Mr. CK Wongand Mr. WW Wong have had a mutual understanding all along to actively cooperate witheach other to jointly control our Group and thus Mr. CK Wong and Mr. WW Wong arepresumed to be acting in concert (within the meaning of the Takeovers Code). Given theaforesaid and for the purpose of the GEM Listing Rules, Mr. CK Wong, Mr. WW Wong andBlooming Union are our Controlling Shareholders. Please refer to the section headed“Relationship with our Controlling Shareholders” in this prospectus for further details.

PLACING STATISTICS

Market capitalisationupon Listing (note 1)

HK$324,480,000

Offer size 25% of the enlarged issued share capital of the CompanyPlacing Price per Placing

ShareHK$0.26

Number of Placing Shares 312,000,000 Shares (comprising 208,000,000 New Sharesand 104,000,000 Sale Shares)

Board lot 10,000 SharesUnaudited pro forma net

tangible assets perShare (note 2)

HK$0.06 based on a Placing Price of HK$0.26 perPlacing Share

Notes:

1. The calculation of the market capitalisation of the Shares is based on 1,248,000,000 Shares in issueand to be issued immediately after completion of the Placing and the Capitalisation Issue and thePlacing Price of HK$0.26 per Placing Share.

2. For the calculation of the unaudited pro forma adjusted combined net tangible asset value per Shareattributable to the Shareholders, please refer to the section headed “Unaudited pro forma financialinformation” in Appendix II to this prospectus.

REASONS FOR THE LISTING AND USE OF PROCEEDS

Our Directors believe that the listing of the Shares on GEM will facilitate theimplementation of our business strategies. As stated in the section headed “Business –Business strategies” in this prospectus, we plan to expand our market share in the civilengineering construction industry in Hong Kong by competing for sizeable civil engineering

SUMMARY

– 6 –

projects in Hong Kong through acquisition of additional site equipment and furtherstrengthening our manpower. The net proceeds of the Placing will provide financialresources to our Group to achieve such business strategies which will further strengthen ourmarket position and expand our market share. A public listing status will also enhance ourcorporate profile and recognition and assist us in reinforcing our brand awareness andimage. We believe that a public listing status on GEM could attract potential customers,suppliers and subcontractors who are more willing to establish business relationship withlisted companies. It will also generate reassurance among our Group’s existing customers,suppliers and subcontractors and strengthen our competitiveness in the market. The Listingwill also enable our Group to have access to capital market for raising funds both at thetime of Listing and at later stages, which would in turn assist us in future businessdevelopment of our Group. A public listing status on GEM may offer our Company abroader shareholder base which could potentially lead to a more liquid market in the tradingof the Shares. We also believe that our internal control and corporate governance practicescould be further enhanced following the Listing.

We will not receive any of the proceeds from the sale of the Sale Shares by the SellingShareholder in the Placing. We estimate that the aggregate net proceeds to be received by usfrom the Placing, after deducting related underwriting fees and estimated expenses inconnection with the Placing, based on the Placing Price of HK$0.26 per Placing Share willbe approximately HK$35.7 million. Our Directors presently intend that the net proceeds willbe applied as follows:

– approximately HK$18.0 million (or approximately 50.4% of the net proceeds) willbe used for acquisition of additional site equipment;

– approximately HK$7.6 million (or approximately 21.2% of the net proceeds), willbe used for further strengthening our manpower;

– approximately HK$6.8 million (or approximately 19.1% of the net proceeds), willbe used for the repayment of bank borrowings and a finance lease to reduce ourfinance cost. Specifically, (i) approximately HK$3.1 million will be used towholly prepay the bank loan to be drawn in April 2016 for settlement of theoutstanding indebtedness under the SME Financing Guarantee Scheme forfinancing our Group’s working capital bearing interest at 1% below the HongKong dollar prime rate per annum and an effective interest rate of 3.99% and isrepayable on a monthly basis over the loan term of 50 months up to April 2020;(ii) approximately HK$1.6 million will be used to wholly prepay the bank loandrawn in March 2014 for acquisition of a site equipment bearing interest at 3%over the Hong Kong Interbank Offered Rate per annum and an effective interestrate of 3.23% per annum and is repayable on a monthly basis over the loan termof 5 years up to January 2019; (iii) approximately HK$1.0 million will be used towholly prepay the finance lease incurred since September 2013 which willbecome mature in 5 years from the date of occurrence bearing interest rate at afixed rate of 2.50% per annum and an effective interest rate of 6.05% per annum,which were incurred to fund our purchase of motor vehicle; and (iv)approximately HK$1.0 million will be used to wholly prepay the finance leaseincurred since September 2015 which will become mature in 4 years from thedate of occurrence bearing interest rate at a fixed rate of 2.25% per annum andeffective interest rate of 5.5% per annum, which were incurred to fund ourpurchase of motor vehicle; and (v) approximately HK$0.1 million will be used towholly prepay the finance lease incurred since January 2015 which will becomemature in 3 years from the date of occurrence bearing interest rate at a fixed rateof 2.25% per annum and effective interest rate of 5.58% per annum, which wereincurred to fund our purchase of motor vehicle; and

– approximately HK$3.3 million (or approximately 9.3% of the net proceeds), willbe used as general working capital of our Group.

The following table sets forth a breakdown of how the net proceeds to be received byus from the Placing are intended to be applied and the timing of application:

SUMMARY

– 7 –

From the LatestPracticable

Date to30 September

2016

From1 October

2016 to31 March

2017

From1 April2017 to

30 September2017

From1 October

2017 to31 March

2018 TotalHK$ million HK$ million HK$ million HK$ million HK$ million

Acquisition of additionalsite equipment 17.3 − 0.7 − 18.0

Further strengthening ourmanpower 6.8 − 0.8 − 7.6

Repayment of bank loansand finance lease 6.7 0.1 − − 6.8

General working capital ofour Group 3.3 − − − 3.3

LISTING EXPENSES

Our Directors estimate that the total amount of expenses in relation to the Listing isapproximately HK$20.9 million, which will be borne by the Selling Shareholder and ourGroup as to approximately HK$2.5 million and HK$18.4 million, respectively. The listingexpenses are non-recurring in nature and are mainly consisted of professional fees paid tothe Sponsor, the legal advisers, the reporting accountants and other professional parties forthe provision of their services in connection with the Placing. No significant listing expensewas incurred by our Group during the two years ended 31 March 2015. Of the aggregatelisting expenses of approximately HK$18.4 million, approximately HK$7.9 million wascharged to profit or loss for the eight months ended 30 November 2015 and approximatelyHK1.7 million is expected to be charged to profit or loss for the four months ending 31March 2016. Our Group expects to further charge approximately HK$3.9 million to profit orloss, while approximately HK$4.9 million is expected to be directly attributable to the issueof Shares and accounted for as a deduction from equity upon successful listing under therelevant accounting standards. The amount of listing expenses is a current estimate forreference only and the final amount to be recognised to the consolidated statement ofcomprehensive income of our Group for the years ending 31 March 2017 is subject to auditand the actual changes in variables and assumptions.

DIVIDENDS

No member of our Group had declared any dividend during the Track Record Periodand up to the Latest Practicable Date.

There is no expected dividend payout ratio after the Listing. The payment and theamount of any future dividends will be at the discretion of our Directors and will dependupon our Group’s future operations and earnings, capital requirements and surplus, generalfinancial condition, contractual restrictions and other factors which our Directors deemrelevant. Any final dividend for a financial year will be subject to Shareholders’ approval.Holders of the Shares will be entitled to receive such dividends pro rata according to theamounts paid up or credited as paid up on the Shares. Dividends may be paid only out ofour Company’s distributable profits as permitted under the relevant laws. There can be noassurance that our Company will be able to declare or distribute in the amount set out inany plan of our Board or at all. The past dividend distribution record may not be used as areference or basis to determine the level of dividends that may be declared or paid by ourCompany in the future.

PRINCIPAL RISK FACTORS

There are certain risks involved in our operations which are beyond our control. Theycan be broadly categorised into risks relating to our business and risks relating to theindustry in which we operate. Potential investors are advised to read the section headed“Risk factors” in this prospectus carefully before making any investment decision in thePlacing. Some of the more particular risk factors include:

� We rely on the availability of public sector civil engineering projects in HongKong and any failure of our Group to secure public sector projects wouldadversely affect our operations and financial results.

� We have concentrated customer base and any decrease in the number of projectswith our five largest customers would adversely affect our operations andfinancial results.

SUMMARY

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� Our business relies on successful tenders and any failure of our Group to securetender contracts would affect our operations and financial results.

� Error or inaccurate estimation of project duration and costs when determining thetender price increase in construction costs may adversely affect our profitability orresult in substantial loss incurred by us.

� Our performance depends on market conditions and trends in the civil engineeringconstruction industry and any deterioration in the prevailing market conditions inthe civil engineering construction industry may adversely affect our performanceand financial conditions.

� We operate in a relatively competitive environment.

RECENT DEVELOPMENTS

Subsequent to the Track Record Period and up to the Latest Practicable Date, we havecontinued to focus on developing our business of undertaking civil engineering works inHong Kong. As at the Latest Practicable Date, we had a total of 20 contracts on hand.Please refer to the section headed “Business – Our civil engineering contracts – Contracts onhand” in this prospectus for a full list of our contracts on hand as at the Latest PracticableDate.

The aggregate contract sum of all contracts on hand is approximatelyHK$1,384,140,000 and approximately HK$234,304,000 of revenue has been recognised forthe contracts on hand (with approximately HK$6,241,000 of revenue recognised exceedingthe original contract sum), representing approximately 16.9% of the aggregate contract sum,as at 30 November 2015. As at the Latest Practicable Date, all existing projects havecontinued to contribute revenue to our Group and none of them have had any materialinterruption. We expect to recognise revenue of approximately HK$285,367,000 for the yearending 31 March 2016 based only on our contracts on hand, which is higher than ourrevenue of approximately HK$159,963,000 and HK$271,949,000 for the years ended 31March 2014 and 2015, respectively. The amount of revenue expected to be recognised issubject to change due to the actual progress and commencement and completion dates of ourprojects. Based on the budget costs of each project, our Directors expect that our grossprofit margin for the year ending 31 March 2016 to be at similar levels to that recordedduring the Track Record Period. Accordingly, our Directors currently expect an increase inour revenue and gross profit for the year ending 31 March 2016. Our Directors also expectthat our financial performance will be affected by the Listing expenses to be recognised forthe year ending 31 March 2016.

Subsequent to the Track Record Period and up to the Latest Practicable Date, we havebeen awarded with two additional contracts with an aggregate contract sum of approximatelyHK$301,317,000. Our Directors consider that our Group is well-positioned to take on newcivil engineering projects and believe that the Government’s increasing public expenditureon infrastructure would favour the growth of our Group and the demand of our services.

To further strengthen our working capital position and enhance our financial resourcesfor our contracts on hand and newly awarded projects, we obtained a credit facility from abank in March 2016 of up to HK$20,000,000 which consists of: (i) a factoring facility of upto HK$10,000,000 by factoring of certain accounts receivable from our major customer(s) tothe bank; and (ii) a banking facility of HK$10,000,000. Our Directors considered that thisarrangement can provide a flexible alternative to increase our working capital and financeour liquidity requirement.

In addition, we expect that annual premium of approximately HK$1,060,000 for thepurposes of obtaining surety bonds for the due performance of our Group’s obligations undercertain contracts will be recognised as expenses commencing from April 2016 until theexpiry of the defects liability period of the relevant contracts. For further details of theguarantees of sureties, please refer to the section headed “Relationship with our ControllingShareholders – Independence of our Group – (i) Financial Independence” in this prospectus.

Save and except for the Listing expenses as disclosed above, our Group did not haveany significant non-recurrent items in our combined statements of comprehensive incomesubsequent to the Track Record Period. Our results of operations for the year ending 31March 2016 are expected to be significantly affected by the non-recurring Listing expensesas discussed in the paragraph headed “Listing expenses” in this section.

SUMMARY

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MATERIAL ADVERSE CHANGE

The impact of the Listing expenses on the profit and loss accounts has posted amaterial adverse change in the financial or trading position or prospect of our Group since30 November 2015 (being the date of the latest audited combined financial statements weremade up). Prospective investors should be aware of the impact of the Listing expenses onthe financial performance of our Group for the year ending 31 March 2016.

Save as disclosed above, our Directors have confirmed that, up to the date of thisprospectus, there had been no material adverse change in the financial or trading positionsor prospect of our Company or its subsidiaries since 30 November 2015 (being the date ofwhich our Group’s latest audited combined financial statements were made up as set out inthe Accountants’ Report in Appendix I to this prospectus) and there had been no event since30 November 2015 which would materially affect the information shown in the Accountants’Report in Appendix I to this prospectus.

LITIGATION AND REGULATORY COMPLIANCE

During the Track Record Period and up to the Latest Practicable Date, there wereon-going litigation cases against our Group including employees’ compensation claims,personal injury claims and certain immaterial non-compliance incidents with the PredecessorCompanies Ordinance, the Companies Ordinance and the Employment Ordinance (Chapter57 of the Laws of Hong Kong). During the Track Record Period, we recorded one fatalaccident at the construction site where a worker employed by a subcontractor of our Groupwas fatally injured and certified dead in the course of unloading the water pipes. For detailsof the litigation claims, instances of non-compliance and the fatal accident, please refer tothe sections headed “Business – Litigation and potential claims”, “Business −Non-compliance” and “Business – Occupational health and safety – System of recording andhandling accidents and our safety compliance record” in this prospectus.

Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation (Chapter311Z of the Laws of Hong Kong)

The Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation (the“NRMM Regulation”) came into effect on 1 June 2015 to introduce regulatory control onthe emissions of non-road mobile machinery (the “NRMMs”), including non-road vehiclesand regulated machines such as crawler cranes, excavators and air compressor. Our Directorsconfirmed that such regulated machines also include site equipment such as generators,hydraulic truck crane, vibrating rollers and aerial working platforms which are subject to theAir Pollution Control (Non-road Mobile Machinery) (Emission) Regulation. For furtherdetails of the NRMM requirements, please refer to the section headed “Regulatory Overview– B. Environmental Protection – Air Pollution Control (Non-road Mobile Machinery)(Emission) Regulation (Chapter 311Z of the Laws of Hong Kong)” in this prospectus. As atthe Latest Practicable Date, our Group has obtained approval or exemption for all of ourmachines that are subject to the NRMM Regulation.

On 8 February 2015, the Works Branch of Development Bureau issued the TechnicalCircular (Works) No. 1/2015 (the “Technical Circular”), pursuant to which the Governmenthas promulgated an implementation plan to phase out progressively the use of exemptedNRMM for four types of exempted NRMM, namely generators, air compressors, excavatorsand crawler cranes in new capital works contracts of public, including design and buildcontracts, with an estimated contract value exceeding HK$200 million and tenders invited onor after 1 June 2015. For further details of the Technical Circular, please refer to the sectionheaded “Regulatory Overview – B. Environmental Protection – Air Pollution Control(Non-road Mobile Machinery) (Emission) Regulation (Chapter 311Z of the Laws of HongKong)” in this prospectus.

Our Directors confirm that none of the public projects which we participate in as at theLatest Practicable Date are subject to the phase out plan detailed in the Technical Circular.In addition, our Directors consider that we will remain able to participate in or tender forpublic contract with an estimated contract value exceeding HK$200 million by leasingsufficient approved NRMMs and factoring such additional costs in our tender applications.Thus, our Directors are of the view that the implementation of the Air Pollution Control(Non-road Mobile Machinery) (Emission) Regulation and the exempted NRMM phase outplan as detailed in the Technical Circular has no significant impact or adverse effect on ourGroup’s operation and financial results.

SUMMARY

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

“Accountants’ Report” the accountants’ report prepared by Grant ThorntonHong Kong Limited, the text of which is set out inAppendix I to this prospectus

“Articles” or “Articles ofAssociation”

the amended and restated articles of association of ourCompany as amended from time to time, a summary ofwhich is set out in Appendix IV to this prospectus

“associate(s)” has the meaning ascribed to it under the GEM ListingRules

“Blooming Union” Blooming Union Investments Limited（聯旺投資有限公司）, one of our Controlling Shareholders, the SellingShareholder and a company incorporated in the BVIwith limited liability on 1 July 2015 and owned as to50% by Mr. CK Wong and as to 50% by Mr. WWWong

“Board” the board of Directors

“business day” any day (other than a Saturday, Sunday or publicholiday) on which banks in Hong Kong are generallyopen for normal banking business to the public

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“Capitalisation Issue” the issue of 1,039,990,000 Shares to be made uponcapitalisation of certain sums standing to the credit ofthe share premium account of our Company referred toin the paragraph headed “A. Further information aboutthe Company and its subsidiaries – 3. Writtenresolutions of our sole Shareholder passed on 24 March2016” in Appendix V to this prospectus

“CCASS” the Central Clearing and Settlement System establishedand operated by HKSCC

DEFINITIONS

– 11 –

“CCASS Clearing Participant” a person permitted to participate in CCASS as a directclearing participant or general clearing participant

“CCASS Custodian Participant” a person permitted to participate in CCASS as acustodian participant

“CCASS Investor Participant” a person admitted to participate in CCASS as aninvestor participant who may be an individual or jointindividuals or a corporation

“CCASS Participants” a CCASS Clearing Participant, a CCASS CustodianParticipant or a CCASS Investor Participant

“China Harbour” China Harbour Engineering Company Limited, asubsidiary of China Communications ConstructionCompany Limited (which has been listed on the MainBoard of the Stock Exchange)

“China State Construction” China State Construction Engineering (Hong Kong)Limited, a subsidiary of China State ConstructionInternational Holdings Limited (which has been listedon the Main Board of the Stock Exchange)

“close associate(s)” has the meaning ascribed to it under the GEM ListingRules

“Companies Law” the Companies Law (as revised) of the Cayman Islands,as amended, supplemented and/or otherwise modifiedfrom time to time

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws ofHong Kong), which came into effect on 3 March 2014,as amended, modified and supplemented from time totime

“Companies (Exemption ofCompanies and Prospectusesfrom Compliance withProvisions) Notice”

the Companies (Exemption of Companies andProspectuses from Compliance with Provisions) Notice(Chapter 32L of the Laws of Hong Kong), as amended,supplemented or otherwise modified from time to time

“Companies (Winding Up andMiscellaneous Provisions)Ordinance”

the Companies (Winding Up and MiscellaneousProvisions) Ordinance (Chapter 32 of the Laws ofHong Kong), as amended, supplemented or otherwisemodified from time to time

DEFINITIONS

– 12 –

“Company”, “our”, “ourCompany”, “we” or “us”

Luen Wong Group Holdings Limited（聯旺集團控股有限公司）, a company incorporated in the Cayman Islandsas an exempted company with limited liability on 16October 2015

“connected person(s)” has the meaning ascribed to it under the GEM ListingRules

“connected transaction” has the meaning ascribed to it under the GEM ListingRules

“Controlling Shareholders” has the meaning ascribed to it under the GEM ListingRules and in the context of this prospectus refers toBlooming Union, Mr. CK Wong and Mr. WW Wong

“core connected person” has the meaning ascribed to it under the GEM ListingRules

“Corporate Governance Code” the Corporate Governance Code as set out in Appendix15 to the GEM Listing Rules

“CT Partners” CT Partners Consultants Limited, an independentinternal control adviser

“Deed of Indemnity” the deed of indemnity dated 24 March 2016 enteredinto by our Controlling Shareholders in favour of ourGroup as further detailed in the section headed “E.Other information – 1. Tax and other indemnities” inAppendix V to this prospectus

“Deed of Non-Competition” the deed of non-competition undertaking dated 24March 2016 entered into by our ControllingShareholders in favour of our Company (for itself andas trustee for and on behalf of our subsidiaries) asfurther detailed in the section headed “Relationshipwith our Controlling Shareholders – Non-CompetitionUndertakings” in this prospectus

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

“GEM” the Growth Enterprise Market of the Stock Exchange

“GEM Listing Rules” the Rules Governing the Listing of Securities on theGrowth Enterprise Market of the Stock Exchange, asamended, modified and supplemented from time to time

“Government” the government of Hong Kong

DEFINITIONS

– 13 –

“Gransing Securities” Gransing Securities Co., Limited, a corporationlicensed under the SFO to engage in Type 1 (dealing insecurities), Type 4 (advising on securities), Type 6(advising on corporate finance) and Type 9 (assetmanagement) regulated activities under the SFO, actingas the joint bookrunner and the joint lead manager forthe Placing and an independent third party

“Group”, “we, “us” or “our” our Company and its subsidiaries at the relevant timeor, where the context otherwise requires, in respect ofthe period prior to our Company becoming the holdingcompany of its present subsidiaries pursuant to theReorganisation, its present subsidiaries and thebusinesses operated by such subsidiaries

“HKSCC” Hong Kong Securities Clearing Company Limited, awholly-owned subsidiary of Hong Kong Exchanges andClearing Limited

“HKSCC Nominees” HKSCC Nominees Limited

“HK$” or “HKD” and “cents” Hong Kong dollars and cents respectively, the lawfulcurrency of Hong Kong

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

“Hong Kong Branch ShareRegistrar”

Union Registrars Limited, the branch share registrarand transfer office of our Company in Hong Kong

“Hop Fung” Hop Fung Construction & Engineering CompanyLimited （合峰建築工程有限公司）, a companyincorporated in Hong Kong on 31 July 2002 withlimited liability and an indirect wholly-ownedsubsidiary of our Company upon completion of theReorganisation

“independent third party(ies)” individual(s) or company(ies) who or which, to the bestof our Directors’ knowledge, information and belief,having made all reasonable enquiries, is/areindependent of and not connected with (within themeaning of the GEM Listing Rules) our Company orits connected persons

“Inland Revenue Ordinance” the Inland Revenue Ordinance (Chapter 112 of theLaws of Hong Kong)

“Ipsos” Ipsos Limited, an independent market research agency

DEFINITIONS

– 14 –

“Ipsos Report” a market research report commissioned by us andprepared by Ipsos on the overview of the civilengineering construction industry in Hong Kong inwhich our Group operates

“Joint Bookrunners” or “JointLead Managers”

Gransing Securities and Suncorp Securities

“Latest Practicable Date” 21 March 2016, being the latest practicable date priorto the printing of this prospectus for the purpose ofascertaining certain information in this prospectus priorto its publication

“Legal Counsel” Mr. Chan Chung, barrister-at-law of Hong Kong, whois an independent third party

“Listing” listing of the Shares on GEM

“Listing Date” the date, expected to be on or about Tuesday, 12 April2016, on which dealings in the Shares first commenceon GEM

“Luen Hing” Luen Hing Construction & Eng. Limited（聯興創建工程有限公司）, a company incorporated in Hong Kong on11 November 1998 with limited liability and anindirect wholly-owned subsidiary of our Company uponcompletion of the Reorganisation

“Memorandum of Association” or“Memorandum”

the memorandum of association of our Company asamended from time to time

“Mr. CK Wong” Mr. WONG Che Kwo （黃智果先生）, an executiveDirector, the chairman of our Board and one of ourControlling Shareholders

“Mr. WW Wong” Mr. WONG Wing Wah （黃永華先生）, an executiveDirector, our chief executive officer and one of ourControlling Shareholders

“New Shares” 208,000,000 new Shares to be offered by our Companyfor subscription at the Placing Price under the Placing

“Placing” the conditional placing of the Placing Shares by theUnderwriters on behalf of our Company and the SellingShareholder for cash at the Placing Price as describedin the section headed “Structure and conditions of thePlacing” in this prospectus

DEFINITIONS

– 15 –

“Placing Price” the final price of HK$0.26 per Placing Share in HKdollars (exclusive of brokerage of 1%, SFC transactionlevy of 0.0027% and Stock Exchange trading fee of0.005%) at which the Placing Shares are to be offeredunder the Placing

“Placing Shares” the 312,000,000 Shares (comprising 208,000,000 NewShares to be offered by our Company and 104,000,000Sale Shares to be offered by the Selling Shareholder)being offered for subscription or purchase at thePlacing Price pursuant to the Placing

“Predecessor CompaniesOrdinance”

the predecessor Companies Ordinance (Chapter 32 ofthe Laws of Hong Kong) as in force before 3 March2014

“Reorganisation” the corporate reorganisation arrangements implementedby our Group in preparation for the Listing which ismore particularly described in the section headed“History and development – Reorganisation” in thisprospectus

“Sale Shares” 104,000,000 existing Shares to be offered by theSelling Shareholder for purchase at the Placing Priceunder the Placing

“Selling Shareholder” Blooming Union, one of the Controlling Shareholderswhich is expected to offer to sell the Sale Sharespursuant to the Placing

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 ofthe Laws of Hong Kong), as amended, modified andsupplemented from time to time

“Share(s)” ordinary share(s) with nominal value of HK$0.01 eachin the share capital of our Company, which are to betraded in Hong Kong dollars and listed on GEM

“Shareholder(s)” holder(s) of the Share(s)

“Share Option Scheme” the share option scheme conditionally adopted by ourCompany on 24 March 2016, the principal terms ofwhich are summarised in the section headed “D. ShareOption Scheme” in Appendix V to this prospectus

DEFINITIONS

– 16 –

“Sponsor” or “TC Capital” TC Capital Asia Limited, a licensed corporation forcarrying on Type 1 (dealing in securities) and Type 6(advising on corporate finance) regulated activitiesunder the SFO, acting as the sponsor of the Listing andan independent third party

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary(ies)” has the meaning ascribed thereto in section 15 of theCompanies Ordinance

“Substantial Shareholder(s)” has the meaning ascribed thereto in the GEM ListingRules and details of our Substantial Shareholders areset out in the section headed “Substantial Shareholders”in this prospectus

“Suncorp Securities” Suncorp Securities Limited, a corporation licensedunder the SFO to engage in Type 1 (dealing insecurities) regulated activity under the SFO, acting asthe joint bookrunner and the joint lead manager for thePlacing and an independent third party

“Super Pioneer” Super Pioneer Trading Limited（超鋒貿易有限公司）, acompany incorporated in the BVI with limited liabilityon 1 July 2015 which will become a directwholly-owned subsidiary of our Company uponcompletion of the Reorganisation

“Takeovers Code” the Codes on Takeovers and Mergers issued by theSFC, as amended, modified and supplemented fromtime to time

“Track Record Period” comprises the two financial years ended 31 March 2014and 2015 and the eight months ended 30 November2015

“Underwriters” the underwriters of the Placing whose names are setout in the section headed “Underwriting –Underwriters” in this prospectus

“Underwriting Agreement” the conditional underwriting agreement relating to thePlacing entered into on 31 March 2016 among ourCompany, the Selling Shareholder, the executiveDirectors, our Controlling Shareholders, the Sponsor,the Joint Bookrunners, the Joint Lead Managers and theUnderwriters relating to the Placing, particulars ofwhich are summarised in the section headed“Underwriting” in this prospectus

DEFINITIONS

– 17 –

“US$” or “U.S. dollars” United States dollars, the lawful currency of the UnitedStates

“sq.ft.” square foot

“sq.m.” square metre(s)

“%” per cent

DEFINITIONS

– 18 –

This glossary contains explanations of certain terms used in this prospectus inconnection with the business of our Group. The terms and their meanings may notcorrespond to the standard industry meanings or usage of these terms.

“bills of quantities” a list of items included in the civil engineering contractproviding description, quantity and the unit price of thework to be performed to provide a means of valuingthe civil engineering work performed

“Building Authority” has the meaning ascribed to it under the BuildingsOrdinance and, as at the Latest Practicable Date, meansthe Director of Buildings of the Government

“Buildings Department” the Buildings Department of the Government

“Buildings Ordinance” the Buildings Ordinance (Chapter 123 of the Laws ofHong Kong)

“Census and StatisticsDepartment”

Census and Statistics Department of the Government

“Construction Industry Council” the Construction Industry Council in Hong Kong, astatutory body established on 1 February 2007 pursuantto the Construction Industry Council Ordinance(Chapter 587 of the Laws of Hong Kong)

“Employees’ CompensationOrdinance”

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

“ISO” an acronym for a series of quality management andquality assurance standards published by InternationalOrganisation for Standardisation, a non-governmentorganisation based in Geneva, Switzerland, forassessing the quality systems of business organisations

“ISO 9001” ISO 9001 is an internationally recognised standard fora quality management system. It aims at theeffectiveness of the quality management system inmeeting customer requirements. It prescribesrequirements for ongoing improvement of qualityassurance in design, development, production,installation and servicing

GLOSSARY

– 19 –

“ISO 14001” ISO 14001 is an internationally recognised standard forthe environmental management of businesses. It aims atrecognising the desirable behavior of businessesconcerning the environment. It prescribes controls foran encompassing range of corporate activities whichinclude the use of natural resources, handling andtreatment of waste and energy consumption

“Labour Development” the Labour Department of the Government

“OHSAS 18001” OHSAS 18001 is an internationally recognisedspecification for Occupational Health and SafetyManagement Systems. It specifies requirements for anoccupational health and safety management system toenable an organisation to develop and implement apolicy and objectives which take into account legalrequirements and information about occupational risksand to improve their occupational safety and healthperformance

“private sector projects” works contracts that are not public sector projects

“public sector projects” works contracts that originate from the Government orstatutory bodies

“quotation” the type of contracts with our suppliers and/orsubcontractors secured by request for quotation fromthe relevant suppliers and/or subcontractors

“roads and drainage works” in respect of our business, generally refer toconstruction of transport interchange, carriageway andwalkway, road improvement and widening works, floodprevention or improvement works and sewageimprovement works comprising construction ofdrainage channel, outfall pipe, box culvert and pumpingstation and drainage related infrastructures

“schedule of rates” a set of general regulations and special conditionsgoverning the execution of work and payment forworks performed

“site formation works” in respect of our business, generally refer to excavationand/or filling works for forming a new site orachieving designed formation level for laterdevelopment

“structural works” in respect of our business, generally refer to theconstruction of reinforced concrete structures forbridges, retaining walls, etc.

GLOSSARY

– 20 –

“subcontractor” in respect of a construction project, a contractor who isappointed by the main contractor or by anothersubcontractor involved in the construction and whogenerally carries out specific work tasks of theconstruction

“tender contract” the type of contracts with customers obtained bytendering which usually require construction servicesfor a specific period and details of which are set out inthe section headed “Business – Customers – Majorterms of engagement” in this prospectus

GLOSSARY

– 21 –

This prospectus contains forward-looking statements that are, by their nature, subject tosignificant risks and uncertainties. In some cases the words such as “aim”, “anticipate”,“believe”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”, “plan”,“potential”, “predict”, “propose”, “seek”, “should”, “will”, “would” and other similarexpressions or the negative use of such words are used to identify forward-lookingstatements. These forward-looking statements include, without limitation, statements relatingto:

� our Group’s business and operating strategies and plans of operation;

� the amount and nature of, and potential for, future development of our Group’sbusiness;

� our Company’s dividend distribution plans;

� the regulatory environment as well as the general industry outlook for the industryin which our Group operate;

� future developments in the industry in which our Group operate;

� the trend of the economy of Hong Kong in general; and

� other factors beyond our Group’s control.

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

Our Group’s future results could differ materially from those expressed or implied bysuch forward-looking statements. In addition, our Group’s future performance may beaffected by various factors including, without limitation, those discussed in the sectionsheaded “Risk factors”, “Business”, “Financial information” and “Statement of businessobjective and use of proceeds” in this prospectus.

Subject to the requirements of the applicable laws, rules and regulations, our Companydoes not have any obligation to update or otherwise revise the forward-looking statements inthis prospectus, whether as a result of new information, future events or otherwise. As aresult of these and other risks, uncertainties and assumptions, the forward-looking events andcircumstances discussed in this prospectus might not occur in the way our Company expects,or at all. Should one or more risks or uncertainties stated in the aforesaid sectionsmaterialise, or should any underlying assumptions to prove incorrect, actual outcomes mayvary materially from those indicated. Prospective investors should therefore not place unduereliance on any of the forward-looking statements. All forward-looking statements containedin this prospectus are qualified by reference to the cautionary statements as set out in thissection.

FORWARD-LOOKING STATEMENTS

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

FORWARD-LOOKING STATEMENTS

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You should carefully consider all of the information in this prospectus including therisks and uncertainties described below before making an investment in the PlacingShares. You should pay particular attention to the fact that the legal and regulatoryenvironment in Hong Kong may differ in some respects from that which prevails in othercountries. The business, financial condition or results of operations of our Group couldbe materially and adversely affected by any of these risks and uncertainties. The tradingprice of our Shares could decline due to any of these risks and uncertainties, and youmay lose all or part of your investment.

We believe that there are certain risks involved in our business and operations. Theycan be classified into (i) risks relating to our business; (ii) risk relating to the industry inwhich we operate; (iii) risks relating to Hong Kong; (iv) risks relating to the Placing; and(v) risks relating to this prospectus. You should consider our business and prospectus in lightof the challenges we face, including the ones discussed in this section.

RISKS RELATING TO OUR BUSINESS

We rely on the availability of public sector civil engineering projects in Hong Kong andany failure of our Group to secure public sector projects would adversely affect ouroperations and financial results

We have relied and will continue to focus on public sector civil engineering projectswhich by their nature are only procured by our customers from a limited number of projectemployers who are normally Government departments. For the two years ended 31 March2015 and the eight months ended 30 November 2015, our revenue attributable to publicsector projects amounted to approximately HK$149,234,000, HK$255,484,000 andHK$135,834,000 respectively, representing approximately 93.3%, 93.9% and 87.8% of ourtotal revenue respectively.

Our results of operations in relation to our civil engineering business will continue torely on the following: (i) our ability to continue to secure public sector projects from ourcustomers; (ii) the public policy in relation to infrastructure and civil engineering projects;and (iii) other factors that generally affect the Hong Kong construction industry. Anymaterial delay, suspension, termination or reduction of number or contract value of publicsector projects may adversely affect our revenue, hence our results of operations.

Our civil engineering projects are non-recurrent in nature. There is no guarantee thatour existing customers will provide us with new business opportunities or that we willsecure new customers. During the Track Record Period, most of our revenue was derivedfrom civil engineering projects with Government departments in Hong Kong, and the maincontractors (i.e. our customers) of such projects do not have any long-term businesscommitment with us. Our relationships with our major customers are non-exclusive and atarm’s length. We may not be able to diversify the composition of our customer base due tothe nature of civil engineering works which are normally funded by the Government. If theGovernment substantially reduces its expenditures on civil engineering works, we may notbe able to secure projects on similar terms from main contractors. If any such event occurs,there may be a material adverse effect on our business, financial condition and/or results ofoperations.

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We have concentrated customer base and any decrease in the number of projects withour five largest customers would adversely affect our operations and financial results

A significant portion of our revenue was derived from a small number of customersduring the Track Record Period. Our five largest customers’ revenue contribution for the twoyears ended 31 March 2015 and the eight months ended 30 November 2015 accounted forapproximately 94.1%, 96.0% and 97.5% of our revenue of the same period, respectively. Forthe same period, our largest customer accounted for approximately 63.2%, 53.1% and 36.7%of our revenue, respectively.

During the Track Record Period and up to the Latest Practicable Date, we did not enterinto any long-term service agreement or master service agreement with our customers.Furthermore, our service contracts for all civil engineering construction works are enteredinto on a project-by-project basis. As such, there is no assurance that we will be able toretain our customers upon expiry of the contract period or that they will maintain theircurrent level of business with us in the future. If there is a significant decrease in thenumber of projects or size of projects in terms of contract sums awarded by our five largestcustomers to us for whatever reasons, and if we are unable to obtain suitable projects of acomparable size and quantity as replacement, our financial conditions and operating resultswill be materially and adversely affected. Besides, if any of our five largest customersexperiences any liquidity problem, it may result in delay or default in settling progresspayments to us, which in turn will have an adverse impact on our cash-flows and financialconditions. We cannot guarantee that we will be able to diversify our customer base byobtaining significant number of new projects from our existing and potential customers.

Our business relies on successful tenders and any failure of our Group to secure tendercontracts would affect our operations and financial results

Most of our revenue is derived from contracts awarded through competitive tenderingand is not recurring in nature. During the two years ended 31 March 2015 and the eightmonths ended 30 November 2015, all of our revenue were derived from tendered contracts.We generally submit new tenders or to bid for new contracts from time to time upon expiryof existing contracts. The contract period for our civil engineering projects generally rangesfrom 2 years to 4 years. There is no right of first refusal upon expiry of such contracts andtherefore, there is a risk that we may not succeed in tendering for the same customer’sprojects upon the expiry of our contract. Moreover, there is no assurance that (i) we wouldbe invited to or are made aware of the tendering process; or (ii) the terms and conditions ofthe new contracts would be comparable to the existing contracts; or (iii) our tenders wouldbe selected by customers. In the competitive tendering process, we may have to lower ourservice charges or offer more favourable terms to our customers in order to increase thecompetitiveness of our tenders. If we are unable to reduce our costs accordingly andmaintain our competitiveness, our results of operations would be adversely affected.Furthermore, so far as our Directors are aware, most of our customers have maintained anevaluation system to ensure that the service providers meet certain standards of management,industrial expertise, financial capability, reputation and regulatory compliance which maychange from time to time. There is no assurance that we will meet our customers’ tenderingrequirements in which case we may not be granted the tender and our reputation, businessoperations, financial condition and results of operations may be adversely affected.

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Error or inaccurate estimation of project duration and costs when determining thetender price or increase in construction costs may adversely affect our profitability orresult in substantial loss incurred by us

Construction contracts and in particular public projects are normally awarded through acompetitive tendering process. We determine a tender price by estimating the constructioncosts under the contract duration as specified in the tender invitation documents. There is noassurance that tenders submitted by us contain no mistake and error. Such mistakes anderrors may be in the form of inaccurate estimation, oversight of important tender terms,inadvertent typographical errors, errors in calculations, etc. Further, construction costs mayincrease due to inflation of raw materials and labour costs. In case of contracts awarded tous with mistakes or errors in the submitted tender or if there is a substantial increase inconstruction costs, our profitability in a project might be adversely affected or we may bebound by the contract to undertake the project at a substantial loss.

Inaccurate estimation on project schedule, project costs and technical difficulties in thetendering process may result in cost overruns when we actually execute the awarded project.Many factors affect the time taken and the costs actually involved in completingconstruction projects undertaken by us. Examples of such factors include shortage and costescalation of labour and materials, difficult geological conditions, adverse weatherconditions, variations to the construction plans instructed by customers, stringent technicalconstruction requirements, threatened claims and material disputes with main contractors,subcontractors and suppliers, accidents, and changes in the Government’s policies. Otherunforeseen problems or circumstances may also occur during project implementation. If anyof such factors arises and remains unresolved, completion of construction works may bedelayed or we may be subject to cost overruns or our customers may even be entitled tounilaterally terminate the contract.

Some of our contracts contain specific completion schedule requirements and liquidateddamages provisions (i.e. we may be liable to pay the customer liquidated damages if we donot meet the schedules). Any failure to meet the schedule requirements of our contractscould cause us to pay significant liquidated damages, which would reduce or eliminate ourprofit expected from the relevant contracts.

A project may be delayed or its costs may be increased because of delays during theprocess of obtaining any specific permits, approvals from relevant agencies or authorities ofthe Government. Failure to complete construction according to specifications and qualitystandards may result in disputes, contract termination, liabilities and/or lower returns thananticipated on the construction project concerned. Such delays or failure to complete and/orunilateral termination of a contract by customers may cause our revenue or profitability tobe lower than we originally expected. We cannot guarantee that we will not encounter costoverruns or delays on our current and future construction projects. If such cost overruns ordelays occur, we may experience increases in costs exceeding our budget or be required topay liquidated damages, hence reduction in or elimination of the profits on our contracts.

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Our past revenue and profit margin may not be indicative of our future revenue andprofit margin

For the two years ended 31 March 2015 and the eight months ended 30 November2015, our revenue amounted to approximately HK$159,963,000, HK$271,949,000 andHK$154,641,000, respectively; our gross profit amounted to approximately HK$15,020,000,HK$25,600,000 and HK$17,286,000, respectively (representing gross profit margin ofapproximately 9.4%, 9.4% and 11.2%, respectively); while our net profit amounted toapproximately HK$9,430,000, HK$18,079,000 and HK$6,392,000, respectively (representingnet profit margin of approximately 5.9%, 6.6% and 4.1%, respectively).

However, such trend of historical financial information of our Group is a mere analysisof our past performance only and does not have any positive implication or may notnecessarily reflect our financial performance in the future which will depend on ourcapability to secure new business opportunities and to control our costs. Profit margins forour civil engineering works may fluctuate from project to project due to factors such as thetype of construction techniques and site equipment employed and the amount of labourresources required. There is no assurance that our profit margins in the future will remain ata level comparable to those recorded during the Track Record Period. Our financialcondition may be adversely affected by any decrease in our profit margins.

It is not uncommon in our industry to have numerous construction disputes andlitigation. Our performance may be adversely affected by such construction disputesand litigation

It is not uncommon in our industry to have construction disputes and litigation. Wemay be in disputes with our customers, subcontractors, suppliers, workers and other partiesin connection with our projects for various reasons. Such disputes may be in connectionwith late completion of works, delivery of substandard works, personal injuries or labourcompensation in relation to the works. Please refer to the section headed “Business –Litigation and potential claims” in this prospectus for further information on materialdisputes or litigation we encountered during the Track Record Period.

The handling of contractual disputes, litigation and other legal proceedings maysometimes involve a high degree of our management’s attention and input. Handling of legalproceedings and disputes can be both costly and time-consuming, and may significantlydivert the efforts and resources of our management.

In addition, the outcomes of legal proceedings or disputes are influenced by, amongothers, negotiation skills, knowledge and judgment of our management. Our Group, to alarge extent, relies on the relevant expertise and qualification of our management (includingour executive Directors) in dealing with contractual disputes, litigation and arbitration.Should any claims against us fall outside the scope and/or limit of our insurance coverage ormonies retained from subcontractors, our financial position may be adversely affected.

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If progress payment or retention money is not paid to us in full as a result of disputesover our work done, our liquidity position may be adversely affected

We normally receive progress payment from our customers. Progress payment isgenerally made monthly by reference to the value of works done in that month. A portion ofcontract value (which generally is subject to a maximum of 5% of the total contract value)is usually withheld by our customers as retention money. Please refer to the section headed“Business – Customers – Major terms of engagement” in this prospectus for further details.As at 31 March 2014 and 2015 and 30 November 2015, retention monies receivables ofapproximately HK$17,957,000, HK$19,217,000 and HK$23,815,000, respectively, wereretained by our customers.

There is no assurance that progress payment will always be certified and paid to us infull, or the retention money will be paid by our customers to us in full. Partial payment orfailure by our customers to make remittance at all as a result of disputes over our worksdone may have an adverse effect on our liquidity position.

Any failure, damage or loss of our site equipment may adversely affect our operationsand financial performance

Our civil engineering services rely on site equipment. Market developments in anddemand for different construction techniques and different types of site equipment maychange continuously. If we fail to remain attentive to and invest in suitable site equipment tocope with any latest development in such market trends or demands and to cater to differentneeds and requirements of different customers, our overall competitiveness and thus ourfinancial performance and operation results may be adversely affected.

In addition, there is no assurance that our site equipment will not be damaged or lostas a result of, among others, improper operation, accidents, fire, adverse weather conditions,theft or robbery. In addition, site equipment may break down or fail to function normallydue to wear and tear or mechanical or other issues. If any failed, damaged or lost siteequipment cannot be repaired and/or replaced in a timely manner, our operations andfinancial performance could be adversely affected.

Furthermore, we plan to acquire additional site equipment by utilising a portion of thenet proceeds from the Placing so as to enhance our technical ability and to strengthen ourcapability to cater to different needs and requirements of different customers. Please refer tothe section headed “Statement of business objective and use of proceeds” in this prospectusfor details of the types of site equipment to be purchased and the intended timing ofdeployment of the net proceeds in this regard. As a result of the purchase of additional siteequipment, it is expected that additional depreciation will be charged to our profit or lossand may therefore affect our financial performance and operating results.

RISK FACTORS

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There is no assurance that the Technical Circular (Works) No. 1/2015 issued by theWorks Branch of Development Bureau (the “Technical Circular”) or other similaradministrative promulgations issued by the Government will not have any negativeimpact on our Group

The Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation wasgazetted on 23 January 2015 and came into effect on 1 June 2015 to introduce regulatorycontrol on the emissions of non-road mobile machinery. On 8 February 2015, the WorksBranch of Development Bureau issued the Technical Circular, pursuant to which theGovernment has promulgated an implementation plan to phase out progressively the use ofexempted NRMM for four types of exempted NRMM, namely generators, air compressors,excavators and crawler cranes in new capital works contracts of public, including design andbuild contracts, with an estimated contract value exceeding HK$200 million and tendersinvited on or after 1 June 2015. For details of the Air Pollution Control (Non-road MobileMachinery) (Emission) Regulation and the Technical Circular, please refer to the paragraphheaded “Regulatory overview – Air Pollution Control (Non-road Mobile Machinery)(Emission) Regulation (Chapter 311Z of the Laws of Hong Kong)” in this prospectus.

As at the Latest Practicable Date, our Group has 35 regulated machines and out ofwhich 31 machines were exempted and 4 machines were approved with a proper label in aprescribed format issued by the Hong Kong Environmental Protection Department under theAir Pollution Control (Non-road Mobile Machinery) (Emission) Regulation. Of the 31exempted machines, there are 20 exempted machines (4 generators, 4 air compressors and 12excavators) to be phased out under the phase out plan as detailed in the Technical Circular.The Technical Circular aims to require the relevant departments of the Government toinclude specific terms of limiting the quantity of exempted NRMMs to certain percentage inthe contract made with the main contractors in the construction industry. It is neither bindingnor regulatory to our Group’s business operations and any breach of such terms shall onlyamount to a breach of contract by the respective main contractor under the contract madewith the relevant department of the Government to which our Group is not a party.Nevertheless, we cannot assure that the Government will not extend the scope of the saidimplementation plan or issue other similar administrative promulgations which may causeany potential negative impact to our Group’s business operation and the constructionindustry as a whole. If there is such extension of the scope and promulgations, our businessoperation, financial status, results and prospect in the future may be materially and adverselyaffected.

Cash inflows and outflows in connection with construction projects may be irregular,thus may affect our net cash flow position

Cash flows from operating activities primarily consisted of our Group’s revenues fromcivil engineering projects undertaken by us. For each of the two years ended 31 March 2015and the eight months ended 30 November 2014 and 2015, we recorded a net operating cashinflow of approximately HK$7,402,000, a net operating cash outflow of approximatelyHK$3,687,000, a net operating cash outflow of approximately HK$1,169,000 and a netoperating cash inflow of approximately HK$5,228,000, respectively.

RISK FACTORS

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In a construction project, net cash outflows to pay certain operating expenditures maynot align with progress payments to be received at the relevant periods. Progress paymentswill be paid after our construction works commence and are certified by our customers (orauthorised persons employed by them). Accordingly, the cash inflow and outflow for aparticular project may fluctuate as the construction works proceed. If during any particularperiod of time, there exists too many projects which require substantial cash outflow whilewe have significantly less cash inflows during that period, our cash flow position may beadversely affected.

We recorded net current liabilities as at 31 March 2014 and 2015 and net liabilities asat 31 March 2014 and we may expose ourselves to liquidity risk if we experience netcurrent liabilities in the future

We recorded net current liabilities of approximately HK$36,196,000 andHK$12,413,000 as at 31 March 2014 and 2015, respectively. The net current liabilitiesposition was primarily attributable to (i) the amounts due to customers for contract work ofapproximately HK$39,981,000 and HK$39,980,000 as at 31 March 2014 and 2015,respectively; and (ii) the mortgage loan drawn to fund the acquisition of an investmentproperty, a non-current asset. As at 30 November 2015, we recorded net current assets ofapproximately HK$5,240,000. We recorded net liabilities of approximately HK$9,775,000 asat 31 March 2014. There is no assurance that we will not record net current liabilities andnet liabilities in the future. We may not have sufficient working capital to meet our currentliabilities or expand our operations as anticipated. In such circumstances, our liquidity,business operations, financial condition and prospects may be materially and adverselyaffected.

Unsatisfactory performance by our subcontractors or unavailability of subcontractorsmay adversely affect our operations and profitability

Depending on the availability of our labour resources and the opportunity cost ofperforming the work with our own resources, we may subcontract part of our works to othersubcontractors. Please refer to the section headed “Business – Subcontractors” in thisprospectus for further details. For the two years ended 31 March 2015 and the eight monthsended 30 November 2015, subcontracting charges incurred by us amounted to approximatelyHK$34,422,000, HK$54,817,000 and HK$50,913,000, respectively. There is no assurancethat we are able to monitor the performance of these subcontractors as directly andefficiently as with our own staff. In addition, our inability to hire qualified subcontractorscould hinder our ability to complete a project within the prescribed deadline.

Outsourcing exposes us to risks associated with non-performance, delayed performanceor substandard performance by subcontractors or third parties. Accordingly, we mayexperience deterioration in the quality or delay in completion of our civil engineeringprojects. We may also incur additional costs due to the delays or a higher price in sourcingthe services, equipment or supplies in default. We are usually liable for our subcontractors’default. These events may have impact upon our profitability, financial performance andreputation, as well as result in litigation or damages claims.

RISK FACTORS

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Our subcontractors may be exposed to charges in relation to violation of safety,environmental and/or employment laws and regulations which may affect their renewal ofrelevant licences or may even lead to revocation of their licences. If this happens in ourprojects, we will have to appoint another subcontractor(s) for replacement and thusadditional costs may be incurred.

If our subcontractors violate any laws, rules or regulations in relation to health andsafety matters, we may sometimes be subject to prosecutions as primary defendant byrelevant authorities. For instance, under the Immigration Ordinance (Chapter 115 of theLaws of Hong Kong), if a subcontractor employs an illegal immigrant on a construction site,the construction site controller (including but not limited to the principal or main contractorand the subcontractor) may be found to have committed an offence and liable to a fine. Inaddition, we may be liable to claims for losses and damages, if such violations cause anypersonal injuries/death or damage to properties. Moreover, pursuant to the EmploymentOrdinance (Chapter 57 of the Laws of Hong Kong), a principal contractor or a maincontractor and every tier of subcontractors shall be jointly and severally liable to pay anywages that become due to an employee who is employed by a subcontractor on any workwhich the subcontractor has contracted to perform, and such wages are not paid within theperiod specified in the Employment Ordinance (Chapter 57 of the Laws of Hong Kong). Ouroperations and hence our financial position may thereby be adversely affected if any of oursubcontractors violate their obligations to pay their employees.

We may damage various underground services utilities and are exposed to suchinherent project risks

Services utilities, such as fresh and flush water mains, low or high voltage electriccables, optical fibre telephone lines, cable television fibre and high pressure gas mains, arelaid underground in Hong Kong. There is no assurance that damage to those utilities will notoccur during our excavation works. Accordingly, we may be liable to the costs for the repairof such damaged services utilities.

It is not unusual to find difficult conditions at the underground level which may nothave been anticipated at the preliminary stage. Such ground conditions may make our civilengineering works difficult and may incur higher project expenses. In the event that we havecommitted to a fixed sum or rate contract and that no adjustment to the contract sum couldbe agreed with our customers, we may have to bear such increased expenses ourselves andour profitability would be adversely affected.

Shortage of labour may affect our projects and our performance

Generally, our construction works are labour intensive. For any given project, a largenumber of workers from various trades with different skills may be required. There is noassurance that the supply of labour (especially experienced and skilled labour) will besufficient during the forthcoming years when the peak load of construction activities isongoing. All labour intensive projects are more susceptible to labour shortage, and oursubcontracting costs including labour costs of our subcontractors may escalate. If there is asignificant increase in the costs of labour and demand for experienced and skilled labour andwe have to retain our labour (likewise our subcontractors retain their labour) by increasing

RISK FACTORS

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their wages, our staff cost and/or subcontracting cost will increase and thus lower ourprofitability. On the other hand, if we or our subcontractors fail to retain our existing labourand/or recruit sufficient labour (especially experienced and skilled labour) in a timelymanner to cope with our existing or future projects, we may not be able to timely completeour projects, resulting in liquidated damages and/or financial losses. For sensitively analysesillustrating the impact of fluctuations in staff costs and subcontracting charges, please referto the section headed “Financial information – Description of selected components of ourincome statement – Cost of sales – Sensitivity analyses” in this prospectus.

If we are unable to retain our key management personnel, our business, operationalresults and financial condition may suffer

Our success and growth depends on our ability to identify, hire, train and retainsuitable, skilled and qualified employees, including management personnel with the requisiteindustry expertise. Our Directors and members of senior management, in particular, ourexecutive Directors are important to us. Details of their expertise and experience are set outin the section headed “Directors and senior management” in this prospectus. If any of ourexecutive Directors ceases to be involved in the management of our Group in the future andour Group is unable to find a suitable replacement in a timely manner, there could be anadverse impact on our business, results of operation and profitability of our Group.

We may be affected by possible increases in insurance costs and reduction of insurancecoverage by our insurers and certain risks involved in our business operation aregenerally not insured

For the two financial years ended 31 March 2015 and the eight months ended 30November 2015, the aggregate expenses of our insurances were approximately HK$246,000,HK$262,000 and HK$409,000, respectively. Our insurance policies may not cover all of ourrisks or payments and our insurers may not fully compensate us for all potential losses,damages or liabilities relating to our properties or our business operations. We cannotcontrol if there is a reduction or limitation of insurance coverage by insurers upon theexpiry of our current policies. Any further increase in insurance costs (such as an increase ininsurance premiums) or reduction in coverage may materially and adversely affect ourbusiness operations and financial results. Further, there are certain types of losses for whichinsurance coverage is not generally available (such as risks in relation to collectability ofour trade and retention receivables and liabilities arising from events such as epidemics,natural disasters, adverse weather conditions, political unrest and terrorist attacks, etc.) oncommercial terms acceptable to us, or at all. If we suffer any losses, damages or liabilitiesin the course of our business operations arising from events for which we do not have anyor adequate insurance cover, we have to bear such losses, damages or liabilities byourselves. In such a case, our business operations, financial condition and results ofoperations may be adversely affected.

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We are exposed to claims arising from latent defects liability

We do not maintain any defects liability insurance and we may face claims arisingfrom latent defects that are existing but not yet active, developed or visible, found in theworks which are constructed by us. If there is any significant claim against us for defectsliability of any default or failure of our services by our customers or other party, ourprofitability may be adversely affected.

We engage third parties for transporting certain of our site equipment which we arenot able to transport and may not be able to claim for loss or damage to our siteequipment during the transportation process

During the Track Record Period, we engaged third parties to transport certain of oursite equipment between sites. Our transportation expenses amounted to approximatelyHK$205,000, HK$541,000 and HK$558,000 for the two years ended 31 March 2015 and theeight months ended 30 November 2015, respectively. We do not purchase any insurance ontransportation of the site equipment by third party logistics service providers and we cannotassure that our logistics service providers have sufficient insurance coverage for loss ordamage to our site equipment. As such, we may not be able to claim for any loss or damageto our site equipment during the transportation process, which could materially andadversely affect our business, financial conditions and results of operation.

We plan to expand our capacity by acquiring site equipment, which may result in anincrease in depreciation expenses and cashflow used in investing activities and mayadversely affect our operating results and financial position

We rely heavily on the use of site equipment, including excavators, vibrating rollers,generators, air compressors, a hydraulic truck crane, hydraulic breakers and aerial workingplatforms. As at the Latest Practicable Date, we had 56 units of site equipment with anaggregate net book value of approximately HK$6,797,000. For the two years ended 31March 2015 and the eight months ended 30 November 2015, we acquired new siteequipment in the amount of approximately HK$4,310,000, HK$410,000 and HK$812,000 atcost, respectively. To further enhance and optimise our overall efficiency and capacity aswell as technical capability in performing civil engineering construction works, we intend toacquire three hydraulic truck cranes, one excavator, three generators and one air compressoras well as three motor vehicles. The expected total capital expenditure for the acquisition ofthe aforesaid site equipment and motor vehicles will be approximately HK$18.0 million,which will be acquired using the net proceeds from the Placing.

As a result of the acquisition of site equipment and motor vehicles using the netproceeds from the Placing, our cash flow used in investing activities is expected to increaseby approximately HK$17,324,000 and HK$643,000 during the years ending 31 March 2017and 2018, respectively. Our Directors further estimate that assuming all other things remainunchanged, our depreciation expenses will increase and our gross profit will decrease byapproximately HK$1,814,000 and HK$1,958,000 during the years ending 31 March 2017 and2018, respectively. Accordingly, our operating results and financial position may beadversely affected.

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Changes in existing environmental regulations and guidelines may impose additionalcost and burden to us

Our business is subject to the environmental regulations and guidelines issued by theGovernment, which apply to the operation of all construction projects in Hong Kong. Suchregulations and guidelines may be amended by the Government from time to time to reflectthe latest environmental needs. Any changes to such regulations and guidelines could imposeadditional cost and burden to us.

Industrial actions or strikes may affect our business

Typical construction works are divided into various disciplines, and each requireshighly specialised labour. Industrial action of any one discipline may disrupt the progress ofour construction works. During the Track Record Period, our civil engineering projects didnot encounter any strike action. However, there is no assurance that industrial actions orstrikes will not be launched in the future. Such industrial actions or strikes may adverselyimpact our business performance and hence profitability and results of operation. Any delaysin completing our civil engineering works caused by such action may affect our business,financial conditions and results of operations.

Personal injuries, property damages or fatal accidents may occur if safety measures arenot followed at the construction sites

In the course of our operations, we require our employees and subcontractors to adhereto and implement all the safety measures and procedures as stipulated in our work andsafety policy. We monitor and supervise closely our employees and subcontractors in theimplementation of all such safety measures and procedures during execution of works.However, we cannot guarantee that our employees or subcontractors will not violate theapplicable laws, rules or regulations. If any such employees or subcontractors fails tocomply with our safety measures at the construction sites, personal injuries, property damageor fatal accidents may occur in greater numbers and/or to a serious extent. Please refer tothe section headed “Business – Occupational health and safety – System of recording andhandling accidents and our safety compliance record” in this prospectus for furtherinformation on the material accidents we encountered during the Track Record Period. Thesemay adversely affect the financial position of our Group to the extent not fully recoverablefrom our insurance policies. They may also cause our relevant licence and/or certificationsto be suspended or not renewed.

Furthermore, public project tenders are generally evaluated by taking into account anumber of factors, which include without limitation the subcontractor’s compliance recordswith the relevant laws and regulations. We may also be subject to inspections by therelevant Government departments (e.g. Labour Department) from time to time and theseinspections may lead to formal charge(s) against our Group. Non-compliance and convictionrecords may affect our chance of winning future bids.

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Our Group has records of certain immaterial non-compliance of Hong Kong regulatoryrequirements which could lead to the imposition of fines

There have been instances of immaterial non-compliance with certain Hong Kongregulatory requirements by our Group. These include, among others, non-compliance of thePredecessor Companies Ordinance, the Companies Ordinance and the EmploymentOrdinance (Chapter 57 of the Laws of Hong Kong), details of which are set out in thesection headed “Business – Non-compliance” in this prospectus. If the relevant Governmentauthorities take enforcement actions against the relevant subsidiary of our Group and/or ourControlling Shareholders fail to indemnify us to a sufficient extent or at all, we may berequired to pay penalty or incur other liabilities, and our reputation, financial condition andresults of operations may be adversely affected.

We are exposed to interest rate risks which is unhedged and may affect our cash flows

As at 30 November 2015, our Group had bank loans and overdrafts and obligationsunder finance leases amounting to approximately HK$5,688,000 and HK$3,948,000,respectively, which bore interest at 3.23% to 5.50% and 5.44% to 6.21% per annumrespectively. Our Group has not hedged against interest rate risks. Should there be anincrease in interest rate, our interest expenses may increase and our cash flows andprofitability may be adversely affected.

Our business plans and strategies may not be successful or achieved within theexpected time frame or within the estimated budget

We intend to further enhance our site equipment and our manpower in order to copewith the expected increase in demand for our services. However, our plans and strategiesmay be hindered by risks including but not limited to those mentioned elsewhere in thissection. There is no assurance that we will be able to successfully maintain or increase ourmarket share or grow our business successfully after deploying our management andfinancial resources. Any failure in maintaining our current market position or implementingour plans could materially and adversely affect our business, financial condition and resultsof operations.

Our Group’s operations may be affected by inclement weather conditions and aresubject to other construction risks

Our business operations are mostly conducted outdoors and are affected by weatherconditions. If inclement weather conditions persist or a natural disaster occurs, we may beprevented from performing works at our construction sites, and we may fail to meetspecified time schedule. If we have to halt operations during inclement weather conditionsor a natural disaster, we may continue to incur operating expenses while we experiencereduced revenues and profitability. Besides, our business is subject to outbreak of severecommunicable diseases (such as swine flu, avian flu, severe respiratory syndrome and Ebolavirus disease), natural disasters or other acts of God which are beyond our control. Theseincidents may also adversely affect the economy, infrastructure, livelihood and society inHong Kong. Acts of wars and terrorism may also injure our employees, cause loss of lives,damage our facilities, disrupt our operations and destroy our works performed. If any such

RISK FACTORS

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incident occurs, our revenue, costs, financial conditions and growth potentials will beadversely affected. It is also difficult to predict the potential effect of these incidents andtheir materiality to our business as well as those of our customers, suppliers andsubcontractors.

Our financial performance and results of operations will be affected by our Listingexpenses, which are non-recurring in nature

Our Directors estimate that the total amount of expenses in relation to the Listing isapproximately HK$20.9 million, which will be borne by the Selling Shareholder and ourGroup as to approximately HK$2.5 million and HK$18.4 million, respectively. Of suchamount to be borne by us, approximately HK$4.9 million is directly attributable to the issueof the New Shares and is expected to be accounted for as a deduction from equity uponListing. The remaining amount of approximately HK$13.5 million, which cannot be sodeducted, will be charged to profit or loss. Of the approximately HK$13.5 million whichwill be charged to profit or loss, approximately HK$Nil, HK$Nil and HK$7.9 million hasbeen charged during the two years ended 31 March 2015 and the eight months ended 30November 2015, respectively and approximately HK$1.7 million is expected to be chargedto profit or loss for the four months ending 31 March 2016. Our Group expects to furthercharge approximately HK$3.9 million to profit or loss for the year ending 31 March 2017.Expenses in relation to the Listing are non-recurring in nature. Our Board wishes to informthe Shareholders and potential investors that our Group’s financial performance and resultsof operations for the two years ending 31 March 2017 will be significantly affected by theestimated expenses in relation to the Listing.

Our Group’s liquidity and financial position may be affected by our debt financing andour Group’s gearing ratio and finance costs are expected to increase after Listing

We have obtained a credit facility of up to HK$20,000,000 from a bank in Hong Kongin order to provide for a flexible alternative to increase our working capital and finance ourliquidity requirement for our contracts on hand and newly awarded projects. Such creditfacility consists of: (i) a factoring facility of up to HK$10,000,000 by factoring of certainaccounts receivable from our major customer(s) to the bank; and (ii) a banking facility ofHK$10,000,000. Hence, our Company’s gearing ratio and finance costs are expected toincrease after Listing. In the event that we fail to repay the bank loans on time, or wecannot factor our accounts receivables to obtain funds or if we are unable to generatesufficient cash flow for our operations or otherwise unable to obtain sufficient funds tofinance our business in the future, our liquidity and financial condition may be materiallyand adversely affected.

RISK FACTORS

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RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE

Our performance depends on market conditions and trends in the civil engineeringconstruction industry and any deterioration in the prevailing market conditions in thecivil engineering construction industry may adversely affect our performance andfinancial conditions

All our businesses and operations have been and will continue to be located in HongKong. The future growth and level of profitability of the civil engineering constructionindustry in Hong Kong depend primarily upon the continued availability of large civilengineering construction projects. The nature, extent and timing of such projects will,however, be determined by the interplay of a variety of factors. These factors include, inparticular, the Government’s policy and spending patterns on the civil engineeringconstruction industry in Hong Kong such as the on-going plan of the “Ten MajorInfrastructure Projects”, speed of approval of the relevant budgets and/or projects and thegeneral conditions and prospects of the Hong Kong economy. They may affect theavailability of civil engineering construction projects from the public sector or private sector.Apart from the public spending of the Government, other factors also affect the civilengineering construction industry. These other factors include cyclical trends in the economyas a whole, fluctuations in interest rates and the availability of new projects in the privatesector. If there is any recurrence of a recession in Hong Kong, deflation or any changes inHong Kong’s currency policy, or if the demand for civil engineering works in Hong Kongdeteriorates, our operations and profitability could be adversely affected.

We operate in a relatively competitive environment

The civil engineering construction industry in Hong Kong has many participants and iscompetitive. As at the Latest Practicable Date, there were over 700 structural and civilengineering subcontractors being registered under the Construction Industry Council in HongKong. Some of the major market players have significantly more resources and are betterpositioned than our Group, including but not limited to having a long operating history,better financing capabilities and well developed, technical expertise. New participants maywish to enter the industry provided that they have the appropriate skills, local experience,necessary site equipment, capital and they are granted the requisite licences or approvals bythe relevant regulatory bodies. Increased competition may result in lower operating marginsand loss of market share, which may adversely affect our profitability and operating results.

RISK FACTORS

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RISKS RELATING TO HONG KONG

The state of economy in Hong Kong may adversely affect our performance andfinancial condition

Our performance and financial conditions depend on the state of economy in HongKong. Our revenue attributable to the Hong Kong market accounted for all of our Group’stotal revenue during the Track Record Period. If there is a downturn in the economy ofHong Kong, our results of operations and financial position may be adversely affected. Inaddition to economic factors, social unrest or civil movements such as occupation activitiesmay also affect the state of economy in Hong Kong and in such case, our Group’soperations and financial position may also be adversely affected.

The state of political environment in Hong Kong may adversely affect our performanceand financial condition

Hong Kong is a special administrative region of the PRC. It enjoys a high degree ofautonomy under the principle of “one country, two systems” in accordance with the BasicLaw of Hong Kong. However, we are not in any position to guarantee the “one country, twosystems” principle and the level of autonomy would be maintained as currently in place.Since our operations are located in Hong Kong, any change of Hong Kong’s existingpolitical environment may affect the stability of the economy in Hong Kong, therebyaffecting our results of operations and financial positions. Recently, thousands of residentsof Hong Kong engaged in civil disobedience protests. Activists protested outside keygovernment buildings and occupied several major intersections, causing major disruption totraffic and trade in the affected areas. Any political and social instability in Hong Kong, ifsignificant and prolonged, could have a material adverse effect on our business, financialcondition, results of operations and prospects.

RISKS RELATING TO THE PLACING

There has been no prior public market for the Shares and an active trading marketmay not develop after the Listing

Prior to the Listing, there has been no public market for the Shares. There is noguarantee that an active trading market for the Shares will develop or be sustained uponcompletion of the Listing. A listing on the GEM does not guarantee that an active and liquidtrading market for the Shares will develop, or if it does develop, that it will be sustainedfollowing the Listing, or that the market price of the Shares will not decline following theListing.

The trading volume and market price of our Shares may be volatile, which could resultin substantial losses for Shareholders

The market price and trading volume of the Shares may be highly volatile. There are anumber of factors which may affect the market price of the Shares, and these factors includewithout limitation changes in our income or cash flows, new investments and strategicalliances. Any such developments may result in large and sudden changes in the volume and

RISK FACTORS

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market price at which the Shares will be trading. There is no guarantee that thesedevelopments will or will not occur in the future and it is difficult to quantify the impact onour Group and on the trading volume and market price of the Shares. Further, changes in themarket price of the Shares may also be due to factors which may not be directly related toour financial or business performance.

Shareholders’ equity interests may be diluted as a result of additional equityfund-raising

In the future, we may need to raise additional funds to finance acquisitions, expansionor new developments of our business. If funds are raised through the issue of new equityand equity-linked securities of our Company other than on a pro-rata basis to the existingShareholders, the percentage ownership of the Shareholders in our Company may be reducedaccordingly as a result of which Shareholders may experience dilution in their percentageshareholdings in our Company. Furthermore, it is also possible that such new securities mayhave preferred rights, options or pre-emptive rights that render them more valuable than orsenior to the Shares.

The exercise of options granted under the Share Option Scheme may result in dilutionto the Shareholders

Our Company has conditionally adopted the Share Option Scheme although no optionshad been granted thereunder as at the Latest Practicable Date. Any exercise of the options tobe granted under the Share Option Scheme in the future and issue of Shares thereunderwould result in the reduction in the percentage ownership of the Shareholders and may resultin a dilution in the earnings per Share and the net asset value per Share, as a result of theincrease in the number of Shares outstanding after such issue.

Future sale of a substantial amount of Shares by existing Shareholders may adverselyaffect the market price of our Shares and our ability to raise equity capital

Any future sale of a substantial amount of the Shares by the existing Shareholders, orthe possibility of such sale, could negatively impact the market price of the Shares in HongKong and our ability to raise equity capital in the future at a time and price that we deemappropriate.

There is no guarantee that the Substantial Shareholders or Controlling Shareholderswill not dispose of the Shares held by them after the lock-up period, and the effect ofwhich, if any, on the market price of the Shares cannot be predicted. The Shares held byControlling Shareholders are subject to certain lock-up periods beginning on the ListingDate, details of which are set out in the section headed “Underwriting – Underwritingarrangements and expenses – Undertakings” in this prospectus.

It is also possible that there may be a sale of a substantial amount of Shares by any ofthe Substantial Shareholders or Controlling Shareholders or the perception that such salemay occur, which may materially and adversely affect the prevailing market price of theShares

RISK FACTORS

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RISKS RELATING TO THIS PROSPECTUS

There can be no guarantee as to the accuracy of facts and other statistics contained inthis prospectus with respect to the economies and the industry in which we operate

Certain facts and other statistics in this prospectus are derived from various sourcesincluding the Ipsos Report and various official government publications that we believe tobe reliable and appropriate for such information. However, we cannot guarantee the qualityor reliability of such source materials. We have no reason to believe that such information isfalse or misleading or that any fact has been omitted that would render such informationfalse or misleading. Whilst our Directors have taken all reasonable care in the reproductionof the information, they have not been prepared or independently verified by us, the SellingShareholder, the Sponsor, the Joint Bookrunners, the Joint Lead Managers, the Underwritersor any of their respective directors, affiliates or advisers. Therefore, we make norepresentation as to the accuracy of such facts and statistics. Due to possibly flawed orineffective collection methods or discrepancies between published information, marketpractice and other problems, the statistics referred to or contained in this prospectus may beinaccurate or may not be comparable to statistics produced for other publications orpurposes and should not be unduly relied upon. Furthermore, there is no assurance that theyare stated or compiled on the same basis or with the same degree of accuracy as may be thecase elsewhere. In all cases, investors should give consideration as to how much weight orimportance they should attach to, or place on, such information or statistics.

Investors should read this entire prospectus carefully and we strongly caution you notto place any reliance on any information (if any) contained in press articles or othermedia regarding us and the Placing including, in particular, any financial projections,valuations or other forward-looking statement

Prior to the publication of this prospectus, there may be press or other media, whichcontains certain information referring to us and the Placing that is not set out in thisprospectus. We wish to emphasise to potential investors that neither we nor any of theSelling Shareholder, the Sponsor, the Joint Bookrunners, the Joint Lead Managers, theUnderwriters, our Directors, officers, employees, advisers, agents or representatives of anyof them, or any other parties (collectively, the “Professional Parties”) involved in thePlacing has authorised the disclosure of such information in any press or media, and neitherthe press reports, any future press reports nor any repetition, elaboration or derivative workwere prepared by, sourced from, or authorised by us or any of the Professional Parties.Neither we, the Selling Shareholder, nor any Professional Parties accept any responsibilityfor any such press or media coverage or the accuracy or completeness of any suchinformation. We make no representation as to the appropriateness, accuracy, completeness orreliability of any such information or publication. To the extent that any such information isnot contained in this prospectus or is inconsistent or conflicts with the information containedin this prospectus, we disclaim any responsibility, liability whatsoever in connectiontherewith or resulting therefrom. Accordingly, you should rely solely upon the information inthis prospectus in making your investment decisions regarding the Shares but note thatundue reliance should not be placed on any forward looking statements contained in thisprospectus which may not occur in the way we expect or may not materialise at all as setout in the section headed “Forward-looking statements” in this prospectus.

RISK FACTORS

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DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This prospectus, for which our Directors collectively and individually accept fullresponsibility, includes particulars given in compliance with the Companies (Winding Upand Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing)Rules (Chapter 571V of the Laws of Hong Kong) and the GEM Listing Rules for thepurpose of giving information with regard to our Company. Our Directors, having made allreasonable enquiries, confirm that to the best of their knowledge and belief, the informationcontained in this prospectus is accurate and complete in all material respects and notmisleading or deceptive and there are no other matters the omission of which would makeany statement in this prospectus misleading.

FULLY UNDERWRITTEN

This prospectus is published solely in connection with the Placing and the listing of theShares on GEM, which is sponsored by the Sponsor and is managed by the Joint LeadManagers. The Placing Shares are fully underwritten by the Underwriters pursuant to theUnderwriting Agreement. For further information about the Underwriters and the Placing andunderwriting arrangements, please refer to the section headed “Underwriting – Underwriters”in this prospectus.

RESTRICTIONS ON OFFER AND SALE OF THE PLACING SHARES

Each person acquiring the Placing Shares will be required to confirm, or be deemed byhis/her acquisition of Placing Shares to confirm, that he/she is aware of the restrictions onoffers and sales of the Placing Shares described in this prospectus.

No action has been taken in any jurisdiction other than Hong Kong to permit theoffering of the Placing Shares or the distribution of this prospectus. This prospectus is notan offer or invitation in any jurisdiction in which it is not authorised, and is not an offer orinvitation to any person to whom it is unlawful to make an unauthorised offer or invitation.

The distribution of this prospectus and the offering of the Placing Shares in otherjurisdictions are subject to restrictions and may not be made except as permitted under theapplicable laws or any applicable rules and regulations of such jurisdictions pursuant toregistration with or authorisation by the relevant regulatory authorities as an exemptiontherefrom.

Prospective investors for the Placing Shares should consult their financial advisors andtake legal advice, as appropriate, to inform themselves of, and to observe, all applicablelaws and regulations of any relevant jurisdiction. Prospective investors for the PlacingShares should inform themselves as to the relevant legal requirements of applying for thePlacing Shares and any applicable exchange control regulations and applicable taxes in thecountries of their respective citizenship, residence or domicile.

The Placing Shares are offered solely on the basis of the information contained andrepresentations made in this prospectus. No person is authorised in connection with thePlacing to give any information or to make any representation not contained in this

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

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prospectus, and any information or representation not contained herein must not be reliedupon as having been authorised by our Company, the Selling Shareholder, the Sponsor, theJoint Bookrunners, the Joint Lead Managers, the Underwriters, and any of their respectivedirectors or any other persons involved in the Placing. It is expected that, pursuant to thePlacing, the Underwriters will, on behalf of our Company and the Selling Shareholder,conditionally place the Placing Shares with investors.

STRUCTURE AND CONDITIONS OF THE PLACING

The structure and conditions of the Placing is set forth in the section headed “Structureand conditions of the Placing” in this prospectus.

APPLICATION FOR LISTING ON GEM

Our Company satisfies the requirements relating to continuity of ownership and controlthroughout the full financial year immediately preceding the Latest Practicable Date and upuntil the Listing Date under Rule 11.12A(2) of the GEM Listing Rules.

Our Company has applied to the Stock Exchange for the listing of, and permission todeal in, the Shares in issue and to be issued on GEM as mentioned in this prospectus. Nopart of the share or loan capital of our Company is listed, traded or dealt in on any otherstock exchange.

A total of 312,000,000 Shares, representing 25% of the enlarged issued share capital ofour Company immediately following completion of the Placing and the Capitalisation Issue(without taking into account any Shares which may be allotted and issued pursuant to theexercise of any options which may be granted under the Share Option Scheme), will bemade available under the Placing.

Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)Ordinance, if the permission for the Shares offered under this prospectus to be listed onGEM has been refused before the expiration of three weeks from the date of the closing ofthe Placing or such longer period not exceeding six weeks as may, within the said threeweeks, be notified to our Company for permission by or on behalf of the Stock Exchange,then any allotment made on an application in pursuance of this prospectus shall, whenevermade, be void.

Pursuant to Rule 11.23(7) of the GEM Listing Rules, the minimum prescribedpercentage of at least 25% of the issued share capital of our Company must at all times beheld by the public. A total of 312,000,000 Placing Shares, representing 25% of the enlargedissued share capital of our Company, will be in the hands of the public immediatelyfollowing completion of the Placing and the Capitalisation Issue and upon Listing.


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PROFESSIONAL TAX ADVICE RECOMMENDED

Potential applicants for the Placing Shares are recommended to consult theirprofessional advisers if they are in doubt as to the taxation implications of the subscriptionfor, holding, purchase, disposal of or dealing in the Shares or exercising their rightsthereunder. It is emphasised that none of our Company, the Selling Shareholder, ourDirectors, the Sponsor, the Joint Lead Managers, the Joint Bookrunners, the Underwriters,their respective directors or any other person involved in the Placing accepts responsibilityfor any tax effects on, or liabilities of, holders of Shares resulting from the subscription for,holding, purchase, disposal of or dealing in the Shares or the exercise of their rightsthereunder.

SHARE REGISTRAR, REGISTRATION AND STAMP DUTY

All the Placing Shares will be registered on the Hong Kong branch register of membersof our Company in Hong Kong by the Hong Kong Branch Share Registrar. Dealings in theShares registered on our Company’s branch register of members maintained in Hong Kongwill be subject to Hong Kong stamp duty. Dealings in the Shares registered on the principalregister of members of our Company maintained in the Cayman Islands will not be subjectto Cayman Islands stamp duty.

The Shares are freely transferable. Only securities registered on the branch register ofmembers of our Company kept in Hong Kong may be traded on GEM unless the StockExchange otherwise agrees.

SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

Subject to the approval of the listing of, and permission to deal in, the Shares on GEMand our Company’s compliance with the stock admission requirements of HKSCC, theShares will be accepted as eligible securities by HKSCC for deposit, clearance andsettlement in CCASS with effect from the Listing Date or, under contingent situation, anyother date as determined by HKSCC. Settlement of transactions between participants of theStock Exchange is required to take place in CCASS on the second business day after anytrading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASSOperational Procedures in effect from time to time.

All necessary arrangements have been made for the Shares to be admitted into CCASS.If investors are unsure about the details of CCASS settlement arrangement and how sucharrangements will affect their rights and interests, they should seek the advice of theirstockbroker or other professional adviser.

COMMENCEMENT OF DEALINGS IN THE SHARES

Dealings in the Shares on GEM are expected to commence at 9:00 a.m. on Tuesday, 12April 2016. The Shares will be traded in board lots of 10,000 Shares each. The stock codefor our Shares is 8217. We will not issue temporary documents of title.


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LANGUAGE

If there is any inconsistency between this prospectus and the Chinese translation of thisprospectus, this prospectus shall prevail. If there is any inconsistency between the Chinesenames of the Chinese entities mentioned in this prospectus and their English translation, theChinese names shall prevail.

CURRENCY TRANSLATIONS

Unless otherwise specified, translations of US$ into HK$ in this prospectus are basedon the exchange rate set out below (for the purpose of illustration only):

US$1.00 = HK$7.80

No representation is made that any amounts in US$ and HK$ can be or could havebeen converted at the relevant dates at the above exchange rate or any other rates or at all.

ROUNDING

Certain amounts and percentage figures included in this prospectus have been subjectto rounding adjustments. Accordingly, totals of rows or columns of numbers in tables maynot be equal to the apparent total of individual items. Where information is presented inthousands or millions of units, amounts may have been rounded up or down. Anydiscrepancies in any table between totals and sums of amounts listed therein are due torounding.


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DIRECTORS

Name Residential address Nationality

Executive Directors

Mr. Wong Che Kwo（黃智果先生）

Room B, 10/F, Block 1The Great Hill8 Tung Lo Wan Hill RoadShatinNew TerritoriesHong Kong

Chinese

Mr. Wong Wing Wah（黃永華先生）

Flat D, 6/F, Block 3Vista ParadisoMa On ShanNew TerritoriesHong Kong

Chinese

Mr. Wong Tak Ming（黄德明先生）

1/F, Block 19Wai Ha TsuenNo. 100 Tai PoNew TerritoriesHong Kong

Chinese

Mr. Chiu Chi Wang（趙智宏先生）

Flat E, 13/F, Block 4Harbour Place8 Oi King StreetHung HomKowloonHong Kong

Chinese

Independent non-executive Directors

Mr. Wong Chi Kan（黄智瑾先生）

Flat F, 12/F, Block 1Tsuen Wan PlazaTsuen WanNew TerritoriesHong Kong

Chinese

Mr. Liu Yan Chee James（劉恩賜先生）

Flat E, 42/F, Tower 5The Long Beach8 Hoi Fai RoadKowloonHong Kong

Chinese

DIRECTORS AND PARTIES INVOLVED IN THE PLACING

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Name Residential address Nationality

Mr. Tai Hin Henry（戴騫先生）

Flat 56D, Block 7Le Point8 King Ling RoadTseung Kwan ONew TerritoriesHong Kong

Chinese

For further information on the profile and background of our Directors, please refer tothe section headed “Directors and senior management” in this prospectus.

PARTIES INVOLVED

Sponsor TC Capital Asia LimitedSuites 1903-4, 19th Floor, Tower 6The Gateway, Harbour City9 Canton Road, Tsim Sha TsuiKowloon, Hong Kong(A licensed corporation carrying on Type 1 (dealing insecurities) and Type 6 (advising on corporate finance)regulated activities under the SFO)

Joint Bookrunners, Joint LeadManagers and theUnderwriters

Gransing Securities Co., LimitedRooms 805-806 Far East Consortium Building121 Des Voeux Road CentralHong Kong(A licensed corporation carrying on Type 1 (dealing insecurities), Type 4 (advising on securities), Type 6(advising on corporate finance) and Type 9 (assetmanagement) regulated activities under the SFO)

Suncorp Securities LimitedRoom 3616, 36/F., Cosco Tower183 Queen’s Road CentralHong Kong(A licensed corporation carrying on Type 1 (dealing insecurities) regulated activity under the SFO)


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Legal adviser to our Company As to Hong Kong lawD. S. Cheung & Co.29/F., Bank of East AsiaHarbour View Centre56 Gloucester RoadWanchai, Hong Kong(Solicitors of Hong Kong)

As to Cayman Islands lawAppleby2206-19 Jardine House1 Connaught PlaceCentralHong Kong(Cayman Islands attorneys-at-law)

Legal advisers to the Sponsorand the Underwriters

As to Hong Kong lawLi, Wong, Lam & W. I. Cheung22nd Floor, Infinitus Plaza199 Des Voeux Road CentralHong Kong(Solicitors of Hong Kong)

Reporting accountants Grant Thornton Hong Kong LimitedLevel 12, 28 Hennessy RoadWanchai, Hong Kong(Certified Public Accountants)

Internal control consultant CT Partners Consultants LimitedUnit 1601A, 16th Floor, China Hong Kong City33 Canton RoadTsim Sha Tsui, KowloonHong Kong

Property valuer Ascent Partners Valuation Service LimitedSuite 2102, Hong Kong Trade Centre161-167 Des Voeux Road CentralHong Kong

Compliance adviser TC Capital Asia LimitedSuites 1903-4, 19th Floor, Tower 6The Gateway, Harbour City9 Canton Road, Tsim Sha TsuiKowloon, Hong Kong(A licensed corporation carrying on Type 1 (dealing insecurities) and Type 6 (advising on corporate finance)regulated activities under the SFO)


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Selling Shareholder Blooming Union Investments LimitedNovaSage ChambersP.O. Box 4389Road TownTortolaBritish Virgin Islands


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Registered office in the CaymanIslands

P.O. Box 1350Clifton House75 Fort StreetGrand Cayman KY1-1108Cayman Islands

Headquarter and principalplace of business in HongKong registered under Part16 of the CompaniesOrdinance

Unit 1505, 15/FDelta House3 On Yiu StreetShatinNew TerritoriesHong Kong

Company secretary Mr. Woo Yuen FaiCertified Public AccountantFlat C, 7/F Kwong Wah Centre36 Fau Tsoi StreetYuen LongNew TerritoriesHong Kong

Compliance officer Mr. Wong Wing WahFlat D, 6/F, Block 3Vista ParadisoMa On ShanNew TerritoriesHong Kong

Authorised representatives Mr. Woo Yuen FaiCertified Public AccountantFlat C, 7/F, Kwong Wah Centre36 Fau Tsoi StreetYuen LongNew TerritoriesHong Kong

Mr. Wong Che KwoRoom B, 10/F, Block 1The Great Hill8 Tung Lo Wan Hill RoadShatinNew TerritoriesHong Kong

Members of Audit Committee Mr. Liu Yan Chee James (Chairman)Mr. Wong Chi KanMr. Tai Hin Henry

CORPORATE INFORMATION

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Members of RemunerationCommittee

Mr. Wong Chi Kan (Chairman)Mr. Wong Wing WahMr. Liu Yan Chee James

Members of NominationCommittee

Mr. Wong Che Kwo (Chairman)Mr. Wong Chi KanMr. Tai Hin Henry

Cayman Islands principal shareregistrar and transfer office

Appleby Trust (Cayman) Ltd.Clifton House75 Fort StreetPO Box 1350Grand Cayman KY1-1108Cayman Islands

Hong Kong branch shareregistrar and transfer office

Union Registrars LimitedA18/F., Asia Orient TowerTown Place33 Lockhart RoadWanchaiHong Kong

(which will be relocated to Suites 3301-04, 33/F., TwoChinachem Exchange Square, 338 King’s Road, NorthPoint, Hong Kong with effect from 5 April 2016)

Principal banker Bank of China (Hong Kong) Limited1 Garden RoadHong Kong

Company website www.luenwong.hk(information contained in this website does not formpart of this prospectus)

CORPORATE INFORMATION

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The information set forth in this section has been derived from the Ipsos Report. Webelieve that the sources of the information are appropriate sources for such information,and we have taken reasonable care in extracting and reproducing such information. Wehave no reason to believe that such information is materially false or misleading, and nofact has been omitted that would render such information materially false or misleading.However, the information has not been independently verified by us, the SellingShareholder, the Sponsor, the Joint Bookrunners, the Joint Lead Managers, theUnderwriters, any of the respective directors, officers, employees, advisers, agents orrepresentatives or any other party involved in the Placing and no representation is givenas to its accuracy. Except as otherwise stated, all the data and forecast in this sectionare derived from the Ipsos Report.

