If you are in any doubt360storage.hkej.com/ipo/08221.pdfCo-manager Financial Adviser ... but without...

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

PF Group Holdings Limited(Incorporated in the Cayman Islands with limited liability)

LISTING ON THE GROWTH ENTERPRISE MARKETOF THE STOCK EXCHANGE OF HONG KONG LIMITED

BY WAY OF PLACINGNumber of Placing Shares : 500,000,000 Placing Shares (subject to the

Offer Size Adjustment Option)Placing Price : Not more than HK$0.16 per Placing Share

and expected to be not less than HK$0.14per Placing Share, plus brokerage of 1%,SFC transaction levy of 0.0027% andStock Exchange trading fee of 0.005%(payable in full on application inHong Kong dollars and subject to refund)

Nominal value : HK$0.01 per shareStock code : 8221

Sponsor

Joint Bookrunners

Joint Lead Managers

Co-manager Financial Adviser

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take noresponsibility for the contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever forany loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.A copy of this prospectus, having attached thereto the documents specified under the section headed “Appendix V — Documents Delivered to the Registrar ofCompanies and Available for Inspection” of this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C ofthe Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and theRegistrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above.The Placing Price is expected to be fixed by the Price Determination Agreement between our Company and the Joint Lead Managers (for themselves and on behalfof the Underwriters) on the Price Determination Date, which is expected to be on or before Wednesday, 28 December 2016. The Placing Price will not be morethan HK$0.16 per Placing Share and is expected to be not less than HK$0.14 per Placing Share. If our Company and the Joint Lead Managers (for themselvesand on behalf of the Underwriters) are unable to reach an agreement on the Placing Price by that date or such later date as may be agreed by our Company andthe Joint Lead Managers (for themselves and on behalf of the Underwriters), the Placing will not become unconditional and will not proceed.The Joint Lead Managers (for themselves and on behalf of the Underwriters) may, with our consent, reduce the indicative Placing Price range below that statedin this prospectus at any time prior to the Price Determination Date. In such a case, notices of reduction of the indicative Placing Price will be published on ourwebsite at www.pfs.com.hk and the website of the Stock Exchange at www.hkexnews.hk.Prior to making an investment decision, prospective investors should carefully consider all the information set out in this prospectus, including the risk factorsset out in the section headed “Risk Factors” of this prospectus. Prospective investors of the Placing Shares should note that the Joint Lead Managers (forthemselves and on behalf of the Underwriters) are entitled to terminate their obligations under the Underwriting Agreement by notice in writing to us given bythe Joint Lead Managers (for themselves and on behalf of the other Underwriters), upon the occurrence of any of the events set forth under the section headed“Underwriting — Underwriting Arrangements and Expenses — Grounds for termination” of this prospectus at any time prior to 8:00 a.m. (Hong Kong time) onthe Listing Date. Such events include, but without limitation to, any act of God, war, riot, public disorder, civil commotion, economic sanctions, fire, flood,explosion, epidemic, outbreak of an infectious disease, calamity, crisis, terrorism, strike or lock-out.

IMPORTANT

CO S.342

A1A1R11.05R24.05(1)(b)

R11.23(2)(a)A1A15(1)

3rd Sch.(9)

R14.04

CO S.342C

12 December 2016

GEM has been positioned as a market designed to accommodate companies to which ahigher investment risk may be attached than other companies listed on the Stock Exchange.

Prospective investors should be aware of the potential risks of investing in suchcompanies and should make the decision to invest only after due and careful consideration.

The greater risk profile and other characteristics of GEM mean that it is a market moresuited to professional and other sophisticated investors.

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

The principal means of information dissemination on GEM is publication on the internetwebsite operated by the Stock Exchange. Listed companies are not generally required to issuepaid announcements in gazetted newspaper. Accordingly, prospective investors should notethat they need to have access to the website at www.hkexnews.hk in order to obtain up-to-dateinformation on GEM-listed issuers.

CHARACTERISTICS OF GEM

— i —

Expected Price Determination Date(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . At or before 5:00 p.m. on

Wednesday, 28 December, 2016

Announcement of the Placing Price and the levels of

indication of interest in the Placing to be published on the

GEM website of the Stock Exchange at www.hkexnews.hk(3)

and our Company’s website at www.pfs.com.hk(3) on

or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 5 January, 2017

Allotment of Placing Shares on or before . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 5 January, 2017

Deposit of Share certificates for the Placing Shares into

CCASS on or before(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 5 January, 2017

Dealings in the Shares on GEM to commence at 9:00 a.m. on . . . . . . . . . . Friday, 6 January, 2017

Notes:

1. All times and dates refer to Hong Kong local times and dates. Details of the structure of the Placing, including its

conditions, are set out in the section headed “Structure and Conditions of the Placing” of this prospectus. If there is any

change in the above expected timetable, an announcement will be published on the website of the Stock Exchange at

www.hkexnews.hk and our website at www.pfs.com.hk.

2. The Price Determination Date is scheduled on or before Wednesday, 28 December 2016 (or such later date as may be

agreed between our Company and the Joint Lead Managers (for themselves and on behalf of the Underwriters). If the

Joint Lead Managers (for themselves and on behalf of the Underwriters) and our Company are unable to reach an

agreement on the Placing Price on the Price Determination Date, the Placing will not become unconditional and will lapse

immediately.

3. None of the websites or any information contained therein form part of this prospectus.

4. The share certificates for the Placing Shares allotted and issued to the placees are expected to be deposited directly into

CCASS on or before Thursday, 5 January 2017 for credit to the respective CCASS Participants’ or the CCASS Investor

Participants’ stock amounts designated by the Underwriters, the placees or their agents (as the case may be). Our

Company will not issue any temporary documents of title.

All share certificates will only become valid certificates of title of the Shares to which they relate

provided that the Placing has become unconditional in all respects and the Underwriting Agreement

has not been terminated in accordance with its terms at or before 8:00 a.m. (Hong Kong time) on the

Listing Date.

EXPECTED TIMETABLE(1)

— ii —

IMPORTANT NOTICE TO INVESTORS

Our Company has issued this prospectus solely in connection with the Placing, and does not

constitute an offer to sell or a solicitation of an offer to buy any security other than the Placing

Shares offered by this prospectus pursuant to the Placing. No person may use this prospectus for

the purpose of, and it does not constitute, an offer or invitation in any other jurisdiction or in any

other circumstances. Our Company has taken no action to permit a Placing of the Placing Shares

or the distribution of this prospectus in any jurisdiction other than Hong Kong. The distribution of

this prospectus and the offering of the Placing Shares in other jurisdictions are subject to

restrictions and may not be made except as permitted under the applicable laws, rules and

regulations of such jurisdictions pursuant to registration with or authorisation by the relevant

regulatory authorities or an exemption there from.

You should rely only on the information contained in this prospectus to make your investment

decision. Our Company, the Sponsor, the Joint Bookrunners, the Joint Lead Managers and the

Underwriters have not authorised anyone to provide you with information that is different from

what is contained in this prospectus. Any information or representation not made in this prospectus

must not be relied on by you as having been authorised by our Company, the Sponsor, the Joint

Bookrunners, the Joint Lead Managers, the Underwriters, any of their respective directors,

officers, employees, agents or representatives or any other party involved in the Placing.

The contents on our Company’s website at www.pfs.com.hk, do not form part of this

prospectus.

Page

Characteristics of GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Waiver and Exemption from Strict Compliance with the Requirements under the GEMListing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Information about this Prospectus and the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Directors and Parties Involved in the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

CONTENTS

— iii —

Page

Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

History, Reorganisation and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Directors, Senior Management and Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

Continuing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

Relationship with Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Business Objectives and Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

Reasons for the Placing and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228

Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234

Structure and Conditions of the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242

Appendix I — Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Appendix II — Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . . . . . II-1

Appendix III — Summary of the Constitution of our Company

and Cayman Islands Company Law . . . . . . . . . . . . . . . . . . . . . . . III-1

Appendix IV — Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . IV-1

Appendix V — Documents Delivered to the Registrar of Companies

and Available for Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1

CONTENTS

— iv —

This summary aims to give you an overview of the information contained in this prospectusand should be read in conjunction with the full text of this prospectus. Since this is a summary, itdoes not contain all the information that may be important to you. You should read the wholeprospectus, including our financial statements and the accompanying notes, before you decide toinvest in the Placing Shares.

There are risks associated with any investment. Some of the particular risks of investing in theOffer Shares are set forth in the section headed “Risk Factors” of this prospectus. You should readthat section carefully before you decide to invest in the Placing Shares.

OVERVIEW

Our Group is based in Hong Kong and has been operating in the Hong Kong securities industryfor over 20 years. We are principally engaged in the provision of (i) securities dealing and brokerageservices; (ii) placing and underwriting service; (iii) financing service including securities and IPOmargin financing; and (iv) asset management services. Our services mainly relate to equity and debtsecurities traded on the Stock Exchange in Hong Kong.

The following table sets out a breakdown of turnover by major services provided by our Groupfor each of the three financial years ended 31 March 2016 and the four months ended 31 July 2015and 2016.

Financial year ended 31 March Four months ended 31 July2014 2015 2016 2015 2016

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

(unaudited)% HK$’000 %

1) Commission incomefrom securitiesdealing andbrokerage services 12,717 23.3 10,225 24.1 10,918 26.7 5,513 66.4 1,282 5.2

2) Fee and commissionincome from placingand underwritingactivities 32,620 60.0 23,171 54.7 15,884 38.8 1,183 14.2 20,142 80.9

3) Interest incomefrom marginfinancing 5,028 9.2 5,006 11.8 4,245 10.4 1,174 14.1 2,344 9.4

4) Fund managementfee 3,829 7.0 2,448 5.8 434 1.1 434 5.2 — —

5) Others (Note) 271 0.5 1,545 3.6 9,440 23.0 5 0.1 1,120 4.5

54,465 100.0 42,395 100.0 40,921 100.0 8,309 100.0 24,888 100.0

Note: Others include handling fee, referral fee and settlement fee.

BUSINESS MODEL

Securities dealing and brokerage services — Our Group provides securities dealing and brokerageservices to customers for trading in securities listed on the Stock Exchange. Our Group does not acceptwalk-in customers. Customers may place orders for securities trading through telephone calls or ourGroup’s internet platform though most of the trading orders are placed through telephone calls. OurGroup charges its customers a fee calculated based on the transaction value. During the Track RecordPeriod and up to the Latest Practicable Date, such fee is up to 2.0% of transaction value (subject to

SUMMARY

— 1 —

a minimum charge of HK$100, or determined by customers and sales representative) for securitiestrading through telephone orders and at a range between 0.1% and 0.2% of transaction value (subjectto a minimum charge at a range between HK$70 and HK$100) for online securities trading. Theaverage brokerage commission rates charged during the three financial years ended 31 March 2016 andthe four months ended 31 July 2016 were approximately 0.18%, 0.21%, 0.20% and 0.18%,respectively.

Placing and underwriting services — Our Group acts as an underwriter or a sub-underwriter or aplacing agent or a sub-placing agent for companies listed or to be listed on the Stock Exchange orshareholders of companies listed on the Stock Exchange for their fund raising exercises such as IPOs,rights issues, open offers or placing of new and/or existing shares and debt securities. Our Groupcharges placing or underwriting commission at a rate determined by negotiation with customers whichis generally in line with market practice.

Margin financing services — Credit facilities are offered by our Group to its customers who wouldlike to purchase securities listed on the Stock Exchange on a margin basis, which offers fundingflexibility to our Group’s customers. Our Group also provides IPO margin financing service andprovides funding to customers for application of IPOs. All financing extended to our Group’scustomers for margin financing purposes is secured by securities or debt instruments convertible intoshares listed on the Stock Exchange and pledged to our Group. Acceptable securities for pledging andtheir respective margin ratios are reviewed and determined by one Responsible Officer and onemanagement team member on a case-by-case basis. During the Track Record Period, the interest ratecharged to our customers ranged from 3.25% p.a. to 10.25% p.a..

Asset management services — During the Track Record Period and up to May 2015, we providedasset management services to one hedge fund, i.e. Customer B, as set out in the section headed“Business — Major Customers” in this prospectus, whereby we were responsible for identifying,evaluating and reviewing investments of the fund. In May 2015, our Group ceased to provide assetmanagement services to Customer B as one of our asset management staff that was managingCustomer B had himself set up his own asset management company to manage Customer B. In July2016, we hired two staff for our asset management services and as at the Latest Practicable Date, thediscretionary funds managed by our Group amounted to approximately HK$113.3 million.

Others services — Our Group also provides ancillary services including application for new issuesand nominee services such as collection of cash and scrip dividends. Our Group charges our customershandling service fees and dividend collection fees, which are recognised when the agreed serviceshave been provided. In addition to the above services, our Directors may on a case by case basis comeacross fund raising related projects which require the introduction of other professional parties inwhich we may request for a referral fee. For the financial year ended 31 March 2015, we referred anIPO sponsorship project to an Independent Third Party to act as sponsor and we were paid a referralfee based on 10% of their sponsorship fee. We also acted as an underwriter and placing agent for suchdeal. For the financial year ended 31 March 2016, our Group completed one referral transaction forwhich the contract was signed on 14 July 2015, generating a total revenue of approximately HK$9.4million in relation to the referral of a potential investor to a controlling shareholder of a Hong Konglisted company who was looking for purchasers of a controlling interest in such listed company. OurGroup is entitled to the referral fee upon successful disposal of the equity interest by the controllingshareholder and the referral fee charged by our Group is a sum fixed between the selling shareholderand our Group. In September 2016, our Group also completed a referral transaction for the acquisition

SUMMARY

— 2 —

of the controlling stake in a company listed on the Stock Exchange and our Group generated a referralfee income of HK$6.8 million. We have also completed the general offer on behalf of the acquirer andis entitled to a professional fee and a loan commitment fee of approximately HK$3.2 million inaggregate. Other than the mentioned referral fees which were non-recurring fees, we do not have atrack record of earning referral fees. Our Directors believe that there is opportunity for our Group toreceive similar referral fee in the future.

Placing and underwriting services generated the most revenue for our Group during the TrackRecord Period. There is no change in the business focus of our Group during and after the TrackRecord Period.

COMMISSION AND FEE

The following is a summary of the fees (subject to adjustments after arm’s length negotiationwith customers) charged by our Group for different services for the three financial years ended 31March 2016 and the four months ended 31 July 2016:

Financial year ended 31 March Four monthsended 31 July

20162014 2015 2016

Securities brokeragecommission

Up to 0.25% ofgross amount,

minimum $100 (ordetermined bycustomer and

salesrepresentative)




(Note 1)




(Note 2)




Placing or underwriting feeand commission

Up to 3.25% orfixed fee




Margin financing interest Up to 9.25% p.a. Up to 9.25% p.a. Up to 10.25% p.a. Up to 8.25% p.a.

Asset management

- Management fee 0.5% p.a. of thenet asset value as

at the close ofbusiness in each

month andpayable annually

0.5% p.a. of thenet asset value as



0.5% p.a. of thenet asset value as



Note 3

- Performance fee 15% of theincrease in the net

asset value as atthe valuation date

and payableannually

15% of theincrease in the net


and payableannually



and payableannually

Note 3

Other fees

Handling fees for ancillaryservices (such as scripthandling and settlementrelated services, inactiveaccount annual fees, IPOservices, dividend/bonusclaims, photocopying)

Fixed charge onone time basis

depending on thenature of service







Dividend collection fee 0.3% of dividendamount, minimum

HK$20 (HongKong stock) or

HK$300(Overseas stock)

0.3% of dividendamount, minimum









Notes:

1. Our Group charged 1% brokerage commission only in two major transactions where additional effort was requiredto locate purchasers of shares in these two transactions.

SUMMARY

— 3 —

2. Our Group charged 2% brokerage commission only in two transactions where additional effort was required tolocate purchasers of shares in these two transactions.

3 Our Group did not manage any funds for the period stated.

LICENCES AND TRADING RIGHTS

In order to carry on our Group’s business activities as described in this prospectus, PFSL isrequired to remain licensed as a licensed corporation to carry on Type 1 (dealing in securities) andType 9 (asset management) regulated activities under the SFO with the SFC in Hong Kong. Under theSFO, a licensed corporation shall not carry on any regulated activity unless not less than twoResponsible Officers are approved by the SFC in relation to the regulated activity. PFSL has and hadat all material times complied with such requirement.

The rules promulgated by the Stock Exchange also require any person who wishes to trade onthrough its facilities to hold a trading right and to be registered as a participant of the Stock Exchangein accordance with its rules, including those requiring compliance with all relevant legal andregulatory requirements.

Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date(i) our Group has obtained all necessary licences, permits or certificates from the relevantgovernmental bodies necessary to conduct its operations in Hong Kong, and (ii) save as disclosed inthe section headed “Business — Review conducted by SFC and findings” in this prospectus, our Grouphas been and is in compliance with all applicable laws and regulations in all material respects, in theperformance of its relevant business in Hong Kong. Details of the regulatory and licensingrequirements are disclosed under the section headed “Regulatory Overview” of this prospectus. Eachof the licences, certificates and participantship does not specify an expiry date.

Licence/certificate/participantship Date of issue/Effective from

Licence under SFO to carry on Types 1(dealing in securities) regulated activity

1 April 2003

Licence under SFO to carry on Types 9(asset management) regulated activity

1 April 2003

Stock Exchange Participant Certificate 2 April 2002Stock Exchange Trading Right Certificate

Distinctive Nos. 318, 319, 3206 March 2000

CUSTOMER MIX

Customers of our Group’s securities brokerage and margin financing services comprise ofcorporate and individuals from, among others, Hong Kong and the PRC. Customers of our Group’sunderwriting and placing service are companies listed or seeking to be listed on the Main Board orGEM or shareholders of companies listed on the Stock Exchange or other SFO licensed entities thatact as the main placing agent or underwriters.

For the three financial years ended 31 March 2016 and the four months ended 31 July 2016, ourGroup’s largest customer accounted for approximately 37.2%, 10.0%, 23.0% and 33.6% of ourGroup’s total turnover respectively and our Group’s top five largest customers, in aggregate,accounted for approximately 64.4%, 40.3%, 52.1% and 63.9% of our Group’s total turnoverrespectively. All of these top five largest customers are Independent Third Parties.

SUMMARY

— 4 —

The following tables set out the accounts held by our Group’s customers categorised bytransaction frequency, transaction volume and commission income during the Track Record Period.

BROKERAGE

Number of active securities accounts by number of transaction

For the financial year ended31 March

For the fourmonths ended

31 July2014 2015 2016 2016

Number of transaction of our securitiesaccounts

At least 1 purchase and/or sale transaction 109 161 129 1492 to 3 purchase and/or sale transactions 144 128 160 1054 to 11 purchase and/or sale transactions 200 207 195 9412 or over 12 purchase and/or sale transactions 241 226 234 60

Total number of active securities accounts(Note) 694 722 718 408

Note: Active securities accounts represent our Group’s customers having carried out at least one purchase and/or saletransaction during the year/respective period.