SOURCE OF INFORMATION

We commissioned an independent professional market research company, Ipsos, toassess the industry development trends, market demand and competitive landscape of civilengineering construction industry in Hong Kong, at a fee of HK$350,000 and our Directorsconsider that such fee reflects market rates. Ipsos is an independent market research andconsulting company which conducts research on market profiles, market size, share andsegmentation analyses, distribution and value analyses, competitor tracking and corporateintelligence and which has been engaged in a number of market assessment projects inconnection with initial public offerings in Hong Kong. Founded in Paris, France in 1975 andpublicly-listed on the NYSE Euronext Paris since 1999, Ipsos SA acquired Synovate Ltd. inOctober 2011. After the acquisition, Ipsos became one of the largest market research andconsulting companies in the world which employs approximately 16,000 personnelworldwide across 87 countries.

The information contained in the Ipsos Report is derived by means of data andintelligence gathering such as: (i) desk research; (ii) consultation with the Company tounderstand the background information about the business of our Group; and (iii) primaryresearch by interviewing key stakeholders and industry experts including but not limited tocompanies engaged in civil engineering works, government officials and related associations.Information gathered by Ipsos has been analysed, assessed and validated using Ipsosin-house analysis models and techniques. According to Ipsos, information gathered can becross-referenced to ensure accuracy. Nevertheless, we cannot assure you regarding theaccuracy or completeness of the factors, forecasts and statistics in this prospectus obtainedfrom sources such as government publications, market data providers and the Ipsos Report.

Our Directors confirm that, after taking reasonable care, there is no adverse change inthe market information since the date of the Ipsos Report which may qualify, contradict orhave an impact on the information in this section.

INDUSTRY OVERVIEW

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MACRO-ECONOMIC ENVIRONMENT IN HONG KONG

GDP value in Hong Kong increased from approximately HK$1,846.1 billion in 2010 toapproximately HK$2,070.8 billion in 2014, at a CAGR of approximately 2.9%.

It is expected that GDP in Hong Kong will grow consistently from 2015 onwards,reaching about HK$2,440.1 billion in 2019. It can be attributed to the expected increase inexport value given the global economic recovery, and the expected increase in investmentinflow from China to Hong Kong in the next five years as 60% of Chinese outboundinvestments was directed to or channeled through Hong Kong. Consumption contributed50.2% of growth of gross domestic product in 2014 and account for 60% of the GDP in thefirst half of 2015, even as the country grew at its slowest in 25 years. These factors arelikely to stimulate the development of the property market, leading to the growth ofconstruction and civil engineering industries.

MARKET OVERVIEW OF THE CONSTRUCTION INDUSTRY IN HONG KONG

The total investment value in construction projects in Hong Kong increased from aboutHK$174.8 billion in 2010 to about HK$330.6 billion in 2014, at a CAGR of about 17.3% asa result of factors such as the “Ten Major Infrastructure Projects” proposed by theGovernment in 2007 and the growing cost of raw materials and labour, as well as theincreasing contract fees to subcontractors. From 2010 to 2014, the value of constructionprojects commissioned by the public sector increased from approximately HK$31.2 billion toapproximately HK$68.8 billion, at a CAGR of about 21.9%, while that of the private sectorincreased from approximately HK$30.3 billion to approximately HK$53.9 billion, at aCAGR of about 15.5%.

According to the 2016-17 Budget Speech, the Government planned to increase its totalpublic expenditure on infrastructure to about HK$85.8 billion in 2016-17 from aboutHK$79.3 billion in 2015-16, representing about 8.2% growth. These infrastructure projectsinclude the construction of a three-runway system for the Hong Kong International Airport,the Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Zhuhai-MacaoBridge. Meanwhile, land covering approximately 1.3 million sq.m. of floor area is expectedto be provided for commercial buildings in stages in the coming years. The construction ofthe runway, rail link, bridges, roads and buildings will continue to drive the growth of theconstruction industry, and in particular the civil engineering industry.

Major participants in the construction industry in Hong Kong

Customers

Construction projects originate from the customers, which include the Governmentdepartments, land owners and property developers. In the public sector, the Government isthe key customer, and infrastructure projects are mainly commissioned by Governmentdepartments. In the private sector, land owners or property developers obtain land ownershipthrough winning auctions of public land sites. Construction works on these land sites mainlyinvolve the construction of residential, commercial and industrial buildings. Moreover, it iscommon for construction companies to rely on a few customers. Their customers can be theGovernment, public and private utility companies, property developers and main contractorsand subcontractors, etc.

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Main contractors

The main contractors obtain construction projects from the customers. These projectsinclude civil engineering construction, site formation, piling, demolition, erection ofarchitectural superstructure, structural alteration, etc.

Subcontractors

Given the scope of the project or the skillset required, the main contractors mayconsider outsourcing part(s) of the construction works to subcontractors depending on theirexpertise and experience in the field.

Suppliers

The suppliers, such as steel distributors, concrete suppliers and site equipment rentalcompanies, provide the necessary materials and equipment for the projects. Sometimes theconstruction cost would be settled by contra-charge arrangement between the maincontractors and subcontractors.

Gross output value of construction works performed by main contractors andsubcontractors in Hong Kong

The gross output value of the construction works performed by subcontractorsincreased from about HK$9.0 billion in 2010 to about HK$32.5 billion in 2014, at a CAGRof about 37.8%. The value is expected to further increase from about HK$43.0 billion toabout HK$149.9 billion between 2015 and 2019, at a CAGR of approximately 36.6%. Theweight of subcontractors in the overall gross output value of construction works increasedsignificantly from 12.8% in 2010 to 20.9% in 2014. With the growing size and complexityof the construction projects, it has been a growing trend to award large and complex worksas a single contract package to main contractors who possess multi-disciplinaryqualifications, and are on the list of approved contractors of the relevant Governmentdepartment(s) to carry out both civil engineering works and building works. These maincontractors will then subcontract some parts of construction works to differentsubcontractors. Normally, the subcontractors will then outsource part of their works to someother smaller subcontractors. With such kind of multi-level outsourcing and subcontracting,the gross output value as a percentage of total subcontractors has been increasing from 2010to 2014. Moreover, this is expected to grow from 22.2% in 2015 to 33.4% in 2019 with theGovernment’s initiatives to increase housing supply and the upcoming infrastructureprojects.

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MARKET OVERVIEW OF THE CIVIL ENGINEERING CONSTRUCTIONINDUSTRY IN HONG KONG

The chart below shows the gross output value (or revenue) of civil engineeringconstruction industry in Hong Kong and the contribution of the main contractors andsubcontractors on the civil engineering construction industry in Hong Kong between 2010and 2014 and its forecast from 2015 to 2019:

17.6 27.5 41.3 50.8 53.5

67.3 82.7

98.4 112.9

129.1

2.6 4.1

8.1 10.8 14.1

19.3

26.6

35.9

45.5

57.4

20.1 31.7

49.4 61.7 67.6

86.6

109.3

134.3

158.4

186.5

0.0

50.0

100.0

150.0

200.0

2010 2011 2012 2013 2014 2015E 2016F 2017F 2018F 2019F

Main Contractor Subcontractor

HK$ billion

Source: Ipsos Report

The market size of the civil engineering construction industry in Hong Kong is aroundHK$67.6 billion in terms of revenue, which accounted for around 43.6% of the constructionindustry in Hong Kong in 2014. The revenue of the civil engineering sector in Hong Kongrose at a CAGR of around 35.4%, from around HK$20.1 billion in 2010 to around HK$67.6billion in 2014. The rising number of projects for civil engineering works as well as theincrease in the contract value of projects in recent years were the major reasons for thegrowth. It is expected that the revenue of the civil engineering construction industry in HongKong will grow substantially from around HK$86.6 billion in 2015 to around HK$186.5billion in 2019, equivalent to a CAGR of around 21.1%. The increment is mainly due to theongoing and upcoming Ten Major Infrastructure Projects which included the construction ofnew development areas (“NDAs”), urban renewal projects and the Government’s plan toincrease the public housing.

The revenue of civil engineering works performed by subcontractors at constructionsites grew from about HK$2.6 billion in 2010 to about HK$14.1 billion in 2014, at a CAGRof about 52.6%. The weight of subcontractors in the overall revenue of civil engineeringconstruction works increased 8.0%, from around 12.9% in 2010 to around 20.9% in 2014.With large complex projects and a need for a multitude of specialised skills, many maincontractors in Hong Kong rely heavily on subcontractors for the execution of civilengineering works. Therefore the growth of the number of these projects and the increasingreliance on subcontractors for execution resulted in the increment of the weight ofsubcontractors in the overall revenue of civil engineering construction works in Hong Kong.

Sustained growth of the demand for civil engineering subcontracting works is expectedwith the weight of subcontractors in the overall revenue of civil engineering constructionworks in Hong Kong expected to grow from about 22.3% in 2015 to about 30.8% in 2019due to the increase in the number of large and complex construction works, such as the “Kai

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Tak development – reconstruction and upgrading of Kai Tak Nullah”, “Expansion of Tai Powater treatment works and ancillary raw water and fresh water transfer facilities – part 2works” and the ongoing and upcoming Ten Major Infrastructure Projects.

Sub-segments of civil engineering works in Hong Kong

Based on the licenses in the Development Bureau, the sub-segments of the civilengineering works in Hong Kong are ports works, roads and drainage, site formation andwaterworks. Some iconic civil engineering works in Hong Kong include the Tsing MaBridge and Hong Kong International Airport.

Roads and drainage works

Roads and drainage works refer to the construction and widening of roads, constructionof footbridge and other drainage related infrastructures such as the sewage pipes, stormdrains, water mains and other maintenance works. In line with the trend that theGovernment’s plan to develop the NDAs in North East New Territories and Hung Shui Kiu,it is expected that the demand for residential and commercial buildings in these areas willincrease, and infrastructure and facilities such as highways, roads and drainages arenecessary for the development.

Structural works

Civil engineering structural works refer to the construction of major frameworks of theinfrastructures which provide them with the supportive structures and allow them towithstand various extreme forces, such as large variations in temperature, dynamic loadssuch as waves or traffic, or high pressures from water or compressed gases. Some of themare being constructed in corrosive environments, such as at sea, in industrial facilities orbelow ground. Many types of civil engineering works require structural works including portworks, site formation, waterworks as well as road and drainage. Major civil engineeringstructural works in recent years include the Hong Kong-Zhuhai-Macao bridge and the TuenMun Western bypass as well as the Railway Network Extension – Five Railway Projects arecurrently at different stages of implementation and are expected to be completed between2015 and 2021. These projects include the West Island Line, the South Island Line (East),the Kwun Tong Line Extension, the Guangzhou-Shenzhen-Hong Kong Express Rail Link(Hong Kong Section), and the Shatin to Central Link. Apart from these five railwayextension projects, several railway projects are planned to commence in 2018 and areexpected to be completed between 2023 and 2031. These projects include Northern Link andKwun Tong Station, Hung Shui Kiu Station, Tung Chung West Extension, Tuen Mun SouthExtension, East Kowloon Line, South Island Line (West), and North Island Line. Therefore,continuous demand for structural works are envisaged.

Site formation works

Site formation works required at construction sites refer to the demolition of anexisting building, excavation to the design formation level and reduction and stabilisation ofconstruction sites. Major site formation projects in recent years included the Liantang/HeungYuen Wai Boundary Control Point and the Kai Tak Cruise Terminal Development. Siteformation works are crucial to every construction projects, including general buildings andcivil engineering projects. Whether it is a redevelopment project or a new project, site

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formation works are imperative to stabilise the construction site before any constructionworks take place. With increasing construction activities taking place in Hong Kong, it isexpected that site formation works will continue its growth momentum.

Wage trend for workers in the civil engineering construction industry in Hong Kong

The chart below shows the salary index of civil engineering construction workers inHong Kong between 2010 and 2015:

0

30

60

90

120

150

180

2010 2011 2012 2013 20152014

95.5 100.0107.8

120.8132.6

145.6

Salary index for workers in the civil engineering construction industry

Notes: Index series with April 2003 as base period (i.e. April 2003 = 100)

The salary index for workers in the civil engineering construction industry rose from95.5 to 145.6 between 2010 and 2015, which can be translated to an increase of around52.5% and a CAGR of around 8.8%. The aging and shrinking construction industryworkforce has been a long existing challenge for the civil engineering construction industryin Hong Kong. As of 2014, approximately 40.0% of the registered construction workers inHong Kong are seniors, with an average age of over 50 years old. Given the labourintensive job nature of the civil engineering construction, the aging population together withthe limited number of skilled workers have made the situation even worse and as a result,workers’ salaries have been driven up over the past 5 years. According to the Hong KongConstruction Industry Employees’ General Union, it is expected that the daily wages forconstruction workers will increase by about 10.3% from 2014/15 to 2015/16. Amongstdifferent types of construction workers, the daily wage for carpenter (formwork), concretorand bar bender and fixer will experience a significant growth at about 17.1%, 15.0% and12.9%, respectively from 2014/15 to 2015/16. As the salaries of the workers increase, thecosts and hence final fees of civil engineering construction projects are set to increase.

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Price trend of key raw materials used in the civil engineering construction industry inHong Kong

The charts below show the wholesale price trend of steel reinforcements, cements anddiesel fuel in Hong Kong from January 2010 to November 2015:

Portland cement (ordinary), per tonne

HK$

Steel reinforcements – high tensile steel bars, 10mm to 40mm, per tonne

HK$

Diesel fuel – for industrial use (light), per 200-litre drum

500

550

600

650

700

750

Nov 2015201520142013201220112010 Nov 20152015201420132012201120100

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Steel reinforcements

The average wholesale price of steel reinforcements decreased from an annual averageprice of about HK$5,733.8 per tonne in 2010 to about HK$3,767.4 per tonne for the 11months ended 30 November 2015, which translated to a CAGR of about -8.1%. Monthlyaverage price of steel reinforcements reached its peak at about HK$6,595.0 per tonne inSeptember 2011. The rising trend was mainly attributed to the strong construction demand inHong Kong.

However, the price of steel reinforcements experienced a downtrend since September2011. The decreasing price for crude steel, together with the downsizing of the constructionindustry in China are the major reasons which led to an overproduction of steel in China. Asover 90% of structural steel consumed in Hong Kong came from China, monthly averageprice of steel reinforcements in Hong Kong started to fall continually from HK$6,595.0 pertonne in September 2011 to about HK$3,333.0 per tonne in November 2015, down by about49.5%.

Cement

Hong Kong’s annual average wholesale price of cement showed a substantial growthfrom around HK$612.7 per tonne in 2010 to approximately HK$739.3 per tonne for the 11months ended 30 November 2015, representing a CAGR of about 3.8%. The annual growthrate was most significant in 2011, a change of about 8.2%, this can be attributed to thecorrection of the oversupply of cement in the market. Other support of the rising price trendcame from the appreciation of the RMB which resulted in high commodity prices, as well asthe accelerated pace of inflation in Hong Kong.

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Diesel fuel

The average wholesale price of diesel fuel in Hong Kong dropped slightly at a CAGRof about -0.9%, from an annual average price of about HK$2,187.6 per 200-litre drum in2010 to an annual average price of about HK$1,882.7 per 200-litre drum for the 11 monthsended 30 November 2015. The monthly average wholesale price of diesel fuel rose sharplyfrom around HK$2,257.0 per 200-litre drum in November 2010 to about HK$2,916.0 per200-litre drum in May 2011, up by about 29.2%. Such increase was mainly attributed to theinstability in Libya and the appreciation of the US dollar.

However, in view of the European debt crisis, the monthly average wholesale price ofdiesel fuel in Hong Kong slumped to about HK$1,931.0 per 200-litre drum in October 2011from about HK$2,875.0 per 200-litre drum in September 2011. Since Libya has restored itsdiesel fuel output to pre-war levels, the monthly average wholesale price of diesel fuel inHong Kong has become more stable since 2012 and the situation is expected to persist inthe coming years.

COMPETITIVE LANDSCAPE OF THE CIVIL ENGINEERING CONSTRUCTIONINDUSTRY IN HONG KONG

The top five civil engineering contractors act as main contractors in the overall civilengineering construction industry, and they accounted for about 54.6% of the total revenueof the civil engineering construction industry in 2014.

Meanwhile, the civil engineering subcontracting industry in Hong Kong is fragmented.As at the Latest Practicable Date, there were over 700 structural and civil engineeringsubcontractors being registered under the Construction Industry Council. As a significantnumber of civil engineering projects are originated from the Government and generally, amain contractor is responsible for overseeing the entire project from a broader perspective,in most cases subcontractors are principally responsible for project execution. Thus, duringthe post tendering process, main contractors tend to work with subcontractors with assuredquality and capability in order to reduce the risk of project delay. As such, subcontractorswith a solid track record is more welcomed by main contractors when they are considering apartner to cooperate with.

The ranking for civil engineering subcontractors is not available due to the scatteredinformation. Civil engineering works can be broadly classified into port works, roads anddrainage, site formation, waterworks, and structural works. Amongst these, civil engineeringworks can be further categorised into finer sub-segments, such as demolition, excavation,land leveling, slope stabilisation etc.. Furthermore, as mentioned above, there is a largenumber of civil engineering subcontractors (over 700 as at the Latest Practicable Date)specialising in different civil engineering works, and most of these civil engineeringsubcontractors are private companies with a lack of publicly available information.

In 2014, our Group accounted for around 1.8% (or HK$254 million) of the totalrevenue in the civil engineering construction industry generated by subcontractors (HK$14.1billion) in Hong Kong.

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Future trends and development of the civil engineering industry in Hong Kong

Civil engineering companies in Hong Kong have been increasingly exporting civilengineering consulting services overseas.

The quality of civil engineering works in Hong Kong enjoy a good reputation aroundthe world. Civil engineering companies in Hong Kong have been exporting projectmanagement and engineering consulting services to emerging markets in Asia, especiallyChina. There has been a substantial need for infrastructure development in China,demanding a certain level of civil engineering sub-contractors, as well as professionals.

Transportation link construction will be the major projects that sustain the growth of thecivil engineering industry in Hong Kong.

The transportation sector will remain the largest end-user group of Hong Kong’s civilengineering construction industry. Announced in 1997, the “Ten Major InfrastructureProjects” are mainly transportation projects. In the coming years, the infrastructure projectswill still revolve around the transportation sector, such as the ongoing construction of HongKong-Zhuhai-Macao Bridge, MTR Shatin-Central Line as well as the Hong Kong-ShenzhenExpress Link. The transportation sector is expected to act as one of the key drivers for thecivil engineering construction industry in Hong Kong in the near future.

Factors of competition

Qualifications

Civil engineering subcontractors who registered under the Subcontractor RegistrationScheme (SRS) launched by the Construction Industry Council will enjoy enhancedrecognition and visibility in the civil engineering construction industry in Hong Kong.Subcontractors may apply for registration in one or more of 52 trades covering commonstructural, civil, finishing, electrical and mechanical works and supporting services. As at theLatest Practicable Date, there are over 700 structural and civil engineering subcontractorsregistered under the Construction Industry Council. Main contractors may considerqualifications as an important factor when choosing subcontractors. Subcontractors whopossess sufficient project experience, high quality construction works with proven trackrecords have higher chance to win project tenders.

Technical expertise

Civil engineering contractors are expected to possess related expertise to carry outdifferent types of civil engineering works. It is also an important factor to meet projecttimeline, quality and budget. With good technical understanding of civil engineering worksby an experienced project management team, the contractor is able to address differentissues that may arise during project execution, and foresee potential problems during theproject. Thus, civil engineering contractors with specialised expertise appeared to have ahigher chance to get the tender and be involved in high value projects.

Quality of works

Quality of works is one of the most important factors of competition in civilengineering construction industry in Hong Kong. Lower quality civil engineering works maycause some serious problem, including bursting pipes, difficulties in foundation works,especially for shallow foundations. In general, customers assess civil engineering contractorsin different aspects, which include the timeliness of project delivery, the quality of works

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and the capability of meeting safety and environmental requirements. In addition, civilengineering contractors who maintain a good safety record are also more competitive thantheir competitors.

Market drivers

Ten Major Infrastructure Projects such as the Hong Kong-Zhuhai-Macao Bridge, theRailway Network Extension project and the Tuen Mun Western bypass have driven thegrowth of the construction industry especially in the civil engineering sector. As most ofthese Ten Major Infrastructure Projects are mega size and take several years to complete,due to the complexity and scope, it is expected that several subcontractors are needed forany one of these projects, which will then boost up the demand for civil engineeringsubcontractors in the coming years. Moreover, in the 2016-17 Budget Speech, theGovernment reiterated its commitment to infrastructure. With the occupational trainingsinitiated by the Government in recent years which aimed to provide more skilled labor to theconstruction industry, in order to create enough job opportunities for these trainedconstruction workers, it is expected that the Government will continue their support on theconstruction industry by executing the remaining major infrastructure projects in thepipeline, such as the Hong Kong-Shenzhen airport cooperation and the Hong Kong-Shenzhenjoint development of the Lok Ma Chau Loop.

Entry barriers

Knowledge of civil engineering, structural, geology and technical expertise is one ofthe entry barriers for the civil engineering subcontracting industry as a subcontractor isprincipally responsible for execution and problem solving at the construction site. Industryknowledge and technical expertise can only be accumulated through years of education,on-site practical experience as well as trial and error. Potential players that lack industryknowledge and technical expertise would encounter difficulties when entering the industry.

Moreover, subcontracting works usually involve highly specialised site equipmentduring operation. Therefore sufficient capital is required for site equipment investment whenentering the industry. If a subcontractor solely relies on site equipment rental serviceproviders, it is difficult for them to provide enough flexibility for various constructionprojects.

Opportunities

Infrastructure development plans

Infrastructure development plans, in particular the Ten Major Infrastructure Projectsinitiated by the Government in 2007, drove the demand in construction industry in recentyears with a focus on the civil engineering sector. Given that the Government has announcedto spend an estimated HK$85.8 billion on public infrastructure in its 2016-17 BudgetSpeech, it is expected that existing and new infrastructure projects will continue to provideopportunities to the subcontractors in the civil engineering industry.

Government support on labour training

Shortage of skilled labour has been a long existing problem in the civil engineeringconstruction industry which is labour intensive. In order to attract new entrants to theconstruction industry, the Development Bureau has cooperated with the ConstructionIndustry Council to launch the Build Up Training Programme since 2010. One of theinitiatives is implementing the Enhanced Construction Manpower Training Scheme (ECMTS)

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with enhanced training allowance in selected trades. Successful graduate trainees willreceive reasonable allowance during the training period and also a stable income fromparticipating employers after graduation. The support and subsidies from the Government isanticipated to increase the supply of labour in the long run and hence further stabilising thecivil engineering construction industry.

Threats

Increasing construction costs will hinder the profitability of the civil engineeringsubcontractors in Hong Kong

Similar to the construction industry in Hong Kong, civil engineering subcontractorsalso face the problem of increasing construction costs due to the inflation of raw materialsand labour costs. The average wage of construction workers in Hong Kong increased byabout 57.5% between 2010 and 2015, reaching about HK$91.2 per hour in 2015, while theaverage wholesale price of cement in Hong Kong increased substantially at a CAGR ofabout 3.8% between 2010 to 2015, from an average of about HK$612.7 per tonne to anaverage of about HK$739.3 per tonne.

Insufficient experienced and skilled labour may threaten the development of civil engineeringindustry in Hong Kong

According to the “Report on manpower research for the construction industry in HongKong” published in 2014, it was projected that over 30,000 to 40,000 additional constructionworkers, in which over 15,000 to 20,000 skilled workers would be needed in 2018. A largenumber of civil engineering workers will be in a great demand due to the strong growth ofthe civil engineering industry in Hong Kong. The problem of insufficient experienced andskilled labour may threaten the development of Hong Kong’s civil engineering industry.

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This section sets forth a summary of the major laws and regulations applicable to ourbusiness in Hong Kong.

A. LABOUR, HEALTH AND SAFETY

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

The Factories and Industrial Undertakings Ordinance provides for the safety andhealth protection to workers in an industrial undertaking. Under the Factories andIndustrial Undertakings Ordinance, every proprietor shall, as far as is reasonablypracticable take care of the safety and health at work of all persons employed by himat the industrial undertaking by:

� providing and maintaining plant and work systems that are safe and withoutrisks to health;

� making arrangements for ensuring safety and health in connection with theuse, handling, storage and transport of articles and substances;

� providing all necessary information, instruction, training, and supervision forensuring safety and health;

� providing and maintaining safe access to and egress from the workplaces;and

� providing and maintaining a work environment that is safe and without risksto health.

A proprietor who contravenes these duties commits an offence and is liable to afine of HK$500,000. A proprietor who contravenes these duties wilfully and withoutreasonable excuse commits an offence and is liable to a fine of HK$500,000 and toimprisonment for 6 months.

Section 6BA(5) of the Factories and Industrial Undertakings Ordinance alsoprovides that on and after the appointed day (as defined in the Factories and IndustrialUndertakings Ordinance) every proprietor shall not employ at the undertaking arelevant person who has not been issued a relevant safety training certificate or whoserelevant certificate has expired. A proprietor who contravenes this section commits anoffence and is liable to a fine of HK$50,000 (level 5).

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

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

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Employers must, as far as reasonably practicable, ensure the safety and health oftheir employees at work by attending to the following:

� providing and maintaining plant and work systems that are safe and withoutrisks to health;

� making arrangement for ensuring safety and absence of risks to health inconnection with the use, handling, storage or transport of plant orsubstances;

� providing all necessary information, instruction, training, and supervision forensuring safety and health;

� maintaining the workspace in a condition that is safe and without risks tohealth;

� providing and maintaining safe access to and egress from the workplaces;and

� providing and maintaining a working environment that is safe and withoutrisks to health.

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

The Commissioner for Labour may also issue improvement notice againstnon-compliance of the Occupational Safety and Health Ordinance or the Factories andIndustrial Undertakings Ordinance, or suspension notice against activity of workplacewhich may create imminent hazard to the employees. Failure to comply with suchnotices constitutes an offence punishable by a fine of HK$200,000 and HK$500,000respectively and imprisonment of up to 12 months.

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

The Employees’ Compensation Ordinance establishes a no-fault andnon-contributory employee compensation system for work injuries and lays down therights and obligations of employers and employees in respect of injuries or deathcaused by accidents arising out of and in the course of employment, or by prescribedoccupational diseases.

Under the Employees’ Compensation Ordinance, if an employee sustains an injuryor dies as a result of an accident arising out of and in the course of his employment,his employer is in general liable to pay compensation even if the employee might havecommitted acts of faults or negligence when the accident occurred. Similarly, an

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employee who suffers incapacity or dies arising from an occupational disease is entitledto receive the same compensation as that payable to employees injured in occupationalaccidents.

According to section 15 of the Employees’ Compensation Ordinance, an employermust notify the Commissioner for Labour of any work accident by submitting Form 2(within 14 days for general work accidents and within 7 days for fatal accidents),irrespective of whether the accident gives rise to any liability to pay compensation. Ifthe happening of such accident was not brought to the notice of the employer or didnot otherwise come to his knowledge within such periods of 7 or 14 days (as the casemay be) then such notice shall be given not later than 7 days or, as may beappropriate, 14 days after the happening of the accident was first brought to the noticeof the employer or otherwise came to his knowledge.

Pursuant to section 24 of the Employees’ Compensation Ordinance, a principalcontractor shall be liable to pay compensation to subcontractors’ employees who areinjured in the course of their employment to the subcontractor. The principal contractoris, nonetheless, entitled to be indemnified by any person who would have been liable topay compensation to the injured employee.

According to section 40 of the Employees’ Compensation Ordinance, allemployers (including contractors and subcontractors) are required to take out insurancepolicies to cover their liabilities for injuries at work in respect of all their employees(including full-time and part-time employees). Where a principal contractor hasundertaken to perform any construction work, it may take out an insurance policy foran amount not less than HK$200 million per event to cover its liability and that of itssubcontractor(s) under the Employees’ Compensation Ordinance and at common law.An employer who fails to comply with the Employees’ Compensation Ordinance tosecure an insurance cover is liable on conviction to a fine at level 6 (currently atHK$100,000) and imprisonment for 2 years.

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

A principal contractor is subject to the provisions on subcontractor’s employees’wages in the Employment Ordinance. Section 43C of the Employment Ordinanceprovides that if any wages become due to an employee who is employed by asubcontractor on any work which the subcontractor has contracted to perform, and suchwages are not paid within the period specified in the Employment Ordinance, suchwages shall be payable by the principal contractor and/or every superior subcontractorjointly and severally. A principal contractor’s liability shall be limited (a) to the wagesof an employee whose employment relates wholly to the work which the principalcontractor has contracted to perform and whose place of employment is wholly on thesite of the building work; and (b) to the wages due to such an employee for 2 monthswithout any deductions (such months shall be the first 2 months of the period inrespect of which the wages are due).

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An employee who has outstanding wage payments from a subcontractor mustserve a notice in writing on the principal contractor within 60 days after the wage duedate or another 90 days if permissible. A principal contractor and superiorsubcontractor (where applicable) shall not be liable to pay any wages to the employeeof the subcontractor if that employee fails to serve a notice on the principal contractor.

Upon receipt of such notice from the relevant employee, a principal contractorshall, within 14 days after receipt of the notice, serve a copy of the notice on everysuperior subcontractor to that subcontractor (where applicable) of whom he is aware.

A principal contractor who without reasonable excuse fails to serve notice on thesuperior subcontractor(s) shall be guilty of an offence and shall be liable on convictionto a fine at level 5 (currently at HK$50,000).

Pursuant to section 43F of the Employment Ordinance, if a principal contractor orsuperior subcontractor pays to an employee any wages under section 43C of theEmployment Ordinance, the wages so paid shall be a debt due by the employer of thatemployee to the principal contractor or superior subcontractor having made suchpayment, as the case may be. The principal contractor or superior subcontractor mayeither (1) claim contribution from every superior subcontractor to the employee’semployer or from the principal contractor and every other such superior subcontractoras the case may be; or (2) deduct by way of set-off the amount paid by him from anysum due or may become due to the subcontractor in respect of the work that he hassubcontracted.

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

The Occupiers Liability Ordinance regulates the obligations of a person occupyingor having control of premises on injury resulting to persons or damage caused to goodsor other property lawfully on the land.

The Occupiers Liability Ordinance imposes a common duty of care on an occupierof premises to take such care as in all the circumstances of the case is reasonable tosee that the visitor will be reasonably safe in using the premises for the purposes forwhich he is invited or permitted by the occupier to be there.

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

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

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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 constructionsite, the construction site controller commits an offence and is liable to a fine ofHK$350,000.

Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong)

The Minimum Wage Ordinance provides for a prescribed minimum hourly wagerate (currently set at HK$32.5 per hour) during the wage period for every employeeengaged under a contract of employment under the Employment Ordinance.

Any provision of the employment contract which purports to extinguish or reducethe right, benefit or protection conferred on the employee by the Minimum WageOrdinance is void.

Construction Workers Registration Ordinance (Chapter 583 of the Laws of HongKong)

The Construction Workers Registration Ordinance (“CWRO”) was enacted on 2July 2004 to provide, among others, for registration and regulation of constructionworkers. The principal object of the CWRO is to establish a system for registration ofconstruction workers and to regulate construction workers who personally carry outconstruction work on construction sites.

Employment of registered construction workers

Under sections 3(1) and 5 of the CWRO, the principal contractors/subcontractors/employers/controllers of construction sites are required to employ only registeredconstruction workers to personally carry out construction work on construction sites.

Keeping and submission of site daily attendance report

Under the CWRO, a principal contractor/controller of a construction site isrequired to:

1. establish and maintain a daily record in the specified form that containsinformation on registered construction workers employed by him and, in thecase of a controller being the principal contractor, by a subcontractor of thecontroller (section 58(7)(a) of the CWRO); and

2. furnish the Registrar of Construction Workers in such manner as directed bythe Registrar of Construction Workers with a copy of the record:

i. for the period of 7 days after any construction work begins on the site;and

ii. for each successive period of 7 days, within 2 working days followingthe last day of the period concerned (section 58(7)(b) of the CWRO).

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

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

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

Industry scheme

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

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

(1) foundation and associated works;

(2) civil engineering and associated works;

(3) demolition and structural alteration works;

(4) refurbishment and maintenance works;

(5) general building construction works;

(6) fire services, mechanical, electrical and associated works;

(7) gas, plumbing, drainage and associated works; and

(8) interior fitting-out works.

The Mandatory Provident Fund Schemes Ordinance does not stipulate thatemployers in these two industries must join the Industry Schemes. The IndustrySchemes provide convenience to the employers and employees in the construction and

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catering industries. Casual employees do not have to switch schemes when they changejobs within the same industry, so long as their previous and new employers areregistered with the same Industry Scheme. This is convenient for scheme members andsaves administrative costs.

Dangerous Goods Ordinance (Chapter 295 of the Laws of Hong Kong)

Pursuant to the Dangerous Goods Ordinance (Chapter 295 of the Laws of HongKong), storage of any dangerous goods in excess of the prescribed exempted quantityshall require a dangerous goods licence.

Under the Dangerous Goods Ordinance, “dangerous goods” include all explosives,compressed gases, petroleum and other substances giving off inflammable vapours,substances giving off poisonous gas or vapour, corrosive substances, substances whichbecome dangerous by interaction with water or air, substances liable to spontaneouscombustion or of a readily combustible nature.

Under section 6 of the Dangerous Goods Ordinance, no person shall store anydangerous goods in excess of exempted quantity in any premises or places without alicence issued by the director of the Fire Services Department. Pursuant to Regulation77 of the Dangerous Goods (General) Regulations, every application for any licence tomanufacture or store in bulk any permanent gas or liquefied gas shall be made inwriting addressed to the director of the Fire Services Department.

Under section 14 of the Dangerous Goods Ordinance, any person who contravenessection 6 of the Dangerous Goods Ordinance shall be guilty of an offence and shall beliable to a fine of HK$25,000 and to imprisonment for 6 months.

B. 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 forcontrolling emission of air pollutants and noxious odour from construction, industrialand commercial activities and other polluting sources. Subsidiary regulations of the AirPollution Control Ordinance impose control on air pollutant emissions from certainoperations through the issue of licences and permits.

A contractor shall observe and comply with the Air Pollution Control Ordinanceand its subsidiary regulations, particularly the Air Pollution Control (Open Burning)Regulation, the Air Pollution Control (Construction Dust) Regulation and the AirPollution Control (Smoke) Regulation. The contractor responsible for a constructionsite shall devise, arrange methods of working and carrying out the works in such amanner so as to minimise dust impacts on the surrounding environment, and shallprovide experienced personnel with suitable training to ensure that these methods areimplemented. Asbestos control provisions in the Air Pollution Control Ordinancerequire that building works involving asbestos must be conducted only by registeredqualified personnel and under the supervision of a registered consultant.

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

Under the Air Pollution Control (Construction Dust) Regulation, “constructionwork” includes but not limited to the construction, demolition and reconstruction of thewhole or any part of any building or other structure and site formation. Under section 3of the Air Pollution Control (Construction Dust) Regulation, the contractor responsiblefor a construction site where any notifiable work is proposed to be carried out shallgive notice to the public officer appointed under the Air Pollution Control Ordinance ofthe 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 iswithin 100 metres of any exit to the open air, construction of the foundation of abuilding, construction of the superstructure of a building or road construction work.

Under section 4 of the Air Pollution Control (Construction Dust) Regulation, thecontractor responsible for a construction site where a notifiable work is being carriedout shall ensure that the work is carried out in accordance with the Schedule of the AirPollution Control (Construction Dust) Regulation.

Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation(Chapter 311Z of the Laws of Hong Kong)

The Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulationcame into effect on 1 June 2015 to introduce regulatory control on the emissions ofnon-road mobile machinery (the “NRMMs”), including non-road vehicles and regulatedmachines such as crawler cranes, excavators and air compressors. Our Directorsconfirmed that such regulated machines also include site equipment such as generators,hydraulic truck crane, vibrating rollers and aerial working platforms which are subjectto the Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation.

Unless exempted, NRMMs which are regulated under this provision are requiredto comply with the emission standards prescribed under this regulation. From 1September 2015, all regulated machines sold or leased for use in Hong Kong must beapproved or exempted with a proper label in a prescribed format issued by theEnvironmental Protection Department pursuant to section 4 of the Air Pollution Control(Non-road Mobile Machinery) (Emission) Regulation. Under section 5 of the AirPollution Control (Non-road Mobile Machinery) (Emission) Regulation, starting from 1December 2015, only approved or exempted NRMMs with a proper label are allowedto be used in specified activities and locations including construction sites. However,existing NRMMs which are already in Hong Kong on or before 30 November 2015will be exempted from complying with the emission requirements pursuant to section11 of the Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation. Aperiod of six months (from 1 June 2015 to 30 November 2015, both dates inclusive) isallowed for existing NRMMs to apply for exemption.

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Any person who sells or leases a regulated machine for use in Hong Kong, oruses a regulated machine in specified activities or locations without (i) exemption orthe Environmental Protection Department’s approval is liable to a fine of up toHK$200,000 and imprisonment for up to six months, and (ii) a proper label is liable toa fine of up to HK$50,000 and imprisonment for up to three months.

On 8 February 2015, the Works Branch of Development Bureau issued theTechnical Circular (Works) No. 1/2015 (the “Technical Circular”), pursuant to whichthe Government has promulgated an implementation plan to phase out progressively theuse of exempted NRMM for four types of exempted NRMM, namely generators, aircompressors, excavators and crawler cranes in new capital works contracts of public,including design and build contracts, with an estimated contract value exceedingHK$200 million and tenders invited on or after 1 June 2015. Notwithstanding theaforesaid phase out plan, exempted NRMM may still be permitted at the discretion ofthe architect or engineer of public contracts if there is no feasible alternative. Pursuantto the phase out plan detailed in the Technical Circular, the contractors being invited totender or to participate in all new capital works contracts of public works (includingdesign and build contracts) with an estimated contract value exceeding HK$200 millionon or after 1 June 2015 shall allow no exempted generator and air compressor to beused on site after 1 June 2015 and the quantity of exempted excavators and crawlercranes used on site not to exceed 50%, 20% and 0% of the total number of exemptedNRMMs being used on site since 1 June 2015, 1 June 2017 and 1 June 2019,respectively.

As at the Latest Practicable Date, our Group has 35 regulated machines, out ofwhich 31 machines were exempted and 4 machines were approved with a proper labelin a prescribed format issued by the Hong Kong Environmental Protection Departmentunder the Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation.Set out below is the table showing the details of the exempted and approved NRMMsowned by our Group as at the Latest Practicable Date:

Quantity

Carryingvalue as at

30November

2015Approved ExemptedHK$’000

Mobile generator 3 4 1,094(Note 1)

Air Compressor 1 4 3(Note 2)

Excavator − 12 2,272Road works machine(Note 3) − 7 241Lifting platform − 2 316Mobile crane − 2 2,185

4 31 6,111

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Notes:

1. Carrying value of approved and exempted generators amounted to approximately HK$355,000and HK$739,000, respectively.

2. Carrying value of approved and exempted air compressors amounted to approximately HK$Niland HK$3,000, respectively, and one approved air compressor was acquired after the TrackRecord Period for approximately HK$260,000.

3. Road works machine consist of vibrating rollers.

Of the 31 exempted machines, there are 20 exempted machines (4 generators, 4air compressors and 12 excavators) to be phased out under the phase out plan detailedin the Technical Circular. Our Directors confirm that none of the public projects whichwe participate in as at the Latest Practicable Date are subject to the phase out plandetailed in the Technical Circular. In addition, our Directors consider that we willremain able to participate in or tender for public contract with an estimated contractvalue exceeding HK$200 million by leasing sufficient approved NRMMs and factoringsuch additional costs in our tender applications. Thus, our Directors are of the viewthat the implementation of the Air Pollution Control (Non-road Mobile Machinery)(Emission) Regulation and the exempted NRMM phase out plan as detailed in theTechnical Circular has no significant impact or adverse effect on our Group’s operationand financial results.

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

The Noise Control Ordinance controls the noise from construction, industrial andcommercial activities. A contractor shall comply with the Noise Control Ordinance andits subsidiary regulations in carrying out general construction works. For constructionactivities that are to be carried out during the restricted hours and for percussive pilingat all times, construction noise permits are required from the Environmental ProtectionDepartment in advance.

Under the Noise Control Ordinance, noisy construction work and the use ofpowered mechanical equipment in populated areas are not allowed between 7 p.m. and7 a.m. on normal weekdays and any time on general holidays, unless prior approval hasbeen granted by the Environmental Protection Department through the ConstructionNoise Permit System. Certain equipment is also subject to restrictions when its use isallowed. Hand-held percussive breakers and air compressors must comply with noiseemissions standards and be issued with a noise emission label from the EnvironmentalProtection Department. Percussive pile-driving is allowed on weekdays only with priorapproval, in the form of a Construction Noise Permit from the EnvironmentalProtection Department. Any person who is in contravention of the aforesaid provisions,according to the Noise Control Ordinance, shall be liable (a) on first conviction to afine of HK$100,000; (b) on second or subsequent conviction, to a fine of HK$200,000,and in any case to a fine of HK$20,000 for each day during which the offencecontinues.

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

The Water Pollution Control Ordinance controls the effluent discharged from alltypes of industrial, commercial, institutional and construction activities into publicsewers, rainwater drains, river courses or water bodies. For any industry/tradegenerating wastewater discharge (except domestic sewage that is discharged intocommunal foul sewers or unpolluted water to storm drains), they are subject tolicensing control by the Environmental Protection Department.

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

According to the Water Pollution Control Ordinance, unless being licensed underthe Water Pollution Control Ordinance, a person who discharges any waste or pollutingmatter into the waters or discharges any matter into a communal sewer or communaldrain in a water control zone commits an offence and is liable to imprisonment for 6months and (a) for a first offence, a fine of HK$200,000; (b) for a second orsubsequent offence, a fine of HK$400,000, and in addition, if the offence is acontinuing offence, to a fine of HK$10,000 for each day during which it is proved tothe satisfaction of the court that the offence has continued.

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

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

A contractor shall observe and comply with the Waste Disposal Ordinance and itssubsidiary regulations, particularly the Waste Disposal (Charges for Disposal ofConstruction Waste) Regulation and the Waste Disposal (Chemical Waste) (General)Regulation.

Under the Waste Disposal (Charges for Disposal of Construction Waste)Regulation, a main contractor who undertakes construction work with a value ofHK$1,000,000 or above will be required to establish a billing account with theEnvironmental Protection Department to pay any disposal charges payable in respect ofthe construction waste generated from construction work undertaken under thatcontract, within 21 days after the contract is awarded.

Under the Waste Disposal (Chemical Waste) (General) Regulation, anyone whoproduces chemical waste or causes it to be produced has to register as a chemicalwaste producer. The waste must be packaged, labelled and stored properly beforedisposal. Only a licensed collector can transport the waste to a licensed chemical waste

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disposal site for disposal. Chemical waste producers also need to keep records of theirchemical waste disposal for inspection by the staff of the Environmental ProtectionDepartment.

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 theDirector of Environmental Protection. A person who except under and in accordancewith a permit or authorisation, does, causes or allows another person to do anything forwhich such a permit or authorisation is required commits an offence and is liable to afine of HK$200,000 and to imprisonment for 6 months for the first offence,HK$500,000 and to imprisonment for 6 months for a second or subsequent offence.

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

Under the Dumping at Sea Ordinance, any waste producers involved in marinedumping and related loading operations are required to obtain permits from theDirector of Environmental Protection.

Under the Dumping at Sea Ordinance, a person who except under and inaccordance with a permit, does anything or causes or allows another person to doanything for which a permit is needed commits an offence and is liable on convictionto a fine of HK$200,000 and to imprisonment for 6 months on a first conviction; andHK$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 satisfiedthat the operation has continued.

Environmental Impact Assessment Ordinance (Chapter 499 of the Laws of HongKong)

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

According to the Environmental Impact Assessment Ordinance, a person commitsan offence if he constructs or operates a designated project listed in Part I of Schedule2 of the Environmental Impact Assessment Ordinance (which includes roads, railwaysand depots, residential and other developments, etc.) without an environmental permitfor the project; or contrary to the conditions, if any, set out in the permit. The offenderis liable (a) on a first conviction on indictment to a fine of HK$2,000,000 and toimprisonment for 6 months; (b) on a second or subsequent conviction on indictment toa fine of HK$5,000,000 and to imprisonment for 2 years; (c) on a first summaryconviction to a fine at level 6 (currently at HK$100,000) and to imprisonment for 6months; (d) on a second or subsequent summary conviction to a fine of HK$1,000,000

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and to imprisonment for one year, and in any case where the offence is of a continuingnature, the court or magistrate may impose a fine of HK$10,000 for each day on whichhe is satisfied the offence continued.

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

Emission of dust from any building under construction or demolition in suchmanner as to be a nuisance is actionable under the Public Health and MunicipalServices Ordinance. Maximum penalty is HK$10,000 (level 3) upon conviction with adaily fine of HK$200.

Discharge of muddy water from a construction site is actionable under the PublicHealth and Municipal Services Ordinance. Maximum fine is HK$50,000 (level 5) uponconviction.

Any accumulation of water on any premises found to contain mosquito larvae orpupae is actionable under the Public Health and Municipal Services Ordinance.Maximum penalty is HK$25,000 (level 4) upon conviction and a daily fine of HK$450.

Any accumulation of refuse which is a nuisance or injurious to health isactionable under the Public Health and Municipal Services Ordinance. Maximumpenalty is HK$10,000 (level 3) upon conviction and a daily fine of HK$200.

Any premises in such a state as to be a nuisance or injurious to health isactionable under the Public Health and Municipal Services Ordinance. Maximumpenalty is HK$10,000 (level 3) upon conviction and a daily fine of HK$200.

C. CONTRACTOR LICENSING REGIME AND OPERATION

Contractor Licensing Regime and the Subcontractor Registration Scheme

Under the current contractors registration system in Hong Kong, the BuildingAuthority shall keep a register of general building contractors who are qualified toperform the duties of a general building contractor and a register of specialistcontractors who are qualified to carry out specialised works (such as “foundationworks” and “site formation works”) specified in the category in the sub-register inwhich they are entered. Registered general building contractors may carry out generalbuilding works and street works which do not include any specialised works designatedfor registered specialist contractors.

The main contractors carrying out private sector site formation works andancillary services are required to register or work together with contractors who areregistered on either the list of register of general building contractors or the list ofregister of specialist contractors (sub-register of site formation works category) withthe Buildings Department in Hong Kong.

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For any site formation works and ancillary services where an entity is involved asa subcontractor, if there is a registered specialist contractor who is registered with theBuildings Department under the appropriate category to supervise the works and liaisewith the Building Authority, the entity itself is not required to be such registeredspecialist contractor or to obtain any requisite licenses, permits and approval for itsoperation and business except the business registration.

Subcontractors in Hong Kong may apply for registration under the SubcontractorRegistration Scheme managed by the Construction Industry Council, a body corporateestablished under the Construction Industry Council Ordinance (Chapter 587 of theLaws of Hong Kong) in February 2007.

The Subcontractor Registration Scheme was formerly known as the VoluntarySubcontractor Registration Scheme (the “VSRS”), which was introduced by theProvisional Construction Industry Co-ordination Board (the “PCICB”). The PCICB wasformed in September 2001 to spearhead industry reform and to pave way for the earlyformation of the statutory industry coordinating body.

A technical circular issued by the Works Branch of the Development Bureau (thenthe Environment, Transport and Works Bureau) (“WBDB”) on 14 June 2004 (nowsubsumed into the Project Administration Handbook for Civil Engineering Works bythe CEDD) requires that all public works contractors with tenders to be invited on orafter 15 August 2004 to employ all sub-contractors (whether nominated, specialist ordomestic) registered from the respective trades available under the VSRS.

After the Construction Industry Council took over the work of the PCICB inFebruary 2007 and the VSRS in January 2010, the Construction Industry Councillaunched stage 2 of the VSRS in January 2013. VSRS was also then renamedSubcontractor Registration Scheme. All subcontractors registered under the VSRS haveautomatically become registered subcontractors under the Subcontractor RegistrationScheme.

Subcontractors may apply for registration on the Subcontractor RegistrationScheme in one or more of 52 trades covering common structural, civil, finishing,electrical and mechanical works and supporting services. The 52 trades further branchinto around 94 specialties, including sheet piles, driven piles, earthwork, geotechnicalworks, and ground investigation etc.

Where a contractor is to sub-contract/sub-let part of the public works involvingtrades available under the Primary Register (a list of companies registered inaccordance with the Rules and Procedures for the Primary Register of theSubcontractor Registration Scheme) of the Subcontractor Registration Scheme, he shallengage all subcontractors (whether nominated, specialist or domestic) who areregistered under the relevant trades in the Primary Register of the SubcontractorRegistration Scheme. Should the sub-contractors further sub-contract (irrespective ofany tier) any part of the part of the public works sub-contracted to them involvingtrades available under the Primary Register of the Subcontractor Registration Scheme,

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the contractor shall ensure that all sub-contractors (irrespective of any tier) areregistered under the relevant trades in the Primary Register of the SubcontractorRegistration Scheme.

Applications for registration under the Primary Register of the SubcontractorRegistration Scheme are subject to the following entry requirements:–

(a) completion of at least one job within five years as a main contractor/subcontractor in the areas which it applies or to have acquired comparableexperience by itself/its proprietors, partners or directors within the last fiveyears;

(b) listings on one or more government registration schemes operated by policybureaus or departments of the Government relevant to the trades andspecialties for which registration is sought;

(c) the applicant or its proprietor, partner or director having been employed by aregistered subcontractor for at least five years with experience in the trade/specialty applying for and having completed all the modules of the ProjectManagement Training Series for Sub-contractors (or equivalent) conductedby the Construction Industry Council; or

(d) the applicant or its proprietor, partner or director having registered asRegistered Skilled Worker under the Construction Workers RegistrationOrdinance (Chapter 583 of the Laws of Hong Kong) for the relevant trade/specialty with at least five years’ experience in the trade/specialty applyingfor and having completed the Senior Construction Workers TradeManagement Course (or equivalent) conducted by the Construction IndustryCouncil.

A registered subcontractor shall apply for renewal within three months before theexpiry date of its registration by submitting an application to the Construction IndustryCouncil in a specified format providing information and supporting documents asrequired to show compliance with the entry requirements. An application for renewalshall be subject to approval by the management committee which oversees theSubcontractor Registration Scheme (the “Management Committee”). If some of theentry requirements covered in an application can no longer be satisfied, theManagement Committee of the Construction Industry Council may give approval forrenewal based on those trades and specialties where the requirements are met. Anapproved renewal shall be valid for two years from the expiry of the currentregistration.

A registered subcontractor shall observe the Codes of Conduct for RegisteredSubcontractor (Schedule 8 of the Rules and Procedures for the Primary Register of theSubcontractor Registration Scheme) (the “Codes of Conduct”). Failing to comply withthe Codes of Conduct may result in regulatory actions taken by the ManagementCommittee.

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The circumstances pertaining to a registered subcontractor that may call forregulatory actions include, but are not limited to:

1. supply of false information when making an application for registration,renewal of registration or inclusion of additional trades;

2. failure to give timely notification of changes to the registration particulars;

3. serious violations of the registration rules and procedures;

4. convictions of senior management staff (including but not limited toproprietors, partners or directors) for bribery or corruption under thePrevention of Bribery Ordinance (Chapter 201 of the Laws of Hong Kong);

5. convictions for failure to pay wages on time to workers in accordance withthe relevant provisions contained in the Employment Ordinance;

6. wilful misconducts that may bring the Subcontractor Registration Schemeinto serious disrepute;

7. civil awards/judgments in connection with the violation of or convictionsunder the relevant sections of the Mandatory Provident Fund SchemesOrdinance;

8. convictions under the Factories and Industrial Undertakings Ordinance orOccupational Safety and Health Ordinance in relation to serious constructionsite safety incidents resulting in one or more of the following consequence:

i. loss of life; or

ii. serious bodily injury resulting in loss or amputation of a limb or hadcaused or was likely to cause permanent total disability;

9. conviction of five or more offences under the Factories and IndustrialUndertakings Ordinance and/or Occupational Safety and Health Ordinanceeach arising out of separate incidents in any six months period (according tothe date of committing the offence but not the date of conviction),committed by the Registered Subcontractor at each of a construction siteunder a contract;

10. convictions for employment of illegal worker under the ImmigrationOrdinance; or

11. late payment of workers’ wages and/or late payment of contribution underthe Mandatory Provident Fund Schemes Ordinance over 10 days with solidproof of such late payment of wages and/or contribution.

The Management Committee may instigate regulatory actions by directing that:

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A. written strong direction and/or warning be given to a registeredsubcontractor;

B. a registered subcontractor to submit an improvement plan with the contentsas specified and within a specified period;

C. a registered subcontractor be suspended from registration for a specifiedduration; or

D. the registration of a registered subcontractor be revoked.

D. OTHERS

Competition Ordinance (Chapter 619 of the Laws of Hong Kong)

The Competition Ordinance prohibits and deters undertakings in all sectors fromadopting anti-competitive conduct which has the object or effect of preventing,restricting or distorting competition in Hong Kong. It provides for general prohibitionsin three major areas of anti-competitive conduct described as the first conduct rule, thesecond conduct rule and the merger rule.

The first conduct rule prohibits undertakings from making or giving effect toagreements or decisions or engaging in concerted practices that have as their object oreffect the prevention, restriction or distortion of competition in Hong Kong. The secondconduct rule prohibits undertakings that have a substantial degree of market power in amarket from engaging in conduct that has as its object or effect the prevention,restriction or distortion of competition in Hong Kong. The merger rule prohibitsmergers that have or are likely to have the effect of substantially lessening competitionin Hong Kong. The scope of application of the merger rule is limited to carrier licencesissued under the Telecommunications Ordinance (Chapter 106 of the Laws of HongKong).

Pursuant to section 82 of the Competition Ordinance, if the CompetitionCommission has reasonable cause to believe that (a) a contravention of the firstconduct rule has occurred; and (b) the contravention does not involve seriousanti-competitive conduct, it must, before bringing proceedings in the CompetitionTribunal against the undertaking whose conduct is alleged to constitute thecontravention, issue a notice (a “warning notice”) to the undertaking.

However, under section 67 of the Competition Ordinance, where a contraventionof the first conduct rule has occurred and the contravention involves seriousanti-competitive conduct or a contravention of the second conduct rule has occurred,the Competition Commission may, instead of bringing proceedings in the Tribunal inthe first instance, issue a notice (an “infringement notice”) to the person against whomit proposes to bring proceedings, offering not to bring those proceedings on conditionthat the person makes a commitment to comply with requirements of the infringementnotice. “Serious anti-competitive conduct” means any conduct that consists of any ofthe following or any combination of the following – (a) fixing, maintaining, increasing

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or controlling the price for the supply of goods or services; (b) allocating sales,territories, customers or markets for the production or supply of goods or services; (c)fixing, maintaining, controlling, preventing, limiting or eliminating the production orsupply of goods or services; (d) bid-rigging.

In the event of the breaches of the Competition Ordinance, the CompetitionTribunal may make orders including: imposing a pecuniary penalty if satisfied that anentity has contravened a competition rule; disqualifying a person from acting as adirector of a company or taking part in the management of a company; prohibiting anentity from making or giving effect to an agreement; modifying or terminating anagreement; and requiring the payment of damages to a person who has suffered loss ordamage.

Compliance with the relevant requirements

Our Directors confirmed that our Group has obtained all relevant permits/registrations/licenses for its existing operations during the Track Record Period and upto the Latest Practicable Date.

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OUR CORPORATE HISTORY

Overview

The history of our Group can be traced back to 1998 when Mr. CK Wong (an executiveDirector, the chairman of our Board and a Controlling Shareholder), together with Mr. WWWong (an executive Director, the chief executive officer and a Controlling Shareholder),incorporated Luen Hing in Hong Kong, one of our principal operating subsidiaries, which isprincipally engaged in civil engineering works in Hong Kong.

Mr. CK Wong has over 30 years of experience in the civil engineering industry inHong Kong. Mr. CK Wong acquainted Mr. WW Wong, who has over 19 years of experiencein civil engineering industry in Hong Kong. In 1998, Mr. CK Wong and Mr. WW Wong,being confident in the prospect of civil engineering construction industry in Hong Kong,decided to explore business opportunities in undertaking civil engineering business in HongKong with their own capital accumulated from previous business ventures. Please refer tothe section headed “Directors and senior management” in this prospectus for details relatingto the background and industry experience of Mr. CK Wong and Mr. WW Wong.

Details of the members of our Group and their respective corporate history are set outbelow:

OUR COMPANY

Our Company was incorporated in the Cayman Islands with limited liability on 16October 2015. Our Company completed the Reorganisation on 22 February 2016 inpreparation for the Listing pursuant to which our Company became the holding company ofour Group. Details of the Reorganisation are set out in the paragraph headed“Reorganisation” in this section.

OUR PRINCIPAL OPERATING SUBSIDIARIES

Luen Hing

Luen Hing was incorporated in Hong Kong with limited liability on 11 November1998, and 10,000 shares and 10,000 shares were respectively allotted and issued to Mr. CKWong and Mr. WW Wong credited as fully paid at the then par value of the shares and atthe consideration of HK$10,000 and HK$10,000, respectively. After the allotments, LuenHing was owned as to 50% and 50% by Mr. CK Wong and Mr. WW Wong, respectively.

Following the incorporation of Luen Hing in 1998, and in order to raise workingcapital, on 25 February 2003, the shareholders resolved to increase the then authorised sharecapital of Luen Hing from HK$20,000 to HK$5,000,000. On the same date, 1,890,000 and1,890,000 ordinary shares of HK$1.00 each in Luen Hing were respectively allotted andissued to Mr. CK Wong and Mr. WW Wong credited as fully paid at the then par value andthe consideration of HK$3,780,000 was settled via the current account of Luen Hing Civil

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Eng Co, a sole proprietorship of Mr. CK Wong which has ceased business activities in oraround 2006. After the allotments, Luen Hing remained owned as to 50% and 50% by Mr.CK Wong and Mr. WW Wong, respectively.

As part of the Reorganisation, on 29 October 2015, Mr. CK Wong and Mr. WW Wong,as vendors, and Super Pioneer, as purchaser, entered into a sale and purchase agreementpursuant to which Super Pioneer acquired 1,900,000 shares and 1,900,000 shares of LuenHing, representing all its issued shares in aggregate, from Mr. CK Wong and Mr. WWWong, respectively, and in consideration thereof, Super Pioneer in aggregate issued andallotted 2 shares in Super Pioneer, credited as fully paid, to Blooming Union.

On 21 March 2016, Luen Hing applied HK$280,000 and HK$5,200,000 owed by LuenHing to Mr. CK Wong and Mr. WW Wong, respectively, toward the satisfaction of the issueand allotment of 5,480,000 new shares of Luen Hing at a subscription price of HK$1 pershare to Super Pioneer (as directed by Mr. CK Wong and Mr. WW Wong, respectively).After the aforesaid loans capitalisation and issue and allotment of shares, Luen Hing remainsa wholly owned subsidiary of Super Pioneer.

After the aforesaid share transfer and loans capitalisation, Super Pioneer held all theissued shares of Luen Hing, and Luen Hing became a wholly-owned subsidiary of SuperPioneer.

Hop Fung

Hop Fung was incorporated in Hong Kong with limited liability on 31 July 2002, and10,000 shares and 10,000 shares were respectively allotted and issued to Mr. CK Wong andMr. WW Wong at the then par value of the shares and at the consideration of HK$10,000and HK$10,000, respectively. After the allotments, Hop Fung was owned as to 50% and50% by Mr. CK Wong and Mr. WW Wong, respectively.

As part of the Reorganisation, on 29 October 2015, Mr. CK Wong and Mr. WW Wong,as vendors, and Super Pioneer, as purchaser, entered into a sale and purchase agreementpursuant to which Super Pioneer acquired 10,000 shares and 10,000 shares of Hop Fung,representing all its issued shares in aggregate, from Mr. CK Wong and Mr. WW Wong,respectively, and in consideration thereof, Super Pioneer in aggregate issued and allotted 2shares in Super Pioneer, credited as fully paid, to Blooming Union.

On 21 March 2016, Hop Fung applied HK$4,920,000 owed by Hop Fung to Mr. CKWong toward the satisfaction of the issue and allotment of 4,920,000 new shares of HopFung at a subscription price of HK$1 each to Super Pioneer (as directed by Mr. CK Wong).After the aforesaid loan capitalisation, issue and allotment of shares of Hop Fung remain awholly owned subsidiary of Super Pioneer.

After the aforesaid share transfer and loan capitalisation, Super Pioneer held all theissued shares of Hop Fung, and Hop Fung became a wholly-owned subsidiary of SuperPioneer.


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BUSINESS DEVELOPMENT AND MILESTONES

The following table sets out the major developments and milestones of our Group sinceestablishment:

Year Event

1998 Luen Hing was incorporated in Hong Kong on 11 November1998

1999 In order to capture the growing business opportunities forcivil engineering works in Hong Kong, we strategicallypositioned ourselves as a subcontractor in the civilengineering construction industry principally engaged incivil engineering works including roads and drainage works,structural works and site formation works in Hong Kong. InApril 1999, we commenced our first civil engineeringproject with a major customer for roads and drainage worksand structural works at Lot No. 55, Haul Road, TseungKwan O.

2000 � During the period between 2000 and 2001, we wereawarded tender contracts with an aggregate contractvalue of approximately HK$84 million for roads anddrainage works, structural works and site formationworks relating to construction of the West Rail LineViaduct (Tin Shui Wai to Tuen Mun North).

� We won a subcontractor safety award in a safety awardcompetition organised by our customer in recognitionof our occupational health and safety management forour work performance in the Tseung Kwan O Roadproject.

2001 During the period between 2001 and 2004, we were awardedtender contracts by a major customer with an aggregatecontract value of approximately HK$117 million for roadsand drainage works and structural works relating to CastlePeak Road improvement between Tsuen Wan and Ting Kau.


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2002 � Hop Fung was incorporated in Hong Kong on 31 July2002

� During the period between 2002 and 2005, we wereawarded tender contracts by a major customer with anaggregate contract value of approximately HK$153million for roads and drainage works, structural worksand site formation works relating to construction ofRoute 9 – Ngong Shuen Chau Viaduct.

2005 � In January 2005, Luen Hing was registered with theSubcontractor Registration Scheme of the ConstructionIndustry Council.

� During the period between 2005 and 2011, we wereawarded tender contracts with an aggregate contractvalue of approximately HK$102 million for roads anddrainage works and structural works relating to CentralReclamation Phase III.

� From 2005-2006, we won the bronze award under theConstruction Industry Safety Award Scheme organisedby the Labour Department in recognition of our effortin occupational health and safety management andcompliance.

2008 � During the period between 2008 and 2014, we wereawarded tender contracts with an aggregate contractvalue of approximately HK$306 million for roads anddrainage works and structural works relating toreconstruction and improvement of Tuen Mun Road.

� In 2008 and during the period between 2014 and 2015,we were awarded tender contracts with an aggregatecontract value of approximately HK$174 million forstructural works and site formation works at AndersonRoad.

2009 We were awarded certificates and recognised as “anenvironmental subcontractor” and “the safest subcontractor”by our customer for our effort in environmental and safetymanagement and compliance in the Central ReclamationPhase III project.

2010 We won the “Excellent Site Safety Award” granted by ourcustomer for our excellent safety record and our effort insite safety management and compliance in the CentralReclamation Phase III project.


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2013 � During the period between 2013 and 2014, we wereawarded tender contracts with an aggregate contractvalue of approximately HK$87 million relating toconstruction of portal beams for the HongKong-Zhuhai-Macao Bridge construction project.

� We were awarded as the “winner of safesub-contractor” by our customer for our effort in safetymanagement and compliance in South Island Line(East) project.

2014 � During the period between 2013 and 2014, we wereawarded tender contracts by a major customer with anaggregate contract value of approximately HK$187million for roads and drainage works and structuralworks relating to widening of Fanling Highway.

� We were recognised as “the best subcontractor/jointventure working team of June 2014 – safety &environmental incentive scheme” for our effort insafety and environmental management in the HongKong-Zhuhai-Macao Bridge (Hong Kong Link Roadsection) project.

2015 � We were awarded tender contracts by a major customerwith an aggregate contract value of approximatelyHK$633 million for structural works relating to theHong Kong-Zhuhai-Macao Bridge construction projectand associated infrastructure works.

� In August 2015, we have received certificates ofapproval from DW Certification Limited for ourintegrated management system’s current compliancewith ISO 9001:2008 (quality management), ISO14001:2004 (environmental management) and OHSAS18001:2007 (occupational health and safetymanagement).

� Our Company was incorporated on 16 October 2015 aspart of the Reorganisation for the purpose of theListing.

2016 We were further awarded a tender contract by a majorcustomer with a contract value of approximately HK$296.9million for structural works relating to the HongKong-Zhuhai-Macao Bridge construction project.


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REORGANISATION

Our Company completed the Reorganisation on 22 February 2016 in preparation for theListing, pursuant to which our Company became the ultimate holding company of ourGroup. Details of the Reorganisation are set out in the section headed “A. Furtherinformation about the Company – 4. Corporate reorganisation” in Appendix V to thisprospectus.

As confirmed by our Directors, the change of shareholdings in Luen Hing and HopFung, being the subsidiaries of our Company incorporated in Hong Kong, under theReorganisation would not require any approval or permit from any relevant Governmentauthorities in Hong Kong.

Our Group structure

The following chart sets forth the corporate and shareholding structure of our Groupimmediately prior to the Reorganisation:–

Luen Hing

50%

Mr. CK Wong Mr. WW Wong

Luen Hing (Note 1)

50%

Hop Fung

50%


Hop Fung (Note 2)

50%

Notes:

1. Luen Hing is principally engaged in civil engineering works in Hong Kong.

2. Hop Fung was an investment holding company holding an investment property in Tai Wai, Hong Kong priorto the disposal of such property, details of which are set out in the section headed “Business – Properties”in this prospectus. Hop Fung is currently a subcontractor of Luen Hing in respect of one of our existingcivil engineering projects.


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The following chart sets forth our corporate and shareholding structure immediatelyafter completion of the Reorganisation but before completion of the Placing and theCapitalisation Issue:

100% 100%

50%


Blooming Union

50%

Super Pioneer (Note 1)

Our Company

Hop Fung (Note 3)

Luen Hing (Note 2)

100%

100%

Notes:

1. Super Pioneer is an investment holding company incorporated in the BVI.


3. Hop Fung was an investment holding company holding an investment property in Tai Wai, Hong Kong priorto the disposal of such property, details of which are set out in the section headed “Business – Properties”in this prospectus. Hop Fung is currently a subcontractor of Luen Hing in respect of one of our existing

civil engineering projects.


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The following chart sets forth our corporate shareholding structure immediately aftercompletion of the Placing and the Capitalisation Issue:

100% 100%

50%


Blooming Union

50%

Super Pioneer (Note 1)

Our Company

Hop Fung (Note 3)

Luen Hing (Note 2)

75%

100%

Public

25%

Notes:

1. Super Pioneer is an investment holding company incorporated in the BVI.


3. Hop Fung was an investment holding company holding an investment property in Tai Wai, Hong Kong priorto the disposal of such property, details of which are set out in the section headed “Business – Properties”in this prospectus. Hop Fung is currently a subcontractor of Luen Hing in respect of one of our existingcivil engineering projects.


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OVERVIEW

We are an established subcontractor engaged in civil engineering works. We have over16 years of experience in providing civil engineering works as a subcontractor and areflexible in deploying resources to meet our customers’ demand.

The civil engineering works undertaken by us are mainly related to (i) roads anddrainage works (including construction and improvement of local road, carriageway withjunction improvement and the associated footpaths, planting areas, drains, sewers, watermains and utilities diversion); (ii) structural works (including construction of reinforcedconcrete structures for bridges and retaining walls); and (iii) site formation works (includingexcavation and/or filling works for forming a new site or achieving designed formation levelfor later development).

During the Track Record Period and up to the Latest Practicable Date, we hadundertaken 51 civil engineering contracts, of which 31 contracts were completed. As at theLatest Practicable Date, we had 20 contracts on hand with a total estimated outstandingcontract sum attributable to our Group in the amount of approximately HK$1,384,140,000,of which approximately HK$234,304,000 of revenue has been recognised as at 30 November2015 (with approximately HK$6,241,000 of revenue recognised exceeding the originalcontract sum); and approximately HK$191,737,000 are expected to be recognised as revenuefor the period from 1 December 2015 to 31 March 2016 (with approximately HK$3,547,000of revenue expected to be recognised exceeding the original contract sum) andHK$824,469,000, HK$109,706,000 and HK$33,713,000 are expected to be recognised asrevenue during the three years ending 31 March 2019, respectively. The amount of revenueexpected to be recognised is subject to change due to the actual progress andcommencement and completion dates of our projects. Further details of our contracts are setout in the paragraph headed “Our civil engineering contracts − Contracts on hand” in thissection.

Our direct customers are primarily main contractors of various different types of civilengineering projects in Hong Kong. Such projects can generally be categorised into publicsector projects and private sector projects. Public sector projects refer to projects which themain contractors are employed by the Government or statutory bodies while private sectorprojects refer to those that are not public sector projects. The majority of our revenue duringthe Track Record Period was derived from public sector projects. The following table setsout a breakdown of our revenue during the Track Record Period attributable to public andprivate sector projects:

For the year ended 31 MarchFor the eight months ended 30

November2014 2015 2014 2015

HK$’000 % HK$’000 % HK$’000 % HK$’000 %

Public sector projects 149,234 93.3 255,484 93.9 180,479 96.9 135,834 87.8Private sector projects 10,729 6.7 16,465 6.1 5,846 3.1 18,807 12.2

159,963 100.0 271,949 100.0 186,325 100.0 154,641 100.0

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As a subcontractor, we secure our contracts from main contractors after a competitivetendering process whereby we are invited to submit our tender. For the two years ended 31March 2015 and the eight months ended 30 November 2015, revenue derived from our fivelargest customers amounted to approximately 94.1%, 96.0% and 97.5%, respectively, of ourtotal revenue. We have maintained a stable relationship with our major customers who awardcivil engineering contracts to us based on our expertise. Our five largest customers, byrevenue, during the Track Record Period have maintained business relationship with us for aperiod ranging from 2 to 16 years.

While we have our own direct labours for carrying out our projects, depending on theavailability of our labour resources and the nature of works involved, we may subcontractsome of our construction works such as works in relation to steel fixing, formwork erectionand drainage works to our subcontractors for purposes of better allocation of our Group’sresources. For the two years ended 31 March 2015 and the eight months ended 30November 2015, subcontracting charges incurred by us attributable to our five largestsubcontractors accounted for approximately 61.8%, 53.3% and 55.7%, respectively, of ourtotal subcontracting charges incurred. Our five largest subcontractors, by cost of sales,during the Track Record Period have maintained business relationship with us for a periodranging from 2 to 10 years.

Our suppliers primarily provide us with construction materials such as concrete andsteel reinforcement bars, precast concrete units, timbers and diesel fuel, and site equipmentfor rental such as dump trucks, crane lorries, hydraulic truck cranes and excavators. For thetwo years ended 31 March 2015 and the eight months ended 30 November 2015, our fivelargest suppliers accounted for approximately 55.7%, 67.5% and 54.0%, respectively, of ourtotal purchases incurred (excluding subcontracting charges incurred). Our five largestsuppliers, by cost of sales, during the Track Record Period have maintained businessrelationship with us for a period ranging from less than 1 year to 16 years.

We possess our own site equipment for carrying out our projects and therefore are notmaterially reliant on our suppliers for site equipment rental. Our owned site equipment include,among others, excavators, vibrating rollers, hydraulic breakers, air compressors, generators, aerialworking platforms and a hydraulic truck crane with net book value of approximatelyHK$6,898,000 in aggregate as at 30 November 2015. We believe that our investment in siteequipment has placed us in a position to cater to civil engineering projects of different scales andcomplexity and to meet the expected growing demand of our customers. For the two years ended31 March 2015 and the eight months ended 30 November 2015, we acquired new site equipmentin the amount of approximately HK$4,310,000, HK$410,000 and HK$812,000 at cost,respectively. For further information regarding our site equipment, please refer to the paragraphheaded “Site equipment” in this section. Depending on availability of our site equipment, projectschedule and the nature of works involved, we may rent site equipment such as dump trucks,crane lorries, hydraulic truck cranes and excavators from suppliers on our approved list at rentalcharges determined with reference to duration and rate of usage of the site equipment. For thetwo years ended 31 March 2015 and the eight months ended 30 November 2015, our siteequipment rental cost incurred amounted to approximately HK$21,441,000, HK$31,874,000 andHK$21,988,000, respectively.

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According to the Ipsos Report, there is substantial growth potential in the civilengineering construction industry in Hong Kong. Various infrastructure development plans,notably the “Ten Major Infrastructure Projects”, such as the construction of the HongKong-Zhuhai-Macao Bridge and the increasing public expenditure by the Government oninfrastructure will continue to be the growth drivers in the civil engineering constructionindustry in Hong Kong. Riding on our operational resources and experience, our Directorsbelieve that we are well-positioned to capture the growing demand for civil engineeringservices in Hong Kong. For details on the market drivers relating to our Group, please referto the paragraph headed “Industry overview – Competitive landscape of the civil engineeringconstruction industry in Hong Kong – Market drivers” in this prospectus.

COMPETITIVE STRENGTHS

We believe the following competitive strengths contribute to our success anddifferentiate us from our competitors:

Well-established presence in the civil engineering construction industry in Hong Kong

We have been operating in the civil engineering construction industry in Hong Kongfor 16 years. Since 1999, we have undertaken various civil engineering construction projectsin Hong Kong, some of which are related to the major public infrastructures in Hong Kongsuch as the West Rail Line Viaduct, Route 9 Ngong Shuen Chau Viaduct, CentralReclamation Phase III project, Tuen Mun Road, Fanling Highway, the Liantang/Heung YuenWai Boundary Control Point and the Hong Kong-Zhuhai-Macao Bridge. Luen Hing, ourprincipal operating subsidiary, has been registered in the Subcontractor Registration Schemeof the Construction Industry Council since 2005. We have established ourselves as adedicated subcontractor with high service quality in the civil engineering constructionindustry achieving customer satisfaction, quality of work and cost control which in turnenables our Group to gain confidence from our customers and therefore increase ouropportunities of winning new projects from customers. In addition, we are also able to carryout a variety of civil engineering construction projects such as roads and drainage works,structural works and site formation works. We believe that our proven track record, ourdiverse experience and capabilities and our ability to deliver our jobs on time and to thesatisfaction of our customers are the crucial factors to our success in the industry.Furthermore, our Group has also received a number of awards from our customers inrecognition of our safety management. For details in relation to the awards granted to ourGroup, please refer to the paragraph headed “Awards and recognitions” in this section. Aswe normally receive tender invitations directly from customers, we consider that ourwell-established presence in the civil engineering construction industry in Hong Kong andour long-standing business relationship with our customers give us an advantage in terms ofsecuring new business opportunities. Throughout our operating history, we believe we haveestablished good reputation and a well-established presence in the civil engineeringconstruction industry in Hong Kong which are crucial to our business operations and futurebusiness development of our Group.

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Experienced project management team

Our management team has extensive industry knowledge and project experience in thecivil engineering construction industry. Mr. CK Wong and Mr. WW Wong, who are ourexecutive Directors, our Controlling Shareholders and our co-founders, have over 30 yearsand 19 years of experience, respectively, in providing civil engineering services for bothpublic and private sector projects in Hong Kong. Mr. Lo Shek Kwong, the quantity surveyormanager of our Group, has over 25 years of experience in quantity surveying, contractualadministration and construction project management. Furthermore, we have our in-housesurveying team comprising 10 land surveyors as at the Latest Practicable Date, whichenables us to speed up the setting out process and enhance our efficiency and overall servicequality. For details of the qualification and experience of our Directors and seniormanagement, please refer to the section headed “Directors and senior management” in thisprospectus. Their qualifications and experience facilitate the formulation of competitivetenders, which are essential in securing new business opportunities, and in deciding the bestsuitable construction methodology in order to carry out our project works in an efficient andtimely manner. Our Directors believe that the combination of our management and technicalteams’ expertise and knowledge of the industry have been and will continue to be ourGroup’s valuable assets and strive our Group towards greater success.

Possession of a variety of site equipment for performing different types of civilengineering works

We possess our own site equipment for performing different types of civil engineeringworks and therefore we are not materially reliant on our suppliers for site equipment rental.We have made substantial investment in purchasing our own site equipment for performingdifferent types of works. For the two years ended 31 March 2015 and the eight monthsended 30 November 2015, we acquired new site equipment in the amount of approximatelyHK$4,310,000, HK$410,000 and HK$812,000 at cost, respectively. As at 30 November2015, our site equipment had a total net book value of approximately HK$6,898,000.

Our owned site equipment include, among others, excavators, vibrating rollers,hydraulic breakers, air compressors, generators, aerial working platforms and a hydraulictruck crane. We believe that our investment in different types of site equipment has placedus in a position to cater to civil engineering projects of different scales and complexity. OurDirectors also consider that possession of our own site equipment allows us to devisesuitable works schedules and methods tailored to different needs and requirements fromdifferent customers and enables us to efficiently and effectively schedule our projects anddeploy our manpower.

Stable relationship with our major customers, suppliers and subcontractors

We have established stable business relationship with our major customers who aremostly reputable main contractors and the longest time with which is approximately 16years. Among our five largest customers (in terms of revenue) during the Track RecordPeriod, we have been providing services to them for a period ranging from 2 to 16 years.Furthermore, we have also established stable business relationship with our major suppliersand subcontractors and the longest time with which is approximately 16 years and 10 years,

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respectively. Our Directors are of the view that our operating history, together with thelong-term relationships with our major customers, suppliers and subcontractors, wouldincrease our recognition and visibility in the market and enable us to attract potentialbusiness opportunities.

Our commitment to maintaining safety standard, quality control and environmentalprotection

We place considerable emphasis to maintain safety standard and quality control as theycan directly affect our reputation, our service quality and our profitability. Our managementsystem was certified to be in accordance with the standard required under ISO 9001:2008(quality management), ISO 14001:2004 (environmental management) and OHSAS18001:2007 (occupational health and safety management). In addition, our major customershave recognised our efforts in upkeeping a safe working environment that our Group hasbeen granted performance awards in safety and environmental management in respect of theprojects undertaken by us. Our Directors believe that since workplace safety andenvironmental compliance are some of the key assessment criteria for our customers, oureffective occupational health and safety management and environment management systemsand good compliance track record would help reduce our exposure to these claims andimprove our overall service quality and profitability.

BUSINESS STRATEGIES

Our principal business objective is to further strengthen our position as an establishedsubcontractor for civil engineering works in Hong Kong and to create long-termShareholder’s value. We intend to achieve our business objective by competing for sizeableand profitable civil engineering projects through expanding our scale of operation by meansof (i) acquisition of additional site equipment; (ii) further strengthening our manpower; and(iii) adherence to prudent financial management to ensure sustainable growth and capitalsufficiency.

According to the 2016-2017 Budget Speech, the Government has planned to raise thetotal public expenditure on various ongoing infrastructure projects to around HK$85.8billion, representing a growth of about 8.2% compared to the 2015-2016 spending oninfrastructure. Various ongoing infrastructure projects include the Ten Major InfrastructureProjects such as Hong Kong-Macau-Zhuhai Bridge Project, Guangzhou-Shenzhen-HongKong Express Rail Link and North East New Territories New Development Areas and HungShui Kiu Project. These infrastructure projects are mega size and characterised by their largecontract sum, large scale, high degree of complexity and long duration of projects whichmay take several years to complete. In view of the increasing spending committed by theGovernment on infrastructure works, our Directors believe that the gross output value of thecivil engineering industry in Hong Kong will continue to rise. Having considered our solidexperience in the civil engineering industry, our proven track record and good reputation, weplan to expand our market share in the civil engineering construction industry in Hong Kongby deploying our resources towards competing for sizeable and profitable civil engineeringprojects in Hong Kong.

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To manage our contracts on hand and newly awarded projects, we plan to expand ourscale of operation by the following business strategies:

(i) Acquisition of additional site equipment

To further enhance and optimise our overall efficiency and capacity as well astechnical capability in performing sizeable civil engineering construction works, weintend to acquire additional site equipment with higher efficiency and technicalcapability. It will also allow us to cope with our business development plan toundertake larger scale projects in the future and minimise site equipment rental costs.During the Track Record Period, in addition to our owned site equipment, we neededto lease additional hydraulic truck cranes and excavators from site equipment providersto cope with our project needs. For the two years ended 31 March 2015 and the eightmonths ended 30 November 2015, the site equipment rental cost of our Group incurredwas approximately HK$21,441,000, HK$31,874,000 and HK$21,988,000, respectively.To cope with our needs for the projects on hand and newly awarded projects, startingfrom September 2015 and up to the Latest Practicable Date, we have purchased 3generators, 1 hydraulic breaker, 1 air compressor, 1 welding machine and 11 motorvehicles (consist of 10 vans and 1 crane lorry). Furthermore, to further optimise ourconstruction efficiency and technical capability for newly awarded projects, we plan toacquire 3 hydraulic truck cranes, 1 excavator, 3 generators and 1 air compressor aswell as 3 motor vehicles. The expected total capital expenditure for the acquisition ofthe aforesaid site equipment and motor vehicles will be approximately HK$18.0 millionand such acquisition will be financed by the proceeds from the Placing. Our Directorsbelieve that acquisition of additional site equipment will allow us to: (i) increase ourtender success rate due to the immediate availability of relevant site equipmentaccording to tender requirements; (ii) enhance our construction efficiency and technicalcapability; (iii) increase our flexibility to deploy our resources more efficiently; and(iv) reduce our site equipment rental costs. Our Directors believe that our investmentsin site equipment will enable us to cater to projects of larger scale and highercomplexity in the future. Our Group will also continue to evaluate the operatingcondition, effectiveness and efficiency of our site equipment and assess our need foradditional site equipment in view of our business development.

(ii) Further strengthening our manpower

We consider that a team of strong workforce equipped with diversified knowledgeand experience in operating different types of site equipment and performing differenttypes of civil engineering works is crucial to our continuing success. To ensure that wehave sufficient manpower for our contracts on hand and newly awarded projects, fromAugust 2015 to the Latest Practicable Date, 1 project manager has been recruited tostrengthen our project management capability, 3 engineers, 3 land surveyors, 4 quantitysurveyors, 4 safety officers, 1 safety supervisor, 2 foremen and more than 70 siteworkers were recruited to carry out site works. As at the Latest Practicable Date, wehad a total of 238 employees, details of which are set out in the section headed“Business – Employees” in this prospectus. To further enhance our manpower for ourprojects on hand and newly awarded projects, we plan to utilise approximately HK$7.6million from the proceeds of the Placing to hire 3 crane operators for operation of our

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hydraulic truck cranes in construction site, 2 engineers for strengthening ourengineering team and 1 project manager, 3 foremen, 1 quantity surveyor and 1administrative staff for strengthening our project implementation capability to copewith our contracts on hand and newly awarded projects. In addition, taking intoaccount the expected completion schedules of our projects on hand, it is envisaged thatan aggregate of approximately 50 employees and 3 existing subcontractors involvingapproximately 40 site workers provided by the aforesaid subcontractors will bere-allocated from 3 contracts, with an aggregate contract value of approximatelyHK$199,437,000 which will be completed by May 2016, to our other projects,including our newly awarded contracts. Furthermore, apart from our own labourresources, we will continue to identify and collaborate with more competentsubcontractors who meet our quality standards and selection criteria to cope with ourbusiness needs in view of the augmenting scale and complexity of our projects.Recently, we have expanded our internal approved list of subcontractors and engaged 3new subcontractors to provide further manpower resources of about 30 site workers forexecution of steel fixing works and formwork erection works for our contracts on handand newly awarded contracts.

In addition, we also intend to provide more training to our existing and newlyrecruited staff on occupational health and safety, site equipment operation and civilengineering works techniques. Such training courses would include internal training aswell as courses organised by external parties and training institutions.

It is our tendering strategy to focus on submitting tenders for contracts which arerelated to the same infrastructural project in which we had participated in the past. Forinstance, for the year ended 31 March 2015 and the eight months ended 30 November2015, we won 13 tenders of which, 6 of the tenders won were related to infrastructuralprojects which we were involved in the past. Accordingly, a number of our contracts onhand are related to construction of the same infrastructure which shares the sameworkforce and the same worksite or worksite in the vicinity. Our experience with therelevant infrastructural project and familiarity with the conditions of the relevant siteallow us to deploy our manpower resources and allocate site equipment more flexiblyand efficiently. We are therefore able to execute several projects concurrently relatingto construction of the same infrastructure in a cost-effective manner.

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(iii) Adherence to prudent financial management to ensure sustainable growth andcapital sufficiency

We will continue to maintain a prudent financial management strategy in ourbusiness operations. Our Directors believe that a prudent financial management incapital commitment could provide reasonable return for shareholders steadily whileensuring our continued growth in the long term. Our Directors consider that taking intoaccount the cash flow expected to be generated from our operations, bank borrowingswe currently have in place, unutilised credit facilities currently available to us andproceeds from the Placing, we have sufficient working capital and financial resourcesto perform our contracts on hand and newly awarded contracts as illustrated below:

� We have the following financial resources in place:

– bank balances and cash as at 31 January 2016 amounting toapproximately HK$14,367,000;

– expected cash generated from our operations for the year ending 31March 2017;

– estimated net proceeds from the Placing of approximately HK$35.7million, based on the Placing Price of HK$0.26 per Placing Share; and

– unrestricted unutilised bank overdraft facilities of approximatelyHK$6,000,000 as at 31 January 2016.

To further strengthen our working capital position and enhance our financialresources for our contracts on hand and newly awarded projects, we obtaineda credit facility from a bank in March 2016 of up to HK$20,000,000 whichconsists of: (i) a factoring facility of up to HK$10,000,000 by factoring ofcertain accounts receivable from our major customer(s) to the bank; and (ii)a banking facility of HK$10,000,000. Our Directors considered that thisarrangement can provide a flexible alternative to increase our workingcapital and finance our liquidity requirement.

� Pursuant to the terms of the one of the contracts with China Harbour inrespect of the Hong Kong-Zhuhai-Macao Bridge Project, the contract sum ofthis contract is HK$455,319,000, of which HK$50 million is earmarked forpayment of our project expenses including site set-up cost, site running cost,cost for design of formwork mould, supply and fabrication of formworkmould and scaffolding and cost for safety and environmental management,etc. to be incurred at the beginning of this project. We are entitled to receivesuch payment from China Harbour by way of progress payment. Based onthe preliminary project expenses incurred as aforesaid, we submit to ChinaHarbour our progress payment application on a monthly basis. Once it isapproved, a payment certificate will be issued to us. We generally receivesuch progress payment from China Harbour within 40 days of our paymentapplication with 1% of such progress payment retained by China Harbour as

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retention money. The said sum of HK$50 million is arrived at after arm’slength negotiations between our Group and China Harbour with reference toour preliminary working capital needs for this project. Our Directorsconsider that such arrangement will relieve our cashflow and financialpressure at the start of the project. On the basis of the foregoing, ourDirectors consider that the abovementioned arrangement with China Harbouris on normal commercial terms, fair and reasonable and in the interest of ourCompany and its Shareholders as a whole.

� We will continue to adopt a prudent treasury management policy to (i)ensure that our funds are properly and efficiently collected and deployedsuch that there is no material shortfall in cash which may interrupt ourGroup’s daily business obligations; (ii) maintain sufficient level of funds tosettle our liabilities when they fall due; (iii) maintain adequate liquidity tocover our operation cash flow, project expenditures and administrativeexpenses; and (iv) streamline our operational processes to achieve savings inconstruction-related costs, maintenance and other operating costs.

Our Directors believe that by expanding our scale of operation as mentioned above, wewill be able to (i) efficiently manage our contracts on hand and newly awarded projects; (ii)participate in larger scale civil engineering projects; and (iii) have additional manpower tofurther strengthen our workforce and quality of our service which is of utmost importance toour Group’s competiveness and ongoing development in the Hong Kong civil engineeringconstruction industry. For further details regarding the proposed use of proceeds from thePlacing in pursuit of these business strategies, please refer to the section headed “Statementof business objective and use of proceeds – Use of proceeds” in this prospectus. Leveragingour proven track record, our reputation, solid experience in public sector projects over theTrack Record Period and our prudent financial management, our Directors are of the viewthat we possess the necessary resources and technical ability and are well positioned tocapture the emerging business opportunities for sizeable projects in the future.

Implementation of business strategies

As at the Latest Practicable Date, we have not identified any target for acquisition anddo not have any acquisition plan.

For further details on the implementation of the above-mentioned business strategies,please refer to the section headed “Statement of business objective and use of proceeds” inthis prospectus.

OUR SERVICES

Type of works undertaken

We are a subcontractor in the civil engineering construction industry principallyengaged in undertaking roads and drainage works, structural works and site formation worksin Hong Kong.

BUSINESS

– 96 –

Roads and drainage works

Roads and drainage works generally refer to construction of transport interchange,carriageway and walkway, road improvement and widening works, while drainage worksgenerally include flood prevention or improvement works and sewage improvement workscomprising construction of drainage channel, outfall pipe, box culvert and pumping stationand drainage related and infrastructures. Both roads and drainage constructions also includeassociated building works and landscaping works.

During the Track Record Period, the principal types of roads and drainage worksperformed by us include extension of concrete structure at highways, modification ofjunction, construction of underground drainage, manholes, cable trenches, supply andinstallation of fire fighting system and water mains, diversion of sewerage pipes andconstruction of temporary traffic arrangement.

Structural works

Structural works generally refer to construction of major frameworks of theinfrastructures which provide them with supportive structures and allow them to withstandvarious extreme forces.

During the Track Record Period, the principal types of structural works performed byus include construction of reinforced concrete structures in relation to construction ofvehicular bridge, widening of bridge and installation and construction of portal beams forland viaduct, construction of elevator shafts, construction of concrete footing for noisebarrier foundation and construction of retaining walls.

Site formation works

Site formation works generally refer to works performed to prepare a construction sitefor subsequent works for foundation and superstructure. They generally involve theclearance of construction site, demolition of existing structures, forming the site (includingexcavation and filing) to the design formation and/or basement level, reduction andstabilisation of existing slopes, and associated infrastructure works.

During the Track Record Period, the principal types of site formation works performedby us include slope formation and installation of temporary works structures including sheetpiling, shoring, ground treatment, concrete block placing and access deck.

BUSINESS

– 97 –

OUR CIVIL ENGINEERING CONTRACTS

The following table sets out the number of contracts that we have been awarded duringthe Track Record Period and up to the Latest Practicable Date and the correspondingaggregate amount of original contract sum in respect of such contracts:


For theeight

monthsended

30November

2015


LatestPracticable

Date2014 2015

Number of contracts awarded (Note 1) 16 7 6 2

Corresponding aggregate amount oforiginal contract sum in respect ofsuch contracts (Note 2) HK$’000 HK$’000 HK$’000 HK$’000

319,704 125,214 644,681 301,317

Notes:

1. Number of contracts awarded for each financial year includes all contracts with respect to which ourengagement was confirmed during the financial year.

2. Such amount excludes any subsequent changes due to variation orders. Please refer to the paragraphheaded “Operation flow – Variation orders” of this section for details.

BUSINESS

– 98 –

Set out below is the table showing the number of contracts completed and awarded tous and the aggregate contract sum during the Track Record Period and as at the LatestPracticable Date:

Number ofcontracts

Contractsum(Note)

HK$’000

As at 1 April 2013Existing contracts 20 476,985

During the financial year ended 31 March 2014Contracts completed 12 142,120New contracts awarded 16 319,704

As at 31 March 2014Existing contracts 24 654,569

During the financial year ended 31 March 2015Contracts completed 16 137,700New contracts awarded 7 125,214

As at 31 March 2015Existing contracts 15 642,083

During the eight months ended 30 November 2015Contracts completed 1 8,400New contracts awarded 6 644,681

As at 30 November 2015Existing contracts 20 1,278,364

For the period between 1 December 2015 and before theLatest Practicable Date

Contracts completed 2 195,541New contracts awarded 2 301,317

As at the Latest Practicable DateExisting contracts 20 1,384,140

Note: The contract sum is based on the initial agreement between our customer and us and may notinclude additions, modifications due to subsequent variation orders, such as final revenue recognisedfrom a contract may differ from the contract sum.

BUSINESS

– 99 –

Subsequent to the Track Record Period, we were awarded with two contracts. As at theLatest Practicable Date, there were 20 contracts on hand, all of which were in progress.

The number of contracts awarded for the year ended 31 March 2015 was considerablylower than the number of contracts awarded for the year ended 31 March 2014 because wewere occupied with various civil engineering projects close to our full service capacity priorto commencement of the Track Record Period and during the year ended 31 March 2014. Assuch, considering our availability of manpower resources, our servicing capacity, the numberof projects we were working on at that time, expected increase in costs of materials, labourcosts as well as complexity and length of contracts we tendered for, we had taken arelatively prudent approach in costs estimation by factoring a higher profit margin whichmay cause our tender price submitted during the year ended 31 March 2014 to be lesscompetitive, which therefore directly affected the number of contracts awarded to our Groupfor the year ended 31 March 2015. For the period starting from 1 April 2015 to the LatestPracticable Date, the number of contracts awarded was slightly higher than the number ofcontracts awarded during the financial year ended 31 March 2015 but was less than thenumber of contracts awarded during the financial year ended 31 March 2014. Nevertheless,the aggregate contract value of those six contracts awarded during the eight months ended30 November 2015 were much greater than the aggregate contract value of the contractsawarded for each of the two years ended 31 March 2015. It was mainly attributable to theaward of the various new mega-sized contracts including the Hong Kong-Zhuhai-MacaoBridge construction project and associated infrastructure works. This is in line with ourbusiness strategy to focus on competing for sizeable projects in terms of complexity,duration and contract sum. Please refer to the paragraph headed “Business strategies” of thissection for further details of our business strategies.

Depending on the nature and complexity of a project as well as the existence of anyunforeseen circumstances (such as bad weather conditions, industrial accidents, variationorders requested by customers, etc., if any), the duration of a contract (from the date ofengagement to the date of completion) could generally range from approximately 2 years to4 years. During the Track Record Period, the average duration of completed projects wasapproximately 2.2 years.

BUSINESS

– 100 –

Our customers primarily include main contractors of various different types of civilengineering projects in Hong Kong. Such projects can generally be categorised into publicsector projects and private sector projects. Public sector projects refer to projects which themain contractors are employed by the Government or statutory bodies while private sectorprojects refer to those that are not public sector projects. The majority of our revenue duringthe Track Record Period was derived from public sector projects. The following table setsout a breakdown of the number of contracts with revenue contribution to us during the TrackRecord Period by public and private sector projects:


For theeight

monthsended 30

November20152014 2015

Number of contracts with revenuecontribution to us

� Public sector projects 26 25 14

� Private sector projects 3 5 5

29 30 19

The following table sets out a breakdown of our revenue during the Track RecordPeriod attributable to public and private sector projects:

For the year ended 31 MarchFor the eight months ended 30

November2014 2015 2014 2015

HK$’000 % HK$’000 % HK$’000 % HK$’000 %

Public sector projects 149,234 93.3 255,484 93.9 180,479 96.9 135,834 87.8Private sector projects 10,729 6.7 16,465 6.1 5,846 3.1 18,807 12.2

159,963 100.0 271,949 100.0 186,325 100.0 154,641 100.0

Completed contracts

During the Track Record Period and up to the Latest Practicable Date, we completed31 civil engineering contracts.

BUSINESS

– 101 –

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BUSINESS

– 105 –

Con

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BUSINESS

– 106 –

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BUSINESS

– 107 –

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BUSINESS

– 108 –

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.

BUSINESS

– 109 –

OPERATION FLOW

The following diagram summarises the principal steps of our operation flow:

Customer acceptance assessment for potential customers

Securing new business opportunity by invitation

Preparation and submission of tenderto customer

On-site inspection

Within 2 days

Within 2 days

From approximately 7 to 21 daysdepending on the complexity of theproject

From approximately 1 to 3months depending on the complexity ofthe project

Review of tender and engagement or tender interview

Procurement of necessary site equipment and construction materialsand/or engagement of subcontractors

Actual commencementof work on site

Execution

In-house quality inspection and supervision

Inspection and approval by customer

Issue of invoice/interim payment

Review and payment by customer

Defects liability period (if required)

From approximately 3 to 31 days

Generally from approximately 2 to 4 years depending on thecomplexity of the project

Ongoing throughout the execution of theproject

Ongoing throughout the execution of the project

Invoices of interim payment are issued on a monthly basis in accordance withthe contract

Approximately 4 weeks to3 months

During the defects liability period which typically lasts for 12 months, we may be requested to repair or make good of any defect or imperfection. We will receive the remaining retention money after completion of the defects liability period.

Practicalcompletion

BUSINESS

– 110 –

Note: The time frame may vary for different contracts depending on various factors such as the terms ofcontract, the nature of works to be performed, presence of variation orders and/or our agreement with thecustomer on the timeframe for the principal steps to be undertaken as well as other unforeseeablecircumstances.

Invitation for tendering, preparation and submission

We are usually invited by our customer to submit a tender for a potential project as asubcontractor. Our customers are main contractors of different types of civil engineeringprojects and we are provided with the specifications and drawings along with the invitations.For further information of our marketing activities, please refer to the paragraph headed“Marketing activities” in this section.

Our estimating department, which is led by our estimating manager who has over 20years of experience in quantity surveying, is responsible for assisting our executive Directorson the preliminary review and assessment of a potential project. In the preliminary reviewand assessment process, we consider (i) the technical specifications of a potential project;(ii) the commencement date and duration of a potential project; (iii) the location and theconditions of the site; (iv) our resources availability; and (v) our previous experience inrelevant projects.

Once our executive Directors consider a potential project to be acceptable based on ourreview and assessment, we will prepare and submit a tender proposal to our customeraccordingly. In the course of preparation of a tender, we mainly consider (i) the complexityof a potential project; (ii) the manpower needed; (iii) the availability of site equipmentrequired; and (iv) the tender price (details of our pricing strategy is set out in the paragraphheaded “Customers − Pricing strategy” in this section). On-site visit may be conducted tohave a better understanding on the conditions of the site, if necessary. We then preparetender documents including bills of quantities and terms of the contract.

Tenders submitted during the Track Record Period

During the Track Record Period, all of our civil engineering construction contractswere obtained through tendering. The following table sets out the number of contractstendered, number of successfully tendered contracts and our success rate during the TrackRecord Period and from 1 December 2015 up to the Latest Practicable Date:


For theeight

monthsended 30

November2015


LatestPracticable

Date2014 2015

Number of tenders submitted 44 41 33 18Number of tenders won 5 8 5 –Success rate (%) 11.36 19.51 15.15 –

BUSINESS

– 111 –

Note: For the eight months ended 30 November 2015, there were 33 tender applications submitted by ourGroup. Out of the said 33 tender applications, we received 25 rejected tender results and the tenderresults of the remaining 3 tender applications are yet to be known. For the period from 1 December2015 to the Latest Practicable Date, there were 18 tender applications submitted by our Group. Outof the said 18 tender applications, we received 8 rejected tender results and the tender results of theremaining 10 tender applications are yet to be known.

Our tender success rate for the year ended 31 March 2014 was lower than the tendersuccess rate for the year ended 31 March 2015 and for the eight months ended 30 November2015 principally because we were occupied with various civil engineering projects close toour full service capacity prior to commencement of the Track Record Period and during theyear ended 31 March 2014. Nevertheless, it was our strategy to be responsive to ourcustomers’ tender invitations and submit tenders to our existing customers in order tomaintain business relationship with our existing customers and maintain our presence in themarket. Under such circumstances, taking account of our availability of manpower resources,our servicing capacity, the number of projects we were working on at that time, expectedincrease in costs of materials, labour costs as well as complexity and length of contracts wetendered for, we had taken a relatively prudent approach in costs estimation by factoring ahigher profit margin which may cause our tender price to be less competitive than thetenders submitted by our competitors during the year ended 31 March 2014.

On the other hand, higher tender success rates were achieved for the year ended 31March 2015 and for the eight months ended 30 November 2015 since most of ourlarge-scale contracts (in terms of complexity, scale, duration and contract value) awardedbefore the Track Record Period were substantially completed during such periods. As ourGroup has more capacity to engage in new projects, we focused on submitting tenders forcontracts which are related to the same infrastructural project in which we had participatedin the past. Our Directors consider that we have a higher chance of winning those contractsin view of our past experience and involvement in the relevant infrastructural project. Forinstance, for the year ended 31 March 2015 and for the eight months ended 30 November2015, we won 13 tenders of which, 6 of the tenders won were related to infrastructuralprojects which we were involved in the past. Therefore, we achieved higher tender successrates for the year ended 31 March 2015 and for the eight months ended 30 November 2015.

Project acceptance

Upon receipt of our tender, our customer may, by way of interview or enquiries, clarifywith us the particulars of our submitted tender. Once our customer decides to engage us, wewill be informed of its acceptance of our tenders by a letter of award or letter of intentissued to us by our customer. We may then enter into a formal engagement agreement withthe customer. For the principal terms of our engagement in a typical contract, please refer tothe paragraph headed “Customers – Major terms of engagement” of this section.

BUSINESS

– 112 –

Project execution and customer acceptance

Once our engagement is confirmed, we commence the implementation of the projectby: (i) forming a project team; (ii) planning and arranging the required site equipment to bedelivered to the construction site; (iii) procuring and arranging with suppliers for therequired materials for the project; and (iv) negotiating on finalising the subcontractingarrangement if necessary.

Forming a project team

Depending on the scale and complexity of the project, our project team generallycomprises the following key personnel: project manager, construction manager, site agent,engineer, quantity surveyor, land surveyor, safety officer, foreman and other site workerschosen by the project manager and construction manager.

Our executive Directors also closely monitor the progress of the project on acontinuous basis to ensure that our works meet our customers’ requirements, within budgetand in compliance with all applicable laws and regulations. Our project team will overseethe project on site and report to the executive Directors on project status and identify anyissues that need to be resolved from time to time. Set out below are some general dutiesperformed by our key personnel in a project team:

Project manager

Our project manager is mainly responsible for communicating with our customers,subcontractors and other members of the project team on the project status, allocation ofresources in a project, reviewing the progress reports, safety reports and site daily records.Our project manager directly reports to our executive Directors on contract management,project status and issues, and attend progress meetings to report the project progress to ourcustomers.

Construction manager

Our construction manager is responsible for supervising our overall workforce on site,monitoring work efficiency and performance of site workers and liaising with therepresentatives of our customers and subcontractors on site with the assistance from theproject team. Our construction manager directly reports to our executive Directors on anymajor issues happening on the construction site.

Site agent

Our site agent is responsible for inspecting fieldworks, assisting our project managerand construction manager to supervise and monitor work progress on site, supervisingworkmanship and quality and preparing site daily records setting out the works performedby our workers and subcontractors.

BUSINESS

– 113 –

Engineer

Our engineer is responsible for overseeing the engineering and technical aspects of theproject such as designing the whole site operation and suitable methodology and proceduresfor customer’s approval. Our engineer is also responsible for assisting the project managerand construction manager in liaising with our customers and their representative consultantson site.

Quantity surveyor

Our quantity surveyor is responsible for inspecting the work progress on site andpreparing payment application. Our quantity surveyor is also required to update our projectmanager with the latest certified progress from our customers.

Land surveyor

Our land surveyor is responsible for providing professional and technical support onmeasurement and calculation of the location, distance, elevation or dimension of landfeatures or structures relevant to project implementation. Our land surveyors enable us tospeed up the setting out process and enhance our efficiency and overall service quality.

Safety officer

Our safety officer is responsible for supervising implementation of site safety measuresand monitoring on the day-to-day occupational health and safety compliance.

Foreman

Our foreman is responsible for assisting our site agent to supervise and provideguidance to site workers, carrying out in-process and final inspection and coordinatingday-to-day site operations.

Planning and arranging site equipment

Most of our works involve usage of site equipment. When site equipment is requiredfor a project, we either make use of our own site equipment or rent from external siteequipment rental service providers. Mr. Wong Tak Ming, an executive Director (whoseexperience and qualifications are disclosed in the section headed “Directors and seniormanagement” in this prospectus), is responsible for managing the site equipment for allprojects and determining the types of site equipment to be used, the time for the usage ofsite equipment and the transportation logistics of site equipment.

For details on our site equipment, please refer to the paragraph headed “Siteequipment” in this section.

BUSINESS

– 114 –

Purchasing of construction materials

The key construction materials that we purchase for our civil engineering projectsinclude concrete, steel reinforcement bars, precast concrete units, timbers and diesel fuel.Our purchasing department consults our quantity surveyors and engineering department todetermine the quantity, delivery schedule, specifications and type of construction materialsto be purchased in order to meet our customers’ requirements. Our purchasing departmentwill then place orders with our approved suppliers and purchase the required materials on aproject basis. In some projects, certain construction materials such as concrete and steelreinforcement bars may be purchased by our customer i.e. the main contractors, on ourbehalf for use in the relevant projects. Please refer to the paragraph headed “Suppliers –Contra-charge arrangement with our customers” in this section for further details.

Our construction materials are purchased and sent to the site directly from oursuppliers. As the materials are purchased on a project basis in accordance with the projectrequirements, we rely on the accurate estimation on the amount of construction materialsneeded and we normally allow for a small buffer in each batch of order to avoid wastage.As such, we do not retain any construction materials as inventory.

For details on our suppliers, please refer to the paragraph headed “Suppliers” in thissection below.

Appointment of subcontractors

Depending on our capability, resources level, cost effectiveness and the complexity ofthe project, we may subcontract specific parts of the project, such as steel fixing works,formwork erection works and drainage works, to our subcontractors in Hong Kong on ourGroup’s approved list of subcontractors. Save for such specific parts of the project, weusually carry out other parts of a project by our direct employees. More than onesubcontractor may be engaged for a project depending on the scale and complexity of theproject.

The agreement between our subcontractor and us generally contains key terms andconditions including the scope of works, completion date, defects liability period, etc. thatare mirrored to those contained in the agreement between us and our customer. For detailson our subcontracting arrangement, please refer to the paragraph headed “Subcontractors” inthis section.

Execution

The construction works are executed by our direct labours and/or our subcontractorsunder the supervision of our on-site project teams and representatives of our customers.Throughout the execution phase, our project manager and construction manager will meetour customers to review work progress and to resolve any issues identified during the courseof execution.

BUSINESS

– 115 –

Variation orders

Our customer may, in the course of project execution, place additional ordersconcerning variation to part of the works that are necessary for completion of the project.Such orders are commonly referred to as variation orders. Variation orders may include: (i)additions, omissions, substitutions, alterations, changes in quality, form, character, kind,position or dimension; (ii) changes to any sequence, method or timing of constructionspecified in the original contract; and (iii) changes to the site or entrance to and exit fromthe site. We will discuss with our customer to mutually agree on the sum of variation orderswhich may be added to or deducted from the contract sum under the original contract. Weare usually notified of a variation order by way of a letter from our customer setting out thedetailed works to be carried out as a result of such variation order. We will then prepare andsubmit the rate for such variation order to our customer for approval. The principal termsand settlement of variation orders are generally in line with the terms of the originalcontract.

Monitoring and quality inspection

Our executive Directors, with the assistance of our project team, monitor workprogress, project performance, risks in delaying the construction programme, comments fromour customer and follow-up matters for the project. In addition, we hold progress meetingwith our customer throughout the project to keep our customers informed of our projectsstatus and any major issues identified during project execution.

Our construction manager is responsible for overall supervision of overall workforce onsite to monitor the quality and ensure the projects are executed in accordance with ourquality standards. Our site agent is required to prepare site daily records describing theworks performed by our workers or subcontractors (if any). Such site daily records arepassed to our project manager and construction manager for review. Our site agent alsoassists our project manager and construction manager to monitor work progress andcoordinate with our foreman to supervise workmanship and quality.

Our work progress is also inspected by our quantity surveyor before we preparepayment applications to our customer.

Customer inspection and application for payment and certification

In addition to our quality inspection as described above, our customers also inspect ourworks done from time to time in order to confirm and certify completion of the relevantworks before our interim payment applications are certified. Upon completion of suchinspection, our customer may issue a report specifying defects that need to be rectified by us(if any).

We are entitled to receive progress payments from our customers. Our application forprogress payments is normally made on a monthly basis. Based on the works performed byus in the preceding month, we submit to our customers interim payment applications whichgenerally include details of completed works, the actual quantities of our work done,variation orders (if any) and the cost of the materials delivered on a monthly basis. The

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amount to be received by us from some customers (who are also our suppliers of certainconstruction materials and other supplies) is netted off by any contra-charge paid by ourcustomers on our behalf, details of the contra-charge arrangement are set out in theparagraph headed “Suppliers – Contra-charge arrangement with our customers” in thissection. Once our customer approves our payment application, a payment certificate will beissued to us. Generally, we receive payment from our customers within 45 days of ourpayment application. Our customer will usually retain up to 10% of each interim paymentand up to a maximum limit of 5% of the contract sum as retention money. 50% of theretention money is released to us upon completion of a project and the remaining 50% willbe released to us upon expiration of the defects liability period of a project.

We normally pay progress payment to our subcontractors on a monthly basis withreference to the value of the work performed by our subcontractors in the preceding monthafter our inspection and verification on their works. Generally, we are required to pay oursubcontractors within 30 days of payment application submitted by our subcontractors.

Project completion

Once we have completed the entire project to the satisfaction of our customer, ourcustomer will (i) verbally confirm completion of the project during progress meetings andsuch customers’ verbal confirmation is evidenced by subsequent payment certificates issuedby our customers in respect of our final payment and/or (ii) issue a practical completioncertificate for the project. In some civil engineering projects, certificates of practicalcompletion are issued by our customers which indicate that the contract works have beencompleted, tested and approved. Furthermore, we will take steps to record customers’ verbalconfirmation on practical completion by exchange of correspondence in writing. During theTrack Record Period and up to the Latest Practicable Date, our Group had not encounteredany disputes with our customers in ascertaining the status and completion of a project(whether verbal or otherwise). A contract is normally regarded as practically completedwhen (i) the works under the contract have been duly completed as verified by our customerafter inspection; (ii) there is no apparent defect; and (iii) maintenance or defects liabilityperiod commences. It generally takes approximately 2 months for us to reach an agreementon the final account with our customers taking into account the value of our work done(including variation orders (if any)) and the retention money. We normally receive finalpayment and 50% of the retention money from our customers within 45 days after the saidfinal account is agreed.

Defects liability period and release of retention money

Our customers normally require a defects liability period, during which we areresponsible for rectifying defects or imperfections in relation to our works done which arediscovered after completion. The defects liability period typically last for 12 months aftercompletion. Upon expiration of the defects liability period, the remaining 50% of theretention money will be released to us by our customers.

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Working capital requirement associated with undertaking contract works

When undertaking contract works, there are often time lags between making paymentsto our subcontractors and receiving payments from our customers, resulting in possible cashflow mismatch. If we choose to pay our subcontractors only after receiving payments fromour customers, we will risk our reputation for not being able to make payments in a timelymanner, which could harm our ability to engage capable and quality subcontractors for ourbusiness in the future. The extent of such cash flow mismatch is illustrated by thedifferences between our creditors’ turnover days and our debtors’ turnover days. For the twoyears ended 31 March 2015 and the eight months ended 30 November 2015, our creditors’turnover days were approximately 33.6 days, 20.4 days and 24.5 days respectively and ourdebtors’ turnover days were approximately 39.6 days, 33.2 days and 50.2 days, respectively,which are further discussed in the sections headed “Financial information – Discussion ofcertain combined statements of financial position items – Trade and other receivables –Trade receivables” and “Financial information – Discussion of certain combined statementsof financial position items – Trade and other payables – Trade payables”, respectively, inthis prospectus.

In order to manage our liquidity position in view of such possible cash flow mismatchassociated with undertaking contract works, we have adopted the following measures:

(i) Before undertaking each new project, our finance department led by our financialcontroller, Ms. Chan Yin Wa Cecilia, whose experience and qualifications aredisclosed in the section headed “Directors and senior management” in thisprospectus, will prepare an analysis of the forecast amount and timing of cashinflows and outflows in relation to a project as well as our other liquidityrequirements associated with our ongoing projects and our overall businessoperations so as to ensure the sufficiency of our financial resources beforeundertaking a new project.

(ii) Our finance department is also responsible for the overall monitoring of ourcurrent and expected liquidity requirements on a monthly basis to ensure that wemaintain sufficient financial resources to meet our liquidity requirements.

(iii) If, based on our regular monitoring by our finance department, there is anyexpected shortage of internal financial resources, we will refrain from undertakingnew projects and/or consider different financing alternatives, including but notlimited to obtaining adequate committed lines of funding from banks and otherfinancial institutions. In January 2015, we obtained a banking facility ofHK$4,000,000 granted under the SME Financing Guarantee Scheme. Weconsidered that bank borrowing under the SME Financing Guarantee Scheme wasan appropriate means of raising capital for our Group at that time because theinterest rate of such bank loan was 1% below the Hong Kong dollar prime rateper annum, which allowed us to obtain a more affordable debt financing withlower finance cost. Such bank borrowing allowed us to meet the working capitalrequirements for our ongoing projects and the projects newly awarded at that timefor paying subcontracting charges, employees’ wages, material costs and siteequipment rental charges incurred during execution of our civil engineering

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projects at that time. Such banking facility, which aims to help small andmedium-sized enterprises (SMEs) and non-listed enterprises obtain financing formeeting their working capital and business needs, has been repaid before theListing. After the Listing, we will finance our working capital (including anypossible mismatch of cash inflows and outflows of our projects) through, amongothers, the cash flow to be generated from our contracts on hand, the estimatednet proceeds from the Placing of approximately HK$35.7 million and ourunutilised banking facilities, details of which are set out in the paragraph headed“Business Strategies – (iii) Adherence to prudent financial management to ensuresustainable growth and capital sufficiency” of this section. Hence, our Directorsbelieve that we have sufficient working capital and financial resources to paysubcontracting charges, direct wages, material costs and site equipment rentalcharges in order to meet our liquidity requirements and minimise the effect ofpossible cash flow mismatch associated with the projects undertaken by us afterthe Listing.

Our cash flows and working capital position may also be affected by possible delays inthe work progress of our civil engineering projects. During the Track Record Period, wehave experienced delays in several projects. Such delays were mainly caused by thepostponement of the originally scheduled commencement date of a part or a phase of ourworks due to the delay in the work progress on the part of our customers or our customers’other subcontractors. As a result of such delays, our customers were unable to hand over thesite to us to commence the relevant part or phase of our works. During the Track RecordPeriod, our Group did not cause any material delays in completion of our works which ledus to pay liquidated damages. Our Directors consider that the major impact of delays causedby our customers is to defer our cash inflows and outflows and our plan to deploy labourand materials but would normally not cause a material impact on our liquidity andprofitability unless there is a significant fluctuation in labour costs and material prices. Ineach of the aforesaid delays during the Track Record Period, we have successfullyimplemented the following measures in order to manage our working capital resources andminimise our cash outflows during the delay:

(i) We participated in regular meetings with our customers who, upon identifying anyexpected delays in the originally scheduled commencement date of any part orphase of our works, would promptly notify us in these meetings. Our projectmanagement team will also exercise its own judgment based on its observationson site as to whether the next phase of works could be handed over on time byour customers and timely liaise with them to understand if any possible delaycould occur. If, prior to the originally scheduled commencement date, we hadalready performed preparatory works or purchased relevant materials, ourcustomers would make payments to us based on the amount of certified worksperformed and the cost of the materials purchased.

(ii) After receiving the aforesaid notification from customers, we would notify ourrelevant subcontractors as soon as practicable and request for a correspondingdelay in their work commencement date. If such subcontractors were alreadyworking on the site for other parts or phases of the works undertaken by us, wewould request for the temporary suspension of their services after their

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completion of said works and before the commencement of the delayed parts orphases of the works. Staff who are paid on a daily basis may not be called on sitefor work. By doing so, we would effectively and promptly put further cashoutflows and costs on hold. In order to alleviate the impact on the saidsubcontractors and staff and to maintain good working relationships with them aswell as to optimise the deployment of our available resources, we would considerengaging or assigning such subcontractors and staff in our other sites and projectswhere such opportunities are available.

(iii) During the period of delay, we would continue to participate in regular meetingswith our customers so as to monitor the status of the relevant projectcontinuously. We would request for a sufficient notice period prior to there-scheduled commencement date of the delayed works such that we could havesufficient time to arrange for necessary resources for the delayed works.

Our Directors confirm that the delays in work progress due to the delays in handoverof site to us would not hold us liable to penalty or liquidated damages. Our Directorsbelieve that by implementing the aforesaid measures during the Track Record Period, ourGroup had successfully minimised cash outflows and avoided unnecessary lock-up of ourworking capital resources during the aforesaid delays. Going forward, we will implement theaforesaid measures to manage our working capital resources and minimise cash outflowsupon the occurrence of delays of a similar nature.

CUSTOMERS

Characteristics of our customers

During the Track Record Period, our customers primarily include main contractors ofvarious different types of civil engineering projects in Hong Kong. For informationregarding our customers in respect of each of our projects undertaken during the TrackRecord Period, please refer to the paragraph headed “Our civil engineering contracts” in thissection.

Major customers

For the two years ended 31 March 2015 and the eight months ended 30 November2015, the percentage of our total revenue attributable to our largest customer amounted toapproximately 63.2%, 53.1% and 36.7%, respectively, while the percentage of our totalrevenue attributable to our five largest customers combined amounted to approximately94.1%, 96.0% and 97.5%, respectively.

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Set out below is a breakdown of our revenue by our five largest customers during theTrack Record Period and their respective background information:

For the year ended 31 March 2014:

Rank CustomerBackground ofcustomer

Type of worksundertaken byus for thecustomerduring theTrack RecordPeriod

Approximateyears ofbusinessrelationshipwith ourGroup Credit term

Paymentterm

Revenue derivedfrom the customerHK$’000 %

1 China Harbour A constructioncontractor which is asubsidiary of acompany listed inHong Kong

Roads anddrainage,structural andsite formationworks

12 Within 45 daysfrom the issueof paymentapplicationfrom our Groupto the customer

Mainly bycheque

101,138 63.2

2 Chun Wo Construction A constructioncontractor which is asubsidiary of acompany listed inHong Kong

Roads anddrainage andstructural works


Mainly bycheque

20,145 12.6

3 China StateConstruction

A constructioncontractor which is asubsidiary of acompany listed inHong Kong



Mainly bycheque

11,350 7.1

4 Customer D A constructioncontractor which is asubsidiary of acompany listed inAustralia

Roads anddrainage works


Mainly bycheque

9,688 6.1

5 Leighton – China State– Van Oord JointVenture

A joint ventureconstruction contractorestablished byCustomer D, ChinaState Construction andan independent thirdparty



Mainly bycheque

8,118 5.1

Five largest customers combined 150,439 94.1All other customers 9,524 5.9

Total revenue 159,963 100.0

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Paymentterm





Mainly bycheque

144,349 53.1

2 Dragages − ChinaHarbour − VSL J.V.

A joint ventureconstruction contractorestablished by ChinaHarbour andindependent thirdparties

Structuralworks


Mainly bycheque

61,682 22.7





Mainly bycheque

36,300 13.3




Mainly bycheque

11,013 4.0




Mainly bycheque

7,988 2.9



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For the eight months ended 30 November 2015:




Paymentterm






Mainly bycheque

56,688 36.7




Mainly bycheque

33,643 21.7

3 Dragages − ChinaHarbour − VSL J.V.

A joint ventureconstruction contractorestablished by ChinaHarbour andindependent thirdparties

Structuralworks


Mainly bycheque

29,136 18.8




Mainly bycheque

16,367 10.6




Mainly bycheque

15,009 9.7



None of our Directors, their close associates, or any Shareholders who or which, to theknowledge of our Directors, owned more than 5% of the issued Shares of our Company asat the Latest Practicable Date had any interest in any of the five largest customers of ourGroup during the Track Record Period.

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The following table sets out the aggregate revenue attributable to our major customersand its joint ventures, which our Directors consider them as affiliated entities under thesame group, during the Track Record Period:

For the year ended 31 MarchFor the eightmonths ended

2014 2015 30 November 2015

HK$’000% of total

revenue HK$’000% of total

revenue HK$’000% of total

revenue

Aggregate revenueattributable toChina Harbourand its jointventure 106,569 66.6 206,031 75.8 62,779 40.5

Aggregate revenueattributable toChina StateConstruction andits joint ventures 22,520 14.1 41,465 15.2 56,688 36.7

Aggregate revenueattributable toCustomer D andits joint ventures 18,847 11.8 17,088 6.3 18,807 12.2

Customer concentration

For the two years ended 31 March 2015 and the eight months ended 30 November2015, the percentage of our total revenue attributable to our five largest customers combinedamounted to approximately 94.1%, 96.0% and 97.5% respectively. The percentage of ourtotal revenue attributable to our largest customer amounted to approximately 63.2%, 53.1%and 36.7% respectively for the same periods. According to the Ipsos Report, it is commonfor civil engineering contractors to rely on a few customers and such customer concentrationis not uncommon for construction companies in Hong Kong. Our Directors consider thatdespite the customer concentration, our Group’s business model is sustainable despite suchcustomer concentration due to the following factors:

� Due to the nature of the civil engineering construction industry in which ourGroup is engaged in, our customer base is relatively concentrated to reputablemain contractors which dominate more than 50% of the market share in the civilengineering construction industry in Hong Kong. As a result, given the marketlandscape of the civil engineering construction industry in Hong Kong, thepotential customer base of our Group is limited.

� It is not uncommon for a single project to have a large contract sum such that asmall number of projects can contribute to a substantial amount of our revenue. Inaddition, a project of sizeable scale can have a contract period of several years.

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Therefore, if we decide to undertake a certain project with large contract sum, therelevant customer may easily become our largest customer in terms of revenuecontribution to us for more than one financial year.

� We have been actively tendering for projects among major main contractors forpublic sector projects. In the event that any of our major customers substantiallyreduce the number of contracts placed with us or terminates its businessrelationship with us, our Directors consider that we would have extra capacity tohandle other potential projects from other customers in view of the expectedgrowth of demand for civil engineering services in Hong Kong and ourcompetitive strengths as detailed in the paragraph headed “Competitive strengths”in this section. According to the Ipsos Report, the demand for civil engineeringworks is expected to surge in the future and the estimated revenue of the civilengineering construction industry in Hong Kong is anticipated to grow at a CAGRof approximately 21.2% from approximately HK$88.6 billion in 2015 toapproximately HK$186.5 billion in 2019.

� We experienced a strong demand for our services from a wide range of customersduring the Track Record Period as evidenced by the number of tender invitationsthat we received from customers during the Track Record Period. Please refer tothe paragraph headed “Operation flow – Invitation for tendering, preparation andsubmission – Tenders submitted during the Track Record Period” of this sectionfor further details.

� A majority of our five largest customers have long-standing business relationshipwith us for over ten years and we will therefore endeavour to accommodate theirdemands for our services to the extent our resources allow in order to capturemore opportunities for larger scale projects in the future.

� Our Directors consider that we have a complementary business relationship withour major customers. Our experience and our proven track record as a qualitysubcontractor in handling civil engineering projects also give business advantageto our customers to ensure their projects are executed on time, within budget andin accordance with their quality standards.

Our relationship with China Harbour

For the two years ended 31 March 2014 and 2015 and the eight months ended 30November 2015, revenue from China Harbour amounted to approximately HK$101,138,000,HK$144,349,000 and HK$33,643,000, representing approximately 63.2%, 53.1% and 21.7%of our total revenue for the corresponding periods, respectively. The revenue attributable toChina Harbour decreased substantially to 21.7% for the eight months ended 30 November2015. Such decrease is mainly attributable to completion of 9 contracts with China Harbourwith an aggregate contract sum of approximately HK$70,096,000 during the year ended 31March 2015.

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Background of China Harbour

China Harbour is one of the key main contractors in the civil engineering constructionindustry in Hong Kong. Founded in 1980 and headquartered in the PRC, China Harbour is asubsidiary of China Communications Construction Company Limited which has been listedon the Main Board of the Stock Exchange. China Harbour is principally engaged in theprovision of engineering services in engineering-procurement-construction (EPC),build-operate-transfer (BOT), and public-private-partnership (PPP) formats for both publicand private sectors, including marine engineering, dredging and reclamation, road andbridge, railway, airport, equipment assembly. China Harbour’s business also covers otherindustries such as building, municipal works, environmental, hydraulic engineering, powerplant and energy, and resource exploration.

Business relationship with China Harbour

We have 12 years’ business relationship with China Harbour with revenue contribution.We started to provide civil engineering services to China Harbour as a subcontractor in2003. During the Track Record Period, we had undertaken 17 contracts with China Harbour,of which 11 contracts have a contract sum of over HK$10 million. Subsequent to the TrackRecord Period, our Group was awarded with one contract with contract sum ofapproximately HK$297 million from China Harbour in relation to structural works. ChinaHarbour also supplied construction materials such as concrete and steel reinforcement barsto our Group during the Track Record Period. For details, please refer to the paragraph“Suppliers – Contra-charge arrangement with our customers” in this section.

Contractual arrangement with China Harbour

Consistent with our arrangements with other customers, we entered into constructioncontracts with China Harbour on a project-by-project basis. Under our agreement with ChinaHarbour, it generally contains material terms including (i) interim payment terms whichrequire China Harbour to pay us on a monthly basis with a credit term of 45 days for theinterim and final payments. China Harbour is generally entitled to retain 5% of each interimpayment and up to a maximum limit of 5% of the total contract sum as retention money; (ii)supervision and human resources arrangement under which China Harbour would arrangepersonnel responsible for managing the project as a main contractor, whereas our Groupwould engage other subcontractors to carry out the works if necessary; (iii) contra-chargearrangement under which China Harbour will procure construction materials, such asconcrete and steel reinforcement bars on our behalf, details of which are set out in theparagraph headed “Suppliers – Contra-charge arrangement with our customers” in thissection; (iv) maintenance of insurance by China Harbour and our Group; and (v) defectsliability period of 12 months.

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Our Directors consider that the substantial revenue contribution from China Harbour tous during the Track Record Period will not affect our business prospects and sustainabilityof our business based on the following factors:

� Sound track records

– We have been providing civil engineering services as a subcontractor inHong Kong for over 16 years. Our Directors believe that our establishedoperating history with a wide range of project references allows us toconsolidate our reputation and secure projects from different maincontractors.

– China Harbour is one of the key players in the civil engineering constructionindustry in Hong Kong. Our Directors believe that our relationship withChina Harbour will enhance our project references and reputation throughbuilding a positive reputation in the industry.

– In addition to China Harbour, we also serve China State Construction, one ofthe key main contractors in the civil engineering construction industry inHong Kong and a subsidiary of China State Construction InternationalHoldings Limited (listed on the Main Board of the Stock Exchange). ChinaState Construction was our largest customer for the eight months ended 30November 2015. Revenue attributable to China State Construction amountedto approximately HK$11,350,000, HK$36,300,000 and HK$56,688,000,representing approximately 7.1%, 13.3% and 36.7% of our total revenue forthe two financial years ended 31 March 2015 and the eight months ended 30November 2015, respectively. This demonstrates that our Group also placesequal emphasis on other major customers instead of confining ourselves to asingle customer.

� Our flexibility and capability to take up projects of different scales and meet therequirements of different customers

Our Group’s performance is, to a significant extent, attributable to our possessionof a broad range of site equipment. We possess sufficient number of siteequipment which enables us to perform civil engineering works of different scalesand complexity. To utilise our assets and facilitate our work effectively, we relyon management who has extensive knowledge and experience in the industry. Wealso have a project team with members possessing relevant qualifications andindustry experience, details of which are set out in the section headed “Directorsand senior management” in this prospectus. As such, we are capable of providingrecommendations on the projects in order to meet the requirement of differentcustomers.

� Our future business plan

– Our business opportunities arose mainly from invitation for tenders bycustomers. In the civil engineering construction industry in Hong Kong,reputation, relationships with customers, flexibility and price constitute thekey factors of competition and we consider that our customers will select

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their subcontractors based on these factors. We experienced a strong demandfor our services from a wide range of customers during the Track RecordPeriod as evidenced by the number of tender invitations that we receivedfrom customers during the Track Record Period. Please refer to theparagraph headed “Operation flow – Invitation for tendering, preparation andsubmission – Tenders submitted during the Track Record Period” of thissection for further details.

– A majority of our five largest customers has business relationship with us forover 10 years. Although our five largest customers represent over 90% ofour revenue during the Track Record Period, the scale of projects from thesemajor customers continues to grow. For instance, from 2013 to 2014, wewere awarded 2 tender contracts with an aggregate contract value ofapproximately HK$87 million relating to construction of portal beams for theHong Kong-Zhuhai-Macao Bridge project. From 2014 to 2015, we wereawarded 3 tender contracts by China State Construction with an aggregatecontract value of approximately HK$187 million for roads and drainageworks and structural works relating to widening of Fanling Highway. From2015 to 2016, we were awarded tender contracts by China Harbour with anaggregate contract value of approximately HK$929.6 million for structuralworks relating to the Hong Kong-Zhuhai-Macao Bridge project andassociated infrastructure works. The above demonstrates our businessstrategy to pursue relatively sizeable civil engineering construction projects.

– As such, we intend to purchase additional site equipment to cater to a widerrange of requirements from our customers. We intend to use approximatelyHK$18.0 million from the net proceeds from the Placing to purchase siteequipment for our projects and approximately HK$7.6 million from the netproceeds to recruit additional staff members to capture these businessopportunities.

– As at the Latest Practicable Date, we had 20 contracts on hand. Thesecontracts are expected to contribute approximately HK$191,737,000 andapproximately HK$824,469,000 to our revenue for the period from 1December 2015 to 31 March 2016 and for the year ending 31 March 2017,respectively. The amount of revenue expected to be recognised is subject tochange due to the actual progress and commencement and completion datesof our projects. Out of the 20 contracts on hand, 15 contracts have beenentered into between our Group and the customers other than China Harbourand its joint ventures, such contracts are expected to contributeapproximately HK$47,695,000 and approximately HK$78,411,000 to ourrevenue for the period from 1 December 2015 to 31 March 2016 and for theyear ending 31 March 2017, respectively.

Marketing activities

During the Track Record Period, we secured new businesses mainly through directinvitation for tender by customers. Our Directors consider that due to our proven trackrecord and our well-established relationship with our existing customers, we are able toleverage our existing customer base, reputation and our years of experience in civil

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engineering construction projects such that we do not rely heavily on marketing andpromotional activities. Our executive Directors are generally responsible for liaising andmaintaining our relationship with customers and keeping abreast of market developmentsand potential business opportunities.

Pricing strategy

Our pricing is determined based on a cost-plus pricing model in general with markupdetermined on a project-by-project basis. We estimate our cost of undertaking a project withreference to various factors including but not limited to (i) the nature, scale and complexityof the project, (ii) the estimated number and types of workers and site equipment required;(iii) the construction methods and techniques expected to be applied in a project; (iv) thecompletion date requested by customers; and (v) the prevailing market conditions in general.

When preparing for a tender, we also take into account the estimated material cost withreference to the relevant price indicators on the material and labour prices. When there isprice fluctuation on such price indicators in the preceding month which our managementconsiders to be material, we will obtain quotations from our suppliers for preparation of thebills of quantities or schedule of rates which would form part of the tender document andgovern the relevant material costs for a project. Furthermore, we determine a certainpercentage of markup over our estimated cost on a project-by-project basis. The markuppercentage may vary for different projects due to factors such as (i) the size of the project;and (ii) the likelihood of any material deviation of the actual cost from our estimated costhaving regard to the types and amount of labours, site equipment, materials and otherresources involved in our cost estimations.

Major terms of engagement

Our customers engage us on a project basis and our customers do not enter intolong-term agreements with us. In general, contracts entered into between us and ourcustomers contain major terms and conditions relating to the particulars of a project,contract price, contract period, the type and scope of work, bills of quantities or schedule ofrates, payment terms, retention money, liquidated damages, indemnities, insurance anddefects liability period. The following summarises the major terms of engagement with ourcustomers:

Contract period

The period of a project typically starts from the date when we are allowed tocommence work at the construction site. The contract period varies depending on the projectsize and complexity. However, such period may be extended pursuant to the terms of therelevant contract.

Types and scope of work

The contract also identifies the types and scope of the work in details which we areengaged to perform under the contracts, details of which are set out in the paragraph headed“Our services” in this section.

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Bills of quantities or schedule of rates

Most of our contracts would include the bills of quantities or schedule of rates whichgenerally contain the description of the types of work, specifications, quantities of works tobe done and the unit rates for each type of works under the project. In general, there is nospecific clauses in relation to price adjustment in our contracts with our customers.

Payment terms

For interim or progress payment, we generally provide our customers with a writtenstatement of the details of completed works, the estimated fee of our work done along withany variation orders (if any) and the costs of the materials delivered under the contract on amonthly basis. In respect of final payment, we usually issue final account showing theamount we are entitled to for our customers’ approval. For details, please refer to theparagraphs headed “Operation flow – Customer inspection and application for payment andcertification” and “Operation flow – Project completion” in this section.

Retention money

Our customers may hold up a certain percentage of each interim payment made to usas retention money. In general, our customers may retain up to 10% of each interim paymentand up to a maximum limit of 5% of the contract sum as retention money for a project. 50%of the retention money withheld is normally released to us after completion of a project andthe remaining retention money is normally released after the expiry of the defects liabilityperiod.

As at 31 March 2014 and 2015 and 30 November 2015, our retention moniesreceivables amounted to approximately HK$17,957,000, HK$19,217,000 andHK$23,815,000, respectively. Please refer to the section headed “Financial information –Discussion of certain combined statements of financial position items – Trade and otherreceivables” in this prospectus for a further discussion and analysis regarding our trade andother receivables.

Liquidated damages

A contract may contain clauses on liquidated damages to protect our customers againstany significant delay in completion of works subcontracted to us. However, under certaincircumstances such as poor weather conditions or issue of variation orders, our customersmay grant us extension of time without a need to pay liquidated damages to the customers.

During the Track Record Period and up to the Latest Practicable Date, no liquidateddamages of material nature had been claimed by our customers against us by reason of latecompletion of any of the contracts undertaken by us.

Indemnities

Pursuant to most of our contracts, we shall indemnify our customers against allliabilities for bodily injury, damage to property, penalties, proceedings, damages, cost,charges and expenses which may arise out of or in connection with execution of our workbeing in breach of any applicable laws or regulation, unless the aforementioned liabilities or

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claims are caused solely by the wrongful acts or omissions of our customers. For anycriminal charges against our Group due to non-compliance of applicable laws andregulations in relation to safety, health and environment by the subcontractors’ employees,we are generally entitled under the terms of the subcontracting agreement between us andour subcontractors to claim against our Group’s subcontractors for any losses, liabilities,costs and expenses resulting from such criminal charges or convictions. Our Directorsconfirm that we had not experienced any material claims by our customers arising frombreach of contracts during the Track Record Period and up to the Latest Practicable Date.

Insurance

In general, it is the obligation of the main contractor of the civil engineering project toeffect proper insurance policies against damages, claims and compensation in respect of thepersons who are employed to work at the construction sites. Please refer to the paragraphheaded “Insurance” in this section below for further details.

Termination

If, in the opinion of our customers, we fail to execute the works in accordance withour customers’ requirements and our works are unsatisfactory or likely to be so and causeunduly delay to the overall progress of the project, our customer may terminate our contractby giving advance notice of intention to do so.

During the Track Record Period and up to the Latest Practicable Date, we did notexperience any early termination of contracts by our customers.

Performance guarantee

As confirmed by our Directors, it is not uncommon for main contractors to require thedirectors and/or shareholders of subcontractors to provide performance guarantee in thesubcontracts as security for our Group’s due performance and observance of the subcontract.

During the Track Record Period and up to the Latest Practicable Date, there were 9contracts in an aggregate contract sum of HK$284,175,000 which involved performanceguarantees provided by Mr. CK Wong and/or Mr. WW Wong, our executive Directors andControlling Shareholders, in favour of certain customers. Pursuant to the performanceguarantee, Mr. CK Wong and/or Mr. WW Wong have given a personal guarantee as securityfor the due performance and observance of our Group’s obligations under the contracts up toa specified amount ranging from 10% to 25% of the contract sum to an unlimited amountfor all losses and damages suffered by the customers as a result of our Group’s default underthe contract. As at the Latest Practicable Date, among those 9 contracts, 4 contracts werecompleted and performance guarantee in respect of such contracts were released and 5contracts are still in progress. Please refer to the section headed “Relationship with ourControlling Shareholders – (i) Financial independence” in this prospectus for details of theperformance guarantees given by our Controlling Shareholders.

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Defects liability period

After completion of a contract, we are subject to a defects liability period of 12 monthsduring which we are responsible to rectify works defects or imperfections arising fromworks subcontracted to us. If we have engaged subcontractors for a project, we normallyrequire an identical defects liability period from our subcontractors in respect of the workscarried out by the subcontractors.

If any defects or imperfections are identified, we will agree on a rectification worksprogramme with our customers so that the defects can be remedied as soon as practicable.We will then arrange our direct labours to execute the rectification works at our own costsor, where applicable, require the relevant subcontractor to rectify the defects and/or bear therectification costs. During the Track Record Period, we did not experience any materialclaim by our customers arising from defective works.

Collection of our trade receivables and retention monies receivables

As at 31 March 2014 and 2015 and 30 November 2015, we recorded trade receivablesof approximately HK$15,583,000, HK$33,832,000 and HK$29,786,000, respectively, ofwhich approximately HK$1,447,000, HK$3,514,000 and HK$937,000, respectively had beenpast due but not impaired. For the two years ended 31 March 2015 and the eight monthsended 30 November 2015, our debtors’ turnover days were approximately 39.6 days, 33.2days and 50.2 days, respectively. In addition, we had concentration of credit risk ofapproximately 30.5%, 38.3% and 46.7% of our total trade receivables as at 31 March 2014and 2015 and 30 November 2015, respectively, were due from our largest debtor, andapproximately 90.2%, 97.2% and 93.6% from our five largest debtors.

In order to mitigate our risk in relation to the collectability of our trade receivables andretention monies receivables, we have implemented the following measures:

� Customer acceptance procedures are performed on our customers, including butnot limited to (i) checking our internal record regarding the payment history ofthe existing customer; and (ii) for sizeable projects, depending on the situationand with the assistance of independent consultant if necessary, doing appropriatesearches to ascertain the potential customer’s credibility.

� Material overdue payments are monitored continuously and evaluated on acase-by-case basis as to the appropriate follow-up actions having regard to thecustomer’s normal payment processing procedures, our relationship with thecustomer, its financial position as well as the general economic environment.

� Follow-up actions generally include but not limited to issuing payment reminders,actively liaising with customers, and, if necessary, taking legal actions.

� In addition, we review the recoverable amount of each individual receivablebalance at the end of each reporting period to ensure adequate impairment lossesare provided for irrecoverable amounts.

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Please also refer to the section headed “Financial information – Discussion of certaincombined statements of financial position items – Trade and other receivables” in thisprospectus for a further discussion and analysis on our trade receivables and our tradereceivables turnover days during the Track Record Period.

Seasonality

Our Directors believe that the industry in which we operate does not exhibit anysignificant seasonality.

INVENTORIES

We do not maintain any inventories during the Track Record Period as our constructionmaterials are purchased and consumed on a project-by-project basis.

SUPPLIERS

During the Track Record Period, the principal construction materials used andpurchased by our Group include concrete, steel reinforcement bars, precast concrete units,timbers and diesel fuel which are sourced from a number of suppliers on our Group’sapproved list.

Characteristics of our suppliers

During the Track Record Period, suppliers of goods and services to our Group mainlyinclude: (i) suppliers of construction materials; (ii) site equipment rental service providers;and (iii) suppliers of other parts and consumables such as nails and screws and othermiscellaneous goods including personal protective equipment used by our on-site workerssuch as reflective vests and safety helmets.

We generally order the relevant construction materials and services on aproject-by-project basis and therefore do not enter into any long-term supply agreementswith our suppliers. Our Directors believe that we have maintained good businessrelationships with our suppliers. During the Track Record Period, we did not encounter anymaterial difficulty in sourcing supplies based on our needs. We are usually responsible forsourcing construction materials for our projects, and except in the case where we areprovided with materials by our customers pursuant to the contra-charge arrangement, detailsof which are set out in the paragraph headed “Suppliers – Contra-charge arrangement withour customers” in this section below, we are able to choose our own suppliers for ourprojects. As at the Latest Practicable Date, there were approximately 69 suppliers includedin our approved list of suppliers. We select our suppliers from our approved list of suppliersbased on their prices, quality, past performances and timeliness of delivery. Our suppliersnormally grant us a credit period of not more than 30 days from the invoice date.

During the Track Record Period, we did not experience any material difficulties ordelays in performing our projects caused by material shortage or delay in the supply ofgoods and services that we required. Our Directors consider that the possibility of a materialshortage or delay is low given the abundance of suppliers of the same kind in the market.

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The following table sets out a breakdown of our total purchases incurred by typeduring the Track Record Period:

For the year ended 31 MarchFor the eight months ended

30 November2014 2015 2014 2015

HK$’000 % HK$’000 % HK$’000 % HK$’000 %

Subcontracting charges 34,422 32.3 54,817 30.2 31,923 24.0 50,913 48.0Construction materials

and supplies 50,393 47.2 94,606 52.1 78,311 58.9 33,016 31.1Rental of site

equipment 21,441 20.1 31,874 17.5 22,493 16.9 21,988 20.7Parts and consumables 431 0.4 398 0.2 296 0.2 204 0.2

Total purchases 106,687 100.0 181,695 100.0 133,023 100.0 106,121 100.0

Please refer to the section headed “Financial information – Description of selectedcomponents of our income statement – Costs of sales” in this prospectus for a discussion ofthe trend in our purchases from our suppliers during the Track Record Period as shown inthe above table as well as the relevant sensitivity analyses.

During the Track Record Period, aside from one supplier in the PRC which providedprecast concrete units to us, our suppliers were located in Hong Kong and all our purchasesare denominated in HK dollars.

Prices of supplies

Prices are determined by reference to quotations of suppliers as agreed between us andthe suppliers on an order-by-order basis. Our Directors consider various factors, includingbut not limited to the future price trend of the materials and services when preparing tenderproposals and hence we could generally pass on the increase in costs to our customers.During the Track Record Period and up to the Latest Practicable Date, we did not experienceany material fluctuations in the costs of materials and services that had a material impact onour business, financial condition or results of operations.

Major suppliers

For the two years ended 31 March 2015 and the eight months ended 30 November2015, the percentage of our total purchases incurred (excluding subcontracting chargesincurred) from our largest supplier amounted to approximately 29.2%, 50.6% and 19.1% ofour total purchases incurred (excluding subcontracting charges incurred), respectively, whilethe percentage of our total purchases incurred (excluding subcontracting charges incurred)from our five largest suppliers combined amounted to approximately 55.7%, 67.5% and54.0% of our total purchases incurred (excluding subcontracting charges incurred),respectively.

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Set out below is a breakdown of our total purchases incurred (excluding subcontractingcharges incurred) by our five largest suppliers during the Track Record Period and theirrespective background information:


Rank Supplier Background of supplier

Type ofpurchases/rental from thesupplier

Approximateyear(s) ofbusinessrelationshipwith ourGroup Credit term

Paymentterm

Purchases by usfrom the supplier

HK$’000 %

1 China Harbour A construction contractorwhich is a subsidiary of acompany listed in HongKong

Purchase ofconstructionmaterials suchas concrete andsteelreinforcementbars (Note)


Set off withtradereceivables

21,092 29.2

2 Chun WoConstruction

A construction contractorwhich is a subsidiary of acompany listed in HongKong




5,396 7.5

3 Supplier C A company incorporated inHong Kong whichprincipally providesexcavators and dumptrucks for rental

Rental of dumptrucks

4 Monthlyprogresspayment with acredit period of30 days

Mainly bycheque

5,228 7.2

4 Supplier D A company incorporated inHong Kong whichprincipally engaged in theprovision of precastconcrete units

Purchase ofprecast concreteunits


Mainly bycheque

4,826 6.7

5 Supplier E A partnership establishedin the PRC which isprincipally engaged in theproduction and sales ofprecast concrete units andhardware processing

Purchase ofprecast concreteunits


Mainly bycheque

3,701 5.1

Five largest suppliers combined 40,243 55.7All other suppliers 32,022 44.3

Total purchases incurred(excluding subcontracting charges incurred) 72,265 100.0

Note:

The purchases of the relevant construction materials are made pursuant to the contra-charge arrangement,details of which are set out in the paragraph headed “Suppliers – Contra-charge arrangement with ourcustomers” in this section below.

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Type ofpurchasesfrom thesupplier


Paymentterm


HK$’000 %





64,160 50.6

2 Supplier F A provider of constructionmaterials such asscaffoldings parts in HongKong and a subsidiary of acompany listed in London

Purchase ofscaffoldingsparts


Mainly bycheque

5,917 4.7

3 Supplier C A company incorporated inHong Kong whichprincipally providesexcavators and dumptrucks for rental

Rental of dumptrucks


Mainly bycheque

5,647 4.5






5,317 4.2

5 Supplier H A company incorporated inHong Kong whichprincipally provides siteequipment such as cranelorries and hydraulic truckcranes for rental

Rental of siteequipment suchas crane lorriesand hydraulictruck cranes


Mainly bycheque

4,451 3.5



Note:

The purchases of the relevant construction materials are made pursuant to the contra-charge arrangement,details of which are set out in the paragraph headed “Suppliers – Contra-charge arrangement with ourcustomers” in this section below.

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Type ofpurchases/rental from thesupplier


Paymentterm


HK$’000 %






10,561 19.1





8,361 15.1

3 Chun WoConstruction





3,969 7.2

4 Supplier H A company incorporated inHong Kong whichprincipally provides siteequipment such as cranelorries and hydraulic truckcranes for rental

Rental of siteequipment suchas crane lorriesand hydraulictruck cranes


Mainly bycheque

3,666 6.6

5 Supplier J A company incorporated inHong Kong whichprincipally provides siteequipment such as mobilecranes for rental

Rental of siteequipment suchas mobilecranes

Less than1 year

Monthlyprogresspayment with acredit period of30 days

Mainly bycheque

3,337 6.0



Note: The purchases of the relevant construction materials are made pursuant to the contra-chargearrangement, details of which are set out in the paragraph headed “Suppliers – Contra-chargearrangement with our customers” in this section below.

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None of our Directors, their close associates, or any Shareholders who to ourDirectors’ knowledge owned more than 5% of the issued Shares of our Company as at theLatest Practicable Date had any interest in any of the five largest suppliers of our Groupduring the Track Record Period.

Contra-charge arrangement with our customers

According to the Ipsos Report, it is common in the civil engineering constructionindustry that a main contractor may pay on behalf of its subcontractor for certain expensesfor a civil engineering project. Such expenses are typically deducted from its payments tothat subcontractor in settling its service fees for the project. Such payment arrangement isreferred to as the “contra charge arrangement” and the amounts involved are referred to asthe “contra-charge”.

During the Track Record Period, we had contra-charge arrangement with some of ourcustomers. Such contra-charge consisted of purchase cost of construction materials, rentalcost of site equipment, utility cost and other miscellaneous expenses. Pursuant to thecontra-charge arrangement set out in the contract with our customers, upon our writtenrequest, our customer may purchase construction materials specified in the contract such asconcrete materials and steel reinforcement bars and make payments on our behalf. Suchpurchase cost of construction materials is settled by way of contra-charge to the accountwith such customer. Our customers may also, upon our request, lease their site equipment toour Group or pay miscellaneous expenses on our behalf on an as-needed basis, where wesettled such amounts with our customers through the contra-charge arrangement. Effectively,the payments due to us from our customer will be settled after netting off such contra-chargeamounts. For each of the two years ended 31 March 2015 and the eight months ended 30November 2015, our contra-charge incurred amounted to HK$27,492,000, HK$73,004,000and HK$23,985,000 respectively, and such contra-charge incurred amounts attributable toour top five customers during the Track Record Period amounted to approximatelyHK$27,336,000, HK$71,973,000 and HK$23,985,000, respectively, representingapproximately 99.4%, 98.6% and 100.0% of our total contra-charge incurred for the sameperiods, respectively. As we settled such costs by way of contra-charge by netting off withthe payments due from our customers, both cash inflows from the project work done andcash outflows from the purchase of construction materials were reduced by the sameamount. Therefore, the contra-charge arrangement had no material effect on the Group’scashflow positions during the Track Record Period.

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The following table sets forth the information on our customers from whom we hadcontra-charge arrangement during the Track Record Period:

For theyear

ended 31March

2014

For theyear

ended 31March

2015

For theeight

monthsended 30

November2015

HK$’000Approximate

% HK$’000Approximate


%

China HarbourRevenue derived and

approximate % of totalrevenue 101,138 63.2 144,349 53.1 33,643 21.7

Contra-charge charged by ChinaHarbour and approximate %of total purchases incurred(excluding subcontractingcharges incurred) 21,217 29.4 64,160 50.6 8,361 15.1

Weighted average of gross profitmargin (Note) 4.9 4.9 7.2

China State ConstructionRevenue derived and


Contra-charge charged by ChinaState Construction andapproximate % of totalpurchases incurred (excludingsubcontracting chargesincurred) 679 0.9 5,362 4.2 10,561 19.0


Chun Wo ConstructionRevenue derived and


Contra-charge charged by ChunWo Construction andapproximate % of totalpurchases incurred (excludingsubcontracting chargesincurred) 5,396 7.5 2,298 1.8 3,969 7.2

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For theyear

ended 31March

2014

For theyear

ended 31March

2015

For theeight

monthsended 30

November2015




%


Customer DRevenue derived and


Contra-charge charged byCustomer D and approximate% of total purchases incurred(excluding subcontractingincurred charges) 44 0.1 − – – –


Dragages − China Harbour −VSL J.V.

Revenue derived andapproximate % of totalrevenue 5,431 3.4 61,682 22.7 29,136 18.8

Contra-charge charged byDragages − China Harbour −VSL J.V. and approximate %of total purchases incurred(excluding subcontractingcharges incurred) 117 0.2 153 0.1 1,094 2.0


China State − Leader JointVenture

Revenue derived andapproximate % of totalrevenue 3,052 1.9 4,542 1.7 – –

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For theyear

ended 31March

2014

For theyear

ended 31March

2015

For theeight

monthsended 30

November2015




%

Contra-charge charged by ChinaState − Leader Joint Ventureand approximate % of totalpurchases incurred (excludingsubcontracting chargesincurred) 39 0.1 1,031 0.8 – –

Weighted average of gross profitmargin (Note) 29.0 29.0 –

Note: The weighted average of gross profit margin equals the simple average of project gross profitmargins weighted by project revenues.

SUBCONTRACTORS

It is a common industry practice for subcontractors to further subcontract part of theirworks to other subcontractors. Subject to our capacity, resources level, types of civilengineering works, cost effectiveness, complexity of the projects and customers’requirements, we may subcontract our works such as steel fixing works, formwork erectionworks and drainage works to other subcontractors in a project.

Our subcontractors include local sole proprietors as well as limited liability companies.During the Track Record Period, all of our subcontractors were located in Hong Kong andall of our service fees were denominated in HK dollars. Hop Fung, one of our operatingsubsidiaries, is also a subcontractor for one of our civil engineering contracts.

We are accountable to our customers for the works performed in a project, includingthose carried out by our subcontractors. Unless otherwise specified in the contracts with ourcustomers, our customers generally consent to our use of subcontractor for a project and donot limit which subcontractor to be used by us. According to the agreements we entered intowith our subcontractors, we are entitled to hold our subcontractors liable for any damagessuffered by our Group.

For the two years ended 31 March 2015 and the eight months ended 30 November2015, we incurred subcontracting charges of approximately HK$34,422,000, HK$54,817,000and HK$50,913,000, respectively. Please refer to the section headed “Financial Information– Description of selected components of our income statement – Costs of sales” in thisprospectus for the relevant sensitivity analysis.

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Major subcontractors

For the two years ended 31 March 2015 and the eight months ended 30 November2015, the percentage of our Group’s subcontracting charges incurred attributable to ourGroup’s largest subcontractor amounted to approximately 17.3%, 17.7% and 15.0% of ourGroup’s total subcontracting charges incurred, respectively, while the percentage of ourGroup’s subcontracting charges incurred attributable to our Group’s five largestsubcontractors combined amounted to approximately 61.8%, 53.3% and 55.7% of ourGroup’s total subcontracting charges incurred, respectively, for the same period.

Set out below is a breakdown of our Group’s total subcontracting charges incurred tomajor subcontractors of our Group and their respective background information:


Rank Subcontractor

Type of servicesprovided by thesubcontractor

Approximateyear(s) ofbusinessrelationshipwith ourGroup Credit term Payment term

Totalsubcontracting

charges incurredHK$’000 %

1 Subcontractor A (Note 1) Formwork erection 10 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

5,947 17.3

2 Subcontractor B (Note 2) Drainage works 2 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

4,678 13.6

3 Subcontractor C (Note 1) Steel fixing 2 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

4,082 11.9

4 Subcontractor D (Note 1) Formwork erection 9 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

3,343 9.7

5 Subcontractor E (Note 1) Drainage works 3 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

3,210 9.3

Five largest subcontractors combined 21,260 61.8All other subcontractors 13,162 38.2

Total subcontracting charges incurred 34,422 100.0

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Note:

1. Each of these subcontractors is a sole proprietorship established in Hong Kong and a subcontractingservice provider for civil engineering construction projects.

2. Subcontractor B is a limited liability company incorporated in Hong Kong and a subcontractingservice provider for civil engineering construction projects.


Rank Subcontractor



Total subcontractingcharges incurred

HK$’000 %

1 Subcontractor C (Note) Steel fixing 2 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

9,727 17.7

2 Subcontractor A (Note) Formwork erection 10 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

6,518 11.9

3 Subcontractor D (Note) Formwork erection 9 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

4,918 9.0

4 Subcontractor F (Note) Formwork erection 8 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

4,102 7.5

5 Subcontractor G (Note) Formwork erection 10 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

3,931 7.2



Note: Each of these subcontractors is a sole proprietorship established in Hong Kong and a subcontractingservice provider for civil engineering construction projects.

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Rank Subcontractor



Total subcontractingcharges incurred

HK$’000 %

1 Subcontractor C (Note) Steel fixing 2 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

7,626 15.0

2 Subcontractor H (Note) Steel fixing 2 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

5,646 11.1

3 Subcontractor J (Note) Drainage works 4 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

5,380 10.6

4 Subcontractor E (Note) Drainage works 3 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

4,976 9.8

5. Subcontractor A(Note) Formwork erection 10 Within 30 days from theissue of paymentapplication from thesubcontractor to our Group

Mainly bycheque

4,709 9.2



Note: Each of these subcontractors is a sole proprietorship established in Hong Kong and a subcontractingservice provider for civil engineering construction projects.

None of our Directors, their close associates, or any Shareholders who or which, to theknowledge of our Directors, owned more than 5% of the issued Shares of our Company asat the Latest Practicable Date had any interest in any of the five largest subcontractors ofour Group during the Track Record Period.

Basis of selection of subcontractors

We maintain an internal list of approved subcontractors. We carefully evaluate theperformance of our subcontractors and select subcontractors based on a range of factors suchas their background, technical capability, experience, fee quotations, service quality, track

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records, labour resources, timeliness of delivery, reputation and safety performance. We willreview and update our internal approved list of subcontractors according to our assessmentof their performance on a continuous basis.

Key terms of subcontracting engagement

As our customers engage us on a project basis, we do not enter into any long-termcontract with our subcontractors. We enter into written agreement (with a term ofengagement mirroring with the terms of the contract with our customer) with oursubcontractors governing the general terms of subcontracting arrangement. The followingsummarises the major terms of engagement with our subcontractors:

Scope of works andspecification

: The scope of services and types of works to be carriedout by the subcontractor are specified in thesubcontracting agreement. In general, a subcontractor isrequired to perform its work in accordance with thespecifications required by our customer.

Subcontracting Fee : The subcontracting fee to be received by thesubcontractor is usually represented in a provisional sum,which is subject to remeasurement and valuationaccording to the bills of quantities included in thesubcontract and further subject to any variation orders oradditional works to be performed by the subcontractorswith our prior consent. In general, we determine theamount of subcontracting charges based on (i) certainpercentage of the amount of fees to be received by usfrom our customers in respect of the portion of worksbeing subcontracted; (ii) the amount of labour resourcesrequired from our subcontractors; (iii) the nature ofworks to be performed by our subcontractors; and (iv) theprevailing market conditions. There is no priceadjustment clause in the subcontracts between our Groupand our subcontractors.

Payment terms : For interim payments, our subcontractors are required toprovide us with a payment application setting out thedetails of the completed work on a monthly basis and wegenerally pay our subcontractors within 30 days after thepayment application is certified and approved by us.

In respect of final payment, a final account is submittedby our subcontractor within 60 days after the practicalcompletion of the project and we will first release 50% ofthe retention money and the final payment to oursubcontractor. After the expiry of the defects liabilityperiod, we will release the remaining retention money toour subcontractor.

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Defects liabilityperiod andretention money

: Similar to the practices with our customers, we alsorequire a defects liability period of 12 months duringwhich our subcontractors shall be responsible forrectifying works defects arising from works subcontractedto them at their own expenses. Unless otherwise agreed,we usually hold up to 5% of each interim payment to oursubcontractor as retention money. 50% of the retentionmoney withheld is usually released to our subcontractorsafter completion of a project and the remaining retentionmoney is released after the expiry of the defects liabilityperiod.

Safety andprohibition ofillegal workers

: Our subcontractors are required to carry out the works inaccordance with all relevant safety, health andenvironmental laws, rules and regulations as well as thesafety rule of the main contractor and these of our Group.Our subcontractors are also prohibited from hiring illegalworkers. In the event of any non-compliance, the relevantsubcontractor shall indemnify our Group against anyexpenses, penalties and other losses arising from suchnon-compliance.

Termination : If a subcontractor leaves the work uncompleted, fails tocomplete the work on the date of completion or, if in theopinion of our project manager or construction manager,the works are unsatisfactory, our Group may terminatethe subcontracting agreement by giving advance notice ofintention to do so.

Indemnity : Subcontractors are required to indemnify our Groupagainst any loss, expense or claim arising from the failureto comply with subcontracting agreement by thesubcontractor and/or its employees. We are entitled tohold our subcontractors liable for any loss and damagesuffered by our Group if their works are not performed inaccordance with the requirements set out in the maincontract.

Control over subcontractors

In order to closely monitor the performance of our subcontractors and to ensure thatthe subcontractors comply with the contractual requirements and the relevant laws andregulations, we require our subcontractors to follow our internal control measures in relationto quality control, safety and environmental compliance. During project implementation, ourproject team regularly meets with our subcontractors and closely monitors their workprogress and performance as well as their compliance with our safety measures and quality

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standards. For further information regarding our measures in relation to quality control,safety and environmental compliance, please refer to the paragraphs headed “Qualitycontrol”, “Occupational health and safety” and “Environmental compliance” in this section.

During the Track Record Period and up to the Latest Practicable Date, there were nomaterial disputes between our Group and our customers with respect to the quality of workperformed by us and our subcontractors.

SITE EQUIPMENT

Type of site equipment

We rely on the use of site equipment to enable us to carry out civil engineering worksand possess a broad range of site equipment to perform different types of projects. OurDirectors believe that our investment in site equipment will enable us to cater to projects oflarger scale and higher complexity in the future.

For the two years ended 31 March 2015 and the eight months ended 30 November2015, we acquired new site equipment in the amount of approximately HK$4,310,000,HK$410,000 and HK$812,000 at cost, respectively. As at 30 November 2015, our siteequipment carried a net book value of approximately HK$6,898,000. Set out below are themajor types of site equipment used by our Group:

(i) Excavator

An excavator is a heavy construction equipment consisting of a boom, arm, bucket andcab on an upperstructure which could rotate. The upperstructure sits atop an undercarriagewith tracks or wheels.

(ii) Hydraulic breaker

A hydraulic breaker is a powerful percussion hammer fitted to an excavator fordemolition, construction and quarrying. It is powered by an auxiliary hydraulic system fromthe excavator which is fitted with a foot-operated valve for this purpose.

(iii) Vibrating roller

A vibrating roller is a compactor type of engineering vehicle used to compact soil,gravel, asphalt in the construction of roads and foundations.

(iv) Air compressor

An air compressor is a device that forces air into a chamber and compresses the air toprovide high-pressure air to power pneumatic tools, such as jackhammers.

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(v) Generator

A generator provides backup electrical power as virtual power plant at the constructionsites.

(vi) Aerial working platforms

An aerial work platform, also known as an aerial device or an elevating work platformis a mechanical device used to provide temporary access for people or equipment toinaccessible areas, usually at height.

(vii) Hydraulic truck crane

A hydraulic truck crane is a type of machine, generally equipped with a hoist rope,wire ropes or chains, and sheaves, that can be used both to lift and lower materials and tomove them horizontally. It is mainly used for lifting heavy things and transporting them toother places.

(viii) Others

Other site equipment of our Group include hydraulic cranes, hydraulic hammers,welding machines and other commonly used construction site equipment.

The following table sets out the useful life and average age of our major types of siteequipment as at 30 November 2015:

Type of site equipmentExpected

useful lifeAverage

age(years) (years)

Excavator 10.0 5.0Hydraulic breaker 10.0 4.0Vibrating roller 10.0 7.5Air compressor 10.0 10.1Generator 10.0 4.2Aerial working platform 10.0 1.9Hydraulic truck crane 10.0 1.7Others 10.0 8.3

Total 10.0 5.7

We normally purchase our site equipment from authorised dealers in Hong Kong ordirectly from the overseas manufacturer and do not purchase any parallel-imported siteequipment.

With the possession of our own site equipment, we do not have to rely completely onour suppliers for site equipment rental services. During the Track Record Period, we rentedsite equipment from independent third parties, save for the site equipment rental arrangement

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with Hop Fung Crane Company as described below. Such site equipment primarily includedump trucks, crane lorries, hydraulic truck cranes and excavators. For the two years ended31 March 2015 and the eight months ended 30 November 2015, our site equipment rentalcost incurred amounted to approximately HK$21,441,000, HK$31,874,000 andHK$21,988,000, respectively.

For the financial year ended 31 March 2015 and up to 31 October 2015, we rented acrane and an excavator from Hop Fung Crane Company on normal commercial terms and inordinary course of our business. Hop Fung Crane Company is a partnership established inHong Kong and was principally engaged in leasing of construction site equipment. HopFung Crane Company is owned by the spouse of Mr. CK Wong (our executive Director andone of our Controlling Shareholders) and an independent third party. For the two yearsended 31 March 2015 and the eight months ended 30 November 2015, the total siteequipment rental costs paid to Hop Fung Crane Company amounted to approximatelyHK$Nil, HK$772,000 and HK$633,000, respectively. Such rental arrangement with HopFung Crane Company has been completed and ceased. Our Directors confirm that, duringthe Track Record Period and up to the Latest Practicable Date, Hop Fung Crane Companydid not conduct any business activities which competed or was likely to compete, directly orindirectly, with the business of our Group.

We believe that our investment in different types of site equipment has placed us in aposition to cater to projects of different scales and complexity. Our Directors also considerthat possession of our own site equipment allows us to devise suitable works schedules andmethods tailored to the different needs and requirements of different customers and enablesus to efficiently and effectively schedule our projects and deploy our manpower.

Repair and maintenance

We perform on-site routine checks on our site equipment prior to commencement ofour projects and during the execution stage of the projects. In addition, routine maintenanceprocedures, such as injecting lubricants when they run out and cleaning the dust that pile upin the key components of the site equipment to ensure smooth operation, are performed onan on-going basis by our in-house mechanics.

We have a team of in-house mechanics who are capable of repairing and maintainingour site equipment. As at the Latest Practicable Date, our team of in-house mechanicsconsisted of a mechanic with 30 years of experience and the 2 licensed electricians who arequalified to perform electrical maintenance work. Our in-house mechanics are capable ofrepairing minor defects in the site equipment such as replacing the worn-out ormalfunctioning parts and components of a machine when it becomes out of order. As such,we are able to extend the usable life of our site equipment which is more cost-effective thanreplacing the entire machine with a new one. Routine and minor examination and repairingby our in-house mechanics is less time-consuming and can shorten the idle time duringwhich a malfunctioning or out-of-order machine remains unusable.

For malfunctioning site equipment that requires major examination and/or specialisedskills, we will send such malfunctioning site equipment to the authorised dealer for repairs ifthe site equipment is still under warranty, or send to other third party repair companies.

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Age and replacement cycle of site equipment

The following table sets out a breakdown of the value of our site equipment bydifferent age groups as at the Latest Practicable Date:

Number ofunits of site

equipment

Net bookvalue of site

equipment

Original costof acquisition

of siteequipment

HK$’000 HK$’000(unaudited)

Less than 1 year 6 1,055 1,1051 year to less than 3 years 8 3,345 4,7203 years to less than 5 years 15 1,669 3,0765 years or above 27 728 4,163

56 6,797 13,064

Our Directors consider that as at the Latest Practicable Date, our existing siteequipment (including those whose useful life has almost reached the end of the expecteduseful life) were in good operating conditions in general. We do not have a pre-determinedor regular replacement cycle for our site equipment. Replacement decisions are made on acase-by-case basis having regard to the operating condition of each unit of site equipmentand the cost effectiveness of replacing only the malfunctioning parts. The average age of oursite equipment based on the cost of acquisition is approximately 5.8 years. The averageremaining useful life of our site equipment based on accounting estimation is approximately4.7 years. We replace aged site equipment only when it is imperative to do so. Pursuant toour accounting policies, depreciation of site equipment is provided for using straight-linemethod over a period of 10 years. In particular, as the air compressors owned by our Groupare close to full depreciation, it is our Group’s plan to utilise proceeds from the Placing ofapproximately HK$0.1 million to acquire an additional air compressor to further enhanceand optimise our overall construction efficiency. Our Directors consider that (i) the existingair compressors were still in good operating conditions in general as at the LatestPracticable Date; (ii) it only takes up to one month to replace an air compressor; and (iii) anair compressor is not costly and can be readily rented and/or purchased from anyindependent third parties to satisfy our project needs. Our Group will also continue toevaluate the operating condition, effectiveness and efficiency of our site equipment andassess our need for additional site equipment in view of our business development.

Safekeeping of site equipment

Site equipment that are in use at work sites are kept under the general management ofthe respective work sites. During the Track Record Period, site equipment that was not inuse was stored in our warehouse located in a leased premises located in Yuen Long, whichwere equipped with locked gates and closed-circuit television security cameras. The tenancyagreement for our warehouse in Yuen Long has been terminated by us in August 2015,details of the said tenancy agreement is set out in the paragraph headed “Properties” in this

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section. As at the Latest Practicable Date, given the number of projects on hand and theavailability of our site equipment for such projects, all of our site equipment are operating atfull service capacity in construction sites and no storage of idle site equipment is required.

Financing arrangements for the purchase of motor vehicles and site equipment

Taking into account our liquidity position and capital need, during the Track RecordPeriod, our Group raised external financing for the purchase of some motor vehicles and siteequipment through finance leases and bank borrowings, respectively. In considering whetheror not to enter into finance lease arrangements, our Group takes into account several factorsincluding interest cost, availability of funds, repayment schedule and security requirements,among which interest cost is an important factor. As at 31 March 2014 and 2015 and 30November 2015, the effective interest rates ranged from 3.21% to 7.35% and from 3.25% to6.21% and from 3.23% to 6.21% per annum, respectively for our banking facilities(including finance leases).

During the Track Record Period, our Group acquired certain motor vehicles by way offinance leases, under which our Group had to pay stipulated monthly rents for use of themotor vehicles in a fixed term. Since the terms of these finance leases transfer substantiallyall the risks and rewards of ownership of the motor vehicles to our Group as the lessee, therelevant motor vehicles were accounted for as our Group’s assets under the category ofproperty, plant and equipment. Our Group had motor vehicles under finance leases with netbook value amounting to approximately HK$4,103,000, HK$3,223,000 and HK$4,171,000 asat 31 March 2014 and 2015 and 30 November 2015, representing approximately 94.1%,92.3% and 87.8% of the net book value of motor vehicles as at 31 March 2014 and 2015and 30 November 2015, respectively.

Service capacity and utilisation rate

Our Directors consider that due to the nature of our business and operations, it is notfeasible and not practicable to quantify and disclose detailed service capacity and utilisationrate of our site equipment for the following reasons:

(a) Different types of site equipment have different functions and it is therefore notentirely feasible to quantify the capacity of each piece of site equipment bymaking reference to an objective and comparable scale or standard ofmeasurement.

(b) The utilisation rate of each individual site equipment cannot be clearly defined. Atypical civil engineering projects requires the use of different site equipment atdifferent stages, and site equipment may from time to time be left unused inactive construction sites pending completion of other stages. Site equipment isalso sometimes left unused for repairing or maintenance at work sites.