Number of active securities accounts by transaction volume



31 July20162014 2015 2016

Transaction volume of our securitiesaccounts

Less than or equal to HK$100,000 210 247 181 177HK$100,001 to HK$500,000 176 152 187 106HK$500,001 to HK$1,000,000 73 81 82 42HK$1,000,001 to HK$5,000,000 127 137 138 53HK$5,000,001 to HK$10,000,000 28 35 50 13Over HK$10,000,000 80 70 80 17

Total number of active securities accounts(Note) 694 722 718 408


SUMMARY

— 5 —

Number of active securities accounts by commission income

For the financial year ended

31 March 2014


31 March 2015


31 March 2016

For the four months ended

31 July 2016

Number of

active

securities

account

Commission

income derived by

our Group

Number of

active

securities

account

Commission

income derived by

our Group

Number of

active

securities

account

Commission

income derived by

our Group

Number of

active

securities

account

Commission

income derived by

our Group

(HK$’000) % (HK$’000) % (HK$’000) % (HK$’000) %

Commission income

generated from

securities accounts

Less than or equal to

HK$10,000 574 907 7.1 609 975 9.5 582 966 8.8 379 426 33.2

HK$10,001 to HK$50,000 80 1,796 14.1 81 1,928 18.9 99 2,262 20.7 27 607 47.3

HK$50,001 to HK$100,000 16 1,153 9.1 17 1,231 12.0 13 974 8.9 1 83 6.5

HK$100,001 to HK$500,000 18 3,007 23.6 13 3,030 29.6 21 3,767 34.5 1 166 13.0

Over HK$500,000 6 5,854 46.1 2 3,061 30.0 3 2,949 27.1 0 — —

Total (Note) 694 12,717 100.0 722 10,225 100.0 718 10,918 100.0 408 1,282 100.0


Our Group’s regulatory requirement under the FRR requires us to have a paid up capital ofHK$10 million and a minimum liquid capital requirement of HK$3 million or the variable requiredliquid capital, whichever is the higher. During the Track Record Period and up to the LatestPracticable Date, PFSL had an actual paid up share capital in the amount of HK$10 million. Theamount of actual reported month-end liquid capital pursuant to the FRR for the three financial yearsended 31 March 2016 and the four months ended 31 July 2016 ranged from approximately HK$40.2million to HK$88.9 million, HK$82.1 million to HK$101.9 million, HK$98.7 million to HK$119.9million and HK$109.3 million to HK$117.0 million, respectively.

PLACING AND UNDERWRITING SERVICES

Financial year ended 31 March Four months ended 31 July

2014 2015 2016 2016

No. oftransactions Income

As a %of totalplacing

andunderwriting

incomeNo. of

transactions Income


andunderwriting

incomeNo. of

transactions Income


andunderwriting

incomeNo. of

transactions Income


andunderwriting

incomeHK$’000

(Note)% HK$’000

(Note)% HK$’000

(Note)% HK$’000

(Note)%

- IPO 14 27,274 85.8 16 12,362 55.6 7 7,559 53.8 5 12,310 68.2

- Rights issue/Openoffer

3 3,912 12.3 2 4,169 18.8 2 1,951 13.9 1 2,328 12.9

- Placing of shares 1 600 1.9 5 4,735 21.3 2 1,138 8.1 4 2,677 14.8

- Placing of debtsecurities

Nil — — 2 950 4.3 1 3,405 24.2 1 736 4.1

Total 18 31,786 100.0 25 22,216 100.0 12 14,053 100.0 11 18,051 100.0

Note: Fee and commission income from placing and underwriting activities set out above exclude commission received fromsubscribers in the amount of approximately HK$0.8 million, HK$1.0 million, HK$1.8 million and HK$2.1 million forthe three financial years ended 31 March 2016 and the four months ended 31 July 2016 respectively.

SUMMARY

— 6 —

Our Group’s total revenue decreased by approximately 22.2% from approximately HK$54.5million for the financial year ended 31 March 2014 to approximately HK$42.4 million for the financialyear ended 31 March 2015 which was primarily due to the drop in fee and commission income fromplacing and underwriting activities of approximately HK$9.4 million as a result of the decrease inaverage commission rates charged by our Group.

Our Group’s total revenue slightly decreased by approximately 3.5% from approximatelyHK$42.4 million for the financial year ended 31 March 2015 to approximately HK$40.9 million forthe financial year ended 31 March 2016. This was mainly a result of (i) a decrease in revenuesgenerated from our placing and underwriting services by approximately HK$7.3 million as weparticipated in fewer placing and underwriting transactions and overall transaction value for thefinancial year ended 31 March 2016 was lower, and (ii) a decrease in fund management fee ofapproximately HK$2.0 million due to the termination of fund management contract with customer Bin May 2015. Such decrease was offset by the increase in referral fee recorded in other revenue fromapproximately HK$0.3 million for the financial year ended 31 March 2015 to approximately HK$9.4million for the financial year ended 31 March 2016.

Our Group recorded total revenue for the four months ended 31 July 2016 of approximatelyHK$24.9 million, representing an increase of approximately HK$16.6 million, or 199.5% fromapproximately HK$8.3 million for the four months ended 31 July 2015. The significant increase inrevenue was mainly attributed to the increase in revenues generated from our placing and underwritingservices by approximately HK$19.0 million mainly as a result of the increase in both the number oftransactions and overall transaction value of placing and underwriting transactions participated by ourGroup during the period. Such increase was partly offset by the decrease in commission income fromsecurities dealing and brokerage services from approximately HK$5.5 million for the four monthsended 31 July 2015 to approximately HK$1.3 million for the four months ended 31 July 2016.

Our Group’s profit and total comprehensive income decreased by approximately 10.2% fromapproximately HK$18.3 million for the financial year ended 31 March 2014 to approximatelyHK$16.5 million for the financial year ended 31 March 2015 which was primarily due to the drop intotal revenue of approximately HK$12.1 million. Such drop in revenue was partly offset by thedecrease in commission expenses of approximately HK$3.8 million, decrease in other operatingexpenses of approximately HK$3.4 million and decrease in income tax expense of approximatelyHK$1.5 million.

For the financial year ended 31 March 2016, our Group’s profit and total comprehensive incomewas approximately HK$6.9 million, representing a decrease of approximately HK$9.6 million, or58.2%, from approximately HK$16.5 million for the financial year ended 31 March 2015. Suchdecrease was mainly because we incurred listing expenses of approximately HK$6.0 million duringthe financial year ended 31 March 2016.

For the four months ended 31 July 2016, our Group’s profit and total comprehensive income wasapproximately HK$12.5 million, representing an increase of approximately HK$13.6 million from thenet loss of approximately HK$1.0 million for the four months ended 31 July 2015. The significantlyimproved financial result was primarily due to the increase in total revenue of approximately HK$16.6million.

INDUSTRY LANDSCAPE AND COMPETITIVE STRENGTHS

Our Directors believe that we compete mainly with local small and medium sized brokeragefirms of Category B and Category C in Hong Kong. According to the information from the StockExchange, PFSL was ranked 217 out of 506 Exchange Participants based on the market share of the

SUMMARY

— 7 —

trading fee, transaction levy and investor compensation levy (if applicable) for the period from 1January 2015 to 31 December 2015. The transaction fee and levy collected by PFSL representedapproximately 0.0122% of the total of the industry for the period from 1 January 2015 to 31 December2015. Please refer to the section headed “Business — Competition” of this prospectus for more details.

Our Directors are of the view that our Group generally has the following competitive advantages:i) long history of establishment with progressive business development; ii) experienced management;iii) well-established relationship with customers and expanding customer base; iv) solid platform forplacing and underwriting business; and v) advanced computer system and technology.

SHAREHOLDER INFORMATION

Immediately following the completion of the Placing and the Capitalisation Issue (without takinginto account of the Shares which may be issued upon the exercise of options which may be grantedunder the Share Option Scheme and assuming the Offer Size Adjustment Option is not exercised),TML (owned as to 57.1% by Mr. B Lo and 42.9% by Mr. C Lo, both executive Directors) will hold75% of the issued share capital of our Company. TML, Mr. B Lo and Mr. C Lo are our ControllingShareholders. Mr. B Lo and Mr. C Lo are siblings.

SUMMARY FINANCIAL INFORMATION

The following table summarises some selected financial information for the periods indicated.You should read the Accountants’ Report set out in Appendix I to this prospectus for further details.

Financial yearended 31 March

Four monthsended 31 July

2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)HK$’000

Total Revenue 54,465 42,395 40,921 8,309 24,888Other income, gains and losses 781 1,472 207 116 (47)Listing expenses — — (5,989) (1,106) (1,759)Profit/(loss) before tax 23,098 19,763 9,636 (952) 15,377Profit/(loss) and total

comprehensiveincome/(expense) for theyear/period (Note) 18,329 16,463 6,883 (1,029) 12,535

Profit/(loss) and totalcomprehensiveincome/(expense) for theyear/period attributable toowners of our Company 18,399 16,532 6,955 (1,007) 12,535

Note: For the financial year ended 31 March 2016, if the non-recurring referral fees and the one-off Listing expenses areexcluded, our Group would have a net profit of approximately HK$5.0 million (after considering the tax effect). For thefour months ended 31 July 2016, if the one-off Listing expenses are excluded, our Group would have a net profit ofapproximately HK$14.3 million.

SUMMARY

— 8 —

As at 31 MarchAs at

31 July20162014 2015 2016

Current assets 201,869 244,328 214,594 241,688Current liabilities (108,166) (134,134) (93,413) (107,999)Non-current assets 2,263 2,235 2,176 2,203Non-current liabilities N/A N/A N/A N/ANet assets 95,966 112,429 123,357 135,892Net current assets 93,703 110,194 121,181 133,689

Financial yearended 31 March


2014 2015 2016 2015 2016

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

HK$’000

Net cash generated by/(used in) operatingactivities 59,436 27,286 (25,975) 21,501 27,581

Net cash generated by/(used in) investingactivities 19 621 (5,262) (107) (118)

Net cash (used in)/generated by financingactivities (25,378) (4,624) 4,696 1,967 (38)

Net increase/(decrease) in cash and cashequivalents 34,077 23,283 (26,541) 23,361 27,425

Cash and cash equivalents at the beginningof year/period 5,905 39,982 63,265 63,265 36,724

Cash and cash equivalents at the end ofyear/period 39,982 63,265 36,724 86,626 64,149

Financial ratios

As at/Financial year ended31 March

As at/Fourmonths

ended31 July

20162014 2015 2016

Net profit margin 33.7% 38.8% 16.8% 50.4%Net profit margin before interest and tax 43.2% 47.3% 24.2% 62.1%Return on equity* 19.1% 14.6% 5.6% 27.7%Return on total assets* 9.0% 6.7% 3.2% 15.4%Current ratio 1.9 1.8 2.3 2.2Interest coverage 56.5 73.4 36.4 177.7Net debt to equity ratio N/A N/A N/A N/AGearing ratio 39.9% 30.0% 27.8% 25.2%

* Return on equity and return on total assets for the four months ended 31 July 2016 were annualised for illustrative purpose.

Note: Please refer to the sub-section headed “Key Financial Ratios” of the section headed “Financial Information” of thisprospectus for the calculation of the above financial ratios.

SUMMARY

— 9 —

PLACING STATISTICS

Based on PlacingPrice of

HK$0.16per Share

Based on PlacingPrice of

HK$0.14per Share

Market capitalisation (Note 1) HK$320,000,000 HK$280,000,000Unaudited pro forma adjusted combined net tangible assets

per Share (Note 2) HK$0.102 HK$0.097

Notes:

(1) The calculation of the market capitalisation of the Shares is based on 2,000,000,000 Shares expected to be in issueimmediately following completion of the Capitalisation Issue and the Placing and assuming the Offer Size AdjustmentOption is not exercised.

(2) The unaudited pro forma adjusted combined net tangible assets per Share has been arrived at after the adjustmentsreferred to in the section headed “Unaudited Pro Forma Financial Information” in Appendix II to this prospectus and onthe basis of 2,000,000,000 Shares to be in issue immediately following completion of the Placing and the CapitalisationIssue and assuming the Offer Size Adjustment Option is not exercised, and taking into account of the respective PlacingPrice of HK$0.16 and HK$0.14.

IMPACT OF LISTING EXPENSES

The listing expenses represent the fees and costs incurred for issue of new Shares and getting theexisting and new Shares listed on GEM. As the issue of new Shares is the issue of an equityinstrument, but the listing of existing and new Shares is not, the listing expenses that are not clearlyseparable are required to be allocated between the two transactions using the proportion of the numberof new Shares to be issued to the total number of Shares in issue upon Listing. Since the number ofnew Shares to be issued represents 25% of the total number of Shares in issue upon Listing, listingexpenses that are not clearly separable are allocated to equity and the profit or loss on a 25/75proportion.

As a result of the Listing, it is expected that a sum of approximately HK$19.3 million relatingto the Listing will be recognised by our Group based on a Placing Price of HK$0.15 per Placing Share,being the mid-point of the indicative range of Placing Price and assuming the Offer Size AdjustmentOption is not exercised, of which approximately HK$6.7 million is directly attributable to the issueof new Shares under the Placing and would be accounted for as a deduction from equity, while theremaining balance of approximately HK$12.6 million was charged as to HK$6.0 million and HK$1.8million to the profit or loss of our Group for the financial year ended 31 March 2016 and the fourmonths ended 31 July 2016 respectively and will be charged as to HK$4.8 million to the profit or lossof our Group for the eight months ending 31 March 2017.

Our Directors wish to emphasise that the aforesaid amount is a current estimate for referenceonly and the final amount to be recognised in the equity and the profit or loss of our Group for thefinancial years ending 31 March 2017 is subject to adjustment and the then changes in estimates andassumptions.

SUMMARY

— 10 —

DIVIDEND

Our Directors will declare dividends, if any, in Hong Kong dollars with respect to our Shares ona per-Share basis and will pay such dividends in Hong Kong dollars. Our Group does not have aspecific dividend policy/payout ratio and the amount of dividends to be distributed to our Shareholderswill depend upon our earnings and financial condition, operating requirements, capital requirementsand any other conditions that our Directors may deem relevant and will be subject to the approval ofour Shareholders. During the Track Record Period, we did not declare any dividends.

Our Board has the absolute discretion to decide whether to declare or distribute dividends in anyyear and we will re-evaluate our dividend policy annually. There is no assurance that dividends of suchamount or any amount will be declared or distributed each year or in any year.

BUSINESS STRATEGIES, FUTURE PLANS AND USE OF PROCEEDS

Our Directors have developed the following business strategies: (i) develop our securities andmargin financing services; (ii) develop our placing and underwriting services through establishingnew and maintain existing relationships with investment banks and professionals in the industry sothat we may gain access to more placing and underwriting opportunities; and (iii) enhance our Group’squality of service.

The net proceeds of the Placing, after deducting related expenses, are estimated to amount toapproximately HK$55.7 million (assuming a Placing Price of HK$0.15, being the midpoint of theindicative Placing Price range and the Offer Size Adjustment Option is not exercised). It is intendedthat the net proceeds from the Placing will be applied in the following manner:

From theLatest

PracticableDate to

31 March2017

For the six months ending % of netproceeds

(approximate)30 September

201731 March

201830 September

201831 March

2019 Total

HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million

Expansion of margin financingservices (Note 1) 7.5 15.0 15.0 10.9 — 48.4 87.0%

Upgrade of our Group’s ITSystems (Note 2) — 0.4 0.4 0.4 0.5 1.7 3.0%

General working capital 5.6 — — — — 5.6 10.0%

13.1 15.4 15.4 11.3 0.5 55.7 100%

Notes:

1. As margin receivable, subject to FRR calculation, is classified as liquid assets under the FRR, the funds designated formargin financing also has the effect of improving our liquid capital and thus raising our capacity of undertakingunderwriting activities.

2. Our Group intends to use approximately HK$1.7 million as initial set-up cost and monthly service expenses for theupgrade of our Group’s accounting, front office and back office systems.

SUMMARY

— 11 —

The net proceeds from the Placing will vary depending on the final Placing Price to bedetermined. For more details regarding the use of the proceeds, please refer to the section headed“Reasons for the Placing and Use of Proceeds” of this prospectus.

RISK FACTORS

Potential investors of the Placing Shares should, before making any investment decision inrelation to our Company, carefully consider all of the information set out in this prospectus and, inparticular, the risks and special considerations associated with an investment in our Company as setout in the section headed “Risk Factors” in this prospectus. Some of the most material risk factorsinclude: i) our business is subject to the volatility and activeness of the financial markets which areunpredictable in nature and as such the performance of different segments of our business mayfluctuate significantly and subject to factors beyond our control. We cannot assure that our historicallevel of income can be sustained; ii) we may be unable to successfully compete with other largercompanies that compete with our Group for the same customers; iii) we are subject to extensiveregulatory requirements, the non-compliance with which could cause us to incur fines, restriction onour Group’s activities or even suspension or revocation of some or all of our licences for carrying onour business activities; iv) we recorded negative operating cash flow for the year ended 31 March2016. If we continue to have negative operating cash flow in the future, our liquidity and financialcondition may be materially and adversely affected; v) our risk management policies and proceduresand internal controls may not fully protect us against risks inherent in our business; vi) we are exposedto business risks from our placing and underwriting business in case the securities agreed to beunderwritten by us are undersubscribed or the placing exercises fails to complete; and vii) we may besubject to substantial risks if our customers default on payments or if the value of the relevantsecurities collaterals are insufficient to cover the outstanding balances due to significant marketvolatility.

In addition to the “Risk Factors” section of this prospectus, investors should also refer to thesections headed “Industry Overview” of this prospectus for an overview of the volatility of the HongKong stock market and “Financial Information” of this prospectus which describes the fluctuation ofour business segmentally.

RECENT DEVELOPMENTS AND MATERIAL ADVERSE CHANGE

Subsequent to the Track Record Period, the Hong Kong stock market has remained volatile. TheHang Seng Index fluctuated between the lows of around 21,700 to a high of around 24,300 since 1August 2016. The Directors believe that the Hong Kong financial market is still being affected by theslowing economic growth in the PRC and the effects of the 2016 US presidential elections on globaleconomics. This can be seen from the sudden volatility in the Hang Seng Index which droppedapproximately 494 points or approximately 2.2% from 22,909 points the day after 2016 USpresidential elections. However, within the five trade days after the 2016 US presidential elections,no margin call was made to our Group’s margin clients except for the follow-up margin calls to marginclients who were already under margin call position before the 2016 US presidential elections. Further,other global uncertainties still remain such as after effects of the Brexit and the US Federal Reservestance on reducing, maintaining or increasing interest rates. Hong Kong, having its exchange ratepegged to the US dollar will have similar positive and negative effects of tightening or loosening ofmonetary policies. Comparing various statistics for the period from January to October 2016 to thesame period in 2015 indicates that there is still a weak market: average daily turnover by value beinglower by approximately 40.8%, average share traded per trading day being lower by approximately13.3%, average number of trades per day lower by approximately 28.5% and the total funds raisedbeing lower by 59.1%.

SUMMARY

— 12 —

Our Directors believe that we will continue to operate in a challenging and difficult financialenvironment in Hong Kong in the last quarter of 2016. For the three months ended 31 October 2016,our average monthly revenue from our securities dealing and brokerage services remained lower atapproximately HK$0.6 million as compared to the monthly average of approximately HK$0.9 millionfor the year ended 31 March 2016 and our average monthly revenue from margin financing ofapproximately HK$0.5 million was higher than the monthly average of approximately HK$0.4 millionfor the year ended 31 March 2016. Further, subsequent to the Track Record Period and up to the LatestPracticable Date, our Group has completed seven placing and underwriting transactions, and twotransactions outstanding and expected to be completed in December 2016. For the placing andunderwriting transactions completed after the Track Record Period, our Group recognized a totalrevenue of approximately HK$2.9 million. In September 2016, our Group also completed a referraltransaction for the acquisition of the controlling stake in a company listed on the Stock Exchange andour Group generated a referral fee income of HK$6.8 million. We have also completed the generaloffer on behalf of the acquirer and is entitled to a professional fee and a loan commitment fee ofapproximately HK$3.2 million in aggregate. Further, our asset management operations have beenrestarted and have, as at the Latest Practicable Date, secured four new asset management customerswith a total value of assets under management of approximately HK$113.3 million.

Some unaudited financial information of our Group, including our Group’s revenue for the threemonths ended 31 October 2016, our Group’s assets, liabilities and indebtedness as at 31 October 2016,are derived from our Group’s unaudited combined financial statements prepared by our Directors inaccordance with the Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by theHKICPA, which were reviewed by the Reporting Accountants in accordance with the Hong KongStandard on Review Engagements 2400 “Engagements to Review Historical Financial Statements”issued by the HKICPA.

On 5 December 2016, the Shenzhen-Hong Kong Stock Connect was launched.

On 5 December 2016, PFHL, a subsidiary of the Group, capitalised an amount due to a Directorof approximately HK$6.1 million.

Save for the above and save as disclosed in the section headed “Financial Information — Impactof Listing Expenses” in this prospectus, our Directors confirm that there has been no material adversechange in the financial or trading positions or the prospects of our Group since 31 July 2016, beingthe date of our Company’s latest audited financial statements as set out in Appendix I to thisprospectus and up to the date of this prospectus.

SUMMARY

— 13 —

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

following meanings:

“Ample Capital” or “Sponsor” Ample Capital Limited, a corporation which is licensed to

conduct type 4 (advising on securities), type 6 (advising on

corporate finance) and type 9 (asset management) regulated

activities under the SFO, the Sponsor of the Listing

“Articles of Association” or

“Articles”

the articles of association of our Company, adopted on 5

December 2016 with effect from the Listing Date and as

amended from time to time, a summary of which is contained

in Appendix III to this prospectus

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

“Board” the board of Directors of our Company

“business day” a day (excluding Saturday and Sunday and public holiday) on

which licensed banks in Hong Kong are open for general

banking transactions to the public

“Business Registration

Ordinance”

the Business Registration Ordinance (Chapter 310 of the

Laws of Hong Kong) as amended, supplemented or otherwise

modified from time to time

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate, a method of assessing the

average growth of a value over a certain time period

“Capitalisation Issue” the issue of 1,499,999,999 new Shares to be made upon the

capitalisation of certain sums standing to the credit of the

share premium account of our Company upon completion of

the Placing as referred to in the section headed “Appendix IV

— Statutory and General Information — Resolutions in

writing of the sole Shareholder passed on 5 December 2016”

to this prospectus

“CCASS” the Central Clearing and Settlement System established and

operated by HKSCC

“CCASS Broker Participant” a person permitted to participate in CCASS as a broker

participant

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing

participant or general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian

participant

DEFINITIONS

— 14 —

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor

participant who may be an individual or joint individuals or a

corporation

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian

Participant or a CCASS Investor Participant

“close associate(s)” has the meaning ascribed thereto under Rule 1.01 of the GEM

Listing Rules

“Code of Conduct” the Code of Conduct for Persons Licensed by or Registered

with the SFC issued by the SFC from time to time

“Companies Law” The Companies Law, Cap. 22 (Law 3 of 1961, as consolidated

and revised) of the Cayman Islands

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong

Kong) which came into effect on 3 March 2014 as amended,

supplemented or otherwise modified from time to time

“Companies (Winding Up and

Miscellaneous Provisions)

Ordinance”

the Companies (Winding Up and Miscellaneous Provisions)

Ordinance (Chapter 32 of the laws of Hong Kong) as

amended, supplemented or otherwise modified from time to

time

“Company” PF Group Holdings Limited, an exempted company

incorporated with limited liability in the Cayman Islands on 3

August 2015 and references to “we”, “us” or “our” refer to

our Group or, where the context requires, our Company

“Connected Person(s)” has the meaning ascribed to it under the GEM Listing Rules

“Controlling Shareholders(s)” has the meaning ascribed to it under the GEM Listing Rules,

and in the context of this prospectus, means collectively

TML, Mr. B Lo and Mr. C Lo

“core connected person(s)” has the meaning ascribed thereto under Rule 1.01 of the GEM

Listing Rules

“Corporate Governance Code” Appendix 15 of the GEM Listing Rules (as amended,

supplemented or otherwise modified from time to time)

DEFINITIONS

— 15 —

“Deed of Indemnity” the deed of indemnity dated 5 December 2016 and executed

by the Controlling Shareholders as indemnifiers in favour of

our Company (for itself and as trustee of the members of the

Group) in respect of, among others, certain indemnities

regarding taxation

“Deed of Non-Competition” the deed of non-competition dated 5 December 2016 and

executed by the Controlling Shareholders as covenators in

favour of our Company (for itself and as trustee of the

members of the Group), particulars of which are set out in the

section headed “Relationship with Controlling Shareholders

— Deed of Non-competition” of this prospectus

“DEGL” Dynamic Express Global Limited, a company incorporated in

BVI with limited liability on 1 June 2015 and a wholly-owned

subsidiary of our Company

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

“FRR” Securities and Futures (Financial Resources) Rules (Chapter

571N of the Laws of Hong Kong)

“GEM” the Growth Enterprise Market of the Stock Exchange

“GEM Listing Rules” The Rules Governing the Listing of Securities on GEM (as

amended, supplemented or otherwise modified from time to

time)

“Group”, “our Group”, “we” or

“us”

our Company and its subsidiaries or, where the context so

requires, in respect of the period before our Company became

the holding company of its present subsidiaries, such

subsidiaries as if they were our Company’s subsidiaries at that

time, but does not include PICFL after its disposal on 23

March 2016

“HKEx” Hong Kong Exchanges and Clearing Limited

“HKFRS” Hong Kong Financial Reporting Standards, which includes

Hong Kong Financial Reporting Standards, Hong Kong

Accounting Standards and Interpretations issued by Hong

Kong Institute of Certified Public Accountants

“HKICPA” Hong Kong Institute of Certified Public Accountants

DEFINITIONS

— 16 —

“HKSCC” Hong Kong Securities Clearing Company Limited

“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of

HKSCC

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

“Hong Kong Legal Advisers” Robertsons, the legal advisers to our Company as to Hong

Kong law in relation to the Listing

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“Incorporation Share” one Share which was allotted and issued in nil-paid form to

the initial subscriber of our Companies on 3 August 2015 and

was transferred to TML on the same date

“Independent Third Party(ies)” person(s) or company(ies) which is/are independent of and

not connected with any directors, chief executive or

substantial shareholders of our Company or its subsidiaries or

any of their respective associates within the meaning of the

GEM Listing Rules

“Joint Bookrunners” Ample Orient Capital Limited and Ping An Securities Limited

“Joint Lead Managers” Ample Orient Capital Limited, ChaoShang Securities Limited

and Ping An Securities Limited

“Khoo Connected Service

Agreement”

agreement dated 7 December 2016 entered into between PFSL

and Mr. Khoo Ken Wee in relation to the provision of

brokerage, margin financing and placing services to him,

where applicable

“Latest Practicable Date” 2 December 2016, being the latest practicable date prior to the

printing of this prospectus for the purpose of ascertaining

certain information contained in this prospectus

“Lo’s Group Connected Service

Agreement”

agreement dated 7 December 2016 entered into between

PFSL, Mr. B Lo and Mr. C Lo in relation to provision of

brokerage, margin financing and placing services to them and

their respective associates, where applicable

“Licensed Representative(s)” a licensed representative that has the same meaning as

ascribed to it in the SFO

“Listing” listing of our Shares on GEM

DEFINITIONS

— 17 —

“Listing Date” the date on which dealings in our Shares first commence on

GEM, which is expected to be on Friday, 6 January 2017

“Listing Division” the Listing Division of the Stock Exchange

“Listing Rules” the Rules Governing the Listing of Securities on The Stock

Exchange of Hong Kong

“Main Board” the stock exchange (excluding the options market) operated

by the Stock Exchange which is independent from and

operated in parallel with GEM

“Memorandum of Association” or

“Memorandum”

the memorandum of association of our Company adopted on

5 December 2016 and as amended from time to time, a

summary of which is set out in Appendix III to this prospectus

“Minimum Wage Ordinance” the Minimum Wage Ordinance (Chapter 608 of the Laws of

Hong Kong) as amended, supplemented or otherwise modified

from time to time

“Mr. B Lo” Mr. Lo Tak Wing Benson, our executive Director, one of our

Controlling Shareholders and the sibling of Mr. C Lo

“Mr. C Lo” Mr. Lo Shiu Wing Chester, our executive Director, one of our

Controlling Shareholders and the sibling of Mr. B Lo

“Offer Size Adjustment Option” the option to be granted by our Company to and exercisable

by the Joint Lead Managers (for themselves and on behalf of

the Underwriters) under the Underwriting Agreement, at their

sole and absolute discretion, to require our Company to issue

up to an additional 75,000,000 Shares, representing 15% of

the initial number of the Placing Shares at the Placing Price,

details of which are set out in the section headed “Structure

and Conditions of the Placing” of this prospectus

“p.a.” per annum

“PFHL” Pacific Foundation Holdings Limited, a company

incorporated in Hong Kong on 7 October 1993 and

wholly-owned by DEGL. It is a wholly-owned subsidiary of

our Company

“PFSL” Pacific Foundation Securities Limited, a company

incorporated in Hong Kong on 17 June 1987 and is

wholly-owned by PFHL. It is a wholly-owned subsidiary of

our Company

DEFINITIONS

— 18 —

“PICFL” Pacific Innovest Corporate Finance Limited, a company

incorporated in Hong Kong on 5 August 2002; prior to the

Reorganisation it was owned as to 90% by PFSL and 10% by

Mr. Khoo Ken Wee, a non-executive Director and; as at the

Latest Practicable Date it was owned as to 90% by Mr. B Lo

and 10% by Mr. Khoo Ken Wee

“Placing” the conditional offering of the Placing Shares by the

Underwriters for and on behalf of our Company at the Placing

Price, as further described under the section headed

“Structure and Conditions of the Placing” in this prospectus

“Placing Price” the price for each Placing Share of not more than HK$0.16 per

Placing Share and expected to be not less than HK$0.14 per

Placing Share (excluding brokerage, Stock Exchange trading

fee and SFC transaction levy) and to be fixed on the Price

Determination Date

“Placing Shares” 500,000,000 new Shares being offered by our Company for

subscription at the Placing Price under the Placing together,

where relevant, with any additional Shares which may be

issued pursuant to the Offer Size Adjustment Option; and a

“Placing Share” means one of these Shares

“PRC” the People’s Republic of China, excluding, for the purposes of

this prospectus, Hong Kong, Macao and Taiwan

“Predecessor Companies

Ordinance”

the Companies Ordinance (Cap. 32 of the laws of Hong Kong)

prior to its repeal and replacement on 3 March 2014 by the

Companies Ordinance and the Companies (Winding Up and

Miscellaneous Provisions) Ordinance

“Price Determination Agreement” the agreement to be entered into by the Joint Lead Managers

(for themselves and on behalf of the Underwriters) and our

Company on the Price Determination Date to determine the

Placing Price

“Price Determination Date” the date, which is expected to be on or before Wednesday, 28

December 2016, on which the Placing Price will be

determined for the purposes of the Placing

“Reorganisation” the reorganisation of the corporate structure of our Group,

further details of which are described under the section

headed “History and Development — Reorganisation” and the

section headed “Group Reorganisation” in Appendix IV to

this prospectus

DEFINITIONS

— 19 —

“Responsible Officer(s)”/“RO(s)” a person that is approved under section 126 of the SFO to

supervise one or more regulated activities of a licensed

corporation

“Securities Ordinance” the repealed Securities Ordinance (Chapter 333 of the Laws of

Hong Kong)

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of the

Laws of Hong Kong), as amended, supplemented or otherwise

modified from time to time

“Share(s)” ordinary share(s) with nominal value of HK$0.01 each in the

share capital of our Company

“Share Option Scheme” the share option scheme conditionally adopted by our

Company, further details of which are described in the section

headed “Share Option Scheme” in Appendix IV to this

prospectus

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

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Stock Exchange Participant(s)” a corporation(s) licensed to carry on Type I (dealing in

securities) regulated activity under the SFO who, in

accordance with the rules of the Stock Exchange, may trade

on or through the Stock Exchange and whose name is entered

in a list, register or roll kept by the Stock Exchange as a

person who, may trade on or through the Stock Exchange

“subsidiary” or “subsidiaries” has the meaning ascribed to it under the GEM Listing Rules

“Substantial Shareholders” has the meaning ascribed to it under the GEM Listing Rules

“Takeovers Code” The Codes on Takeovers and Mergers and Share Buy-backs

issued by the SFC, as amended, modified and supplemented

from time to time

“TML” Thoughtful Mind Limited, a company incorporated in BVI

with limited liability on 19 May 2015, a Controlling

Shareholder and owned as to 57.1% by Mr. B Lo and 42.9%

by Mr. C Lo

“Track Record Period” the three financial years of our Group ended 31 March 2016

and the four months ended 31 July 2016

DEFINITIONS

— 20 —

“Underwriters” the underwriters of the Placing, whose names are set out

under the section headed “Underwriting — Underwriters” in

this prospectus

“Underwriting Agreement” the conditional underwriting agreement entered into on 9

December 2016 among our Company, the executive Directors,

our Controlling Shareholders, the Sponsor, the Joint

Bookrunners, the Joint Lead Managers and the Underwriters

relating to the Placing, particulars of which are summarised in

the section headed “Underwriting” in this prospectus

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

“%” per cent.

Unless otherwise specified, all references to any shareholding in our Company in this prospectus

assume no Share which may be allotted and issued upon the exercise of any options which may be

granted under the Share Option Scheme.

Certain amounts and percentage figures included in this prospectus have been subject to

rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic

aggregation of the figures preceding them.

DEFINITIONS

— 21 —

This glossary contains explanations and definitions of certain terms used in this prospectus in

connection with our Group and our business. These terms and their meanings may or may not

correspond to standard industry meaning or usage of these terms.

“AE(s)” accounts executive(s)

“AMS” and “AMS/3.8” Automatic Order Matching and Execution System, an

electronic stock trading system of the Stock Exchange, the

first generation of which was implemented in 1993 and is

currently in its third generation

“BSS” the Broker Supplied System, being a front office solution

either developed in-house by an Exchange Participant or a

third-party software package acquired from commercial

vendors, enabling the Exchange Participant to connect its

trading facilities to the Open Gateway to conduct trading

“collateral coverage” a ratio calculated by Margin Collateral Value over

Outstanding Margin Loan

“credit limit” for cash clients, credit limit refers to trading limit granted to

the clients

for margin clients, credit limit refers to margin loan limit

granted to the clients

“Exchange Participant(s)” corporation(s) licensed to carry out Type 1 (dealing in

securities) regulated activity under the SFO who, in

accordance with the rules of the Stock Exchange, may trade

on or through the Stock Exchange and whose name(s) is/are

entered in a list, register or roll kept by the Stock Exchange

as person(s) who may trade on or through the Stock Exchange

“IPO(s)” initial public offering(s)

“IT” information technology

“margin collateral value” market value of securities collateral

“margin loan limit” maximum amount of margin loan granted by our Group to

clients

“margin ratio” the maximum percentage of financing received by our

customers against the market value of collateral securities in

his/her account in respect of the collateral securities

“OCG” Orion Central Gateway, a new market access platform to

support secured connections between the BSS of Exchange

Participants (“EPs”) and the HKEx securities market

GLOSSARY OF TECHNICAL TERMS

— 22 —

“Open Gateway” a Windows-based device provided by the Stock Exchange and

installed at the Exchange Participants’ office to facilitate

electronic interface of the AMS/3.8 with front office systems

operated by the Exchange Participant

“retail investors” an individual who purchases securities for his or her personal

account rather than an organisation

“Stock Exchange Trading Right” a right to be eligible to trade on or through the Stock

Exchange as an Exchange Participant and entered as such a

right in a list, register or roll kept by the Stock Exchange

“T+2” two trading days from the relevant transaction day

“trading limit” maximum amount of securities dealings that can be conducted

by cash clients on credit basis

GLOSSARY OF TECHNICAL TERMS

— 23 —

FORWARD-LOOKING STATEMENTS CONTAINED IN THIS DOCUMENT MAY NOT

MATERIALISE

This document includes forward-looking statements. All statements other than statements of

historical facts contained in this document, including, without limitation, those regarding our future

financial position, our strategy, plans, objectives, goals and targets, future developments in the

markets where we participate or are seeking to participate, and any statements preceded by, followed

by or that include the words “believe”, “expect”, “aim”, “intend”, “will”, “may”, “might”, “plan”,

“consider”, “potential”, “propose”, “anticipate”, “seek”, “should”, “would” or similar expressions or

the negative thereof, are forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other

factors, some of which are beyond our control, which may cause our actual results, performance or

achievements, or industry results, to be materially different from any future results, performance or

achievements expressed or implied by the forward-looking statements.

These forward-looking statements are based on numerous assumptions regarding our present and

future business strategies and the environment in which we will operate in the future. Important

factors that could cause our actual performance or achievements to differ materially from those in the

forward-looking statements include, among others, the following:

• Future development, trends and conditions in the industry and markets in which we operate;

• Expansion, consolidation or other trends in the industry in which we operate;

• Regulations and restrictions;

• General political and economic conditions in Hong Kong, the PRC and internationally;

• Exchange rate fluctuations and developing legal system, in each case pertaining to Hong

Kong and the industry and markets in which we operate;

• Macroeconomic measures taken by the Hong Kong and/or the PRC governments to manage

economic growth;

• Our business prospects;

• The competition for our business activities and the actions and development of our

competitors;

• Financial condition and performance of our Group;

• Our dividend policy;

FORWARD-LOOKING STATEMENTS

— 24 —

or that any fact has been omitted that would render such forward-looking statements fake or

misleading in any material respect.

The information and assumptions contained in the forward-looking statements have not been

independently verified by us, the Controlling Shareholders, the Sponsor, the Joint Bookrunners, the

Joint Lead Managers, the Underwriters, any other party involved in the Placing or their respective

directors, officers, employees, advisers or agents and no representation is given as to the accuracy or

completeness of such information or assumptions on which the forward-looking statements are made.

Additional factors that could cause actual performance or achievements of our Group to differ

materially include, but are not limited to those discussed under the section “Risk factors” and

elsewhere in this document.

These forward-looking statements are based on current plans and estimates, and apply only as of

the date they are made. We undertake no obligation to update or revise any forward-looking statements

in light of new information, future events or otherwise. Forward-looking statements involve inherent

risks and uncertainties and are subject to assumptions, some of which are beyond our control. We

caution you that a number of important factors could cause actual outcomes to differ, or to differ

materially, from those expressed in any forward-looking statement.

FORWARD-LOOKING STATEMENTS

— 25 —

Potential investors of the Placing Shares should carefully consider all of the information set

forth in this prospectus and, in particular, the following risks and special considerations associated

with an investment in our Company before making any investment decision in relation to the

Placing Shares. The occurrence of any of the following risks may have a material adverse effect

on the business, results of operations, financial conditions and future prospects of our Group.