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(c) As set out in the fixed asset register of our Group as at 30 November 2015, wehad more than 50 units of site equipment and over 10 types of site equipment ofvarious sizes and capacity. Given the number of site equipment owned by ourGroup, it is impracticable for our Group to track in details the usage of eachindividual site equipment.

In view of the above, it would be difficult and impracticable to define accurateutilisation rate of site equipment in general and to make a full account of the daily/hourlyusage of each individual site equipment. Nevertheless, we will optimise our operationalefficiency and capacity by scheduling the use of suitable site equipment at suitable time withreference to the construction method involved in a project.

QUALITY CONTROL

To maintain consistent quality services for our customers, we have established formalquality management system which is certified to be in compliance with the requirements ofISO 9001:2008. We have in-house quality assurance requirements specifying, among otherthings, specific work procedures for performing different types of works, responsibilities ofpersonnel of different levels, quality inspection procedures and standards, subcontractingrequirements, accident reporting and complaint and punitive measures for works below ourrequired standards and work procedures for operating different types of site equipment.Compliance of these quality assurance requirements is mandatory for our workers andsubcontractors.

Mr. CK Wong and Mr. WW Wong, our executive Directors and our ControllingShareholders, are responsible for our overall quality control. For the background andindustry experience of Mr. CK Wong and Mr. WW Wong, please refer to the section headed“Directors and senior management” in this prospectus.

Quality control on our services

Our executive Directors closely monitor the progress of each project to ensure that ourservice (i) meets our customer’s requirements; (ii) are completed within the time stipulatedin the contract and the budget allocated for the project; and (iii) comply with all relevantand applicable rules and regulations. Our project managers and construction managers assistour executive Directors to monitor overall work quality and project progress. Our site agentscoordinate with our foremen to perform on-site inspections and supervise site workers on adaily basis. Our project managers will timely inform our executive Directors of the projectstatus and any quality issues arising from project execution.

For our quality control measures over our subcontractors, please refer to the paragraphheaded “Subcontractors – Control over subcontractors” of this section.

Quality control on our site equipment and materials

We closely monitor the quality of purchased materials and site equipment. To ensurethe quality of supplies, prior to ordering, our purchasing department will ensure that thematerials are sourced from our approved suppliers to ensure overall quality of supplies.

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Upon arrival of the ordered materials, all materials are sent directly to the relevant worksites for inspection by our foremen and engineers before utilisation. During the inspection,we will check (i) whether the quantity is correct; (ii) whether there is any observabledefects; and (iii) for site equipment purchased by us, whether it functions normally. Inaddition, for certain public sector projects, our Group is also required to engage independentprofessionals or professionals appointed by our customers to perform inspection and qualitytests on sample materials such as precast concrete units. Any defective materials or materialsthat fall short of the product specifications would be returned to the suppliers forreplacement.

Our Directors confirm that during the Track Record Period and up to the LatestPracticable Date, we had not received any complaint or claim for compensation from ourcustomers due to quality issue in relation to works performed by us or by oursubcontractors.

OCCUPATIONAL HEALTH AND SAFETY

Occupational health and work safety measures

We place emphasis on occupational health and work safety during the delivery of ourservices as it is our concern not to put our employees, the subcontractors and the generalpublic in hazards. We have adopted an occupational health and safety system as required byrelevant occupational health and safety laws, rules and regulations and managed by oursafety and environmental department under the supervision of Mr. WW Wong, whosebackground and industry experience are set out in the section headed “Directors and seniormanagement” in this prospectus. Our occupational health and safety management system iscertified to be in compliance with the standard required under OHSAS 18001:2007. Due tothe nature of works in construction sites, risks of accidents or injuries to workers areinherent. As such, we have established safety plans and in-house rules to provide ouremployees and our subcontractors’ employees with a safe and healthy working environmentby specifying various safety measures.

Our safety policy sets out the following work safety measures:

– Effective promotion and communication of safety procedures are maintainedthrough, among others, establishing safety bulletin and detailed record of accidentstatistics, holding regular internal and external safety meetings, documentingsafety measures and issues identified for each project by preparing safety reportsand training records.

– All employees on site, including subcontractors’ employees, are required toreceive site safety induction briefing sessions and trainings before they commencework on-site and during the course of execution of project on-site. Topics of oursafety training typically cover safety procedures for performing different types ofwork, safety procedures for handling chemicals, safety procedures for emergencyand duties and procedures for reporting hazards, incidents, accidents and diseases,and good housekeeping of workplaces.

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– All employees on site, including subcontractors’ employees, are required to followthe general safety rules adopted by our Group which are communicated to theworkers before they commence work and posted on prominent notice boards onsite. Workers who breach any such rules will be subject to internal disciplinaryactions.

– Risk assessments are generally conducted by our engineer and safety &environmental manager to identify the potential hazards and accidents and providesuggestion on proper preventive measures prior to commencement of works.

– Site inspections are carried out on a daily basis by our safety supervisors on siteto ensure strict compliance with the statutory occupational health and safety laws,rules and regulations.

– Specific safety measures in relation to, among others, emergency, working atheight, roadwork or work adjacent to live carriageway, sewerage and drainageworks, site transport, construction of temporary access road, safe operation of siteequipment and reporting of hazards and accidents are communicated with workersand documented in detail.

Our safety & environmental department, which is supervised by Mr. WW Wong,consists of a safety & environmental manager, 2 safety officers and 3 safety supervisors.Our safety & environment department is responsible for preparing safety plans, managingour occupational health and safety management system to ensure smooth implementation ofour safety procedures and risk control measures. We also keep our customers informed ofthe safety issues identified from each project through regular safety meetings and submissionof safety reports. Furthermore, a site safety team is formed for different projects at site levelwhich generally consists of, among others, our project manager, site agent, engineer, safetyofficer or safety supervisor and the authorised representative of subcontractors. The role ofour site safety team is to monitor the implementation of on-site safety measures includinginspection of site equipment to ensure they are safe for use, regular safety checks tomaintain safe working environment and site tidiness, handling safety incidents and keepingsafety records. While our on-site staff are required to attend regular safety briefingsconducted by our customers, we also provide further safety training to our staff coveringtopics such as our safety measures and requirements and the use of personal protectiveequipment.

We have received a certificate from DW Certification Limited for our currentcompliance with OHSAS 18001. Our Group was accredited with OHSAS 18001:2007compliance certification in August 2015. The current certificate will expire in August 2018.The accreditation body, DW Certification Limited, conducts an external audit to assesswhether the relevant management system is in conformity with the standards in place everythree years. Such surveillance visit is normally conducted on a yearly basis before the expiryof the relevant certificate. Upon satisfaction in regards to the relevant management system, arenewal certificate will be issued.

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It is also noteworthy that we have received certain awards from our customers inrecognition of our good safety performance. For further details, please refer to the paragraphheaded “Awards and recognitions” in this section.

System of recording and handling accidents and our safety compliance record

If an accident occurs, the injured worker (including our employees and oursubcontractors’ employees) or the person who witnessed the accident is required to report toour site staff or safety officer. Our safety officer will then investigate the accident by takingphotos in respect of the accident scene, examine the equipment or material involved (if any)and take statements from the injured worker, witness(es) of the accident (if any) and otherpersonnel in relation to the particular project. If the accident is a “reportable accident” asassessed by our safety officer, he will prepare an accident report and submit it to ourcustomer (the main contractor) and the Labour Department within the period as specifiedunder the relevant laws and regulations. “Reportable accidents” means workplace accidentsthat are required to be reported to the Labour Department. For any accident that results intotal or partial incapacity of an employee, the accident should be reported in writing within14 days after the date of accident. For accidents that involve death or fatal injury to anemployee, the accident has to be notified to the Labour Department within 7 days after theaccident.

Remedial actions will be taken by our project management team to remove imminentdanger and to prevent reoccurrence of similar accidents in the future. Our safety officer willcarry out follow-up inspection to ensure that remedial works are implemented.

The following table sets out a comparison of the industrial accident rate per 1,000workers and the industrial fatality rate per 1,000 workers in the construction industry inHong Kong between our Group and the industry average during the periods indicated:

ConstructionIndustry in Hong

Kong(Note 1)

Our Group(Note 2)

From 1 January to 31 December 2013Industrial accident rate per 1,000 workers in

construction industry 40.8 3.36Industrial fatality rate per 1,000 workers in

construction industry 0.277 0


construction industry 41.9 16.88Industrial fatality rate per 1,000 workers in

construction industry 0.242 3.38(Note 3)


construction industry not available 16.22Industrial fatality rate per 1,000 workers in

construction industry not available 0

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Notes:

1. The statistics are extracted from the Occupational Safety and Health Statistics Bulletin Issue No.15(August 2015) published by Occupational Safety and Health Branch of the Labour Department of theGovernment.

2. Our Group’s accident rate and fatality rate is calculated by dividing the number of reportableaccidents and accidents involving fatal injuries (as the case may be) during the calendar year orrelevant period (i.e., 1 in 2013; 5 in 2014; and 5 in 2015) by the number of site workers as at theend of the calendar year. The number of site workers includes employees of our Group and oursubcontractors.

3. In 2014, there was one fatal accident involving a worker employed by a subcontractor of our Group.

Please refer to the paragraph below for further details.

As at the Latest Practicable Date, there were 2 ongoing common law personal injuryclaims, 5 ongoing employees’ compensation litigations, 2 ongoing criminal litigations, 6potential employees’ compensation claims and 13 potential common law personal injuryclaims arising from 2 accidents and 13 accidents (of which occurrence of 1 accident wasalleged by a claimant of an employee’s compensation case) occurred before and during theTrack Record Period and up to the Latest Practicable Date, respectively, further details ofwhich are disclosed in the paragraphs headed “Litigation and potential claims – Ongoinglitigations in relation to employees’ compensation claims, common law personal injuryclaims and criminal litigations against our Group as at the Latest Practicable Date” and“Litigation and potential claims – Potential litigations in relation to employees’compensation claims and common law personal injury claims against our Group as at theLatest Practicable Date”, respectively, in this section below. As illustrated above, theaccident rate at our construction sites was substantially lower than the construction industryaverage in Hong Kong for the two calendar years ended 31 December 2013 and 31December 2014. A comparison of the industry’s average accident rate and that of ourGroup’s for the calendar year ended 31 December 2015 is not available as there is norelevant industrial accident rate for such period as at the Latest Practicable Date.

In November 2014, there was one incident involving fatal injury at the construction sitewhereby a worker employed by a subcontractor of our Group was fatally injured andcertified dead in the course of unloading the water pipes. The deceased and the workersinvolving in the aforesaid unloading operation which caused injuries to the deceased werenot our direct employees. It was alleged that on the date of the incident, bundles of waterpipes were stacked on the deck of the lorry. Three bundles, namely the first bundle to thethird bundle of 4 water pipes, each was stacked on the deck of the lorry counted frombottom, and the last bundle of 3 water pipes, namely the fourth bundle, was placed on thetop. During the unloading operation of the the fourth bundle, it struck the deceased who wasworking by the left side of the lorry.

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After the aforesaid accident, relevant loading and unloading operations at the relevantwork site was suspended by the Labour Department. In this connection, a method statementwas prepared by the main contractor and submitted to the Labour Department to demonstratethe safety measures for the loading and unloading procedures to be followed at the relevantwork site. To further strengthen our safety control and avoid re-occurrence of similarincident in the future, we had reviewed the aforesaid method statement and implemented thefollowing key internal control measures for carrying out loading and unloading operations:–

– Temporary traffic arrangement for the loading and unloading operations wereproperly implemented.

– Access at unloading area shall be checked thoroughly before operation.

– Safety briefings for all workers were conducted at the loading and unloading area.

– Lifting gear shall be checked and examined thoroughly.

– Positions of crane lorry shall be checked and examined thoroughly.

– The area of lifting operations shall be fenced off during the operation and noworker shall be allowed to approach the lifting zone.

– All material shall be secured with guide rope during the lifting operations.

After the implementation of the aforementioned measures, the Labour Departmentpermitted resumption of the relevant loading and unloading operations at the relevant worksite in January 2015. The fatal accident resulted in criminal charges brought against therelevant main contractor, our Group as a subcontractor and the relevant sub-subcontractor(engaged by us), which was direct employer of the deceased and workers involving in thesaid incident. For further details of the said incident, please refer to the paragraph headed“Litigation and potential claims” in this section. Our Directors believe that the accidentshould have been caused by the own deviation of the relevant safety requirements by thedeceased and/or workers, who were not our direct employees, involving in the unloadingoperation and that the occurrence of the incident was not within our reasonableforeseeability of the hazards. Our Directors also believe that, so far as reasonablypracticable, we had maintained our safety management system and have followed allnecessary safety requirement as required by the main contractor in the unloading operation.Further, as it is the burden of the prosecution to prove their case beyond reasonable doubt attrial, we are advised that we have merits in our defence.

A table showing our Group’s lost time injuries frequency rates (“LTIFR(s)”) is set outbelow:

For the year ended 31 December 2013 1.14For the year ended 31 December 2014 5.70From 1 January 2015 to 31 December 2015 5.5

Notes:

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1. LTIFR is a frequency rate that shows how many lost time injuries occurred over a specified time(e.g. per 1,000,000 hours) worked in a period. The LTIFRs shown above are calculated bymultiplying the number of lost time injuries in terms of loss days of our Group that occurred duringthe relevant calendar year or period by 1,000,000 divided by the number of hours worked by siteworkers over the same calendar year or period. It is assumed that the working hour of each worker is10 hours per day. The number of working days for the three calendar years ended 31 December 2015were approximately 295 days, 296 days and 295 days, respectively.

2. Employees of our Group and our subcontractors are included in the LTIFRs shown above.

For the two calendar years ended 31 December 2015, we experienced an increase inLTIFRs. Our Directors believe that it was primarily due to the following reasons:

(i) An increase in total number of construction site workers being employed by ourGroup during the aforesaid period resulted in increasing number of reportableaccidents.

(ii) As a result of the shortage of skilled workers in the construction industry in HongKong during the aforesaid period, our Group had to employ more constructionworkers who are less experienced with weaker safety awareness.

Our Directors consider that our Group’s LTIFRs during the Track Record Period werecomparatively lower than some of the peers’ in the construction industry. Going forward, wewill continue to take sufficient safety measures and provide more safety training to increasethe work safety awareness of our workers and our subcontractors in the hope of reducing thenumber of work accidents in the future.

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The following table sets out the common nature and type of material industrialaccidents which occurred during the Track Record Period or may occur in construction siteand the corresponding safety measures and requirements to prevent the occurrence of similaraccidents:

Nature and type of industrialaccidents

Safety measures and requirements undertaken

Contusion, laceration and/orfracture injury caused inconnection with lifting anddisposing of materials

We always seek to minimise the needs for ourworkers to handle and lift heavy materials wherepossible. In circumstances where manual handlingof heavy materials is inevitable, our Group willprovide relevant facilities such as hydraulic truckcranes, loaders or carts to facilitate such manualworks. Training to workers in relation to thecorrect handling techniques will also be conductedin accordance with the relevant rules andregulations.

Contusion, laceration and/orfracture injury in connectionwith operating site equipment

Workers are required to strictly follow relevantsafety procedures for operating various types ofsite equipment such as grinding wheels and liftingmachinery. Only qualified and/or trained workersare permitted to operate certain site equipmentaccording to our in-house safety rules.

Contusion, bruise, sprain and/orfracture injury caused inconnection with falling fromhigh-altitude

Workers are required to strictly follow ourGroup’s relevant safety rules whilst working atheight. For works to be conducted within liftshafts and at a height of 2 metres or above, therelevant working platforms or structures shall beinspected by competent person beforecommencement of work and regularly during thecourse of execution of the work. Depending onthe height of works, each worker is strictlyrequired to wear safety harness.

External safety consultant

To further enhance our employees’ awareness in work safety, in July 2015, we engagedan external safety consultant to advise us on the general safety policy of our Group. Theexternal safety consultant team includes a chartered member of the Institution ofOccupational Safety and Health of the United Kingdom. The external safety consultantconducted a review on our occupational health and safety policy with a view to assisting ourGroup to (i) comply with the statutory obligations, (ii) improve employees’ occupationalhealth and safety, (iii) enhance the hazard identification and risk control capabilities, and(iv) encourage the identification, sharing and implementation of best practice. Furthermore,the external safety consultant assisted our Group to complete the certification audit of

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OHSAS 18001:2007 in August 2015 which helps our Group to (i) identify and control healthand safety risks, (ii) reduce the potential risks for accidents, (iii) aid legal compliance, and(iv) improve overall safety performance.

ENVIRONMENTAL COMPLIANCE

Our Group’s operations on sites are subject to certain environmental requirementspursuant to the laws in Hong Kong such as Air Pollution Control Ordinance, Noise ControlOrdinance, Water Pollution Control Ordinance and Waste Disposal Ordinance. For details ofthe regulatory requirements, please refer to the section headed “Regulatory overview” in thisprospectus.

We are committed to the minimisation of any adverse impact on the environmentresulting from our business activities. In order to comply with the applicable environmentalprotection laws, we had implemented an environmental management system which wascertified to be in compliance with the standard required under ISO 14001:2004. Apart fromfollowing the environmental protection policies formulated and required by our customers,we have also established our environmental management policy to ensure propermanagement of environmental protection and compliance of environmental laws andregulations by both our employees and workers of the subcontractors on among others, airpollution, noise control and waste disposal. For the two years ended 31 March 2015 and theeight months ended 30 November 2015, we incurred approximately HK$2,472,000,HK$3,033,000 and HK$1,381,000 respectively, which primarily consisted of Governmentlevy on dumping of construction wastes. The Group estimates that its annual cost ofcompliance going forward will be at a level similar to that during the Track Record Periodand consistent with its scale of operation.

During the Track Record Period and up to the Latest Practicable Date, we did notrecord any non-compliance with applicable environmental requirements that resulted inprosecution or penalty being brought against us.

It is also noteworthy that we have received certain awards from our customers inrecognition of our effort to act as an environmentally responsible subcontractor. For furtherdetails, please refer to the paragraph headed “Awards and recognitions” in this section.

INSURANCE

Pursuant to section 40 of the Employees’ Compensation Ordinance, all employers are,subject to section 40(1B) of the Employees’ Compensation Ordinance, required to take outinsurance policies to cover their liabilities both under the Employees’ CompensationOrdinance and at common law for injuries at work in respect of all their employees. Wehave obtained insurance cover in accordance with such requirement.

Pursuant to section 40(1B) of the Employees’ Compensation Ordinance, where a maincontractor has undertaken to perform any construction work, it may take out an insurancepolicy for an amount not less than HK$200 million per event to cover its liability and thatof its subcontractor(s) under the Employees’ Compensation Ordinance and at common law.Where a main contractor has taken out a policy of insurance under section 40(1B) of the

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Employees’ Compensation Ordinance, the main contractor and a subcontractor insured underthe policy shall be regarded as having complied with the relevant requirements of theEmployees’ Compensation Ordinance. As a subcontractor, our Group’s liability in respect ofthe claims from employees of our Group and our Group’s subcontractors arising out of andin the course of their employment will be covered by the insurance policy taken out by therelevant main contractor.

Our Directors confirmed that during the Track Record Period, all our civil engineeringprojects were covered and protected by the employees’ compensation insurance andcontractor’s all risks insurance taken out by the main contractor for the entire constructionproject. Such insurance policies covered and protected all employees of main contractors andsubcontractors of all tiers working in the relevant construction site, and the works performedby them in the relevant construction site.

During the Track Record Period, our Group maintained insurance coverage against,among other matters, (i) liability for third party bodily injury occurred in our officepremises; (ii) loss or damage of our site equipment; and (iii) third-party liability in relationto the use of our vehicles.

Certain types of risks, such as the risk in relation to the collectability of our trade andretention receivables and liabilities arising from events such as epidemics, natural disasters,adverse weather conditions, political unrest and terrorist attacks, are generally not coveredby insurance because they are either uninsurable or it is not cost justifiable to insure againstsuch risks.

Our Directors believe that our current insurance policies is adequate and consistentwith industry norm having regard to our current operations and the prevailing industrypractice. For the two years ended 31 March 2015 and the eight months ended 30 November2015, our insurance expenses were approximately HK$246,000, HK$262,000 andHK$409,000 respectively. During the Track Record Period and up to the Latest PracticableDate, we had not made, and had not been the subject of, any material insurance claim.

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EMPLOYEES

As at the Latest Practicable Date, we had 238 full-time employees who were directlyemployed by our Group in Hong Kong. The following table sets out a breakdown of thenumber of our employees by functions:

As atthe Latest

PracticableDate

Directors and general management 7Administration, accounting and finance 8Project management and supervision 17Safety and environmental compliance 8Engineering and surveying 22Site workers 176

238

Our Directors consider that we have maintained good relationship with our employees.We have not experienced any significant disputes with our employees or any disruption toour operations due to labour disputes, save as disclosed in the paragraph headed “Litigationand potential claims” in this section. In addition, we have not experienced any difficulties inrecruitment and retention of experienced core staff or skilled personnel during the TrackRecord Period.

We generally recruit our employees through placing advertisements in the open marketwith reference to factors such as their experience, qualifications and expertise required forour business operations. They are normally subject to a probation period ranging from 1month to 3 months. We endeavour to use our best effort to attract and retain appropriate andsuitable personnel to serve our Group. Our Group assesses the available human resources ona continuous basis and will determine whether additional personnel are required to cope withthe business development of our Group.

We provide various types of trainings to our employees and sponsor our employees toattend various training courses, including those on occupational health and safety in relationto our work. Such training courses include our internal training as well as courses organisedby external parties such as the Construction Industry Council and the Occupational Safetyand Health Council.

The remuneration package our Group offered to our employees includes salary, bonusesand other cash subsidies. In general, our Group determines employee salaries based on eachemployee’s qualifications, position and seniority. Our Group has designed an annual reviewsystem to assess the performance of our employees, which forms the basis of our decisionswith respect to salary raises, bonuses and promotions.

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Our Group operates MPF scheme for all qualifying employees in Hong Kong. Theassets of the schemes are held separately from those of our Group, in funds under thecontrol of trustees. Our Group contributes 5% of relevant monthly payroll costs to the MPFscheme, whose contribution is matched by employees and subject to a cap of HK$1,250from June 2012 to May 2014 and HK$1,500 thereafter per employee. During the two yearsended 31 March 2015 and the eight months ended 30 November 2015, the total expensesrecognised in the combined statements of comprehensive income amounted to approximatelyHK$1,397,000, HK$2,262,000 and HK$1,156,000, respectively, which represents contributionspayable to the scheme by our Group at rates specified in the rules of the MPF scheme.

RESEARCH AND DEVELOPMENT

During the Track Record Period and as at the Latest Practicable Date, we did notengage in any research and development activity.

COMPETITIVE LANDSCAPE

The top five civil engineering contractors act as main contractors in the overall civilengineering construction industry, and they accounted for about 54.6% of the total revenueof the civil engineering construction industry in 2014. Meanwhile, the civil engineeringsubcontracting industry in Hong Kong is fragmented. As at the Latest Practicable Date, therewere over 700 structural and civil engineering subcontractors being registered under theConstruction Industry Council. According to the Ipsos Report, in 2014, our Group accountedfor around 1.8% (or HK$254 million) of the total revenue in the civil engineeringconstruction industry generated by civil engineering subcontractors (HK$14.1 billion) inHong Kong.

Our Directors consider that technical expertise, quality of work, relationship withcustomers, suppliers and subcontractors, site equipment capability, project pricing and safetyrecords are the determinants of competitiveness of a civil engineering subcontractors inHong Kong. Entry barriers to the civil engineering construction industry in Hong Kongmainly include: (i) knowledge of civil engineering, structural, geology and technicalexpertise; (ii) sufficiency of practical industry experience; (iii) capital requirement; and (iii)significant capital investment in specialised site equipment. For details, please refer to thesection headed “Industry overview – Competitive landscape of the civil engineeringconstruction industry in Hong Kong – Entry barriers” in this prospectus.

According to the Ipsos Report, the demand for civil engineering works is expected tosurge in future due to various infrastructure development plans, notably the “Ten MajorInfrastructure Projects”, and the planned increase in the Government’s public expenditure oninfrastructure. With our own proven track record, experienced project management team, siteequipment, specialist knowledge in the civil engineering construction industry and stablerelationship with our key customers, suppliers and subcontractors, details of which are setout in the paragraph headed “Competitive strengths” in this section, our Directors believethat our Group is well-positioned to capture the growing demand for civil engineeringconstruction services in Hong Kong.

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Please refer to the section headed “Industry overview – Competitive landscape of thecivil engineering construction industry in Hong Kong” in this prospectus for further detailsof the competitive landscape of the civil engineering construction industry in Hong Kong.

PROPERTIES

Owned properties

The following table summarises the information regarding our owned property as at theLatest Practicable Date:

Address Gross floor area Use of the property(sq.ft.)

Workshop 16, 13th Floor,New Commerce Centre,19 On Sum Street, SiuLek Yuen, Shatin, NewTerritories, Hong Kong

660 For storage purpose

The above property was purchased by us in June 2007 for a consideration ofHK$1,600,000 (excluding relevant transaction costs) and was pledged as security for bankloan with an outstanding principal amount of approximately HK$2,008,000 as at 30November 2015. As at 31 January 2016, the market value of the above property wasapproximately HK$4,120,000 as assessed by Ascent Partners Valuation Service Limited, anindependent property valuer. For further details, please refer to the property valuation set outin Appendix III to this prospectus. For further information regarding our bank loans, pleaserefer to the section headed “Financial information – Indebtedness” in this prospectus.

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Leased properties

The following table summarises the information regarding our leased properties duringthe Track Record Period and up to the Latest Practicable Date:

Address LandlordGross

floor areaUse of theproperty

Key terms of thetenancy

(sq.ft)

Unit 05 on 15thFloor ofNorth Wing,Delta House,No. 3 On YiuStreet,Sha Tin, NewTerritories,Hong Kong

An independentthird party

625 For office use Monthly rental ofHK$16,167 with a termcommencing from 17August 2015 to 16August 2016

D.D. 121 Lot Nos.1387RP,1387ARP,1388 & 1389RPYuen Long,New Territories

Independent thirdparties

10,118 Used forstorage ofsiteequipment

Monthly rental ofHK$16,800 for theperiod commencingfrom 1 November 2012to 31 December 2014and HK$21,000 for theperiod commencingfrom 1 January 2015 to31 August 2015. Theterm of the tenancy hasexpired.

Licensed property

During the Track Record Period and up to 31 October 2015, Mr. CK Wong and Mr.WW Wong (as owners of the property) granted a licence to use Workshop 17, 13th Floor,New Commerce Centre, 19 On Sum Street, Siu Lek Yuen, Shatin, New Territories, HongKong to Luen Hing and Hop Fung as their office at nil consideration for such licence. Forthe two years ended 31 March 2015 and the eight months ended 30 November 2015, themanagement fee and rates of such licensed property amounted to approximately HK$15,000,HK$18,000 and HK$11,000, respectively. Our Directors confirm that the aforesaid licencearrangement in relation to such property had been completed and ceased.

Property rental income

During the Track Record Period, we also owned an investment property located atFestival City, Tai Wai. Such investment property was purchased by us in June 2010 for aconsideration of HK$13,396,000 (excluding relevant transaction costs) with the intention ofleasing it for earning rental income.

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During the Track Record Period, we recognised rental income of approximatelyHK$679,000 from the lease of such investment property to independent third parties.

As we intend to focus on our business of undertaking contract works after Listing, wehave, on 18 September 2015, entered into a sale and purchase agreement with anindependent third party for the disposal of the investment property by us for a considerationof HK$12,700,000. The consideration was determined after arm’s length negotiation with thesaid independent third party and with reference to the market value of the investmentproperty as assessed by Ascent Partners Valuation Service Limited. Completion of thedisposal of the investment property took place on 30 October 2015.

INTELLECTUAL PROPERTY

As at the Latest Practicable Date, our Group has registered a trade mark in HongKong, which is intended to be used by our Group to foster our corporate image. Our Grouphas also registered of a domain name. Please refer to the section headed “B. Furtherinformation about the business – 2. Intellectual property rights of our Group” in Appendix Vto this prospectus for further details of our intellectual property rights.

As at the Latest Practicable Date, (i) we were not aware of any dispute orinfringements by our Group of any intellectual property rights owned by third parties, and(ii) we were not aware of any dispute or pending or threatened claims against our Group inrelation to material infringement of any intellectual property rights of third parties.

LICENSES, PERMITS AND REGISTRATION

As advised by the Legal Counsel, except for the business registration under theBusiness Registration Ordinance (Chapter 310 of the Laws of Hong Kong), there are nolicenses, permits or approvals required to be obtained for our Group to carry on our businessas a subcontractor of the relevant civil engineering projects.

Based on our Directors’ experience, some of our customers, in particular maincontractors of major public sector projects, prefer to engage subcontractors who areregistered in the Subcontractor Registration Scheme of the Construction Industry Council. Inview of this, we have first completed such registration since 2005. The following tablesummarises the details of such registration held by Luen Hing as at the Latest PracticableDate:

Type of registration Granted by Granted to Trades Specialties

Date ofupcomingexpiry

Registered Subcontractor Construction IndustryCouncil

Luen Hing Concreting Formwork,Reinforcement BarFixing, Concreting,General Civil Works,Other Structural andCivil Trades, FinishingWet Trades, Painting,Metal Work, Plumbing

Concreting Formwork,Reinforcement BarFixing, Concreting,General Civil Works,Other Structural andCivil Trades, Brick/block work, Painting,Metal Work, Plumbing

13/01/2017

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The Subcontractor Registration Scheme was introduced by the Construction IndustryCouncil in order to build up a pool of capable and responsible subcontractors withspecialised skills and strong professional ethics. The registration and the renewal ofregistration for the Subcontractor Registration Scheme are subject to the satisfaction ofcertain entry requirements which primarily concern the applicant’s experience and/orqualification in the relevant works. For further details in relation to the SubcontractorRegistration Scheme, please refer to the section headed “Regulatory overview − Contractorlicensing regime and operation − Contractor licensing regime and subcontractor registrationscheme” in this prospectus. Our Directors confirm that during the Track Record Period andup to the Latest Practicable Date, we had satisfied all requirements for the registration andthe renewal of registration for the Subcontractor Registration Scheme. Our Directorsconfirmed that our Group had not experienced any material difficulties in obtaining and/orrenewing the aforesaid registration and they were not aware of any circumstances that wouldsignificantly hinder or delay the renewal of the registration. Our Directors do not foreseeany material impediment in the renewal of the aforesaid registration by us.

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AWARDS AND RECOGNITIONS

We have received a number of awards or certificates during our operating history inrecognition of our commitment and dedication to safety management and environmentalcompliance. The following table summarises the awards or certificates obtained by ourGroup:

Certifications for compliance with ISO/OHSAS requirements

Date Award or recognition Issuing organisation

August 2015 (Note) Certification of approval inrelation to our qualitymanagement system to be incompliance with therequirements of ISO9001:2008 in respect of ourprovision of civil engineeringworks

DW Certification Limited

August 2015 (Note) Certification of approval inrelation to our occupationalhealth and safety managementsystem to be in compliancewith the requirements of ISO14001:2004 in respect of ourprovision of civil engineeringworks


August 2015 (Note) Certificate of approval inrelation to our environmentalmanagement system to be incompliance with therequirements of OHSAS18001:2007 in respect of ourprovision of civil engineeringworks


Note: The certification will be renewed every three years and the current certificate will expire on 16August 2018.

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Awards in recognition of our Group’s safety and environmental compliance

Date Award or recognition

July 2000 Distinction Safety Performance Subcontractor – Tseung Kwan ORoad Project (TKOTL55) granted by an affiliate of our majorcustomer

2005-2006 Construction Industry Safety Award Scheme – Bronze Awardgranted by the Labour Department

March 2009 The Environmental Subcontractor Award granted by our majorcustomer

April 2009 The Safest Subcontractor Award granted by our major customer

August 2009 The Environmental Subcontractor Award granted by our majorcustomer

January 2010 Excellent Site Safety Award granted by our major customer

May 2013 Winner of Safe Sub-contractor Award granted by our majorcustomer

June 2014 The Best Subcontractor/ Joint Venture Working Team Awardgranted by our major customer under the Safety &Environmental Incentive Scheme

LITIGATION AND POTENTIAL CLAIMS

During the Track Record Period and as at the Latest Practicable Date, our Group hadbeen or is involved in a number of claims, litigations and potential claims against ourGroup. Set out below are the details of (i) the ongoing litigations in relation to employees’compensation claims, common law personal injury claims and criminal litigations againstour Group as at the Latest Practicable Date; (ii) potential litigations in relation toemployees’ compensation claims and common law personal injury claims against our Groupas at the Latest Practicable Date; (iii) the litigation in relation to employees’ compensationclaims and common law personal injury claims against our Group settled or withdrawnduring the Track Record Period and up to the Latest Practicable Date; and (iv) our criminalconvictions during the Track Record Period and up to the Latest Practicable Date.

Our Group’s liabilities in a case of personal injuries to our employees by accidentsarising out of and in the course of their employment include those under (i) the Employees’Compensation Ordinance; and (ii) common law personal injury claim. The Employees’Compensation Ordinance establishes a no-fault, non-contributory employee compensationsystem which gives employees the right to compensation in respect of (i) injuries or deathcaused by accidents arising out of and in the course of employment, or (ii) prescribedoccupational diseases under the Employees’ Compensation Ordinance. On the other hand,unlike an employee’ compensation claim under the Employees’ Compensation Ordinance

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which no proof of our fault is required, if the injury is caused to an employee by ournegligence, breach of statutory duty, or other wrongful act or omission, an injured employeemay also bring a common law personal injury claim against us. For some of the potentialclaims, even if the relevant employees’ compensation had been settled under our employees’compensation insurance, the injured employees may still pursue litigation claims throughpersonal injury claims against us under common law. The damages awarded under commonlaw claims are normally reduced by the value of the compensation paid or payable under theEmployees’ Compensation Ordinance in any event. Our Directors are of the view thatoccurrence of personal injury claims and employees’ compensation claims is not uncommonin the industry.

Ongoing litigations in relation to employees’ compensation claims, common lawpersonal injury claims and criminal litigations against our Group as at the LatestPracticable Date

Luen Hing has joined as a defendant in respect of the following nine outstandingclaims and litigations:

Name(s) of ourGroupcompany(ies)

Particulars of thecharges

Total amountinvolved for theongoing claims Status

Insurancecoverage

Potential consequence and maximumpenalties

Personal injury claims

1. Luen Hing In June 2012, it waspurported that theplaintiff sustainedinjuries to his left footwhilst erectingformwork in the courseof work.

To be assessed bythe court.(Note 1)

Ongoing.Checklist reviewhearing to be heldon 8 April 2016.

To be coveredby insurancepolicy.

N/A

2. Luen Hing In September 2012, itwas purported that theplaintiff sufferedfracture of his rightshoulder whilsttransferring metal platesin the course of work.

ApproximatelyHK$1,399,000plus interest andcosts as shown inthe claimant’swithout prejudicepre-action letter,however, the finalamount is to beassessed by thecourt.

Ongoing.Checklist reviewhearing to be heldon 26 August2016.


N/A

Employees’ compensation claims

3. Luen Hing In January 2015, it waspurported that theplaintiff sustainedinjury to his right footwhilst the operator ofthe crane lorry operatedthe crane lorry to liftup iron chain withoutawaiting the plaintiff tounfasten a bundle ofiron bars from the ironchain

To be assessed bythe court.

Ongoing. Firsthearing to be heldon 27 May 2016.


N/A

4. Luen Hing In August 2014, it waspurported that theplaintiff crushed his leftmiddle finger whilstpositioning the loadingor unloading manholecover and frame.


Ongoing. Firsthearing to be heldon 5 August 2016.


N/A

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Insurancecoverage


5. Luen Hing In August 2014, it waspurported that theplaintiff sustainedinjury on his rightshoulder whilst pryingthe base of a concretebarrier with a crowbar.


Ongoing. Firsthearing to be heldon 2 September2016.


N/A

6. Luen Hing In March 2015, it waspurported that theplaintiff sustainedinjuries over his head,neck and back whilstperforming bar bendingwork.

To be assessed bythe court.(Note 2)



N/A

7. Luen Hing In February 2014, itwas purported that theplaintiff sustainedinjuries to his rightelbow and left handwhilst using a drillingmachine.

To be assessed bythe court.(Notes 2 and 3)



N/A

Criminal litigations

8. Luen Hing In October 2014, LuenHing was charged bythe Labour Departmentthat it failed: (i) toprovide and maintainsafe plant and systemof work, (ii) to providenecessary information,instruction, training andsupervision for safety atwork of person(s)employed at industrialundertaking as requiredunder the Factories andIndustrial UndertakingsOrdinance, and (iii) toensure workmanwearing suitable safetyhelmet as requiredunder the ConstructionSites (Safety)Regulation.


Ongoing. Trialhearing to be heldon 29 April 2016.

As confirmedby ourDirectors,penaltiesarising fromcriminalclaims areusually notcovered byinsurance.

Under the Factories and IndustrialUndertakings Ordinance, in relation tocharges (i) and (ii), the maximum penaltyfor each of them is a fine of HK$500,000and imprisonment for 6 months.

Under the Construction Sites (Safety)Regulation, in relation to charge (iii), themaximum penalty is a fine of HK$50,000.

As advised by our Legal Counsel, since thedirectors, officers and employees of LuenHing are not the defendant, they will nothave any liability under charges and thelikelihood of the Court to impose maximumpenalty is not particularly high and a fairestimate of the likely penalty would be fineof HK$120,000, HK$120,000 andHK$15,000 for the charges (i), (ii) and (iii),respectively, if Luen Hing is found liable.Our Legal Counsel also opined that if LuenHing is so convicted, the conviction will nothave any significant impact creatingimpediment on the application for renewalof registration of Luen Hing under theSubcontractor Registration Scheme. In viewof the amount of the likely penalty, ourDirectors consider that no provision isnecessary to be made.

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Insurancecoverage


9. Luen Hing In November 2014,Luen Hing was chargedby the LabourDepartment that itfailed: (i) to provideand maintain a systemof work for unloadingwater pipes, so far asreasonably practicable,safe and without risksto health and (ii) toprovide suchinformation, instruction,training and supervisionfor the health andsafety at work of allemployees whichresulted in the death ofa worker.


Ongoing. Trialhearing to be heldon 17-20 and 24May 2016 (with25 May 2016 bereserved).

As confirmedby ourDirectors,penaltiesarising fromcriminalclaims areusually notcovered byinsurance.

Under the Factories and IndustrialUndertakings Ordinance, a fine ofHK$500,000 and to imprisonment for 6months.

As advised by our Legal Counsel, since thedirectors, officers and employees of LuenHing are not the defendant, they will nothave any liability under these charges andthe likelihood of the Court to imposemaximum penalty is not particularly highand a fair estimate of the likely penaltywould be a fine of HK$150,000 for each ofthe charges (i) and (ii) if Luen Hing isfound liable. As further advised by ourLegal Counsel that according to the casespresented by the prosecution, Luen Hingwas not the one accused for failure toprovide and maintain a system of work andproper information, training and supervisionfor the health and safety of workers at theindustrial undertaking, however, undersection 13(1) of the Factories and IndustrialUndertakings Ordinance, even if the offenceis committed by other proprietor(s), LuenHing (as one of the proprietors of the sameindustrial undertaking) will still be liable forthe same offence. Our Legal Counsel,therefore, opined that even if Luen Hingwas so convicted, its role and culpability inthis case would be minor and the convictionwould not have any significant impactcreating impediment on the application forrenewal of registration of Luen Hing underthe Subcontractor Registration Scheme. Inview of the amount of the likely penalty,our Directors consider that no provision isnecessary to be made.

Notes:

1. As at the Latest Practicable Date, no statement of damages was received by our Group. As such, weare not in a position to assess the likely amount of compensation and/or damages to be claimed bythe claimant in relation to such claim. Our Directors take the view that the amount to be borne byour Group in the proceeding shall be covered by the relevant insurance policy and our Group’s entireconduct of its defence against such claim in the proceeding has been taken up by the relevant insurer.

2. As at the Latest Practicable Date, the Labour Department had not yet assessed the amount of suchclaim. Our Directors take the view that the amount to be borne by our Group for this claim shall becovered by the relevant insurance policy.

3. The occurrence of the accident was being alleged by the claimant of the employee’s compensationcase.

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Potential litigations in relation to employees’ compensation claims and common lawpersonal injury claims against our Group as at the Latest Practicable Date

As confirmed by our Directors, as at the Latest Practicable Date, there were 13workplace accidents (of which occurrence of 1 accident was alleged by a claimant of anemployees’ compensation claim) occurred during the Track Record Period and up to theLatest Practicable Date, which gave rise to ongoing employees’ compensation claims andmay give rise to potential employees’ compensation and/or common law personal injuryclaims.

Potential claims refer to those claims that have not commenced against our Group butare within the limitation period of two years (for employees’ compensation claims) or threeyears (for personal injury claims) from the date of the relevant incidents pursuant to theLimitation Ordinance (Chapter 347 of the Laws of Hong Kong). As such court proceedingshave not commenced, we are not in a position to assess the likely quantum of such potentialclaims and outstanding claims. Our Directors take the view that the amount of such potentialclaims and outstanding claims to be borne by our Group in the proceedings shall be coveredby relevant insurance policy. These accidents (save for 1 accident as alleged by a claimantof an employees’ compensation claim) were caused during usual and ordinary course of ourbusiness and have neither caused disruption to our Group’s business nor have an adverseimpact on our Group to obtain any licences or permits for our operation. Please see below asummary of the expiry of limitation period of the aforesaid work injury cases:

Year

Number ofemployees’

compensationclaims which

limitationperiod will

expire

Number ofpersonal

injury claimswhich

limitationperiod will

expire

2016 2 02017 3 62018 1 62019 0 1

Total: 6 13

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The number of accidents that we recorded during the Track Record Period and up tothe Latest Practicable Date is summarised in the following table:


From 1 April 2015to the Latest

Practicable Date2014 2015

Number of accidents resulting ininjuries of:

� our employees 1(Note) 7 3� our subcontractors’ employees 0 1 1

1 8 4

Note: The occurrence of the accident was being alleged by the claimant of an employees’ compensation

case.

Litigations against our Group settled or withdrawn during the Track Record Periodand up to the Latest Practicable Date

During the Track Record Period and up to the Latest Practicable Date, the followingemployees’ compensation claims and/or personal injury claims, being covered by insurancepolicies, were settled or withdrawn against our Group.


Nature of theclaims

Particulars of theclaims

Approximatesettlementamount

Date ofsettlement/withdrawal ofclaims

1. LuenHing

Employees’compensationclaim

On 20 September2012, the applicantsuffered fracture ofhis right shoulderwhile moving ametal plate.

HK$110,000(exclusive ofcosts) (Note 1)

19 January2015

2. LuenHing

Employees’compensationclaim

On 14 June 2012, theapplicant sustainedinjuries to his leftfoot whilst erectingformwork.


17 December2014

3. LuenHing

(i) Employees’compensationclaim

(ii) Personalinjury claim

On 5 July 2012, theapplicant’s rightthigh was laceratedwhilst using a steelbending machine.

HK$1,054,000 (Note 2)

(exclusive ofcosts) (Note 1)

4 February2016

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Nature of theclaims

Particulars of theclaims

Approximatesettlementamount

Date ofsettlement/withdrawal ofclaims

4. LuenHing



On 18 September2010, the plaintifffell down a manholeor pit for a distanceof about 3 to 4meters and sustainedinjuries to his leftsided lumbar spineand left knee.

HK$1,837,040 (Note 2)


11 March 2015

5. LuenHing



On 26 July 2011, theplaintiff sustainedinjuries to his lowerback, left shoulderand left chest whilstlifting rebars.

HK$878,200 (Note 2)


30 June 2014

6. LuenHing

Personal injuryclaim

On 10 September2010, the plaintiff’sright foot wascontused and crashedby a dislodgedsegment of theconcrete pipe whilstinstalling a concretepipe.

HK$1,050,000(exclusive ofcosts) (Note 1)

17 January2014

7. LuenHing

Personal injuryclaim

On 1 September2011, the plaintiffsustained injuries tohis left back andright lower limbwhilst transportingbuilding materials.


2 October2013

Notes:

1. Our Directors confirm our Group’s entire conduct of its defence against such claims and settlementnegotiation in the proceeding have been taken up by the relevant insurer and the amount ofsettlement and litigation costs shall be totally covered by the relevant insurance policy.

2. The settlement amount settled both personal injury and employee’s compensation claims raised by theclaimant.

There are insurance policies in place to cover our potential liabilities in relation to theabove. For details, please refer to the paragraph headed “Insurance” in this section.

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No provision for litigation claims

Having considered, among other things, (i) the nature and the degree of injuries of theincidents; (ii) any payments made so far for settlement for the incidents; (iii) the status ofthe injured employees; (iv) the difficulty and uncertainty in estimating total costs oftreatment and potential claims against our Group; (v) the coverage of insurance policy; and(vi) our Group’s historical litigation records, our Directors consider that no provision forcontingent liabilities in respect of current, pending and potential litigations is necessary.

Indemnity given by our Controlling Shareholders

Our Controlling Shareholders have entered into a Deed of Indemnity whereby ourControlling Shareholders have agreed to indemnify our Group, subject to the terms andconditions of the Deed of Indemnity, in respect of any liabilities and penalties which mayarise as a result of any outstanding and potential litigations (including criminal litigations),claims of our Group on or before the date on which the Placing becomes unconditional.Further details of the Deed of Indemnity are set out in the paragraph headed “E. Otherinformation – Tax and other indemnities” in Appendix V to this prospectus.

Save as disclosed above, our Directors, to the best of their knowledge, information andbelief having made all reasonable enquiries, are not aware of any litigation proceedings(current, pending or threatened) against us which could have a material adverse effect on ourfinancial condition or results of operations.

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Criminal convictions

During the Track Record Period and up to the Latest Practicable Date, our Group wasconvicted for the following criminal litigations:

Name(s) of ourGroupcompany(ies) Particulars of the convictions Consequence and penalties

1. Luen Hing In October 2013, it was purported thatLuen Hing failed to take adequate stepsto prevent a person from falling from aheight of 2 metres or more, whichcontravenes Regulations 38B(1A),68(1)(a) and 68(2)(g) of the ConstructionSites (Safety) Regulations (Chapter 59Iof the laws of Hong Kong).

Luen Hing was convicted and finedHK$20,000.

Luen Hing paid the fine of HK$20,000 on 5June 2014.

Our Legal Counsel opined that this convictionwill not have any significant impact creatingimpediment on the application for renewal ofregistration of Luen Hing under theSubcontractor Registration Scheme.

2. Luen Hing In November 2014, it was purported thatLuen Hing failed to ensure that eachchain, rope and lifting gear in use shallbe thoroughly examined by a competentexaminer in the preceding six monthsbefore it is used, which contravenesRegulation 18(1)(e) and 19 of theFactories and Industrial Undertakings(Lifting Appliances and Lifting Gear)Regulations (Chapter 59J of the laws ofHong Kong).

Luen Hing was convicted and was finedHK$4,000.

Luen Hing paid the fine of HK$4,000 on 6August 2015.

Our Legal Counsel opined that this convictionwill not have any significant impact creatingimpediment on the application for renewal ofregistration of Luen Hing under theSubcontractor Registration Scheme.

The criminal convictions were all monetary penalty and such convictions were madeagainst our Group but not against our Directors or the senior management of our Grouppersonally.

Save as disclosed above and to best of our Directors’ knowledge and belief, during theTrack Record Period and up to the Latest Practicable Date, our Group did not experienceany significant incidents or accidents in relation to workers’ safety and we were notconvicted for any material breach of workplace safety laws and regulations.

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NON-COMPLIANCE

Our Directors confirm that they were aware of the occurrence of certainnon-compliances of our Group with (1) the Predecessor Companies Ordinance and theCompanies Ordinance in respect of matters including among others, timely adoption ofaudited accounts, failure to convene annual general meetings within the prescribed time, andlate filing of or missing reportable information in statutory forms to the Companies Registry;and (2) the Employment Ordinance (Chapter 57 of the Laws of Hong Kong) in respect oflate payment of wages to the Group employees. As advised by the Legal Counsel, thosenon-compliance incidents not disclosed in this prospectus are either time barred by the timelimit for prosecution of three years under both Predecessor Companies Ordinance andCompanies Ordinance or immaterial in nature under the relevant ordinances. Taking intoaccount the above and the fact that any loss, fee, expense and penalty of our Group inrelation to non-compliance matters will be fully indemnified by our ControllingShareholders, our Directors consider, and the Sponsor concurs, that the impact of themwould be immaterial upon our Group’s operation and financial positions.

As confirmed by our Directors, as at the Latest Practicable Date, save as disclosedabove, our Group did not receive any notices for any fines or penalties for anynon-compliance that is material and systemic.

Indemnity given by our Controlling Shareholders

Our Controlling Shareholders, collectively as the indemnifiers, entered into the Deed ofIndemnity whereby our Controlling Shareholders have agreed to indemnify our Group,subject to the terms and conditions of the Deed of Indemnity, in respect of any liabilitiesand penalties which may arise as a result of any non-compliances of our Group on or beforethe date on which the Placing becomes unconditional. Further details of the Deed ofIndemnity are set out in the paragraph headed “E. Other information – Tax and otherindemnities” in Appendix V to this prospectus.

No provision

No provision was made in the financial statements of our Group in respect of theaforementioned non-compliances as our Directors have taken into consideration thefollowing: (i) up to the Latest Practicable Date, our Directors were not aware of anyprosecution instituted against us or any notices for any fine or penalties in relation to theabove non-compliances; (ii) even if there is any prosecution, the actual amount of penaltycannot be estimated with reasonable accuracy and the potential maximum penalties of theabovementioned non-compliance incidents to be immaterial; (iii) legal opinion on chance ofprosecution and legal liability; and (iv) our Controlling Shareholders shall indemnify ourGroup pursuant to the Deed of Indemnity.

Having taken into account (i) the nature of the abovementioned non-compliances; and(ii) after adopting the preventative measures as set out in the paragraph headed“Non-compliance – Internal control measures to prevent the recurrence of non-complianceincidents” of this section below, there has not been any recurrence of similar types ofnon-compliances and there was no indication that our Directors lack the ability to operate

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the business in a fully compliant manner after adopting the preventative measures, ourDirectors are of the view, and the Sponsor concurs, that our Group’s internal controlmeasures are adequate and effective.

Furthermore, taking into account (i) the non-compliances mentioned above did notinvolve intentional misconduct, fraud, dishonesty or corruption on the part of our Directors;and (ii) our Directors have adopted the preventative measures as set out in the paragraphheaded “Non-compliance – Internal control measures to prevent the recurrence ofnon-compliance incidents” of this section below, our Directors are of the view, and theSponsor concurs, that these non-compliances do not reflect a material defect in the character,integrity or experience of our Directors. Furthermore, our Directors have been given trainingon the new Companies Ordinance. Our Directors are therefore of the view, and the Sponsorconcurs, that our Directors are suitable to act as our Company’s Directors under Rules 5.01and 5.02 of the GEM Listing Rules. Furthermore, given the rectification status of thenon-compliances identified as well as the Deed of Indemnity given in favour of us by ourControlling Shareholders, our Directors are of the view, and the Sponsor concurs, that theabovementioned non-compliances do not affect our suitability of Listing under Rule 11.06 ofthe GEM Listing Rules.

Internal control measures to prevent the recurrence of non-compliance incidents

In relation to the non-compliance incidents mentioned above, our Group has engagedCT Partners, an independent internal control adviser, to review and providerecommendations to our internal control designs for preventing the recurrence of theabove-mentioned non-compliance incidents. After taking into account the recommendationsmade by CT Partners, our Group has adopted or will adopt the following key measures:

1. with regard to the non-compliance in relation to the Predecessor CompaniesOrdinance and the Companies Ordinance, our company secretary, Mr. Woo YuenFai, has been responsible for keeping the filing register up to date on a monthlybasis in respect of, among other things, the status of all relevant documentsrequired under the Companies Ordinance (including the preparation status offinancial statements that are required to be laid in the following annual generalmeeting of each company in our Group) starting from November 2015 and wewill seek legal advice from external legal adviser to ensure ongoing compliance;and

2. with regard to the non-compliance in relation to the Employment Ordinance(Chapter 57 of the Laws of Hong Kong), written procedures have been put inplace to ensure on-going compliance on payroll. Our financial controller, Ms.Chan Yin Wa Cecilia, has been responsible for checking and approval of thepayroll record with the assistance from the designated personnel from the humanresources and administrative department.

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REVIEW BY CT PARTNERS

We endeavour to uphold the integrity of our business by maintaining an internal controlsystem into our organisational structure. In preparation for the Listing and to furtherimprove our internal control system, in August 2015, we engaged CT Partners, anindependent internal control adviser, to perform an evaluation under the Committee ofSponsoring Organisations of the Treadway Commission’s 2013 framework of the adequacyand effectiveness of our Group’s internal control system including the areas of financial,operation, compliance and risk management.

CT Partners is a company rendering internal control review services, which has beenpreviously engaged in internal control review projects for a number of companies listed onthe Stock Exchange. Besides, the engagement team of CT Partners includes members of theHong Kong Institute of Certified Public Accountants, a Certified Internal Auditor, a memberof the Society of Chinese Accountants & Auditors, a fellow member of the Associations ofChartered Certified Accountants, an associate member of the Association of InternationalAccountants, a member of Certified General Accountants Association of British Columbia,and an associate of the Taxation Institute of Hong Kong and a Certified Tax Adviser (HK).

In August 2015, CT Partners completed the first review of our internal control systemon, among others, our control environment, risk assessment, control activities, informationand communication, monitoring activities, financial reporting and disclosure, humanresources and payroll, cash management and treasury, sales and receipts cycle, projectmanagement and compliance procedures with Appendix 15 Corporate Governance Code ofthe GEM Listing Rules. In order to strengthen our internal control system and aside fromthe key measures taken to prevent the recurrence of the non-compliance incidents, albeitimmaterial in nature, stated in the paragraph headed “Non-compliance” of this section, ourGroup has also adopted or will adopt the following key measures:

– we agree to establish system and manuals in relation to, among others,distribution of annual, interim or quarterly reports and publication, handling andmonitoring of inside information prior to public announcement and otherrequirements under the GEM Listing Rules;

– we have established an authorisation and written approval matrix for handlingcheque payment and the daily operation of the Group;

– in November 2015, our Directors attended training sessions conducted by ourlegal advisers as to Hong Kong law on the on-going obligations and duties of adirector of a company whose shares are listed on the Stock Exchange;

– we will engage CT Partners to have an annual review on the adequacy andeffectiveness of our internal control system for the financial year ending 31 March2016, including areas of financial, operational, compliance and risk management;

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– we have engaged TC Capital as our compliance adviser and will, upon Listing,engage a legal adviser as to Hong Kong laws, which will advise and assist ourBoard on compliance matters in relation to the GEM Listing Rules and/or otherrelevant laws and regulations applicable to our Company;

– we have established an audit committee which comprises all independentnon-executive Directors, namely Mr. Liu Yan Chee James, Mr. Wong Chi Kan andMr. Tai Hin Henry. The audit committee has adopted its terms of reference whichsets out clearly its duties and obligations to, among other things, overseeing theinternal control procedures and accounting and financial reporting matter of ourGroup, and ensuring compliance with the relevant laws and regulations. For thebiographical details of the independent non-executive Directors, please refer to thesection headed “Directors and senior management” in this prospectus; and

– when considered necessary and appropriate, we will seek professional advice andassistance form independent internal control consultants, external legal advisersand/or other appropriate independent professional advisers with respect to mattersrelated to our internal controls and legal compliance.

In October 2015, CT Partners performed a follow-up review on our internal controlsystem and we did not note any findings of material weakness or insufficiency in ourGroup’s internal control system.

View of our Directors and the Sponsor

Having considered that:

(i) the employees’ compensation and personal injury claims against our Group duringthe Track Record Period were fully covered by the insurance policies maintainedby the relevant main contractors;

(ii) enhanced safety measures were put in place and remedial actions were effectivelycarried out by us to prevent the occurrence of fatal and significant industrialaccidents; and

(iii) the total amount of fine paid by us during the Track Record Period and up to theLatest Practicable Date in relation to our safety and health related convictions wasonly HK$24,000 and that the said convictions did not adversely affect ourregistration under the Subcontractor Registration Scheme,

our Directors are of the view, and the Sponsor concurs, the fatal accident, the convictions inrelation to the breach of safety and health-related laws and regulations, and the accidentswhich resulted in personal injury claims and/or employees’ compensation claims disclosed inthis section would not have material adverse impact on our Group’s operation and financialposition.

BUSINESS

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As set out in the paragraphs headed “Occupational health and safety”,“Non-compliance” and “Litigation and potential claims” in this section, our Group has laiddown and implemented additional safety measures to enhance internal control measures inorder to monitor ongoing compliance with the relevant laws and regulations to prevent therecurrence of the litigations, prosecutions and non-compliance incidents in the future. On thebasis that (i) our accident rates were lower than the industry average during the TrackRecord Period; and (ii) we have been accredited with OHSAS 18001 qualification in respectof our occupational safety and health management system, our Directors believe, and theSponsor concurs that, these measures are adequate and effective to promote a safer andhealthier environment for the workers at our construction sites and to prevent recurrence ofthe said incidents.

Furthermore, our Directors and Legal Counsel both take the view, and the Sponsorconcurs, that the above mentioned litigations, prosecutions and immaterial non-complianceincidents would not affect (i) the suitability of our executive Directors under Rules 5.01 and5.02 of the GEM Listing Rules; and (ii) or our Company’s suitability of Listing under Rule11.06 of the GEM Listing Rules on the following grounds:

(i) The litigations, prosecutions and past immaterial non-compliance would not havematerial adverse impact on our Group’s operation and financial position asdisclosed above.

(ii) The litigations, prosecutions and past immaterial non-compliance incidents wereunintentional, did not involve any dishonesty of fraudulent act on the part of ourDirectors or cast any doubt on their integrity or competence.

(iii) Our Group has implemented and will continue to implement appropriate measuresto avoid recurrence of the litigations, prosecutions and non-compliance incidentsand will engage an external professional adviser for ensuring strict compliancewith the relevant laws and regulations.

(iv) Our Group has carried out remedial actions and fully rectified all of theimmaterial non-compliance incidents, if applicable.

(v) Our Directors confirm, and the Sponsor concurs that, the internal control measuresimplemented by our Group are sufficient and could effectively ensure a properinternal control system of our Group and prevent the recurrence ofnon-compliance incident of same nature.

BUSINESS

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OVERVIEW

Our Board currently consists of seven Directors, comprising four executive Directorsand three independent non-executive Directors. Our Directors are supported by our seniormanagement in the day-to-day management of our business.

The following table sets out the information in respect of our Directors and seniormanagement:

Directors

Name Age Position

Date ofjoining ourGroup

Date ofappointmentas Director ofour Company Principal responsibilities

Relationship withother Director(s)and/or seniormanagement

Mr. WONG Che Kwo（黃智果先生）

57 Executive Directorand Chairman ofour Board

November1998

16 October2015

Joint responsibility offormulation of overallbusiness developmentstrategy and overallmanagement and majorbusiness decisions of ourGroup and the chairman ofthe nomination committee

Father-in-law of Mr.CHIU Chi Wang

Mr. WONG Wing Wah（黃永華先生）

58 Executive Director,Chief ExecutiveOfficer

November1998

16 October2015

Joint responsibility offormulation of overallbusiness developmentstrategy and execution ofdaily management andadministration of ourbusiness and operations andmonitoring occupationalhealth, safety andenvironmental complianceand a member of theremuneration committee

N/A

Mr. WONG Tak Ming（黃德明先生）

55 Executive Director June 1999 16 November2015

Overseeing execution of dailymanagement of siteoperations of our Group

N/A

Mr. CHIU Chi Wang（趙智宏先生）

31 Executive Director November2012

16 November2015

Overseeing the engineering andtechnical aspects of variousprojects of our Group

Son-in-law of Mr.WONG Che Kwo

Mr. WONG Chi Kan（黄智瑾先生）

30 Independentnon-executiveDirector

24 March 2016 24 March 2016 Chairman of the remunerationcommittee and a member ofthe audit committee and amember of the nominationcommittee

N/A

Mr. LIU Yan CheeJames（劉恩賜先生）


24 March 2016 24 March 2016 Chairman of the auditcommittee and a member ofthe remuneration committee

N/A

Mr. TAI Hin Henry（戴騫先生）


24 March 2016 24 March 2016 A member of the auditcommittee and a member ofthe nomination committee

N/A

DIRECTORS AND SENIOR MANAGEMENT

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Senior Management

Name Age Position

Date of

joining our

Group

Date of

appointment of

current position

Principal

responsibilities

Relationship

with other

Director(s)

and/or senior

management

Ms. CHAN Yin

Wa Cecilia

（陳彥燁女士）

27 Financial Controller August 2015 August 2015 Overseeing the

financial

operations of our

Group

N/A

Mr. LO Shek

Kwong

（羅錫光先生）

64 Quantity Surveyor

Manager

June 2005

and

rejoined in

May 2009

June 2005 and

reappointed in

May 2009

Overseeing all

quantity surveying

functions of our

projects

N/A

Mr. WONG Ka

Chun Jeffery

（王嘉俊先生）

39 Site Agent June 2004 September 2009 Monitoring work

progress of our

projects and

supervising

workmanship and

quality

N/A

Executive Directors

Mr. WONG Che Kwo（黃智果先生）, aged 57, is the co-founder of our Group, anexecutive Director and our Chairman. Mr. CK Wong is one of our Controlling Shareholdersand also a director of Hop Fung, Luen Hing and Super Pioneer. He has over 30 years ofexperience in civil engineering construction industry in Hong Kong. Mr. CK Wong isprimarily responsible for formulation of overall business development strategy and overallmanagement and major business decisions of our Group. Prior to establishing our Group,from May 1982 to June 1983, Mr. CK Wong worked as a construction worker in a civilengineering construction contractor in Hong Kong where he started to gain exposure toproject execution of civil engineering construction. In 1983, he started the business of civilengineering works as a sole proprietorship where he continued to extend his expertise andexperience in civil engineering works as a subcontractor focusing on road and drainageworks. In November 1998, he co-founded Luen Hing with Mr. WW Wong, our executiveDirector and our Chief Executive Officer, in order to capture the growing businessopportunities for civil engineering construction works in Hong Kong. Mr. CK Wong is thefather-in-law of Mr. Chiu Chi Wang who is an executive Director.

Mr. WONG Wing Wah（黃永華先生）, aged 58, is the co-founder of our Group, anexecutive Director and our Chief Executive Officer. Mr. WW Wong is one of our ControllingShareholders and also a director of Hop Fung, Luen Hing and Super Pioneer. He has over 19years of experience in civil engineering construction industry in Hong Kong. Mr. WW Wongis primarily responsible for formulation of overall business development strategy, executionof daily management and administration of our business and operations and monitoring


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occupational health, safety and environmental compliance. Prior to joining our Group, inFebruary 1996, Mr. WW Wong worked for Luen Hing Civil Eng Co., a sole proprietorshipestablished by Mr. CK Wong, and commenced his career in the civil engineeringconstruction industry. In November 1998, Mr. WW Wong co-founded Luen Hing with Mr.CK Wong in order to capture the growing business opportunities for civil engineeringconstruction works in Hong Kong.

Mr. WONG Tak Ming（黃德明先生）, aged 55, is an executive Director. Mr. Wong hasover 25 years of experience in civil engineering construction industry in Hong Kong. He isprimarily responsible for overseeing execution of daily management of site operations of ourGroup. He joined our Group as a site superintendent in June 1999 and was promoted to siteagent in May 2003. He was further promoted to construction manager in January 2011.

Prior to joining our Group, Mr. Wong’s working experience includes:

Name of companiesPrincipal businessactivity Position Period of service

Shun Yip Construction Co.,Ltd

Construction Site foreman May 1992 – May1993

Tobishima Corporation Construction Foreman June 1993 –October 1994

Yiu Kee Engineering Co. Construction Site supervisor November 1994 –May 1995

Tobishima Corporation Construction General foreman September 1996 –March 1998

Kin Lee Ko ConstructionCo. Ltd

Construction Site agent March 1998 – June1998

Chun Wo Construction &Engineering Co., Ltd

Construction General foreman July 1998 – June1999

Mr. Wong has completed the training courses conducted by the Occupational Safety &Health Council on Basic Safety Management, Construction Safety and Basic OccupationalHealth in October 1992. He was also awarded a certificate for Safety & Health Supervisor(Construction) in January 1993.

Mr. CHIU Chi Wang（趙智宏先生）, aged 31, is an executive Director. Mr. Chiu joinedour Group as a trainee engineer in November 2012. He was promoted to engineer in March2015 and he is responsible for overseeing the engineering and technical aspects of variousprojects of our Group. Prior to joining our Group, he worked as a police constable fromJanuary 2007 to November 2012. Mr. Chiu graduated from Rosaryhill School in July 2004.Mr. Chiu completed the Standard Criminal Investigation Course in September 2012. He


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completed a Diploma in Civil Engineering in February 2016 which is a part-time courseoffered by the Hong Kong Institute of Vocational Education. Mr. Chiu is the son-in-law ofMr. CK Wong who is an executive Director and the Chairman of our Board.

Independent non-executive Directors

Mr. WONG Chi Kan（黃智瑾先生）, aged 30, is an independent non-executive Director.He has over 5 years of experience in auditing and accounting. Mr. Wong has served as anassistant financial controller in iRregular Consulting Limited, a company principally engagedin provision of financial public relations services, since March 2016. He worked as anaccounting manager in Hao Wen Holdings Limited (a company listed on GEM of the StockExchange (stock code: 8019) and principally engaged in sale of biodegradable foodcontainers and disposable industrial packaging for consumer products) between March 2015and March 2016. From January 2014 to February 2015, he was a senior associate and furtherpromoted to an assistant manager in BDO Limited. From November 2010 to January 2014,he served as an accountant and later promoted to senior accountant in HLB Hodgson ImpeyCheng Limited. Mr. Wong obtained a Bachelor of Commerce degree and a master’s degreein Professional Accounting from the University of New South Wales in May 2009 andAugust 2010 respectively. He is also a fellow member of the Certified PractisingAccountants Australia since March 2014. Mr. Wong is a certified public accountant of theHong Kong Institute of Certified Public Accountants.

Mr. LIU Yan Chee James（劉恩賜先生）, aged 45, is an independent non-executiveDirector. He has more than 20 years of experience in finance and accounting. He has been adirector of Special Fine Investment and Management Limited, a company principallyengaged in fund management business, since January 2014.

Mr. Liu’s previous working experience primarily includes:


Tung Shing (Brokers) Group Investment banking Sales Director andHead ofInstitutional Sales

September 2011 –October 2015

KGI Asia Limited Investment banking Sales Director October 2007 –September 2011

Enlighten Securities Limited Investment banking Sales Director November 2003 –October 2007

Sun Hung Kai InvestmentServices Limited

Investment banking Sales Director Mid-2001 –October 2003

Vickers Ballas, Hong KongLimited

Investment banking Sales Director March 1997 –mid-2001


– 186 –


Sun Hung Kai InvestmentServices Limited

Investment banking Account Manager July 1995 – March1997

Mr. Liu graduated from Dalhousie University in Canada with a Bachelor of Commercein February 1994.

Mr. TAI Hin Henry（戴騫先生）, aged 30, is an independent non-executive Director.Mr. Tai has over 6 years of experience in auditing and accounting. He has been anaccounting manager of Rich Gain Construction Development Company Limited, aconstruction company in Hong Kong, since August 2014. From May 2009 to July 2014, Mr.Tai worked as an audit senior in Louis Leung and Partners CPA Limited. He also worked atNew Time Trading Company, a company principally engaged in the trading of jewellery andjade, as a sales executive during the period from September 2007 to April 2009. Mr. Taigraduated from the London School of Economics and Political Science, University ofLondon with a Bachelor of Science majoring in Accounting and Finance in June 2007. Hehas completed the CPA Qualification Programme of the Hong Kong Institute of CertifiedPublic Accountants in August 2015.

Disclosure required under Rule 17.50(2) of the GEM Listing Rules

Save as disclosed above, each of our Directors confirms with respect to himself that:(i) he has not held directorships in the last three years in other public companies thesecurities of which are listed on any securities market in Hong Kong or overseas; (ii) hedoes not hold any other position in our Company or any of its subsidiaries; (iii) save asdisclosed in the section “C. Further information about Substantial Shareholders, Directorsand Experts – 1. Disclosure of interests” in Appendix V to this prospectus, he does not haveany interests in the Shares within the meaning of Part XV of the SFO; (iv) had no otherrelationship with any Directors, Substantial Shareholders, Controlling Shareholders, or seniormanagement of our Company as at the Latest Practicable Date; (v) there is no otherinformation that needs to be disclosed pursuant to Rule 17.50(2) of the GEM Listing Rules;and (vi) to the best of the knowledge, information and belief of our Directors having madeall reasonable enquiries, there are no other matters with respect to the appointment of ourDirectors that need to be brought to the attention of our Shareholders.

SENIOR MANAGEMENT

Ms. CHAN Yin Wa Cecilia（陳彥燁女士）, aged 27, is the financial controller of ourGroup. Ms. Chan joined our Group in August 2015 and is responsible for overseeing thefinancial operations of our Group. Ms. Chan graduated from the University of Queensland inAustralia in December 2009 with a Bachelor of Commerce majoring in Accounting andFinance. She is a fellow member of the Certified Practising Accountants Australia. Prior tojoining our Group, from December 2010 to March 2015, she worked at Wong Brothers & Cowhere she was promoted from a trainee accountant to an accountant.


– 187 –

During the three years immediately preceding the Latest Practicable Date, Ms. Chanhas not been a director of a public company the securities of which are listed on anysecurities market in Hong Kong or overseas.

Mr. LO Shek Kwong（羅錫光先生）, aged 64, is the quantity surveyor manager of ourGroup. He has over 25 years of experience in quantity surveying, contractual administrationand construction project management. He is responsible for overseeing all quantity surveyingfunction of our projects. Mr. Lo first joined our Group as a quantity surveyor manager inJune 2005. In January 2007, he left our Group and joined Leighton-China State-JohnHolland Joint Venture as a quantity surveyor manager until he re-joined our Group in May2009 as a quantity surveyor manager. Prior to joining our Group, from December 1982 toOctober 2002, Mr. Lo worked in the quantity surveying department of various constructioncompanies such as Sang Lee Construction Co., Ltd, Leighton Contractors (Asia) Ltd., ShuiOn-China Harbour Joint Venture, K.E.C. Joint Venture headed by Kumagai Gumi Co., Ltd(Hong Kong) and China Overseas (Hong Kong) Limited which he was responsible for thequantity surveying functions of various major construction projects.

Mr. Lo obtained an Ordinary Certificate in Building Technology in July 1974 and aHigher Certificate in Building Technology in November 1976 from the Hong KongPolytechnic (now known as the Hong Kong Polytechnic University). He also obtained aCertificate in Quality Assurance in June 2004 from Seneca College, Canada.

During the three years immediately preceding the Latest Practicable Date, Mr. Lo hasnot been a director of a public company the securities of which are listed on any securitiesmarket in Hong Kong or overseas.

Mr. WONG Ka Chun Jeffery（王嘉俊先生）, aged 39, is the site agent of our Group.He has over 14 years of experience in civil engineering construction industry in Hong Kong.Mr. Wong joined our Group as an engineer in June 2004 and was promoted to site agent inSeptember 2009. He is responsible for monitoring work progress of our projects andsupervising workmanship and quality. Prior to joining our Group, from September 2003 toMay 2004, he worked as an assistant engineer at China Overseas (Hong Kong) Limited, acompany principally engaged in property and construction businesses. He worked as anassistant engineer at HK Construction – AMEC – China Railway – China Everbright JointVenture from March 2001 to September 2003. Mr. Wong graduated from the McMasterUniversity in Canada in June 2001 with a Bachelor of Engineering.

During the three years immediately preceding the Latest Practicable Date, Mr. Wonghas not been a director of a public company the securities of which are listed on anysecurities market in Hong Kong or overseas.


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COMPANY SECRETARY

Mr. Woo Yuen Fai（胡遠輝先生）, aged 32, was appointed as the company secretary ofour Company on 24 March 2016. Mr. Woo has more than 9 years of experience in auditingand finance. He is the financial controller and the company secretary of Chun SingEngineering Holdings Limited, a company listed on the Main Board of the Stock Exchange(stock code: 2277) and is principally engaged in the foundation and substructureconstruction business. From September 2006 to August 2014, Mr. Woo worked in theassurance and business advisory department of SHINEWING (HK) CPA Limited, a certifiedpublic accounting firm. Mr. Woo obtained his bachelor’s degree of business administration(honors) in accountancy and law from the City University of Hong Kong in November 2006and is a member of the Hong Kong Institute of Certified Public Accountants.

During the three years immediately preceding the Latest Practicable Date, Mr. Woo hasnot been a director of a public company the securities of which are listed on any securitiesmarket in Hong Kong or overseas.

COMPLIANCE OFFICER

Mr. WW Wong, an executive Director, our Chief Executive Officer and one of theControlling Shareholders of our Company, was appointed as the compliance officer of ourCompany on 24 March 2016. Please refer to the paragraph headed “Directors” above in thissection for the biographical details of Mr. WW Wong.

REMUNERATION POLICY

Our executive Director, independent non-executive Directors and senior managementreceive compensation in the form of director fees, salaries, benefits in kind and/ordiscretionary bonuses with reference to those paid by comparable companies, timecommitment and the performance of our Group. Our Group also reimburses our Directorsand senior management for expenses which are necessarily and reasonably incurred for theprovision of services to our Group or executing their functions in relation to the operationsof our Group. Our Group regularly reviews and determines the remuneration andcompensation packages of our Directors and senior management by reference to, amongother things, market level of remuneration and compensation paid by comparable companies,the respective responsibilities of our Directors and the performance of our Group.

After Listing, the remuneration committee of our Company will review and determinethe remuneration and compensation packages of our Directors with reference to theirresponsibilities, workload, the time devoted to our Group and the performance of our Group.Our Directors may also receive options to be granted under the Share Option Scheme detailsof which are set out in the paragraph headed “D. Share Option Scheme” in Appendix V tothis prospectus.


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REMUNERATIONS OF DIRECTORS AND SENIOR MANAGEMENT

Our Directors receive compensation in the form of Directors fees, salaries, allowances,discretionary bonuses and other benefits as well as contributions to retirement benefitschemes. The total compensation accrued to our Directors for the two years ended 31 March2015 and the eight months ended 30 November 2015 was HK$3,946,000, HK$3,934,000 andHK$2,160,000, respectively.

The aggregate compensation (including Directors fees, salaries, discretionary bonus,contributions to retirement benefit schemes, pension, allowances and other benefits) paid toour five highest paid individuals during the two years ended 31 March 2015 and the eightmonths ended 30 November 2015 were HK$4,747,000, HK$4,783,000 and HK$2,641,000,respectively.

Under the arrangement currently in force, we estimate the total compensation(including Directors fees, salaries, discretionary bonus, contributions to retirement benefitschemes, pension) to be paid or accrued to our Directors for the year ending 31 March 2016to be HK$4.4 million.

We did not pay to our Directors or the five highest paid individuals any inducementfees to join us or as compensation for loss of office for each of the two years ended 31March 2015 and the eight months ended 30 November 2015. Furthermore, none of ourDirectors waived any compensation for the same period.

Save as disclosed above, no other payments has been paid or is payable, in respect ofthe two years ended 31 March 2015 and the eight months ended 30 November 2015 by us orany of our subsidiaries to our Directors.

BOARD COMMITTEES

Audit committee

Our Company established an audit committee on 24 March 2016 with its written termsof reference in compliance with the GEM Listing Rules. The primary duties of the auditcommittee are to review and supervise our financial reporting process and internal controlsystem, nominate and monitor external auditors and to provide advice and comments to theBoard on matters related to corporate governance.

The audit committee of our Company comprises the three independent non-executiveDirectors, namely Mr. Liu Yan Chee James, Mr. Wong Chi Kan and Mr. Tai Hin Henry. Mr.Liu Yan Chee James currently serves as the chairman of the audit committee.

Remuneration committee

Our Company established a remuneration committee on 24 March 2016 with its writtenterms of reference in compliance with the GEM Listing Rules. The primary duty of theremuneration committee is to make recommendations to the Board on the remuneration ofour Directors and our senior management.


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The remuneration committee of our Company comprises Mr. Wong Wing Wah, ourexecutive Director and Chief Executive Officer, Mr. Liu Yan Chee James and Mr. Wong ChiKan, our independent non-executive Directors. Mr. Wong Chi Kan currently serves as thechairman of the remuneration committee.

Nomination committee

Our Company established a nomination committee on 24 March 2016 with its writtenterms of reference by reference to the code provisions of the Corporate Governance Codeand Corporate Governance Report set out in Appendix 15 to the GEM Listing Rules. Theprimary duties of the nomination committee are to make recommendations to the Boardregarding candidates to fill vacancies on the Board and/or in senior management.

The nomination committee of our Company comprises Mr. Wong Che Kwo, ourexecutive Director and Chairman, Mr. Wong Chi Kan and Mr. Tai Hin Henry, ourindependent non-executive Directors. Mr. Wong Che Kwo currently serves as the chairmanof the nomination committee.

CORPORATE GOVERNANCE

Our Company will comply with the Corporate Governance Code in Appendix 15 to theGEM Listing Rules.

Our Directors will review our corporate governance policies and compliance with theCorporate Governance Code each financial year and comply with the “comply or explain”principle in our corporate governance report which will be included in our annual reportsupon the Listing.

COMPLIANCE ADVISER

In accordance with Rule 6A.19 of the GEM Listing Rules, our Company has appointedTC Capital as its compliance adviser. Pursuant to Rule 6A.23 of the GEM Listing Rules, ourCompany will consult with and seek advice from the compliance adviser on a timely basisin the following circumstances:

(1) before the publication of any regulatory announcement, circular or financialreport;

(2) where a transaction, which might be a notifiable or connected transaction, iscontemplated including share issues and share repurchases;

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

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


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The term of appointment of the compliance adviser of our Company shall commenceon the Listing Date and end on the date on which our Company complies with Rule 18.03 ofthe GEM Listing Rules in respect of the financial results for the second full financial yearcommencing after the Listing Date and such appointment shall be subject to extension bymutual agreement.

The compliance adviser of our Company shall provide us with services, includingguidance and advice as to compliance with the requirements under the GEM Listing Rulesand applicable laws, rules, codes and guidelines, and to act as one of our principal channelsof communication with the Stock Exchange.


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OUR CONTROLLING SHAREHOLDERS

Immediately following completion of the Capitalisation Issue and the Placing, each ofMr. CK Wong, Mr. WW Wong and Blooming Union will control more than 30% of theissued share capital of our Company. Mr. CK Wong and Mr. WW Wong have had a mutualunderstanding all along to actively cooperate with each other to jointly control our Groupand thus Mr. CK Wong and Mr. WW Wong are presumed to be acting in concert (within themeaning of the Takeovers Code). Given the aforesaid and for the purpose of the GEMListing Rules, Mr. CK Wong, Mr. WW Wong and Blooming Union are our ControllingShareholders. Blooming Union is an investment holding company and has not commencedany substantive business activities as at the Latest Practicable Date. Each of Mr. CK Wong,Mr. WW Wong and Blooming Union confirms that he/it does not hold or conduct anybusiness which competes, or is likely to compete, either directly or indirectly, with thebusiness of our Group, and would require disclosure pursuant to Rule 11.04 of the GEMListing Rules.

INDEPENDENCE OF OUR GROUP

In the opinion of our Directors, our Group is capable of carrying on our businessesindependently of, and does not place undue reliance on, our Controlling Shareholders, theirrespective close associates or any other parties, taking into account the following factors:

(i) Financial independence

Our Group has an independent financial system and makes financial decisionsaccording to our own business needs. Our Group has sufficient capital to operate itsbusiness independently, and has adequate internal resources and a strong credit profileto support its daily operations.

During the Track Record Period, our Controlling Shareholders had providedpersonal guarantees in respect of certain credit facilities provided by financialinstitutions. Please refer to notes 21 and 22 of Section II in the Accountants’ Report inAppendix I to this prospectus for details of the balances of the credit facilities taken byour Group during the Track Record Period. Our Directors confirm that all personalguarantees provided by our Controlling Shareholders in respect of the aforesaid creditfacilities will be released or replaced by our Company’s corporate guarantee upon theListing.

During the Track Record Period and up to the Latest Practicable Date, our Grouphas entered into 9 contracts (the “Guaranteed Contracts”) in an aggregate contractsum of approximately HK$284,175,000 which involved performance guarantee withcertain customers. Pursuant to the performance guarantee, Mr. CK Wong and/or Mr.WW Wong, our Controlling Shareholders and executive Directors, have givenperformance guarantee in favour of our customers as security for the due performanceand observance of our Group’s obligations under the Guaranteed Contracts between ourGroup and the relevant customers. If our Group fails to perform our obligations leadingto a breach of the Guaranteed Contracts, Mr. CK Wong and/or Mr. WW Wong will berequired to indemnify the relevant customers up to (i) a specified amount ranging from

RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

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10% to 25% of the contract sum or (ii) an unlimited amount for all losses, claims,damages, costs and expenses suffered by the relevant customers as a result of ourGroup’s default under the Guaranteed Contracts.

As at the Latest Practicable Date, among the 9 contracts, 4 contracts werecompleted and the respective performance guarantees given have been released and 5contracts were still in progress. The following table sets out the details of theGuaranteed Contracts involving the performance guarantees given by our ControllingShareholders which have not yet been released:

Contractno. Customer (Note 1)

Type of worksinvolved

Public orprivatesectorproject

Contractsum

(Note 2)

Actual orexpectedcompletiondate (Note 3) Project status

Extent ofliability of

contractsum

(HK$’000)

1 Chun WoConstruction(Note 4)

Roads and drainageand structuralworks

Public 11,011 December2016

In progress 25%

2. China StateConstruction(Note 5)

Roads and drainageand site formationworks

Public 17,077 May 2016 In progress Unlimited


Roads and drainageand structuralworks

Public 122,770 December2018

In progress 10%


Structural works Public 59,000 May 2017 In progress Unlimited

5. Chun WoConstruction(Note 4)

Structural works Public 22,693 April 2016 In progress 25%

Notes:

1. The above customers are among our five largest customers during the Track Record Period, details ofwhich are set out in the section headed “Business – Customers – Major customers” in thisprospectus.

2. The contract sum is based on the initial agreement between our customers and us and may notinclude additions, modifications due to subsequent variation orders and therefore, final revenuerecognised from a contract may differ from the contract sum.

3. The expected completion date for a particular contract is provided based on our management’s bestestimation. In making the estimation, our management takes into account factors including theexpected completion date specified in the relevant contract (if any), the extension period granted byour customers (if any) and the actual work schedule.

4. The personal guarantees given by Mr. CK Wong and Mr. WW Wong will be replaced by ourCompany’s corporate guarantee upon the Listing.

5. Our Company was informed that save for occurrence of any event which renders the contract to beinevitably amended, it is the internal policy of the customer not to amend the terms of the existingcontracts. Therefore, the customer has declined our request to release the personal guarantee providedby Mr. CK Wong and/or Mr. WW Wong. Our Group will take out a surety bond before Listing from


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an authorised insurer, which is a wholly-owned subsidiary of a Hong Kong licensed bank, in favourof the customer in the value of the contract sum for the due performance of our Group’s obligationsunder the contract on normal commercial terms. Such surety bond will be granted without anyguarantees or other financial support from our Controlling Shareholders.

6. Our Company was informed that save for occurrence of any event which renders the contract to beinevitably amended, it is the internal policy of the customer not to amend the terms of the existingcontracts. Therefore, the customer has declined our request to release the personal guarantee providedby Mr. CK Wong and/or Mr. WW Wong. Our Group will take out a surety bond before Listing froman insurer in favour of the customer in the value representing 10% of the contract sum for the dueperformance of our Group’s obligations under the contract on normal commercial terms. Such suretybond will be granted without any guarantees or other financial support from our ControllingShareholders.

Our Directors confirm that it is not uncommon for main contractors to require directorsand/or shareholders of subcontractors to provide performance guarantee in the subcontractsto ensure our Group’s due performance and observance of a subcontract. In addition, ourDirectors are of the view that release of all of the personal guarantees without consent ofthe respective counterparty will give rise to early termination liabilities and practical andcommercial difficulties against our Group, and renegotiation of the release of all personalguarantees to be replaced by our Company’s corporate guarantee will also not be feasibleand cost-effective. For the Guaranteed Contracts which the performance guarantees given byour Controlling Shareholders have not yet been released, (i) our Group has obtained consentfrom the relevant customer to have such personal guarantee to be replaced by ourCompany’s corporate guarantee upon Listing; or (ii) our Group will take out a surety bondbefore Listing, on a stand-alone basis, from an independent authorised insurer, which is awholly-owned subsidiary of a Hong Kong licensed bank, in the contract sum orpredetermined percentage of the contract sum of the relevant contract, as the case may be, infavour of the relevant customer to secure the due performance of our Group’s obligationsunder the respective contract. With regard to the aforesaid surety bonds arrangement, weexpect that annual premium of approximately HK$1,060,000 for the issue of the surety bondwill be recognised as expenses commencing from April 2016, and the surety bonds will bevalid until the release of personal guarantees given by our Controlling Shareholders underthe relevant Guaranteed Contracts. In addition, our Directors decide that, going forward, ourGroup will not enter into any contract involving similar performance guarantee to be givenby our Controlling Shareholders.