RISKS RELATING TO BUSINESS AND OPERATIONS OF OUR GROUP

Our business is subject to the volatility and activeness of the financial markets which are

unpredictable in nature and as such the performance of different segments of our business may

fluctuate significantly and subject to factors beyond our control and we cannot assure that our

historical level of income can be sustained

We generate income mainly from the provision of (i) securities dealing and brokerage services;

(ii) placing and underwriting services; (iii) financing services including securities and IPO financing;

and (iv) asset management, which is subject to the volatility and activeness of the financial market in

Hong Kong. During the Track Record Period, our Group’s financial performance has been subject to

substantial fluctuation. Our revenue from our securities dealing and brokerage services has

substantially decreased from approximately HK$12.7 million for the year ended 31 March 2014 to

approximately HK$10.9 million for the year ended 31 March 2016, representing a decrease of

approximately 14.1%. For the four months ended 31 July 2016, our revenue from securities dealing

and brokerage services further decreased to approximately HK$1.3 million as compared to

approximately HK$5.5 million for the same period in 2015, representing a decrease of approximately

76.7%. Our revenue from placing and underwriting activities decreased from approximately HK$32.6

million for the year ended 31 March 2014 to approximately HK$15.9 million for the year ended 31

March 2016, representing a decrease of 51.3%. For the four months ended 31 July 2016, our revenue

from placing and underwriting activities substantially increased from approximately HK$1.2 million

for the four months ended 31 July 2015 to HK$20.1 million, representing an increase of 1,602.6%. Any

sudden downturn in the market sentiment, the global economic and sudden change in political

environment, which are beyond our control, may adversely affect the financial market and our ability

to generate revenues. Severe fluctuation in market and economic sentiments may also lead to a

prolonged period of sluggish market activities which would in turn incur adverse impact on our

business and operating performance. As such, the revenue and profitability of our Group may fluctuate

and there is no assurance that we will be able to maintain our historical financial results under difficult

or unstable economic conditions.

We may be unable to successfully compete with other larger companies that compete with ourGroup for the same customers

As at 31 October 2016, there were 586 Stock Exchange Participants in Hong Kong of which 550

are trading participants. We compete in an industry where there are competitors which are large

multi-national financial institutions such as banks and investment banks with global network and local

presence in Hong Kong and we face local competition from branded medium-sized and

well-established financial services firms, as well as other small-sized financial services firms, which

RISK FACTORS

— 26 —

offer similar range of services as our Group. We may be unable to compete effectively and

successfully with these competitors as they may have substantially more financial resources than us.

If we are unable to effectively compete with them, our business operations and financial results of

operations may be materially and adversely affected.

We are subject to extensive regulatory requirements, the non-compliance with which could causeus to incur fines, restriction on our Group’s activities or even suspension or revocation of someor all of our licences for carrying on our business activities

The Hong Kong financial market in which we operate is highly regulated. There are changes in

rules and regulations from time to time in relation to the regulatory regime for the financial service

industry, including but not limited to, the SFO, the Companies Ordinance, the Listing Rules, the GEM

Listing Rules, the Stock Exchange Trading Rules, the FRR and the Takeovers Code. Any such changes

might result in an increase in our cost of compliance, or might restrict our business activities. In case

we fail to comply with the applicable rules and regulations from time to time, it might result in fines,

restrictions on our Group’s activities or even suspension or revocation of some or all of our licences

for carrying on our business activities. Accordingly, our business operation and financial results might

be materially and adversely affected.

Furthermore, we are required to be, and continuously to be, licensed with the relevant regulatory

authorities including without limitation, as licensed corporations under the SFO. In this respect, we

have to ensure continuous compliance with all applicable laws, regulations, codes and guidelines, and

to satisfy the SFC, the Stock Exchange and/or other regulatory authorities that we remain fit and

proper to be licensed. If there is any change or tightening of the relevant laws, rules, regulations,

codes and guidelines, it may adversely affect our operation and business.

A licensed corporation under the SFO is subject to regulatory inspections from time to time. If

the results of the inspections reveal serious misconduct, the SFC may make further investigations and

take disciplinary actions including revocation or suspension of licences, public or private reprimand

or imposition of pecuniary penalties against us, our Responsible Officers or Licensed Representatives.

Any of such disciplinary actions taken against us, our Directors, Responsible Officers, Licensed

Representatives and/or staff may have an adverse impact on our business operation and financial

results. There is no assurance that there will not be any investigations taken against them or our

companies.

We recorded negative operating cash flow for the year ended 31 March 2016. If we continue tohave negative operating cash flow in the future, our liquidity and financial condition may bematerially and adversely affected

We recorded negative operating cash flows of approximately HK$26.0 million for the year ended

31 March 2016, which was primarily attributed to increase in accounts receivable of approximately

HK$13.3 million, increase in prepayment of approximately HK$1.8 million, decrease in accounts

payable of approximately HK$44.0 million and income tax paid of approximately HK$1.7 million

which was then offset by profit before tax of approximately HK$9.6 million, increase in other

payables and accruals of approximately HK$2.7 million and decrease in cash held on behalf of

customers of approximately HK$21.7 million. The decrease in accounts payable as at 31 March 2016

RISK FACTORS

— 27 —

was mainly due to the decrease in accounts payable to cash clients which was mainly driven by the

amount of cash held on behalf of clients by our Group and the aggregate amount of securities that cash

clients sold and remained outstanding as at that year end. Please refer to the section headed “Financial

Information — Liquidity, Financial Resources and Capital Structure — Cash flows generated by/(used

in) operating activities” of this prospectus for further details. We cannot assure you that we will be

able to record positive operating cash flows in the future. Our liquidity and financial condition may

be materially and adversely affected should our future operating cash flow remain negative, and we

cannot assure you that we will have sufficient cash from other sources to fund our operations. If we

resort to other financing activities to generate additional cash, we will incur additional financing costs

and we cannot guarantee that we will be able to obtain the financing on terms acceptable to us or at

all.

Our risk management policies and procedures and internal controls may not fully protect us

against risks inherent in our business

We have established internal control systems for each of our business segment. Our internal

control systems require constant monitoring and updating by our Directors and senior management

with the change in business and regulatory environment. We rely on the effectiveness of our internal

control systems and procedures to record, process, summarise and report financial and other data in

an accurate and timely manner to identify any reporting errors and non-compliance with relevant rules

and regulations. Any deficiencies in our internal control systems and procedures may materially and

adversely affect our Group’s businesses and prospects. Moreover, no matter how sophisticated in

designs, our internal control systems may still contain inherent limitations caused by misjudgement

or fault of our Directors, senior management and/or staff. There is no assurance that our internal

control systems are adequate or effective. Any failure to locate and address any internal control

matters and deficiencies on time may result in investigations and/or disciplinary actions taken against

us and/or our employees. Our Group’s financial condition and operations may therefore be materially

and adversely affected.

For details of our current internal control for each of our business segments, please refer to the

section headed “Business — Internal control” of this prospectus.

We are exposed to business risks from our placing and underwriting business in case thesecurities underwritten by us are undersubscribed or the placing exercises are failed to complete

Placing and underwriting commission was the largest income source during the Track Record

Period which in total accounted for approximately 60.0%, 54.7%, 38.8% and 80.9% of our total

revenue for the three financial years ended 31 March 2016 and the four months ended 31 July 2016,

respectively.

During the Track Record Period, for our underwriting service, we were obliged to take up the

undersubscribed securities up to the maximum of our underwriting commitment. We also involved in

a number of placing exercises as placing agents or sub-placing agents. The placing exercises were all

on a best effort basis.

RISK FACTORS

— 28 —

If the securities underwritten by us are undersubscribed and we fail to procure subscribers to take

up all of the undersubscribed shares, we are required to purchase all of the undersubscribed portion

for our own account, which would materially and adversely affect our liquidity. Our financial position

would also be adversely affected if the underwritten securities so taken up by us becomes illiquid

and/or their market value drops. In the case of placing of securities under a best effort basis, if the

securities are undersubscribed or if market conditions become volatile, the placing may not be

completed in full or may be cancelled as a result. Our commission from such placing engagements may

reduce or in the worst case, we may have no commission at all.

Moreover, the placing and underwriting commission generated by us is directly related to the

number of placing and underwriting exercises secured and completed by us and their fund raising

sizes. Our Directors consider that our placing and underwriting business is subject to various external

factors which are beyond our control, including the number and the size of IPOs in the market, and

the activeness of the secondary market for fund-raising exercises under the prevailing financial market

environment. There is no assurance that the performance of our Group’s placing and underwriting

business will not be affected by such external factors.

We may be subject to substantial risks if our customers default on payments or if the value ofthe relevant securities collaterals are insufficient to cover the outstanding balances due tosignificant market volatility

During the course of provision of securities dealing and brokerage services, our customers are

required to settle their securities transactions two days after the trade date. If our customers do not

have sufficient cash with us to do so, our Group is required to settle the same with CCASS on behalf

of the customers. As such, our liquidity position will be adversely affected.

For our financing services, we provide margin financing to our customers with their securities

or debt instruments convertible into shares listed on the Stock Exchange as collaterals and IPO

financing for subscription of shares in connection with IPOs. In a volatile market, if stock price

declines to the extent that the value of their collaterals fall below our prescribed level, we may require

our customers to deposit additional cash or other securities as further collaterals to reduce the credit

risk exposures or increase the collateral values. If our customers are unable to meet the margin calls,

we are entitled to sell the relevant pledged securities and apply the sale proceeds toward repayment

of the outstanding balance. There is no assurance that proceeds from selling of securities collateral are

sufficient to cover outstanding balance. Our Group’s businesses and financial performance will be

adversely affected if our customers fail to cover the shortfalls.

Our brokerage services involve active interactions between our staff and customers and thereforeit is subject to human errors, which we have to bear the losses resulting therefrom

During the course of providing securities dealing and brokerage services, trading errors (such as

incorrect input of customers’ instructions, including stock code, number of shares or buy/sell orders

or incorrect input of account numbers) may occur. Upon discovery of any trading errors, we have to

take immediate actions to close out error trade positions and recognise gains or losses from such error

trades, if any. For the three financial years ended 31 March 2016, the four months ended 31 July 2016

and the period from 1 August 2016 up to the Latest Practicable Date, we identified six, three, four,

RISK FACTORS

— 29 —

nil and two incident(s) of error trades, respectively, among which our Group suffered losses in five,

three, three, nil and one error trades for the three financial years ended 31 March 2016, the four

months ended 31 July 2016 and the period from 1 August 2016 up to the Latest Practicable Date,

respectively. As a result of the error trades, we recognised a net loss of approximately HK$3,024,

HK$515, HK$13,777, nil and HK$1,420 respectively for the three financial years ended 31 March

2016, the four months ended 31 July 2016 and the period from 1 August 2016 up to the Latest

Practicable Date. During the Track Record Period and up to the Latest Practicable Date, we were not

subject to any regulatory fines or penalties as a result of error trades.

For any loss arising from error trades, the responsibility to bear the loss and any related expenses

rests with the party upon which erred. If the error was made by in-house AEs, the loss is borne by our

Group and if the error was made by self-employed AEs, the loss is borne by the self-employed AEs.

However, our management will also take into consideration, among other things, the quantum of theloss involved and if the quantum of loss incurred as considered by our management is immaterial, ourGroup may bear the loss on behalf of the self-employed AEs. For the three financial years ended 31March 2016, the four months ended 31 July 2016 and the period from 1 August 2016 up to the LatestPracticable Date, there was one, nil, one, nil and one error trade respectively which the losses ofapproximately HK$605, nil, HK$1,322, nil and HK$1,080, respectively, were borne by self-employedAEs. In the event that the trading errors are not effectively prevented or controlled, or rectificationmeasures could not cover the loss incurred, we may be subject to reputation loss, material losses andthe financial results of our Group would be adversely affected.

We rely on our key management personnel to conduct our business, and the loss of any keymembers of our senior management or professional staff may negatively affect our operation

Our performances and the implementation of our business plans depend on, to a significantextent, the strategies and visions of our key management personnel. Given that the competition forrecruiting competent personnel is intense, we may not be able to attract or retain the services of thenecessary key personnel for our business in the future. Our key management personnel have extensiveexperience and network in the financial service industry and are responsible for formulating ourcorporate strategies and overseeing our business operation and development.

Should our key personnel cease to be involved in our management in the future and we fail tofind suitable replacements, our operation and profitability may be materially and adversely affected.In addition, we may need to incur additional costs to recruit, train and retain key personnel.

As at the Latest Practicable Date, our Group had 5 Responsible Officers in aggregate for variousregulated activities we conduct. Under the licensing requirements of the SFO, we must at all timesmaintain at least two Responsible Officers for each regulated activity. Any resignation of ourResponsible Officers may result in breaching the relevant licensing requirements. This may result insuspension of our licences and thus jeopardising our business operation.

We may not be able to effectively enforce our non-solicitation clause with some of our employeesunder Hong Kong laws

We have entered into employment contracts with some of our employees that includenon-solicitation clauses which restrict some of our employees from soliciting business from ourGroup’s pre-existing customers (other than those introduced by such employee) for a period of 12

RISK FACTORS

— 30 —

months after the termination of their employment with our Group. However, such restrictive covenants

may not be enforceable under Hong Kong laws and will be subject to the determination of the Hong

Kong Courts. If we are unable to effectively enforce such restrictive covenant against our employees,

we may not be able to restrict such employees from soliciting business from our pre-existing

customers (other than those introduced by such employee) after the termination of their employment

with our Group and this may have an adverse impact on our business operation and financial results.

Given that our revenue is sourced from transactions which are of non-recurring nature, ourrevenue and profitability are highly unpredictable

Our revenue is primarily generated from transactions which are of a non-recurring nature and on

a transaction-by-transaction basis. Our revenue is also subject to the size of transactions and the scope

of services to be rendered. In addition, terms and conditions of each engagement including its payment

schedule are negotiated and determined on a case-by-case basis.

For our placing and underwriting services, we completed 18, 25, 12 and 11 placing and

underwriting engagements respectively for the three financial years ended 31 March 2016 and the four

months ended 31 July 2016.

Given the non-recurring business nature, our revenue and profitability are highly unpredictable.

Therefore, our future financial results may be subject to fluctuations depending on our success in

entering into new engagements. There is no assurance that we are able to secure new engagements at

levels similar to those we had during the Track Record Period, and there is also no assurance that the

engagements we successfully secure can be completed. Due to the market conditions and

circumstances of each engagement, our revenue and profitability may therefore fluctuate significantly.

We may be unable to fully detect money laundering and/or other illegal or improper activities

in our business operations on a timely basis

We may be unable to detect money laundering and/or other illegal or improper activities fully or

in a timely manner, which could expose us to liabilities for fines and other penalties and may affect

our businesses.

We are required to comply with applicable anti-money laundering laws and regulations in Hong

Kong, for example, the Anti-Money Laundering and Counter-Terrorist Financing (Financial

Institutions) Ordinance (Chapter 615 of the Laws of Hong Kong) and the Guideline on Anti-Money

Laundering and Counter-Terrorist Financing. These laws and regulations require us, among other

things, to carry out customer due diligence and report suspicious transactions to the applicable

regulatory authorities. While we have policies and procedures aimed at detecting and preventing the

use of our operations for money laundering activities and other illegal or improper activities, such

policies and procedures may not preclude customers’ intentional fraud. To the extent that we fail to

identify money laundering activities promptly and fully comply with the applicable laws and

regulations, the relevant government agencies may impose fines and/or penalties on us, which may

significantly affect our business operation and financial results.

RISK FACTORS

— 31 —

Our expansion plans may not materialise in accordance with the timetable or at all

As set out in more details in the section headed “Business Objectives and Strategies” in this

prospectus, our Group intends to (i) develop our brokerage services; (ii) develop our placing and

underwriting services through establishing new relationships and maintain existing relationships with

other investment banks and professionals in the industry; and (iii) enhance our Group’s quality of

service.

The above expansion plans are based on current intentions and assumptions. The future execution

may be subject to capital investment and human resources constraints. Furthermore, our expansion

plans may also be hindered by other factors beyond our control, such as the general market conditions,

the performance of the financial service industry, and the economic and political environment of Hong

Kong, PRC and the world. Therefore, our expansion plans may not materialise in accordance with the

timetable or at all.

Any harm to our reputation may have a material adverse effect on our business, results of

operations and financial condition

We and our services are vulnerable to adverse market perception as we operate in an industry

where integrity, customer trust and confidence are critical. Litigation and disputes, employee

misconduct, changes in senior personnel, customer complaints, outcome of regulatory investigations

or penalties on us may harm our reputation. Any harm to our reputation may cause our existing and

potential customers to be reluctant to purchase services from us, and may thus have a material adverse

effect on our business, results of operations and financial condition.

The use of the “Pacific Foundation” brand name by other entities may expose us to reputational

risks if any actions taken by these entities damage the “Pacific Foundation” brand name

Certain entities are using the same name “Pacific Foundation” as their corporate name. If any

actions taken by these entities damage the “Pacific Foundation” brand name, or any negative publicity

is associated with any of these entities, our reputation, business, growth prospects, results of

operations and financial condition may be materially and adversely affected.

Any failure in protection of computer system from external threat may cause disruption to our

operation

The computer system used by us may be vulnerable to the attack of computer virus, worms,

Trojan horses, hackers or other disruptive actions by visitors or other internet users. Such disruption

may cause data corruption and interruption in our storage system and delay or cessation in the services

provided through our securities dealing system and our online trading platform, which could result in

a material adverse effect on our business. Inappropriate use of the internet by third parties may also

jeopardise the security of confidential information (such as trading data or trading records) stored in

the computer system and cause losses to our Group.

RISK FACTORS

— 32 —

RISKS RELATING TO HONG KONG

Political risks associated with doing business in Hong Kong

Our Group’s business and operations are located in Hong Kong. Hong Kong is a Special

Administrative Region of the PRC, with its own executive, judicial and legislative branches. Hong

Kong enjoys a high degree of autonomy from China under the principle of ‘‘one country, two

systems’’. However, our Group can give no assurance that Hong Kong will continue to enjoy the same

level of autonomy from China. Any intervention by the government of China in the affairs of Hong

Kong, in breach of the ‘‘one country, two systems’’ principle, may adversely affect our Group’s

revenues and operations.

During the Occupy Central movement which occurred from late September 2014 to early

December 2014, thousands of residents of Hong Kong engaged in civil disobedience protests. Activists

protested outside key government buildings and occupied several major city intersections, causing

major disruption to traffic and trade in the affected areas. Any political and social instability in Hong

Kong, if significant and prolonged, could have a material adverse effect on our Group’s business,

financial condition, results of operations and prospects.

RISKS RELATING TO THE PLACING OF OUR SHARES

Investors will experience immediate dilution

Because the Placing Price of our Shares is higher than the net tangible assets value per Share as

at 31 July 2016, subscribers of our Shares in the Placing will experience an immediate dilution in the

unaudited pro forma adjusted net tangible assets value to HK$0.097 per Share, based on the minimum

Placing Price of HK$0.14 per Share, or HK$0.102 per Share, based on the maximum Placing Price of

HK$0.16 per Share, assuming that the Offer Size Adjustment Option is not exercised. If the Offer Size

Adjustment Option is exercised in full, our unaudited pro forma adjusted net tangible assets value will

be diluted to HK$0.104 per Share, based on the maximum Placing Price of HK$0.16 per Share.

There has been no prior public market for our Shares and an active trading market for our Shares

may not develop prior to the Placing, there has been no public market for our Shares. The initial

Placing Price range for our Shares as disclosed in this prospectus was the result of negotiations

between us and the Joint Lead Managers (for themselves and on behalf of the Underwriters), and the

Placing Price may differ significantly from the market price for our Shares following the Placing.

While we have applied for the listing of, and permission to deal in, our Shares on the Stock Exchange,

there is no guarantee that an active and liquid trading market for our Shares will develop, or if it does

develop, will be sustained following the Placing or that the market price of our Shares will not decline

following the Placing. We give no assurance that these developments will not occur in the future.

The trading price and the trading volume of our Shares may be highly volatile and may be

affected by the following factors:

• actual or anticipated fluctuations in our results of operations;

RISK FACTORS

— 33 —

• recruitment or loss of key personnel by us or our competitors;

• announcements of competitive developments, acquisitions or strategic alliances in our

industry;

• changes in earnings estimates or recommendations by financial analysts;

• changes in investors’ perception of our Group and the investment environment generally;

• the liquidity of the market for our Shares;

• potential litigation or regulatory investigations;

• general market conditions or other developments affecting us or the industry in which we

operate;

• the operating and stock price performance of other companies, other industries and other

events or factors beyond our control;

• political, social and economic conditions in China;

• developments in information technology; and

• release of lock-up or other transfer restrictions on our Shareholders.

Moreover, in recent years, the securities markets have experienced significant price and volume

fluctuations, some of which may not relate to the operating performance of particular companies.

These market fluctuations may adversely affect the market price of our Shares.

Future sales of substantial amounts of our Shares in the public market could adversely affect the

prevailing market price of our Shares. Our Controlling Shareholders have given non-disposal

undertakings to our Company, the Stock Exchange, the Sponsor and Joint Lead Managers (for

themselves and on behalf of the Underwriters) in respect of their Shares and our Company will not

be allowed to issue Shares or securities convertible into equity securities of our Company within six

months from the Listing Date. Please refer to the section headed “Underwriting” of this prospectus for

a more detailed discussion of the restrictions that may apply to future issues and sales of our Shares.

After these restrictions lapse, the market price of our Shares could decline as a result of future sales

of substantial amounts of our Shares or other securities relating to our Shares in the public market,

the issuance of new Shares or other securities relating to our Shares, or the perception that such sales

or issuances may occur. This could also materially and adversely affect our Group’s ability to raise

capital in the future at a time and at a price it deems appropriate.

Shareholders’ interests in our Company may be diluted in the future

Our Company will comply with Rule 17.29 of the GEM Listing Rules, which specifies that no

further Shares or securities convertible into equity securities of our Company (subject to certain

RISK FACTORS

— 34 —

exceptions) may be issued or form the subject of any agreement to be issued within six months fromthe Listing Date. Upon expiry of such six-month period, our Group may raise additional funds by wayof issue of new equity or equity-linked securities of our Company and such fund-raising exercises maynot be conducted on a pro-rata basis to existing Shareholders. As such, the shareholding of our thenShareholders may be reduced or diluted. We may in the future expand our capabilities and businessthrough acquisition, joint venture and strategic partnership with parties who can add value to ourbusiness. We may require additional equity funding after the Placing and the equity interest of ourShareholders will be diluted should our Company issue new Shares to finance future acquisitions, jointventures and strategic partnerships and alliances.

Our Group may issue additional Shares upon exercise of options to be granted under the ShareOption Scheme. Under the HKFRSs, the costs of share options to be granted under the Share OptionScheme will be charged to our Group’s income statement over the vesting period by reference to thefair value at the date of granting of the share options. Our Group’s profitability may be adverselyaffected during the vesting period over the life of any outstanding share options granted or to begranted under the Share Option Scheme. Upon exercise of the outstanding share options, our Companyshall allot and issue further new Shares to the holders of such outstanding share options which willresult in dilution of shareholders’ interests in our Company.

The interests of our Controlling Shareholders may not always coincide with our or your bestinterests

Upon completion of the Placing and the Capitalisation Issue (but without taking into account ofany Shares that may be allotted and issued pursuant to the exercise of options which may be grantedunder the Share Option Scheme or the exercise of the Offer Size Adjustment Option), our ControllingShareholders will own, approximately 75% of our Shares. If the interests of our ControllingShareholder conflict with our and/or your interests, or if our Controlling Shareholders chooses tocause our business to pursue strategic objectives that conflict with our and/or your interests, ourCompany or those other Shareholders, including you, may be adversely affected as a result. OurControlling Shareholders could have significant influence in determining the outcome of anycorporate transaction or other matter submitted to our Shareholders for approval, including but notlimited to mergers, privatizations, consolidations and the sale of all, or substantially all, of our assets,election of directors, and other significant corporate actions. Our Controlling Shareholders have noobligation to consider the interests of our Company or the interests of our other shareholders otherthan pursuant to the deed of non-competition, see “Relationship with Controlling Shareholders —Deed of Non-competition” of this prospectus for more details. Consequently, our ControllingShareholders’ interests may not necessarily be in line with the best interests of our Company or theinterests of our other Shareholders, which may have a material and adverse effect on our Company’sbusiness operations and the price at which our Shares are traded on the Stock Exchange.

Statistics and facts in this prospectus have not been independently verified

This prospectus includes certain facts, forecasts and other statistics including those relating toHong Kong and the securities industry that have been extracted from government official sources andpublications or other sources. Our Company believes the sources of these statistics and facts areappropriate and we have taken reasonable care in extracting and reproducing such statistics and facts.Our Company has no reason to believe that such statistics and facts are false or misleading or that anyfact has been omitted that would render such statistics and facts false or misleading. These statistics

RISK FACTORS

— 35 —

and facts from these sources have not been independently verified by our Company, the Sponsor, the

Joint Lead Managers, the Joint Bookrunners, the Underwriters, any of their respective affiliates or

advisers or any other party involved in the Placing and therefore, our Company makes no

representation as to the accuracy or completeness of these statistics and facts. As such, these statistics

and facts should not be unduly relied upon. Due to possibly flawed or ineffective collection methods

or discrepancies between published information and market practice and other problems, the statistics

from official government publications referred to or contained in this prospectus may be inaccurate

or may not be comparable to statistics produced for other economies. Furthermore, there is no

assurance that they are stated or compiled on the same basis or with the same degree of accuracy as

may be the case elsewhere.

Lack of liquidity of our Shares and volatility of our Share price on GEM may be resulted

Prior to the Placing, there has been no public market for our Shares. There is no guarantee that

a liquid public market for our Shares will develop or be sustained upon completion of the Placing. In

addition, the Placing Price has been determined by negotiations between the Joint Lead Managers (for

themselves and on behalf of the Underwriters) and our Company, and may not be indicative of the

market price of our Shares that will prevail in the trading market and such market prices may be

volatile. If an active public market for our Shares does not develop after the Placing, the market price

and liquidity of our Shares may be adversely affected. Investors may not be able to sell their Shares

at or above the Placing Price. The stock market of Hong Kong generally has experienced increasing

price and volume fluctuations, some of which have been unrelated or have not corresponded to the

operating performances of such companies in recent years. Volatility in the price of our Shares may

be caused by factors outside our control and may be unrelated or disproportionate to our operating

results.

Termination of the Underwriting Agreement

Prospective investors of the Placing Shares should note that the Underwriters are entitled to

terminate their obligations under the Underwriting Agreement by the Joint Lead Managers (for

themselves and on behalf of the Underwriters) giving notice in writing to our Company upon the

occurrence of any of the events set out in the paragraph headed “Grounds for termination” in the

section headed “Underwriting” in this prospectus at any time prior to 8:00 a.m. (Hong Kong time) on

the Listing Date. Such events include, without limitation, any acts of God, wars, riots, public disorder,

civil commotion, fire, flood, tsunami, explosions, epidemic, pandemic, acts of terrorism, earthquakes,

strikes or lockouts.

Our Group may be unable to declare and distribute dividends to Shareholders

Our dividend distribution after the Listing will be made at the discretion of our Directors.

Our dividend distribution after the Listing will be made at the discretion of our Directors, if any,

in Hong Kong dollars with respect to our Shares on a per Share basis and depends on many factors,

including our earnings and financial condition, operating requirements, capital requirements and any

conditions that our Directors may deem relevant and will be subject to the approval of our

Shareholders. For the three financial years ended 31 March 2016 and the four months ended 31 July

2016, we did not declare dividends.

RISK FACTORS

— 36 —

OTHER RISK FACTORS

Natural disasters, acts of war, terrorist attacks, political unrest and other events may have

negative impact on our business

Natural disasters and other acts of god which are beyond our control may materially and

adversely affect the economy and livelihood of the people in Hong Kong. Our operations and financial

condition may be adversely affected, especially when such events occur in regions in which our

operations, independent manufacturers and raw material suppliers are located.

Acts of war, terrorists’ attacks and political unrest may cause damage or disruption to our

facilities, our employees, raw material suppliers and our markets, any of which could materially and

adversely affect our overall results of operations and financial condition.

RISK FACTORS

— 37 —

Our Company has sought the following waiver from strict compliance with Rule 20.42(3) of the

GEM Listing Rules.

CONTINUING CONNECTED TRANSACTIONS

PFSL has entered into and is expected to continue certain transactions, which will constitute

non-exempt continuing connected transactions subject to reporting, annual review, announcement and

independent shareholders’ approval requirements upon Listing. Pursuant to Rule 20.42(3) of the GEM

Listing Rules, our Company has applied for and has been granted a waiver from strict compliance with

the relevant announcement and shareholders’ approval requirement set out in Chapter 20 of the GEM

Listing Rules in relation to the non-exempt continuing connected transaction of our Company referred

above. Further details of such waiver are set out in the section headed “Continuing Connected

Transactions” in this prospectus.

WAIVER AND EXEMPTION FROM STRICT COMPLIANCE WITHTHE REQUIREMENTS UNDER THE GEM LISTING RULES

— 38 —

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This prospectus, for which our Directors collectively and individually accept full responsibility,

includes particulars given in compliance with the Companies Ordinance, the Securities and Futures

(Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the GEM Listing Rules

for the purpose of giving information with regard to our Company. Our Directors, having made all

reasonable enquiries, confirm that, to the best of their knowledge and belief the information contained

in this prospectus is accurate and complete in all material respects and not misleading or deceptive,

and there are no other matters the omission of which would make any statement herein or this

prospectus misleading.

Printed copies of this prospectus are available, for information purposes only, at the office of

Ample Capital Limited, Unit A, 14th Floor, Two Chinachem Plaza, 135 Des Voeux Road Central, Hong

Kong during normal office hours from 9:30 a.m. to 5:00 p.m. from Monday, 12 December 2016 up to

and including Thursday, 5 January 2017 (both dates inclusive).

PLACING SHARES ARE FULLY UNDERWRITTEN

This prospectus is published solely in connection with the Placing, which is sponsored by Ample

Capital Limited and lead managed by the Joint Lead Managers and is fully underwritten by the

Underwriters (subject to the terms and conditions of the Underwriting Agreement). For further

information about the Underwriters and the underwriting arrangements, please refer to the section

headed “Underwriting” of this prospectus.

DETERMINATION OF THE PLACING PRICE

The Placing Shares are being offered at the Placing Price which is expected to be fixed by

agreement among our Company and the Joint Lead Managers (for themselves and on behalf of the

Underwriters) on the Price Determination Date. The Price Determination Date is expected to be on or

before Wednesday, 28 December 2016. If, for whatever reason, our Company and the Joint Lead

Managers (for themselves and on behalf of the Underwriters) are not able to agree on the Placing Price

on the Price Determination Date, the Placing will not become unconditional and will not proceed.

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This prospectus, for which our Directors collectively and individually accept full responsibility,

includes particulars given in compliance with the Companies (Winding Up and 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 the purpose of giving information with regard

to our Group.

INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

— 39 —

PLACING SHARES TO BE OFFERED IN HONG KONG ONLY

No action has been taken in any jurisdiction other than Hong Kong to permit the offering of the

Placing Shares or the distribution of this prospectus. Accordingly, this prospectus may not be used for

the purposes of, and does not constitute, an offer or invitation in any jurisdiction or in any

circumstance in which such offer or invitation is not authorised or to any person to whom it is

unlawful to make such an offer or invitation.

No invitation may be made directly or indirectly by or on behalf of our Company to the public

in the Cayman Islands to subscribe for or acquire any of the Placing Shares. Each person acquiring

the Placing Shares will be required to confirm and is deemed by his acquisition of the Placing Shares

to have confirmed that he is aware of the restrictions on the offers of the Placing Shares described in

this prospectus and that he is not acquiring, and has not been offered, any Placing Shares in

circumstances that contravene any such restrictions.

The Placing is made solely on the basis of the information contained and the representations

made in this prospectus. No person is authorised in connection with the Placing to give any

information, or to make any representation, not contained in this prospectus, and any information or

representation not contained herein must not be relied upon as having been authorised by our

Company, the Sponsor, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, and any of

their respective directors or affiliates of any of them or any other person and party involved in the

Placing. The contents as shown in the website of our Company of www.pfs.com.hk do not form part

of this prospectus.

APPLICATION FOR LISTING ON GEM

Our Company is able to satisfy the requirements relating to continuity of ownership and control

throughout the full financial year immediately preceding the Latest Practicable Date and up until the

Listing Date under the GEM Listing Rules.

Our Company has applied to the Listing Division for the listing of, and permission to deal in,

our Shares in issue and to be issued pursuant to the Capitalisation Issue and the Placing and the Shares

that may be issued pursuant to the exercise of the Offer Size Adjustment Option and the Shares, up

to 10% of our Shares to be in issue on the Listing Date, that may be issued pursuant to the exercise

of the options which may be granted under the Share Option Scheme and as otherwise described in

this prospectus on GEM.

No part of our Company’s share or loan capital is listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, our Company was not seeking or proposing to seek listing of, or

permission to deal in, any part of its share or loan capital on any other stock exchange.

Pursuant to Rule 11.23(7) of the GEM Listing Rules, at least 25% of the total issued share capital

of our Company must at all times be held by the public.


— 40 —

A total of 500,000,000 Shares, representing about 25% of our Company’s issued share capital

immediately upon completion of the Placing and the Capitalisation Issue, will be in the hands of the

public at the time of Listing, without taking into account any Shares that may be issued pursuant to

the exercise of the Offer Size Adjustment Option and the options which may be granted under the

Share Option Scheme. Only securities registered on the branch register of members of our Company

kept in Hong Kong may be traded on GEM unless the Stock Exchange otherwise agrees.

PROFESSIONAL TAX ADVICE RECOMMENDED

Potential investors for the Placing Shares are recommended to consult their professional advisers

if they are in doubt as to the taxation implications of the subscription for, holding, purchase, disposal

of or dealing in our Shares or exercising their rights thereunder. It is emphasised that none of our

Company, our Directors, the Sponsor, the Joint Lead Managers, the Joint Bookrunners, the

Underwriters and their respective directors, agents or advisers or any other person involved in the

Placing accepts responsibility for any tax effects on or liabilities resulting from the subscription for,

holding, purchase, disposal of, dealing in, or the exercise of any right in relation to the Placing Shares.

REGISTRATION AND STAMP DUTY

All the Placing Shares are freely transferable and will be registered on our Company’s branch

register of members to be maintained in Hong Kong by our Company’s branch share registrar and

transfer office in Hong Kong. Our Company’s principal register of members will be maintained in the

Cayman Islands by our Company’s principal share registrar and transfer office in the Cayman Islands.

Only Shares registered on the branch register of members of our Company in Hong Kong may

be traded on GEM unless the Stock Exchange otherwise agrees.

Dealings in our Shares registered on our Company’s branch register of members maintained in

Hong Kong will be subject to Hong Kong stamp duty.

SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

Subject to the granting of the approval for listing of, and permission to deal in, our Shares on

the Stock Exchange and our Company’s compliance with the stock admission requirements of HKSCC,

our Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in

CCASS with effect from the Listing Date or any other date HKSCC chooses. Settlement of

transactions between participants of the Stock Exchange is required to take place in CCASS on the

second business day after any trading days. Investors should seek the advice of their stockbrokers or

other professional advisers for details of those settlement arrangements and how such arrangements

will affect their rights and interests.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational

Procedures in effect from time to time. All necessary arrangements have been made for our Shares to

be admitted into CCASS.


— 41 —

STRUCTURE AND CONDITIONS OF THE PLACING

Details of the structure and conditions of the Placing, including its conditions, are set out in the

section headed “Structure and Conditions of the Placing” in this prospectus.

RESTRICTIONS ON SALE OF THE PLACING SHARES

Each person acquiring the Placing Shares will be required to confirm that he is aware of the

restrictions on offers and sales of the Placing Shares described in this prospectus. No action has been

taken in any jurisdiction other than Hong Kong to permit the offering of the Placing Shares or the

distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this prospectus

may not be used for the purposes of, and does not constitute, an offer or invitation in any jurisdiction

or in any circumstance in which such offer or invitation is not authorised or 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 other jurisdictions

are subject to restrictions and may not be made except as permitted under the applicable laws or any

applicable rules and regulations of such jurisdictions pursuant to registration with or authorisation by

the relevant regulatory authorities as an exemption therefrom.

The Placing Shares are offered for subscription solely on the basis of the information contained,

and the representations made in this prospectus. No person is authorised in connection with the

Placing to give any information, or to make any representation, not contained in this prospectus, and

any information or representation not contained herein must not be relied upon as having been

authorised by our Company, the Sponsor, the Joint Lead Managers, the Joint Bookrunners, the

Underwriters, any of their respective directors or employees or any other persons involved in the

Placing.

REGISTER OF MEMBERS

Our Company’s principal register of members will be maintained by our principal share registrar,

Codan Trust Company (Cayman) Limited, in the Cayman Islands and our Company’s Hong Kong

Branch register of members will be maintained by our Hong Kong branch share registrar, Union

Registrars Limited, in Hong Kong.

COMMENCEMENT OF DEALING IN THE SHARES

Dealing in our Shares on GEM is expected to commence at 9:00 a.m. on Friday, 6 January 2017

under the GEM stock code 8221. Shares will be traded in board lot of 20,000 Shares each.

Our Company will not issue any temporary document of title.


— 42 —

LANGUAGE

If there is any inconsistency between this prospectus and the Chinese translation of this

prospectus, this prospectus shall prevail.

ROUNDING

Certain amounts and percentage figures included in this prospectus have been subject to

rounding adjustments. Accordingly, totals of rows or columns of numbers in tables may not be equal

to the apparent total individual items. When information is presented in thousands or millions of units,

amounts may have been rounded up or down.


— 43 —

DIRECTORS

Name Address Nationality

Executive Directors

Mr. Lo Tak Wing Benson

(羅德榮)

Apartment 19, 42/F

Convention Plaza Apartments

1 Harbour Road

Wanchai, Hong Kong

Chinese

Mr. Lo Shiu Wing Chester

(羅紹榮)

Villa Monte Rosa

Block F, 1/F, Unit 2

41A Stubbs Road

Hong Kong

Chinese

Non-executive Director

Mr. Khoo Ken Wee

(邱堅煒)

Flat D, 16/F

Block D

Dragon View

39 Macdonnell Road

Mid Levels, Hong Kong

Singaporean

Independent non-executive Directors

Mr. Ma Wai Hung Vincent

(馬偉雄)

Flat A, 11/F, Tower 1

Tregunter

14 Tregunter Path

Mid Levels, Hong Kong

Chinese

Mr. Mok Kwai Pui Bill

(莫貴標)

2/F, 2A Wilson Road

Jardine’s Lookout

Wanchai, Hong Kong

Chinese

Mr. Ng Shu Bun Andrew

(伍樹彬)

Flat 2, 3/F, Block D

Beverly Hill

6 Broadwood Road

Hong Kong

British

Further information on our Directors is disclosed in the section headed “Directors, Senior

Management and Staff” in this prospectus.