As at 21 March 2016, Mr. CK Wong and Mr. WW Wong had advanced loans ofHK$284,157.17 and HK$5,267,065.80, respectively, to Luen Hing. On 21 March 2016, byway of loans capitalisation, Luen Hing applied HK$280,000 owed to Mr. CK Wong andHK$5,200,000 owed to Mr. WW Wong toward the satisfaction of the issue and allotment of5,480,000 new shares of Luen Hing at a subscription price of HK$1 per share to SuperPioneer (as directed by Mr. CK Wong and Mr. WW Wong). The remaining uncapitalisedbalance of HK$4,157.17 and HK$67,065.80 will be repaid by Luen Hing to Mr. CK Wongand Mr. WW Wong, respectively, upon Listing.

As at 21 March 2016, Mr. CK Wong had advanced a loan of HK$4,924,580.87 to HopFung. On 21 March 2016, by way of loan capitalisation, Hop Fung applied HK$4,920,000owed to Mr. CK Wong toward the satisfaction of the issue and allotment of 4,920,000 new


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shares of Hop Fung at a subscription price of HK$1 per share to Super Pioneer (as directedby Mr. CK Wong). The remaining uncapitalised balance of HK$4,580.87 will be repaid byHop Fung to Mr. CK Wong upon Listing.

In view of the above, our Directors are of the view that our Group will be financiallyindependent from the Controlling Shareholders after the Listing.

(ii) Operational independence

Our Group has established our own organisational structure comprising individualdepartments, each with specific areas of responsibilities. Our Group has not shared ouroperational resources, such as suppliers, customers, marketing, sales and generaladministration resources with the Controlling Shareholders and/or their close associates.

For the financial year ended 31 March 2015 and up to 31 October 2015, werented site equipment from Hop Fung Crane Company on normal commercial terms andin the ordinary course of our business. Hop Fung Crane Company is a partnershipestablished in Hong Kong and was principally engaged in leasing of construction siteequipment. Hop Fung Crane Company is owned by the spouse of Mr. CK Wong (ourexecutive Director and one of our Controlling Shareholders) and an independent thirdparty. For the two years ended 31 March 2015 and the eight months ended 30November 2015, the total site equipment rental costs paid to Hop Fung Crane Companyamounted to approximately HK$Nil, HK$772,000 and HK$633,000, respectively. Suchrental arrangement with Hop Fung Crane Company has been completed and ceased.Our Directors confirm that, during the Track Record Period and up to the LatestPracticable Date, Hop Fung Crane Company did not conduct any business activitieswhich competed or was likely to compete, directly or indirectly, with the business ofour Group.

Pursuant to an agreement entered into among Mr. CK Wong, Mr. WW Wong,Luen Hing and Hop Fung, Mr. CK Wong and Mr. WW Wong (as owners of theProperty) granted a licence to use Workshop 17, 13th Floor, New Commerce Centre, 19On Sum Street, Siu Lek Yuen, Shatin, New Territories, Hong Kong (the “Property”) toLuen Hing and Hop Fung for office use during the Track Record Period and up to 31October 2015. Although the consideration for such licence was nil, Luen Hing and HopFung were jointly required to pay the management fee and rates of the Property onbehalf of Mr. CK Wong and Mr. WW Wong during the term of the licence. For the twoyears ended 31 March 2015 and the eight months ended 30 November 2015, theaggregate amount of management fee and rates paid by our Group for the Propertyamounted to approximately HK$15,000, HK$18,000 and HK$11,000, respectively. OurDirectors confirm that the aforesaid licence arrangement in relation to the Property hadbeen completed and ceased. On 9 September 2015, our Group entered into a tenancyagreement with an independent third party to lease a property located at Unit 5, 15thFloor, North Wing, Delta House, No. 3 On Yiu Street, Shatin, New Territories for aterm of one year since 17 August 2015 with monthly rent of HK$16,167. Our Groupstarted occupying such property the aforesaid premises since 1 November 2015. OurDirectors are of the view that the additional monthly rent of HK$16,167 has nomaterial impact on our profitability.


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Our Directors are of the view that our Group has no operational dependence onthe Controlling Shareholders.

(iii) Independence of management

Our Company aims at establishing and maintaining a strong and independentBoard to oversee our Group’s business. Our Board’s main function includes theapproval of the overall business plans and strategies of our Group, monitoring theimplementation of these policies and strategies and the management of our Company.Our Group has an independent management team, which is led by a team of seniormanagement with substantial experience and expertise in our business, to implementour Group’s policies and strategies.

Our Board consists of seven Directors, comprising four executive Directors andthree independent non-executive Directors. Mr. CK Wong and Mr. WW Wong are alsothe directors of Blooming Union. No other Directors or senior management serves anyexecutive or management role in Blooming Union.

Each of our Directors is aware of his or her fiduciary duties as a Director whichrequire, among other things, that he or she acts for the benefit and in the best interestsof our Company and does not allow any conflict between his or her duties as aDirector and his or her personal interest to exist. In the event that there is a potentialconflict of interest arising out of any transaction to be entered into between our Groupand our Directors or their respective close associates, the interested Director(s) shallabstain from voting at the relevant meeting of our Board in respect of such transactionsand shall not be counted in the quorum. In addition, the senior management team ofour Group is independent from the Controlling Shareholders. Our Directors are of theview that the Board and senior management are capable of managing our Group’sbusiness independently from the Controlling Shareholders.

(iv) Independence of major suppliers and major subcontractors

Our Directors confirm that none of the Controlling Shareholders, our Directorsand their respective close associates, have any relationship with the major suppliers andmajor subcontractors of our Group (other than the business contacts in the ordinary andusual course of business of our Group) during the Track Record Period.

(v) Independence of major customers

Our Directors confirm that none of the Controlling Shareholders, our Directorsand their respective close associates, have any relationship with the major customers ofour Group (other than the business contacts in the ordinary and usual course ofbusiness of our Group) during the Track Record Period.


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RULE 11.04 OF THE GEM LISTING RULES

The Controlling Shareholders, our Directors and their respective close associates do nothave any interest in a business (apart from our Group’s business) which competes or islikely to compete, directly or indirectly, with our Group’s business, and would requiredisclosure pursuant to Rule 11.04 of the GEM Listing Rules.

NON-COMPETITION UNDERTAKINGS

In order to maintain a clear delineation of the businesses between us and ourControlling Shareholders, our Controlling Shareholders (together the “Covenantors”) haveentered into the Deed of Non-Competition in favour of our Company (for itself and astrustee for each of our subsidiaries from time to time).

Under the Deed of Non-Competition:

(a) each of the Covenantors hereby jointly and severally, and irrevocably andunconditionally undertakes to our Company that each of the Covenantors shall notand shall procure (other than members of our Group) that neither the Covenantorsnor their close associates and/or companies controlled by the Covenantors (otherthan members of our Group) will:

(i) directly or indirectly be interested in or engaged 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 ourGroup’s business (being in the provision of civil engineering works as asubcontractor, including but not limited to, (i) roads and drainage works(including construction and improvement of local road, carriageway withjunction improvement and the associated footpaths, planting areas, drains,sewers, water mains and utilities diversion); (ii) structural works (includingconstruction of reinforced concrete structures for bridges and retainingwalls); and (iii) site formation works (including excavation and/or fillingworks for forming a new site or achieving designed formation level for laterdevelopment) (the “Restricted Activity”) in territories in which any memberof our Group carries on or is engaged or invests in the Restricted Activityfrom time to time (the “Restricted Territories”), nor provide support in anyform to persons other than members of our Group to engage in business thatconstitute or may constitute direct or indirect competition with thebusinesses that our Group is currently and from time to time carrying onunless the prior written consent of our Company has been obtained (based onan affirmative vote of a majority of the independent non-executive Directors,who do not have, and are not deemed to have, a material interest in therelevant matter);

(ii) solicit or procure any of the suppliers, the subcontractors and/or thecustomers of our Group from time to time to terminate their businessrelationships or otherwise reduce the amount of business with our Group;and


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(iii) solicit or procure any of the Directors, senior management or otheremployees of our Group from time to time to resign or otherwise ceaseproviding services to our Group;

(b) each of the Covenantors undertakes to our Company that in the event theCovenantors or any of their close associates (other than members of our Group)are given any business opportunity that is or may involve direct or indirectcompetition with the businesses of our Group (the “Business Opportunity”), theCovenantors shall refer the Business Opportunity on our Group and shall assistour Group to obtain such Business Opportunity in the terms no less favourablethan those offered to any of the Covenantors or their close associates (the “FirstRight of Refusal”). In addition, each of the Covenantors hereby jointly andseverally, irrevocably and unconditionally, undertakes with our Company thatnone of the Covenantors and their respective close associates (other than memberof our Group) will pursue the Restricted Activity and/or the Business Opportunityuntil our Company decides not to pursue the Restricted Business and/or theBusiness Opportunity because of commercial reasons and provides such decisionin writing to the Covenantors. Any decision of our Company will have to beapproved by the independent non-executive Directors taking into consideration ourGroup’s prevailing business and financial resources, the financial resourcesrequired for the Business Opportunity and any expert opinion on the commercialviability of the Business Opportunity;

(c) each of the Covenantors undertakes to our Company that the Covenantors shall,during the term of the Deed of Non-Competition, indemnify and keep indemnifiedour Company and our Group against any loss suffered by our Company or ourGroup (as relevant) arising out of any breach of any of the Covenantors’undertakings under the Deed of Non-Competition;

(d) each of the Covenantors acknowledges that:

(i) the independent non-executive Directors will review, at least on an annualbasis, the compliance with the Deed of Non-Competition by the Covenantorsand the First Right of Refusal provided by the Covenantors on theCovenantors’ existing or future competing businesses; and

(ii) our Company will disclose the decisions on matters reviewed by theindependent non-executive Directors relating to the compliance andenforcement of the Deed of Non-Competition (e.g. the exercise of the FirstRight of Refusal) either through the annual report of our Company or byway of announcements published by our Company to the public;

(e) each of the Covenantors further undertakes as follows:

(i) the Covenantors shall, upon demand, promptly provide all informationnecessary for the annual review by the independent non-executive Directorsand the enforcement of the Deed of Non-Competition; and


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(ii) the Covenantors shall make an annual declaration on compliance with theDeed of Non-Competition in the annual report of our Company and/or asrequired by the relevant requirements under the GEM Listing Rules;

(f) the aforesaid undertakings are conditional upon our Shares being listed and quotedon GEM;

(g) each of the Covenantors represents and warrants that neither the Covenantors northeir close associates and/or companies controlled by the Covenantors (other thanmembers of our Group) are currently directly or indirectly interested in orengaged in any business, apart from the business operated by members of ourGroup, which competes or is likely to compete, directly or indirectly, with ourGroup’s business as at the date of the Deed of Non-Competition;

(h) the Covenantors’ obligations under the Deed of Non-Competition shall remain ineffect until:

(i) the date upon which our Shares cease to be listed on the Stock Exchange; or

(ii) the date upon which the Covenantors and their close associates, individuallyor collectively, cease to own 30% or more of the then issued share capital ofour Company directly or indirectly, or are otherwise ceased to be regarded ascontrolling shareholders under the GEM Listing Rules,

whichever occurs first; and

(i) The aforesaid undertakings do not apply to the following situations:

(i) the holding by the Covenantors and their close associates of interests inshares or other securities that represents (or upon conversion will represent)not more than 5% voting rights in any company the shares of which arelisted on a recognised stock exchange and which conducts or is engaged inany Restricted Activity;

(ii) the holding by the Covenantors and their close associates of interests inshares or other securities that represents (or upon conversion will represent)not more than 5% voting rights in any non-listed company which conductsor is engaged in any Restricted Activity, provided that the Covenantors and/or their close associates are not entitled to appoint a majority of the directorsor management of that company;

As confirmed by our Directors, as at the Latest Practicable Date, our ControllingShareholders and their respective close associates and/or companies controlled by them donot have any interests in any form of business apart from the business operated by membersof our Group that competes or is likely to compete, directly or indirectly with the businessof our Group.


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CORPORATE GOVERNANCE MEASURES

Each of the Controlling Shareholders has confirmed that he/it fully comprehends his/itsobligations to act in the best interests of our Company and the Shareholders as a whole. Toavoid potential conflicts of interest, our Group will implement the following measures:

(a) the Covenantors will make an annual confirmation as to compliance with his/itsundertaking under the Deed of Non-competition for inclusion in the annual reportof our Company;

(b) our Board is committed to the view that our Board should include a balancedcomposition of executive and non-executive Directors (including independentnon-executive Directors) so that there is a strong independent element on ourBoard which can effectively exercise independent judgment. Our Company hasappointed three independent non-executive Directors. Our Directors believe thatour independent non-executive Directors are of sufficient calibre, are free of anybusiness or other relationship which could interfere in any material manner withthe exercise of their independent judgment and will be able to provide impartialand professional advice to protect the interests of the minority Shareholders.Details of our independent non-executive Directors are set out in the sectionheaded “Directors and senior management” in this prospectus;

(c) our Company has appointed TC Capital as our compliance adviser, which willprovide advice and guidance to our Company in respect of compliance with theapplicable laws and the GEM Listing Rules including various requirementsrelating to directors’ duties and internal controls. Please refer to the sectionheaded “Directors and senior management – Compliance adviser” in thisprospectus for further details in relation to the appointment of compliance adviser;

(d) the Controlling Shareholders undertake to provide all information requested byour Group which is necessary for the annual review by the independentnon-executive Directors and the enforcement of the Deed of Non-competition; and

(e) our independent non-executive Directors will, based on the information availableto them, review on an annual basis (a) the compliance with the Deed ofNon-competition; and (b) all the decisions taken in relation to whether to pursuethe new opportunity under the Deed of Non-competition.


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So far as our Directors are aware, immediately following completion of theCapitalisation Issue and the Placing (without taking into account any Shares which may beissued pursuant to the exercise of any options which may be granted under the Share OptionScheme), the following persons will have interests or short positions in our Shares orunderlying Shares which would fall to be disclosed to us and the Stock Exchange under theprovisions 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 rightsto vote in all circumstances at general meetings of any other member of our Group:

Long position in the Shares

NameCapacity/Natureof interest

Number ofShares held/interested inimmediately

followingcompletion of the

CapitalisationIssue and the

Placing

Percentage ofShareholdingimmediately



Placing

Blooming Union Beneficial owner 936,000,000 75%

Mr. CK Wong Interest of a controlledcorporation (Note 1)

936,000,000 75%

Mr. WW Wong Interest of a controlledcorporation (Note 2)

936,000,000 75%

Ms. Law OiLing

Interest of spouse (Note 3) 936,000,000 75%

Ms. Lai SiuKuen

Interest of spouse (Note 4) 936,000,000 75%

Notes:

1. Mr. CK Wong beneficially owns 50% of the entire issued shares of Blooming Union. Therefore, Mr.CK Wong is deemed, or taken to be, interested in 936,000,000 Shares held by Blooming Union forthe purpose of the SFO.

2. Mr. WW Wong beneficially owns 50% of the entire issued shares of Blooming Union. Therefore, Mr.WW Wong is deemed, or taken to be, interested in 936,000,000 Shares held by Blooming Union forthe purpose of the SFO.

3. Ms. Law Oi Ling, the spouse of Mr. CK Wong, is deemed, or taken to be, interested in 936,000,000shares in which Mr. CK Wong is interested for the purpose of the SFO.

4. Ms. Lai Siu Kuen, the spouse of Mr. WW Wong, is deemed, or taken to be, interested in 936,000,000

Shares in which Mr. WW Wong is interested for the purpose of the SFO.

SUBSTANTIAL SHAREHOLDERS

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Save as disclosed above, our Directors are not aware of any other persons who will,immediately following completion of the Capitalisation Issue and the Placing (without takinginto account any Shares which may be issued pursuant to the exercise of any options whichmay be granted under the Share Option Scheme), have interests or short positions in theShares or underlying Shares which would be required to be disclosed to our Company andthe Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, orwho will be directly or indirectly, interested in 10% or more of the nominal value of anyclass of share capital carrying rights to vote in all circumstances at general meetings of ourCompany or any of its subsidiaries.

SUBSTANTIAL SHAREHOLDERS

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SHARE CAPITAL

Without taking into account any Shares to be issued upon exercise of any optionswhich may be granted under the Share Option Scheme, the share capital of our Companyimmediately following the Capitalisation Issue and the Placing will be as follows:

Authorised share capital HK$

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

Issued and to be issued, fully paid or credited as fully paid uponcompletion of the Capitalisation Issue and the Placing:

HK$

10,000 Shares in issue at the date of this prospectus 1001,039,990,000 Shares to be issued pursuant to the Capitalisation

Issue10,399,900

208,000,000 Shares to be issued pursuant to the Placing 2,080,000

1,248,000,000 Total 12,480,000

MINIMUM PUBLIC FLOAT

According to Rule 11.23(7) of the GEM Listing Rules, at the time of the Listing and atall times thereafter, our Company must maintain the “minimum prescribed percentage” of25% of our Company’s issued share capital in the hands of the public.

The table is prepared on the basis of the Placing becoming unconditional and theCapitalisation Issue and the issue of the Placing Shares being completed.

It takes no account of any Shares to be issued upon exercise of any options which maybe granted under the Share Option Scheme or of any Shares which may be allotted andissued or repurchased by our Company under the general mandate as referred to below orotherwise.

RANKING

The Placing Shares will rank pari passu in all respects with all our Shares now in issueor to be issued as mentioned in this prospectus, and, in particular, will qualify in full for alldividends or other distributions declared, made or paid on our Shares in respect of a recorddate which falls after the date of Listing other than participation in the Capitalisation Issue.

SHARE CAPITAL

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CAPITALISATION ISSUE

Pursuant to the resolutions of our sole Shareholder passed on 24 March 2016, subjectto the share premium account of our Company being credited as a result of the Placing, ourDirectors are authorised to allot and issue a total of 1,039,990,000 Shares credited as fullypaid at par to Blooming Union by way of capitalisation of the sum of HK$10,399,900standing to the credit of the share premium account of our Company, and our Shares to beallotted and issued pursuant to this resolution shall rank pari passu in all respects with theexisting issued Shares.

GENERAL MANDATE TO ISSUE SHARES

Subject to the Placing becoming unconditional, our Directors have been granted ageneral unconditional mandate to allot, issue and deal with the Shares or securitiesconvertible into Shares or options, warrants or similar rights to subscribe for Shares or suchsecurities convertible into Shares, and to make or grant offers, agreements or options whichmight require such Shares to be allotted and issued or dealt with subject to the requirementthat the aggregate nominal value of the Shares so allotted and issued or agreed conditionallyor unconditionally to be allotted and issued (otherwise than pursuant to a rights issue, orscrip dividend scheme or similar arrangements, or a specific authority granted by theShareholders) shall not exceed:

(a) 20% of the aggregate nominal value of the share capital of our Company in issueimmediately following the completion of the Capitalisation Issue and the Placing(not including Shares to be issued upon exercise of any options which may begranted under the Share Option Scheme); and

(b) the aggregate nominal value of the share capital of our Company repurchased bythe Company (if any) pursuant to the general mandate to repurchase Sharesreferred to in the paragraph headed “General mandate to repurchase Shares”below.

This mandate does not cover Shares to be allotted, issued, or dealt with under a rightsissue or pursuant to the exercise of the options which may be granted under the ShareOption Scheme. This general mandate to issue Shares will remain in effect until the earliestof:

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

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

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

SHARE CAPITAL

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For further details of this general mandate, please refer to the sub-paragraph headed “3.Written resolutions of our sole Shareholder passed on 24 March 2016” under the paragraph“A. Further information about the Company” in Appendix V to this prospectus.

GENERAL MANDATE TO REPURCHASE SHARES

Subject to the Placing becoming unconditional, our Directors have been granted ageneral unconditional mandate to exercise all the powers of our Company to repurchaseShares with an aggregate nominal value of not more than 10% of the aggregate nominalvalue of the share capital of our Company in issue following the completion of theCapitalisation Issue and the Placing (without taking into account any Shares to be issuedupon exercise of any options which may be granted under the Share Option Scheme).

This mandate only relates to repurchases made on GEM, or on any other stockexchange on which the securities of our Company may be listed and which is recognised bythe SFC and the Stock Exchange for this purpose, and such repurchases are made inaccordance with all applicable laws and the requirements of the GEM Listing Rules. Asummary of the relevant GEM Listing Rules is set out in the paragraph headed “A. Furtherinformation about the Company – 6. Repurchase of shares by our Company” in Appendix Vto this prospectus.

The general mandates to issue and repurchase Shares will remain in effect until theearliest of:

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

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

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

For further details of this general mandate, please refer to the paragraph headed “A.Further information about the Company – 6. Repurchase of shares by our Company” inAppendix V to this prospectus.

SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme. Details of theprincipal terms of the Share Option Scheme are summarised in the paragraph headed “D.Share Option Scheme” in Appendix V to this prospectus.

Our Group did not have any outstanding share options, warrants, convertibleinstruments, or similar rights convertible into the Shares as at the Latest Practicable Date.

SHARE CAPITAL

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CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETINGARE REQUIRED

As a matter of the Companies Law, an exempted company is not required by law tohold any general meetings or class meetings. The holding of general meeting or classmeeting is prescribed for under the articles of association of a company. Accordingly, ourCompany will hold general meetings as prescribed for under the Articles, a summary ofwhich is set out in “Summary of the constitution of our Company and Cayman IslandsCompany Law” set out in Appendix IV to this prospectus.

SHARE CAPITAL

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You should read this section in conjunction with our audited combined financialinformation, including the notes thereto, as set out in the Accountants’ Report inAppendix I to this prospectus. Our combined financial information have been prepared inaccordance with the Hong Kong Financial Reporting Standards (including Hong KongAccounting Standards, amendments and interpretations) issued by the Hong KongInstitute of Certified Public Accountants (“HKFRSs”). You should read the entireAccountants’ Report and not merely rely on the information contained in this section.

The following discussion and analysis contains certain forward-looking statementsthat reflect the current views with respect to future events and financial performance.These statements are based on assumptions and analyses made by us in light of ourexperience and perception of historical trends, current conditions and expected futuredevelopments, as well as other factors we believe are appropriate under thecircumstances. However, whether actual outcomes and developments will meet ourexpectations and projections depends on a number of risks and uncertainties over whichwe do not have control. For further information, please refer to the sections headed“Risk factors” and “Forward-looking statements” in this prospectus.

OVERVIEW

We are principally engaged in the provision of civil engineering works in Hong Kong

During the Track Record Period, the civil engineering works provided by our Groupmainly included (i) roads and drainage works (including construction and improvement oflocal road, carriageway with junction improvement and the associated footpaths, plantingareas, drains, sewers, water mains and utilities diversion); (ii) structural works (includingconstruction of reinforced concrete structures for bridges and retaining walls); and (iii) siteformation works (including excavation and/or filling works for forming a new site orachieving designed formation level for later development). We primarily undertookconstruction projects in the public sector in Hong Kong and were generally engaged as asubcontractor.

During the Track Record Period, our revenue was approximately HK$159,963,000,HK$271,949,000 and HK$154,641,000 for each of the two years ended 31 March 2015 andthe eight months ended 30 November 2015, respectively.

BASIS OF PRESENTATION

The combined financial information incorporates the financial information of ourCompany and all our subsidiaries during the Track Record Period. The financial statementsof our subsidiaries are prepared for the same reporting period as our Company, usingconsistent accounting policies.

Subsidiaries are entities controlled by our Group. Our Group controls an entity whenour Group is exposed, or has rights, to variable returns from its involvement with the entityand has the ability to affect those returns through its power over the entity. When assessingwhether our Group has power over the entity, only substantive rights relating to the entity(held by our Group and others) are considered.

FINANCIAL INFORMATION

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Our Group includes the income and expenses of a subsidiary in the combined financialstatements from the date we gain control until the date when our Group ceases to control thesubsidiary.

Intra-group transactions, balances and unrealised gains and losses on transactionsbetween group companies are eliminated in preparing the combined financial statements.Amounts reported in the financial statements of subsidiaries have been adjusted wherenecessary to ensure consistency with the accounting policies adopted by our Group.

Changes in our Group’s interests in subsidiaries that do not result in a loss of controlare accounted for as equity transactions, whereby adjustments are made to the amounts ofcontrolling interests within combined equity to reflect the change in relative interests, but noadjustments are made to goodwill and no gain or loss is recognised.

When our Group loses control of a subsidiary, the profit or loss on disposal iscalculated as the difference between (i) the aggregate of the fair value of the considerationreceived and the fair value of any retained interest; and (ii) the previous carrying amount ofthe assets (including goodwill) and liabilities of the subsidiary and any non-controllinginterests. Where certain assets of the subsidiary are measured at revalued amounts or fairvalues and the related cumulative gain or loss has been recognised in other comprehensiveincome and accumulated in equity, the amounts previously recognised in othercomprehensive income and accumulated in equity are accounted for as if our Company haddirectly disposed of the related assets (i.e., reclassified to profit or loss or transferreddirectly to retained earnings). The fair value of any investment retained in the formersubsidiary at the date when control is lost is regarded as the fair value on initial recognitionfor subsequent accounting under HKAS 39 “Financial Instruments: Recognition andMeasurement” or, when applicable, the cost on initial recognition of an investment in anassociate or a joint venture.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIALCONDITION

Our results of operations and financial condition have been and will continue to beaffected by a number of factors, many of which may be beyond our control, including thosefactors set out in the section headed “Risk factors” of this prospectus and those set outbelow.

Market demand for construction activities

We derive our revenue mainly from civil engineering works, whose demand relates tothe number of infrastructure projects, which may vary according to a combination of factorsincluding the amount of Government spending, investment prospects of Hong Kong, thedemand of infrastructure, supply of land, population growth, etc. Our revenue was affectedby the number and size of civil engineering projects we undertook during the Track RecordPeriod. The construction industry in Hong Kong has been benefited from the Government’sefforts to supply land for residential buildings and the ongoing Ten Major InfrastructureProjects and other large scale infrastructure projects.


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The increase or decrease in the demand for construction activities would thereforeaffect the demand of our services. There is no assurance that the number of constructionprojects will not decrease in the future and any reduction in the number of constructionprojects in Hong Kong would adversely and materially affect our business in general andour results of operation.

Cost control and management

Costs of construction materials and supplies, staff costs, subcontracting charges and siteequipment rental are the main components of our costs of sales. During the Track RecordPeriod, these four components of cost in aggregate amounted to approximatelyHK$137,620,000, HK$233,075,000 and HK$131,586,000 representing approximately 94.9%,94.6% and 95.8% of our costs of sales for each of the two years ended 31 March 2015 andthe eight months ended 30 November 2015, respectively. Although we determine our projectprices based on a cost-plus method with reference to the time and costs estimated to beinvolved in a project, the actual time and costs involved in completing our civil engineeringprojects may be adversely affected by a number of uncontrollable or unforeseen factors,including shortage and cost escalation in materials and labour, unexpected difficultgeological conditions, adverse weather conditions and changes in rules, regulations andpolicies set out by the Government. Most of our construction contracts are remeasurementcontracts which contain, among other things, bills of quantities or schedule of rates that arebased on the agreed unit rates and the estimated quantities of each item to be consumed inthe project. We will be paid based on actual quantities of works done by us in the project,which normally will be measured by our customer upon completion of the project.

The price of each construction contract is determined with reference to our bids andsubstantially agreed to at the time a project is awarded. In order to determine the bids, weneed to estimate the time and costs involved in a project. However, we may fail toaccurately estimate completion costs. The actual amount of total costs incurred incompleting a project may be adversely affected by many factors, such as adverse weatherconditions, accidents, unforeseen site conditions and fluctuations in the price of rawmaterials. If the costs for a project exceed the contracted price in the relevant contract, wemay achieve lower-than-expected profits or even incur losses, which could materially andadversely affect our financial performance and results of operations.

Collectability and timing of collection of our trade debtors and retention moniesreceivables

We normally receive progress payments from our customers on a monthly basis withreference to the value of works done, and a portion of such payment, ranging from 1% to10% and subject to a ceiling, is usually withheld by our customers as retention money andhalf of which will be remitted to us after completion of the construction project works andthe remaining half of which will be remitted to us after the defects liability period.Accordingly, there can be no assurance that the retention money or any future retentionmoney will be remitted by our customers to us on a timely basis and in full. Any latepayment, whether arising from payment practice of our customers or delay in completion ofthe construction project, may adversely affect our future liquidity position.


– 210 –

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

Our combined financial information has been prepared in accordance with HKFRSs.We have identified certain accounting policies that are critical to the preparation of ourfinancial information. These accounting policies are important for an understanding of ourresults of operations and financial position and are set forth in Note 2 of Section II of theAccountants’ Report in Appendix I to this prospectus.

In addition, the preparation of the financial information requires our management tomake significant and subjective estimates, assumptions and judgments that affect thereported amounts of revenues, expenses, assets and liabilities, and the disclosure ofcontingent liabilities, at the end of each of the two years ended 31 March 2014 and 2015and the eight months ended 30 November 2015. However, uncertainties about theseassumptions, estimates and judgments could result in outcomes that require a materialadjustment to the carrying amounts of the assets and liabilities affect in the future. Thesekey assumptions and estimates are set forth in Note 3 of Section II of the Accountants’Report in Appendix I to this prospectus.

We believe the following critical accounting policies and accounting estimates involvethe most significant or subjective judgments and estimates used in the preparation of thefinancial information.

Accounting policies

Revenue recognition

Please refer to Note 2.14 of Section II of the Accountants’ Report in Appendix I to thisprospectus.

Construction contracts


Property, plant and equipment


Accounting estimates




– 211 –

RESULTS OF OPERATIONS OF OUR GROUP

The following table sets out the combined results of our Group for each of the twoyears ended 31 March 2014 and 2015 and the eight months ended 30 November 2014 and2015, which are derived from, and should be read in conjunction with, the combinedfinancial information set out in the Accountants’ Report in Appendix I to this prospectus:


30 November2014 2015 2014 2015


Revenue 159,963 271,949 186,325 154,641Costs of sales (144,943) (246,349) (170,904) (137,355)

Gross profit 15,020 25,600 15,421 17,286

Other income 425 346 347 2,236Administrative and other operating

expenses (3,607) (3,772) (1,493) (10,122)

Profit from operations 11,838 22,174 14,275 9,400

Finance costs (452) (471) (291) (338)

Profit before income tax 11,386 21,703 13,984 9,062

Income tax expense (1,956) (3,624) (2,337) (2,670)

Profit and total comprehensiveincome for the year/periodattributable to equity holders ofthe Company 9,430 18,079 11,647 6,392


– 212 –

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– 219 –

The following table sets out our revenue for our public and private sector projectsduring the Track Record Period:

Year ended 31 March Eight months ended 30 November2014 2015 2014 2015

HK$’000 % HK$’000 % HK$’000 % HK$’000 %

Public sector projects 149,234 93.3 255,484 93.9 180,479 96.9 135,834 87.8Private sector

projects 10,729 6.7 16,465 6.1 5,846 3.1 18,807 12.2

159,963 100.0 271,949 100.0 186,325 100.0 154,641 100.0

During the Track Record Period, the majority of our revenue was derived from publicsector projects.

Costs of sales

Our Group’s costs of sales consist primarily of construction materials and supplies,direct staff costs, subcontracting charges and an appropriate portion of variable and fixedconstruction overheads, which included depreciation and miscellaneous direct costs. Thefollowing table sets out the breakdown of our Group’s costs of sales during the TrackRecord Period:


30 November2014 2015 2014 2015


Construction materials and supplies 51,678 79,074 59,693 49,083Staff costs 37,004 60,219 42,090 27,576Subcontracting charges 31,617 59,971 37,866 35,512Rental of site equipment 17,321 33,811 21,904 19,415Repair and maintenance 909 1,746 1,290 477Depreciation 2,923 2,560 1,561 1,641Parts and consumables 898 1,710 1,182 1,051Professional fees 78 159 108 173Others 2,515 7,099 5,210 2,427

144,943 246,349 170,904 137,355

Construction materials and supplies

Construction materials and supplies mainly represent the expenses for the purchase ofconcrete, steel reinforcement bars, structural steel and diesel fuel and these costs are directlycharged to our construction project works. For each of the two years ended 31 March 2015


– 220 –

and the eight months ended 30 November 2015, construction materials and suppliesexpenses amounted to approximately HK$51,678,000, HK$79,074,000 and HK$49,083,000,representing approximately 35.7%, 32.1% and 35.7% of our total costs of sales, respectively.

Staff costs

Staff costs represent the labour costs for the provision of our construction projectworks. For each of the two years ended 31 March 2015 and the eight months ended 30November 2015, staff costs amounted to approximately HK$37,004,000, HK$60,219,000 andHK$27,576,000, representing approximately 25.5%, 24.4% and 20.1% of our total costs ofsales, respectively.

Subcontracting charges

Subcontracting charges represent charges and fees paid to our subcontractors whichmainly provide labour and services necessary for the completion of the civil engineeringworks undertaken by us. For each of the two years ended 31 March 2015 and the eightmonths ended 30 November 2015, subcontracting charges amounted to approximatelyHK$31,617,000, HK$59,971,000 and HK$35,512,000, representing approximately 21.8%,24.3% and 25.9% of our total costs of sales, respectively.

Rental of site equipment

Rental of site equipment represents the expenses for the rental of site equipment andmotor vehicles for carrying out the civil engineering works undertaken by us. For each ofthe two years ended 31 March 2015 and the eight months ended 30 November 2015, rentalof site equipment expenses amounted to approximately HK$17,321,000, HK$33,811,000 andHK$19,415,000, representing approximately 12.0%, 13.7% and 14.1% of our total costs ofsales, respectively.

Other costs of sales expenses

Other costs of sales expenses include less significant and/or miscellaneous direct costsfor carrying out the civil engineering works undertaken by us, which mainly includeentertainment expenses, depreciation of our site equipment and motor vehicles, repair andmaintenance of our site equipment, parts and consumables purchased for replacement ofwearable parts of our site equipment and professional fees for the testing of constructionmaterial and supplies.

Sensitivity analyses

The following sensitivity analyses illustrates the impact of hypothetical changes, basedon historical fluctuations in construction materials and supplies, staff costs andsubcontracting charges under costs of sales during the Track Record Period:


– 221 –

Costs of construction materials and supplies

Corresponding change in costs of salesPercentage change in price ofconstruction materials andsupplies for the year ended 31 March

for the eightmonths ended30 November

2014 2015 2015HK$’000 HK$’000 HK$’000

+10% 5,168 7,907 4,908+5% 2,584 3,954 2,454+2% 1,034 1,581 982-2% (1,034) (1,581) (982)-5% (2,584) (3,954) (2,454)-10% (5,168) (7,907) (4,908)

Staff costs

Corresponding change in costs of sales

Percentage change instaff costs for the year ended 31 March


2014 2015 2015HK$’000 HK$’000 HK$’000

+10% 3,700 6,022 2,758+5% 1,850 3,011 1,379+2% 740 1,204 552-2% (740) (1,204) (552)-5% (1,850) (3,011) (1,379)-10% (3,700) (6,022) (2,758)

Subcontracting charges

Corresponding change in costs of sales

Percentage change insubcontracting charges for the year ended 31 March


2014 2015 2015HK$’000 HK$’000 HK$’000

+10% 3,162 5,997 3,551+5% 1,581 2,999 1,776+2% 632 1,199 710-2% (632) (1,199) (710)-5% (1,581) (2,999) (1,776)-10% (3,162) (5,997) (3,551)


– 222 –

Gross profit margin

The following table sets out our gross profit and gross profit margin during the TrackRecord Period:


30 November2014 2015 2014 2015

Gross profit (HK$’000) 15,020 25,600 15,421 17,286Gross profit margin 9.4% 9.4% 8.3% 11.2%

During the Track Record Period, our gross profit margin varied substantially fromproject to project and is mainly attributable to our pricing, which is determined based on acost-plus pricing model in general with mark-up determined on a project-by-project basisand such mark-up is determined based on the following factors:

Contract value of the project

We would normally set a tender price based on a relatively lower mark-up forprojects with a larger contract value due to the larger absolute amounts of revenue andgross profit (being the contract sum less the expected costs of sales) expected to bederived from a project with a larger contract value.

Nature and complexity of civil engineering works

When preparing our tender price, we consider, among other factors, (i) the amountof project management; (ii) the level of difficulty; (iii) the amount of uncertainties; (iv)the types and amount of works to be performed using different techniques; (v) thetypes and amount of resources such as labour skills, construction materials and suppliesand site equipment; and (vi) the quality, safety and environmental standards. We wouldalso take into account the likelihood of any material deviation of actual costs from ourestimated costs having regard to the estimated subcontracting charges, staff costs,construction materials and supplies costs, rental of site equipment costs and other costsof sales.

Competition

The level of competition for each construction project is subject to factors beyondour control, including, among others, the number of contractors invited to bid for theconstruction project, our competitors’ capacity and the nature and complexity of theworks involved. If the level of competition of a particular construction project is lowor if our competitors’ tender prices are relatively high, which is due to their owncommercial decisions, we may be able awarded the construction project even if ourtender price is not particularly competitive.


– 223 –

Cost control

While we may obtain preliminary quotations from our subcontractors whenpreparing our tender prices, the final agreed prices with our subcontractors are subjectto further negotiations after we are successfully awarded with a tender and after weobtain more specific information regarding the works and the site conditions. Suchfurther negotiations with our subcontractors may result in higher or lower gross profitmargins.

We enter into contra charge arrangements with some of our customers for, amongothers, the purchase of construction materials and supplies and site equipment rentaland hence any increase in these costs are borne by our customers. The prices ofconstruction materials and supplies and site equipment rental and other costs of salesthat are not covered by contra charge arrangements are determined by reference toquotations of suppliers as agreed by us and our suppliers on an order-by-order basis.While we price in the estimated future price trend of these costs of sales whenpreparing our tender proposals, material deviation of the actual costs from ourestimated costs may arise, which would result in higher or lower gross profit margins.

Due to, among others, the factors stated above, our gross profit margin variedsubstantially from project to project during the Track Record Period.

The following table sets out our gross profit and gross profit margins for our publicand private sector projects during the Track Record Period:

Year ended 31 March Eight months ended 30 November2014 2015 2014 2015

% % % %

Gross profit (HK$’000)Public sector projects 12,755 84.9 23,063 90.1 14,099 91.4 15,745 91.1Private sector projects 2,265 15.1 2,537 9.9 1,322 8.6 1,541 8.9Overall gross profit 15,020 100.0 25,600 100.0 15,421 100.0 17,286 100.0

Gross profit marginPublic sector projects 8.6% 9.0% 7.8% 11.6%Private sector projects 21.1% 15.4% 22.6% 8.2%Overall gross profit margin 9.4% 9.4% 8.3% 11.2%

As discussed above, we would normally set a tender price based on a relatively lowergross profit margin for projects with a larger contract value due to the larger absoluteamounts of revenue and gross profit (being the contract sum less the expected costs of sales)expected to be derived from a project with a larger contract value. As the contract values ofour public sector projects were generally larger than the contract values of our private sectorprojects. During the two years ended 31 March 2015 we recorded lower gross profit marginsfor our public sector projects than for our private sector projects. Gross profit margin for ourpublic sector projects increased during the eight months ended 30 November 2015 mainlydue to a variation order received for the Reconstruction and improvement of Tuen MunRoad – Sam Shing Hui section project, which generated a gross profit margin of


– 224 –

approximately 27.5%. Gross profit margin for our private sector projects decreased duringthe Track Record Period. This is mainly attributable to the commencement of a project witha larger contract value during the year ended 31 March 2015. The increase in overall grossprofit margin during the eight months ended 30 November 2015 is mainly attributable to thehigher gross profit margin generated by the variation order under the public sector project.

During the Track Record Period, we recorded gross loss in one project ofapproximately HK$464,000, which was mainly due to the additional manpower and timerequired to complete the earthworks as a result of unexpected difficult geological conditions.The loss-making project was completed in March 2014 and the Directors expect that all ofthe costs for the project have been incurred and recognised by the Group before and duringthe Track Record Period and there would not be any further losses to be recognised for theproject subsequent to the Track Record Period.

Other income

Our other income consist primarily of gain on disposal of investment property, rentalincome and gain on disposal of property, plant and equipment.

Administrative and other operating expenses

Our administrative and other operating expenses consist primarily of staff costs anddirectors’ remuneration, depreciation, rental fees, building management fees and rates,Listing expenses and other administrative expenses. The following table sets out ouradministrative expenses by nature during the Track Record Period:


30 November2014 2015 2014 2015


Staff costs, including directors’emoluments 2,072 1,923 567 922

Depreciation 753 704 469 368Rental fees, building management

fees and rates 279 301 192 223Utility expenses 108 91 64 82Entertainment 64 43 43 1Audit fee 24 24 – 61Professional fees 4 4 4 36Listing expenses – – – 7,883Others 303 682 154 546

3,607 3,772 1,493 10,122


– 225 –

Income tax

Income tax expenses primarily consist of deferred tax and provision for current incometax expenses incurred in Hong Kong. During the Track Record Period, all of our Group’srevenue was derived in Hong Kong and our Group was subject to profits tax in Hong Kong.During each of the two years ended 31 March 2014 and 2015 and the eight months ended 30November 2015, the effective tax rate of our Group was approximately 17.2%, 16.7% and29.5%, respectively.

Our Company and its subsidiaries are incorporated in different jurisdictions, withdifferent taxation requirements illustrated below:

The Cayman Islands and the BVI

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

Hong Kong

All of our Company’s Hong Kong incorporated subsidiaries were subject to Hong Kongprofits tax at a rate of 16.5% during the Track Record Period.

Our Directors confirm that they were not aware of any disputes/unresolved tax issueswith any tax authorities as at the Latest Practicable Date.

PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

Eight months ended 30 November 2015 compared with eight months ended 30November 2014

Revenue

Our Group’s revenue decreased by approximately HK$31,684,000, or 17.0%, fromapproximately HK$186,325,000 for the eight months ended 30 November 2014 toHK$154,641,000 for the eight months ended 30 November 2015. Such decrease is mainlyattributable to the completion of 16 projects with an aggregate contract sum ofapproximately HK$137,700,000 during the year ended 31 March 2015, while a major projectwith contract sum of approximately HK$455,319,000 was awarded in late August, which hadonly commenced in September 2015.

Costs of sales

Our Group’s costs of sales decreased by approximately HK$34,549,000, or 19.6%,from approximately HK$170,904,000 for the eight months ended 30 November 2014 toHK$137,355,000 for the eight months ended 30 November 2015. Staff costs decreased byapproximately 34.5% and subcontracting charges decreased by a smaller percentage ofapproximately 6.2% due to the commercial decision to subcontract more of our projectworks to our subcontractors during the eight months ended 30 November 2015.


– 226 –

Gross profit and gross profit margin

Our Group’s gross profit increased by approximately HK$1,865,000, or 12.1%, fromapproximately HK$15,421,000 for the eight months ended 30 November 2014 toapproximately HK$17,286,000 for the eight months ended 30 November 2015. Gross profitmargin increased from 8.3% for the eight months ended 30 November 2014 to 11.2% for theeight months ended 30 November 2015 mainly due to a variation order received for theReconstruction and improvement of Tuen Mun Road – Sam Shing Hui section project, whichgenerated a gross profit margin of approximately 27.5%. Our Directors consider that ourresulting gross profit margin is a combination of our pricing of each project, competition forthe project and cost control. Our gross profit margin was determined on a project-by-projectbasis and is generally (i) lower for projects with a larger contract value as we set our tenderprices based on lower expected profit margins due to the larger absolute amounts of revenueand gross profit expected to be derived from a project with a larger contract value; and (ii)higher for projects which require more project management, greater level of techniques inconstruction works and/or a higher standard of quality and safety.

Other income

Our Group’s other income increased by approximately HK$1,889,000, fromapproximately HK$347,000 for the eight months ended 30 November 2014 to approximatelyHK$2,236,000 for the eight months ended 30 November 2015. Other income increasedmainly due to an increase of gain on disposal of investment property of approximatelyHK$1,792,000 during the eight months ended 30 November 2015, which mainly arose fromthe gain on disposal of an investment property located at Festival City, Tai Wai.


Our Group’s administrative and other operating expenses increased by approximatelyHK$8,629,000 from approximately HK$1,493,000 for the eight months ended 30 November2014 to approximately HK$10,122,000 for the eight months ended 30 November 2015. Suchincrease is mainly attributable to the Listing expenses of approximately HK$7,883,000 forthe eight months ended 30 November 2015 and the increase in staff costs mainly due to theaddition of administrative staff.

Finance costs

Our Group’s finance costs increased by approximately HK$47,000, or 16.2%, fromapproximately HK$291,000 for the eight months ended 30 November 2014 to approximatelyHK$338,000 for the eight months ended 30 November 2015. The increase is mainlyattributable to a drawdown of a bank loan in the principal amount of HK$4,000,000 inMarch 2015 for the acquisition of site equipment and general working capital to facilitateour business operations.


– 227 –

Income tax expense

During each of the eight months ended 30 November 2014 and 2015, the effective taxrate of our Group was approximately 16.7% and 29.5%, respectively. The effective tax rateof our Group for the eight months ended 30 November 2015 was higher than the statutorytax rate of 16.5% because Listing expenses were non-deductible.

Profit for the period and net profit margin

As a result of the foregoing, our Group’s profit for the period decreased byapproximately HK$5,255,000, or 45.1%, from approximately HK$11,647,000 for the eightmonths ended 30 November 2014 to approximately HK$6,392,000 for the eight monthsended 30 November 2015. Our net profit margin decreased from 6.3% for the eight monthsended 30 November 2014 to 4.1% for the eight months ended 30 November 2015. Thedecrease in net profit margin is mainly attributable to the increase in administrative andother operating expenses due to the Listing expenses of approximately HK$7,883,000,partially offset by a higher gross profit margin for the eight months ended 30 November2015.

Year ended 31 March 2015 compared with year ended 31 March 2014

Revenue

Our Group’s revenue increased by approximately HK$111,986,000, or 70.0%, fromapproximately HK$159,963,000 for the year ended 31 March 2014 to HK$271,949,000 forthe year ended 31 March 2015. Such increase is mainly attributable to the increase inconstruction works to speed up the progress of two projects with an aggregate contract sumof approximately HK$195,541,000 to meet completion deadlines during the year ended 31March 2015.

Costs of sales

Our Group’s costs of sales increased by approximately HK$101,406,000, or 70.0%,from approximately HK$144,943,000 for the year ended 31 March 2014 to HK$246,349,000for the year ended 31 March 2015. While costs of sales increased in line with our revenueas a result of the increase in construction activities, subcontracting charges increased byapproximately 89.7% whereas staff costs increased by approximately 62.7% for the yearended 31 March 2015 compared with the year ended 31 March 2014. For the year ended 31March 2015, our Directors considered that it was more appropriate to subcontract moreconstruction works to subcontractors having considered our capacity, resources level, typesof construction works, cost effectiveness and complexity of our projects.

Gross profit and gross profit margin

Our Group’s gross profit increased by approximately HK$10,580,000, or 70.4%, fromapproximately HK$15,020,000 for the year ended 31 March 2014 to approximatelyHK$25,600,000 for the year ended 31 March 2015. Gross profit increased in line with ourrevenue. Gross profit margin was stable at approximately 9.4% for each of the years ended31 March 2014 and 2015.


– 228 –

Other income

Our Group’s other income decreased by approximately HK$79,000, or 18.6%, fromapproximately HK$425,000 for the year ended 31 March 2014 to approximately HK$346,000for the year ended 31 March 2015. Other income decreased due to a gain on disposal ofproperty, plant and equipment of approximately HK$120,000 during the year ended 31March 2014.


Our Group’s administrative and other operating expenses increased by approximatelyHK$165,000, or 4.6%, from approximately HK$3,607,000 for the year ended 31 March 2014to approximately HK$3,772,000 for the year ended 31 March 2015. Our staff costs,representing the largest item within our administrative and other operating expenses, haddecreased by approximately HK$149,000, from approximately HK$2,072,000 for the yearended 31 March 2014 to approximately HK$1,923,000 for the year ended 31 March 2015mainly due to a decrease in bonus paid to Directors by approximately HK$200,000.Depreciation decreased slightly due to the disposal and the writing off of fixed assets duringthe year ended 31 March 2015. Other expenses increased by approximately HK$379,000,from approximately HK$303,000 for the year ended 31 March 2014 to approximatelyHK$682,000 for the year ended 31 March 2015 mainly due to a loss recognised on disposalof property plant and equipment of approximately HK$306,000. The remaining items in ouradministrative and other operating expenses were at similar levels or had increased/decreased slightly in terms of dollar amounts.

Finance costs

Our Group’s finance costs increased by approximately HK$19,000, or 4.2%, fromapproximately HK$452,000 for the year ended 31 March 2014 to approximately HK$471,000for the year ended 31 March 2015. The increase is mainly attributable to an increase in bankloans for the acquisition of site equipment and general working capital to facilitate ourbusiness operations and bank overdrafts for the financing of our working capital, althoughthere was a decrease in finance leases.

Income tax expense

During each of the two years ended 31 March 2014 and 2015, the effective tax rate ofour Group was approximately 17.2% and 16.7%, respectively, which were slightly higherthan the statutory tax rate of 16.5% due to an effect arising from non-deductible expenses.

No income tax was paid during each of the two years ended 31 March 2014 and 2015due to the offset of assessable profits by tax losses brought forward.

Profit for the year and net profit margin

As a result of the foregoing, our Group’s profit for the year increased by approximatelyHK$8,649,000, or 91.7%, from approximately HK$9,430,000 for the year ended 31 March2014 to approximately HK$18,079,000 for the year ended 31 March 2015. Our net profit


– 229 –

margin increased from 5.9% for the year ended 31 March 2014 to 6.6% for the year ended31 March 2015. The improvement in net profit margin is mainly attributable to the decreasein administrative and other operating expenses as a proportion of revenue as a result ofscale.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

We have historically met our liquidity requirements principally through a combinationof cash flow from operations and bank borrowings. Our uses of cash are mainly for thefinancing of our operations and working capital requirements and capital expenditures onproperty, plant and equipment. Going forward, we do not expect any material changes to theunderlying drivers of our sources of cash and uses of cash, except for the net proceeds fromthe Placing which will be used according to our use of proceeds plan as detailed in thesection headed “Statement of business objective and use of proceeds” in this prospectus. Asat the Latest Practicable Date, we had not experienced any liquidity problems in settling ourpayables in the normal course of business.

Cash flows

The following table sets forth our Group’s cash flows for the years/periods indicated:


30 November2014 2015 2014 2015


Operating cash flow beforeworking capital changes 15,394 25,744 16,194 9,497

Net cash generated from/(used in)operating activities 7,402 (3,687) (1,169) 5,228

Net cash (used in)/generated frominvesting activities (4,478) 209 (383) 11,495

Net cash (used in)/generated fromfinancing activities (894) 477 (1,998) (9,332)

Net increase/(decrease) in cash andcash equivalents 2,030 (3,001) (3,550) 7,391

Cash and cash equivalents at thebeginning of the year/period 1,389 3,419 3,419 418

Cash and cash equivalents at theend of the year/period 3,419 418 (131) 7,809


– 230 –

Cash flows from operating activities

Cash flows from operating activities primarily consisted of our Group’s revenues fromcivil engineering projects undertaken by us. Our Group mainly derives its cash inflow fromoperating activities from the receipt of payments from customers and the primary sources ofcash outflow from operations include payrolls, payment to subcontractors and suppliers.

Our cash from operating activities reflects profit before tax for the year, mainlyadjusted for depreciation, gain or loss on disposal of property, plant and equipment andfinance costs.

During the eight months ended 30 November 2015, our cash generated from operationsconsisted of operating profit of approximately HK$9,497,000 before working capitalchanges. Working capital changes primarily included (i) a decrease in amounts due tocustomers for contract work of approximately HK$11,654,000 in line with the decrease inrevenue of approximately HK$31,684,000 due to a decrease in construction activitiesundertaken by us and is driven by progress billings and the settlement thereof; (ii) anincrease in amounts due from customers for contract work of approximately HK$8,119,000which is also driven by progress billings and the settlement thereof.

During the eight months ended 30 November 2014, our cash generated from operationsconsisted of operating profit of approximately HK$16,194,000 before working capitalchanges. Working capital changes primarily included (i) an increase in trade and otherreceivables of approximately HK$19,061,000; and (ii) an increase in trade and otherpayables of approximately HK$4,908,000.

During the year ended 31 March 2015, our cash generated from operations consisted ofoperating profit of approximately HK$25,744,000 before working capital changes. Workingcapital changes primarily included (i) an increase in trade and other receivables ofapproximately HK$18,939,000 in line with the increase in revenue of approximatelyHK$111,986,000 due to an increase in construction activities undertaken by us; (ii) adecrease in trade and other payables of approximately HK$4,224,000; and (iii) a decrease inamounts due to Directors of approximately HK$3,915,000, which were unsecured,interest-free and have no fixed terms of repayment.

During the year ended 31 March 2014, our cash generated from operations consisted ofoperating profit of approximately HK$15,394,000 before working capital changes. Workingcapital changes primarily included (i) a decrease in amounts due to customers for contractwork of approximately HK$13,855,000; (ii) an increase in trade and other payables ofapproximately HK$8,749,000; and (iii) an increase in amounts due from customers forcontract work of approximately HK$7,149,000, all of which were driven by progress billingsand the settlement thereof.

Cash flows from investing activities

Cash inflows from investing activities were primarily utilised to purchase property,plant and equipment and cash inflows from investing activities were primarily from thedisposal of investment property and property, plant and equipment.


– 231 –

During the eight months ended 30 November 2015, we recorded net cash generatedfrom investing activities amounting to approximately HK$11,495,000, which was mainlyderived from proceeds generated from the disposal of investment property of approximatelyHK$12,700,000 and partly offset by the purchases of property, plant and equipment ofapproximately HK$1,643,000.

During the eight months ended 30 November 2014, we recorded net cash used ininvesting activities amounting to approximately HK$383,000, which was mainly due to thepurchase of property, plant and equipment.

During the year ended 31 March 2015, we recorded net cash generated from investingactivities amounting to approximately HK$209,000, which was mainly derived fromproceeds generated from the disposal of property, plant and equipment of approximatelyHK$719,000 and partly offset by the purchases of property, plant and equipment ofapproximately HK$510,000.

During the year ended 31 March 2014, we recorded net cash used in investingactivities amounting to approximately HK$4,478,000, which was mainly due to purchases ofproperty, plant and equipment of approximately HK4,625,000 and partly offset by theproceeds generated from the disposal of property, plant and equipment of approximatelyHK$147,000.

Cash flows from financing activities

Cash inflows from financing activities were primarily from drawdown of bankborrowings and cash outflows for financing activities were primarily from repayment ofbank loans and finance leases and the payment of interests accrued thereon.

During the eight months ended 30 November 2015, we recorded net cash used infinancing activities amounting to approximately HK$9,332,000. Cash outflows for financingactivities included (i) repayment of bank loans of approximately HK$7,938,000; (ii)repayment of capital element of finance leases of approximately HK$1,056,000; (iii) interestpaid of approximately HK$214,000; and (iv) interest element of finance leases ofapproximately HK$124,000.

During the eight months ended 30 November 2014, we recorded net cash used infinancing activities amounting to approximately HK$1,998,000. Cash outflows for financingactivities included (i) repayment of capital element of finance leases of approximatelyHK$991,000; (ii) repayment of bank loans of approximately HK$716,000; (iii) interest paidof approximately HK$181,000; and (iv) payment of interest element of finance leases ofapproximately HK$110,000.

During the year ended 31 March 2015, we recorded net cash generated from financingactivities amounting to approximately HK$477,000. Cash inflows from financing activitieswas due to the drawdown of bank borrowings of approximately HK$4,000,000. Cashoutflows for financing activities included (i) repayment of capital element of finance leases


– 232 –

of approximately HK$1,974,000; (ii) repayment of bank loans of approximatelyHK$1,078,000; (iii) interest paid of approximately HK$302,000; and (iv) payment of interestelement of finance leases of approximately HK$169,000.

During the year ended 31 March 2014, we recorded net cash used in financingactivities amounting to approximately HK$894,000. Cash inflows from financing activitieswas due to the drawdown of bank borrowings of approximately HK$3,000,000. Cashoutflows for financing activities included (i) repayment of bank loans of approximatelyHK$1,876,000; (ii) repayment of capital element of finance leases of approximatelyHK$1,566,000; (iii) interest paid of approximately HK$238,000; and (iv) payment of interestelement of finance leases of approximately HK$214,000.

Current assets and liabilities

The following table sets forth details of our Group’s current assets and liabilities as atthe respective dates indicated:

As at 31 MarchAs at

30 NovemberAs at

31 January2014 2015 2015 2016


Current assetsAmount due from a director – 523 – –Amounts due from customers for contract work 7,555 9,474 17,593 16,795Trade and other receivables 35,276 54,215 54,320 54,872Cash and bank balances 3,419 5,900 7,977 14,367

46,250 70,112 79,890 86,034

Current liabilitiesTrade and other payables 23,941 19,717 27,436 40,101Amounts due to customers for contract work 39,891 39,980 28,326 23,316Amounts due to directors 6,604 2,689 10,056 9,874Obligations under finance leases 1,474 1,199 1,537 1,660Bank loans and overdrafts 10,536 18,940 5,688 5,295Tax payable – – 1,607 1,607

82,446 82,525 74,650 81,853

Net current (liabilities)/assets (36,196) (12,413) 5,240 4,181

As at 31 January 2016, we recognised net current assets of approximatelyHK$4,181,000. Our current assets of approximately HK$86,034,000 comprised of (i) tradeand other receivables of approximately HK$54,872,000; (ii) cash and bank balances ofapproximately HK$14,367,000; and (iii) amounts due from customers for contract work ofapproximately HK$16,795,000. Our current liabilities of approximately HK$81,853,000 is


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comprised of (i) trade and other payables of approximately HK$40,101,000; (ii) amounts dueto customers for contract work of approximately HK$23,316,000; (iii) amounts due todirectors of approximately HK$9,874,000; (iv) bank loans and overdrafts of approximatelyHK$5,295,000; (v) obligations under finance lease of approximately HK$1,660,000; and (vi)tax payable of approximately HK$1,607,000.

As at 30 November 2015, we recognised net current assets of approximatelyHK$5,240,000. Our current assets of approximately HK$79,890,000 comprised of (i) tradeand other receivables of approximately HK$54,320,000; (ii) amounts due from customers forcontract work of approximately HK$17,593,000; and (iii) cash and bank balances ofapproximately HK$7,977,000. Our current liabilities of approximately HK$74,650,000 iscomprised of (i) amounts due to customers for contract work of approximatelyHK$28,326,000; (ii) trade and other payables of approximately HK$27,436,000; (iii)amounts due to directors of approximately HK$10,056,000; (iv) bank loans and overdrafts ofapproximately HK$5,688,000; (v) tax payable of approximately HK$1,607,000; and (vi)obligations under finance leases of approximately HK$1,537,000.

During the year ended 31 March 2015, our net current liabilities decreased byapproximately HK$23,783,000, or 65.7%, from approximately HK$36,196,000 as at 31March 2014 to approximately HK$12,413,000 as at 31 March 2015. Such decrease is drivenby an increase in our construction activities during the year ended 31 March 2015 which inturn lead to an increase in our trade and other receivables and amounts due from customersfor contract work. Our current liabilities remained at similar levels as an increase in bankloans and overdrafts was offset by decreases in trade and other payables and amounts due todirectors.

The net current liabilities positions of approximately HK$36,196,000 andHK$12,413,000 as at 31 March 2014 and 2015, respectively, were primarily attributable to(i) the amounts due to customers for contract work of approximately HK$39,891,000 andHK$39,980,000 as at 31 March 2014 and 2015, respectively. Such amounts are temporarydifferences mainly arising from progress billings exceeding costs incurred plus(less)recognised profit(loss), which will cease to exist at completion of the relevant project; and(ii) the mortgage loan, which is a current liability, drawn to fund the acquisition of theinvestment property, a non-current asset as at 31 March 2014 and 2015, which wassubsequently reclassified as held for sale in current assets and disposed of in October 2015.


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DISCUSSION OF CERTAIN COMBINED STATEMENTS OF FINANCIAL POSITIONITEMS

Property, plant and equipment

The following table sets out the respective carrying values of our Group’s property,plant and equipment as at the respective dates indicated:

Land andbuildings

Furnitureand

equipmentSite

equipmentMotor

vehicles TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at31 March 2014 1,045 420 7,899 4,358 13,722

31 March 2015 964 250 7,128 3,491 11,833

30 November 2015 911 713 6,898 4,752 13,274

As shown in the table above, our Group’s property, plant and equipment consistsprimarily of site equipment and motor vehicles. We purchased our site equipment and motorvehicles mainly with our internally generated resources, bank loans and/or through financelease arrangements.

Site equipment are primarily the various types of machinery for our civil engineeringconstruction works, which include excavators, vibrating rollers, generators, air compressors,a hydraulic truck crane, hydraulic breakers and aerial working platforms. The site equipmenthad a carrying amount of approximately HK$7,899,000 as at 31 March 2014, whichdecreased slightly to approximately HK$7,128,000 as at 31 March 2015 due to depreciationof site equipment, offset by the purchase of a number of site equipment during the year. Thecarrying amount of site equipment then decreased slightly to approximately HK$6,898,000as at 30 November 2015 as a result of disposals and depreciation of site equipment. Forfurther details of the site equipment for our Group’s operations, please refer to the sectionheaded “Business – Site equipment” of this prospectus.

Motor vehicles are mainly vans and crane lorries used for transportation of employeesamong sites and construction works, respectively. Our Group also owned some motorvehicles to facilitate our project management staff to travel between different constructionsites and offices. The carrying amount of our motor vehicles was approximatelyHK$4,358,000 as at 31 March 2014 which decreased to approximately HK$3,491,000 as at31 March 2015 due to disposals and depreciation of motor vehicles, although partly offsetby purchases of a few new motor vehicles. The carrying amount of motor vehicles thenincreased to approximately HK$4,752,000 as at 30 November 2015 due to the addition ofcertain motor vehicles.


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Our Group owns a property for operational use and leases a property for general officeuse. For details of our properties, please also refer to the section headed “Business –Properties” of this prospectus.

Some of our motor vehicles were purchased by entering into finance leasearrangements during the Track Record Period. As at 31 March 2014 and 2015 and 30November 2015, our motor vehicles with net book amount of approximately HK$4,103,000,HK$3,223,000 and HK$4,171,000, respectively, were held under finance leases.

Amounts due to/from customers for contract work

Our construction contracts in progress are recorded as the amount of costs incurredplus(less) recognised profit(losses) less progress billings and are presented as (i) amountsdue from customers for contract work as an asset when costs incurred plus(less) recognisedprofit(losses) exceeds progress billings; or (ii) amounts due to customers for contract workas a liability when progress billings exceeds costs incurred plus(less) recognisedprofit(losses). Unlike trade receivables, amounts due from customers for contract workrepresent work performed by us, for which the payment certificates have not yet beenobtained from our customers as at the end of a financial year/period.

The following table sets out our Group’s amounts due from/to customers for contractwork as at the respective dates indicated:

As at 31 March

As at30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

Amounts due from customers for contract work 7,555 9,474 17,593Amounts due to customers for contract work (39,891) (39,980) (28,326)

(32,336) (30,506) (10,733)

The amounts due from/to customers for contract work vary from period to period dueto the difference in volume and value of construction works we performed close to the endof each reporting period and duration between our submission of progress paymentapplications and receipt of progress certificates from our customers. It normally takesapproximately 45 days for our customers to certify our progress payment applications.Notwithstanding the above, payment certification for final payment would normally takelonger as they are usually subject to a process of negotiation.

As at 31 March 2014 and 2015 and 30 November 2015, amounts due from customersfor contract work included a balance of HK$Nil, HK$Nil and approximately HK$1,900,000not yet certified by customers, respectively, relating to projects which we recognised revenuefor the works done submitted in the account application by reference to the amount ofcompleted works estimated by our in-house surveyor to the customers. Our Directors are ofthe view that the revenue recognised during the Track Record Period by reference to our


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in-house surveyor’s estimation of works done thus represents an insignificant portion.Referring to the impairment of trade receivables described in the paragraph headed “Tradeand other receivables – Trade receivables” below, based on the fact that (i) we haveon-going business relationships with these customers and we have not received any notice ofdisagreement on our final payment application from these customers as at the LatestPracticable Date; (ii) we have received all interim payments timely on the same project andwe are not aware of the deterioration of the credit quality of these customers; and (iii) it isthe industry norm to allow a defects liability period of 12 months from date of completionof the project before final accounts are to be approved by our customers and settled, ourDirectors consider that no impairment of trade receivables is necessary.

Trade and other receivables

Our trade and other receivables consisted of (i) trade receivables; (ii) retention moniesreceivables; and (iii) other receivables, deposits and prepayments. The following table setsout the breakdown of trade and other receivables as at the respective dates indicated:

As at 31 March

As at30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

Trade receivables 15,583 33,832 29,786Retention monies receivables 17,957 19,217 23,815Other receivables, deposits and prepayments 1,736 1,166 719

35,276 54,215 54,320

Trade receivables

Trade receivables were mainly derived from our provision of construction works. Ourcustomers are generally required to make payments to us within 45 days after thesubmission of payment application by our Group, which is usually made on a monthly basisfor each ongoing project.

Our trade receivables increased from approximately HK$15,583,000 as at 31 March2014 to approximately HK$33,832,000 as at 31 March 2015 due to the increase inconstruction works to speed up the progress of two projects to meet completion deadlinesimposed by the customers during the year ended 31 March 2015, which led to an increase inour revenue, combined with fluctuations in the actual works progress of our ongoingprojects, the amount certified by the relevant customers and the amount settled by therelevant customers as at the respective reporting dates.


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Our trade receivables decreased from approximately HK$33,832,000 as at 31 March2015 to approximately HK$29,786,000 as at 30 November 2015. This was primarily due tofluctuations in the actual works progress of our ongoing projects, the amount certified by therelevant customers and the amount settled by the relevant customers as at the respectivereporting dates.

To a certain extent, our trade receivables (including retention monies receivables) wereconcentrated to our largest debtor and the five largest debtors as illustrated in the tablebelow for the respective dates indicated:

As at 31 March

As at30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

Largest debtor 8,506 17,309 20,763Five largest debtors 29,331 51,517 50,931

We seek to maintain strict control over our outstanding trade receivables as well asretention monies receivables to minimise credit risk. Our management reviews overduebalances regularly and sends out payment reminders for such balances. We do not hold anycollateral or other credit enhancements over our trade receivables balances. Tradereceivables are non-interest bearing.

The following table sets out our ageing analysis of trade receivables from clients,presented based on date of invoice as at the respective dates indicated:

As at 31 March

As at30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

0-30 days 7,511 14,383 25,82531-60 days 7,833 19,449 3,02461-90 days 154 – 66Over 90 days 85 – 871

15,583 33,832 29,786

Trade receivables which were past due but not impaired related to a number ofindependent customers that had a good track record of credit with us. Based on past credithistory, our Directors believe that no provision for impairment is necessary in respect ofthese balances as there has not been a significant change in credit quality and the balancesare still considered to be fully recoverable.


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As at the Latest Practicable Date, approximately HK$15,583,000 or 100%,HK$33,832,000 or 100% and HK$29,108,000 or 97.7% of trade receivables as at 31 March2014 and 2015 and 30 November 2015, respectively, were settled.

The following table sets out our debtors’ turnover days during the year/periodindicated:


For theeight

monthsended 30

November2014 2015 2015days days days

Debtors’ turnover days 39.6 33.2 50.2

Note: Debtors’ turnover days is calculated by the average trade receivables as at the respective period enddivided by the total revenue for the period and multiplied by the number of days in the period.

The debtors’ turnover days decreased from approximately 39.6 days for the year ended31 March 2014 to approximately 33.2 days for the year ended 31 March 2015. The decreaseis mainly attributable to a substantial increase in revenue during the year ended 31 March2015. This is slightly offset by an increase in trade receivables due to the fluctuations in theactual works progress of our ongoing projects, the amount certified by the relevantcustomers and the amount settled by the relevant customers as at the respective reportingdates.

The debtors’ turnover days increased from approximately 33.2 days for the year ended31 March 2015 to approximately 50.2 days for the eight months ended 30 November 2015.The increase is mainly attributable to the progress of several major projects beingconcentrated towards the end of the period, thereby accumulating trade receivables whichhad not been settled as at 30 November 2015. This is slightly offset by a decrease in tradereceivables due to the fluctuations in the actual works progress of our ongoing projects, theamount certified by the relevant customers and the amount settled by the relevant customersas at the respective reporting dates.

Retention monies receivables

When undertaking contract works, some of our customers may, depending on thecontract terms, hold up a certain percentage of each payment made to us as retention money.In general, our customers will retain up to 10% of each interim payment and up to amaximum limit of 5% of the contract sum as retention money for the project. 50% of theretention money withheld is normally released to us after the completion of a project and theremaining retention money is normally released after the expiry of the defects liabilityperiod.


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Our retention monies receivables increased from approximately HK$17,957,000 as at31 March 2014 to approximately HK$19,217,000 as at 31 March 2015 due to the increase inconstruction works to speed up the progress of two projects with an aggregate contract sumof HK$195,541,000 to meet completion deadlines during the year ended 31 March 2015, andhence retention monies receivables grew in line with the increase in our revenue.

Our retention monies receivables increased from approximately HK$19,217,000 as at31 March 2015 to HK$23,815,000 as at 30 November 2015, such increase is due to theretaining of retention money by our customers for our construction works without anysignificant release of retention monies during the eight months ended 30 November 2015.

Other receivables, deposits and prepayments

Prepayments and deposits mainly represented amounts paid for rental and utilitydeposits for warehouse, deposits for material purchase and advance payments to injuredworkers. Prepayments and deposits were amounted to approximately HK$1,736,000,HK$1,166,000 and HK$719,000 as at 31 March 2014 and 2015 and 30 November 2015,respectively.

Trade and other payables

Our trade and other payables consisted of (i) trade payables; (ii) retention moniespayables; and (iii) accruals and other payables. The following table sets out the breakdownof trade and other payables as at the respective dates indicated:

As at 31 March

As at30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

Trade payables 17,489 10,114 17,416Retention monies payables 2,045 3,278 3,647Accruals and other payables 4,407 6,325 6,373

23,941 19,717 27,436

Trade payables

Our trade payables mainly represented amounts payable to our suppliers, from whomwe purchased construction materials, and subcontracting charges.

As our business is project-based and our construction projects may not be recurring,our costs of sales during the Track Record Period fluctuated subject to the size and theprogress of our construction works and as such our trade payables balance and creditors’turnover days as at a reporting date or during a reporting period may be affected.


– 240 –

Our trade payables decreased from approximately HK$17,489,000 as at 31 March 2014to approximately HK$10,114,000 as at 31 March 2015.

Our trade payables increased from approximately HK$10,114,000 as at 31 March 2015to approximately HK$17,416,000 as at 30 November 2015.

The following table sets out our ageing analysis of trade payables presented based onthe invoice dates as at the respective dates indicated:

As at 31 MarchAs at 30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

0-30 days 10,411 6,894 17,18331-60 days 5,556 2,646 3161-90 days 466 69 202Over 90 days 1,056 505 –

17,489 10,114 17,416

The credit period on trade payables is generally 0 to 30 days. As at the LatestPracticable Date, all of our trade payables as at 31 March 2014 and 2015 were settled andapproximately HK$16,571,000 or 95.2% of trade payables as at 30 November 2015 weresettled.

The following table sets out our creditors’ turnover days during the year/periodindicated:


For theeight

monthsended 30

November2014 2015 2015days days days

Creditors’ turnover days 33.6 20.4 24.5

Note: Creditors’ turnover days is calculated by the average trade payables as at the respective period enddivided by costs of sales for the period and multiplied by the number of days in the period.

The creditors’ turnover days were 33.6 days, 20.4 days and 24.5 days for each of theyears ended 31 March 2014 and 2015 and for the eight months ended 30 November 2015,respectively. As discussed above, our creditors’ turnover days may fluctuate due to thenon-recurring and project-by-project basis of our civil engineering works.


– 241 –

Amounts due to directors

The amounts due to directors was approximately HK$6,604,000, HK$2,689,000 andHK$10,056,000 as at 31 March 2014 and 2015 and 30 November 2015, respectively, whichmainly represented advances for financing the daily operations of our Group and for thesettlement of Listing expenses during the eight months ended 30 November 2015. Suchamounts were unsecured, interest free and have no fixed terms of repayment. On 21 March2016, Luen Hing applied HK$280,000 and HK$5,200,000 owed by Luen Hing to Mr. CKWong and Mr. WW Wong, respectively, toward the satisfaction of the issue and allotment of5,480,000 new shares of Luen Hing at a subscription price of HK$1 per share to SuperPioneer (as directed by Mr. CK Wong and Mr. WW Wong, respectively) and the remaininguncapitalised balance of amounts due to directors of HK$4,157.17 and HK$67,065.80 willbe repaid by Luen Hing to Mr. CK Wong and Mr. WW Wong, respectively, upon Listing;and Hop Fung applied HK$4,920,000 owed by Hop Fung to Mr. CK Wong toward thesatisfaction of the issue and allotment of 4,920,000 new shares of Hop Fung at asubscription price of HK$1 per share to Super Pioneer (as directed by Mr. CK Wong) andthe remaining uncapitalised balance of amounts due to directors of HK$4,580.87 will berepaid by Hop Fung to Mr. CK Wong upon Listing.

Capital deficiency/Equity attributable to equity holders of our Company

During the Track Record Period, we recognised a capital deficiency attributable toequity holders of our Company of approximately HK$9,775,000 as at 31 March 2014 andequity attributable to equity holders of our Company of approximately HK$8,304,000 andHK$14,696,000 as at 31 March 2015 and 30 November 2015, respectively. The capitaldeficiency as at 31 March 2014 is attributable to accumulated losses incurred prior to theTrack Record Period. The accumulated losses incurred are mainly attributable to the thingross profit margins recognised and losses incurred on several projects due to unforeseencircumstances and/or errors or inaccurate estimations of project duration and costs.Unforeseen circumstances and errors or inaccurate estimations of project duration and costsarose due to the inherent risks involved in determining tender prices by estimating theconstruction costs under the contract duration as specified in the tender invitation documentswhich may differ substantially upon project implementation. Many factors affect the timetaken and the costs actually involved in completing construction projects undertaken.Examples of such factors include shortage and cost escalation of labour and materials,difficult geological conditions, adverse weather conditions, variations to the constructionplans instructed by customers, stringent technical construction requirements, accidents, andchanges in the Government’s policies. Other unforeseen problems or circumstances may alsooccur during project implementation.

During the construction industry downturn in Hong Kong prior to 2010, such riskswere not fully priced into the markups when submitting bids for several projects in order toremain competitive and increase our revenue stream to pay for our staff costs and fixedoverheads and service our debts. Upon the recovery of the construction industry in HongKong and during the Track Record Period, we were able to gradually set higher tenderprices, whilst remaining competitive, to take into consideration the likelihood ofuncertainties and material deviations in estimated and actual project duration and costs. As ittook several years to gradually set higher tender prices and to complete projects that we


– 242 –

were awarded during the construction industry downturn, we recorded an accumulated lossas at 31 March 2014. In addition, to improve our profitability, we also established anestimating department in 2013 to review and assess new projects to minimise the likelihoodof unforeseen circumstances and improve project duration and costs estimations.Furthermore, we focused on bidding for contracts of the same infrastructural projects as ourexperience with the relevant project and familiarity with the conditions of the relevant sitewould allow us to reduce the likelihood of unforeseen circumstances and make betterestimations of project duration and costs.

RELATED PARTY TRANSACTIONS AND BALANCES

Please refer to notes 16, 21, 22 and 29 of Section II in the Accountants’ Report inAppendix I to this prospectus for details of the related parties transactions and balances withrelated parties. Our Directors are of the view that these transactions were conducted on anarm’s length basis, and would not distort our results of operation during the Track RecordPeriod or make our historical results during the Track Record Period not reflective of ourexpectations of our future performance. Our Directors confirm that all other personalguarantees provided for our Group will be released or replaced by corporate guarantees orguaranteed by surety bonds and all amounts due to/from related parties will be settled beforeListing.

INDEBTEDNESS

The following table sets out our Group’s indebtedness as at the respective datesindicated:


NovemberAs at 31January

2014 2015 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Current liabilitiesAmounts due to directors 6,604 2,689 10,056 9,874Obligations under finance leases 1,474 1,199 1,537 1,660Bank loans and overdrafts 10,536 18,940 5,688 5,295

18,614 22,828 17,281 16,829

Non-current liabilitiesObligations under finance leases 2,278 1,912 2,411 2,471

20,892 24,740 19,692 19,300

The amounts due to directors were unsecured, interest free and have no fixed terms ofrepayment.


– 243 –

Bank overdrafts and bank loans

The following table sets out the breakdown of bank loans and overdrafts as at therespective dates indicated:



2014 2015 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Secured term loans 2,984 6,404 5,520 5,295Secured bank overdrafts – 5,482 168 –Secured mortgage loan 7,552 7,054 – –

10,536 18,940 5,688 5,295

As at 31 January 2016, we had total bank overdraft facilities of HK$6,000,000, ofwhich the unutilised and unrestricted bank overdraft facilities amounted to approximatelyHK$6,000,000.

Our bank loans are classified as current liabilities according to the HK Interpretation 5,Presentation of Financial Statements – Classification by the Borrower of a Term Loan thatContains a Repayment on Demand Clause issued by the Hong Kong Institute of CertifiedPublic Accountants. According to the repayment schedule, the bank overdrafts and bankloans are repayable as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Within 1 year or on demand 10,536 18,940 5,688

The carrying amount of bank overdrafts and bank loans are denominated in HK dollars.The bank overdrafts and bank loans bear interests on a floating basis at effective interestrates ranging from 0.91% to 5.50%, 0.92% to 5.50% and 3.23% to 5.50% per annum as at31 March 2014 and 2015 and 30 November 2015, respectively.


– 244 –

The bank term loans and overdrafts were secured by the land and building of ourGroup, a property owned by the Controlling Shareholders and their unlimited personalguarantees.

In addition, as at 31 March 2014 and 2015 and 30 November 2015, bank term loan(the “HKMC Loan”) of HK$Nil, HK$4,000,000 and HK$3,512,000 were secured by theguarantee given by the Hong Kong Mortgage Corporation Limited and unlimited personalguarantees given by the Controlling Shareholders. Pursuant to terms as set out in the loanagreement, Luen Hing shall not have its shares listed on the Main Board or the GEM of theStock Exchange or any similar exchanges in or outside Hong Kong. The funds from a newbank term loan to be drawn in April 2016, that does not have a covenant forbidding LuenHing from having its shares listed on the Main Board or the GEM of the Stock Exchange,will be been used to fully repay the HKMC Loan before the Listing.

The mortgage loan was secured by the investment property of our Group. As at theLatest Practicable Date, the investment property of our Group was sold and the mortgageloan has been fully repaid.

In March 2016, we obtained a credit facility from a bank of up to HK$20,000,000which consists of: (i) a factoring facility of up to HK$10,000,000 by factoring of certainaccounts receivable from our major customer(s) to the bank; and (ii) a banking facility ofHK$10,000,000. Such credit facility was secured by unlimited personal guarantees given bythe Controlling Shareholders.

The personal guarantees provided by the Controlling Shareholders in respect of thebank term loans and overdrafts will be released and replaced by a corporate guaranteeprovided by our Company upon Listing.


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Finance lease liabilities

During the Track Record Period, we acquired certain motor vehicles by way of financelease arrangements mainly through banks and finance lease companies. The carryingamounts of all finance lease liabilities are denominated in HK dollars. The following tablesets out our obligations under finance leases repayable as at the respective dates indicated:

As at 31 March

As at30


2014 2015 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Total minimum lease paymentsWithin one year 1,619 1,314 1,677 1,805After one year but within two

years 1,254 1,001 1,398 1,549After two years but within five

years 1,149 1,008 1,121 1,022

4,022 3,323 4,196 4,376Future finance charges on finance

leases (270) (212) (248) (245)

Present value of finance leaseliabilities 3,752 3,111 3,948 4,131

Present value of finance leasepayments

Within one year 1,474 1,199 1,537 1,660After one year but within two

years 1,177 937 1,319 1,474After two years but within five

years 1,101 975 1,092 997

3,752 3,111 3,948 4,131

The underlying interest rates of these obligations under finance leases ranged from6.05% to 7.35%, 5.44% to 6.21% and 5.44% to 6.21% per annum as at 31 March 2014 and2015 and 30 November 2015, respectively.

The finance leases liabilities are secured by our motor vehicles as at 31 March 2014and 2015 and 30 November 2015, respectively. Finance leases liabilities with carryingamounts of approximately HK$3,752,000 and HK$3,111,000 as at 31 March 2014 and 2015,respectively, are guaranteed by personal guarantees given by Mr. CK Wong and Mr. WWWong. Finance lease liabilities with carrying amounts of approximately HK$3,948,000 as at30 November 2015 are guaranteed by personal guarantees given by Mr. CK Wong. OurDirectors confirm that the said personal guarantees given by Mr. CK Wong will be releasedupon the Listing.


– 246 –

Save for the continual use of the financial lease arrangements subsequent to the Listingfor the acquisition of motor vehicles for our daily operation uses and the credit facilityobtained from the bank in March 2016 of up to HK$20,000,000 for strengthening ourworking capital position and enhancing our financial resources for our contracts on hand andnewly awarded projects, our Directors confirm that our Company did not have any otherexternal financing plans as at the Latest Practicable Date.

Contingent liabilities

We had no significant contingent liabilities as at 31 March 2014 and 2015 and 30November 2015.

Commitments

We have the following capital commitments as at the respective dates indicated:

As at 31 March

As at30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

Contracted but not provided forAcquisition of property, plant and equipment – – 490

Our Group had outstanding commitments in respect of future minimum lease paymentsunder non-cancellable operating leases as at the respective dates indicated:

As at 31 March

As at30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

As lessee in respect of our warehouse andoffice equipment

Within one year 160 98 159In the second to fifth years 29 35 26

189 133 185

As lessor in respect of our investmentproperty

Within one year 23 50 –


– 247 –

Our Directors confirm that (i) our Group has not experienced any difficulty inobtaining bank borrowings, has not defaulted in payments on bank borrowings or breachedany finance covenants during the Track Record Period and up to the Latest Practicable Date;(ii) there has not been any material change in our indebtedness and contingent liabilitiessince 30 November 2015 and up to the Latest Practicable Date; (iii) our Directors are notaware of any material defaults in the payment of our trade and non-trade payables and bankborrowings during the Track Record Period and up to the Latest Practicable Date; (iv) ourbank borrowings are subject to standard banking conditions; and (v) our Group has notreceived any notices from banks indicating that they might withdraw or downsize ourbanking facilities and none of our Group’s banking facilities is subject to the fulfillment ofcovenants relating to financial ratio requirements or any other material covenants whichwould adversely affect our Group’s ability to undertake additional debt or equity financing.

Save as disclosed above in the paragraph headed “Indebtedness” in this section, we didnot have, at the close of business on 30 November 2015, any loan capital issued andoutstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness,liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hirepurchase commitments, guarantees or other material contingent liabilities.

OFF-BALANCE SHEET ARRANGEMENTS

Our Group did not enter into any material off-balance sheet transactions orarrangements as at the Latest Practicable Date.

CAPITAL EXPENDITURES

Our capital expenditures during the Track Record Period primarily comprised ofadditions to property, plant and equipment in line with our business expansion. Thefollowing table sets forth details of our capital expenditures during the Track Record Period:

Year ended 31 March

Eightmonths

ended 30November

2014 2015 2015HK$’000 HK$’000 HK$’000

Land and buildings – – –Furniture and equipment 196 84 514Site equipment 4,310 410 812Motor vehicles 2,784 1,349 2,210

7,290 1,843 3,536

Our capital expenditures were funded out of internally generated resources, bank termloans and finance lease arrangements.


– 248 –

Our Group plans to finance future capital expenditures primarily through the netproceeds of the Placing, hire-purchase arrangements and cash generated from operations. Tocope with expansion needs, our Group expects to further incur additional capitalexpenditures which are expected to be generally on site equipment and motor vehicles. It isexpected that approximately 50.4% of the net proceeds, or approximately HK$18.0 millionwill be used to acquire site equipment and motor vehicles.

SUMMARY OF KEY FINANCIAL RATIOS

The table below sets out a summary of key financial ratios respect of our Group’sresults of operation for the years/period ended or as at 31 March 2014 and 2015 and 30November 2015:

As at or for the yearended 31 March

As at orfor the

eightmonths

ended 30November

Notes 2014 2015 2015

Profitability ratiosReturn on assets 1 12.6% 19.4% 6.9%Return on equity 2 N/A 217.7% 43.5%

Liquidity ratiosCurrent ratio 3 0.6 0.8 1.1Quick ratio 4 0.6 0.8 1.1

Capital adequacy ratiosGearing ratio 5 N/A 265.5% 65.6%Net debt to equity ratio 6 N/A 194.5% 11.3%Interest coverage 7 26.2 47.1 27.8

Notes:

1. Return on assets is calculated by dividing net profit for the year/period divided by the total assets atthe end of the respective year/period and expressed as a percentage.