DIRECTORS AND PARTIES INVOLVED IN THE PLACING

— 44 —

PARTIES INVOLVED

Sponsor Ample Capital Limited14A, Two Chinachem Plaza135 Des Voeux Road CentralCentral, Hong Kong

(a licensed corporation under the SFO to carry outtype 4 (advising on securities), type 6 (advising oncorporate finance) and type 9 (asset management) ofthe regulated activities under the SFO)

Joint Bookrunners Ample Orient Capital LimitedUnit 902 Far East Consortium Building121 Des Voeux Road CentralHong Kong

Ping An Securities LimitedUnit 02, 2/FChina Merchants Building152-155 Connaught Road CentralHong Kong

Joint Lead Managers Ample Orient Capital LimitedUnit 902 Far East Consortium Building121 Des Voeux Road CentralHong Kong

ChaoShang Securities LimitedRooms 4001-4002, 40/FChina Resources Building26 Harbour RoadWanchai, Hong Kong


Underwriters Ample Orient Capital LimitedUnit 902 Far East Consortium Building121 Des Voeux Road CentralHong Kong


— 45 —

ChaoShang Securities LimitedRooms 4001-4002, 40/FChina Resources Building26 Harbour RoadWanchaiHong Kong


Wealth Link Securities LimitedUnit B1, 5/FGuangdong Investment Tower148 Connaught Road CentralHong Kong

Legal advisers to our Companyas to Hong Kong law

Robertsons57th FloorThe Center99 Queen’s Road CentralHong Kong(Solicitors, Hong Kong)

Legal advisers to our Companyas to Cayman Islands law

Conyers Dill & PearmanCricket SquareHutchins DrivePO Box 2681Grand Cayman, KY1-1111Cayman Islands(Cayman Islands attorneys-at-law)

Legal advisers to the Sponsorand the Underwriters

Michael Li & Co19/F., Prosperity Tower39 Queen’s Road CentralCentral, Hong Kong(Solicitors, Hong Kong)

Auditors and reporting accountants Deloitte Touche Tohmatsu35/FOne Pacific Place88 QueenswayHong Kong(Certified Public Accountants)


— 46 —

Registered office Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

Principal place of business inHong Kong

11/F, New World Tower

Tower II

16-18 Queen’s Road Central

Hong Kong

Company’s website www.pfs.com.hk

(information contained in this website does not form

part of this prospectus)

Company secretary Mr. Lam Tak Ming CPA

Flat E, 17/F, Block 9

Mayfair Gardens

2-16 Sai Shan Road

Tsing Yi, New Territories

Hong Kong

Compliance officer Mr. Lo Shiu Wing Chester

Villa Mount Rosa

Block F, 1/F, Unit 2

41A Stubbs Road

Hong Kong

Authorised representatives Mr. Lo Tak Wing Benson

Room 19, 42/F

Convention Plaza Apartments

1 Harbour Road

Wanchai, Hong Kong

Mr. Lam Tak Ming

Flat E, 17/F, Block 9

Mayfair Gardens

2-16 Sai Shan Road

Tsing Yi, New Territories

Hong Kong

Audit committee Mr. Mok Kwai Pui Bill (Chairman)



CORPORATE INFORMATION

— 47 —

Remuneration committee Mr. Ng Shu Bun Andrew (Chairman)



Mr. Lo Tak Wing Benson

Nomination committee Mr. Ma Wai Hung Vincent (Chairman)



Mr. Lo Shiu Wing Chester

Compliance adviser Ample Capital LimitedUnit A, 14th Floor

Two Chinachem Plaza

135 Des Voeux Road Central

Central, Hong Kong

Principal share registrar andtransfer office

Codan Trust Company (Cayman) LimitedCricket Square, Hutchins Drive

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

Hong Kong branch share registrarand transfer office

Union Registrars LimitedSuites 3301-04,

33/F,

Two ChinaChem Exchange Square,

338 King’s Road,

North Point, Hong Kong

Principal banker Standard Chartered Bank (Hong Kong) Limited4-4A Des Voeux Road

Central, Hong Kong

CORPORATE INFORMATION

— 48 —

This section contains certain information which has been directly or indirectly derived, inpart, from various governmental, official or publicly available documents, the Internet or othersources, which was not commissioned by our Group nor the Sponsor. Our Directors believe that thesources of this information are appropriate sources for such information and have taken reasonablecare in extracting, compiling and reproducing such information. Our Directors have no reason tobelieve that such information is false or misleading or that any fact has been omitted that wouldrender such information false or misleading. The relevant information has not been independentlyverified by our Group, the Sponsor, the Joint Bookrunners, the Joint Lead Managers, theUnderwriters or any of their respective affiliates or advisers, and therefore may not be accurate,complete or updated. We make no representation as to the accuracy, completeness or fairness ofsuch information and accordingly the information contained herein should not be unduly reliedupon.

In respect of the information which has been directly or indirectly derived from the HKEx’sdocuments, the HKEx and its subsidiaries do not guarantee the accuracy or reliability of theinformation and do not accept any liability (whether in tort, contract or otherwise) for any loss ordamage arising from any inaccuracy or omission of the information; or any decision, action ornon-action based on or in reliance upon any information by any person.

HISTORY OF THE HONG KONG STOCK MARKET

Growth of Hong Kong stock market

As at 31 October 2016, there were 1,943 companies listed on the Stock Exchange (including boththe Main Board and GEM) respectively.

No. of companies listed on Main Board and GEM between 2002 and 2016*

9781,037

1,096 1,135 1,1731,241 1,261

1,3191,413

1,4961,547

1,643

1,7521,866 1,943

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

* As at 31 October 2016

Source: HKEx website

The total market capitalisation of the securities market (including the Main Board and GEM) atthe end of 2015 was approximately HK$24,684 billion, 1.55% lower than at year-end 2014.

INDUSTRY OVERVIEW

— 49 —

Total market capitalisation of companies listed on the Stock Exchangebetween 1999 and 2016*

4,735 4,862 3,946 3,611

5,548 6,696

8,180

13,338

20,698

10,299

17,874

21,077

17,537

21,950

24,043 25,072

24,68425,413

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

HK

$ b

illi

on

Year



The first Mainland enterprise was listed in Hong Kong in July 1993. Since then, there have beenan increasing number of Mainland enterprises listing on the Main Board and GEM. As at 31 December2015, the market capitalisation of Mainland enterprises (H-Share, non H-Share Mainland privateenterprises and red chip companies) listed on the Main Board and GEM amount to a total ofapproximately 62% of the total market capitalisation of companies listed on the Stock Exchange.According to the HKEx website, at the end of 31 October 2016, there were a total of 1,943 companieslisted on the Main Board and GEM. Of these, 987 were Mainland enterprises, constituting 63.0% bymarket capitalisation and 71.9% by annual equity turnover value. For the first 10 months of 2016,there were 36 newly listed Mainland enterprises on the Main Board and GEM. Total equity fundsraised by mainland enterprises also reached approximately HK$652.2 billion in 2015, of which thefunds raised through IPO increased year-on-year by 21% to approximately HK$241.10 billion in 2015.The amount of post-IPO funds raised decreased by 18% to approximately HK$411.1 billion from theprevious year.

Fund-raising activities in the Hong Kong stock market

From 2010 to 2014, Hong Kong remained one of the leading IPO centres in the world, and in2015 Hong Kong regained the top ranking worldwide for IPO funds raised. During each of those years,101, 89, 62, 102, 115 and 124 companies, respectively were newly listed on the HKEx and a total ofapproximately HK$858.7 billion, HK$490.4 billion, HK$305.4 billion, HK$378.9 billion, HK$942.7billion and HK$1,115.6 billion in funds were raised in each of those years. In 2015, 124 IPOs(excluding companies which transferred listing from GEM) were launched compared to 115 for thesame period in 2014. Funds raised by IPOs for the financial year ended 31 December 2015 totalledapproximately HK$261.3 billion, an increase of approximately 12% compared with approximatelyHK$232.5 billion in 2014.

INDUSTRY OVERVIEW

— 50 —

No. of new listing on Main Board and GEM from 1999 to 2016*

38

90 88

117

73 70 6762

84

35

124

94

69

101

89

62

102

115

0

20

40

60

80

100

120

140

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

No.

of

com

pan

ies

Year



Funds raised from IPO from 1999 to 2016*

17

132

26

52 59

97

166

334

261

292

66

248

449

260

90

169

233

166.2

0

50

100

150

200

250

300

350

400

450

500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

HK

$ b

illi

on

Year



Equity funds raised in secondary market from 2002 to 2016*

59

155

185

136

191

298

361 394 409

231 215 210

710

853

0

100

200

300

400

500

600

700

900

800

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

212

HK

$ b

illi

on

s

Year



INDUSTRY OVERVIEW

— 51 —

Equity fund raising in secondary market in Hong Kong was active with year-on-year growth from2007 to 2010. However, by 2011 the amount raised fell significantly to approximately HK$231 billionas the Asia financial market was still affected from the global financial crisis. In 2014, the amountincreased to approximately HK$710 billion in 2014 and continued to increase to approximatelyHK$853 billion in 2015, due to better financial market sentiment.

World ranking of the Hong Kong stock market

According to the World Federation of Exchanges and Bloomberg, Hong Kong ranked the eighthlargest market of the world’s leading stock exchanges in terms of domestic equity marketcapitalisation as of the end of December 2015.

Rank Exchange US$ billion

1 NYSE Euronext (United States of America) 17,7872 NASDAQ OMX (United States of America) 7,2813 Tokyo Stock Exchange and Osaka Securities Exchange 4,8954 Shanghai Stock Exchange 4,5495 London Stock Exchange and Borsa Italian 3,9736 Shenzhen Stock Exchange 3,6397 Euronext Amsterdam, Euronext Brussels, Euronext Lisbon

and Euronext Paris3,306

8 Hong Kong Stock Exchange 3,1859 Deutsche Borse 1,71610 TMX Venture 1,592

Source: World Federation of Exchanges and Bloomberg

SECURITIES TRADING IN HONG KONG

Securities trading

The Main Board and GEM are the two markets operated by the Stock Exchange for securitiestrading. The Main Board provides a platform for the trading of securities of larger and moreestablished companies while GEM provides a platform for the trading of securities of growthcompanies.

Total annual trading turnover from 2002 to 2015

1,643 2,584

3,974 4,520

8,376

21,666

17,653

15,515

17,210 17,154

13,301

15,265

17,156

26,091

-

5,000

10,000

15,000

20,000

30,000

25,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20152014

HK

$ b

illi

on

s

YearSource: HKEx website

INDUSTRY OVERVIEW

— 52 —

Average daily trading turnover from 2002 to 2016*

710

16 18

34

88

72

62

69 70

54

63

69

106

0

10

20

30

40

50

60

70

80

90

100

110

120

130

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

67

2016*

HK

$ b

illi

ons

Year



From 2002 to 2007, the annual daily trading turnover showed a general upward trend. Since theglobal financial crisis which took place in the second half of 2008, the annual daily trading turnoverhas surpassed the 2007 levels and has been between HK$54 billion and HK$106 billion. Tradingturnover in 2009 was approximately HK$15,515 billion, representing a decrease of approximately12.1% compared to 2008. Trading turnover improved in 2010 to approximately HK$17,210 billion,representing an increase of approximately 10.9% compared to 2009. Trading activity was moderate in2011. The average daily turnover amounted to about HK$69.7 billion, approximately 0.9% higher thanthat in 2010. Clouded by uncertainties about the European debt problem, trading became less activein late 2011. Trading turnover was approximately HK$17,154 billion in 2011.

From 2012 to 2015, there was an overall annual increase in the average daily turnover. Theaverage daily turnover in January 2015 was higher than the average daily turnover for 2012, 2013 and2014. The average daily turnover decreased in February 2015 which the Directors believe was mainlya result of weak market sentiment regarding the PRC economy and recovered ground in March 2015and April 2015, and which the Directors also believe was due to the improved sentiment amid the moreaccommodative stances of the major central banks. However, for period between May 2015 toDecember 2015, the average daily turnover was on a decreasing trend, which the Directors believe wasprimarily due to the measures implemented by the PRC Government, such as the tightening marginfinancing rules, to cool down the rapidly expanding securities market in the PRC. For 2015, theworldwide stock markets, including that of Hong Kong, remained volatile due to a combination of theslower economic growth in the PRC, uncertainty on the PRC’s exchange rate and plunge in worldcommodity prices. Total securities market turnover in 2015 was HK$26.1 trillion, up 52.1%year-on-year. The average daily turnover for the overall market in 2015 increased year-on-year by51.9% to HK$105.6 billion.

INDUSTRY OVERVIEW

— 53 —

Average daily trading turnover from January to October 2016

82.2

74.4 72.7 70.8 68.6 67.5 66.7 67.0 67.167.8

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

HK

$ b

illi

ons

Jan Feb Mar Apr May Jun Jul Aug OctSep

Note: year-to-date figure


The average daily turnover for the 10 months of 2016 was approximately HK$67.1 billion, adecrease of 41% when compared to the same period in 2015.

Exchange participants

In order to trade in securities through the trading facilities of the Stock Exchange, a participant,among other things, shall hold a Stock Exchange Trading Right and be a Stock Exchange Participant.It must also be a licensed corporation under the SFO for Type 1 (dealing in securities) regulatedactivity and comply with the financial resources requirements as specified by the FRR and the StockExchange.

As at 31 October 2016, there were 586 Stock Exchange Participants in Hong Kong of which 550are trading participants and 36 are non-trading participants. Stock Exchange Participants are dividedinto three categories by the Stock Exchange based on their market share:

a. Category A (the top 14 firms in terms of their share of the total trading turnover);b. Category B (firms ranked from 15 to 65 in terms of their share of the total trading turnover);

andc. Category C (the remaining firms in the stock market).

TRADING INFRASTRUCTURE AND SETTLEMENT IN HONG KONG

Trading system

All securities listed on the Stock Exchange are traded through AMS. AMS was first introducedin 1993 to accommodate the increasing volume of business as well as to cope with the rapidtechnological advances and growing demand for more efficient trading environment. Prior to thelaunch of AMS, trading on the Stock Exchange was conducted manually, either through its internaltelephone system or the “open outcry” system.

In December 2011, HKEx rolled out AMS/3.8 for its electronic trading platform. Orderprocessing capacity of AMS/3.8 has been increased to 30,000 orders per second, with the averagelatency reduced to around 9 milliseconds on average (excluding the network transmission time).

INDUSTRY OVERVIEW

— 54 —

Under AMS/3.8, there are two approaches to trading — terminal approach and gateway approach:

• Terminal approach — HKEx provides stand-alone trading terminals for Stock ExchangeParticipants, with first terminals at the trading hall and second terminals at the offices ofStock Exchange Participants. Transaction throughput is confined by the rate of data input.

• Gateway approach — HKEx also provides Open Gateway as a Windows-based deviceinstalled at Stock Exchange Participants’ offices to facilitate electronic interface ofAMS/3.8 with front office systems operated by the Stock Exchange Participants. The inputrate of orders that could be submitted via the Open Gateway is governed by a throttlemechanism and Stock Exchange Participants can subscribe necessary quantity of throttlesfrom HKEx in accordance with their order flow demand. Stock Exchange Participants canconnect to the Open Gateway through (i) BSS or; (ii) MWS (Multi-workstation System).

Further, AMS/3.8 offers an order routing system for Stock Exchange Participants to collectinvestors’ orders from proprietary network service vendors (such as the Internet and mobile network)for processing order transactions entered directly by their investors. Pursuant to the Stock Exchangecirculars dated 19 January 2015 and 29 April 2015, the Stock Exchange notified Exchange Participantsthat AMS Terminals will be disconnected from the AMS system will effect from 1 September 2015 andAMS terminals will be de-installed accordingly.

Settlement

CCASS, a computerised book-entry clearing and settlement system for transactions executed onthe Stock Exchange, was introduced in 1992. It accepts share certificates from its participants andholds them in the CCASS depository, and posts electronic share credits to the stock accounts of thedepositing participants. Settlement of transactions is recorded electronically by HKSCC as netincreases or decreases in participants’ stock account balances, without any physical transfer of sharecertificates. HKSCC also facilitates payments through the use of electronic money transfers betweenthe participants’ designated banks. Stock Exchange Participants are required to settle all their tradesin eligible securities through CCASS. Operation of investor accounts in CCASS was launched inMarch 1998. HKEx currently has seven categories of CCASS participants, namely, clearing agencyparticipants, custodian participants, direct clearing participants, general clearing participants, investorparticipants, stock lender participants and stock pledgee participants. Trades executed on AMS/3.8 areautomatically transferred to CCASS for clearing and settlement among the Stock ExchangeParticipants on T+2.

SECURITIES BROKERAGE INDUSTRY IN HONG KONG

Entry barriers

The main entry barriers in Hong Kong’s securities brokerage business are the paid-up sharecapital, liquid capital and licensing requirements of the SFC. Securities dealing is a regulated activityunder the SFO and is governed by the relevant rules and regulations. New entrants who wish to carryon such regulated activity must be licensed with the SFC to become a licensed corporation. Eachlicensed corporation must have not less than two Responsible Officers to directly supervise theconduct of each regulated activity. Depending on the type of regulated activity, licensed corporationshave to at all times maintain paid-up share capital and liquid capital of not less than the specifiedamounts according to the FRR. Please also refer to the section headed “Regulatory Overview” of thisprospectus for details.

INDUSTRY OVERVIEW

— 55 —

Competition

The rapid increase in the trading turnover of the stock market in Hong Kong has created strongdemand to the local brokerage industry but at the same time competition had also been increasing inrecent years. As at 31 October 2016, there were 586 Stock Exchange Participants in Hong Kong ofwhich 550 are trading participants and 36 are non-trading participants. Below is the distribution oftheir market share from 2011 to 2015:

Distribution of market participants’ market share (2011-2015)

53.60%

57.80%56.00% 54.20%

52.30%

35.30%

12.40%

35.00%31.80% 32.50% 34.20%

11.40% 10.50% 11.50% 11.60%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2011 2012 2013 20152014

Per

cen

tag

e

Category A -(Position 1 to 14) Category B - (Position 15 to 65)

Category C - (Position 66 or above)

Year


Note: The table includes all Stock Exchange Participants that had paid transaction levy, investor compensation levy (ifapplicable) and trading fee to the Stock Exchange. The Stock Exchange Participants are classified into CategoryA, Category B or Category C participant by the Stock Exchange in terms of their respective share of the totalmarket turnover.

As illustrated above, the brokerage business in Hong Kong is dominated by certain large firms,in particular those in Category A. The top 14 firms accounted for more than 50% of the marketturnover in the past few years thus leaving competition among firms in Category B and Category Cintense. The average market share of the firms in Category B and Category C in 2014 wasapproximately 0.7% and 0.03% respectively while that of 2015 was 0.7% and 0.03% respectively aswell. The vast number and tiny average market share of the firms in Category B and Category C showsthat the brokerage industry is competitive, especially for the brokerage firms in Category B andCategory C. In September 2016, Category A participants accounted for approximately 56.63% of thetotal market turnover of approximately HK$1,511.7 billion while Category B and C participantsaccounted for approximately 33.33% and 10.04% respectively. PFSL is a Category C ExchangeParticipant and competes mainly with local small and medium sized brokerage firms of Category Band Category C in Hong Kong. According to the information from the Stock Exchange, PFSL wasranked 217 out of 506 Exchange Participants and 244 out of 518 Exchange Participants based on themarket share of the trading fee, transaction levy and investor compensation levy (if applicable) for theperiod from 1 January 2015 to 31 December 2015 and from 1 January 2016 to 30 June 2016respectively. The transaction fee and levy collected by PFSL represented approximately 0.0122% ofthe total of the industry for the period from 1 January 2015 to 31 December 2015. On 1 April 2003,minimum brokerage commission rates in respect of securities and commodities trading in Hong Konghad been deregulated. Since the deregulation, brokerage commissions have generally been subject tomarket forces and negotiations which had further intensified competition within the securitiesbrokerage industry.

According to 2015 annual report of HKEx (stock code: 388), a more open China presentstremendous new opportunities for capital formation, capital exchange and risk management - activitiesin which HKEx must actively strive to entrench its long-term role. In the HKEx Strategic Plan2016-2018, the two key themes are to (i) build the most effective platform for cross-border marketaccess and (ii) develop a unique destination market in Hong Kong for products with both Chinese andinternational relevance. It is one of the key initiatives featured in the HKEx 2016-18 Strategic Plan

INDUSTRY OVERVIEW

— 56 —

to grow and strengthen its core franchise as a compelling listing and fundraising venue. Our Directorsbelieve that these strategies and initiatives implemented by the HKEx will allow the Hong Kong equitymarket to further expand and create additional opportunities to all classes of stock exchangeparticipants.

Our Directors believe that the industry outlook for Category B and Category C participants isfavourable since (i) a more open PRC presents tremendous new opportunities for capital formation,capital exchange and risk management; (ii) it is one key initiative of HKEx to grow and strengthenits core franchise as a compelling listing and fundraising venue; (iii) the trading liquidity of shareslisted in Hong Kong allows for investors to capitalise on such liquidity; (iv) there has been a continuedannual increase in the number of listed companies being listed in Hong Kong thus allowing a morediversified range of company for both short and long term investors to consider; (v) there is no capitalrepatriation restriction; and (vi) there is low currency risk given that the Hong Kong dollar is peggedto the US dollar.

Online securities brokerage

The implied value of retail online trading increased by 19% in 2013/14, compared to the 5%increase in the total market turnover. Retail online trading accounted for 38% of total retail investortrading (compared to 39% in 2012/13) and 9% in total market turnover (compared to 8% in 2012/13).The upward trend in the contribution of retail online trading to total turnover value of online brokerscontinued, reaching 29% in 2013/14.

Statistics on retail online trading in cash market (2009/2010-2014/15)

6.59%6.94% 6.78% 8.22% 9.27% 11.59%

25.82%26.91%

33.75%39.22% 38.20%

44.32%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2009/10 2010/11 2011/12 2012/13 2013/2014 2014/2015

- As % of total market turnover - As% of total retail investor trading


According to the “Cash Market Transaction Survey 2010/11” and “Cash Market TransactionSurvey 2014/2015” published by the Stock Exchange in March 2012 and February 2016 respectively,the number of brokers that offer online trading services to retail investors increased from 126 in the2006/07 survey (or approximately 33% of all surveyed brokers) to 245 in the 2011/12 survey (orapproximately 54% of all surveyed brokers), representing an increase of approximately 94%. Theshare of retail online trading value had risen from approximately 16.8% of total retail investor tradingduring the period from October 2006 to September 2007 to approximately 33.8% of total retailinvestor trading during the period from October 2011 to September 2012.

Cash Market Transaction Survey (2010/11 - 2014/15)2010/11 2011/12 2012/13 2013/14 2014/15

Respondent sample size 431 453 457 433 414

Online brokersNumber of online brokers 209 245 250 247 240As percentage of all responding

Stock Exchange Participants 48% 54% 55% 57% 58%

INDUSTRY OVERVIEW

— 57 —

Cash Market Transaction Survey (2010/11 - 2014/15)2010/11 2011/12 2012/13 2013/14 2014/15

Online tradingTotal implied online trading value

(HK$ million) 1,252,109 919,187 1,235,360 1,465,223 3,079,997As percentage of total retail

investor trading 25.8% 33.8% 39.2% 38.2% 44.3%As percentage of total market

turnover 6.6% 6.8% 8.2% 9.3% 11.6%


As indicated in the “Guidance Note on Internet Regulation” issued by the SFC in March 1999,in general, the SFC will not seek to regulate securities dealing conducted over the Internet thatoriginate outside Hong Kong, provided that such activities are not detrimental to the interests of theinvesting public in Hong Kong. The SFC would expect registered persons to put in place additionaloperational measures if they intend to conduct securities dealing, commodity and futures trading andleveraged foreign exchange trading activities over the Internet. These measures cover aspects ofsuitability and general conduct, order handling and execution, system integrity, responsible personnel,written procedures, client agreements, record keeping and reporting requirements.

Hang Seng Index Volatility Index

Monthly Hang Seng Index Volatility Index from January 2014 to October 2016

18.30

16.7616.37

14.85

14.75

12.86

16.36

13.32

20.04

16.36

14.38

17.54

15.63

13.8612.75

22.26

19.36

21.90

20.41

35.49

29.23

22.46

24.16

18.49

26.5027.85

20.45

20.7821.77

21.72

18.27

16.10

19.97

18.84

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

Jan-

14M

ar-1

4M

ay-1

4

Jul-14

Jul-14

Sep-

14N

ov-1

4

Jan-

15

Mar

-15

May

-15

Jul-15

Sep-

15

Nov

-15

Jan-

16

Mar

-16

May

-16

Jul-16

Sep-

16

Hang Seng Index Volatility Index

Months

Source: http://www.investing.com/

In Hong Kong, Hang Seng Index Volatility Index (“VHSI”) is used as a measurement of the30-day expected volatility of Hang Seng Index. According to the VHSI, from January 2014 to October2016, the average index was approximately 19.41 points, which represents that the Hang Seng Indexwas expected to fluctuate �1,121 index points within the coming 30 days assuming that the HangSang Index was at 20,000. During the same period the VHSI saw a high of approximately 35.49 pointsin August 2015 which meant that it was expected to have a fluctuation in the Hang Seng Index of�2,049 index points assuming that the Hang Sang Index was at 20,000. Our Directors believe that thiswas a result of the flash crash in the Global Stock Markets at that time. Recently, after the USpresidential elections on 9th November 2016, the VHSI hit an intraday high of around 26.1 pointsgiven the global economic uncertainty caused by the potential US election results but has sincerecovered to approximately 17.7 points the day after the US elections.

RETAIL INVESTORS

According to the findings of the “Retail Investor Survey 2014” published by the Stock Exchangein March 2015, the survey found that 36.4% of the Hong Kong adult population (or approximately

INDUSTRY OVERVIEW

— 58 —

2,265,000 individuals) were retail investors in stocks and/or derivatives traded on HKEx, comparedto 35.8% in 2011. Retail investors in the HKEx securities market reached a record high in both numberterms and percentage of the adult population in 2014 — 2,253,000 individuals or 36.2% of the adultpopulation were stock investors, compared to 35.7% in 2011. Stockowners also reached their highestlevel, both in number (2,147,000) and in percentage (34.5%) of the adult population. Retailparticipation in the HKEx derivatives market remained low — 1.6% of the adult population werederivatives investors (100,000 individuals), compared to 2.0% (122,000 individuals) in 2011. Themajority of them (88%) invested also in stocks.

The typical Hong Kong retail stock investor was 47 years old, with tertiary or above education,a monthly personal income of about HK$22,500 and a monthly household income of aboutHK$45,000. Compared with the typical Hong Kong retail stock investor, the typical Hong Kong retailderivatives investor was younger (42 years old), received similar level of education, with a highermonthly personal income (HK$35,000) and a higher monthly household income (HK$75,000).

SECURITIES AND IPO MARGIN FINANCING

Hong Kong has seen a significant growth in its stock market activities in recent years. Thisprovided the authorised institutions (“AI”, as defined under Banking Ordinance (Cap. 155)) with moreopportunities to participate in IPOs, whether as a lending AI to finance the subscription for new sharesor as a receiving bank. Lending AI means an AI which extends credit facilities to its customers for thepurpose of: (i) facilitating their subscription for new shares in an IPO; (ii) financing their acquisitionor holding of shares in listed stocks (in the case of lending to investors); or (iii) financing theirbusiness operations (in the case of lending to stockbrokers).

According to the statutory guideline “New share subscription and share margin financing” of the“Supervisory Policy Manual” issued by Hong Kong Monetary Authority in January 2007, lending AIsshould apply a reasonable margin requirement on their lending to individual customers. The marketnorm is a 10% margin on such lending. This requirement may be satisfied by the deposit of collateral(in the form of cash or securities) with the lending AIs or by setting an appropriate loan-to-value ratio.Lending AIs should exercise prudence in setting the ratios having regard to the underlying financialstrength, liquidity and price volatility of individual stocks. As a reference, the current market normsare: (i) around 50-60% for blue chips (with higher ratios of 70% adopted by lending AIs whichspecialise in share margin financing and have the expertise and sophisticated risk managementsystems to control the risks involved); and (ii) around 30-40% or below for selected second and thirdliners. Such market norms may change from time to time according to market situations.

According to annual reports of 2013-2014, 2014-2015 and 2015-2016 published by the SFC, thefollowing data were extracted from the monthly financial returns submitted to the SFC in accordancewith the FRR by licensed corporations licensed for dealing in securities or securities margin financing:

As at 31 December2011 2012 2013 2014 2015

Number of active margincustomers 135,201 139,375 150,545 181,593 241,948

Amounts of receivables frommargin customers (HK$ million) 50,171 58,812 85,794 111,549 145,307

Average collateral coverage (Note) 3.9 times 4.2 times 3.9 times 4.2 times 4.4 times

Source: SFC Annual Report 2013-2014, 2014-2015 and 2015-2016

Note: The number of times the aggregate market value of securities collateral deposited by customers over the totalamounts of margin loan due from these margin customers on a given date on an industry-wide basis.

INDUSTRY OVERVIEW

— 59 —

HONG KONG REGULATORY OVERVIEW

SECURITIES AND FUTURES COMMISSION

Regulation of securities and futures market

Founded in March 1989, the SFC is an independent statutory body responsible for regulating the

securities and futures market in Hong Kong. The SFC works to ensure orderly securities and futures

market operations, to protect investors and help promote Hong Kong as an international financial

centre and a key financial market in the PRC. The SFC’s regulatory objectives as set out in the SFO

are:

• to maintain and promote the fairness, efficiency, competitiveness, transparency and

orderliness of the securities and futures industry;

• to promote understanding by the public of the operation and functioning of the securities

and futures industry;

• to provide protection for members of the public investing in or holding financial products;

to minimise crime and misconduct in the securities and futures industry;

• to reduce systemic risks in the securities and futures industry; and

• to assist the Financial Secretary of Hong Kong in maintaining the financial stability of

Hong Kong by taking appropriate steps in relation to the securities and futures industry.

Parties regulated by the SFC include, but are not limited to, licensed corporations and individuals

carrying on Type 1 to Type 10 regulated activities under the SFO, investment products offered to the

public, listed companies, HKEx, approved share registrars and all participants in trading activities.

Licensing regime

The SFC operates a system of authorising corporations and individuals (through licences) to act

as financial intermediaries. Under the SFO, a corporation which is not an authorised financial

institution (as defined in section 2(1) of the Banking Ordinance) and is:

(a) carrying on a business in a regulated activity (or holding out as carrying on a regulated

activity); or

(b) actively marketing, whether in Hong Kong or from a place outside Hong Kong, to the public

any services it provides, which would constitute a regulated activity if provided in Hong

Kong,

must be licensed by the SFC to carry out the regulated activities, unless one of the exemptions under

the SFO applies.

REGULATORY OVERVIEW

— 60 —

Through licensing, it regulates the financial intermediaries of licensed corporations and

individuals that are carrying out the following regulated activities:

Type 1: Dealing in securities

Type 2: Dealing in futures contracts

Type 3: Leveraged foreign exchange trading

Type 4: Advising on securities

Type 5: Advising on futures contracts

Type 6: Advising on corporate finance

Type 7: Providing automated trading services

Type 8: Securities margin financing

Type 9: Asset management

Type 10: Providing credit rating services

RESPONSIBLE OFFICER

Each licensed corporation must have not less than two Responsible Officers to directly supervise

the conduct of each regulated activity. For each regulated activity, it must have at least one

Responsible Officer available at all times to supervise the business. The same individual may be

appointed to be a Responsible Officer for more than one regulated activity provided that he is fit and

proper to be so appointed and that there is no conflict in the roles assumed. At least one of the

Responsible Officers must be an executive director as defined under the SFO. All executive directors

must seek the SFC’s approval as Responsible Officers accredited to the licensed corporation.

Qualification and experience required for being a Responsible Officer

A person who intends to apply to be a Responsible Officer must demonstrate that he fulfills the

requirements on both competence and sufficient authority. An applicant should possess appropriate

ability, skills, knowledge and experience to properly manage and supervise the corporation’s regulated

activities. Accordingly, the applicant has to fulfil certain requirements on academic and industry

qualification, industry experience, management experience and regulatory knowledge as stipulated by

the SFC.

If a Responsible Officer intends to conduct regulated activities in relation to matters falling

within the ambit of a particular code issued by the SFC, for instance, the Takeovers Code or the Code

on Real Estate Investment Trusts, additional competence requirements specific to that field would

apply.

REGULATORY OVERVIEW

— 61 —

LICENSED REPRESENTATIVE

An individual is required to be a licensed representative if he is performing a regulated function

for his principal which is a licensed corporation in relation to a regulated activity carried on as a

business or he holds out as performing such function.

Qualification and experience required for being a Licensed Representative

A person who intends to apply to be a licensed representative must demonstrate his competence

requirement under the SFO. An applicant has to establish that he has the requisite basic understanding

of the market in which he is to work as well as the laws and regulatory requirements applicable to the

industry. In assessing the applicant’s competence to be licensed as a licensed representative, the SFC

will have regards to the applicant’s academic qualification, industry qualification and regulatory

knowledge.

FIT AND PROPER

Persons applying for licences and registrations under the SFO, including the licensed

representatives and the Responsible Officers, must satisfy and continue to satisfy after the grant of

such licences that they are fit and proper persons to be so licensed or registered.

Pursuant to Section 129 of the SFO, in considering whether a person is fit and proper for the

purposes of licensing or registration, the SFC shall, in addition to any other matter that the SFC may

consider relevant, have regards to the following:

(a) financial status or solvency;

(b) educational or other qualifications or experience having regard to the nature of the

functions to be performed;

(c) ability to carry on the regulated activity concerned competently, honestly and fairly; and

(d) reputation, character, reliability and financial integrity of the applicant and other relevant

persons as appropriate.

The above matters must be considered in respect of the person (if an individual), the corporation

and any of its officers (if a corporation) or the institution, its directors, chief executive, managers and

executive officers (if an authorised financial institution).

In addition, section 129(2) of the SFO empowers the SFC to take into consideration any of the

following matters in considering whether a person is fit and proper:

(a) decisions made by such relevant authorities as stated in Section 129(2)(a) of the SFO or any

other authority or regulatory organisation, whether in Hong Kong or elsewhere, in respect

of that person;

REGULATORY OVERVIEW

— 62 —

(b) in the case of a corporation licensed under Section 116 or Section 117 of the SFO or

registered under Section 119 of the SFO or an application for such licence or registration:

(i) any information relating to any other person who will be acting for or on its behalf

in relation to the regulated activity; and

(ii) whether the person has established effective internal control procedures and risk

management systems to ensure its compliance with all applicable regulatory

requirements under any of the relevant provisions;

(c) in the case of a corporation licensed under Section 116 or Section 117 of the SFO or an

application for the licence, any information relating to any person who is or to be employed

by, or associated with, the person for the purposes of the regulated activity; and

(d) the state of affairs of any other business which the person carries on or proposes to carry

on.

The SFC is obliged to refuse an application to be licensed if the applicant fails to satisfy the SFC

that he is a fit and proper person to be licensed. The onus is on the applicant to make out a case that

he is fit and proper to be licensed for the regulated activity.

FINANCIAL RESOURCES

Depending on the type of regulated activity, licensed corporations have to maintain at all times

paid-up share capital and liquid capital not less than the specified amounts according to the FRR. The

FRR sets out the computation of a number of variables in respect of all the liquid assets and ranking

liabilities of a licensed corporation and its liquid assets must exceed its ranking liabilities. A licensed

corporation shall at all times maintain liquid capital which is not less than its required liquid capital

as stipulated in section 6 of the FRR. If a licensed corporation conducts more than one type of

regulated activity, the minimum paid-up share capital and liquid capital that it must maintain shall be

the higher or the highest amount required amongst those regulated activities.

A licensed corporation, no matter it provides securities margin financing or not, must monitor its

liquid capital level continuously in order to satisfy the FRR requirements. If the demand for margin

loan from customers increases, the licensed corporation would be required to maintain additional

liquid capital. Advancing margin loan to customers would lead to an increase in the amount receivable

from the margin customers but lower liquid capital, unless the customer deposit sufficient additional

securities collaterals to the licensed corporation.

REGULATORY OVERVIEW

— 63 —

Minimum paid up share capital

The following table summarises the minimum paid-up capital that a licensed corporation is

required to maintain for Type 1 (dealing in securities) and Type 9 (asset management) regulated

activities:

Regulated activity Minimum paid up share capital

Type 1

(a) in the case where the corporation

provides securities margin financing

HK$10,000,000

(b) in any other case HK$5,000,000

Type 9

(a) in the case when the corporation is

subject to the licensing condition

that it shall not hold client assets

Not applicable

(b) in any other case HK$5,000,000

Minimum liquid capital

The following table summarises the minimum liquid capital that a licensed corporation is

required to maintain for Type 1 (dealing in securities) and Type 9 (asset management) regulated

activities at all times of an amount the higher of (a) and (b):

(a) The amount of:

(i) HK$100,000 where the licensed corporation is licensed for Type 9 regulated activity

in the case where the licensed corporation is subject to the licensing condition that it

shall not hold assets;

(ii) HK$500,000 where the licensed corporation is licensed for Type 1 regulated activity

in the case where the licensed corporation is an approved introducing agent or trader;

(iii) HK$3,000,000 where the licensed corporation is licensed for Type 1 regulated activity

in the case where the licensed corporation provides securities margin financing; or

(iv) HK$3,000,000 where the licensed corporation is licensed in any other case for Type

1 and Type 9 regulated activities.

(b) Its variable required liquid capital, meaning the basic amount which is 5% of the aggregate

of (i) its adjusted liabilities (as defined under the FRR); (ii) the aggregate of the initial

margin requirements in respect of outstanding futures contracts and outstanding options

REGULATORY OVERVIEW

— 64 —

contracts held by it on behalf of its clients; and (iii) the aggregate of the amounts of margin

required to be deposited in respect of outstanding futures contracts and outstanding options

contracts held by it on behalf of its clients, to the extent that such contracts are not subject

to the requirement of payment of initial margin requirement.

If the licensed corporation is licensed for more than one type of regulated activity, the minimum

paid-up share capital and liquid capital that the corporation should maintain shall be the highest

amount required among those regulated activities.