2. Return on equity is calculated by dividing net profit attributable to the owners of our Company forthe year/period divided by the total equity attributable to the owners of our Company at the end ofthe respective year/period and expressed as a percentage.

3. Current ratio is calculated by dividing the total current assets by the total current liabilities.

4. Quick ratio is calculated by dividing total current assets net of inventories by current liabilities.

5. Gearing ratio is calculated by dividing all interest-bearing borrowings and obligations under financeleases by total equity and expressed as a percentage.


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6. Net debt to equity ratio is calculated by dividing all interest-bearing borrowings and obligationsunder finance leases net of cash and cash equivalents by total equity and expressed as a percentage.

7. Interest coverage is calculated by the profit before interest and tax divided by the interest expenses.

8. We had deficiency in our total equity as at 31 March 2014. As such, return on equity, gearing ratioand net debt to equity ratio as at 31 March 2014 are not applicable.

Profitability ratios

Return on assets

During the year ended 31 March 2015, our Group carried out a substantial amount ofconstruction works of two projects with an aggregate contract sum of approximatelyHK$195,541,000, which resulted in an increase in revenue, profit for the year and trade andother receivables. Accordingly, our return on assets increased from 12.6% for the year ended31 March 2014 to 19.4% for the year ended 31 March 2015 due to the increase in profit forthe year at a rate greater than the increase in our total assets.

We recorded a decrease in return on total assets to approximately 6.9% for the eightmonths ended 30 November 2015 and such decrease was mainly due to profit for only eightmonths recorded and a decrease in profit for the period due to the completion of 16 projectswith an aggregate contract sum of approximately HK$137,700,000 during the year ended 31March 2015 and incurring of Listing expenses during the eight months ended 30 November2015.

Return on equity

We have deficiency in our total equity as at 31 March 2014. As such, return on equityfor the year ended 31 March 2014 is not applicable. We recorded a decrease in return onequity from approximately 217.7% for the year ended 31 March 2015 to approximately43.5% for the eight months ended 30 November 2015 primarily due to profit for only eightmonths being recorded and the incurring of Listing expenses during the eight months ended30 November 2015.

Liquidity ratios

Current ratio

Our current ratio increased from approximately 0.6 as at 31 March 2014 toapproximately 0.8 as at 31 March 2015. This was primarily due to the increase in our tradereceivables as a result of the growth in our revenue as discussed above.

Our current ratio increased from approximately 0.8 as at 31 March 2015 toapproximately 1.1 as at 30 November 2015. This was primarily due to the repayment ofbank overdrafts with the cash generated from operations.


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Quick ratio

During the Track Record Period, we did not hold any inventory, accordingly, our quickratio was the same as our current ratio.

Capital adequacy ratios

Gearing ratio

We have deficiency in our total equity as at 31 March 2014. As such, gearing ratio forthe year ended 31 March 2014 is not applicable. Our gearing ratio decreased fromapproximately 265.5% as at 31 March 2015 to approximately 65.6% as at 30 November2015. This is mainly due to bank overdrafts being substantially repaid during the eightmonths ended 30 November 2015 with cash generated from operations while our Groupcontinued to accumulate retained earnings.

Net debt to equity ratio

We have deficiency in our total equity as at 31 March 2014. As such, net debt toequity ratio for the year ended 31 March 2014 is not applicable. Our net debt to equity ratiodecreased from approximately 194.5% as at 31 March 2015 to approximately 11.3% as at 30November 2015. This is mainly due to an increase in retained earnings as a result of the netprofit growth during the eight months ended 30 November 2015 as discussed above, whilecash overdrafts were substantially repaid during the eight months ended 30 November 2015with cash generated from operations.

Interest coverage

Our interest coverage was approximately 26.2, 47.1 and 27.8 times for the years ended31 March 2014 and 2015 and the eight months ended 30 November 2015, respectively.During the year ended 31 March 2015, our interest coverage increased substantially to 47.1times as a result of the carrying out of a substantial amount of construction works of twoprojects with an aggregate contract sum of approximately HK$195,541,000 which gave riseto a growth of profit before interest and tax. Our interest coverage decreased to 27.8 timesduring the eight months ended 30 November 2015 due to a decrease in profit for the periodas a result of the Listing expense incurred of HK$7,883,000 during the eight months ended30 November 2015 and the completion of 16 projects with an aggregate contract sum ofapproximately HK$137,700,000 during the year ended 31 March 2015. Our finance costsremained relatively stable during the Track Record Period.

WORKING CAPITAL

Set out below is the details of our financial obligations, totaling approximatelyHK$19,300,000, expected to be fulfilled after 31 January 2016, which is the latestpracticable date for our indebtedness statement, and before 31 March 2016:

� Repayment of bank borrowings, which were primarily for the acquisition of siteequipment, of approximately HK$5,295,000 for the year ending 31 March 2016;


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� Repayment of amount due to directors of approximately HK$9,874,000; and

� Repayment of obligations under finance leases of approximately HK$4,131,000.

Our plans to meet our financial obligations as mentioned above using the followingexpected financial resources:

� Bank balances and cash as at 31 January 2016 amounting to approximatelyHK$14,367,000;

� Expected cash generated from our operations for the year ending 31 March 2016;

� Estimated net proceeds from the Placing of approximately HK$35.7 million,assuming a Placing Price of HK$0.26 per Placing Share; and

� Unrestricted unutilised bank overdraft facilities of approximately HK$6,000,000 asof 31 January 2016.


As advised by our Directors, our Group has not experienced any difficulty in obtainingcredit facilities, and any withdrawal of facilities, defaults in payment of bank borrowings orbreach of covenants, and cancellation of customer orders during the Track Record Periodand up to the Latest Practicable Date.

Our Directors are of the opinion, after due and careful enquiry, that after taking intoconsideration the financial resources available to our Group including banking facilities andinternal resources, and the estimated net proceeds from the Placing, our Group has sufficientworking capital for our present requirements, for at least the next 12 months from the dateof this prospectus. Based on the above factors and after taking into account that (i) ourDirectors’ confirmation that our Group has not had any material default with regard to ourtrade or other payables or any bank borrowings, and has not breached any financialcovenants in our bank borrowings during the Track Record Period; and (ii) our Directors’confirmation that during the Track Record Period and up to the Latest Practicable Date, ourGroup had not experienced any difficulty in obtaining credit facilities or withdrawal offacilities, request for early repayment, default in payments or breach of financial covenantsof bank borrowings, the Sponsor also concurs with our Directors’ view that our Group hassufficient working capital for at least the next 12 months from the date of this prospectus.


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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Foreign exchange risk

Our Group currently is not exposed to foreign exchange risk as all of our monetaryassets and liabilities are denominated in Hong Kong dollars.

Interest rate risk

Our Group is exposed to cash flow interest rate risk due to the fluctuation of theprevailing market interest rate on bank balances.

Our bank loans and overdrafts charge interest at floating interest rates. Having balancedthe costs and benefits, our Directors do not consider a policy on cash flow hedges of interestrate risk necessary. Nevertheless, the management of our Group keeps monitor any changeof interest exposure and will consider implementing measures from time to time to mitigatethe adverse change of interest rate should the need arise.

Credit risk

Our Group is exposed to credit risk primarily due to the collectability risk of the tradereceivables due from our customers. Our Directors consider that our customers are reputablecorporations and hence the credit risk attached to our customers is relatively low. Our Groupperforms on-going credit evaluation on the financial condition of our debtors, past history ofmaking payments and tightly monitors the ageing of the trade receivables. Our Group wouldtake necessary follow up action in case of overdue balances or when the above creditevaluation results draw the attention of our Directors. In addition, our management reviewsthe recoverable amount of the trade receivables individually and collectively at eachreporting date to ensure that adequate impairment losses are made for irrecoverable amounts.The credit policies have been followed by our Group during the Track Record Period andare considered to be effective in limiting our exposure to credit risk.

Liquidity risk

Our Group has a policy in place to regularly monitor our Group’s liquidityrequirements, both current and expected, in order to maintain sufficient reserves of cash andadequate lines of funding from banks and other financial institutions to meet their liquidityrequirements in the short and long term. Our Directors are of the view that our liquidity riskmanagement policy enables our Group to have sufficient resources to meet our debtobligations and working capital needs.

Capital risk

Our Group’s objectives for managing capital are to ensure our ability to continue as agoing concern and to maintain an optimal capital structure in order to minimise our costs ofcapital, support our business and maximise shareholders’ value.


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To maintain or adjust capital structure, we may adjust our dividend payout ratio, makereturn of capital to Shareholders in the form of dividend or share buyback, issue new Sharesor raise new debt. No changes in the objectives, policies or processes were made during theTrack Record Period.

Neither our Company nor any of our subsidiaries are subject to any externally imposedcapital requirements.

DIVIDENDS

No member of our Group had declared any dividend during the Track Record Periodand up to the Latest Practicable Date.

There is no expected dividend payout ratio after the Listing. The payment and theamount of any future dividends will be at the discretion of our Directors and will dependupon our Group’s future operations and earnings, capital requirements and surplus, generalfinancial condition, contractual restrictions and other factors which our Directors deemrelevant. Any final dividend for a financial year will be subject to Shareholders’ approval.Holders of the Shares will be entitled to receive such dividends pro rata according to theamounts paid up or credited as paid up on the Shares.

Dividends may be paid only out of our Company’s distributable profits as permittedunder the relevant laws. There can be no assurance that our Company will be able to declareor distribute in the amount set out in any plan of our Board or at all. The past dividenddistribution record may not be used as a reference or basis to determine the level ofdividends that may be declared or paid by our Company in the future.

LISTING EXPENSES

Our Directors estimate that the total amount of expenses in relation to the Listing isapproximately HK$20.9 million, which will be borne by the Selling Shareholder and ourGroup as to approximately HK$2.5 million and HK$18.4 million, respectively. The listingexpenses are non-recurring in nature and are mainly consisted of professional fees paid tothe Sponsor, the legal advisers, the reporting accountants and other professional parties forthe provision of their services in connection with the Placing. No significant listing expensewas incurred by our Group during the two years ended 31 March 2015. Of the aggregatelisting expenses of approximately HK$18.4 million, approximately HK$7.9 million wascharged to profit or loss for the eight months ended 30 November 2015 and approximatelyHK$1.7 million is expected to be charged to profit or loss for the four months ending 31March 2016. Our Group expects to further charge approximately HK$3.9 million to profit orloss, while approximately HK$4.9 million is expected to be directly attributable to the issueof Shares and accounted for as a deduction from equity upon successful listing under therelevant accounting standards. The amount of Listing expenses is a current estimate forreference only and the final amount to be recognised to the consolidated statement ofcomprehensive income of our Group for the year ending 31 March 2017 is subject to auditand the actual changes in variables and assumptions.


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SUBSEQUENT EVENTS AFTER THE REPORTING PERIOD

Please refer to Section III of the Accountants’ Report in Appendix I to this prospectusfor events of our Group which took place subsequent to 30 November 2015.

RECENT DEVELOPMENTS

Subsequent to the Track Record Period and up to the Latest Practicable Date, we havecontinued to focus on developing our business of undertaking civil engineering works inHong Kong.

As at the Latest Practicable Date, we had a total of 20 contracts on hand. Please referto the section headed “Business – Our civil engineering contracts – Contracts on hand” inthis prospectus for a full list of our contracts on hand as at the Latest Practicable Date.

The aggregate contract sum of all contracts on hand is approximatelyHK$1,384,140,000 and approximately HK$234,304,000 of revenue has been recognised forthe contracts on hand (with approximately HK$6,241,000 of revenue recognised exceedingthe original contract sum), representing approximately 16.9% of the aggregate contract sumof all contracts on hand. As at the Latest Practicable Date, all existing projects havecontinued to contribute revenue to our Group and none of them have had any materialinterruption. We expect to recognise revenue of approximately HK$285,367,000 for the yearending 31 March 2016 based only on our contracts on hand, which is higher than ourrevenue of approximately HK$159,963,000 and HK$271,949,000 for the years ended 31March 2014 and 2015, respectively. The amount of revenue expected to be recognised issubject to change due to the actual progress and commencement and completion dates of ourprojects. Based on the budget costs of each project, our Directors expect that our grossprofit margin for the year ending 31 March 2016 to be at similar levels to that recordedduring the Track Record Period. Accordingly, our Directors currently expect an increase inour revenue and gross profit for the year ending 31 March 2016. Our Directors also expectthat our financial performance will be affected by the Listing expenses to be recognised forthe year ending 31 March 2016.


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Subsequent to the Track Record Period and up to the Latest Practicable Date, ourGroup have been awarded with two additional contracts with an aggregate contract sum ofapproximately HK$301,317,000, the details of which are as follows:

Civil engineeringproject involved Customer

Type(s) ofworksinvolved

Principal worksdone/to be doneby us

Expectedcompletiondate

Contractsum

(HK$’000)

Road and drainageworks adjacent torailway lines

Customer D Roads anddrainageworks

Construction ofcable draw-pitsand cable ducting

July 2016 4,415

Hong Kong-Zhuhai-MacaoBridge project

ChinaHarbour

Structuralworks

Construction ofsub-structure forbridge, abutmentsand retainingwalls

May 2017 296,902


Our Directors consider that our Group is well-positioned to take on new civilengineering projects and believe that the Government’s increasing public expenditure oninfrastructure would favour the growth of our Group and the demand of our services.

In addition, we expect that annual premium of approximately HK$1,060,000 for thepurposes of obtaining surety bonds for the due performance of our Group’s obligations undercertain contracts will be recognised as expenses commencing from April 2016 until theexpiry of the defects liability period of the relevant contracts. For further details of theguarantees of sureties, please refer to the section headed “Relationship with our ControllingShareholders – Independence of our Group – (i) Financial Independence” of this prospectus.

Save and except for the Listing expenses as disclosed above, our Group did not haveany significant non-recurrent items in our combined statements of comprehensive incomesubsequent to the Track Record Period. Our results of operation for the year ending 31March 2016 are expected to be significantly affected by the non-recurring Listing expensesas discussed in the paragraph headed “Listing expenses” in this section.


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DISTRIBUTABLE RESERVES

As at 30 November 2015, our Company had no distributable reserves available fordistribution to its equity holders.

UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

The following is an illustrative statement of our unaudited pro forma adjusted netassets attributable to owners of our Company as at 30 November 2015 as shown in theAccountants’ Report, the text of which is set out in Appendix I to this prospectus, andadjusted as described below:

Adjustedcombined net

tangibleassets

attributableto owners of

our Companyas at 30

November2015

Capitalisationof amounts

due todirectors by

way ofissuance of

shares byLuen Hing

and HopFung

Estimatednet proceeds

from thePlacing

Unauditedpro forma

adjustedcombined net

tangibleassets

attributableto owners of

our Company

Unauditedpro forma

adjusted nettangible

assets perShare

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Note 1) (Note 3) (Note 4) (Note 5)

Based on Placing Priceof HK$0.26 per Share 14,696 10,400 43,562 68,658 0.06

Notes:

1. The unadjusted audited combined net tangible assets attributable to the owners of our Company as of30 November 2015 is extracted from the Accountants’ Report in Appendix I to this prospectus, whichis based on the audited combined net assets of our Group attributable to the owners of our Companyof approximately HK$14,696,000.

2. Our Group’s land and buildings was revalued as at 31 January 2016 by Ascent Partners ValuationService Limited, an independent property valuer, and relevant property valuation report is set out inAppendix III – Property Valuation. The net surplus over their carrying value amounting toHK$3,222,000 has not been included in the combined net tangible assets of our Group attributable toequity holders of our Company as at 30 November 2015. The above adjustment does not take intoaccount the above valuation surplus. Had the land and buildings been stated as such valuation, anadditional depreciation of HK$289,000 per annum in respect of revaluation surplus, before incometaxes, would be charged against the combined statement of profit or loss and other comprehensiveincome.

3. The increase in combined net tangible assets of the Group attributable to equity holders of theCompany upon completion of share issuance of Luen Hing and Hop Fung are based on (i) 5,480,000new shares of Luen Hing issued at a subscription price of HK$1 per share to Super Pioneer; and (ii)4,920,000 new shares of Hop Fung issued at a subscription price of HK$1 per share to Super Pioneeron 21 March 2016 by the way of capitalisation of amounts due to the directors. Any remainingbalances will be settled by cash.


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4. The estimated net proceeds from the Placing are based on 208,000,000 Shares at the Placing Price ofHK$0.26 per Placing Share, after deduction of relevant estimated underwriting commissions and feesand other related fees.

5. The unaudited pro forma combined adjusted net tangible assets per Share are determined after theadjustments as described in Notes 1 and 2 above and on the basis that 1,248,000,000 Shares areissued and outstanding as set out in the section headed “Share Capital” of this prospectus (assumingthat the Placing Shares and the Capitalisation Issue had been issued on 30 November 2015).

6. The unaudited pro forma financial information presented above does not take into account of anytrading or other transactions subsequent to the date of the financial statements included in theunaudited pro forma financial information (i.e. 30 November 2015).

PROPERTY INTERESTS AND PROPERTY VALUATION

Ascent Partners Valuation Service Limited, an independent property valuer, has valuedthe property interest of our Group at HK$4,120,000 as at 31 January 2016.

The table below sets forth the reconciliation of the aggregate amount of net book valueof our property interests from our combined financial information as at 30 November 2015and the valuation of such property interests as at 31 January 2016 as set out in Appendix IIIto this prospectus:

HK$’000 HK$’000

Valuation of property interest owned, occupied and heldunder development by our Group as at 31 January 2016 asset out in the property valuation report in Appendix III tothis prospectus 4,120

Net book value of the following properties as at 30November 2015 as set out in Appendix I to thisprospectus: 911

Add: Additions during the period from 1 December 2015 to31 January 2016 –

Less: Depreciation and amortisation during the period from 1December 2015 to 31 January 2016 (13)

Net book value as at 31 January 2016 (898)

Net valuation surplus 3,222


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DISCLOSURE REQUIRED UNDER CHAPTER 17 OF THE GEM LISTING RULES

Our Directors have confirmed that as of the Latest Practicable Date, there were nocircumstances which would have given rise to a disclosure requirement under Rules 17.15 to17.21 of the GEM Listing Rules upon the listing of the Shares on the GEM.

MATERIAL ADVERSE CHANGE

The impact of the Listing expenses on the profit and loss accounts has posted amaterial adverse change in the financial or trading position or prospect of our Group since30 November 2015 (being the date of the latest audited consolidated financial statementswere made up). Prospective investors should be aware of the impact of the Listing expenseson the financial performance of our Group for the year ending 31 March 2016.

Save as disclosed above, our Directors have confirmed that, up to the date of thisprospectus, there had been no material adverse change in the financial or trading positionsor prospect of our Company or its subsidiaries since 30 November 2015 (being the date ofwhich our Group’s latest audited consolidated financial statements were made up as set outin the Accountants’ Report in Appendix I to this prospectus) and there had been no eventsince 30 November 2015 which would materially affect the information shown in theAccountants’ Report in Appendix I to this prospectus.


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BUSINESS OBJECTIVES AND STRATEGIES

Please refer to the section headed “Business – Business strategies” in this prospectusfor our Group’s business objectives and strategies.

IMPLEMENTATION PLAN

Our Group’s implementation plans are set forth below for each of the six-monthperiods until 31 March 2018. Investors should note that the implementation plans and theirscheduled times for attainment are formulated on the bases and assumptions referred to inthe paragraph headed “Bases and assumptions” below. These bases and assumptions areinherently subject to many uncertainties, variables and unpredictable factors, in particular therisk factors set out in the section headed “Risk Factors” in this prospectus. Our Group’sactual course of business may vary from the business objective set out in this prospectus.There can be no assurance that the plans of our Group will materialise in accordance withthe expected time frame or that the objective of our Group will be accomplished at all.Based on our Group’s business objectives, our Directors intend to carry out the followingimplementation plans:

From the Latest Practicable Date to 30 September 2016

Business strategy Implementation activitiesSources of

funding

Acquisition of additionalsite equipment

� Purchase three hydraulic truckcranes to improve our efficiencyand technical capability instructural works for larger scalecivil engineering projects

� Purchase three motor vehiclesfor use in our projects

� Purchase three generators foruse in our projects

� Evaluate the effectiveness andefficiency of site equipment andassess our need for additionalsite equipment in view of ourbusiness development and obtainquotation for new site equipment

Listing proceedsof approximatelyHK$17.3 million

STATEMENT OF BUSINESS OBJECTIVE AND USE OF PROCEEDS

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funding

Further strengthening ourmanpower

� Recruit three crane operators tooperate our hydraulic truckcranes in construction site

� Recruit two engineers tostrengthen our engineering team

� Recruit one project manager, oneforeman and one administrativestaff to cope with our businessdevelopment and our plan toparticipate in larger scale civilengineering projects

� Provide training to our existingand newly recruited staff and/orsponsor our staff to attendtraining courses on occupationalhealth and safety, site equipmentoperation and civil engineeringworks techniques

Listing proceedsof approximately

HK$6.8 million

From 1 October 2016 to 31 March 2017


funding


� Continue to evaluate theeffectiveness and efficiency ofnew site equipment and assessour need for additional siteequipment in view of ourbusiness development

� Obtain and review quotationsand detailed functionalspecifications of the new siteequipment that could enhanceour efficiency and technicalcapability

Not applicable


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funding


� Continue to assess thesufficiency of our labourresources having regard to ourbusiness development

� Continue to provide training toour existing and newly recruitedstaff and/or sponsor our staff toattend training courses onoccupational health and safety,site equipment operation andcivil engineering workstechniques

Our internalresources

From 1 April 2017 to 30 September 2017


funding


� Purchase additional new siteequipment including an aircompressor and an excavator toimprove our efficiency andtechnical capability



HK$0.7 million


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funding


� Recruit two foremen and onequantity surveyor to strengthenour site manpower to cope withour plan to undertake moreprojects




HK$0.8 million

From 1 October 2017 to 31 March 2018


funding



Not applicable




Not applicable


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BASES AND ASSUMPTIONS

The business objectives set out by our Directors are based on the following bases andassumptions:

� Our Group will have sufficient financial resources to meet the planned capitalexpenditure and business development requirements during the period to whichour future plans relate.

� There will be no material change in the funding requirement for each of ourGroup’s future plans described in this prospectus from the amount as estimated byour Directors.

� There will be no material change in existing laws and regulations, or othergovernmental policies relating to our Group, or in the political, economic ormarket conditions in which our Group operates.

� There will be no change in the effectiveness of the licences, permits andqualifications obtained by our Group.

� There will be no material changes in the bases or rates of taxation applicable tothe activities of our Group.

� There will be no disasters, natural, political or otherwise, which would materiallydisrupt the businesses or operations of our Group.

� Our Group will not be materially affected by the risk factors as set out under thesection headed “Risk factors” in this prospectus.

REASONS FOR THE LISTING

Our Directors believe that the listing of the Shares on GEM will facilitate theimplementation of our business strategies. As stated in the section headed “Business –Business strategies” in this prospectus, we plan to expand our market share in the civilengineering construction industry in Hong Kong by competing for sizeable civil engineeringprojects in Hong Kong through acquisition of additional site equipment and furtherstrengthening our manpower. The net proceeds of the Placing will provide financialresources to our Group to achieve such business strategies which will further strengthen ourmarket position and expand our market share. A public listing status will also enhance ourcorporate profile and recognition and assist us in reinforcing our brand awareness andimage. We believe that a public listing status on GEM could attract potential customers,suppliers and subcontractors who are more willing to establish business relationship withlisted companies. It will also generate reassurance among our Group’s existing customers,suppliers and subcontractors and strengthen our competitiveness in the market. The Listingwill also enable our Group to have access to capital market for raising funds both at thetime of Listing and at later stages, which would in turn assist us in future businessdevelopment of our Group. A public listing status on GEM may offer our Company a


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broader shareholder base which could potentially lead to a more liquid market in the tradingof the Shares. We also believe that our internal control and corporate governance practicescould be further enhanced following the Listing.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the Sale Shares by the SellingShareholder in the Placing.

The net proceeds to be received by us from the Placing based on the Placing Price ofHK$0.26 per Placing Share, after deducting related underwriting fees and estimated expensesin connection with the Placing, are estimated to be approximately HK$35.7 million. OurDirectors presently intend that the net proceeds will be applied as follows:

� approximately HK$18.0 million (or approximately 50.4% of the net proceeds) willbe used for acquisition of additional site equipment;

� approximately HK$7.6 million (or approximately 21.2% of the net proceeds) willbe used for further strengthening our manpower;

� approximately HK$6.8 million (or approximately 19.1% of the net proceeds) willbe used for the repayment of bank borrowings and finance lease to reduce ourfinance cost. Specifically, (i) approximately HK$3.1 million will be used towholly prepay the bank loan to be drawn in April 2016 for settlement of theoutstanding indebtedness under the SME Financing Guarantee Scheme forfinancing our Group’s working capital bearing interest at 1% below the HongKong dollar prime rate per annum and an effective interest rate of 3.99% perannum and is repayable on a monthly basis over the loan term of 50 months up toApril 2020; (ii) approximately HK$1.6 million will be used to wholly prepay thebank loan drawn in March 2014 for acquisition of a site equipment bearinginterest at 3% over the Hong Kong Interbank Offered Rate per annum and aneffective interest rate of 3.23% per annum and is repayable on a monthly basisover the loan term of 5 years up to January 2019; (iii) approximately HK$1.0million will be used to wholly prepay the finance lease incurred since September2013 which will mature in 5 years from the date of occurrence bearing interestrate at a fixed rate of 2.50% per annum and an effective interest rate of 6.05% perannum, which were incurred to fund our purchase of motor vehicle; and (iv)approximately HK$1.0 million will be used to wholly prepay the finance leaseincurred since September 2015 which will become mature in 4 years from thedate of occurrence bearing interest rate at a fixed rate of 2.25% per annum andeffective interest rate of 5.5% per annum, which were incurred to fund ourpurchase of motor vehicle; and (v) approximately HK$0.1 million will be used towholly prepay the finance lease incurred since January 2015 which will becomemature in 3 years from the date of occurrence bearing interest rate at a fixed rateof 2.25% per annum and effective interest rate of 5.58% per annum, which wereincurred to fund our purchase of motor vehicle; and


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� approximately HK$3.3 million (or approximately 9.3% of the net proceeds) willbe used as general working capital of our Group.

The following table sets forth a breakdown of how the net proceeds to be received byus from the Placing are intended to be applied and the timing of application:

From theLatest

PracticableDate to

30 September2016

From1 October

2016 to31 March

2017

From1 April2017 to

30 September2017

From1 October

2017 to31 March

2018 TotalHK$ million HK$ million HK$ million HK$ million HK$ million

Acquisition of additional site equipment 17.3 − 0.7 − 18.0

Further strengthening our manpower 6.8 − 0.8 − 7.6

Repayment of bank loans and finance lease 6.7 0.1 − − 6.8

General working capital of our Group 3.3 − − − 3.3

Our Directors consider that the net proceeds to be received by us from the Placing ofabout HK$35.7 million, together with our Group’s internal resources, cash generated fromour operation and our available banking facilities, will be sufficient to finance the businessplans of our Group as scheduled up to 31 March 2018.

To the extent that the net proceeds from the issue of the Placing Shares are notimmediately required for the above purpose, it is the present intention of our Directors thatsuch proceeds will be placed on short-term interest bearing deposits or treasury productswith authorised financial institutions.

We estimate that the Selling Shareholder will receive net proceeds of approximatelyHK$24.6 million after deduction of underwriting fees and commissions and estimatedexpenses payable by the Selling Shareholder in relation to the Placing. We will not receiveany of the net proceeds of the Placing from the sale of the Sale Shares by the SellingShareholder.


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UNDERWRITERS

Gransing Securities Co., Limited

Suncorp Securities Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

Underwriting Agreement

Pursuant to the Underwriting Agreement, our Company and the Selling Shareholderwill conditionally place the Placing Shares with institutional, professional and otherinvestors in Hong Kong at the Placing Price subject to the terms and conditions in theUnderwriting Agreement and this prospectus.

Subject to, among other conditions, the Listing Department granting the listing of, andpermission to deal in, the Shares in issue and to be issued as mentioned in this prospectusand to certain other conditions as set out in the Underwriting Agreement being satisfied orwaived on or before the dates and times as specified therein or such other dates as the JointBookrunners (for themselves and on behalf of the Underwriters) may agree but in any eventnot later than the 30th day after the date of this prospectus, the Underwriters have agreed tosubscribe for or to procure subscribers for their respective applicable proportions of thePlacing Shares on the terms and conditions under the Underwriting Agreement and in thisprospectus.

Grounds for termination

The Sponsor and/or the Joint Bookrunners (for themselves and on behalf of theUnderwriters) shall have the absolute right which is exercisable by the Sponsor and/or theJoint Bookrunners (for themselves and on behalf of the Underwriters), upon giving notice inwriting to our Company (for itself and on behalf of the Selling Shareholder, our executiveDirectors and our Controlling Shareholders), to terminate the arrangements set out in theUnderwriting Agreement with immediate effect if any of the following events occur at anytime prior to 8:00 a.m. (Hong Kong time) on the Listing Date (which is expected to be onTuesday, 12 April 2016):

(a) it has come to the notice of the Sponsor and/or the Joint Bookrunners that:

(i) any statement contained in the Prospectus or other documents issued or usedby or on behalf of our Company or information provided to the Sponsor andthe Joint Bookrunners in connection with the Placing (the “RelevantDocuments”), considered by the Sponsor and/or the Joint Bookrunners in its/their absolute opinion was, when it was issued, or has become, or beendiscovered to be untrue, inaccurate, incorrect or misleading in any materialrespect;

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(ii) any matter has arisen or has been discovered which would, had it arisen orbeen discovered immediately before the date of this prospectus, constitute anomission therefrom considered by the Sponsor and/or the Joint Bookrunnersin its/their absolute opinion to be material in the context of the Placing;

(iii) any breach of any of the obligations imposed upon any party to theUnderwriting Agreement considered by the Sponsor and/or the JointBookrunners in its/their absolute opinion to be material in the context of thePlacing (other than upon any of the Underwriters);

(iv) either (1) there has been a breach of any of the warranties or provisions ofthe Underwriting Agreement by any of our Company, our executive Directorsor our Controlling Shareholders (collectively, the “Warrantors”) or (2) anymatter or event showing or rendering any of the warranties contained in theUnderwriting Agreement, as applicable, in the absolute opinion of theSponsor and/or the Joint Bookrunners, to be untrue, incorrect or misleadingin any material respect when given or repeated;

(v) any event, act or omission which gives or is likely to give rise to anyliability of a material nature of any of the Warrantors pursuant to theindemnity provisions under the Underwriting Agreement; or

(vi) any event, series of events, matter or circumstance occurs or arises on orafter the date of this prospectus and prior to 8:00 a.m. on the Listing Date,would have rendered any warranties, in the absolute opinion of the Sponsorand/or the Joint Bookrunners, untrue, incorrect, inaccurate or misleading inany respect;

(b) there shall develop, occur, happen, exist or come into effect:

(i) any event, or series of events in the nature of force majeure, including,without limitation, acts of government, fire, explosion, flooding, civilcommotion, acts of war, acts of God, acts of terrorism (whether or notresponsibility has been claimed), declaration of a national or internationalemergency, riots, public disorder, economic sanctions, outbreaks of diseasesor epidemics in Hong Kong;

(ii) any change or development involving a change or development, or any eventor series of events, matters or circumstances likely to result in or representany change or development, in the local, national, regional, internationalfinancial, economic, political, military, industrial, fiscal, regulatory, currency,credit, market or exchange control conditions or any monetary or tradingsettlement system or matters and/or disaster (including without limitation achange in the system under which the value of the Hong Kong currency islinked to that of the currency of the United States, or a material fluctuationin the exchange rate of the Hong Kong dollar);

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(iii) any new law or regulation or any change or development involving aprospective change in existing laws or regulations or any change ordevelopment involving a prospective change in the interpretation orapplication thereof by any court or other competent authority in or affectingHong Kong, the Cayman Islands or BVI (the “Relevant Jurisdictions”);

(iv) the imposition of economic sanctions on any of the Relevant Jurisdictions;

(v) a change or development involving a prospective change in any taxation orexchange control (or the implementation of any exchange control) in any ofthe Relevant Jurisdictions;

(vi) any litigation or claim of importance instigated against any member of ourGroup or any Director;

(vii) a Director being charged with an indictable offence or prohibited byoperation of law or regulation or otherwise disqualified from taking part inthe management of a company;

(viii) a valid demand by any creditor for repayment or payment of any materialindebtedness of any member of our Group or in respect of which anymember of our Group is liable prior to its stated maturity;

(ix) any material loss or damage sustained by any member of our Group(howsoever caused and whether or not the subject of any insurance or claimagainst any person);

(x) any contravention by any member of our Group or any Director of the GEMListing Rules or any applicable laws;

(xi) a prohibition on our Company and the Selling Shareholder for whateverreason from allotting the New Shares and/or transferring the Sale Shares (asthe case may be) pursuant to the terms of the Placing;

(xii) non-compliance of this prospectus (and/or any other documents used inconnection with the subscription and purchase of the Placing Shares) or anyaspect of the Placing with the GEM Listing Rules or any other applicablelaws by any of the Directors or the Warrantors;

(xiii) the issue or requirement to issue by our Company of a supplement oramendment to any of the Relevant Documents (and/or any other documentsused in connection with the subscription of the Placing Shares);

(xiv) any change in the business, business prospects, financial or trading position,conditions or prospects (financial or otherwise) of our Group taken as awhole;

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(xv) a petition or an order is presented for the winding-up or liquidation of anymember of our Group or any member of our Group makes any compositionor arrangement with its creditors or enters into a scheme of arrangement orany resolution is passed for the winding-up of any member of our Group ora provisional liquidator, receiver or manager is appointed over all or part ofthe assets or undertaking of any member of our Group or any analogousmatter thereto occurs in respect of any member of our Group;

(xvi) a disruption in or any general moratorium on commercial banking activitiesor foreign exchange trading or securities settlement, or payment or clearanceservices or procedures in or affecting any of the Relevant Jurisdictions;

(xvii) any change or development in the conditions of local, national orinternational equity securities or other financial markets; or

(xviii) the imposition of any moratorium, suspension or restriction on trading inshares or securities generally on or by the Stock Exchange or by any of theother exchanges or by such system or by order of any regulatory orgovernmental authority,

which in each case or in aggregate in the sole and absolute opinion of theSponsor and/or the Joint Bookrunners (for themselves and on behalf of theUnderwriters):

(i) is or will be materially adverse to or may prejudicially affect the business,financial, trading or other condition or prospects of our Group (as a whole)or any member of our Group;

(ii) has or will have a material adverse effect on the success of the Placing orthe level of interest under the Placing;

(iii) makes or may make it inadvisable, inexpedient or impracticable to proceedwith the Placing or the delivery of the Placing Shares on the terms and inthe manner contemplated by any of the Relevant Documents; or

(iv) has or would have the effect of making any part of the UnderwritingAgreement (including undertaking) incapable of implementation orperformance in accordance with its terms and in the manner contemplated byany of the Relevant Documents and the Underwriting Agreement or whichprevents the processing of applications and/or payments pursuant to thePlacing or pursuant to the underwriting thereof.

Without prejudice to the above, if, at any time prior to 8:00 a.m. (Hong Kong time) onthe Listing Date, it comes to the notice of the Sponsor and/or the Joint Bookrunners:

(a) any matter or event showing any of the warranties contained in the UnderwritingAgreement to be untrue, inaccurate or misleading in any material respect whengiven or repeated or any breach of any of the warranties contained in the

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Underwriting Agreement or any other provision of the Underwriting Agreement byany party hereto (other than the Sponsor, the Joint Bookrunners and the JointLead Managers), which is considered, in the sole and absolute opinion of theSponsor and/or the Joint Bookrunners (for themselves and on behalf of theUnderwriters), to be material in the context of the Placing; or

(b) any matter which, had it arisen immediately before the date of this prospectus andnot having been disclosed in this prospectus, would have constituted a materialomission in the sole and absolute opinion of the Sponsor and/or the JointBookrunners (for themselves and on behalf of the Underwriters) in the context ofthe Placing; or

(c) any statement contained in the this prospectus and the placing letter reasonablyconsidered to be material by the Sponsor and/or the Joint Bookrunners which isdiscovered to be or becomes untrue, incorrect or misleading in any respect and inthe sole and absolute opinion of the Sponsor and/or the Joint Bookrunners (forthemselves and on behalf of the Underwriters) to be material in the context of thePlacing; or

(d) any event, act or omission which gives rise or is likely to give rise to anymaterial liability of any of the Warrantors pursuant to the indemnities contained inthe Underwriting Agreement,

the Sponsor and/or the Joint Bookrunners (for themselves and on behalf of theUnderwriters) shall be entitled (but not bound) by notice in writing to our Company(for itself and on behalf of the Selling Shareholder, the executive Directors and ourControlling Shareholders) on or prior to such time to terminate the UnderwritingAgreement.

Commission and expenses

In connection with the Placing, the Underwriters will receive an underwritingcommission of 3.5% of the aggregate Placing Price of all the Placing Shares, out of whichthey will pay any sub-underwriting commissions.

In connection with the Listing, the Sponsor will receive a sponsorship fee ofHK$4,800,000 and will be reimbursed for its expenses.

In connection with the Listing and the Placing, the total expenses are estimated to beapproximately HK$20.9 million based on the Placing Price of HK$0.26 per Placing Shareand including underwriting commission, brokerage fee, the Stock Exchange trading fee, theSFC transaction levy, the sponsorship and documentation fee, the listing fee, legal and otherprofessional fees, printing cost and other expenses relating to the Placing of whichapproximately HK$18.4 million and approximately HK$2.5 million shall be borne by ourCompany and the Selling Shareholder, respectively.

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Our Company, our Controlling Shareholders and our executive Directors have agreed toindemnify the Underwriters for certain losses which they may suffer, including losses arisingfrom their performance of their obligations under the Underwriting Agreement and anybreach by our Company, the Selling Shareholder, our Controlling Shareholders and ourexecutive Directors pursuant to the terms of the Underwriting Agreement.

Sponsor’s and Underwriters’ interests in our Company

The Sponsor has been appointed as the compliance adviser of the Company with effectfrom the Listing Date until the despatch of the audited consolidated financial results for thesecond full financial year after the Listing Date, and our Company will pay to the Sponsoran agreed fee for its provision of services as required under the GEM Listing Rules.

Save for the interests and obligations under the Underwriting Agreement and theadvisory fee payable to the Sponsor in respect of the Placing, none of the Sponsor, the JointBookrunners, the Joint Lead Managers or the Underwriters is interested beneficially ornon-beneficially in any shares in any member of our Group or has any right (whether legallyenforceable or not) or option to subscribe for or to nominate persons to subscribe for anyshares in any member of our Group.

Undertakings

Undertakings to the Stock Exchange pursuant to the GEM Listing Rules

Pursuant to Rule 13.16A of the GEM Listing Rules, each of the ControllingShareholders has jointly and severally undertaken to our Company and the Stock Exchangethat save as contemplated under the Placing or as provided under Rule 13.18 of the GEMListing Rules, he or it shall not and shall procure that the relevant registered shareholder(s)shall not, without the prior consent of the Stock Exchange:

(a) in the period commencing on the date by reference to which disclosure of ourinterests in our Company is made in this prospectus and ending on the date whichis six months from the Listing Date, dispose of, nor enter into any agreement todispose of or otherwise create any mortgage, charge, pledge, lien, option,restriction, right of first refusal, right of pre-emption, third-party right or interest,other right, interest or encumbrance or security of any kind or another type ofpreferential arrangement (including without limitation, a title transfer or retentionarrangement) having similar effect (the “Encumbrances”) in respect of, any of theShares (or any securities of our Company) in respect of which he or it is shownby this prospectus to be the beneficial owner; or

(b) in the period of six months commencing on the date on which the period referredto in (a) above expires, dispose of, nor enter into any agreement to dispose of orotherwise create any Encumbrances in respect of, any of the Shares (or anysecurities of our Company) referred to in (a) above if, immediately following suchdisposal or upon the exercise or enforcement of such options, rights, interests orEncumbrances, the Controlling Shareholders would, either individually or takentogether with any of them, cease to be a Controlling Shareholder.

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Further, each of the Controlling Shareholders has jointly and severally undertaken tothe Stock Exchange that he/it shall comply with the following requirements:

(i) in the event that he or it pledges or charges any direct or indirect interest in anyShares or other securities of our Company under Rule 13.18(1) of the GEMListing Rules or pursuant to any right or waiver granted by the Stock Exchangepursuant to Rule 13.18(4) of the GEM Listing Rules at any time during therelevant periods specified in sub-paragraphs (a) and (b) above, he or it mustinform our Company immediately in writing disclosing the details specified inRule 17.43(1) to (4) of the GEM Listing Rules; and

(ii) having pledged or charged any interest in the Shares or other securities of ourCompany under sub-paragraph (i) above, he or it must inform our Companyimmediately in writing, in the event that he or it becomes aware that the pledgeeor chargee has disposed of or intends to dispose of such interest and of thenumber of Shares (or other securities of our Company) affected.

Undertakings pursuant to the Underwriting Agreement

Under the Underwriting Agreement:

(a) (i) each of our Controlling Shareholders has jointly and severally undertakes toand covenants with our Company, the Sponsor, the Joint Bookrunners andthe Joint Lead Managers (for themselves and on behalf of the Underwriters)that:

(a) he or it shall comply with all the applicable restrictions andrequirements under the GEM Listing Rules on the disposal by him or itor by any registered holder on his or its behalf, of any Shares or othersecurities of our Company in respect of which he or it is shown in thisprospectus to be the beneficial owner (directly or indirectly);

(b) during the period commencing on the date by reference to whichdisclosure of the shareholding of our Controlling Shareholder is madein this prospectus and ending on the date which is 6 months from theListing Date (the “First Six-Month Period”), he/it shall not, and shallprocure that the relevant registered holder(s) and his/its associates andcompanies controlled by him/it and any nominee or trustee holding ontrust for himself/itself shall not, without the prior written consent of theSponsor and the Joint Bookrunners or otherwise in compliance with therequirements of the GEM Listing Rules, (i) offer, pledge, charge, sell,contract to sell, sell any option or contract to purchase, purchase anyoption or contract to sell, grant or agree to grant any option, right orwarrant to purchase or subscribe for, lend or otherwise transfer ordispose of, either directly or indirectly, any of the Shares or anysecurities convertible into or exercisable or exchangeable for, or thatrepresent the right to receive any such Shares or such securities; or (ii)enter into any swap or other arrangement that transfers to another, in

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whole or in part, any of the economic consequences of ownership ofsuch Shares, whether any of the foregoing transactions is to be settledby delivery of Shares or such other securities, in cash or otherwise; (iii)agree (conditionally or unconditionally) to enter into or effect anytransaction with the same economic effect as any of the transactionsreferred to in (i) or (ii) above; or (iv) announce any intention to enterinto or effect any of the transactions referred to in (i), (ii) or (iii)above;

(c) during the period of 6 months commencing on the date immediatelyfollowing the date on which the First Six-Month Period expires (the“Second Six-Month Period”), he/it shall not, and shall procure that therelevant registered holder(s) and his/its associates or companiescontrolled by him/it and any nominee or trustee holding in trust forhimself/itself shall not, without the prior written consent of theSponsor, the Joint Bookrunners and the Stock Exchange (if requiredunder the GEM Listing Rules), dispose of, nor enter into any agreementto dispose of or otherwise create any options, rights, interests orencumbrances in respect of, any Shares held by him/it or any of his/itsassociates or companies controlled by him/it or any nominee or trusteeholding on trust for himself/itself if, immediately following suchdisposal or upon the exercise or enforcement of such options, rights,interests or encumbrances, he/it would together cease to be ourControlling Shareholder; and

(d) in the event of a disposal of any Shares or securities of our Companyor any interest therein within the Second Six-Month Period, he/it shalltake all reasonable steps to ensure that such a disposal shall not createa disorderly or false market for any Shares or other securities of theCompany,

provided that the restrictions in this paragraph (i)(b) and (c) shall not applyto any Shares which our Controlling Shareholders or any of his/its respectiveassociates may acquire or become interested in following the Listing Date;

(ii) each of our Controlling Shareholders undertakes to and covenants with ourCompany, the Sponsor, the Joint Bookrunners, the Joint Lead Managers andthe Stock Exchange that:

(A) in the event that he/it pledges or charges any of his/its direct or indirectinterest in the Shares under Rule 13.18(1) of the GEM Listing Rules orpursuant to any right or waiver granted by the Stock Exchange pursuantto Rule 13.18(4) of the GEM Listing Rules at any time during therelevant periods as specified in paragraph (i) above, he/it must informour Company, the Sponsor, the Joint Bookrunners and the Joint LeadManagers immediately thereafter, disclosing the details as specified inRule 17.43(1) to (4) of the GEM Listing Rules; and

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(B) having pledged or charged any of his/its interests in the Shares undersub-paragraph (A) above, he/it must inform our Company, the Sponsor,the Joint Bookrunners and the Joint Lead Managers immediately in theevent that he/it becomes aware that the pledgee or chargee has disposedof or intends to dispose of such interest and of the number of theShares affected; and

(b) our Company undertakes to and covenants with the Sponsor, the JointBookrunners and the Joint Lead Managers (for themselves and on behalf of theUnderwriters), and each of our executive Directors and our ControllingShareholders jointly and severally undertakes to and covenants with the Sponsor,the Joint Bookrunners and the Joint Lead Managers (for themselves and on behalfof the Underwriters) to procure that, save with the prior written consent of theSponsor and the Joint Bookrunners (for themselves and on behalf of theUnderwriters), or save pursuant to the Placing, our Company shall not, within theperiod of six months from the Listing Date:

(i) save as permitted under the GEM Listing Rules (including but not limited toRule 17.29 of the GEM Listing Rules) and the applicable laws or pursuant toan issue of Shares under the Share Option Scheme, either directly orindirectly, conditionally or unconditionally, allot or issue or agree to allot orissue any Shares or any other securities of our Company (including warrantsor other convertible securities (and whether or not a class already listed));

(ii) grant or agree to grant either directly or indirectly, conditionally orunconditionally, any options, warrants or other rights carrying any rights tosubscribe for or otherwise convert into, or exchange for any Shares or anyother securities of our Company;

(iii) purchase any securities of our Company;

(iv) enter into any swap or other arrangement that transfers to another, in wholeor in part, any of the economic consequences of subscription or ownership ofShares or such securities, whether any of the foregoing transactions is to besettled by delivery of Shares or such securities, in cash or otherwise; or

(v) offer to or agree to do any of the foregoing or announce any intention to doso.

Our Company will inform the Stock Exchange as soon as it has been informed of theabove matters (if any) by the Controlling Shareholders and disclose such matters by way ofpublishing an announcement in accordance with Rule 17.43 of the GEM Listing Rules.

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PRICE PAYABLE ON SUBSCRIPTION

The Placing Price plus a 1% brokerage fee, a 0.0027% SFC transaction levy and a0.005% Stock Exchange trading fee make up the total price payable in cash on subscription.

CONDITIONS OF THE PLACING

The Placing will be conditional upon, among others:

(a) the Stock Exchange granting the listing of, and permission to deal in, the Sharesin issue and the Shares to be issued as mentioned herein on GEM; and

(b) the obligations of the Underwriters under the Underwriting Agreement becomingunconditional (including the waiver of any condition(s) by the Joint Bookrunners(for themselves and on behalf of the Underwriters) and the UnderwritingAgreement not being terminated in accordance with the terms of that agreement orotherwise),

in each case, on or before the dates and times specified in the Underwriting Agreement(unless and to the extent such conditions are validly waived on or before such datesand times) or such other dates as the Joint Bookrunners (for themselves and on behalfof the Underwriters) may agree but in any event not later than the 30th day after thedate of this prospectus.

If such conditions are not fulfilled or waived by the Joint Bookrunners (for themselvesand on behalf of the Underwriters) prior to the times and dates specified, the Placing willlapse and the Stock Exchange will be notified immediately. Notice of the lapse of thePlacing will be published by our Company on the website of the Stock Exchange atwww.hkexnews.hk and the website of our Company at www.luenwong.hk immediatelyfollowing such lapse.

THE PLACING

312,000,000 Placing Shares (comprising 208,000,000 New Shares to be offered by ourCompany and 104,000,000 Sale Shares to be offered by the Selling Shareholder) are beingoffered pursuant to the Placing, representing in aggregate 25% of the enlarged issued sharecapital of our Company immediately after completion of the Placing and the CapitalisationIssue.

The Placing is fully underwritten by the Underwriters (subject to the terms andconditions of the Underwriting Agreement). Pursuant to the Placing, 208,000,000 NewShares are being conditionally offered by our Company for subscription and 104,000,000Sale Shares conditionally offered by the Selling Shareholder for purchase. It is expected thatthe Underwriters or selling agents nominated by them, on behalf of our Company and theSelling Shareholder, will conditionally place 312,000,000 Placing Shares (comprising208,000,000 New Shares to be offered by our Company and 104,000,000 Sale Shares to beoffered by the Selling Shareholder) at the Placing Price to selected professional, institutionaland other investors in Hong Kong. Professional and institutional investors generally include


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brokers, dealers, companies, high net worth individuals and companies (including fundmanagers) whose ordinary business involves dealings in shares and other securities andcorporate entities which regularly invest in shares and other securities.

BASIS OF ALLOCATION

Allocation of the Placing Shares to selected professional, institutional and otherinvestors will be based on a number of factors, including the level and timing of demandand whether or not it is expected that the relevant investors are likely to purchase furtherShares or hold or sell their Shares after the Listing. Such allocation is intended to result in adistribution of the Placing Shares which would lead to the establishment of a solidprofessional and institutional shareholder base to the benefit of our Company and theShareholders as a whole. In particular, the Placing Shares will be allocated pursuant to Rule11.23(8) of the GEM Listing Rules, that not more than 50% of the Shares in public hands atthe time of Listing will be owned by the three largest public Shareholders. There will not beany preferential treatment in the allocation of the Placing Shares to any persons.

No allocations will be permitted to nominee companies unless the name of the ultimatebeneficiary is disclosed, without the prior written consent of the Stock Exchange. Details ofthe Placing will be announced in accordance with Rules 10.12(4), 16.08 and 16.16 of theGEM Listing Rules.

COMMENCEMENT OF DEALINGS

Dealings in the Shares on GEM are expected to commence at 9:00 a.m. on Tuesday, 12April 2016. The Shares will be traded in board lots of 10,000 Shares each. The stock codeof the Shares is 8217.

SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

If the Stock Exchange grants the listing of and permission to deal in the Shares inissue and to be issued as mentioned in this prospectus on GEM and the Company complieswith the stock admission requirements of HKSCC, the Shares will be accepted as eligiblesecurities by HKSCC for deposit, clearance and settlement in CCASS with effect from thedate of commencement of dealings in the Shares on GEM or any other date as determinedby HKSCC. Settlement of transactions between participants of the Stock Exchange isrequired to take place in CCASS on the second business day after any trading day.

All necessary arrangements have been made for the Shares to be admitted into CCASS.

All activities under CCASS are subject to the General Rules of CCASS and CCASSOperational Procedures in effect from time to time.

In respect of the dealings in the Shares which may be settled through CCASS,investors should seek the advice of their stockbroker or other professional adviser for detailsof those settlement arrangements and how such arrangements will affect their rights andinterests.


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PLACING PRICE

Based on the Placing Price of HK$0.26 per Placing Share plus 1% brokerage fee,0.0027% SFC transaction levy and 0.005% Stock Exchange trading fee, one board lot of10,000 Shares will amount to a total of HK$2,626.20.

Our Company experts to announce the level of indication of interests in the Placing onor before Monday, 11 April 2016 on the website of the Stock Exchange atwww.hkexnews.hk and our Company’s website at www.luenwong.hk.


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The following is the text of a report received from the Company’s reportingaccountants, Grant Thornton Hong Kong Limited, Certified Public Accountants, Hong Kong,for the purpose of incorporation in this prospectus. It is prepared and addressed to thedirectors of the Company and to the Sponsor pursuant to the requirements of AuditingGuideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong KongInstitute of Certified Public Accountants.

致同

31 March 2016

The directorsLuen Wong Group Holdings Limited

TC Capital Asia Limited

Dear Sirs,

We report on the financial information of Luen Wong Group Holdings Limited (the“Company”) and its subsidiaries (collectively referred to as the “Group”), which comprisesthe combined statements of financial position as at 31 March 2014 and 2015, and 30November 2015, and the statement of financial position of the Company as at 30 November2015, the combined statements of comprehensive income, the combined statements ofchanges in equity and the combined statements of cash flows for each of the years ended 31March 2014 and 2015 and the eight months ended 30 November 2015 (the “Track RecordPeriod”), and a summary of significant accounting policies and other explanatoryinformation (the “Financial Information”) and the comparative combined statement ofcomprehensive income, combined statement of changes in equity and combined statement ofcash flows of the Group for the eight months ended 30 November 2014 (the “InterimComparative Information”), prepared on the basis of presentation set out in Note 1.3 ofSection II below, for inclusion in Appendix I to the prospectus of the Company dated 31March 2016 (the “Prospectus”) in connection with the initial listing of the shares of theCompany on the Growth Enterprise Market (“GEM”) of The Stock Exchange of Hong KongLimited (the “Stock Exchange”).

The Company was incorporated as an exempted company with limited liability in theCayman Islands under the Companies Law (as revised) of the Cayman Islands on 16 October2015. Pursuant to a group reorganisation (the “Reorganisation”) as detailed in the sectionheaded “History and Development” in the Prospectus, which was completed on 22 February2016, the Company became the holding company of the companies now comprising theGroup. Apart from the Reorganisation, the Company has not commenced any business oroperation since its incorporation.

APPENDIX I ACCOUNTANT’S REPORT

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As at the date of this report, the Company has direct and indirect interests in thesubsidiaries as set out in Note 1.2 of Section II below. All of these companies are privatecompanies or, if incorporated or established outside Hong Kong, have substantially the samecharacteristics as a Hong Kong incorporated private company.

No audited financial statements have been prepared by the Company as it is notrequired to issue any audited financial statements under the statutory requirement in theCayman Islands. The audited financial statements of the other companies now comprisingthe Group as at the date of this report for which there are statutory audit requirements havebeen prepared in accordance with the relevant accounting principles generally accepted intheir place of incorporation. The details of the statutory auditors of these companies are setout in Note 1.2 of Section II below.

For the purpose of this report, the directors of the Company have prepared thecombined financial statements of the Group (the “Underlying Financial Statements”) inaccordance with Hong Kong Financial Reporting Standards (“HKFRSs”), which include allapplicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards(“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified PublicAccountants (the “HKICPA”). The Underlying Financial Statements for each of the yearsended 31 March 2014 and 2015 and the eight months ended 30 November 2015 wereaudited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPApursuant to separate terms of engagement with the Company.

The Financial Information has been prepared based on the Underlying FinancialStatements, with no adjustment made thereon.

Directors’ responsibility

The directors of the Company are responsible for the preparation of the UnderlyingFinancial Statements and the Financial Information that give a true and fair view inaccordance with HKFRSs, and for such internal control as the directors determine isnecessary to enable the preparation of the Underlying Financial Statements and the FinancialInformation that are free from material misstatement, whether due to fraud or error. Thedirectors of the Company are responsible for the preparation of the Interim ComparativeFinancial Information in accordance with the same basis adopted in respect of the FinancialInformation.

Reporting accountants’ responsibility

It is our responsibility to form an independent opinion and a review conclusion on theFinancial Information and the Interim Comparative Information, respectively, and to reportour opinion and review conclusion thereon to you.

For the purpose of this report, we have carried out procedures on the FinancialInformation in accordance with Auditing Guideline 3.340 “Prospectuses and the ReportingAccountant” issued by the HKICPA.


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We have also performed a review of the Interim Comparative Information inaccordance with Hong Kong Standard on Review Engagements 2410 “Review of InterimFinancial Information Performed by the Independent Auditor of the Entity” issued by theHKICPA. A review consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance with Hong KongStandards on Auditing and consequently does not enable us to obtain assurance that wewould become aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion on the Interim Comparative Information.

Opinion in respect of the Financial Information

In our opinion, for the purpose of this report and on the basis of presentation set out inNote 1.3 of Section II below, the Financial Information gives a true and fair view of thestate of affairs of the Group as at 31 March 2014 and 2015 and 30 November 2015 and ofthe Company as at 30 November 2015, and of the combined results and cash flows of theGroup for each financial year/period during the Track Record Period.

Review conclusion in respect of the Interim Comparative Information

Based on our review, for the purpose of this report, nothing has come to our attentionthat causes us to believe that the Interim Comparative Information is not prepared, in allmaterial respects, in accordance with the same basis adopted in respect of the FinancialInformation.


– I-3 –

I FINANCIAL INFORMATION

COMBINED STATEMENTS OF COMPREHENSIVE INCOME


30 November2014 2015 2014 2015

Note HK$’000 HK$’000 HK$’000 HK$’000(Unaudited)

Revenue 4 159,963 271,949 186,325 154,641Costs of sales (144,943) (246,349) (170,904) (137,355)

Gross profit 15,020 25,600 15,421 17,286Other income 6 425 346 347 2,236Administrative and other

operating expenses (3,607) (3,772) (1,493) (10,122)

Profit from operations 11,838 22,174 14,275 9,400Finance costs 7 (452) (471) (291) (338)

Profit before income tax 8 11,386 21,703 13,984 9,062Income tax expense 9 (1,956) (3,624) (2,337) (2,670)

Profit and totalcomprehensive income forthe year/periodattributable to equityholders of the Company 9,430 18,079 11,647 6,392

Earnings per shareattributable to equityholders of the Company

Basic and diluted 13 N/A N/A N/A N/A


– I-4 –

COMBINED STATEMENTS OF FINANCIAL POSITION


November2014 2015 2015

Note HK$’000 HK$’000 HK$’000

ASSETS AND LIABILITIESNon-current assetsInvestment property 14 11,697 11,140 –Property, plant and equipment 15 13,722 11,833 13,274Deferred tax assets 23 3,280 – –

28,699 22,973 13,274

Current assetsAmount due from a director 16(a) – 523 –Amounts due from customers for

contract work 17 7,555 9,474 17,593Trade and other receivables 18 35,276 54,215 54,320Cash and bank balances 19 3,419 5,900 7,977

46,250 70,112 79,890

Current liabilitiesTrade and other payables 20 23,941 19,717 27,436Amounts due to customers for contract

work 17 39,891 39,980 28,326Amounts due to directors 16(b) 6,604 2,689 10,056Obligations under finance leases 21 1,474 1,199 1,537Bank loans and overdrafts 22 10,536 18,940 5,688Tax payable – – 1,607

82,446 82,525 74,650

Net current (liabilities)/assets (36,196) (12,413) 5,240

Total assets less current liabilities (7,497) 10,560 18,514


– I-5 –


November2014 2015 2015

Note HK$’000 HK$’000 HK$’000

Non-current liabilitiesObligations under finance leases 21 2,278 1,912 2,411Deferred tax liabilities 23 – 344 1,407

2,278 2,256 3,818

Net (liabilities)/assets (9,775) 8,304 14,696

Capital and reservesShare capital 24 – – –Reserves (9,775) 8,304 14,696

(Capital deficiency)/Equityattributable to equity holders of theCompany (9,775) 8,304 14,696


– I-6 –

STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Note

As at 30November

2015HK$’000

ASSETS AND LIABILITIESCurrent assetAmount due from ultimate holding company –

Net assets –

EQUITYShare capital 24 –Accumulated losses –

Total equity –


– I-7 –

COMBINED STATEMENTS OF CHANGES IN EQUITY

(Capital deficiency)/Equity attributable toequity holders of the Company

Share capitalCapitalreserve

(Accumulatedlosses)/

Retainedearnings

(Capitaldeficiency)/

Total equityHK$’000 HK$’000 HK$’000 HK$’000(Note 24) (Note 25)

Balance as at 1 April 2013 – 3,820 (23,025) (19,205)Profit and total

comprehensive incomefor the year – – 9,430 9,430

Balance as at 31 March2014 and 1 April 2014 – 3,820 (13,595) (9,775)

Profit and totalcomprehensive incomefor the year – – 18,079 18,079

Balance as at 31 March2015 and 1 April 2015 – 3,820 4,484 8,304

Profit and totalcomprehensive incomefor the period – – 6,392 6,392

Balance as at 30November 2015 – 3,820 10,876 14,696

Balance as at 1 April 2014(audited) – 3,820 (13,595) (9,775)

Profit and totalcomprehensive incomefor the period (unaudited) – – 11,647 11,647

Balance as at 30November 2014(unaudited) – 3,820 (1,948) 1,872


– I-8 –

COMBINED STATEMENTS OF CASH FLOWS


30 November2014 2015 2014 2015


Cash flows from operatingactivities

Profit before income tax 11,386 21,703 13,984 9,062Adjustments for:

Depreciation 3,676 3,264 2,030 2,009(Gain)/Loss on disposal of

property, plant andequipment (120) 306 (111) (120)

Gain on disposal ofinvestment property – – – (1,792)

Finance costs 452 471 291 338

Operating profit beforeworking capital changes 15,394 25,744 16,194 9,497

Decrease/(Increase) in tradeand other receivables 3,695 (18,939) (19,061) (105)

Increase in amounts due fromcustomers for contract work (7,149) (1,919) (4,841) (8,119)

Decrease/(Increase) in amountdue from a director 23 (523) – 523

Increase/(Decrease) in tradeand other payables 8,749 (4,224) 4,908 7,719

(Decrease)/Increase inamounts due to customersfor contract work (13,855) 89 228 (11,654)

Increase/(Decrease) inamounts due to directors 545 (3,915) 1,403 7,367

Net cash generated from/(usedin) operating activities 7,402 (3,687) (1,169) 5,228


– I-9 –


30 November2014 2015 2014 2015


Cash flows from investingactivities

Proceeds from disposal ofproperty, plant andequipment 147 719 111 438

Proceeds from disposal ofinvestment property – – – 12,700

Purchases of property, plantand equipment (4,625) (510) (494) (1,643)

Net cash (used in)/generatedfrom investing activities (4,478) 209 (383) 11,495

Cash flows from financingactivities

Proceeds from new bankloans 3,000 4,000 – –

Interest paid (238) (302) (181) (214)Interest element of finance

leases (214) (169) (110) (124)Repayments of bank loans (1,876) (1,078) (716) (7,938)Repayment of capital element

of finance leases (1,566) (1,974) (991) (1,056)

Net cash (used in)/generatedfrom financing activities (894) 477 (1,998) (9,332)

Net increase/(decrease) incash and cash equivalents 2,030 (3,001) (3,550) 7,391

Cash and cash equivalents atthe beginning of theyear/period 1,389 3,419 3,419 418

Cash and cash equivalentsat the end of the year/period 19 3,419 418 (131) 7,809


– I-10 –

II NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION

1.1 General information

The Company was incorporated as an exempted company with limited liability in the Cayman Islandsunder the Companies Law (as revised) of the Cayman Islands on 16 October 2015. The addresses of theCompany’s registered office and principal place of business are set out in the section headed “CorporateInformation” of the Prospectus.

The Company is an investment holding company. The Group is principally engaged in the provisionof civil engineering works.

The Company’s immediate and ultimate holding company is Blooming Union Investments Limited, acompany incorporated in the British Virgin Islands (“BVI”). Blooming Union Investments Limited iscontrolled by Mr. Wong Che Kwo and Mr. Wong Wing Wah. Blooming Union Investments Limited, Mr.Wong Che Kwo and Mr. Wong Wing Wah are referred to as the “Controlling Shareholders”.

1.2 Reorganisation

Pursuant to a group reorganisation (the “Reorganisation”) as detailed in the section headed “Historyand Development” in the Prospectus, which was completed on 22 February 2016, the Company became theholding company of the companies now comprising the Group.

Upon the completion of the Reorganisation and as at the date of this report, the Company had director indirect interest in the following subsidiaries:

Name of companyPlace and date ofincorporation

Issued andpaid upcapital

Equityinterest

held Principal activities Note

Super Pioneer TradingLimited (“SuperPioneer”)

BVI,1 July 2015

US$1 100%(Direct)

Investment holding (a)

Luen Hing Construction &Eng. Limited (“LuenHing”)

Hong Kong,11 November 1998

HK$3,800,000 100%(Indirect)

Provision of civilengineering works

(b)

Hop Fung Construction &Engineering CompanyLimited (“Hop Fung”)

Hong Kong,31 July 2002

HK$20,000 100%(Indirect)

Provision of civilengineering works

(b)

Notes:

(a) No audited financial statements have been prepared as it is not required to issue any auditedfinancial statements under the statutory requirement in its place of incorporation.

(b) The statutory financial statements for the year ended 31 March 2014 were prepared inaccordance with the Small and Medium-sized Entity Financial Reporting Standard issued bythe HKICPA and were audited by Francis S.L. Yan & Co., Certified Public Accountants. Thestatutory financial statements for the year ended 31 March 2015 were prepared in accordancewith Hong Kong Financial Reporting Standards issued by the HKICPA and were audited byLai Yiu Hong Certified Public Accountants (Practising).

All companies comprising the Group have adopted 31 March as their financial year end date.


– I-11 –

1.3 Basis of presentation

Pursuant to the Reorganisation as more fully explained in the paragraphs headed “Reorganisation” inthe section headed “History and Development” to the Prospectus, the Company became the holdingcompany of the companies now comprising the Group on 22 February 2016. During the Track RecordPeriod, both of Luen Hing and Hop Fung were controlled by the Controlling Shareholders.

Pursuant to the Reorganisation, which was completed by interspersing the Company and SuperPioneer between Luen Hing and Hop Fung and the Controlling Shareholders, the Company became theholding company of the companies now comprising the Group on 22 February 2016. The Group is underthe common control of the Controlling Shareholders prior to and after the Reorganisation. The Groupcomprising the Company and its subsidiaries resulting from the Reorganisation is regarded as a continuingentity.

The combined statements of comprehensive income, combined statements of changes in equity andcombined statements of cash flows for the Track Record Period which include the results, changes in equityand cash flows of the companies comprising the Group have been prepared using the principles of mergeraccounting under Hong Kong Accounting Guideline 5 “Merger Accounting for Common ControlCombinations” as if the Company had always been the holding company of the Group and the current groupstructure had been in existence throughout the Track Record Period, or since their respective dates ofincorporation/establishment, where it is a shorter period.

The combined statements of financial position as at 31 March 2014 and 2015 and 30 November 2015have been prepared to present the assets and liabilities of the companies comprising the Group as if thecurrent group structure had been in existence at those dates.

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 to all the periods presented, unless otherwise stated.

2.1 Basis of preparation

The Financial Information has been prepared in accordance with Hong Kong Financial ReportingStandards (“HKFRSs”) issued by the HKICPA which are effective for the accounting period beginning on 1April 2015 throughout the Track Record Period. The Financial Information also complies with theapplicable disclosure provisions of the Rules Governing the Listing of Securities on the Growth EnterpriseMarket (“GEM”) of the Stock Exchange. The significant accounting policies that have been used in thepreparation of this Financial Information are summarised below. These policies have been consistentlyapplied to all the periods presented in the Financial Information.

The Financial Information has been prepared on the historical cost convention. The FinancialInformation is presented in Hong Kong Dollars (“HK$”), which is the functional currency of the Companyand its major subsidiaries, and all values are rounded to the nearest thousands (“HK$’000”), except whenotherwise indicated.

The preparation of the Financial Information in conformity with HKFRSs requires the use of certaincritical accounting estimates. It also requires management to exercise its judgement in the process ofapplying the accounting policies of the Group. The areas involving a higher degree of judgement orcomplexity, or areas where assumptions and estimates are significant to the Financial Information aredisclosed in Note 3 below.

The following new and amended HKFRSs that are relevant to the Group have been issued but are notyet effective for the financial year beginning 1 April 2015, and have not been early adopted by the Group:

Annual Improvements Project Annual Improvements 2012-2014 Cycle1

HKAS 1 Amendment Disclosure Initiative1

HKFRS 9 Financial Instruments2


– I-12 –

HKFRS 15 Revenue from Contracts with Customers2

1 Effective for annual periods beginning on or after 1 January 20162 Effective for annual periods beginning on or after 1 January 2018

The Group is in the process of making an assessment of the impact of these new and revisedHKFRSs upon initial application and not yet in a position to state whether they would have a significantimpact on the Group’s results of operations and financial position.

2.2 Basis of consolidation and combination

The Financial Information incorporates the financial statements of the Company and its subsidiaries(collectively referred to as the “Group”) for the Track Record Period. The financial statements of thesubsidiaries are prepared for the same reporting period as the Company, using consistent accountingpolicies.

Subsidiaries are entities controlled by the Group. The Group controls an entity when the Group isexposed, or has rights, to variable returns from its involvement with the entity and has the ability to affectthose returns through its power over the entity. When assessing whether the Group has power over theentity, only substantive rights relating to the entity (held by the Group and others) are considered.

The Group includes the income and expenses of a subsidiary in the combined financial statementsfrom the date it gains control until the date when the Group ceases to control the subsidiary.

Intra-group transactions, balances and unrealised gains and losses on transactions between groupcompanies are eliminated in preparing the combined financial statements. Amounts reported in the financialstatements of subsidiaries have been adjusted where necessary to ensure consistency with the accountingpolicies adopted by the Group.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accountedfor as equity transactions, whereby adjustments are made to the amounts of controlling interests withincombined equity to reflect the change in relative interests, but no adjustments are made to goodwill and nogain or loss is recognised.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as thedifference between (i) the aggregate of the fair value of the consideration received and the fair value of anyretained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities ofthe subsidiary and any non-controlling interests. Where certain assets of the subsidiary are measured atrevalued amounts or fair values and the related cumulative gain or loss has been recognised in othercomprehensive income and accumulated in equity, the amounts previously recognised in othercomprehensive income and accumulated in equity are accounted for as if the Company had directlydisposed of the related assets (i.e., reclassified to profit or loss or transferred directly to retained earnings).The fair value of any investment retained in the former subsidiary at the date when control is lost isregarded as the fair value on initial recognition for subsequent accounting under HKAS 39 “FinancialInstruments: Recognition and Measurement” or, when applicable, the cost on initial recognition of aninvestment in an associate or a joint venture.

2.3 Foreign currency translation

In the individual financial statements of the combined entities, foreign currency transactions aretranslated into the functional currency of the individual entity using the exchange rates prevailing at thedates of the transactions. At the reporting date, monetary assets and liabilities denominated in foreigncurrencies are translated at the foreign exchange rates ruling at that date. Foreign exchange gains and lossesresulting from the settlement of such transactions and from the reporting date retranslation of monetaryassets and liabilities are recognised in profit or loss.

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslatedat the rates prevailing on the date when the fair value was determined. Non-monetary items that aremeasured in terms of historical cost in a foreign currency are not retranslated.


– I-13 –

2.4 Investment property

Investment property is land and/or buildings which are owned or held under a leasehold interest toearn rental income and/or for capital appreciation. These include land held for a currently undeterminedfuture use and property that is being constructed or developed for future use as investment property.

When the Group holds a property interest under an operating lease to earn rental income and/or forcapital appreciation, the interest is classified and accounted for as an investment property on aproperty-by-property basis. Any such property interest which has been classified as an investment propertyis accounted for as if it was held under a finance lease.

On initial recognition, investment property is measured at cost, including any directly attributableexpenditure. Subsequent to initial recognition, investment property is stated at cost less subsequentaccumulated depreciation and impairment losses. Depreciation is provided to write-off the cost ofinvestment property using the straight line method over their estimated useful life of 25 years or over thelease term, if shorter.

Gains or losses arising from the sale of an investment property are included in profit or loss in theperiod in which they arise.

2.5 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.Cost includes expenditure that is directly attributable to the acquisition of the asset. Purchased software thatis integral to the functionality of the related equipment is capitalised as part of that equipment.

Depreciation is provided to write-off the cost less their residual values over their estimated usefullives, using the straight-line method, at the rates per annum as follows:

Land and buildings 5%

Furniture and equipment 10%

Site equipment 10%

Motor vehicles 20%

Assets held under finance leases are depreciated over their expected useful lives on the same basis asowned assets or, where shorter, the term of the relevant lease.

The assets’ residual values, depreciation methods and useful lives are reviewed, and adjusted ifappropriate, at each reporting date.

The gain or loss arising on retirement or disposal is determined as the difference between the salesproceeds and the carrying amount of the asset and is recognised in profit or loss.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to theGroup and the cost of the item can be measured reliably. The carrying amount of the replaced part isderecognised. All other costs, such as repairs and maintenance are charged to profit or loss during thefinancial period in which they are incurred.

2.6 Financial assets

The Group’s accounting policies for financial assets other than investments in subsidiaries are set outbelow.


– I-14 –

Financial assets of the Group are classified into loans and receivables. Management determines theclassification of its financial assets at initial recognition depending on the purpose for which the financialassets were acquired and where allowed and appropriate, re-evaluates this designation at every reportingdate.

All financial assets are recognised when, and only when, the Group becomes a party to thecontractual provisions of the instrument. Regular way purchases of financial assets are recognised on tradedate. When financial assets are recognised initially, they are measured at fair value, plus, in the case ofinvestments not at fair value through profit or loss, directly attributable transaction costs.

Derecognition of financial assets occurs when the rights to receive cash flows from the investmentsexpire or are transferred and substantially all of the risks and rewards of ownership have been transferred.

At each reporting date, financial assets are reviewed to assess whether there is objective evidence ofimpairment. If any such evidence exists, an impairment loss is determined and recognised based on theclassification of the financial asset.

Loans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. Loans and receivables are subsequently measured at amortised costusing the effective interest method, less any impairment losses. Amortised cost is calculated taking intoaccount any discount or premium on acquisition and includes fees that are an integral part of the effectiveinterest rate and transaction cost.

Impairment of financial assets

At each reporting date, financial assets are reviewed to determine whether there is any objectiveevidence of impairment.

Objective evidence of impairment of individual financial assets includes observable data that comesto the attention of the Group about one or more of the following loss events:

� significant financial difficulty of the debtor;

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

� it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

� significant changes in the technological, market, economic or legal environment that have anadverse effect on the debtor;

� the disappearance of an active market for that financial asset because of financial difficulties;and

� a significant or prolonged decline in the fair value of an investment in an equity instrumentbelow its cost.

Loss events in respect of a group of financial assets include observable data indicating that there is ameasurable decrease in the estimated future cash flows from the group of financial assets. Such observabledata includes but not limited to adverse changes in the payment status of debtors in the Group and, nationalor local economic conditions that correlate with defaults on the assets in the Group.

If there is objective evidence that an impairment loss on loans and receivables carried at amortisedcost has been incurred, the amount of the loss is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows (excluding future credit losses that have notbeen incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interestrate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period inwhich the impairment occurs.


– I-15 –

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognised, the previously recognisedimpairment loss is reversed to the extent that it does not result in a carrying amount of the financial assetexceeding what the amortised cost would have been had the impairment not been recognised at the date theimpairment is reversed. The amount of the reversal is recognised in profit or loss of the period in which thereversal occurs.

Impairment losses on financial assets other than trade and retention monies receivables that are statedat amortised cost, are written-off against the corresponding assets directly. Where the recovery of trade andretention monies receivables is considered doubtful but not remote, the impairment losses for doubtfulreceivables are recorded using an allowance account. When the Group is satisfied that recovery of trade andretention monies receivables is remote, the amount considered irrecoverable is written-off against trade andretention monies receivables directly and any amounts held in the allowance account in respect of thatreceivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account arereversed against the allowance account. Other changes in the allowance account and subsequent recoveriesof amounts previously written-off directly are recognised in profit or loss.

2.7 Construction contracts

Construction contracts are contracts specifically negotiated for the construction of an asset or acombination of assets where the customer is able to specify the major structural elements of the design. Theaccounting policy for contract revenue is set out in Note 2.14.

When the outcome of a construction contract can be estimated reliably, contract costs are recognisedas an expense by reference to the stage of completion of the contract at the reporting date. When it isprobable that total contract costs will exceed total contract revenue, the expected loss is recognised as anexpense immediately. When the outcome of a construction contract cannot be estimated reliably, contractcosts are recognised as an expense in the period in which they are incurred.

Construction contracts in progress at the reporting date are recorded in the combined statements offinancial position at the net amount of costs incurred plus recognised profit less recognised losses andprogress billings, and are presented as “Amounts due from customers for contract work” (as an asset) or“Amounts due to customers for contract work” (as a liability). Progress billings not yet paid by customersare included in the combined statements of financial position under “Trade and other receivables”. Amountsreceived before the related work is performed are included under “Trade and other payables”.

2.8 Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand, demand deposits with banks and shortterm highly liquid investments with original maturities of three months or less that are readily convertibleinto known amounts of cash and which are subject to an insignificant risk of changes in value. For thepurpose of the combined statements of cash flows presentation, cash and cash equivalents include bankoverdrafts which are repayable on demand and form an integral part of the Group’s cash management.

2.9 Financial liabilities

The Group’s financial liabilities include trade and other payables, bank loans, overdrafts, amountsdue to directors and finance lease liabilities. Financial liabilities are recognised when the Group becomes aparty to the contractual provisions of the instrument. All interest related charges are expensed whenincurred. A financial liability is derecognised when the obligation under the liability is discharged orcancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a new liability, andthe difference in the respective carrying amount is recognised in profit or loss.


– I-16 –

Trade and other payables and amounts due to directors

They are recognised initially at their fair value and subsequently measured at amortised cost, usingthe effective interest method.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and theredemption value is recognised in profit or loss over the period of the borrowings using the effectiveinterest method.

Finance lease liabilities

Finance lease liabilities are measured at initial value less the capital element of lease repayments (seeNote 2.11).

2.10 Impairment of non-financial assets

Investment property and property, plant and equipment are subject to impairment testing. They aretested for impairment whenever there are indications that the asset’s carrying amount may not berecoverable.

An impairment loss is recognised as an expense immediately for the amount by which the asset’scarrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value, reflectingmarket conditions less costs of disposal, and value in use. In assessing value in use, the estimated futurecash flows are discounted to their present value using a pre-tax discount rate that reflects current marketassessment of time value of money and the risk specific to the asset.

For the purposes of assessing impairment, where an asset does not generate cash inflows largelyindependent from those from other assets, the recoverable amount is determined for the smallest group ofassets that generate cash inflows independently (i.e. a cash-generating unit). As a result, some assets aretested individually for impairment and some are tested at cash-generating unit level.

Impairment losses recognised is charged pro rata to the assets in the cash generating unit, except thatthe carrying value of an asset will not be reduced below its individual fair value less costs of disposal, orvalue in use, if determinable.

An impairment loss is reversed if there has been a favourable change in the estimates used todetermine the asset’s recoverable amount and only to the extent that the asset’s carrying amount does notexceed the carrying amount that would have been determined, net of depreciation or amortisation, if noimpairment loss had been recognised.

2.11 Leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if theGroup determines that the arrangement conveys a right to use a specific asset or assets for an agreed periodof time in return for a payment or a series of payments. Such a determination is made based on anevaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legalform of a lease.

Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risksand rewards of ownership are classified as being held under finance leases. Leases which do not transfersubstantially all the risks and rewards of ownership to the Group are classified as operating leases.


– I-17 –

Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fairvalue of the leased asset, or, if lower, the present value of the minimum lease payments of such assets, areincluded in property, plant and equipment and the corresponding liabilities, net of finance charges, arerecorded as obligation under finance leases.

Subsequent accounting for assets held under finance lease agreements corresponds to those applied tocomparable acquired assets. The corresponding finance lease liability is reduced by lease payments lessfinance charges.

Finance charges implicit in the lease payments are charged to profit or loss over the period of theleases so as to produce an approximately constant periodic rate of charge on the remaining balance of theobligations for each accounting period.

Operating lease charges as the lessee

Where the Group has the right to use of assets held under operating leases, payments made under theleases are charged to the profit or loss on a straight-line basis over the lease terms except where analternative basis is more representative of the time pattern of benefits to be derived from the leased assets.Lease incentives received are recognised in profit or loss as an integral part of the aggregate net leasepayments made. Contingent rental are charged to profit or loss in the accounting period in which they areincurred.

Assets leased out under operating leases as the lessor

Assets leased out under operating leases are measured and presented according to the nature of theassets. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carryingamount of the leased asset and recognised as an expense over the lease term on the same basis as the rentalincome.

Rental income receivable from operating leases is recognised in profit or loss on a straight-line basisover the periods covered by the lease term, except where an alternative basis is more representative of thetime pattern of benefits to be derived from the use of the leased asset. Lease incentives granted arerecognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingentrentals are recognised as income in the accounting period in which they are earned.

2.12 Provisions and contingent liabilities

Provisions are recognised when the Group has a present obligation (legal or constructive) as a resultof a past event, and it is probable that an outflow of economic benefits will be required to settle theobligation and a reliable estimate of the amount of the obligation can be made. Where the time value ofmoney is material, provisions are stated at the present value of the expenditure expected to settle theobligation.

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

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

2.13 Share capital

Ordinary shares are classified as equity. Share capital is determined using the nominal value of sharesthat have been issued.


– I-18 –

Any transaction costs associated with the issuing of shares are deducted from share premium (net ofany related income tax benefit) to the extent they are incremental costs directly attributable to the equitytransaction.

2.14 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable. Provided it is probablethat the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measuredreliably, revenue is recognised as follows:

Contract revenue

When the outcome of a construction contract can be estimated reliably, revenue from a fixed pricecontract work is recognised based on the stage of completion of the contracts, provided that the stage ofcontract completion and the gross billing value of contracting work can be measured reliably. The stage ofcompletion of a contract is established according to the progress certificate (by reference to the amount ofcompleted works confirmed by customers) issued by the customers.

Variations in contract work, claims and incentive payments are included in contract revenue to theextent that they have been agreed with the customers or the outcome of which can be estimated reliably bymanagement and are capable of being reliably measured.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised onlyto the extent of contract costs incurred that it is probable will be recoverable.

Rental income

Rental income is recognised in profit or loss in equal instalments over the periods covered by thelease term, except where an alternative basis is more representative of the pattern of benefits to be derivedfrom the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral partof the aggregate net lease payments receivable.

2.15 Employee benefits

Retirement benefits

Retirement benefits to employees are provided through defined contribution plans.

The Group operates defined contribution retirement benefit plans for its employees, the assets ofwhich are held separately from those of the Group in independently administered funds. The Group’scontributions are made based on specified percentages of the employees’ basic salaries.

The Group’s contributions under the plans are recognised as an expense in profit or loss asemployees render services during the year. The Group’s obligations under these plans are limited to thefixed percentage contributions payable.

Short-term employee benefits

Employee entitlements to annual leave are recognised when they accrue to employees. A provision ismade for the estimated liability for annual leave as a result of services rendered by employees up to thereporting date.

Non-accumulating compensated absences such as sick leave and maternity leave are not recogniseduntil the time of leave.


– I-19 –

2.16 Borrowing costs

Borrowing costs incurred for the acquisition, construction or production of any qualifying asset arecapitalised during the period of time that is required to complete and prepare the asset for its intended use.A qualifying asset is an asset which necessarily takes a substantial period of time to get ready for itsintended use or sale. Other borrowing costs are expensed when incurred.

Borrowing costs are capitalised as part of the cost of a qualifying asset when expenditure for theasset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare theasset for its intended use or sale are being undertaken. Capitalisation of borrowing costs ceases whensubstantially all the activities necessary to prepare the qualifying asset for its intended use or sale arecomplete.

2.17 Accounting for income taxes

Income tax comprises current tax and deferred tax.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscalauthorities relating to the current or prior reporting period, that are unpaid at the reporting date. They arecalculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, basedon the taxable profit for the year. All changes to current tax assets or liabilities are recognised as acomponent of tax expense in the profit or loss.

Deferred tax is calculated using the liability method on temporary differences at the reporting datebetween the carrying amounts of assets and liabilities in the financial statements and their respective taxbases. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred taxassets are recognised for all deductible temporary differences, tax losses available to be carried forward aswell as other unused tax credits, to the extent that it is probable that taxable profit, including existingtaxable temporary differences, will be available against which the deductible temporary differences, unusedtax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwillor from initial recognition (other than in a business combination) of assets and liabilities in a transactionthat affects neither taxable nor accounting profit or loss.

Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the periodthe liability is settled or the asset realised, provided they are enacted or substantively enacted at thereporting date.

Changes in deferred tax assets or liabilities are recognised in the profit or loss, or in othercomprehensive income or directly in equity if they relate to items that are charged or credited to othercomprehensive income or directly in equity.

Current tax assets and current tax liabilities are presented in net if, and only if,

(a) the Group has the legally enforceable right to set off the recognised amounts; and

(b) intends either to settle on a net basis, or to realise the asset and settle the liabilitysimultaneously.

The Group presents deferred tax assets and deferred tax liabilities in net if, and only if,

(a) the entity has a legally enforceable right to set off current tax assets against current taxliabilities; and

(b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the sametaxation authority on either:

(i) the same taxable entity; or


– I-20 –

(ii) different taxable entities which intend either to settle current tax liabilities and assets ona net basis, or to realise the assets and settle the liabilities simultaneously, in each futureperiod in which significant amounts of deferred tax liabilities or assets are expected tobe settled or recovered.

2.18 Fair value measurements

For financial reporting, fair value measurement is categorised into Level 1, 2 and 3 of the three levelfair value hierarchy as defined under the HKFRS 13. The level into which a fair value measurement isclassified is determined with reference to the observability and significance of the inputs used in thevaluation technique as follows:

Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices inactive markets for identical assets or liabilities at the measurement date;

Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail tomeet Level 1, and not using significant unobservable inputs. Unobservableinputs are inputs for which market data are not available;

Level 3 valuations: Fair value measured using significant unobservable inputs.

2.19 Segment reporting

The Group identifies operating segments and prepares segment information based on the regularinternal financial information reported to the chief operating decision maker (“CODM”) for their decisionsabout resources allocation to the Group’s business components and for their review of the performance ofthose components.

2.20 Related parties

For the purposes of the Financial Information, a party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and if that person:

(i) has control or joint control over of the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of a parent of the Group.


– I-21 –

(b) the party is an entity and if any of the following conditions applies:

(i) the entity and the Group are members of the same group.

(ii) one entity is an associate or joint venture of the other entity (or an associate or jointventure of a member of a group of which the other entity is a member).

(iii) the entity and the Group are joint ventures of the same third party.

(iv) one entity is a joint venture of a third entity and the other entity is an associate of thethird entity.

(v) the entity is a post-employment benefit plan for the benefit of employees of either theGroup or an entity related to the Group.

(vi) the entity is controlled or jointly controlled by a person identified in (a).

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

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

3. 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.

3.1 Sources of estimation uncertainty

The Group makes estimates and assumptions concerning the future. The resulting accountingestimates will, by definition, seldom equal the related actual results. The estimates and assumptions thathave a significant risk of causing a material adjustment to the carrying amounts of assets and liabilitieswithin the next financial year are discussed below:


As explained in Note 2.7 and 2.14, revenue recognition on a project is dependent on management’sestimation of the total outcome of the construction contracts, with reference to the progress certificateissued by the customer. The Group reviews and revises the estimates of contract revenue, contract costs andvariation orders, prepared for each construction contract as the contract progresses. Budgeted constructioncosts are prepared by management based on the quotations from time to time provided by the majorcontractors, suppliers or vendors involved and other direct costs to be incurred with reference to their pastexperience. In order to keep the budget accurate and up-to-date, management conducts periodic reviews ofthe budgeted construction costs by comparing the budgeted amounts to the actual costs incurred.

Significant judgement is required in estimating the contract revenue, contract costs and variationwork which may have an impact on percentage of completion of the construction contracts and thecorresponding profit taken.

Management exercised their judgements and estimations based on contract costs and revenues withreference to the latest available information, which includes detailed contract sum. In many cases the resultsreflect the expected outcome of long-term contractual obligations which span more than one reportingperiod. Contract costs and revenues are affected by a variety of uncertainties that depends on the outcomeof future events and often need to be revised as events unfold and uncertainties are resolved. The estimatesof contract costs and revenues are updated regularly and significant changes are highlighted throughestablished internal review procedures.


– I-22 –

3.2 Critical judgements in applying the Group’s accounting policies

Depreciation

Investment property (Note 14) and property, plant and equipment (Note 15) are depreciated on astraight-line basis over their estimated useful lives, after taking into account the estimated residual value.The Group reviews the estimated useful lives of the investment property and property, plant and equipmentregularly in order to determine the amount of depreciation to be recorded during any reporting period. Theuseful lives are based on the Group’s historical experience with similar assets taking into accountanticipated technological changes. The depreciation for future periods is adjusted if there are significantchanges from previous estimates.

Impairment of trade receivables

The Group evaluates whether there is any objective evidence that trade receivables (Note 2.6) areimpaired, and estimates allowances for doubtful debts as a result of the inability of the debtors to make therequired payments. The Group based on the estimates on the ageing of the trade receivables balance,credit-worthiness of the customer and historical write-off experience to assess the financial conditions of thedebtors. If the financial condition of the debtors were to deteriorate, actual impairment would be higherthan the amount estimated.

4. REVENUE

Revenue represents receipts from the provision of civil engineering works.

Revenue recognised during the Track Record Period are as follows:


30 November2014 2015 2014 2015

HK$’000 HK$’000 HK$’000 HK$’000(Unaudited)

Revenue from the provision of civilengineering works 159,963 271,949 186,325 154,641

5. SEGMENT INFORMATION

The Group’s operating activities are attributable to a single reportable and operating segment focusingprimarily on the provision of civil engineering works. This operating segment has been identified on the basis ofinternal management reports reviewed by the CODM, being the executive directors of the Company. The CODMmainly reviews revenue derived from the provision of civil engineering works. The CODM reviews the overallresults of the Group as a whole to make decisions about resources allocation. Accordingly other than theentity-wide disclosure, no segment analysis is presented.

(a) Geographical information

The Group’s operations are located in Hong Kong and all the revenue of the Group were derivedfrom Hong Kong customers. The Group’s non-current assets are located in Hong Kong.


– I-23 –

(b) Major customers

Revenue from customers which individually contributed over 10% of the Group’s revenue is asfollows:


30 November2014 2015 2014 2015


Customer 1 101,138 144,349 123,357 33,643Customer 2 20,145 N/A (Note) N/A (Note) 16,367Customer 3 N/A (Note) 61,682 32,999 29,136Customer 4 N/A (Note) 36,300 18,478 56,688

Note: The corresponding revenue did not individually contribute over 10% of the Group’s revenueduring the corresponding period of the Track Record Period.

6. OTHER INCOME


30 November2014 2015 2014 2015


Gain on disposal of property, plant andequipment 120 – 111 120

Gain on disposal of investment property – – – 1,792Rental income 276 298 198 105Sundry income 29 48 38 219

425 346 347 2,236

7. FINANCE COSTS


30 November2014 2015 2014 2015


Finance charges on obligations underfinance leases 214 169 110 124

Interests on bank loans and overdraftswholly repayable within five years 238 302 181 214

452 471 291 338


– I-24 –

8. PROFIT BEFORE INCOME TAX

Profit before income tax is arrived at after charging/(crediting):


30 November2014 2015 2014 2015


Auditors’ remuneration 24 24 – 61Depreciation:

– own assets 1,494 1,628 1,084 1,058– leased assets 1,625 1,079 575 719

Depreciation of investment property 557 557 371 232(Gain)/Loss on disposal of property, plant

and equipment, net (120) 306 (111) (120)Gain on disposal of investment property – – – (1,792)Site equipment rental costs (included in

cost of sales) 17,321 33,811 21,904 19,415Operating lease charges in respect of

premises and office equipment 208 227 142 172Subcontracting charges (included in cost of

sales) 31,617 59,971 37,866 35,512Rental income less direct outgoings (229) (248) (175) (85)

9. INCOME TAX EXPENSE

Hong Kong profits tax has been provided at the rate of 16.5% based on the estimated assessable profits forthe respective year/period during the Track Record Period.


30 November2014 2015 2014 2015


Current Hong Kong Profits Tax – – – 1,607Deferred tax (Note 23) 1,956 3,624 2,337 1,063

Income tax expense 1,956 3,624 2,337 2,670


– I-25 –

Reconciliation between income tax expense and accounting profit at applicable tax rates:


30 November2014 2015 2014 2015


Profit before income tax 11,386 21,703 13,984 9,062

Tax on profit before taxation at 16.5% 1,878 3,580 2,307 1,495Tax effects on:

Non-deductible expenses 58 76 23 1,326Non-taxable income – – – (132)Unrecognised tax losses 20 – 33 –Unrecognised temporary differences – – (26) (4)Utilisation of previously unrecognised

tax losses – (32) – (15)

Income tax expense 1,956 3,624 2,337 2,670

10. EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTORS’ EMOLUMENTS)


30 November2014 2015 2014 2015


Salaries, wages and other benefits 37,679 59,880 41,090 27,342Contributions to defined contribution

retirement plans 1,397 2,262 1,567 1,156

39,076 62,142 42,657 28,498


– I-26 –

11. DIRECTORS’ EMOLUMENTS AND FIVE HIGHEST PAID INDIVIDUALS

(a) Directors’ emoluments

The directors’ emoluments paid/payable by the Group during the Track Record Period are as follows:

Fees

Salaries,allowances

and benefitsin kind

Discretionarybonuses

Retirementscheme

contributions TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Year ended 31March 2014

Executive directorsMr. Wong Che Kwo – 832 600 15 1,447Mr. Wong Wing Wah – 832 600 15 1,447Mr. Chiu Chi Wang – 358 44 15 417Mr. Wong Tak Ming – 557 63 15 635

– 2,579 1,307 60 3,946

Year ended 31March 2015

Executive directorsMr. Wong Che Kwo – 900 500 18 1,418Mr. Wong Wing Wah – 900 500 18 1,418Mr. Chiu Chi Wang – 362 45 18 425Mr. Wong Tak Ming – 591 64 18 673

– 2,753 1,109 72 3,934

Eight months ended30 November 2015

Executive directorsMr. Wong Che Kwo – 720 – 12 732Mr. Wong Wing Wah – 720 – 12 732Mr. Chiu Chi Wang – 256 – 12 268Mr. Wong Tak Ming – 416 – 12 428

– 2,112 – 48 2,160

Eight months ended30 November 2014(unaudited)

Executive directorsMr. Wong Che Kwo – 560 – 12 572Mr. Wong Wing Wah – 560 – 12 572Mr. Chiu Chi Wang – 240 – 12 252Mr. Wong Tak Ming – 392 – 12 404

– 1,752 – 48 1,800


– I-27 –

Mr. Wong Che Kwo and Mr. Wong Wing Wah were appointed as directors of the Company on 16October 2015. Mr. Chiu Chi Wang and Mr. Wong Tak Ming were appointed as directors of the Company on16 November 2015. The independent non-executive directors, Mr. Wong Chi Kan, Mr. Liu Yan Chee Jamesand Mr. Tai Hin Henry were appointed as directors of the Company on 24 March 2016. During the TrackRecord Period, the independent non-executive directors have not yet been appointed and have not receivedany directors’ remuneration in the capacity of independent non-executive directors.

The emoluments above represented remuneration received by the directors in the capacity ofemployees and/or directors of the companies comprising the Group.

(b) Five highest paid individuals

The five highest paid individuals of the Group during the Track Record Period include three directorswhose emoluments are disclosed above. Details of the emoluments of the remaining two highest paidindividuals are as follows:


30 November2014 2015 2014 2015


Salaries, wages and other benefits 1,036 1,073 694 725Discretionary bonuses 152 166 – –Contributions to defined contribution

retirement plans 30 35 23 24

1,218 1,274 717 749

The emoluments of the remaining two highest paid individuals are within the following bands:


30 November2014 2015 2014 2015

(Unaudited)Number of individuals

HK$Nil to HK$1,000,000 2 2 2 2

During the Track Record Period, no emoluments were paid by the Group to the directors or the fivehighest paid individuals as an inducement to join or upon joining the Group or as compensation for loss ofoffice. No directors or five highest paid individuals has waived or agreed to waive any emoluments duringthe Track Record Period.

12. DIVIDENDS

No dividend was declared or paid by the Group during the Track Record Period to its equity holders.

13. EARNINGS PER SHARE

Information of earnings per share is not presented as its inclusion, for the purpose of this FinancialInformation is not considered meaningful due to the Reorganisation and the presentation of the results of theGroup for the Track Record Period on a combined basis as disclosed in Note 1.3 of Section II above.


– I-28 –

14. INVESTMENT PROPERTY

HK$’000

CostsAs at 1 April 2013, 31 March 2014 and 2015 and 1 April 2015 13,925Disposal (13,925)

As at 30 November 2015 –

Accumulated depreciationAs at 1 April 2013 1,671Charge for the year 557

As at 31 March 2014 and 1 April 2014 2,228Charge for the year 557

As at 31 March 2015 and 1 April 2015 2,785Charge for the period 232Written back on disposal (3,017)


Net book amountAs at 1 April 2013 12,254

As at 31 March 2014 11,697

As at 31 March 2015 11,140


As at 31 March 2014 and 2015, the Group’s investment property was located in Hong Kong, held undermedium lease and were pledged to the bank as security for bank mortgage loan granted to the Group (Note 22).

As at 31 March 2014 and 2015, the fair value of the investment property was approximatelyHK$11,000,000 and HK$12,450,000 respectively which was determined by Ascent Partners Valuation ServiceLimited, an independent professional qualified valuer who has recent relevant experience in the location andcategory of the Group’s investment property being valued, where comparison based on prices realised on actualsales of comparable properties is made. Comparable properties of similar size, character and location are analysedand carefully weighted against all the respective advantages and disadvantages of each property in order to arriveat a fair comparison of values.


– I-29 –

Set out below are information about the fair values of investment property categorised under Level 3 of thethree-level fair value hierarchy as defined under HKFRS 13.

Valuation techniqueSignificantunobservable input

Range of unobservable inputs

Relationship of significant inputs tofair value

31 March2014 2015

Direct comparison method Discount on quality ofthe investmentproperty

HK$ 10,293 toHK$12,019 persquare feet

HK$12,537 toHK$14,057 persquare feet

An increase in percentage of marketunit sale per square feet wouldresults in an increase in fair valueof the investment property by thesame percentage, and vice versa.

15. PROPERTY, PLANT AND EQUIPMENT

Land andbuildings

Furnitureand

equipmentSite

equipmentMotor


As at 1 April 2013Cost 1,608 774 8,827 11,023 22,232Accumulated depreciation (482) (440) (4,062) (7,670) (12,654)

Net book amount 1,126 334 4,765 3,353 9,578

Year ended 31 March2014

Opening net book amount 1,126 334 4,765 3,353 9,578Additions – 196 4,310 2,784 7,290Disposals – (18) (9) – (27)Charge for the year (81) (92) (1,167) (1,779) (3,119)

Closing net book amount 1,045 420 7,899 4,358 13,722

As at 31 March 2014 and1 April 2014

Cost 1,608 943 12,903 13,614 29,068Accumulated depreciation (563) (523) (5,004) (9,256) (15,346)

Net book amount 1,045 420 7,899 4,358 13,722


– I-30 –

Land andbuildings

Furnitureand

equipmentSite

equipmentMotor


Year ended 31 March2015

Opening net book amount 1,045 420 7,899 4,358 13,722Additions – 84 410 1,349 1,843Disposals – (188) – (837) (1,025)Charge for the year (81) (66) (1,181) (1,379) (2,707)

Closing net book amount 964 250 7,128 3,491 11,833

As at 31 March 2015 and1 April 2015

Cost 1,608 678 13,078 12,088 27,452Accumulated depreciation (644) (428) (5,950) (8,597) (15,619)

Net book amount 964 250 7,128 3,491 11,833

Period ended 30November 2015

Opening net book amount 964 250 7,128 3,491 11,833Additions – 514 812 2,210 3,536Disposals – – (307) (11) (318)Charge for the period (53) (51) (735) (938) (1,777)

Closing net book amount 911 713 6,898 4,752 13,274

As at 30 November 2015Cost 1,608 1,182 12,771 14,077 29,638Accumulated depreciation (697) (469) (5,873) (9,325) (16,364)

Net book amount 911 713 6,898 4,752 13,274

As at 31 March 2014 and 2015 and 30 November 2015, the Group’s land and buildings were located inHong Kong, held under long term lease and were pledged to the bank as security of bank term loans andoverdrafts granted to the Group (Note 22).

As at 31 March 2014 and 2015 and 30 November 2015, the Group’s motor vehicles with net book amountof HK$4,103,000, HK$3,223,000 and HK$4,171,000 respectively were held under finance lease (Note 21).


– I-31 –

16. AMOUNTS DUE FROM/TO A DIRECTOR/DIRECTORS

The amounts are unsecured, interest free and have no fixed terms of repayment.

(a) Amount due from a director

Name of director

Maximumoutstanding

during theyear ended

31 March2014

As at 1April 2013

As at 31March 2014

HK$’000 HK$’000 HK$’000

Mr. Wong Wing Wah 173 23 –

Name of director

Maximumoutstanding

during theyear ended

31 March2015

As at 1April 2014

As at 31March 2015

HK$’000 HK$’000 HK$’000

Mr. Wong Wing Wah 523 – 523

Name of director

Maximumoutstanding

during theeight

monthsended 30

November2015

As at 1April 2015

As at 30November

2015HK$’000 HK$’000 HK$’000

Mr. Wong Wing Wah 733 523 –

(b) Amounts due to directors


NovemberName of directors 2014 2015 2015

HK$’000 HK$’000 HK$’000

Mr. Wong Che Kwo 6,027 2,689 6,589Mr. Wong Wing Wah 577 – 3,467

6,604 2,689 10,056


– I-32 –

17. AMOUNTS DUE FROM/TO CUSTOMERS FOR CONTRACT WORK


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Contract costs incurred plus recognised profits lessrecognised losses 649,003 822,298 403,420

Less: Progress billings (681,339) (852,804) (414,153)

(32,336) (30,506) (10,733)

Recognised and included in the combined statements offinancial position as:

– Amounts due from customers for contract work 7,555 9,474 17,593– Amounts due to customers for contract work (39,891) (39,980) (28,326)

(32,336) (30,506) (10,733)

All amounts due from/to customers for contract work are expected to be recovered/settled within one year.

18. TRADE AND OTHER RECEIVABLES


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Trade receivables 15,583 33,832 29,786Retention monies receivables 17,957 19,217 23,815Other receivables, deposits and prepayments 1,736 1,166 719

35,276 54,215 54,320

The ageing analysis of trade receivables based on invoice date is as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

0 – 30 days 7,511 14,383 25,82531 – 60 days 7,833 19,449 3,02461 – 90 days 154 – 66Over 90 days 85 – 871

15,583 33,832 29,786

The Group usually grants customers a credit period of 45 days.

At each reporting date, the Group reviewed trade receivables for evidence of impairment on both anindividual and collective basis. Based on this assessment, no impairment has been recognised during the TrackRecord Period and as at 31 March 2014 and 2015 and 30 November 2015.


– I-33 –

The Group did not hold any collateral as security or other credit enhancements over the trade receivables.

The ageing analysis of trade receivables that were past due but not impaired is as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Neither past due nor impaired 14,136 30,318 28,849Less than 30 days past due 1,208 3,514 6631 – 60 days past due 154 – 69261 – 90 days past due 33 – 179Over 90 days past due 52 – –

15,583 33,832 29,786

Trade receivables which were neither past due nor impaired related to a range of customers for whom therewas no recent history of default.

Trade receivables which were past due but not impaired related to a number of independent customers thathad a good track record of credit with the Group. Based on past credit history, management believe that noprovision for impairment is necessary in respect of these balances as there has not been a significant change incredit quality and the balances are still considered to be fully recoverable.

As at 31 March 2014 and 2015 and 30 November 2015, the retentions held by customers for contract worksincluded in retention monies receivables under current assets of the Group was HK$17,957,000, HK$19,217,000and HK$23,815,000, of which HK$11,056,000, HK$11,757,000 and HK$18,482,000 are expected to be recoveredafter more than one year respectively.

19. CASH AND CASH EQUIVALENTS


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Cash and bank balances presented in the combinedstatements of financial position 3,419 5,900 7,977

Less: bank overdrafts (Note 22) – (5,482) (168)

Cash and cash equivalents presented in the combinedstatements of cash flows 3,419 418 7,809

Cash in banks earns interest at floating rates based on daily bank deposit rates.


– I-34 –

20. TRADE AND OTHER PAYABLES


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Trade payables 17,489 10,114 17,416Retention monies payables 2,045 3,278 3,647Accruals and other payables 4,407 6,325 6,373

23,941 19,717 27,436

The ageing analysis of trade payables based on invoice date is as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

0 – 30 days 10,411 6,894 17,18331 – 60 days 5,556 2,646 3161 – 90 days 466 69 202Over 90 days 1,056 505 –

17,489 10,114 17,416

The Group is granted by its suppliers a credit period ranging from 0 to 30 days.

As at 31 March 2014 and 2015 and 30 November 2015, the retentions held by the Group for contract worksincluded in retention monies payables under current liabilities of the Group was HK$2,045,000, HK$3,278,000and HK$3,647,000, of which HK$425,000, HK$1,719,000 and HK$2,217,000 are expected to be payable aftermore than one year respectively.


– I-35 –

21. OBLIGATIONS UNDER FINANCE LEASES

As at 31 March 2014 and 2015 and 30 November 2015, the Group had obligations under finance leasesrepayable as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Total minimum lease paymentsWithin one year 1,619 1,314 1,677After one year but within two years 1,254 1,001 1,398After two years but within five years 1,149 1,008 1,121

4,022 3,323 4,196Future finance charges on finance lease (270) (212) (248)

Present value of finance lease liabilities 3,752 3,111 3,948

Present value of minimum lease paymentsWithin one year 1,474 1,199 1,537After one year but within two years 1,177 937 1,319After two years but within five years 1,101 975 1,092

3,752 3,111 3,948

As at 31 March 2014 and 2015, the finance lease liabilities were secured by the personal guarantee givenby the Controlling Shareholders. As at 30 November 2015, the finance lease liabilities were secured by thepersonal guarantee given by one of the Controlling Shareholders.

22. BANK LOANS AND OVERDRAFTS

As at 31 March 2014 and 2015 and 30 November 2015, the secured bank loans and overdrafts wererepayable as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Within 1 year or on demand 10,536 18,940 5,688


– I-36 –

As at 31 March 2014 and 2015 and 30 November 2015, the bank loans and overdraft were secured asfollow:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Secured term loans (Note i) 2,984 6,404 5,520Secured bank overdrafts (Note i) – 5,482 168Secured mortgage loan (Note ii) 7,552 7,054 –

10,536 18,940 5,688

Notes:

(i) As at 31 March 2014 and 2015 and 30 November 2015, the bank term loans bear interest on floatingbasis. The effective interest rates of bank term loans were 3.21%, 3.25% to 4.00%, and 3.23% to3.99% per annum respectively.

As at 31 March 2014 and 2015 and 30 November 2015, the bank overdraft bears interest on floatingbasis. The effective interest rates of bank overdrafts were 5.5%, 5.5% and 5.5% per annumrespectively.

The bank term loans and overdrafts were secured by the land and buildings of the Group, a propertyowned by the Controlling Shareholders and their unlimited personal guarantees.

In addition, as at 31 March 2014 and 2015 and 30 November 2015, bank term loans of HK$Nil,HK$4,000,000 and HK$3,512,000 were secured by the guarantee given by the Hong Kong MortgageCorporation Limited and unlimited personal guarantees given by the Controlling Shareholders.Pursuant to terms as set out in the loan agreement, Luen Hing, as the borrower, should not have itsshares listed on the Main Board or the GEM of The Stock Exchange or any similar exchanges in oroutside Hong Kong.

(ii) As at 31 March 2014 and 2015, the mortgage loan bears interest on floating basis. The effectiveinterest rate was 0.91% and 0.92% per annum respectively and was secured by the investmentproperty of the Group.

As at 31 March 2014 and 2015 and 30 November 2015, the bank term loans and mortgage loan wereclassified as current liabilities because the corresponding loan agreements include a clause that the banks have theoverriding right to call the loan at any time regardless any other terms and maturity as set out in the loanagreements.

23. DEFERRED TAXATION

Deferred taxation is calculated in full on temporary differences under the liability method using taxationrate of 16.5% in Hong Kong.


– I-37 –

The movements in deferred tax assets/(liabilities) during the Track Record Period are as follows:

Year ended 31 March

Eightmonths

ended30

November2014 2015 2015

HK$’000 HK$’000 HK$’000

At the beginning of the year/period 5,236 3,280 (344)Charged to profit or loss (1,956) (3,624) (1,063)

At the end of the year/period 3,280 (344) (1,407)

The components of deferred tax assets/(liabilities) recognised in the combined statements of financialposition and the movements during the Track Record Period are as follows:

Acceleratedtax

depreciation Tax losses TotalHK$’000 HK$’000 HK$’000

As at 1 April 2013 (818) 6,054 5,236Charged to profit or loss (Note 9) (413) (1,543) (1,956)

As at 31 March 2014 and 1 April 2014 (1,231) 4,511 3,280Credited/(Charged) to profit or loss (Note 9) 144 (3,768) (3,624)

As at 31 March 2015 and 1 April 2015 (1,087) 743 (344)Charged to profit or loss (Note 9) (320) (743) (1,063)

As at 30 November 2015 (1,407) – (1,407)

Represented by:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Deferred tax assets 3,280 – –Deferred tax liabilities – (344) (1,407)

3,280 (344) (1,407)

Deferred tax assets are recognised for tax losses carried forward to the extent that realisation of the relatedtax benefit through the future taxable profits is probable.

As at 31 March 2014 and 2015 and 30 November 2015, the Group did not have any material unrecogniseddeferred tax assets/liabilities.


– I-38 –

24. SHARE CAPITAL

The CompanyNo. of shares HK$’000

Authorised:38,000,000 ordinary shares of HK$0.01 each 38,000,000 380

Issued and fully paid:1 ordinary share of HK$0.01, upon incorporation and as at 30 November

2015 1 –

The Company was incorporated on 16 October 2015 with authorised share capital of HK$380,000 dividedinto 38,000,000 shares of HK$0.01 each and has not carried on any business since the date of incorporationexcept for the Reorganisation. On the date of incorporation, one nil-paid share was allotted and issued.

On 22 February 2016, 9,999 shares were allotted and issued at par.

On 24 March 2016, pursuant to the written resolution of the shareholder, the authorised share capital of theCompany was increased from HK$380,000 to HK$20,000,000 by creation of an additional of 1,962,000,000 sharesof HK$0.01 each, each ranking pari passu with the shares then in issue in all respects.

There was no authorised and issued capital as at 31 March 2014 and 2015 since the Company has not yetbeen incorporated.

25. RESERVES

The Group

The amounts of the Group’s reserves and the movements during the Track Record Period arepresented in the combined statements of changes in equity of the Financial Information.

The capital reserve of the Group as at 31 March 2014 and 2015 and 30 November 2015 representsthe share capital of entities comprising the Group throughout the Track Record Period.

The Company

The Company has not commenced any business or operation since its incorporation and thereforedoes not have any profit or loss or movements in reserves since its incorporation and up to 30 November2015.

26. MAJOR NON-CASH TRANSACTIONS

During the years ended 31 March 2014 and 2015 and the eight months ended 30 November 2015, additionsto property, plant and equipment of approximately HK$2,665,000, HK$1,333,000 and HK$1,893,000 respectivelywere financed by finance lease arrangements.


– I-39 –

27. OPERATING LEASE COMMITMENTS

As lessee

The total future minimum lease payments under non-cancellable operating leases in respect ofwarehouse and office equipment were as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Within one year 160 98 159In the second to fifth years 29 35 26

189 133 185

As lessor

As at 31 March 2014 and 2015 and 30 November 2015, the Group’s future aggregate minimum leasereceipts under non-cancellable operating lease in respect of its investment property were as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Within one year 23 50 –

28. CAPITAL COMMITMENTS

As at 31 March 2014 and 2015 and 30 November 2015, capital commitments of the Group were as follows:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Contracted but not provided for– Acquisition of property, plant and equipment – – 490


– I-40 –

29. RELATED PARTY TRANSACTIONS

(a) Material related party transactions

Other than as disclosed in Note 16, Note 21 and Note 22 above, the Group entered into the followingmaterial related party transactions during the Track Record Period:

Name of relatedparties Nature


30 November2014 2015 2014 2015


Hop Fung CraneCompany (Note i)

Equipment rentalexpenses

– 772 409 633

The ControllingShareholders (Note ii)

Licence to useoffice premise

– – – –

Notes

(i) Hop Fung Crane Company is an unincorporated company owned by the spouse of one of theControlling Shareholders.

In the opinion of the directors, these transactions were entered into in the normal course ofbusiness at mutually agreed prices and terms.

(ii) During the Track Record Period, the Group was licensed to use an office premise owned bythe Controlling Shareholders without any consideration.

(iii) As at 31 March 2014 and 2015 and 30 November 2015, certain contracts for the performanceworks of provision of civil engineering works amounted to HK$62,635,000, HK$232,551,000and HK$232,551,000 respectively were secured by the personal guarantees given by theControlling Shareholders.

(b) Key management personnel compensation

The emoluments of the key management personnel during the Track Record Period are as follows:


30 November2014 2015 2014 2015


Short-term employee benefits 4,938 4,971 2,390 2,886Post-employment benefits 90 105 69 77

5,028 5,076 2,459 2,963

30. CONTINGENT LIABILITIES

The Group is the defendant of certain outstanding litigation cases in respect of alleged violations of certainsafety and health regulations and accidents and the court has not yet made the judgement up to the date of thisreport. After consulting the Group’s lawyer, the directors are of the opinion that it is not possible to determine theoutcome and hence no provision has been made to the Financial Information.


– I-41 –

31. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENT

(a) Categories of financial instruments


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Financial assetsLoans and receivablesTrade and other receivables 33,777 53,195 53,770Amount due from a director – 523 –Cash and bank balances 3,419 5,900 7,977

37,196 59,618 61,747

Financial liabilitiesFinancial liabilities at amortised costTrade and other payables 23,941 19,717 27,436Amounts due to directors 6,604 2,689 10,056Bank loans and overdrafts 10,536 18,940 5,688Obligations under finance leases 3,752 3,111 3,948

44,833 44,457 47,128

(b) Financial risk factors

The Group’s activities exposed it to a variety of financial risks including interest rate risk, credit riskand liquidity risk.

The Group’s overall risk management programme focuses on the unpredictability of financial marketsand seeks to minimise potential adverse effects on the Group’s financial performance.

(i) Interest rate risk

Interest rate risk relates to the risk that the fair value or cash flows of a financial instrumentwill fluctuate because of changes in market interest rates. The Group’s interest rate risk arisesprimarily from its bank loans and overdrafts. As at 31 March 2014 and 2015 and 30 November 2015,the Group’s bank loans and overdrafts were committed on floating rate basis and were denominatedin Hong Kong Dollars.

As at 31 March 2014 and 2015 and 30 November 2015, it is estimated that if there was adecrease of 50 basis points in interest rate, with all other variables remaining constant, the Group’scombined equity and net profit would have increased by approximately HK$44,000, HK$79,000 andHK$24,000 respectively. The same percentage increase in interest rate would have the samemagnitude on the Group’s combined equity and net profit but of opposite effect. The 50 basis pointsrepresents the reasonable possible change in interest rates over the periods until the next reportingdate.

The Group currently does not have an interest rate hedging policy. However, the managementmonitors the Group’s interest rate exposure and will consider hedging significant interest exposureshould the need arise.


– I-42 –

(ii) Credit risk

Credit risk arises mainly from trade and other receivables, amount due from a director andcash and bank balances. The Group’s maximum exposure to credit risk in the event of thecounterparties’ failure to perform their obligations as at the reporting dates in relation to each classof recognised financial assets is the carrying amount of those assets as stated in the combinedstatements of financial position.

The credit risk of cash and bank balances is limited because the counterparties are banks withsound credit ratings assigned by international credit-rating agencies.

In respect of trade and other receivables, individual credit evaluations are performed on allcustomers and counterparties. These evaluations focus on the counterparty’s financial position, pasthistory of making payments and take into account information specific to the counterparty as well aspertaining to the economic environment in which the counterparty operates. Monitoring procedureshave been implemented to ensure that follow-up action is taken to recover overdue debts. In addition,the Group reviews the recoverable amount of each individual trade and other receivable balance atthe end of each reporting period to ensure adequate impairment losses are made for irrecoverableamounts.

As at 31 March 2014 and 2015 and 30 November 2015, trade and retention monies receivablesfrom an individual customer accounted for 25%, 33% and 39% of the total trade and retentionmonies receivables respectively.

(iii) Liquidity risk

The Group’s policy is to regularly monitor current and expected liquidity requirements and itscompliance with debt covenants, to ensure that it maintains sufficient reserves of cash and adequatecommitted lines of funding from banks and other financial institutions to meet their liquidityrequirements in the short and long term. Management believes there is no significant liquidity risk asthe Group has sufficient committed facilities to fund their operations.

The following table details the remaining contractual maturities of financial liabilities at thereporting dates, which are based on contractual undiscounted cash flows (including interest paymentscomputed using contractual rates or, if floating, based on rates current at the reporting dates) and theearliest date the Group can be required to pay:

Ondemand orwithin one

year

Betweenone and

two years

Betweentwo and

five years TotalCarrying

amountHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March2014

Trade and otherpayables 23,941 – – 23,941 23,941

Amounts due todirectors 6,604 – – 6,604 6,604

Term loans andmortgage loan 10,536 – – 10,536 10,536

Obligations underfinance leases 1,619 1,254 1,149 4,022 3,752

42,700 1,254 1,149 45,103 44,833


– I-43 –


year

Betweenone and

two years

Betweentwo and

five years TotalCarrying

amountHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March2015


Amount due to adirector 2,689 – – 2,689 2,689

Bank overdrafts 5,482 – – 5,482 5,482Term loans and

mortgage loan 13,458 – – 13,458 13,458Obligations under

finance leases 1,314 1,001 1,008 3,323 3,111

42,660 1,001 1,008 44,669 44,457

As at 30 November2015


Amounts due todirectors 10,056 – – 10,056 10,056

Bank overdrafts 168 – – 168 168Term loans 5,520 – – 5,520 5,520Obligations under

finance leases 1,677 1,398 1,121 4,196 3,948

44,857 1,398 1,121 47,376 47,128

Bank loans with a repayment on demand clause are included in the “On demand or within oneyear” time band in the above maturity analysis.

As at 31 March 2014 and 2015 and 30 November 2015 the aggregate undiscounted principaland interest of these bank loans payable in accordance with the scheduled payment terms were asfollows:


year

Betweenone and

two years

Betweentwo and

five yearsOver five

years TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2014Term loans and mortgage loan 1,233 1,235 3,594 5,245 11,307

As at 31 March 2015Term loans and mortgage loan 2,119 2,119 5,578 4,678 14,494

As at 30 November 2015Term loans 1,552 1,552 2,843 – 5,947


– I-44 –

As at 31 March 2014 and 2015 and 30 November 2015, taking into account of the Group’sfinancial position, the directors do not believe that it is probable that the banks will exercise theirdiscretionary rights to demand immediate repayment. Included in the above balances, the directorsbelieve that such bank loans will be repaid in accordance with the scheduled repayment dates as setout in the loan agreements.

(c) Fair value measurement

The carrying amounts of the Group’s financial assets and liabilities are not materially different fromtheir fair values as at 31 March 2014 and 2015 and 30 November 2015.

32. CAPITAL MANAGEMENT

The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concernand to maintain optimal capital structure in order to minimise the costs of capital, support its business andmaximise shareholders’ value.

The Group actively and regularly reviews its capital structure and makes adjustments in light of changes ineconomic conditions. The Group monitors its capital structure on the basis of the debt to equity ratio. For thispurpose, debt is defined as borrowings net of cash and bank balance. In order to maintain or adjust the ratio, theGroup may adjust the amount of dividends paid to shareholders, share buyback, issue new shares and raise newdebts.

The debt to equity ratio at each reporting date was:


November2014 2015 2015

HK$’000 HK$’000 HK$’000

Bank loans and overdrafts 10,536 18,940 5,688Obligation under finance lease 3,752 3,111 3,948

Total borrowings 14,288 22,051 9,636Less: cash and bank balances (3,419) (5,900) (7,977)

Net debts 10,869 16,151 1,659

(Capital deficiency)/Total equity (9,775) 8,304 14,696

Debt to equity ratio N/A 194% 11%


– I-45 –

III SUBSEQUENT EVENTS

The following significant events took place subsequent to 30 November 2015:

(a) Group reorganisation

The companies comprising the Group underwent and completed theReorganisation in preparation for the listing of the Company’s shares on the StockExchange. Further details of the Reorganisation are set out in the section headed“History and Development” in the Prospectus. Upon completion of the Reorganisationon 22 February 2016, the Company became the holding company of the Group.

(b) Settlements of the amounts due to directors

On 21 March 2016, Luen Hing allotted and issued 5,480,000 new shares at asubscription price of HK$1 each to Super Pioneer by the way of capitalisation ofamounts due to the directors.

On 21 March 2016, Hop Fung allotted and issued 4,920,000 new shares at asubscription price of HK$1 each to Super Pioneer by the way of capitalisation ofamounts due to the directors.

Upon completion of the share issuance, the remaining outstanding balances withdirectors will be settled by cash.

(c) Taking out of surety bonds

Subsequent to the reporting date, the Group has accepted a quotation to take outsurety bonds before Listing from an authorised insurer, which is a wholly-ownedsubsidiary of a Hong Kong licensed bank, in favour of a customer, who declined theGroup’s request to release personal guarantees given by the Controlling Shareholders,in the value of the contract sum or predetermined percentage of the contract sum, asthe case may be, for due performance of the Group’s obligations under the contracts.


– I-46 –

IV SUBSEQUENT FINANCIAL STATEMENTS AND DIVIDENDS

No audited financial statements have been prepared by the Company, or its subsidiariesin respect of any period subsequent to 30 November 2015. No dividend has been declared ormade by the Company or any of the companies now comprising the Group in respect of anyperiod subsequent to 30 November 2015.

Yours faithfully,

Grant Thornton Hong Kong LimitedCertified Public AccountantsLevel 1228 Hennessy RoadWanchaiHong Kong

Shaw Chi KitPractising Certificate No.: P04834


– I-47 –

The information set forth in this appendix does not form part of the Accountants’Report on the financial information of the Group for the two years ended 31 March 2015and the eight months ended 30 November 2015 prepared by Grant Thornton Hong KongLimited, Certified Public Accountants, Hong Kong, the reporting accountants of ourCompany, as set forth in Appendix I of this prospectus (the “Accountants’ Report”), and isincluded herein for illustrative purposes only. The unaudited pro forma financial informationshould be read in conjunction with the section headed “Financial Information” in thisprospectus and the Accountants’ Report set forth in Appendix I of this prospectus.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED COMBINED NETTANGIBLE ASSETS

The following is an illustrative unaudited pro forma statement of adjusted combined nettangible assets of the Group which has been prepared in accordance with paragraph 31 ofChapter 7 of the GEM Listing Rules for the purpose of illustrating the effect of the Placingon the audited combined net tangible assets of the Group attributable to equity holders ofthe Company as at 30 November 2015, as if the Placing had taken place on 30 November2015.

The unaudited pro forma statement of adjusted combined net tangible assets of theGroup has been prepared for illustrative purposes only and because of its hypotheticalnature, it may not give a true picture of the combined net tangible assets of the Groupattributable to equity holders of the Company had the Placing been completed as at 30November 2015 or at any future dates. It is prepared based on the audited combined nettangible assets of the Group attributable to equity holders of the Company as at 30November 2015 as set out in the Accountants’ Report in Appendix I to this Prospectus, andadjusted as described below.

Auditedcombined net

tangible assetsof the Group

attributable toequity holders

of theCompany as

at 30November

2015

Capitalisationof amounts

due todirectors by

way ofissuance of

shares byLuen Hing

and Hop Fung

Estimated netproceeds from

the Placing

Unauditedpro forma




of theCompany

Unauditedpro forma




of theCompany per

ShareHK$’000 HK$’000 HK$’000 HK$’000 HK$(Note 1) (Note 3) (Note 4) (Note 5)

Based on the PlacingPrice of HK$0.26 perShare 14,696 10,400 43,562 68,658 0.06

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

– II-1 –

Notes:

(1) The unadjusted combined net tangible assets attributable to the equity holders of the Company as at30 November 2015 is extracted from the Accountants’ Report in Appendix I to this prospectus, whichis based on the audited combined net assets of the Group attributable to the equity holders of theCompany of approximately HK$14,696,000.

(2) The Group’s land and buildings was revalued at 31 January 2016 by Ascent Partners ValuationService Limited, an independent property valuer, and relevant property valuation report is set out inAppendix III – Property Valuation. The net surplus over their carrying value amounting toHK$3,222,000 has not been included in the combined net tangible assets of the Group attributable toequity holders of the Company as at 30 November 2015. The above adjustment does not take intoaccount the above valuation surplus. Had the land and buildings been stated as such valuation, anadditional depreciation of HK$289,000 per annum in respect of revaluation surplus, before incometaxes, would be charged against the combined statement of profit or loss and other comprehensiveincome.

(3) The increase in combined net tangible assets of the Group attributable to equity holders of theCompany upon completion of share issuance of Luen Hing and Hop Fung are based on (i) 5,480,000new shares of Luen Hing issued at a subscription price of HK$1 per share to Super Pioneer; and (ii)4,920,000 new shares of Hop Fung issued at a subscription price of HK$1 per share to Super Pioneeron 21 March 2016 by the way of capitalisation of amounts due to the directors. Any remainingbalances will be settled by cash.

(4) The estimated net proceeds from the Placing are based on 208,000,000 Shares to be offered by theCompany at the Placing Price of HK$0.26 per Share, after deduction of relevant estimatedunderwriting commissions and fees and other related fees expected to be incurred by the Groupsubsequent to 30 November 2015.

(5) The unaudited pro forma adjusted net tangible assets per Share are determined after the adjustmentsas described in Note 3 above and on the basis that 1,248,000,000 Shares are issued and outstandingas set out in the section headed “Share Capital” of this prospectus (assuming that the Placing Sharesand the Capitalisation Issue had been issued on 30 November 2015).

(6) The unaudited pro forma combined financial information presented above does not take into accountof any trading or other transactions subsequent to the date of the financial statements included in theunaudited pro forma financial information (i.e. 30 November 2015).


– II-2 –

B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ONTHE COMPILATION OF UNAUDITED PRO FORMA FINANCIALINFORMATION

The following is the text of the assurance report received from, Grant Thornton HongKong Limited, Certified Public Accountants, Hong Kong, the reporting accountants of theCompany, in respect of the Group’s unaudited pro forma financial information prepared forthe purpose of incorporation in this prospectus.

致同

31 March 2016

TO THE DIRECTORS OF LUEN WONG GROUP HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of proforma financial information of Luen Wong Group Holdings Limited (the “Company”) and itssubsidiaries (collectively referred to as the “Group”) by the directors of the Company (the“Directors”) for illustrative purposes only. The unaudited pro forma financial informationconsists of the unaudited pro forma statement of adjusted combined net tangible assets as at30 November 2015 and related notes as set out on pages II-1 to II-2 of Appendix II to theprospectus issued by the Company dated 31 March 2016 (the “Prospectus”). The applicablecriteria on the basis of which the Directors have compiled the unaudited pro forma financialinformation are described on pages II-1 to II-2 of Appendix II to the Prospectus.

The unaudited pro forma financial information has been compiled by the Directors toillustrate the impact of the proposed listing of the Company’s shares on the GrowthEnterprise Market of The Stock Exchange of Hong Kong Limited by way of placing on theGroup’s financial position as at 30 November 2015 as if the event had taken place at 30November 2015. As part of this process, information about the Group’s financial positionhas been extracted by the Directors from the Group’s financial information for the two yearsended 31 March 2015 and the eight months ended 30 November 2015, on which anaccountants’ report set out in Appendix I to the Prospectus has been published.

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the unaudited pro forma financialinformation in accordance with paragraph 7.31 of the Rules Governing the Listing ofSecurities on Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the“GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of ProForma Financial Information for Inclusion in Investment Circulars” (“AG7”) issued by theHong Kong Institute of Certified Public Accountants (“HKICPA”).


– II-3 –

Our Independence and Quality Control

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

The firm applies Hong Kong Standard on Quality Control 1 and accordingly maintainsa comprehensive system of quality control including documented policies and proceduresregarding compliance with ethical requirements, professional standards and applicable legaland regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 7.31(7) of theGEM Listing Rules, on the unaudited pro forma financial information and to report ouropinion to you. We do not accept any responsibility for any reports previously given by uson any financial information used in the compilation of the unaudited pro forma financialinformation beyond that owed to those to whom those reports were addressed by us at thedates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on AssuranceEngagements 3420 “Assurance Engagements to Report on the Compilation of Pro FormaFinancial Information Included in a Prospectus” issued by the HKICPA. This standardrequires that the reporting accountant plan and perform procedures to obtain reasonableassurance about whether the Directors have compiled the unaudited pro forma financialinformation in accordance with paragraph 7.31 of the GEM Listing Rules and with referenceto AG 7 issued by the HKICPA.

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

The purpose of unaudited pro forma financial information included in the Prospectus issolely to illustrate the impact of a significant event or transaction on unadjusted financialinformation of the Group as if the event had occurred or the transaction had been undertakenat an earlier date selected for purposes of the illustration. Accordingly, we do not provideany assurance that the actual outcome of the event or transaction at 30 November 2015would have been as presented.


– II-4 –

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

� The related unaudited pro forma adjustments give appropriate effect to thosecriteria; and

� The unaudited pro forma financial information reflects the proper application ofthose adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regardto the reporting accountants’ understanding of the nature of the Group, the event ortransaction in respect of which the unaudited pro forma financial information has beencompiled, and other relevant engagement circumstances.

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

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

Opinion

In our opinion:

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

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

(c) the adjustments are appropriate for the purposes of the unaudited pro formafinancial information as disclosed pursuant to paragraph 7.31(1) of the GEMListing Rules.

Grant Thornton Hong Kong LimitedCertified Public AccountantsLevel 1228 Hennessy RoadWanchaiHong Kong

Shaw Chi KitPractising Certificate No.: P04834


– II-5 –

The following is the text of a letter and a valuation certificate prepared for the purposeof incorporation in this prospectus received from Ascent Partners Valuation Service Limited,an independent valuer, in connection with its valuation of the property interests of theGroup.

Suite 2102, Hong Kong Trade Centre161-167 Des Voeux Road Central

Hong Kongwww.ascent-partners.com

Tel: (852) 3679 3890Fax: (852) 3579 0884

31 March 2016

Luen Wong Group Holdings LimitedUnit 05 on 15th FloorNorth Wing, Delta HouseNo. 3 On Yiu StreetSha Tin, New Territories, Hong Kong

Dear Sir/Madam,

INSTRUCTIONS

In accordance with the instructions for us to value the property in which Luen WongGroup Holdings Limited (the “Company”) and its subsidiaries (hereinafter together referredto as the “Group”) have interests in Hong Kong, we confirm that we have carried outproperty inspections, made relevant enquiries and obtained such further information as weconsider necessary for the purpose of providing you with our opinion of the market value ofthe property interests as at 31 January 2016 (referred to as the “Valuation Date”) for thepurpose of incorporation in the prospectus of the Company dated 31 March 2016.

This letter which forms part of our valuation report explains the basis and methodologyof valuation, clarifying assumptions, valuation considerations, title investigation and limitingconditions of this valuation.

BASIS OF VALUATION

Our valuation of the property interests represents the market value which we woulddefine to mean “the estimated amount for which an asset or liability should exchange on thevaluation date between a willing buyer and a willing seller in an arm’s – length transactionafter proper marketing and where the parties had each acted knowledgeably, prudently andwithout compulsion”.

Market Value is understood as the value of an asset or liability estimated withoutregard to costs of sale or purchase (or transaction) and without offset for any associatedtaxes or potential taxes.

APPENDIX III PROPERTY VALUATION

– III-1 –

VALUATION METHODOLOGY

We have valued the property interests which is held and occupied by the Group inHong Kong on market basis and the direct comparison method is adopted where comparisonbased on prices realised on actual sales price of comparable property is made. Comparableproperties of similar size, character, and location are analysed and carefully weighted againstall the respective advantages and disadvantages of each property in order to arrive at a faircomparison of values.

TITLE INVESTIGATION

We have carried out land searches at the Land Registry for the property located inHong Kong. We have been, in some instances, provided with the extracts of the documentsrelating to the property. However, we have not verified ownership of the property to verifythe existence of any amendments which do not appear on the copies handed to us. Alldocuments have been used for reference only.

VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the seller sells the propertyinterests on the open market in their existing states without the benefit of a deferred termcontracts, leasebacks, joint ventures, management agreements or any similar arrangements,which could serve to affect the values of the property interests.

Unless stated as otherwise, we have assumed that the property have been constructed,occupied and used in full compliance with, and without contravention of all laws, exceptonly where otherwise stated. We have further assumed that, for any use of the property uponwhich this report is based, all required licenses, permit, certificate and authorisations havebeen obtained.

We have assumed that the owners of the property have free and uninterrupted rights touse and dispose of the property for the whole of the unexpired term of Land Grant.

Other special assumptions of the property interests, if any, have been stated out in thefootnotes of the valuation certificate attached herewith.

SOURCE OF INFORMATION

We have relied to a considerable extent on information provided by the Group andhave accepted advice given to us on such matters, in particular, but not limited to, the salesrecords, tenure, planning approvals, statutory notices, easements, particulars of occupancy,site and floor areas and all other relevant matters in the identification of the propertyinterests.


– III-2 –

We have had no reason to doubt the truth and accuracy of the information provided tous by the Group. We have also been advised by the Group that no material factors have beenomitted from the information supplied. We consider that we have been provided withsufficient information to reach an informed view, and we have no reason to suspect that anymaterial information has been withheld.

VALUATION CONSIDERATIONS

In valuing the property interests, we have complied with all the requirements containedin Chapter 8 of the Rules Governing the Listing of Securities on the Growth EnterpriseMarket issued by The Stock Exchange of Hong Kong Limited and the HKIS ValuationStandards (2012 Edition) published by The Hong Kong Institute of Surveyors.

LIMITING CONDITIONS

We have inspected the exterior, and wherever possible, the interior of the property butno structural survey had been made. In the course of our inspection, we did not note anyserious defects. We are not, however, able to report that the property is free from rot,infestation or any other structural defects. Further, no test has been carried out on any of thebuilding services. All dimensions, measurements and areas are only approximates. We havenot been able to carry out detailed on-site measurements to verify the site and floor areas ofthe property and we have assumed that the areas shown on the copies of documents handedto us are correct.

We have not carried out any soil investigations to determine the suitability of the soilconditions and the services etc. for any future development. Our valuations are prepared onthe assumption that these aspects are satisfactory and that no extraordinary expenses ordelays will be incurred during the construction period. We do not make any allowance forcontamination or pollution of the land, if any, which may have been caused by past usage.

No allowance has been made in our valuation for any charges, mortgages or amountowing on any property interests nor for any expense or taxation which may be incurred ineffecting a sale. We have assumed that the property is free from encumbrances, restrictionsand outgoings of an onerous nature which could affect their values.

Liability in connection with this valuation report is limited to the client to whom thisreport is addressed and for the purpose for which it is carried out only. We will accept noliability to any other parties or any other purposes.


– III-3 –

REMARKS

Unless otherwise stated, all monetary amounts stated in this report are in Hong KongDollars (HKD).

Our valuation certificate in respect of the property interests is herewith attached.

Yours faithfully,For and on behalf of

Ascent Partners Valuation Service LimitedStephen Y. W. Yeung

MFin BSc(Hons) Land Adm. MHKIS MCIREA RPS(GP)

Principal

Mr. Stephen Y. W. Yeung is a Registered Professional Surveyor (General Practice Division) and aProfessional Member of The Hong Kong Institute of Surveyors with over 10 years’ experience in valuation ofproperties in HKSAR and mainland China. Mr. Yeung is also a valuer on the List of Property Valuers forUndertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations inConnection with Takeovers and Mergers published by HKIS.


– III-4 –

VALUATION CERTIFICATE

Property interests held and occupied by the Group in Hong Kong

Property Description and TenureParticular ofOccupancy

Market value inexisting state as at

31 January 2016

Workshop 16 on 13/F,New Commerce Centre,No. 19 On Sum Street,Sha Tin, New Territories,Hong Kong

9/3100th equal andundivided shares of and inSha Tin Town Lot No.389

The property comprises anindustrial unit on 13th Floor ofan 18-storey industrial building(with 4th and 14th Floorsomitted) completed in 1994.

As shown on and scaled offfrom the building plan, thesaleable area of the property isabout 660 sq.ft.

The lot is held under NewGrant No. 12370 for a termcommencing from 18 September1991 and expiring on 30 June2047.

The government rent payablefor Sha Tin Town Lot No. 389is at 3% of the rateable value ofthe time being per annum.

The property is occupiedby the Group for storagepurpose.

HKD4,120,000

(Hong Kong DollarFour Million OneHundred Twenty

Thousand)

100% interestAttributable to the

Group: HKD4,120,000

Notes:

(1) The registered owner of the property is Luen Hing Construction & Eng. Limited vide Memorial No.07062801080207 dated 5 June 2007.

(2) The property is subject to encumbrances as follows:

(i) An Occupation Permit No. NT 84/94 vide Memorial No. ST772958 dated 13 July 1994;

(ii) A Letter of Compliance vide Memorial No. ST783198 dated 29 September 1994;

(iii) A Deed of Mutual Covenant and Management Agreement vide Memorial No. ST783403 dated 10October 1994; and

(iv) A Mortgage in favour of Bank of China (Hong Kong) Limited vide Memorial No. 13041901280310dated 28 March 2013.

(3) The property lies within an area zoned as “Other Specified Uses (Business)” under Approved Sha TinOutline Zoning Plan No. S/ST/32 dated 11 December 2015.

(4) Our inspection was performed by Mr. Charles Choi, BSc (Hons) in February 2016.


– III-5 –

Set out below is a summary of certain provisions of the Memorandum and Articles ofAssociation of the Company and of certain aspects of Cayman Islands company law.

The Company was incorporated in the Cayman Islands as an exempted company withlimited liability on 16 October 2015 under the Companies Law. The Company’sconstitutional documents consist of its Amended and Restated Memorandum of Association(Memorandum) and the Amended and Restated Articles of Association (Articles).

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum provides, inter alia, that the liability of members of theCompany is limited and that the objects for which the Company is established areunrestricted (and therefore include acting as an investment company), and that theCompany shall have and be capable of exercising any and all of the powers at anytime or from time to time exercisable by a natural person or body corporatewhether as principal, agent, contractor or otherwise and since the Company is anexempted company that the Company will not trade in the Cayman Islands withany person, firm or corporation except in furtherance of the business of theCompany carried on outside the Cayman Islands.

(b) By special resolution the Company may alter the Memorandum with respect toany objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were adopted on 24 March 2016. The following is a summary of certainprovisions of the Articles:

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Share certificates

Every person whose name is entered as a member in the register of membersshall be entitled to receive a certificate for his shares. No shares shall be issued tobearer.

Every certificate for shares, warrants or debentures or representing any otherform of securities of the Company shall be issued under the seal of the Company,and shall be signed autographically by one Director and the Secretary, or by 2Directors, or by some other person(s) appointed by the Board for the purpose. Asregards any certificates for shares or debentures or other securities of theCompany, the Board may by resolution determine that such signatures or either ofthem shall be dispensed with or affixed by some method or system of mechanical

APPENDIX IV SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW

– IV-1 –

signature other than autographic or may be printed thereon as specified in suchresolution or that such certificates need not be signed by any person. Every sharecertificate issued shall specify the number and class of shares in respect of whichit is issued and the amount paid thereon and may otherwise be in such form asthe Board may from time to time prescribe. A share certificate shall relate to onlyone class of shares, and where the capital of the Company includes shares withdifferent voting rights, the designation of each class of shares, other than thosewhich carry the general right to vote at general meetings, must include the words“restricted voting” or “limited voting” or “non-voting” or some other appropriatedesignation which is commensurate with the rights attaching to the relevant classof shares. The Company shall not be bound to register more than 4 persons asjoint holders of any share.

(b) Directors

(i) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Law, the Memorandum andArticles and without prejudice to any special rights conferred on the holders ofany shares or class of shares, any share may be issued with or have attachedthereto such rights, or such restrictions, whether with regard to dividend, voting,return of capital, or otherwise, as the Company may by ordinary resolutiondetermine (or, in the absence of any such determination or so far as the same maynot make specific provision, as the Board may determine). Any share may beissued on terms that upon the happening of a specified event or upon a given dateand either at the option of the Company or the holder thereof, they are liable tobe redeemed.

The Board may issue warrants to subscribe for any class of shares or othersecurities of the Company on such terms as it may from time to time determine.

Where warrants are issued to bearer, no certificate thereof shall be issued toreplace one that has been lost unless the Board is satisfied beyond reasonabledoubt that the original certificate thereof has been destroyed and the Company hasreceived an indemnity in such form as the Board shall think fit with regard to theissue of any such replacement certificate.

Subject to the provisions of the Companies Law, the Articles and, whereapplicable, the rules of any stock exchange of the Relevant Territory (as definedin the Articles) and without prejudice to any special rights or restrictions for thetime being attached to any shares or any class of shares, all unissued shares in theCompany shall be at the disposal of the Board, which may offer, allot, grantoptions over or otherwise dispose of them to such persons, at such times, for suchconsideration and on such terms and conditions as it in its absolute discretionthinks fit, but so that no shares shall be issued at a discount.


– IV-2 –

Neither the Company nor the Board shall be obliged, when making orgranting any allotment of, offer of, option over or disposal of shares, to make, ormake available, any such allotment, offer, option or shares to members or otherswhose registered addresses are in any particular territory or territories where, inthe absence of a registration statement or other special formalities, this is or may,in the opinion of the Board, be unlawful or impracticable. However, no memberaffected as a result of the foregoing shall be, or be deemed to be, a separate classof members for any purpose whatsoever.

(ii) Power to dispose of the assets of the Company or any subsidiary

While there are no specific provisions in the Articles relating to the disposalof the assets of the Company or any of its subsidiaries, the Board may exerciseall powers and do all acts and things which may be exercised or done or approvedby the Company and which are not required by the Articles or the CompaniesLaw to be exercised or done by the Company in general meeting, but if suchpower or act is regulated by the Company in general meeting, such regulationshall not invalidate any prior act of the Board which would have been valid ifsuch regulation had not been made.

(iii) Compensation or payments for loss of office

Payments to any present Director or past Director of any sum by way ofcompensation for loss of office or as consideration for or in connection with hisretirement from office (not being a payment to which the Director is contractuallyor statutorily entitled) must be approved by the Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are provisions in the Articles prohibiting the making of loans toDirectors and their close associates which are equivalent to provisions of HongKong law prevailing at the time of adoption of the Articles.

The Company shall not directly or indirectly make a loan to a Director or adirector of any holding company of the Company or any of their respective closeassociates, enter into any guarantee or provide any security in connection with aloan made by any person to a Director or a director of any holding company ofthe Company or any of their respective close associates, or if any one or more ofthe Directors hold (jointly or severally or directly or indirectly) a controllinginterest in another company, make a loan to that other company or enter into anyguarantee or provide any security in connection with a loan made by any personto that other company.


– IV-3 –

(v) Disclosure of interest in contracts with the Company or with any of itssubsidiaries

With the exception of the office of auditor of the Company, a Director mayhold any other office or place of profit with the Company in conjunction with hisoffice of Director for such period and, upon such terms as the Board maydetermine, and may be paid such extra remuneration therefor (whether by way ofsalary, commission, participation in profits or otherwise) in addition to anyremuneration provided for by or pursuant to any other Articles. A Director may beor become a director or other officer or member of any other company in whichthe Company may be interested, and shall not be liable to account to theCompany or the members for any remuneration or other benefits received by himas a director, officer or member of such other company. The Board may alsocause the voting power conferred by the shares in any other company held orowned by the Company to be exercised in such manner in all respects as it thinksfit, including the exercise thereof in favour of any resolution appointing theDirectors or any of them to be directors or officers of such other company.

No Director or intended Director shall be disqualified by his office fromcontracting with the Company, either as vendor, purchaser or otherwise, nor shallany such contract or any other contract or arrangement in which any Director is inany way interested be liable to be avoided, nor shall any Director so contractingor being so interested be liable to account to the Company for any profit realisedby any such contract or arrangement by reason only of such Director holding thatoffice or the fiduciary relationship thereby established. A Director who is, in anyway, materially interested in a contract or arrangement or proposed contract orarrangement with the Company shall declare the nature of his interest at theearliest meeting of the Board at which he may practically do so.

There is no power to freeze or otherwise impair any of the rights attachingto any Share by reason that the person or persons who are interested directly orindirectly therein have failed to disclose their interests to the Company.

A Director shall not vote (nor shall he be counted in the quorum) on anyresolution of the Board in respect of any contract or arrangement or otherproposal in which he or his close associate(s) is/are materially interested, and ifhe shall do so his vote shall not be counted nor shall he be counted in the quorumfor that resolution, but this prohibition shall not apply to any of the followingmatters namely:

(aa) the giving of any security or indemnity to the Director or his closeassociate(s) in respect of money lent or obligations incurred orundertaken by him or any of them at the request of or for the benefit ofthe Company or any of its subsidiaries;


– IV-4 –

(bb) the giving of any security or indemnity to a third party in respect of adebt or obligation of the Company or any of its subsidiaries for whichthe Director or his close associate(s) has/have himself/themselvesassumed responsibility in whole or in part whether alone or jointlyunder a guarantee or indemnity or by the giving of security;

(cc) any proposal concerning an offer of shares or debentures or othersecurities of or by the Company or any other company which theCompany may promote or be interested in for subscription or purchase,where the Director or his close associate(s) is/are or is/are to beinterested as a participant in the underwriting or sub-underwriting ofthe offer;

(dd) any proposal or arrangement concerning the benefit of employees of theCompany or its subsidiaries including (i) the adoption, modification oroperation of any employees’ share scheme or any share incentive orshare option scheme under which the Director or his close associate(s)may benefit; or (ii) the adoption, modification or operation of a pensionfund or retirement, death or disability benefits scheme which relatesboth to Directors, his close associates and employees of the Companyor any of its subsidiaries and does not provide in respect of anyDirector or his close associate(s), as such any privilege or advantagenot generally accorded to the class of persons to which such scheme orfund relates; or

(ee) any contract or arrangement in which the Director or his closeassociate(s) is/are interested in the same manner as other holders ofshares or debentures or other securities of the Company by virtue onlyof his/their interest in shares or debentures or other securities of theCompany.

(vi) Remuneration

The Directors shall be entitled to receive, as ordinary remuneration for theirservices, such sums as shall from time to time be determined by the Board, or theCompany in general meeting, as the case may be, such sum (unless otherwisedirected by the resolution by which it is determined) to be divided amongst theDirectors in such proportions and in such manner as they may agree or failingagreement, equally, except that in such event any Director holding office for onlya portion of the period in respect of which the remuneration is payable shall onlyrank in such division in proportion to the time during such period for which hehas held office. The Directors shall also be entitled to be repaid all travelling,hotel and other expenses reasonably incurred by them in attending any Boardmeetings, committee meetings or general meetings or otherwise in connectionwith the discharge of their duties as Directors. Such remuneration shall be in


– IV-5 –

addition to any other remuneration to which a Director who holds any salariedemployment or office in the Company may be entitled by reason of suchemployment or office.

Any Director who, at the request of the Company performs services which inthe opinion of the Board go beyond the ordinary duties of a Director may be paidsuch special or extra remuneration (whether by way of salary, commission,participation in profits or otherwise) as the Board may determine and such extraremuneration shall be in addition to or in substitution for any ordinaryremuneration as a Director. An executive Director appointed to be a managingdirector, joint managing director, deputy managing director or other executiveofficer shall receive such remuneration (whether by way of salary, commission orparticipation in profits or otherwise or by all or any of those modes) and suchother benefits (including pension and/or gratuity and/or other benefits onretirement) and allowances as the Board may from time to time decide. Suchremuneration shall be in addition to his ordinary remuneration as a Director.

The Board may establish, either on its own or jointly in concurrence oragreement with other companies (being subsidiaries of the Company or withwhich the Company is associated in business), or may make contributions out ofthe Company’s monies to, such schemes or funds for providing pensions, sicknessor compassionate allowances, life assurance or other benefits for employees(which expression as used in this and the following paragraph shall include anyDirector or former Director who may hold or have held any executive office orany office of profit with the Company or any of its subsidiaries) and formeremployees of the Company and their dependents or any class or classes of suchpersons.

In addition, the Board may also pay, enter into agreements to pay or makegrants of revocable or irrevocable, whether or not subject to any terms orconditions, pensions or other benefits to employees and former employees andtheir dependents, or to any of such persons, including pensions or benefitsadditional to those, if any, to which such employees or former employees or theirdependents are or may become entitled under any such scheme or fund asmentioned above. Such pension or benefit may, if deemed desirable by the Board,be granted to an employee either before and in anticipation of, or upon or at anytime after, his actual retirement.

(vii) Appointment, retirement and removal

At any time or from time to time, the Board shall have the power to appointany person as a Director either to fill a casual vacancy on the Board or as anadditional Director to the existing Board subject to any maximum number ofDirectors, if any, as may be determined by the members in general meeting. AnyDirector appointed by the Board to fill a casual vacancy shall hold office onlyuntil the first general meeting of the Company after his appointment and besubject to re-election at such meeting. Any Director appointed by the Board as an


– IV-6 –

addition to the existing Board shall hold office only until the next followingannual general meeting of the Company and shall then be eligible for re-election.Any Director so appointed by the Board shall not be taken into account indetermining the Directors or the number of Directors who are to retire by rotationat an annual general meeting.

At each annual general meeting, one third of the Directors for the time beingwill retire from office by rotation. However, if the number of Directors is not amultiple of three, then the number nearest to but not less than one third shall bethe number of retiring Directors. The Directors who shall retire in each year willbe those who have been longest in the office since their last re-election orappointment but as between persons who become or were last re-elected Directorson the same day those to retire will (unless they otherwise agree amongthemselves) be determined by lot.

No person, other than a retiring Director, shall, unless recommended by theBoard for election, be eligible for election to the office of Director at any generalmeeting, unless notice in writing of the intention to propose that person forelection as a Director and notice in writing by that person of his willingness to beelected shall have been lodged at the head office or at the registration office. Theperiod for lodgment of such notices will commence no earlier than the day afterthe despatch of the notice of the meeting appointed for such election and end nolater than 7 days prior to the date of such meeting and the minimum length of theperiod during which such notices to the Company may be given must be at least 7days.

A Director is not required to hold any shares in the Company by way ofqualification nor is there any specified upper or lower age limit for Directorseither for accession to the Board or retirement therefrom.

A Director may be removed by an ordinary resolution of the Companybefore the expiration of his term of office (but without prejudice to any claimwhich such Director may have for damages for any breach of any contractbetween him and the Company) and the Company may by ordinary resolutionappoint another in his place. Any Director so appointed shall be subject toretirement by rotation provisions in the articles of association. The number ofDirectors shall not be less than two.

In addition to the foregoing, the office of a Director shall be vacated:

(aa) if he resigns his office by notice in writing delivered to the Company atthe registered office or head office of the Company for the time beingor tendered at a meeting of the Board;


– IV-7 –

(bb) if he dies or becomes of unsound mind as determined pursuant to anorder made by any competent court or official on the grounds that he isor may be suffering from mental disorder or is otherwise incapable ofmanaging his affairs and the Board resolves that his office be vacated;

(cc) if, without special leave, he is absent from meetings of the Board forsix (6) consecutive months, and the Board resolves that his office isvacated;

(dd) if he becomes bankrupt or has a receiving order made against him orsuspends payment or compounds with his creditors generally;

(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 isremoved from office pursuant to the Articles;

(gg) if he has been validly required by the stock exchange of the RelevantTerritory (as defined in the Articles) to cease to be a Director and therelevant time period for application for review of or appeal against suchrequirement has lapsed and no application for review or appeal hasbeen filed or is underway against such requirement; or

(hh) if he is removed from office by notice in writing served upon himsigned by not less than three-fourths in number (or, if that is not around number, the nearest lower round number) of the Directors(including himself) then in office.

From time to time the Board may appoint one or more of its body to bemanaging director, joint managing director, or deputy managing director or tohold any other employment or executive office with the Company for such periodand upon such terms as the Board may determine and the Board may revoke orterminate any of such appointments. The Board may also delegate any of itspowers to committees consisting of such Director or Directors and other person(s)as the Board thinks fit, and from time to time it may also revoke such delegationor revoke the appointment of and discharge any such committees either wholly orin part, and either as to persons or purposes, but every committee so formed shall,in the exercise of the powers so delegated, conform to any regulations that mayfrom time to time be imposed upon it by the Board.

(viii) Borrowing powers

Pursuant to the Articles, the Board may exercise all the powers of theCompany to raise or borrow money, to mortgage or charge all or any part of theundertaking, property and uncalled capital of the Company and, subject to theCompanies Law, to issue debentures, debenture stock, bonds and other securitiesof the Company, whether outright or as collateral security for any debt, liability or


– IV-8 –

obligation of the Company or of any third party. The provisions summarizedabove, in common with the Articles of Association in general, may be varied withthe sanction of a special resolution of the Company.

(ix) Register of Directors and officers

Pursuant to the Companies Law, the Company is required to maintain at itsregistered office a register of directors, alternate directors and officers which isnot available for inspection by the public. A copy of such register must be filedwith the Registrar of Companies in the Cayman Islands and any change must benotified to the Registrar within 30 days of any change in such directors orofficers, including a change of the name of such directors or officers.

(x) Proceedings of the Board

Subject to the Articles, the Board may meet anywhere in the world for thedespatch of business and may adjourn and otherwise regulate its meetings as itthinks fit. Questions arising at any meeting shall be determined by a majority ofvotes. In the case of an equality of votes, the chairman of the meeting shall havea second or casting vote.

(c) Alterations to the constitutional documents

To the extent that the same is permissible under Cayman Islands law and subjectto the Articles, the Memorandum and Articles of the Company may only be altered oramended, and the name of the Company may only be changed by the Company byspecial resolution.

(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Law, if at any time the share capital of the Company isdivided into different classes of shares, all or any of the special rights attached to anyclass of shares may (unless otherwise provided for by the terms of issue of the sharesof that class) be varied, modified or abrogated either with the consent in writing of theholders of not less than three-fourths in nominal value of the issued shares of that classor with the sanction of a special resolution passed at a separate general meeting of theholders of the shares of that class. To every such separate general meeting theprovisions of the Articles relating to general meetings shall mutatis mutandis apply, butso that the necessary quorum (other than at an adjourned meeting) shall be not lessthan two persons together holding (or in the case of a shareholder being a corporation,by its duly authorised representative) or representing by proxy not less than one-thirdin nominal value of the issued shares of that class. Every holder of shares of the classshall be entitled on a poll to one vote for every such share held by him, and any holderof shares of the class present in person or by proxy may demand a poll.


– IV-9 –

Any special rights conferred upon the holders of any shares or class of sharesshall not, unless otherwise expressly provided in the rights attaching to the terms ofissue of such shares, be deemed to be varied by the creation or issue of further sharesranking pari passu therewith.

(e) Alteration of capital

The Company may, by an ordinary resolution of its members, (a) increase itsshare capital by the creation of new shares of such amount as it thinks expedient; (b)consolidate or divide all or any of its share capital into shares of larger or smalleramount than its existing shares; (c) divide its unissued shares into several classes andattach thereto respectively any preferential, deferred, qualified or special rights,privileges or conditions; (d) subdivide its shares or any of them into shares of anamount smaller than that fixed by the Memorandum; and (e) cancel shares which, atthe date of the passing of the resolution, have not been taken or agreed to be taken byany person and diminish the amount of its share capital by the amount of the shares socancelled; (f) make provision for the allotment and issue of shares which do not carryany voting rights; (g) change the currency of denomination of its share capital; and (h)reduce its share premium account in any manner authorised and subject to anyconditions prescribed by law.

Reduction of share capital – subject to the Companies Law and to confirmation bythe court, a company limited by shares may, if so authorised by its Articles ofAssociation, by special resolution, reduce its share capital in any way.

(f) Special resolution – majority required

In accordance with the Articles, a special resolution of the Company must bepassed by a majority of not less than three-fourths of the votes cast by such membersas, being entitled so to do, vote in person or by proxy or, in the case of memberswhich are corporations, by their duly authorised representatives or, where proxies areallowed, by proxy at a general meeting of which notice specifying the intention topropose the resolution as a special resolution has been duly given.

Under Companies Law, a copy of any special resolution must be forwarded to theRegistrar of Companies in the Cayman Islands within 15 days of being passed.

An “ordinary resolution”, by contrast, is defined in the Articles to mean aresolution passed by a simple majority of the votes of such members of the Companyas, being entitled to do so, vote in person or, in the case of members which arecorporations, by their duly authorised representatives or, where proxies are allowed, byproxy at a general meeting of which not less than 14 clear days’ notice has been givenand held in accordance with the Articles. A resolution in writing signed by or on behalfof all members shall be treated as an ordinary resolution duly passed at a generalmeeting of the Company duly convened and held, and where relevant as a specialresolution so passed.


– IV-10 –

(g) Voting rights (generally and on a poll) and right to demand a poll

Subject to any special rights, restrictions or privileges as to voting for the timebeing attached to any class or classes of shares at any general meeting on a poll everymember present in person or by proxy or, in the case of a member being a corporation,by its duly authorised representative shall have one vote for every share which is fullypaid or credited as fully paid registered in his name in the register of members of theCompany but so that no amount paid up or credited as paid up on a share in advanceof calls or instalments is treated for the foregoing purpose as paid up on the share, ona show of hands every member who is present in person (or, in the case of a memberbeing a corporation, by its duly authorised representative) or by proxy shall have onevote. Notwithstanding anything contained in the Articles, where more than one proxy isappointed by a member which is a Clearing House (as defined in the Articles) (or itsnominee(s)), each such proxy shall have one vote on a show of hands. On a poll, amember entitled to more than one vote need not use all his votes or cast all the voteshe does use in the same way.

At any general meeting a resolution put to the vote of the meeting is to bedecided by poll save that the chairman of the meeting may, pursuant to the GEMListing Rules, allow a resolution to be voted on by a show of hands. Where a show ofhands is allowed, before or on the declaration of the result of the show of hands, a pollmay be demanded by:

(i) at least two members present in person or, in the case of a member being acorporation, by its duly authorised representative or by proxy for the timebeing entitled to vote at the meeting; or

(ii) any member or members present in person or, in the case of a member beinga corporation, by its duly authorised representative or by proxy andrepresenting not less than one-tenth of the total voting rights of all themembers having the right to vote at the meeting; or

(iii) a member or members present in person or, in the case of a member being acorporation, by its duly authorised representative or by proxy and holdingshares in the Company conferring a right to vote at the meeting being shareson which an aggregate sum has been paid equal to not less than one-tenth ofthe total sum paid up on all the shares conferring that right.

Should a Clearing House or its nominee(s), be a member of the Company, suchperson or persons may be authorised as it thinks fit to act as its representative(s) at anymeeting of the Company or at any meeting of any class of members of the Companyprovided that, if more than one person is so authorised, the authorisation shall specifythe number and class of shares in respect of which each such person is so authorised.A person authorised in accordance with this provision shall be deemed to have beenduly authorised without further evidence of the facts and be entitled to exercise the


– IV-11 –

same rights and powers on behalf of the Clearing House or its nominee(s), as if suchperson were an individual member including the right to vote individually on a show ofhands.

Where the Company has knowledge that any member is, under the GEM ListingRules, required to abstain from voting on any particular resolution of the Company orrestricted to voting only for or only against any particular resolution of the Company,any votes cast by or on behalf of such member in contravention of such requirement orrestriction shall not be counted.

(h) Annual general meetings

The Company must hold an annual general meeting each year other than the yearof the Company’s adoption of the Articles. Such meeting must be held not more than15 months after the holding of the last preceding annual general meeting, or suchlonger period as may be authorised by the Stock Exchange at such time and place asmay be determined by the Board.

(i) Accounts and audit

The Board shall cause proper books of account to be kept of the sums of moneyreceived and expended by the Company, and the matters in respect of which suchreceipt and expenditure take place, and of the assets and liabilities of the Company andof all other matters required by the Companies Law necessary to give a true and fairview of the state of the Company’s affairs and to show and explain its transactions.

The books of accounts of the Company shall be kept at the head office of theCompany or at such other place or places as the Board decides and shall always beopen to inspection by any Director. No member (other than a Director) shall have anyright to inspect any account or book or document of the Company except as conferredby the Companies Law or ordered by a court of competent jurisdiction or authorised bythe Board or the Company in general meeting.

The Board shall from time to time cause to be prepared and laid before theCompany at its annual general meeting balance sheets and profit and loss accounts(including every document required by law to be annexed thereto), together with acopy of the Directors’ report and a copy of the auditors’ report not less than 21 daysbefore the date of the annual general meeting. Copies of these documents shall be sentto every person entitled to receive notices of general meetings of the Company underthe provisions of the Articles together with the notice of annual general meeting, notless than 21 days before the date of the meeting.

Subject to the rules of the stock exchange of the Relevant Territory (as defined inthe Articles), the Company may send summarized financial statements to shareholderswho has, in accordance with the rules of the stock exchange of the Relevant Territory(as defined in the Articles), consented and elected to receive summarized financialstatements instead of the full financial statements. The summarized financial statements


– IV-12 –

must be accompanied by any other documents as may be required under the rules ofthe stock exchange of the Relevant Territory (as defined in the Articles), and must besent to the shareholders not less than 21 days before the general meeting to thoseshareholders that have consented and elected to receive the summarised financialstatements.

The Company shall appoint auditor(s) to hold office until the conclusion of thenext annual general meeting on such terms and with such duties as may be agreed withthe Board. The auditors’ remuneration shall be fixed by the Company in generalmeeting or by the Board if authority is so delegated by the members.

The auditors shall audit the financial statements of the Company in accordancewith generally accepted accounting principles of Hong Kong, the InternationalAccounting Standards or such other standards as may be permitted by the StockExchange.

(j) Notices of meetings and business to be conducted thereat

An annual general meeting of the Company must be called by at least 21 days’notice in writing, and a general meeting of the Company, other than an annual generalmeeting, shall be called by at least 14 days’ notice in writing. The notice shall beexclusive of the day on which it is served or deemed to be served and of the day forwhich it is given, and must specify the time, place and agenda of the meeting, andparticulars of the resolution(s) to be considered at that meeting, and, in the case ofspecial business, the general nature of that business.

Except where otherwise expressly stated, any notice or document (including ashare certificate) to be given or issued under the Articles shall be in writing, and maybe served by the Company on any member either personally or by sending it throughthe post in a prepaid envelope or wrapper addressed to such member at his registeredaddress as appearing in the Company’s register of members or by leaving it at suchregistered address as aforesaid or (in the case of a notice) by advertisement in thenewspapers. Any member whose registered address is outside Hong Kong may notifythe Company in writing of an address in Hong Kong which for the purpose of serviceof notice shall be deemed to be his registered address. Where the registered address ofthe member is outside Hong Kong, notice, if given through the post, shall be sent byprepaid airmail letter where available. Subject to the Companies Law and the GEMListing Rules, a notice or document may be served or delivered by the Company to anymember by electronic means to such address as may from time to time be authorisedby the member concerned or by publishing it on a website and notifying the memberconcerned that it has been so published.


– IV-13 –

Although a meeting of the Company may be called by shorter notice than asspecified above, such meeting may be deemed to have been duly called if it is soagreed:

(i) in the case of a meeting called as an annual general meeting, by all membersof the Company entitled to attend and vote thereat; and

(ii) in the case of any other meeting, by a majority in number of the membershaving a right to attend and vote at the meeting, being a majority togetherholding not less than 95% of the total voting rights at the meeting of all themembers of the Company.

All business transacted at an extraordinary general meeting shall be deemedspecial business and all business shall also be deemed special business whereit is transacted at an annual general meeting with the exception of thefollowing, which shall be deemed ordinary business:

(aa) the declaration and sanctioning of dividends;

(bb) the consideration and adoption of the accounts and balance sheet andthe reports of the directors and the auditors;

(cc) the election of Directors in place of those retiring;

(dd) the appointment of auditors;

(ee) the fixing of the remuneration of the Directors and of the auditors;

(ff) the granting of any mandate or authority to the Board to offer, allot,grant options over, or otherwise dispose of the unissued shares of theCompany representing not more than 20% in nominal value of itsexisting issued share capital (or such other percentage as may fromtime to time be specified in the rules of the Stock Exchange) and thenumber of any securities repurchased by the Company since thegranting of such mandate; and

(gg) the granting of any mandate or authority to the Board to repurchasesecurities in the Company.

(k) Transfer of shares

Subject to the Companies Law, all transfers of shares shall be effected by aninstrument of transfer in the usual or common form or in such other form as the Boardmay approve provided always that it shall be in such form prescribed by the StockExchange and may be under hand or, if the transferor or transferee is a Clearing Houseor its nominee(s), under hand or by machine imprinted signature or by such othermanner of execution as the Board may approve from time to time.


– IV-14 –

Execution of the instrument of transfer shall be by or on behalf of the transferorand the transferee provided that the Board may dispense with the execution of theinstrument of transfer by the transferor or transferee or accept mechanically executedtransfers in any case in which it in its discretion thinks fit to do so, and the transferorshall be deemed to remain the holder of the share until the name of the transferee isentered in the register of members of the Company in respect thereof.

The Board may, in its absolute discretion, at any time and from time to timeremove any share on the principal register to any branch register or any share on anybranch register to the principal register or any other branch register.

Unless the Board otherwise agrees, no shares on the principal register shall beremoved to any branch register nor shall shares on any branch register be removed tothe principal register or any other branch register. All removals and other documents oftitle shall be lodged for registration and registered, in the case of shares on any branchregister, at the relevant registration office and, in the case of shares on the principalregister, at the place at which the principal register is located.

The Board may, in its absolute discretion, decline to register a transfer of anyshare (not being a fully paid up share) to a person of whom it does not approve or anyshare issued under any share option scheme upon which a restriction on transferimposed thereby still subsists, and it may also refuse to register any transfer of anyshare to more than four joint holders or any transfer of any share (not being a fullypaid up share) on which the Company has a lien.

The Board may decline to recognize any instrument of transfer unless a fee ofsuch maximum sum as the Stock Exchange may determine to be payable or such lessersum as the Board may from time to time require is paid to the Company in respectthereof, the instrument of transfer is properly stamped (if applicable), is in respect ofonly one class of share and is lodged at the relevant registration office or the place atwhich the principal register is located accompanied by the relevant share certificate(s)and such other evidence as the Board may reasonably require to show the right of thetransferor to make the transfer (and if the instrument of transfer is executed by someother person on his behalf, the authority of that person so to do).

The register of members may, subject to the GEM Listing Rules (as defined in theArticles), be closed at such time or for such period not exceeding in the whole 30 daysin each year as the Board may determine.

Fully paid shares shall be free from any restriction with respect to the right of theholder thereof to transfer such shares (except when permitted by the Stock Exchange)and shall also be free from all liens.


– IV-15 –

(l) Power of the Company to purchase its own shares

The Company is empowered by the Companies Law and the Articles to purchaseits own shares subject to certain restrictions and the Board may only exercise thispower on behalf of the Company subject to any applicable requirement imposed fromtime to time by the Articles, code, rules or regulations issued from time to time by theStock Exchange and/or the Securities and Futures Commission of Hong Kong.

Where the Company purchases for redemption a redeemable Share, purchases notmade through the market or by tender shall be limited to a maximum price, and ifpurchases are by tender, tenders shall be available to all members alike.

(m) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to the ownership of shares in theCompany by a subsidiary.

(n) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to bepaid to the members but no dividend shall be declared in excess of the amountrecommended by the Board.

Except in so far as the rights attaching to, or the terms of issue of, any share mayotherwise provide:

(i) all dividends shall be declared and paid according to the amounts paid up onthe shares in respect whereof the dividend is paid, although no amount paidup on a share in advance of calls shall for this purpose be treated as paid upon the share; and

(ii) all dividends shall be apportioned and paid pro rata in accordance with theamount paid up on the shares during any portion or portions of the period inrespect of which the dividend is paid. The Board may deduct from anydividend or other monies payable to any member all sums of money (if any)presently payable by him to the Company on account of calls, instalments orotherwise.

Where the Board or the Company in general meeting has resolved that adividend should be paid or declared on the share capital of the Company, theBoard may resolve:

(aa) that such dividend be satisfied wholly or in part in the form of anallotment of shares credited as fully paid up, provided that the membersentitled thereto will be entitled to elect to receive such dividend (orpart thereof) in cash in lieu of such allotment; or


– IV-16 –

(bb) that the members entitled to such dividend will be entitled to elect toreceive an allotment of shares credited as fully paid up in lieu of thewhole or such part of the dividend as the Board may think fit.

Upon the recommendation of the Board, the Company may by ordinary resolutionin respect of any one particular dividend of the Company determine that it may besatisfied wholly in the form of an allotment of shares credited as fully paid up withoutoffering any right to members to elect to receive such dividend in cash in lieu of suchallotment.

Any dividend, bonus or other sum payable in cash to the holder of shares may bepaid by cheque or warrant sent through the post addressed to the holder at hisregistered address, but in the case of joint holders, shall be addressed to the holderwhose name stands first in the register of members of the Company in respect of theshares at his address as appearing in the register, or addressed to such person and atsuch address as the holder or joint holders may in writing so direct. Every such chequeor warrant shall be made payable to the order of the person to whom it is sent andshall be sent at the holder’s or joint holders’ risk and payment of the cheque or warrantby 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 orother monies payable or property distributable in respect of the shares held by suchjoint holders.

Whenever the Board or the Company in general meeting has resolved that adividend be paid or declared, the Board may further resolve that such dividend besatisfied wholly or in part by the distribution of specific assets of any kind.

The Board may, if it thinks fit, receive from any member willing to advance thesame, and either in money or money’s worth, all or any part of the money uncalled andunpaid or instalments payable upon any shares held by him, and in respect of all orany of the monies so advanced may pay interest at such rate (if any) not exceeding 20% per annum, as the Board may decide, but a payment in advance of a call shall notentitle the member to receive any dividend or to exercise any other rights or privilegesas a member in respect of the share or the due portion of the shares upon whichpayment has been advanced by such member before it is called up.

All dividends, bonuses or other distributions unclaimed for one year after havingbeen declared may be invested or otherwise made use of by the Board for the benefitof the Company until claimed and the Company shall not be constituted a trustee inrespect thereof. All dividends, bonuses or other distributions unclaimed for six yearsafter having been declared may be forfeited by the Board and, upon such forfeiture,shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of anyshare shall bear interest against the Company.


– IV-17 –

The Company may exercise the power to cease sending cheques for dividendentitlements or dividend warrants by post if such cheques or warrants remain uncashedon two consecutive occasions or after the first occasion on which such a cheque orwarrant is returned undelivered.

(o) Proxies

Any member of the Company entitled to attend and vote at a meeting of theCompany is entitled to appoint another person as his proxy to attend and vote insteadof him. A member who is the holder of two or more shares may appoint more than oneproxy to represent him and vote on his behalf at a general meeting of the Company orat a class meeting. A proxy need not be a member of the Company and shall beentitled to exercise the same powers on behalf of a member who is an individual andfor whom he acts as proxy as such member could exercise. In addition, a proxy shallbe entitled to exercise the same powers on behalf of a member which is a corporationand for which he acts as proxy as such member could exercise if it were an individualmember. On a poll or on a show of hands, votes may be given either personally (or, inthe case of a member being a corporation, by its duly authorised representative) or byproxy.

The instrument appointing a proxy shall be in writing under the hand of theappointor or of his attorney duly authorised in writing, or if the appointor is acorporation, either under seal or under the hand of an officer or attorney dulyauthorised. Every instrument of proxy, whether for a specified meeting or otherwise,shall be in such form as the Board may from time to time approve, provided that itshall not preclude the use of the two-way form. Any form issued to a member for useby him for appointing a proxy to attend and vote at an extraordinary general meetingor at an annual general meeting at which any business is to be transacted shall be suchas to enable the member, according to his intentions, to instruct the proxy to vote infavour of or against (or, in default of instructions, to exercise his discretion in respectof) each resolution dealing with any such business.

(p) Calls on shares and forfeiture of shares

The Board may from time to time make such calls as it may think fit upon themembers in respect of any monies unpaid on the shares held by them respectively(whether on account of the nominal value of the shares or by way of premium) and notby the conditions of allotment thereof made payable at fixed times. A call may be madepayable either in one sum or by instalments. If the sum payable in respect of any callor instalment is not paid on or before the day appointed for payment thereof, theperson or persons from whom the sum is due shall pay interest on the same at suchrate not exceeding 20% per annum as the Board shall fix from the day appointed forthe payment thereof to the time of actual payment, but the Board may waive paymentof such interest wholly or in part. The Board may, if it thinks fit, receive from anymember willing to advance the same, either in money or money’s worth, all or any part


– IV-18 –

of the money uncalled and unpaid or instalments payable upon any shares held by him,and in respect of all or any of the monies so advanced the Company may pay interestat such rate (if any) not exceeding 20% per annum as the Board may decide.

If a member fails to pay any call or instalment of a call on the day appointed forpayment thereof, the Board may, at any time thereafter during such time as any part ofthe call or instalment remains unpaid, serve not less than 14 days’ notice on himrequiring payment of so much of the call or instalment as is unpaid, together with anyinterest which may have accrued and which may still accrue up to the date of actualpayment. The notice will name a further day (not earlier than the expiration of 14 daysfrom the date of the notice) on or before which the payment required by the notice isto be made, and it shall also name the place where payment is to be made. The noticeshall also state that, in the event of non-payment at or before the time appointed, theshares 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 respectof which the notice has been given may at any time thereafter, before the paymentrequired by the notice has been made, be forfeited by a resolution of the Board to thateffect. Such forfeiture will include all dividends and bonuses declared in respect of theforfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respectof the forfeited shares but shall, nevertheless, remain liable to pay to the Company allmonies which, at the date of forfeiture, were payable by him to the Company in respectof the shares together with (if the Board shall in its discretion so require) interestthereon from the date of forfeiture until payment at such rate not exceeding 20% perannum as the Board may prescribe.

(q) Inspection of corporate records

Members of the Company have no general right under the Companies Law toinspect or obtain copies of the register of members or corporate records of theCompany. However, the members of the Company will have such rights as may be setforth in the Articles. The Articles provide that for so long as any part of the sharecapital of the Company is listed on the Stock Exchange, any member may inspect anyregister of members of the Company maintained in Hong Kong (except when theregister of member is closed) without charge and require the provision to him of copiesor extracts thereof in all respects as if the Company were incorporated under and weresubject to the Hong Kong Companies Ordinance.

An exempted company may, subject to the provisions of its articles of association,maintain its principal register of members and any branch registers at such locations,whether within or outside the Cayman Islands, as its directors may, from time to time,think fit.


– IV-19 –

(r) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is presentwhen the meeting proceeds to business, and continues to be present until theconclusion of the meeting.

The quorum for a general meeting shall be two members present in person (or inthe case of a member being a corporation, by its duly authorised representative) or byproxy and entitled to vote. In respect of a separate class meeting (other than anadjourned meeting) convened to sanction the modification of class rights the necessaryquorum shall be two persons holding or representing by proxy not less than one-thirdin nominal value of the issued shares of that class.

(s) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles concerning the rights of minority membersin relation to fraud or oppression. However, certain remedies may be available tomembers of the Company under Cayman Islands law, as summarized in paragraph 3(f)of this Appendix.

(t) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound upvoluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution ofavailable surplus assets on liquidation for the time being attached to any class orclasses of shares:

(i) if the Company shall be wound up and the assets available for distributionamongst the members of the Company shall be more than sufficient to repaythe whole of the capital paid up at the commencement of the winding up,then the excess shall be distributed pari passu amongst such members inproportion 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 distributionamongst the members as such shall be insufficient to repay the whole of thepaid-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 paidup, on the shares held by them respectively.

In the event that the Company is wound up (whether the liquidation is voluntaryor compelled by the court) the liquidator may, with the sanction of a special resolutionand any other sanction required by the Companies Law divide among the members inspecie or kind the whole or any part of the assets of the Company whether the assetsshall consist of property of one kind or shall consist of properties of different kinds


– IV-20 –

and the liquidator may, for such purpose, set such value as he deems fair upon any oneor more class or classes of property to be divided as aforesaid and may determine howsuch division shall be carried out as between the members or different classes ofmembers and the members within each class. The liquidator may, with the likesanction, vest any part of the assets in trustees upon such trusts for the benefit ofmembers as the liquidator shall think fit, but so that no member shall be compelled toaccept any shares or other property upon which there is a liability.

(u) Untraceable members

The Company may exercise the power to cease sending cheques for dividendentitlements or dividend warrants by post if such cheques or warrants remain uncashedon two consecutive occasions or after the first occasion on which such a cheque orwarrant is returned undelivered.

In accordance with the Articles, the Company is entitled to sell any of the sharesof a member who is untraceable if:

(i) all cheques or warrants, being not less than three in total number, for anysum payable in cash to the holder of such shares have remained uncashed fora period of 12 years;

(ii) upon the expiry of the 12 years and 3 months period (being the 3 months’notice period referred to in sub-paragraph (iii)), the Company has not duringthat time received any indication of the existence of the member; and

(iii) the Company has caused an advertisement to be published in accordancewith the rules of the stock exchange of the Relevant Territory (as defined inthe Articles) giving notice of its intention to sell such shares and a period ofthree months has elapsed since such advertisement and the stock exchange ofthe Relevant Territory (as defined in the Articles) has been notified of suchintention. The net proceeds of any such sale shall belong to the Companyand upon receipt by the Company of such net proceeds, it shall becomeindebted to the former member of the Company for an amount equal to suchnet proceeds.

(v) Subscription rights reserve

Pursuant to the Articles, provided that it is not prohibited by and is otherwise incompliance with the Companies Law, if warrants to subscribe for shares have beenissued by the Company and the Company does any act or engages in any transactionwhich would result in the subscription price of such warrants being reduced below thepar value of the shares to be issued on the exercise of such warrants, a subscriptionrights reserve shall be established and applied in paying up the difference between thesubscription price and the par value of such shares.


– IV-21 –

3. CAYMAN ISLANDS COMPANY LAW

The Company was incorporated in the Cayman Islands as an exempted company on 16October 2015 subject to the Companies Law. Certain provisions of Cayman Islands companylaw are set out below but this section does not purport to contain all applicablequalifications and exceptions or to be a complete review of all matters of the CompaniesLaw and taxation, which may differ from equivalent provisions in jurisdictions with whichinterested parties may be more familiar.

(a) Company operations

As an exempted company, the Company must conduct its operations mainlyoutside the Cayman Islands. Moreover, the Company is required to file an annualreturn each year with the Registrar of Companies of the Cayman Islands and pay a feewhich is based on the amount of its authorised share capital.

(b) Share capital

In accordance with the Companies Law, a Cayman Islands company may issueordinary, preference or redeemable shares or any combination thereof. The CompaniesLaw provides that where a company issues shares at a premium, whether for cash orotherwise, a sum equal to the aggregate amount or value of the premiums on thoseshares shall be transferred to an account, to be called the “share premium account”. Atthe option of a company, these provisions may not apply to premiums on shares of thatcompany allotted pursuant to any arrangements in consideration of the acquisition orcancellation of shares in any other company and issued at a premium. The CompaniesLaw provides that the share premium account may be applied by the company subjectto the provisions, if any, of its memorandum and articles of association, in such manneras the company may from time to time determine including, but without limitation, thefollowing:

(i) paying distributions or dividends to members;

(ii) paying up unissued shares of the company to be issued to members as fullypaid bonus shares;

(iii) any manner provided in section 37 of the Companies Law;

(iv) writing-off the preliminary expenses of the company; and

(v) writing-off the expenses of, or the commission paid or discount allowed on,any issue of shares or debentures of the company.


– IV-22 –

Notwithstanding the foregoing, the Companies Law provides that no distributionor 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 bepaid, the company will be able to pay its debts as they fall due in the ordinary courseof business.

It is further provided by the Companies Law that, subject to confirmation by thecourt, a company limited by shares or a company limited by guarantee and having ashare capital may, if authorised to do so by its articles of association, by specialresolution reduce its share capital in any way.

The Articles include certain protections for holders of special classes of shares,requiring their consent to be obtained before their rights may be varied. The consent ofthe specified proportions of the holders of the issued shares of that class or thesanction of a resolution passed at a separate meeting of the holders of those shares isrequired.

(c) Financial assistance to purchase shares of a company or its holding company

There are no statutory prohibitions in the Cayman Islands on the granting offinancial assistance by a company to another person for the purchase of, or subscriptionfor, its own, its holding company’s or a subsidiary’s shares. Therefore, a company mayprovide financial assistance provided the directors of the company when proposing togrant such financial assistance discharge their duties of care and acting in good faith,for a proper purpose and in the interests of the company. Such assistance should be onan arm’s-length basis.

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having ashare capital may, if so authorised by its articles of association, issue shares which areto be redeemed or are liable to be redeemed at the option of the company or a memberand, for the avoidance of doubt, it shall be lawful for the rights attaching to any sharesto be varied, subject to the provisions of the company’s articles of association, so as toprovide that such shares are to be or are liable to be so redeemed. In addition, such acompany may, if authorised to do so by its articles of association, purchase its ownshares, including any redeemable shares. Nonetheless, if the articles of association donot authorise the manner and terms of purchase, a company cannot purchase any of itsown shares without the manner and terms of purchase first being authorised by anordinary resolution of the company. A company may not redeem or purchase its sharesunless they are fully paid. Furthermore, a company may not redeem or purchase any ofits shares if, as a result of the redemption or purchase, there would no longer be anyissued shares of the company other than shares held as treasury shares. In addition, apayment out of capital by a company for the redemption or purchase of its own sharesis not lawful unless immediately following the date on which the payment is proposedto be made, the company shall be able to pay its debts as they fall due in the ordinarycourse of business.


– IV-23 –

Under Section 37A(1) the Companies Law, shares that have been purchased orredeemed by a company or surrendered to the company shall not be treated ascancelled but shall be classified as treasury shares if (a) the memorandum and articlesof association of the company do not prohibit it from holding treasury shares; (b) therelevant provisions of the memorandum and articles of association (if any) arecomplied with; and (c) the company is authorised in accordance with the company’sarticles of association or by a resolution of the directors to hold such shares in thename of the company as treasury shares prior to the purchase, redemption or surrenderof such shares. Shares held by a company pursuant to section 37A(1) of the CompaniesLaw shall continue to be classified as treasury shares until such shares are eithercancelled or transferred pursuant to the Companies Law.

A Cayman Islands company may be able to purchase its own warrants subject toand in accordance with the terms and conditions of the relevant warrant instrument orcertificate. Thus there is no requirement under Cayman Islands law that a company’smemorandum or articles of association contain a specific provision enabling suchpurchases. The directors of a company may under the general power contained in itsmemorandum of association be able to buy and sell and deal in personal property of allkinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding companyand, in certain circumstances, may acquire such shares.

(e) Dividends and distributions

With the exception of sections 34 and 37A(7) of the Companies Law, there are nostatutory provisions relating to the payment of dividends. Based upon English case lawwhich is likely to be persuasive in the Cayman Islands, dividends may be paid only outof profits. In addition, section 34 of the Companies Law permits, subject to a solvencytest and the provisions, if any, of the company’s memorandum and articles ofassociation, the payment of dividends and distributions out of the share premiumaccount (see sub-paragraph 2(n) of this Appendix for further details). Section 37A(7)(c)of the Companies Law provides that for so long as a company holds treasury shares, nodividend may be declared or paid, and no other distribution (whether in cash orotherwise) of the company’s assets (including any distribution of assets to members ona winding up) may be made to the company, in respect of a treasury share.

(f) Protection of minorities and shareholders’ suits

It can be expected that the Cayman Islands courts will ordinarily follow Englishcase law precedents (particularly the rule in the case of Foss v. Harbottle and theexceptions thereto) which permit a minority member to commence a representativeaction against or derivative actions in the name of the company to challenge:

(i) an act which is ultra vires the company or illegal;


– IV-24 –

(ii) an act which constitutes a fraud against the minority and the wrongdoers arethemselves in control of the company; and

(iii) an irregularity in the passing of a resolution the passage of which requires aqualified (or special) majority which has not been obtained.

Where a company (not being a bank) is one which has a share capital divided intoshares, the court may, on the application of members thereof holding not less thanone-fifth of the shares of the company in issue, appoint an inspector to examine theaffairs of the company and, at the direction of the court, to report thereon.

Moreover, any member of a company may petition the court which may make awinding up order if the court is of the opinion that it is just and equitable that thecompany should be wound up.

In general, claims against a company by its members must be based on thegeneral laws of contract or tort applicable in the Cayman Islands or be based onpotential violation of their individual rights as members as established by a company’smemorandum and articles of association.

(g) Disposal of assets

There are no specific restrictions in the Companies Law on the power of directorsto dispose of assets of a company, however the directors have certain duties of care,diligence and skill and also fiduciary duties to act in good faith, for proper purpose andin the best interests of the company under English common law (which the CaymanIslands courts will ordinarily follow).

(h) Accounting and auditing requirements

Section 59 of the Companies Law provides that a company shall cause properrecords of accounts to be kept with respect to (i) all sums of money received andexpended by the company and the matters with respect to which the receipt andexpenditure takes place; (ii) all sales and purchases of goods by the company and (iii)the assets and liabilities of the company.

Section 59 of the Companies Law further states that proper books of account shallnot be deemed to be kept if there are not kept such books as are necessary to give atrue and fair view of the state of the company’s affairs and to explain its transactions.

If the Company keeps its books of account at any place other than at itsregistered office or at any other place within the Cayman Islands, it shall, upon serviceof an order or notice by the Tax Information Authority pursuant to the Tax InformationAuthority Law (2013 Revision) of the Cayman Islands, make available, in electronicform or any other medium, at its registered office copies of its books of account, orany part or parts thereof, as are specified in such order or notice.


– IV-25 –

(i) Exchange control

There are no exchange control regulations or currency restrictions in effect in theCayman Islands.

(j) Taxation

Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the CaymanIslands, the Company has obtained an undertaking from the Governor-in-Cabinet:

(i) that no law which is enacted in the Cayman Islands imposing any tax to belevied on profits or income or gains or appreciation shall apply to theCompany or its operations; and

(ii) in addition, that no tax be levied on profits, income gains or appreciations orwhich is in the nature of estate duty or inheritance tax shall be payable bythe Company:

(aa) on or in respect of the shares, debentures or other obligations of theCompany; or

(bb) by way of withholding in whole or in part of any relevant payment asdefined in section 6(3) of the Tax Concessions Law (2011 Revision).

The undertaking for the Company is for a period of twenty years from3 November 2015.

The Cayman Islands currently levy no taxes on individuals or corporationsbased upon profits, income, gains or appreciations and there is no taxation inthe nature of inheritance tax or estate duty. There are no other taxes likely tobe material to the Company levied by the Government of the CaymanIslands save certain stamp duties which may be applicable, from time totime, on certain instruments.

(k) Stamp duty on transfers

There is no stamp duty payable in the Cayman Islands on transfers of shares ofCayman Islands companies save for those which hold interests in land in the CaymanIslands.

(l) Loans to directors

The Companies Law contains no express provision prohibiting the making ofloans by a company to any of its directors. However, the Articles provide for theprohibition of such loans under specific circumstances.


– IV-26 –

(m) Inspection of corporate records

The members of the company have no general right under the Companies Law toinspect or obtain copies of the register of members or corporate records of thecompany. They will, however, have such rights as may be set out in the company’sarticles of association.

(n) Register of members

A Cayman Islands exempted company may maintain its principal register ofmembers and any branch registers in any country or territory, whether within or outsidethe Cayman Islands, as the company may determine from time to time. The CompaniesLaw contains no requirement for an exempted company to make any returns ofmembers to the Registrar of Companies in the Cayman Islands. The names andaddresses of the members are, accordingly, not a matter of public record and are notavailable for public inspection. However, an exempted company shall make available atits registered office, in electronic form or any other medium, such register of members,including any branch register of member, as may be required of it upon service of anorder or notice by the Tax Information Authority pursuant to the Tax InformationAuthority Law (2013 Revision) of the Cayman Islands.

(o) Winding up

A Cayman Islands company may be wound up either by (i) an order of the court;(ii) voluntarily by its members; or (iii) under the supervision of the court

The court has authority to order winding up in a number of specifiedcircumstances including where, in the opinion of the court, it is just and equitable thatsuch company be so wound up.

A voluntary winding up of a company occurs where the Company so resolves byspecial resolution that it be wound up voluntarily, or, where the company in generalmeeting resolves that it be wound up voluntarily because it is unable to pay its debt asthey fall due; or, in the case of a limited duration company, when the period fixed forthe duration of the company by its memorandum or articles expires, or where the eventoccurs on the occurrence of which the memorandum or articles provides that thecompany is to be wound up. In the case of a voluntary winding up, such company isobliged to cease to carry on its business from the commencement of its winding upexcept so far as it may be beneficial for its winding up. Upon appointment of avoluntary liquidator, all the powers of the directors cease, except so far as the companyin general meeting or the liquidator sanctions their continuance.

In the case of a members’ voluntary winding up of a company, one or moreliquidators shall be appointed for the purpose of winding up the affairs of the companyand distributing its assets.


– IV-27 –

As soon as the affairs of a company are fully wound up, the liquidator must makea report and an account of the winding up, showing how the winding up has beenconducted and the property of the company has been disposed of, and thereupon call ageneral meeting of the company for the purposes of laying before it the account andgiving an explanation thereof.

When a resolution has been passed by a company to wind up voluntarily, theliquidator or any contributory or creditor may apply to the court for an order for thecontinuation of the winding up under the supervision of the court, on the grounds that(i) the company is or is likely to become insolvent; or (ii) the supervision of the courtwill facilitate a more effective, economic or expeditious liquidation of the company inthe interests of the contributories and creditors. A supervision order shall take effect forall purposes as if it was an order that the company be wound up by the court exceptthat a commenced voluntary winding up and the prior actions of the voluntaryliquidator shall be valid and binding upon the company and its official liquidator.

For the purpose of conducting the proceedings in winding up a company andassisting the court, there may be appointed one or more persons to be called an officialliquidator or official liquidators; and the court may appoint to such office such personor persons, either provisionally or otherwise, as it thinks fit, and if more than onepersons are appointed to such office, the court shall declare whether any act required orauthorised to be done by the official liquidator is to be done by all or any one or moreof such persons. The court may also determine whether any and what security is to begiven 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 thecustody of the court.

(p) Reconstructions

Reconstructions and amalgamations are governed by specific statutory provisionsunder the Companies Law whereby such arrangements may be approved by a majorityin number representing 75% in value of members or creditors, depending on thecircumstances, as are present at a meeting called for such purpose and thereaftersanctioned by the courts. Whilst a dissenting member would have the right to expressto the court his view that the transaction for which approval is being sought would notprovide the members with a fair value for their shares, nonetheless the courts areunlikely to disapprove the transaction on that ground alone in the absence of evidenceof fraud or bad faith on behalf of management and if the transaction were approvedand consummated the dissenting member would have no rights comparable to theappraisal rights (i.e. the right to receive payment in cash for the judicially determinedvalue of their shares) ordinarily available, for example, to dissenting members of aUnited States corporation.


– IV-28 –

(q) Take-overs

Where an offer is made by a company for the shares of another company and,within four months of the offer, the holders of not less than 90% of the shares whichare the subject of the offer accept, the offeror may at any time within two months afterthe expiration of the said four months, by notice require the dissenting members totransfer their shares on the terms of the offer. A dissenting member may apply to thecourt of the Cayman Islands within one month of the notice objecting to the transfer.The burden is on the dissenting member to show that the court should exercise itsdiscretion, which it will be unlikely to do unless there is evidence of fraud or bad faithor collusion as between the offeror and the holders of the shares who have accepted theoffer as a means of unfairly forcing out minority members.

(r) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles ofassociation may provide for indemnification of officers and directors, save to the extentany such provision may be held by the court to be contrary to public policy, forexample, where a provision purports to provide indemnification against theconsequences of committing a crime.

4. GENERAL

Appleby, the Company’s legal adviser on Cayman Islands law, has sent to the Companya letter of advice which summarises certain aspects of the Cayman Islands company law.This letter, together with a copy of the Companies Law, is available for inspection asreferred to in the paragraph headed “Documents Available for Inspection” in Appendix VI.Any person wishing to have a detailed summary of Cayman Islands company law or adviceon the differences between it and the laws of any jurisdiction with which he is more familiaris recommended to seek independent legal advice.


– IV-29 –

A. FURTHER INFORMATION ABOUT THE COMPANY

1. Incorporation

Our Company was incorporated in the Cayman Islands under the Companies Lawas an exempted company with limited liability on 16 October 2015. Our Company wasregistered as a non-Hong Kong company in Hong Kong under Part 16 of theCompanies Ordinance on 23 November 2015 and establishes a principal place ofbusiness in Hong Kong at Unit 1505, 15/F, Delta House, 3 On Yiu Street, Shatin, NewTerritories, Hong Kong. Mr. Woo Yuen Fai and Mr. CK Wong have been appointed asthe authorised representatives of our Company for the acceptance of service of processand notices on behalf of our Company in Hong Kong.

As our Company is incorporated in the Cayman Islands, it is subject to theCayman Islands law and to its constitution, which comprises the Memorandum and theArticles. A summary of various provisions of its constitution and relevant aspects ofthe Companies Law is set out in “Appendix IV – Summary of the constitution of ourCompany and Cayman Islands Company Law” to this prospectus.

2. Changes in share capital of our Company

(a) As at the date of incorporation, our Company had an authorised share capitalof HK$380,000 divided into 38,000,000 Shares of HK$0.01 each. 1 Sharewas allotted and issued nil-paid to the subscriber on 16 October 2015, andwas subsequently transferred to Blooming Union on the same day.

(b) Pursuant to the Reorganisation and as consideration for the acquisition byour Company of the entire issued share capital of Super Pioneer fromBlooming Union on 22 February 2016, (i) the 1 nil paid Share held byBlooming Union was credited as fully paid, and (ii) 9,999 Shares, allcredited as fully paid, were allotted and issued to Blooming Union.

(c) On 24 March 2016, our sole Shareholder resolved to increase the authorisedshare capital of our Company from HK$380,000 to HK$20,000,000 by thecreation of an additional of 1,962,000,000 Shares, each ranking pari passuwith the Shares then in issue in all respects.

(d) Immediately following completion of the Capitalisation Issue and thePlacing, and taking no account of any Share to be issued upon exercise ofany options which may be granted under the Share Option Scheme,1,248,000,000 Shares will be issued fully paid or credited as fully paid, and752,000,000 Shares will remain unissued.

APPENDIX V STATUTORY AND GENERAL INFORMATION

– V-1 –

(e) Other than pursuant to the general mandate to issue Shares referred to in theparagraph headed “A. Further information about the Company – 3. Writtenresolutions of our sole Shareholder passed on 24 March 2016” in thisappendix and pursuant to the Share Option Scheme, our Company does nothave any present intention to issue any of the authorised but unissued sharecapital of our Company and, without prior approval of our Shareholders ingeneral meeting, no issue of Shares will be made which would effectivelyalter the control of our Company.

(f) Save as disclosed in this prospectus, there has been no alteration in theCompany’s share capital since its incorporation.

3. Written resolutions of our sole Shareholder passed on 24 March 2016

On 24 March 2016, resolutions in writing were passed by our sole Shareholderpursuant to which, among other things:

(a) our Company approved and adopted the Memorandum and the Articles;

(b) conditional on the Listing Division granting the listing of, and permission todeal in, the Shares in issue and to be issued as mentioned in this prospectus(including any Shares to be issued upon exercise of any options which maybe granted under the Share Option Scheme) and on the obligations of theUnderwriters under the Underwriting Agreement becoming unconditional andthe Underwriting Agreement not being terminated in accordance with itsterms or otherwise, in each case on or before the date falling 30 days afterthe date of the issue of this prospectus:

(i) the Placing was approved and our Directors were authorised to allotand issue the Placing Shares pursuant to the Placing to rank pari passuwith the then existing Shares in all respects;

(ii) the rules of the Share Option Scheme, the principal terms of which areset out in the paragraph headed “D. Share Option Scheme” below inthis appendix, were approved and adopted and our Directors wereauthorised, at their absolute discretion but subject to the terms andconditions of the Share Option Scheme, to grant options to subscribefor Shares thereunder and to allot, issue and deal with the Sharespursuant to the exercise of subscription rights attaching to any optionswhich may be granted under the Share Option Scheme and to take allsuch actions as they consider necessary or desirable to implement theShare Option Scheme;

(iii) conditional further on the share premium account of our Companybeing credited as a result of the Placing, the Capitalisation Issue wasapproved, and our Directors were authorised to capitalise an amount ofHK$10,399,900 standing to the credit of the share premium account ofour Company and to appropriate such amount as to capital to pay up in


– V-2 –

full at par 1,039,990,000 Shares for allotment and issue to BloomingUnion, each ranking pari passu in all respects with the then existingissued Shares, and our Directors were authorised to give effect to suchcapitalisation and distributions;

(c) a general unconditional mandate was given to our Directors to exercise allpowers of our Company to allot, issue and deal with, otherwise than by wayof rights issue or an issue of Shares pursuant to the exercise of any optionswhich may be granted under the Share Option Scheme or any other shareoption scheme of our Company or any Shares allotted and issued in lieu ofthe whole or part of a dividend on Shares or similar arrangement inaccordance with the Memorandum and the Articles or pursuant to a specificauthority granted by our Shareholders in general meeting or pursuant to thePlacing, Shares or securities convertible into Shares or options, warrants orsimilar rights to subscribe for shares or securities convertible into Shares oroptions, warrants or similar rights to subscribe for Shares or such convertiblesecurities, and to make or grant offers, agreements or options which mightrequire the exercise of such power, with an aggregate nominal value notexceeding 20% of the aggregate nominal value of the share capital of ourCompany in issue immediately following completion of the CapitalisationIssue and the Placing (excluding any Shares to be issued upon exercise ofany options which may be granted under the Share Option Scheme), suchmandate to remain in effect until 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 generalmeeting of our Company is required by the Memorandum and theArticles or the Companies Law or any other applicable laws of theCayman Islands to be held; or

(iii) the time when such mandate is revoked or varied by an ordinaryresolution of our Shareholders in general meeting;

(d) a general unconditional mandate was given to our Directors authorising themto exercise all powers of our Company to repurchase on GEM or on anyother stock exchange on which the securities of our Company may be listedand which is recognised by the SFC and the Stock Exchange for this purposesuch number of Shares as will represent up to 10% of the aggregate nominalvalue of the share capital of our Company in issue immediately followingcompletion of the Capitalisation Issue and the Placing (excluding any Sharesto be issued upon exercise of any options which may be granted under theShare Option Scheme), such mandate to remain in effect until the earliest of:

(i) the conclusion of the next annual general meeting of our Company;


– V-3 –

(ii) the expiration of the period within which the next annual generalmeeting of our Company is required by the Memorandum and theArticles or the Companies Law or any other applicable laws of theCayman Islands to be held; or

(iii) the time when such mandate is revoked or varied by an ordinaryresolution of our Shareholders in general meeting; and

(e) the general unconditional mandate mentioned in sub-paragraph (c) above wasextended by the addition to the aggregate nominal value of the share capitalof our Company which may be allotted or agreed to be allotted by ourDirectors pursuant to such general mandate of an amount representing theaggregate nominal value of the share capital of our Company repurchased byour Company pursuant to the mandate to repurchase Shares referred to insub-paragraph (d) above, provided that such extended amount shall notexceed 10% of the aggregate nominal value of the share capital of ourCompany in issue immediately following completion of the CapitalisationIssue and the Placing (excluding any Shares to be issued upon exercise ofany options which may be granted under the Share Option Scheme).

4. Corporate reorganisation

In preparing for the Listing, the companies comprising our Group underwent theReorganisation to rationalise the corporate structure of our Group and our Companybecame the holding company of our Group. The Reorganisation involved the followingmajor steps:

(a) On 1 July 2015, Blooming Union was incorporated in the BVI and isauthorised to issue a maximum of 50,000 shares of US$1.00 each. One shareand one share of Blooming Union (representing 50% and 50% of the entireissued share capital of Blooming Union, respectively, at the relevant time)were allotted and issued to Mr. CK Wong and Mr. WW Wong, respectively,on 31 July 2015.

(b) On 1 July 2015, Super Pioneer was incorporated in the BVI and isauthorised to issue a maximum of 50,000 shares of US$1.00 each. One shareof Super Pioneer (representing the entire issued share capital of SuperPioneer at the relevant time) was allotted and issued to Blooming Union on31 July 2015.

(c) On 16 October 2015, our Company was incorporated in the Cayman Islandswith an authorised share capital of HK$380,000 divided into 38,000,000Shares of HK$0.01 each. 1 nil-paid Share was allotted and issued to thesubscriber, and was subsequently transferred to Blooming Union on the sameday.


– V-4 –

(d) On 29 October 2015, Super Pioneer acquired 1,900,000 shares and 1,900,000shares of Luen Hing (which, in aggregate, represents the entire issued sharesof Luen Hing at the relevant time) from Mr. CK Wong and Mr. WW Wong,respectively, and in consideration, Super Pioneer issued and allotted 2 sharesin Super Pioneer, credited as fully paid, to Blooming Union. After theaforesaid share transfer, Super Pioneer held 3,800,000 shares of Luen Hing(representing the entire issued shares of Luen Hing at the relevant time).

(e) On 29 October 2015, Super Pioneer acquired 10,000 shares and 10,000shares of Hop Fung (which, in aggregate, represents the entire issued sharesof Hop Fung at the relevant time) from Mr. CK Wong and Mr. WW Wong,respectively, and in consideration, Super Pioneer issued and allotted 2 sharesin Super Pioneer, credited as fully paid, to Blooming Union. After theaforesaid share transfer, Super Pioneer held 20,000 shares of Hop Fung(representing the entire issued shares of Hop Fung at the relevant time).

(f) Pursuant to the sale and purchase agreement dated 22 February 2016 referredto in item (1) of the paragraph headed “B. Further information about thebusiness – 1. Summary of material contracts” in this appendix, our Companyagreed to acquire 5 share of Super Pioneer (representing the entire issuedshares of Super Pioneer at the relevant time) from Blooming Union, and inconsideration thereof, (i) the 1 nil-paid Share held by Blooming Union wascredited as fully paid; and (ii) 9,999 Shares were allotted and issued toBlooming Union, and will be credited as fully paid.

(g) On 21 March 2016, by way of loans capitalisation, Luen Hing appliedHK$280,000 owed to Mr. CK Wong and HK$5,200,000 owed to Mr. WWWong toward the satisfaction of the issue and allotment of 5,480,000 newshares of Luen Hing at a subscription price of HK$1 each to Super Pioneer(as directed by Mr. CK Wong and Mr. WW Wong, respectively). After theaforesaid loans capitalisation and issue and allotment of shares of Luen Hingremains a wholly-owned subsidiary of Super Pioneer.

(h) On 21 March 2016, by way of loan capitalisation, Hop Fung appliedHK$4,920,000 owed to Mr. CK Wong toward the satisfaction of the issueand allotment of 4,920,000 new shares of Hop Fung at a subscription priceof HK$1 each to Super Pioneer (as directed by Mr. CK Wong). After theaforesaid loan capitalisation and issue and allotment of shares of Hop Fungremains a wholly-owned subsidiary of Super Pioneer.

Immediately after completion of the share transfer referred to in item (f) above,our Company then became the holding company of our Group.

5. Changes in share capital of subsidiaries

The subsidiaries of our Company are listed in the Accountant’s Report of theCompany, the text of which is set out in Appendix I to this prospectus.


– V-5 –

Save as disclosed in the paragraph headed “A. Further information about theCompany – 4. Corporate reorganisation” in this appendix and in the section headed“History and Development” in this prospectus, there has been no alteration in the sharecapital of any of the subsidiaries of our Company within the two years immediatelypreceding the date of this prospectus.

6. Repurchase of Shares by our Company

This section contains information required by the Stock Exchange to be includedin this prospectus concerning the repurchase of Shares by our Company.

(a) Provisions of the GEM Listing Rules

The GEM Listing Rules permit companies whose primary listing is on GEMto repurchase their securities on GEM subject to certain restrictions, a summary ofwhich is set out below:

(i) Shareholders’ approval

The GEM Listing Rules provide that all proposed repurchases ofshares, which must be fully paid up in the case of shares, by a companywith a primary listing on GEM must be approved in advance by an ordinaryresolution of the shareholders, either by way of general mandate or byspecific approval of a particular transaction.

Note: Pursuant to the written resolutions passed by our sole Shareholder on 24 March 2016, ageneral unconditional mandate (the “Repurchase Mandate”) was given to ourDirectors authorising them to exercise all powers of our Company to repurchase Shareson GEM or on any other stock exchange on which the securities of our Company maybe listed and which is recognised by the SFC and the Stock Exchange for this purpose,such number of Shares as will represent up to 10% of the aggregate nominal value ofthe share capital of our Company in issue immediately following completion of theCapitalisation Issue and the Placing (excluding any Shares to be issued upon exerciseof any options which may be granted under the Share Option Scheme), and theRepurchase Mandate shall remain in effect until the earliest of the conclusion of thenext annual general meeting of our Company, or the expiration of the period withinwhich the next annual general meeting of our Company is required by theMemorandum and the Articles or the Companies Law or any other applicable laws ofthe Cayman Islands to be held or the time when the Repurchase Mandate is revoked orvaried by an ordinary resolution of our Shareholders in a general meeting.

(ii) Source of funds

Any repurchase by our Company must be funded out of funds legallyavailable for the purpose in accordance with the Articles, the applicable lawsof the Cayman Islands and the GEM Listing Rules. Our Company may notrepurchase its own Shares on GEM for a consideration other than cash or forsettlement otherwise than in accordance with the trading rules of the StockExchange from time to time.


– V-6 –

Any repurchases by our Company may be made out of profits or out ofthe proceeds of a fresh issue of Shares made for the purpose of therepurchase or, if authorised by the Articles and subject to the CompaniesLaw, out of capital and, in the case of any premium payable on therepurchase, out of profits of our Company or out of our Company’s sharepremium account before or at the time the Shares are repurchased or, ifauthorised by the Articles and subject to the Companies Law, out of capital.

(iii) Connected parties

The GEM Listing Rules prohibit our Company from knowinglyrepurchasing the Shares on GEM from a “core connected person” (as definedin the GEM Listing Rules), which includes a Director, chief executive orsubstantial shareholder of our Company or any of its subsidiaries or a closeassociate of any of them, and a core connected person shall not knowinglysell Shares to our Company on GEM.

(b) Exercise of the Repurchase Mandate

On the basis of 1,248,000,000 Shares in issue immediately after completionof the Capitalisation Issue and the Placing, our Directors would be authorisedunder the Repurchase Mandate to repurchase up to 124,800,000 Shares during theperiod in which the Repurchase Mandate remains in force. Any Sharesrepurchased pursuant to the Repurchase Mandate must be fully paid-up.

(c) Reasons for repurchases

Our Directors believe that it is in the best interests of our Company and ourShareholders for our Directors to have a general authority from Shareholders toenable our Company to repurchase Shares in the market. Such repurchases may,depending on market conditions and funding arrangements at the time, lead to anenhancement of our Company’s net asset value and/or earnings per Share and willonly be made when our Directors believe that such repurchases will benefit ourCompany and our Shareholders.

(d) Funding of repurchases

In repurchasing the Shares, our Company may only apply funds legallyavailable for such purpose in accordance with the Articles, the GEM Listing Rulesand the applicable laws and regulations of the Cayman Islands.

Our Directors do not propose to exercise the Repurchase Mandate to suchextent as would, in the circumstances, have a material adverse effect on theworking capital requirements of our Company or the gearing levels which in theopinion of our Directors are from time to time appropriate for our Company.


– V-7 –

(e) General

None of our Directors nor, to the best of their knowledge, having made allreasonable enquiries, any of their close associates (as defined in the GEM ListingRules), has any present intention to sell any Shares to our Company or any of itssubsidiaries if the Repurchase Mandate is exercised.

Our Directors have undertaken to the Stock Exchange that, so far as thesame may be applicable, they will exercise the Repurchase Mandate in accordancewith the GEM Listing Rules, the Articles and the applicable law and regulationsfrom time to in force in the Cayman Islands.

If as a result of a repurchase of Shares pursuant to the Repurchase Mandate,a Shareholder’s proportionate interest in the voting rights of our Companyincreases, such increase will be treated as an acquisition for the purpose of theTakeovers Code. In certain circumstances, a Shareholder or a group ofShareholders acting in concert (as defined in the Takeovers Code) depending onthe level of increase of our Shareholders’ interest, could obtain or consolidatecontrol of our Company and may become obliged to make a mandatory offer inaccordance with Rule 26 of the Takeovers Code as a result of any such increase.

Save as disclosed above, our Directors are not aware of any consequenceswhich may arise under the Takeovers Code as a consequence of any repurchase ofShares if made immediately after the Listing pursuant to the Repurchase Mandate.At present, so far as is known to the Directors, no Shareholder may becomeobliged to make a mandatory offer in accordance with Rule 26 of the TakeoversCode in the event that our Directors exercise the power in full to repurchase theShares pursuant to the Repurchase Mandate.

Our Directors will not exercise the Repurchase Mandate if the repurchasewould result in the number of Shares which are in the hands of the public fallingbelow 25% of the total number of Shares in issue (or such other percentage asmay be prescribed as the minimum public shareholding under the GEM ListingRules).

No core connected person has notified our Company that he has a presentintention to sell Shares to our Company or any of its subsidiaries, or hasundertaken not to do so, if the Repurchase Mandate is exercised.


– V-8 –

B. FURTHER INFORMATION ABOUT THE BUSINESS

1. Summary of material contracts

The following contracts (not being contracts entered into in the ordinary course ofbusiness) have been entered into by our Group within the two years preceding the dateof this prospectus and are or may be material in relation to the business of ourCompany taken as a whole:

(a) a sale and purchase agreement dated 18 September 2015 entered intobetween Hop Fung as vendor and an independent third party as purchaser,pursuant to which Hop Fung agreed to dispose of its property located at FlatC of North Court on the 5th Floor of Tower 5 of Phase 1, Festival City,No.1 Mei Tin Road, Tai Wai, Sha Tin, New Territories, Hong Kong for anaggregate consideration of HK$12,700,000;

(b) a sale and purchase agreement dated 29 October 2015 entered into amongMr. CK Wong, Mr. WW Wong and Super Pioneer, pursuant to which SuperPioneer agreed to acquire 1,900,000 shares and 1,900,000 shares of LuenHing from Mr. CK Wong and Mr. WW Wong, respectively, and inconsideration thereof, Super Pioneer issued and allotted 2 shares in SuperPioneer, credited as fully paid, to Blooming Union;

(c) an instrument of transfer dated 29 October 2015 entered into between SuperPioneer and Mr. CK Wong for the transfer of 1,900,000 shares of Luen Hingas referred to item (b) above;

(d) bought and sold notes dated 29 October 2015 executed by Super Pioneer andMr. CK Wong for the transfer of 1,900,000 shares of Luen Hing as referredto item (b) above;

(e) an instrument of transfer dated 29 October 2015 entered into between SuperPioneer and Mr. WW Wong for the transfer of 1,900,000 shares of LuenHing as referred to item (b) above;

(f) bought and sold notes dated 29 October 2015 executed by Super Pioneer andMr. WW Wong for the transfer of 1,900,000 shares of Luen Hing as referredto item (b) above;

(g) a sale and purchase agreement dated 29 October 2015 entered into amongMr. CK Wong, Mr. WW Wong and Super Pioneer, pursuant to which SuperPioneer agreed to acquire 10,000 shares and 10,000 shares of Hop Fungfrom Mr. CK Wong and Mr. WW Wong, respectively, and in considerationthereof, Super Pioneer issued and allotted 2 shares in Super Pioneer, creditedas fully paid, to Blooming Union;


– V-9 –

(h) an instrument of transfer dated 29 October 2015 entered into between SuperPioneer and Mr. CK Wong for the transfer of 10,000 shares of Hop Fung asreferred to item (g) above;

(i) bought and sold notes dated 29 October 2015 executed by Super Pioneer andMr. CK Wong for the transfer of 10,000 shares of Hop Fung as referred toitem (g) above;

(j) an instrument of transfer dated 29 October 2015 entered into between SuperPioneer and Mr. WW Wong for the transfer of 10,000 shares of Hop Fung asreferred to item (g) above;

(k) bought and sold notes dated 29 October 2015 executed by Super Pioneer andMr. WW Wong for the transfer of 10,000 shares of Hop Fung as referred toitem (g) above;

(l) a sale and purchase agreement dated 22 February 2016 entered into betweenour Company and Blooming Union, pursuant to which our Company agreedto acquire 5 shares of Super Pioneer from Blooming Union, and inconsideration thereof, (i) the 1 nil paid Share held by Blooming Union wascredited as fully paid; and (ii) 9,999 Shares, all credited as fully paid, wereallotted and issued to Blooming Union;

(m) an instrument of transfer dated 22 February 2016 entered into between ourCompany and Blooming Union for the transfer of 5 shares of Super Pioneeras referred to item (l) above;

(n) a loan capitalisation agreement dated 21 March 2016 entered into betweenSuper Pioneer and Luen Hing, pursuant to which Luen Hing appliedHK$280,000 owed to Mr. CK Wong and HK$5,200,000 owed to Mr. WWWong, respectively, toward the satisfaction of the issue and allotment of5,480,000 new shares of Luen Hing at a subscription price of HK$1 pershare to Super Pioneer (as directed by Mr. CK Wong and Mr. WW Wong,respectively);

(o) a loan capitalisation agreement dated 21 March 2016 entered into betweenSuper Pioneer and Hop Fung, pursuant to which Hop Fung appliedHK$4,920,000 owed by Hop Fung to Mr. CK Wong toward the satisfactionof the issue and allotment of 4,920,000 new shares of Hop Fung at asubscription price of HK$1 per share to Super Pioneer (as directed by Mr.CK Wong);

(p) the Deed of Non-competition;

(q) the Deed of Indemnity; and

(r) the Underwriting Agreement.


– V-10 –

2. Intellectual property rights of our Group

(a) Trademark

As at the Latest Practicable Date, our Group has registered a trade mark asfollow:

TrademarkPlace ofapplication

Applicationnumber Class

Date ofapplication/registration

Name ofapplicant

Hong Kong 303571065 7, 37 26 February2016

Luen Hing

(b) Domain name(s)

As at the Latest Practicable Date, our Group has registered the followingdomain name:

Domain name RegistrantRegistrationdate Expiry date

luenwong.hk Luen Hing 20 November2015

19 November2017

C. FURTHER INFORMATION ABOUT SUBSTANTIAL SHAREHOLDERS,DIRECTORS AND EXPERTS

1. Disclosure of Interests

(a) Interests of Directors and chief executive in shares, underlying shares anddebentures of our Company and our associated corporations

Immediately following completion of the Capitalisation Issue and the Placing(without taking account any Shares to be issued upon exercise of any optionswhich may be granted under the Share Option Scheme), the interests and shortpositions of our Directors or chief executive of our Company in shares,underlying shares and debentures of our Company or any of its associatedcorporations (within the meaning of Part XV of the SFO) which, once the Sharesare listed on GEM, would have to be notified to our Company and the StockExchange under Divisions 7 and 8 of Part XV of the SFO (including any interestsand short positions which they are taken or deemed to have under such provisionsof the SFO) or would be required, pursuant to section 352 of the SFO, to beentered in the register referred to therein, or would be required pursuant to the


– V-11 –

Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions byour Directors to be notified to our Company and the Stock Exchange, will be asfollows:

(i) Long position in the Shares

NameCapacity/natureof interest

Number of Sharesheld/ interested

immediatelyfollowing

completion of theCapitalisationIssue and the

Placing

Percentage ofshareholdingimmediately



Placing

Mr. CK Wong Interest of acontrolledcorporation (Note 1)

936,000,000 75%

Mr. WW Wong Interest of acontrolledcorporation (Note 2)

936,000,000 75%

Notes:

1. The issued shares of Blooming Union are owned as to 50% by Mr. CK Wong.Therefore, Mr. CK Wong is deemed or taken to be interested in all the Sharesheld by Blooming Union for the purpose of the SFO.

2. The issued shares of Blooming Union are owned as to 50% by Mr. WW Wong.Therefore, Mr. WW Wong is deemed or taken to be interested in all the Sharesheld by Blooming Union for the purpose of the SFO.

(ii) Long position in the share of associated corporations

Name of Director

Name ofassociatedcorporation

Capacity/nature

Number ofshare held/

interestedPercentage ofshareholding

Mr. CK Wong BloomingUnion

Beneficialowner

1 50%

Mr. WW Wong BloomingUnion

Beneficialowner

1 50%


– V-12 –

(b) Interests of substantial and other Shareholders in the Shares andunderlying Shares

So far as is known to our Directors and taking no account any Shares whichmay be issued pursuant to options which may be granted under the Share OptionScheme, the following persons (not being a Director or chief executive of ourCompany) will, immediately following completion of the Capitalisation Issue andthe Placing, have interests or short positions in Shares or underlying Shares whichwould fall to be disclosed to our Company and the Stock Exchange under theprovisions of Divisions 2 and 3 of Part XV of the SFO or who will be directly orindirectly interested in 10% or more of the nominal value of any class of sharecapital carrying rights to vote in all circumstances at general meetings of ourCompany or any of its subsidiaries:

Long position in the Shares

Name Capacity/nature

Number ofShares held/

interestedPercentage ofshareholding

Blooming Union Beneficial owner 936,000,000 75%

Ms Law Oi Ling Interest of spouse(Note 1)

936,000,000 75%

Ms Lai Siu Kuen Interest of spouse(Note 2)

936,000,000 75%

Note:

1. Ms. Law Oi Ling, the spouse of Mr. CK Wong, is deemed, or taken to be, interested in936,000,000 Shares in which Mr. CK Wong is interested for the purpose of the SFO.

2. Ms. Lai Siu Kuen, the spouse of Mr. WW Wong, is deemed, or taken to be, interested in936,000,000 Shares in which Mr. WW Wong is interested for the purpose of the SFO.

2. Particulars of service agreements

None of our Directors has or is proposed to have any service agreement with ourCompany or any of its subsidiaries (excluding contracts expiring or determinable by theemployer within one year without payment of compensation other than statutorycompensation).


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3. Remuneration of Directors

(a) The aggregate amount of emoluments (excluding payment pursuant to anydiscretionary benefits or bonus or other fringe benefits) paid by our Group toour Directors in respect of financial year ended 31 March 2014, financialyear ended 31 March 2015 and eight months ended 30 November 2015 wereapproximately HK$3,946,000, HK$3,934,000 and HK$2,160,000,respectively.

(b) Under the arrangement currently in force, we estimate the total compensation(including Directors fees, salaries, discretionary bonus, contributions toretirement benefit schemes, pension), to be paid or accrued to our Directorsfor the year ending 31 March 2016 to be HK$4.4 million.

(c) Under the arrangements currently proposed, conditional upon the Listing, thebasic annual remuneration (excluding payment pursuant to any discretionarybenefits or bonus or other fringe benefits) payable by our Group to each ofour Directors will be as follows:

Executive Directors HK$

Mr. CK Wong 1,080,000Mr. WW Wong 1,080,000Mr. Wong Tak Ming 670,000Mr. Chiu Chi Wang 480,000

Independent non-executive Directors HK$

Mr. Wong Chi Kan 120,000Mr. Liu Yan Chee James 120,000Mr. Tai Hin Henry 120,000

(d) Each of our Directors has entered into a service contract with our Companyfor a term of three years commencing from the Listing Date, which may beterminated by not less than three months’ notice served by either party onthe other, and is subject to termination provisions therein and provisions onretirement by rotation of Directors as set out in the Memorandum and theArticles.


– V-14 –

4. Agency fees or commissions received

Save as disclosed in the section headed “Underwriting – Commission andExpenses” in this prospectus, and in the paragraph headed “E. Other information – 3.Sponsor” in this appendix, none of our Directors or the experts named in the paragraphheaded “E. Other information – 7. Consents of experts” in this appendix had receivedany agency fee or commissions from our Group within the two years preceding thedate of this prospectus.

5. Related party transactions

Details of the related party transactions are set out under Note 29 to theAccountant’s Report of our Company set out in Appendix I to this prospectus.

6. Disclaimers

Save as disclosed in this prospectus:

(a) taking no account of any Shares to be issued upon exercise of any optionswhich may be granted under the Share Option Scheme or repurchased by ourCompany pursuant to the mandate as referred to in the paragraph headed “A.Further information about the Company” in this appendix, and taking noaccount of any Shares which may be issued upon the exercise of optionswhich may be granted under the Share Option Scheme, our Directors are notaware of any person (not being a Director or chief executive of ourCompany) who will, immediately following completion of the CapitalisationIssue and the Placing, have an interest or short position in Shares orunderlying Shares which would fall to be disclosed to our Company and theStock Exchange under the provisions of Divisions 2 and 3 of Part XV of theSFO, or who will be directly or indirectly interested in 10% or more of thenominal value or any class of share capital carrying rights to vote in allcircumstances at general meetings of our Company or any of its subsidiaries;

(b) taking no account of any Shares to be issued upon exercise of any optionswhich may be granted under the Share Option Scheme, none of our Directorsor chief executive of our Company has any interest or short position inshares, underlying shares or debentures of our Company or any of itsassociated corporations (within the meaning of Part XV of the SFO) whichwould have to be notified to our Company and the Stock Exchange underDivisions 7 and 8 of Part XV of the SFO (including any interests and shortpositions which they are taken or deemed to have under such provisions ofthe SFO) or would be required, pursuant to section 352 of the SFO, to beentered in the register referred to therein, or would be required, pursuant toRules 5.46 to 5.67 of the GEM Listing Rules relating to securitiestransactions by our Directors, to be notified to our Company and the StockExchange, in each case once the Shares are listed on GEM;


– V-15 –

(c) none of the Directors or the experts named in the paragraph headed “E.Other information – 6. Qualifications of experts” in this appendix isinterested in the promotion of, or in any assets which have been, within thetwo years immediately preceding the issue of this prospectus, acquired ordisposed of by or leased to any member of our Group, or are proposed to beacquired or disposed of by or leased to any member of our Group;

(d) none of the Directors or the experts named in the paragraph headed “E.Other information – 6. Qualifications of experts” in this appendix ismaterially interested in any contract or arrangement subsisting at the date ofthis prospectus which is significant in relation to the business of our Grouptaken as a whole;

(e) none of the Directors or the experts named in the paragraph headed “E.Other information – 6. Qualifications of experts” in this appendix has anyshareholding in any member of our Group or the right (whether legallyenforceable or not) to subscribe for or to nominate persons to subscribe forsecurities in any member of our Group;

(f) so far as is known to our Directors, none of our Directors, their respectiveclose associates (as defined under the GEM Listing Rules) or Shareholderswho are interested in more than 5% of the issued share capital of ourCompany has any interests in the five largest customers or the five largestsuppliers of our Group;

(g) none of our Directors has any existing or proposed service contracts withany member of our Group (excluding contracts expiring or determinable bythe employer within one year without payment of compensation (other thanstatutory compensation)); and

(h) no remuneration or other benefits in kind have been paid by any member ofour Group to any Director since the date of incorporation of our Company,nor are any remuneration or benefits in kind payable by any member of ourGroup to any Director in respect of the current financial year under anyarrangement in force as at the Latest Practicable Date.

D. SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme on 24 March 2016.The following is a summary of the principal terms of the Share Option Scheme but does notform part of, nor was it intended to be part of the Share Option Scheme, nor should it betaken as affecting the interpretation of the rules of the Share Option Scheme.

The terms of the Share Option Scheme are in accordance with the provisions ofChapter 23 of the GEM Listing Rules.


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(a) Definitions

For the purpose of this section, the following expressions have the meanings setout below unless the context requires otherwise:

“Adoption Date” 24 March 2016, the date on which the Share OptionScheme is conditionally adopted by our soleShareholder by way of written resolutions

“Board” the board of Directors or a duly authorisedcommittee of the board of Directors

“Business Day” any day on which the Stock Exchange is open forthe business of dealing in securities

“Group” our Company and any entity in which our Company,directly or indirectly, holds any equity interest

“Scheme Period” the period commencing on the Adoption Date andexpiring at the close of business on the BusinessDay immediately preceding the tenth anniversarythereof

(b) Summary of terms

The following is a summary of the principal terms of the rules of the ShareOption Scheme conditionally adopted by the written resolutions of our sole Shareholderpassed on 24 March 2016:

(i) Purpose of the Share Option Scheme

The purpose of the Share Option Scheme is to attract and retain the bestavailable personnel, to provide additional incentive to employees (full-time andpart-time), directors, consultants, advisers, distributors, contractors, suppliers,agents, customers, business partners and services providers of our Group and topromote the success of the business of our Group.

(ii) Who may join and basis of eligibility

The Board may, at its absolute discretion and on such terms as it may thinkfit, grant any employee (full-time or part-time), director, consultant or adviser ofour Group, or any substantial shareholder of our Group, or any distributor,contractor, supplier, agent, customer, business partner or services provider of ourGroup, options to subscribe at a price calculated in accordance with paragraph(iii) below for such number of Shares as it may determine in accordance with theterms of the Share Option Scheme. The basis of eligibility of any participant tothe grant of any option shall be determined by the Board (or as the case may be,


– V-17 –

the independent non-executive Directors) from time to time on the basis of hiscontribution or potential contribution to the development and growth of ourGroup.

(iii) Price of Shares

The subscription price of a Share in respect of any particular option grantedunder the Share Option Scheme shall be a price solely determined by the Boardand notified to a participant and shall be at least the higher of: (i) the closingprice of the Shares as stated in the Stock Exchange’s daily quotations sheet on thedate of grant of the option, which must be a Business Day; (ii) the averageclosing prices of the Shares as stated in the Stock Exchange’s daily quotationssheets for the five Business Days immediately preceding the date of grant of theoption; and (iii) the nominal value of a Share on the date of grant of the option.For the purpose of calculating the subscription price, where our Company hasbeen listed on the Stock Exchange for less than five Business Days, the new issueprice shall be used as the closing price for any Business Day fall within theperiod before listing.

(iv) Grant of options and acceptance of offers

An offer for the grant of options must be accepted within seven daysinclusive of the day on which such offer was made. The amount payable by thegrantee of an option to our Company on acceptance of the offer for the grant ofan option is HK$1.

(v) Maximum number of Shares

(aa) subject to sub-paragraphs (bb) and (cc) below, the maximum number ofShares issuable upon exercise of all options to be granted under theShare Option Scheme and any other share option schemes of ourCompany as from the Adoption Date (excluding, for this purpose,Shares issuable upon exercise of options which have been granted butwhich have lapsed in accordance with the terms of the Share OptionScheme or any other share option schemes of our Company) must notin aggregate exceed 10% of all the Shares in issue as at the ListingDate. Therefore, it is expected that our Company may grant options inrespect of up to 124,800,000 Shares (or such numbers of Shares asshall result from a sub-division or a consolidation of such 124,800,000Shares from time to time) to the participants under the Share OptionScheme.

(bb) The 10% limit as mentioned above may be refreshed at any time byobtaining approval of our Shareholders in general meeting provided thatthe total number of Shares which may be issued upon exercise of alloptions to be granted under the Share Option Scheme and any othershare option schemes of our Company must not exceed 10% of theShares in issue as at the date of approval of the refreshed limit. Options


– V-18 –

previously granted under the Share Option Scheme and any other shareoption schemes of our Company (including those outstanding, cancelledor lapsed in accordance with the terms of the Share Option Scheme orany other share option schemes of our Company) will not be countedfor the purpose of calculating the refreshed 10% limit. A circular mustbe sent to our Shareholders containing the information as requiredunder the GEM Listing Rules in this regard.

(cc) our Company may seek separate approval of our Shareholders ingeneral meeting for granting options beyond the 10% limit provided theoptions in excess of the 10% limit are granted only to granteesspecifically identified by our Company before such approval is sought.In such event, our Company must send a circular to our Shareholderscontaining a generic description of such grantees, the number and termsof such options to be granted and the purpose of granting options tothem with an explanation as to how the terms of the options will servesuch purpose, such other information required under the GEM ListingRules.

(dd) The aggregate number of Shares which may be issued upon exercise ofall outstanding options granted and yet to be exercised under the ShareOption Scheme and any other share option schemes of our Companymust not exceed 30% of the Shares in issue from time to time. Nooptions may be granted under the Share Option Scheme or any othershare option schemes of our Company if this will result in such 30%limit being exceeded.

(vi) Maximum entitlement of each participant

The total number of Shares issued and to be issued upon exercise of optionsgranted to any participant (including both exercised and outstanding options)under the Share Option Scheme, in any 12-month period up to the date of grantshall not exceed 1% of the Shares in issue. Any further grant of options in excessof such limit must be separately approved by Shareholders in general meetingwith such grantee and his close associates abstaining from voting. In such event,our Company must send a circular to our Shareholders containing the identity ofthe grantee, the number and terms of the options to be granted (and optionspreviously granted to such grantee), and all other information required under theGEM Listing Rules. The number and terms (including the subscription price) ofthe options to be granted must be fixed before the approval of our Shareholdersand the date of the Board meeting proposing such further grant should be taken asthe date of grant for the purpose of calculating the subscription price.


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(vii) Grant of options to certain connected persons

(aa) Any grant of an option to a Director, chief executive or SubstantialShareholder (or any of their respective associates) must be approved bythe independent non-executive Directors (excluding any independentnon-executive Director who is the grantee of the option).

(bb) Where any grant of options to a substantial Shareholder or anindependent non-executive Director (or any of their respectiveassociates) will result in the total number of Shares issued and to beissued upon exercise of all options already granted and to be granted tosuch person under the Share Option Scheme and any other share optionschemes of our Company (including options exercised, cancelled andoutstanding) in any 12-month period up to and including the date ofgrant:

(i) representing in aggregate over 0.1% of the Shares in issue; and

(ii) having an aggregate value, based on the closing price of theShares at the date of each grant, in excess of HK$5,000,000, suchfurther grant of options is required to be approved byShareholders at a general meeting of our Company, with voting tobe taken by way of poll. Our Company shall send a circular to ourShareholders containing all information as required under theGEM Listing Rules in this regard. All core connected persons ofour Company shall abstain from voting (except where any coreconnected person intends to vote against the proposed grant). Anychange in the terms of an option granted to a substantialShareholder or an independent non-executive Director or any oftheir respective close associates is also required to be approved byShareholders in the aforesaid manner.

(viii) Restrictions on the times of grant of options

(aa) An offer for the grant of options may not be made after any insideinformation (as defined in the SFO) has come to the knowledge of ourCompany until such inside information has been announced pursuant tothe requirements of the GEM Listing Rules and the SFO. In particular,no option may be granted during the period commencing one monthimmediately before the earlier of:

(i) the date of the Board meeting (as such date is first notified to theStock Exchange in accordance with the GEM Listing Rules) forapproving our Company’s results for any year, half-year, quarterlyor other interim period (whether or not required under the GEMListing Rules); and


– V-20 –

(iii) the deadline for our Company to announce its results for any year,half-year or quarterly period under the GEM Listing Rules, orother interim period (whether or not required under the GEMListing Rules).

(bb) Further to the restrictions in paragraph (aa) above, no option may begranted on any day on which financial results of our Company arepublished and:

(i) during the period of 60 days immediately preceding thepublication date of the annual results or, if shorter, the periodfrom the end of the relevant financial year up to the publicationdate of the results; and

(ii) during the period of 30 days immediately preceding thepublication date of the quarterly results and half-year results or, ifshorter, the period from the end of the relevant quarterly orhalf-year period up to the publication date of the results.

(ix) Time of exercise of option

An option may be exercised in accordance with the terms of the ShareOption Scheme at any time during a period as the Board may determine whichshall not exceed ten years from the date of grant subject to the provisions of earlytermination thereof.

(x) Performance targets

Save as determined by the Board and provided in the offer of the grant ofthe relevant options, there is no performance target which must be achievedbefore any of the options can be exercised.

(xi) Ranking of Shares

The Shares to be allotted upon the exercise of an option will be subject toall the provisions of the Articles for the time being in force and will rank paripassu in all respects with the fully paid Shares in issue on the date of allotmentand accordingly will entitle the holders to participate in all dividends or otherdistributions paid or made after the date of allotment other than any dividend orother distribution previously declared or recommended or resolved to be paid ormade with respect to a record date which shall be on or before the date ofallotment, save that the Shares allotted upon the exercise of any option shall notcarry any voting rights until the name of the grantee has been duly entered on theregister of members of our Company as the holder thereof.


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(xii) Rights are personal to grantee

An option shall not be transferable or assignable and shall be personal to thegrantee of the option.

(xiii) Rights on cessation of employment by death

In the event of the death of the grantee (provided that none of the eventswhich would be a ground for termination of employment referred to in (xiv)below arises within a period of 3 years prior to the death, in the case the granteeis an employee at the date of grant), the legal personal representative(s) of thegrantee may exercise the option up to the grantee’s entitlement (to the extentwhich has become exercisable and not already exercised) within a period of 12months following his death provided that where any of the events referred to in(xvii), (xviii) and (xix) occurs prior to his death or within such period of 12months following his death, then his personal representative(s) may so exercisethe option within such of the various periods respectively set out therein.

(xiv) Rights on cessation of employment by dismissal

In the event that the grantee is an employee of our Group at the date ofgrant and he subsequently ceases to be an employee of our Group on any one ormore of the grounds that he has been guilty of serious misconduct, or hascommitted an act of bankruptcy or has become insolvent or has made anyarrangement or composition with his creditors generally, or has been convicted ofany criminal offence involving his integrity or honesty or (if so determined by theBoard) on any other ground on which an employer would be entitled to terminatehis employment at common law or pursuant to any applicable laws or under thegrantee’s service contract with our Group, his option shall lapse automatically (tothe extent not already exercised) on the date of cessation of his employment withour Group.

(xv) Rights on cessation of employment for other reasons

In the event that the grantee is an employee of our Group at the date ofgrant and he subsequently ceases to be an employee of our Group for any reasonother than his death or the termination of his employment on one or more of thegrounds specified in (xiv) above, the option (to the extent not already exercised)shall lapse on the expiry of 3 months after the date of cessation of suchemployment (which date will be the last actual working day with our Company orthe relevant member of our Group whether salary is paid in lieu of notice or not).

(xvi) Effects of alterations to share capital

In the event of any alteration in the capital structure of our Company whilstany option remains exercisable, whether by way of capitalisation of profits orreserves, rights issue, consolidation, subdivision or reduction of the share capitalof our Company (other than an issue of Shares as consideration in respect of a


– V-22 –

transaction to which any member of our Group is a party), such correspondingadjustments (if any) shall be made in the number of Shares subject to the optionso far as unexercised; and/or the subscription prices, as the auditors of orindependent financial adviser to our Company shall certify or confirm in writing(as the case may be) to the Board to be in their opinion fair and reasonable incompliance with the relevant provisions of the GEM Listing Rules, or anyguideline or supplemental guideline issued by the Stock Exchange from time totime (no such certification is required in case of adjustment made on acapitalisation issue), provided that any alteration shall give a grantee the sameproportion of the issued share capital of our Company as that to which he waspreviously entitled, but no adjustment shall be made to the effect of which wouldbe to enable a Share to be issued at less than its nominal value.

(xvii) Rights on a general offer

In the event of a general offer (whether by way of takeover offer or schemeof arrangement or otherwise in like manner) being made to all our Shareholders(or all such holders other than the offeror and, or any persons controlled by theofferor and, or any person acting in association or concert with the offeror) andsuch offer becoming or being declared unconditional, the grantee (or, as the casemay be, his legal personal representative(s)) shall be entitled to exercise theoption in full (to the extent not already exercised) at any time within one monthafter the date on which the offer becomes or is declared unconditional.

(xviii) Rights on winding-up

In the event a notice is given by our Company to the members to convene ageneral meeting for the purposes of considering, and if thought fit, approving aresolution to voluntarily wind-up our Company, our Company shall on the samedate as or soon after it despatches such notice to each member of our Companygive notice thereof to all grantees and thereupon, each grantee (or, as the casemay be, his legal personal representative(s)) shall be entitled to exercise all or anyof his options at any time not later than 2 Business Days prior to the proposedgeneral meeting of our Company by giving notice in writing to our Company,accompanied by a remittance for the full amount of the aggregate subscriptionprice for the Shares in respect of which the notice is given whereupon ourCompany shall as soon as possible and, in any event, no later than the BusinessDay immediately prior to the date of the proposed general meeting referred toabove, allot the relevant Shares to the grantee credited as fully paid.

(xix) Rights on compromise or arrangement

In the event of a compromise or arrangement between our Company and ourShareholders or the creditors of our Company being proposed in connection witha scheme for the reconstruction of our Company or its amalgamation with anyother company or companies pursuant to the Companies Law, our Company shallgive notice thereof to all the grantees (or, as the case may be, their legal personalrepresentatives) on the same day as it gives notice of the meeting to our


– V-23 –

Shareholders or the creditors to consider such a compromise or arrangement andthe options (to the extent not already exercised) shall become exercisable inwhole or in part on such date not later than two Business Days prior to the dateof the general meeting directed to be convened by the court for the purposes ofconsidering such compromise or arrangement (“Suspension Date”), by givingnotice in writing to our Company accompanied by a remittance for the fullamount of the aggregate subscription price for the Shares in respect of which thenotice is given whereupon our Company shall as soon as practicable and, in anyevent, no later than 3:00 p.m. on the Business Day immediately prior to the dateof the proposed general meeting, allot and issue the relevant Shares to the granteecredited as fully paid. With effect from the Suspension Date, the rights of allgrantees to exercise their respective options shall forthwith be suspended. Uponsuch compromise or arrangement becoming effective, all options shall, to theextent that they have not been exercised, lapse and determine. The Board shallendeavour to procure that the Shares issued as a result of the exercise of optionshereunder shall for the purposes of such compromise or arrangement form part ofthe issued share capital of our Company on the effective date thereof and thatsuch Shares shall in all respects be subject to such compromise or arrangement. Iffor any reason such compromise or arrangement is not approved by the court(whether upon the terms presented to the court or upon any other terms as may beapproved by such court), the rights of grantees to exercise their respective optionsshall with effect from the date of the making of the order by the court be restoredin full but only up to the extent not already exercised and shall thereupon becomeexercisable (but subject to the other terms of the Share Option Scheme) as if suchcompromise or arrangement had not been proposed by our Company and no claimshall lie against our Company or any of its officers for any loss or damagesustained by any grantee as a result of such proposal, unless any such loss ordamage shall have been caused by the act, neglect, fraud or willful default on thepart of our Company or any of its officers.

(xx) Lapse of options

An option shall lapse automatically on the earliest of:

(aa) the expiry of the period referred to in paragraph (ix) above;

(bb) the date on which the Board exercises our Company’s right to cancel,revoke or terminate the option on the ground that the grantee commitsa breach of paragraph (xii);

(cc) the expiry of the relevant period or the occurrence of the relevant eventreferred to in paragraphs (xiii), (xiv), (xv), (xvii), (xviii) or (xix)above;

(dd) subject to paragraph (xviii) above, the date of the commencement ofthe winding-up of our Company;


– V-24 –

(ee) the occurrence of any act of bankruptcy, insolvency or entering into ofany arrangements or compositions with his creditors generally by thegrantee, or conviction of the grantee of any criminal offence involvinghis integrity or honesty;

(ff) where the grantee is only a substantial shareholder of any member ofour Group, the date on which the grantee ceases to be a substantialshareholder of such member of our Group; or

(gg) subject to the compromise or arrangement as referred to in paragraph(xix) become effective, the date on which such compromise orarrangement becomes effective.

(xxi) Cancellation of options granted but not yet exercised

Any cancellation of options granted but not exercised may be effected onsuch terms as may be agreed with the relevant grantee, as the Board may in itsabsolute discretion sees fit and in manner that complies with all applicable legalrequirements for such cancellation.

(xxii) Period of the Share Option Scheme

The Share Option Scheme will remain in force for a period of ten yearscommencing on the date on the Adoption Date and shall expire at the close ofbusiness on the Business Day immediately preceding the tenth anniversary thereofunless terminated earlier by our Shareholders in general meeting.

(xxiii) Alteration to the Share Option Scheme

(aa) The Share Option Scheme may be altered in any respect by resolutionof the Board except that alterations of the provisions of the ShareOption Scheme which alters to the advantage of the grantees of theoptions relating to matters governed by Rule 23.03 of the GEM ListingRules shall not be made except with the prior approval of ourShareholders in general meeting.

(bb) Any alteration to any terms of the Share Option Scheme which are of amaterial nature or any change to the terms of options granted, or anychange to the authority of the Board in respect of alteration of theShare Option Scheme must be approved by Shareholders in generalmeeting except where the alterations take effect automatically under theexisting terms of the Share Option Scheme.

(cc) Any amendment to any terms of the Share Option Scheme or theoptions granted shall comply with the relevant requirements of theGEM Listing Rules or any guidelines issued by the Stock Exchangefrom time to time.


– V-25 –

(xxiv) Termination of the Share Option Scheme

Our Company by resolution in general meeting or the Board may at any timeterminate the operation of the Share Option Scheme and in such event no furtheroptions will be offered but options granted prior to such termination shallcontinue to be valid and exercisable in accordance with provisions of the ShareOption Scheme.

(xxv) Conditions of the Share Option Scheme

The Share Option Scheme is conditional on the Listing Division of the StockExchange granting the listing of, and permission to deal in, the Shares may beissued pursuant to the exercise of any options which may be granted under theShare Option Scheme, and commencement of dealings in the Shares on the StockExchange.

(c) Present status of the Share Option Scheme

As at the date of this prospectus, no option has been granted or agreed to begranted under the Share Option Scheme.

E. OTHER INFORMATION

1. Tax and other indemnities

Mr. CK Wong, Mr. WW Wong and Blooming Union (collectively, the“Indemnifiers”) have, under a Deed of Indemnity referred to in paragraph (q) of theparagraph headed “B. Further Information about the Business – 1. Summary ofMaterial Contracts” in this appendix, given joint and several indemnities to ourCompany for ourselves and as trustee for our subsidiaries in connection with, amongstother things:

(a) taxation falling on any member of our Group resulting from or by referenceto any revenue, income, profits or gains granted, earned, accrued, received ormade (or deemed to be so granted, earned, accrued, received or made) on orbefore the date on which the Placing becomes unconditional and dealings inshares of the Company first commence on the Stock Exchange (the“Effective Date”) or any transactions, matters, things, event, act or omissionoccurring or deemed to occur on or before such date, whether alone or inconjunction with any other transaction, matter, thing, event, act, omission orcircumstance whenever occurring, and whether or not such taxation ischargeable against or attributable to any other person, firm or company; and

(b) all costs (including all legal costs), expenses, interests, penalties, fines,charges or other liabilities which any member of our Group may properlyincur in connection with:


– V-26 –

(i) the investigation, assessment, the contesting of any claim under (a)above;

(ii) the settlement of any claim under (a) above;

(iii) any legal proceedings in which any member of our Group claims underor in respect of (a) above, and in which judgment is given for anymember of our Group; or

(iv) the enforcement of any such settlement or judgments.

The Indemnifiers have also, under the deed of indemnity abovementioned, agreedand undertaken to each of the members of our Group that each Indemnifier shallindemnify and at all times keep each of the member of our Group indemnified ondemand from and against any losses, damages, claims or penalties that our Group maysuffer or incur, as a result of:

(a) our Group’s non-compliance matters occurred before the Effective Date, asmore particularly set out in the paragraph headed “Business −Non-Compliance” in this prospectus (the “Compliance Matters”); and/or

(b) the Group’s outstanding litigations and potential claims arising before theEffective Date, as more particularly set out in the paragraph headed“Business – Litigation and Potential Claims” of this prospectus (the“Litigations”)

The Indemnifiers will, however, not be liable under the deed of indemnity fortaxation, among other:

(a) to the extent that provision has been made for such taxation in the auditedconsolidated accounts of our Group or the audited accounts of any memberof our Group for an accounting period ended on or before 30 November2015;

(b) falling on any member of our Group as a result of any transaction enteredinto by any member of our Group on or after the Effective Date in theordinary course of business, or in the ordinary course of acquiring ordisposing of capital assets;

(c) to the extent that such taxation arises or is incurred as a consequence of anychange in the law, rules or regulations, or the interpretation or practicethereof by the Inland Revenue Department or any other statutory orgovernmental authority in any part of the world having retrospective effectcoming into force after the Effective Date or to the extent that such taxationarises or is increased by an increase in rates of taxation after the EffectiveDate with retrospective effect (except the imposition of or an increase in therate of Hong Kong profits tax or any tax of any part of the world on theprofits of companies for the current or any earlier financial period);


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(d) to the extent that such taxation is discharged by another person who is not amember of our Group and that none of the members of our Group isrequired to reimburse such person in respect of the discharge of the taxation;or

(e) to the extent of any provision or reserve made for taxation in the auditedaccounts referred to in sub-paragraph (a) above which is finally establishedto be an over-provision or an excessive reserve, provided that the amount ofany such provision or reserve applied to reduce the liability of theIndemnifiers or any of them in respect of taxation shall not be available inrespect of any such liability arising thereafter.

Our Directors have been advised that no material liability for estate duty underthe laws of the Cayman Islands is likely to fall on our Group, and the estate duty underthe laws of Hong Kong has been abolished.

2. Litigation

Our Directors confirmed that save as disclosed in the section headed “Business −Litigation and potential claims” in this prospectus as at the Latest Practicable Date, nomember of our Group is engaged in any litigation or arbitration of material importanceand no litigation or claim of material importance is pending or threatened by or againstany member of our Group.

3. Sponsor

The Sponsor has made an application on behalf of our Company to the ListingDivision for listing of and permission to deal in the Shares in issue and to be issued asmentioned herein and any Shares which may fall to be issued pursuant to the exerciseof the options which may be granted under the Share Option Scheme.

Neither the Sponsor nor any of its close associates has accrued any materialbenefit as a result of the successful outcome of the Placing, other than the following:

(a) by way of sponsorship, financial advisory and documentation fee paid and tobe paid to the Sponsor for acting as the sponsor of the Placing;

(b) certain close associates of the Sponsor whose usual and ordinary courses ofbusiness involve trading of and dealing in securities may derive commissionsfrom the trading of and dealing in securities of our Company or providemargin financing in connection thereto or purchase or sell securities of ourCompany or hold securities of our Company for investment purposes after itsListing on GEM; and

(c) by way of compliance advisory fee to be paid to TC Capital as ourCompany’s compliance adviser pursuant to the requirements under Rule6A.19 of the GEM Listing Rules


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Sponsor’s fees

The fee payable by our Company to the Sponsor to act as sponsor in relationto the Listing is HK$4,800,000, and the Sponsor will be reimbursed for theirexpenses properly incurred in connection with the Placing.

Save as disclosed in the section headed “Underwriting” in this prospectus,no commissions, discounts, brokerages or other special terms have been granted inconnection with the issue or sale of any share or loan capital of our Company orany of our subsidiaries within the two years preceding the date of this prospectus.

4. Preliminary expenses

The preliminary expenses relating to the incorporation of our Company areapproximately HK$42,000 and are payable by our Company.

5. Promoter

Our Company has no promoter for the purpose of the GEM Listing Rules.

6. Qualifications of experts

The following are the respective qualifications of the experts who have giventheir opinion or advice which is contained in this prospectus:

Name Qualifications

TC Capital Asia Limited A licensed corporation to engage in Type 1(dealing in securities) and Type 6 (advisingon corporate finance) regulated activitiesunder the SFO

Grant Thornton Hong KongLimited

Certified Public Accountants

Appleby Cayman Islands attorneys-at-law

Chan Chung Barrister-at-law of Hong Kong, the legalcounsel of our Company

Ascent Partners Valuation ServiceLimited

Property valuer

7. Consents of experts

Each of the experts named in the sub-paragraph headed “6. Qualification ofexperts” in this appendix has given and has not withdrawn its/his written consent to theissue of this prospectus, with the inclusion of its/his letters and/or reports and/oropinions and/or summary thereof (as the case may be) and/or references to its/his nameincluded herein in the form and context in which they respectively appear.


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8. Binding effect

This prospectus shall have the effect, if an application is made in pursuancehereof, of rendering all persons concerned bound by all of the provisions (other thanthe penal provisions) of sections 44A and 44B of the Companies (Winding Up andMiscellaneous Provisions) Ordinance so far as applicable.

9. Registration procedures

The principal register of members of our Company in the Cayman Islands will bemaintained by Appleby Trust (Cayman) Ltd. and a branch register of members of ourCompany in Hong Kong will be maintained by Union Registrars Limited. Save whereour Directors otherwise agree, all transfers and other documents of title to Shares mustbe lodged for registration with, and registered by, our Hong Kong Branch ShareRegistrar in Hong Kong and may not be lodged in the Cayman Islands. All necessaryarrangements have been made to enable the Shares to be admitted into CCASS.

10. No material adverse change

Save as disclosed in the section headed “Financial Information – Material adversechange” in this prospectus, our Directors confirm that there has been no materialadverse change in the financial or trading position or prospects of our Company or oursubsidiaries since 30 November 2015 (being the date to which the latest auditedcombined financial statements of our Group were made up) and up to the LatestPracticable Date.

11. Taxation of holders of Shares

(a) Hong Kong

Dealings in Shares registered on our Company’s Hong Kong branch registerof members will be subject to Hong Kong stamp duty.

Profits from dealings in Shares arising in or derived from Hong Kong mayalso be subject to Hong Kong profits tax.

(b) Cayman Islands

No stamp duty is payable in the Cayman Islands on transfers of shares ofCayman Islands companies except those which hold interests in land in theCayman Islands.

(c) Consultation with professional advisers

Intending holders of the Shares are recommended to consult theirprofessional advisers if they are in any doubt as to the taxation implications ofsubscribing for, purchasing, holding or disposing of or dealing in the Shares. It isemphasised that none of our Company, our Directors or parties involved in the


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Placing accepts responsibility for any tax effect on, or liabilities of holders ofShares resulting from their subscription for, purchase, holding or disposal of ordealing in Shares.

13. Miscellaneous

(a) Save as disclosed in this prospectus:

(i) within the two years immediately preceding the date of this prospectus:

(aa) no share or loan capital of our Company or any of its subsidiarieshas been issued, agreed to be issued or is proposed or intended tobe issued fully or partly paid either for cash or for a considerationother than cash;

(bb) no commissions, discounts, brokerages or other special terms havebeen granted or agreed to be granted in connection with the issueor sale of any share or loan capital of our Company or any of itssubsidiaries and no commission has been paid or is payable inconnection with the issue or sale of any capital of our Companyor any of its subsidiaries; and

(cc) no commission has been paid or payable (except tosub-underwriter) for subscribing or agreeing to subscribe,procuring or agreeing to procure subscriptions, for any shares ordebenture of our Company or any of its subsidiaries;

(ii) no founders, management or deferred shares or any debentures of ourCompany have been issued or agreed to be issued;

(iii) no share or loan capital of our Company is under option or is agreedconditionally or unconditionally to be put under option;

(iv) there has not been any interruption in the business of our Group whichmay have or have had a significant effect on the financial position ofour Group in the 24 months immediately preceding the date of thisprospectus;

(v) none of the experts named in the sub-paragraph headed “6.Qualifications of experts” in this appendix:

(aa) is interested beneficially or non-beneficially in any securities inany member of our Group, including the Shares; or

(bb) has any right or option (whether legally enforceable or not) tosubscribe for or to nominate persons to subscribe for anysecurities in any member of our Group, including the Shares;


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(vi) our Company and our subsidiaries do not have any debt securitiesissued or outstanding, or authorised or otherwise created but unissued,or any term loans whether guaranteed or secured as at the LatestPracticable Date;

(vii) no company within our Group is presently listed on any stock exchangeor traded on any trading system;

(viii) our Group has no outstanding convertible debt securities; and

(ix) the English text of this prospectus shall prevail over the Chinese text.

14. Particulars of the Selling Shareholder

Name Blooming Union

Place of incorporation: BVI

Registered office: NovaSage Chambers, P.O. Box 4389, RoadTown, Tortola, British Virgin Islands

Nature of business: Investment holding

Number of Share to be sold: 104,000,000 Shares

15. Bilingual Prospectus

The English language and Chinese language versions of this prospectus are beingpublished separately in reliance upon the exemption provided in section 4 of theCompanies (Exemption of Companies and Prospectuses from Compliance withProvisions) Notice (Chapter 32L of the Laws of Hong Kong).


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DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONGKONG

The documents attached to a copy of this prospectus delivered to the Registrar ofCompanies in Hong Kong for registration were the written consents referred to in theparagraph headed “E. Other information – 7. Consents of experts” in Appendix V to thisprospectus, copies of the material contracts referred to in the paragraph headed “B. Furtherinformation about the business – 1. Summary of material contracts” in Appendix V to thisprospectus, and a copy of the statement of particulars of the Selling Shareholder as set outin the paragraph headed “Particulars of the Selling Shareholder” in Appendix V to thisprospectus.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of D.S. Cheung & Co. at 29/F., Bank of East Asia, Harbour View Centre, 56 Gloucester Road,Wanchai, Hong Kong, during normal business hours up to and including the date which is14 days from the date of this prospectus:

(a) the Memorandum and the Articles;

(b) the Accountant’s Report and the report on the unaudited pro forma financialinformation of our Group prepared by Grant Thornton Hong Kong Limited, thetexts of which are set out in Appendices I and II to this prospectus;

(c) the audited combined financial statements of our Company for each of the twoyears ended 31 March 2014 and 2015 and the eight months ended 30 November2015;

(d) the property valuation report relating to the property interests of our Groupprepared by Ascent Partners Valuation Service Limited, the text of which is setout in Appendix III to this prospectus;

(e) the letter of advice prepared by Appleby summarising certain aspects ofCompany’s Law referred to in Appendix IV to this prospectus;

(f) the report on internal control review prepared by CT Partners ConsultantsLimited;

(g) the material contracts referred to the paragraph headed “B. Further informationabout the business – 1. Summary of material contracts” in Appendix V to thisprospectus;

(h) the written consents referred to in the paragraph headed “E. Other information –7. Consent of experts” in Appendix V to this prospectus;

APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES AND AVAILABLE FOR INSPECTION

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(i) the service contracts and letters of appointment of our Directors referred to in theparagraph headed “C. Further information about Substantial Shareholders,Directors and Experts – 2. Particulars of service agreements” in Appendix V tothis prospectus;

(j) the Companies Law;

(k) the rules of the Share Option Scheme;

(l) the legal opinions prepared by Mr. Chan Chung, the Legal Counsel, in respect ofcertain aspects of Hong Kong law applicable to our Group;

(m) the statement of particular of the Selling Shareholder as set out in the paragraphheaded “Particulars of the Selling Shareholder” in Appendix V to this prospectus;

(n) the Ipsos Report; and

(o) the legal opinions issued by Mr. Chan Chung, the Legal Counsel.

APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES AND AVAILABLE FOR INSPECTION

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Sponsor

Joint Bookrunners and Joint Lead Managers

PLACING


Stock Code: 8217



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