CONTINUING COMPLIANCE OBLIGATIONS

Remaining fit and proper

Licensed corporations, licensed persons and registered institutions must remain fit and proper at

all times and comply with all applicable provisions of the SFO and its subsidiary legislation as well

as the codes and guidelines issued by the SFC.

Submission of audited accounts

Licensed corporations and associated entities of intermediaries (except for those which are

authorised financial institutions) are required to submit their audited accounts and other required

documents within four months after the end of each financial year as required under Section 156(1)

of the SFO.

Submission of financial resources returns

Licensed corporations are required to submit monthly financial resources returns to the SFC

except for those licensed corporations for only Types 4 (advising on securities), 5 (advising on futures

contracts), 6 (advising on corporate finance), 9 (asset management) and/or 10 (providing credit rating

services) regulated activities and their licenses are subject to the condition that they shall not hold

customer assets. In such latter case, the licensed corporations concerned shall submit semi-annual

financial resources returns to the SFC as required under Section 56 of the FRR.

Payment of annual fees

Licensed corporations, licensed persons and registered institutions should pay annual fees within

one month after each anniversary date of the licenses or registrations under Section 138(2) of the SFO,

details of the annual fees applicable to the two types of the regulated activities that our Group is

engaged in are as follows:

Type of intermediary Annual fees for Types 1 and 9 regulated activities

Licensed corporation HK$4,740 per regulated activity

Licensed representative (not approved

as Responsible Officer)

HK$1,790 per regulated activity

REGULATORY OVERVIEW

— 65 —

Type of intermediary Annual fees for Types 1 and 9 regulated activities

Licensed representative (approved as

Responsible Officer)

HK$4,740 per regulated activity

Registered institution HK$35,000 per regulated activity

Continuous professional training

According to the Guidelines on Continuous Professional Training published by the SFC pursuant

to Section 399 of the SFO, a licensed corporation is held primarily responsible for designing and

implementing a continuous education system best suited to the training needs of the individuals they

engage which will enhance their industry knowledge, skills and professionalism. A licensed

corporation should at least annually evaluate the training needs of the individuals they engage.

Licensed individuals must undertake a minimum of five continuous professionalism training hours per

calendar year for each regulated activity he engages in.

Obligation for substantial shareholder

As required under Section 132 of the SFO, a person (including a corporation) has to apply for

SFC’s approval prior to becoming or continuing to be a substantial shareholder of a licensed

corporation. A person, being aware that he becomes a substantial shareholder of a licensed corporation

without SFC’s prior approval should, as soon as reasonably practicable and in any event within three

business days after he becomes so aware, apply to the SFC for approval to continue to be a substantial

shareholder of the licensed corporation.

Prior approval would also need to be obtained from the SFC in cases such as addition or

reduction of regulated activity, modification or waiver of licensing condition, and change of financial

year end.

Employee dealings

As mentioned in the Code of Conduct, a licensed person under the SFO should have a policy

which has been communicated to employees in writing on whether employees are permitted to deal for

their own accounts in securities. In the event that employees of a licensed person are permitted to deal

for their own accounts in securities:

(i) the written policy should specify the conditions on which employees may deal for their own

accounts;

(ii) employees should be required to identify all related accounts (including accounts of their

minor children and accounts in which the employees hold beneficial interests) and report

them to senior management;

(iii) employees should generally be required to deal through the registered person or its

affiliates;

REGULATORY OVERVIEW

— 66 —

(iv) if the licensed person provides services in securities or futures contracts listed or traded on

one of the Hong Kong exchanges or in derivatives, including over-the counter derivatives

written over such securities, and its employees are permitted to deal through another dealer,

in those securities, the registered person and employee should arrange for duplicate trade

confirmations and statements of account to be provided to senior management of the

registered person;

(v) any transactions for employees’ accounts and related accounts should be separately

recorded and clearly identified in the records of the registered person; and

(vi) transactions of employees’ accounts and related accounts should be reported to and actively

monitored by senior management of the registered person who should not have any

beneficial or other interest in the transactions and who should maintain procedures to detect

irregularities and ensure that the handling by the registered person of these transactions or

orders is not prejudicial to the interests of the registered person’s other customers.

A licensed person should not knowingly deal in securities or futures contracts for another

registered person’s employee unless it has received written consent from that registered person.

Minimum paid-up share capital and liquid capital

PFSL, being a corporation licensed to carry on Type 1 and Type 9 regulated activities under the

SFO, is required to have a minimum paid-up share capital of HK$10 million. Pursuant to the FRR, it

shall also maintain at all times a minimum liquid capital of HK$3 million or the variable required

liquid capital, whichever the higher. Save as disclosed in the section headed “Business — Review

Conducted by SFC and findings” in this prospectus, our Directors confirm that PFSL has at all times

complied with each of the above continuing compliance obligations, including FRR and SFC licensing

requirements, during the Track Record Period and up to the Latest Practicable Date.

During Track Record Period and up to the Latest Practicable Date, PFSL has an actual paid up

share capital in the amount of HK$10 million, and the amount of actual reported liquid capital

pursuant to FRR had ranged from approximately HK$40.2 million to HK$132.7 million.

ANTI-MONEY LAUNDERING AND TERRORIST FINANCING

Money laundering covers a wide range of activities and processes intended to alter the identity

of the source of criminal proceeds in a manner which disguises their illegal origin. Terrorist financing

is a term which includes the financing of terrorist acts, and of terrorist and terrorist organisations. It

extends to any funds, whether from a legitimate or illegitimate source.

The four main pieces of legislation in Hong Kong that are concerned with money laundering and

terrorist financing are the Anti-Money Laundering and Counter-Terrorist Financing (Financial

Institutions) Ordinance (Cap 615), the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405),

the Organised and Serious Crimes Ordinance (Cap 455) and the United Nations (Anti-Terrorism

Measures) Ordinance (Cap 575). The SFC has also published the Prevention of Money Laundering and

Terrorist Financing Guidance Note (September 2009), which was superseded by (1) Prevention of

REGULATORY OVERVIEW

— 67 —

Money Laundering & Terrorist Financing Guideline (April 2012); and (2) Guideline on Anti-Money

Laundering and Counter Terrorist Financing (July 2012) which require licensed corporations to,

among other things, adopt and enforce “know your customers” policies and procedures. Staff of

licensed corporations who knows, suspects or has reasonable grounds to believe that a customer might

have engaged in money laundering activities must immediately report to the compliance

division/senior management of its organisation which, in turn, will be reported to the Joint Financial

Intelligence Unit.

In relation to the aforesaid compliance obligations, our Group has adopted various measures as

set out in the operation manual of PFSL which covers, among others, keeping records of staff members

registered with the SFC and proper notification to the SFC for any changes in particulars or

employment status, obtaining approval from the Board for appointment of Responsible Officers and

conducting background checks on new staff, providing a copy of Code of Conduct and other regulatory

updates issued by the SFC to staff, proper filing of financial return to the SFC based on financial

statements with supporting schedules for each item and the breakdown showing adjustment as required

under FRR.

HONG KONG EXCHANGES AND CLEARING LIMITED

Apart from the SFC, HKEx also plays a leading role in regulating companies seeking admission

to the Hong Kong markets and supervising those companies once they are listed.

HKEx is a recognised exchange controller under the SFO. It owns and operates the only stock

and futures exchanges in Hong Kong, namely the Stock Exchange and the Futures Exchange, and their

related clearing houses. The duty of HKEx is to ensure orderly and fair markets and that risks are

managed prudently, consistent with the public interest and in particular, the interests of the investing

public.

In its role as the operator and frontline regulator of the central securities and derivatives

marketplace in Hong Kong, HKEx regulates listed issuers; administers listing, trading and clearing

rules; and provides services, primarily at the wholesale level, to customers of the exchanges and

clearing houses, including issuers and intermediaries — investment banks or sponsors, securities and

derivatives brokers, custodian banks and information vendors — who service the investors directly.

These services comprise of trading, clearing and settlement, depository and nominee services, and

information services.

Approval for the Listing

Save for the approval from the Stock Exchange no other regulatory approval is required for the

Listing.

REGULATORY OVERVIEW

— 68 —

OUR BUSINESS HISTORY

Our history can be traced back to April 1988, when the late Mr. Lo Kam Wing Albert (“Mr. ALo”), the eldest sibling of Mr. B Lo and Mr. C Lo, our executive Directors, acquired a 20% interest

in Richard Cheng Securities Limited (“RCSL”) (which was later renamed as PFSL in 1993) from

Throgmorton Investments Holdings Limited (formerly named as Sapello Limited) (“Throgmorton”),

a company owned by Mr. A Lo’s then father in law, with his personal financial resources. RCSL was

registered as a dealer under the Securities Ordinance (Cap. 333 of the laws of Hong Kong) (now

repealed) to carry on business as a dealer in securities.

In March 1991, Throgmorton disposed of its entire interest in RCSL and after the disposal, Mr.

A Lo together with his then spouse and sibling, Mr. B Lo, controlled 70% of the issued shares of RCSL

with the remaining 30% held by Independent Third Parties. The source of funds for the acquisition by

Mr. A Lo, his then spouse, Ms. Lo Cheng Wai Kwan, Wendy, and Mr. B Lo of their interest in RCSL

was from their respective personal financial resources. Mr. A Lo and Mr. B Lo invested in RCSL

because they recognised the potential of Hong Kong to become a well-established securities market

after the Hong Kong dollar was linked to the US dollar in 1983.

In April 1988, RCSL further expanded its operations through the acquisition of a second trading

right from Ma Ching Chung Joseph, an Independent Third Party. In March 1992, RCSL acquired its

third trading right on the Stock Exchange from Hung Fai & Co, an Independent Third Party. By

increasing the number of trading rights that RCSL had, it was able to increase its ability to place trade

orders.

In May 1993, RCSL changed its name to PFSL and has since been operating under the PFSL

name.

With the signing of the memorandum of understanding on Sino-Hong Kong regulatory

cooperation between the China Securities Regulatory Commission (CSRC), Shanghai Stock Exchange,

Shenzhen Stock Exchange, Hong Kong’s Securities and Futures Commission (SFC) and HKSE on 19

June 1993, Mr. B Lo understood that this would formally open up the Hong Kong market for the listing

of Mainland firms in Hong Kong and thus would allow for further growth opportunities for PFSL.

In January 1999, 50% of the shareholding interest in PFSL, of which 10% was held by an

Independent Third Party, was consolidated through PFHL and on 27 June 2005, PFSL became

wholly-owned by PFHL.

In August 2002, PFSL incorporated PICFL to expand the scope of financial services it offered

to our Group’s customers. In August 2005, PICFL ceased to be licensed under SFO for type 6 regulated

activity as our Group focused on developing its brokerage services.

Pursuant to the promulgation of the SFO in April 2003, PFSL obtained the SFC licence to carry

out Type 1 (dealing in securities) and Type 9 (asset management) regulated activities under the SFO

after being admitted as an Exchange Participant in providing brokerage, margin financing as well as

placing and underwriting services to individuals and corporate customers. For further details

concerning the business of PFSL, please refer to the section headed “Business” of this prospectus.

HISTORY, REORGANISATION AND DEVELOPMENT

— 69 —

Over the past 20 years, our Group has expanded from providing brokerage services for retail

customers to assisting in fund raising for IPOs and secondary market fund raising and asset

management services.

MILESTONE

The following table summarises our Group’s key milestones since its establishment:

April 1988 RCSL acquired a second trading right

March 1992 RCSL acquired a third trading right

May 1993 Our Group’s main operating subsidiary was renamed as

“Pacific Foundation Securities Limited”

December 2000 PFSL completed its first underwriting and placing as an

underwriter

December 2001 PFSL completed its first deal as a joint lead manager

April 2002 PFSL relocated its offices to its existing leased premises

April 2003 PFSL was licensed under SFO to carry out type 1 (dealing in

securities) and type 9 (asset management) regulated activities

February 2003 Our Group upgraded its trading platform from AMS/3 to BSS

April 2015 Our Group upgraded its hardware and software trading

platform to connect to the OCG

July 2015 Our Group rolled out of the next connection to the OCG

OUR CORPORATE DEVELOPMENT

Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted

company with limited liability on 3 August 2015. As at the date of the incorporation, our Company

had an authorised share capital of HK$380,000.00 divided into 38,000,000 shares of HK$0.01 each.

As part of the Reorganisation, our Company became the ultimate holding company of our Group.

For details of changes in the share capital of our Group, please refer to the section headed

“Statutory and General Information” in Appendix IV to this prospectus.

A summary of the corporate history of the major operating subsidiaries of our Group is set out

below:

PFHL

On 7 October 1993, PFHL was incorporated in Hong Kong with an authorised share capital of

HK$10,000.00 divided into 10,000 shares of HK$1.00 each. One share was issued to each of the initial

subscribers, Iceland Nominees Limited and Welltech Nominees Limited at par.


— 70 —

On 2 February 1994, Iceland Nominees Limited transferred its one share in PFHL to Mr. B Lo

at a consideration of HK$1.00, being the nominal value of the shares of PFHL. On the same day,

Welltech Nominees Limited transferred its one share in PFHL to Mr. A Lo. Upon completion of the

aforementioned transfers, PFHL was equally held by Mr. A Lo and Mr. B Lo.

On 17 April 1998, Mr. A Lo transferred his one share (being his entire interests in PFHL) to Ms.

Lo Cheng Wai Kwan, Wendy at a consideration of HK$1.00. On 27 August 1998, three shares of PFHL

were allotted to Mr. B Lo at a consideration of HK$1.00 each and two shares were allotted to Ms. Lo

Cheng Wai Kwan, Wendy at a consideration of HK$1.00 each. Upon completion of the allotments to

Mr. B Lo and Ms. Lo Cheng Wai Kwan, Wendy, respectively, PFHL was held as to approximately

57.1% by Mr. B Lo and 42.9% by Ms. Lo Cheng Wai Kwan, Wendy.

On 26 January 1999, Ms. Lo Cheng Wai Kwan, Wendy transferred all her shareholdings of three

shares in PFHL to Mr. C Lo at a consideration of HK$1.00 each. Upon completion of the transfer,

PFHL was held as to approximately 57.1% by Mr. B Lo and 42.9% by Mr. C Lo.

PFHL carries on the business of investment holding and is the intermediary holding company of

PFSL, our main operating subsidiary.

PFSL

PFSL (formerly known as Queets Limited on incorporation) was incorporated on 17 June 1987

with an authorised share capital of HK$1,000.00 divided into 100 shares of HK$10.00 each of which

one share was allotted and issued to each of Gregson Limited and Dredson Limited for cash at par

value each.

On 27 December 1987, the name of Queets Limited was changed to Richard Cheng Securities

Limited.

On 18 November 1987, Gregson Limited and Dredson Limited disposed of their entire

shareholding interests in PFSL by transferring one share to Throgmorton and one share to Cheng Kai

Chiu, Anthony, an Independent Third Party, respectively at a consideration of HK$10.00 each, being

the nominal value of the shares of PFSL immediately prior to the transfer.

On 7 January 1988, the authorised share capital of PFSL was increased from HK$1,000.00

divided into 100 shares of HK$10.00 each to HK$6,000,000.00 by creation of an additional 599,900

shares of HK$10.00 each. On 8 January 1988, 599,998 shares were allotted and issued to Throgmorton

for cash at par. As a result of the allotment and the share transfer above, Throgmorton held

approximately 99% of the issued share capital of PFSL.

On 16 March 1988, the share capital of PFSL was increased from HK$6,000,000.00 divided into

600,000 shares of HK$10.00 each to HK$10,000,000.00 by creation of an additional 400,000 shares

of HK$10.00 each. On the same day, Throgmorton subscribed for and was allotted and issued 400,000

shares for cash at par.


— 71 —

On 13 April 1988, Throgmorton transferred 200,000 shares in PFSL to Mr. A Lo at the cash

consideration of HK$2,000,000.00 based on the nominal value of the shares of PFSL. The

consideration was settled on 8 April 1988.

On 14 March 1991, the following transfers occurred:

(i) Throgmorton transferred 300,000 shares in PFSL to Ms. Lo Cheng Wai Kwan, Wendy, the

then spouse of Mr. A Lo, at the consideration of HK$1.00;

(ii) Throgmorton transferred 100,000 shares in PFSL to Fung Hung, Henry, an Independent

Third Party, at the consideration of HK$1.00;

(iii) Throgmorton transferred 200,000 shares in PFSL to Mr. B Lo at the consideration of

HK$1.00;

(iv) Throgmorton transferred 100,000 shares in PFSL to Ms. Choi Mo Lin, Vanessa, an

Independent Third Party, at the consideration of HK$1.00;

(v) Throgmorton disposed of its remaining entire shareholding interests in PFSL by

transferring its 99,999 shares in PFSL to Ms. Gomes Maria Da Silva, Rubi Angela, an

Independent Third Party, at the consideration of HK$1.00; and

(vi) Mr. Cheng Kai Chiu, Anthony disposed of his entire shareholding interests in PFSL by

transferring his one share to Ms. Gomes Maria Da Silva, Rubi Angela at the consideration

of HK$1.00.

Upon completion of the above transactions, PFSL was owned as to 20% by Mr. A Lo, 30% by

Ms. Lo Cheng Wai Kwan, Wendy, 10% by Mr. Fung Hung, Henry, 20% by Mr. B Lo, 10% by Ms. Choi

Mo Lin, Vanessa, and 10% by Ms. Gomes Maria Da Silva, Rubi Angela.

On 3 May 1993, the name of Richard Cheng Securities Limited was changed to PFSL.

On 27 January 1999, Mr. A Lo, Mr. B Lo and Ms. Choi Mo Lin, Vanessa disposed of their entire

shareholding interests in PFSL by transferring 200,000, 200,000 and 100,000 shares in PFSL,

respectively to PFHL at the consideration of HK$3,600,000, HK$3,600,000 and HK$1,800,000,

respectively.

On 25 September 2000, Ms. Lo Cheng Wai Kwan, Wendy disposed of her entire shareholding

interests in PFSL by transferring 300,000 shares in PFSL to PFHL at a consideration of

HK$10,000,000. The consideration was fully settled.

On 8 August 2003, Ms. Gomes Maria Da Silva, Rubi Angela disposed of her entire shareholding

interests in PFSL by transferring 100,000 shares in PFSL to PFHL at the consideration of

HK$2,700,000 as agreed by the sale and purchase agreement dated 31 July 2003 entered into between

Ms. Gomes Maria Da Silva, Rubi Angela and PFHL. The consideration was fully settled.


— 72 —

On 27 June 2005, Mr. Fung Hung, Henry disposed of his entire shareholding interests in PFSL

by transferring his 100,000 shares in PFSL to PFHL at the consideration of HK$3,000,000.00 as

agreed by the sale and purchase agreement dated 27 June 2005 entered into between Mr. Fung Hung,

Henry and PFHL. The consideration was fully settled.

Upon completion of the above transfers, PFSL was wholly-owned by PFHL. All the

abovementioned transfers were properly and legally completed and settled.

PFSL is our main operating company and principally carries on the business of the provision of

(i) securities dealing and brokerage service; (ii) placing and underwriting service; (iii) financing

service including securities and IPO margin financing; and (iv) asset management services. PFSL also

provides ancillary services including application for new issues and nominee services such as

collection of cash and scrip dividends. PFSL commenced its business operations in 1988.

PICFL

On 5 August 2002, PICFL was incorporated in Hong Kong with an authorised share capital of

HK$1,000,000.00 divided into 1,000,000 shares of HK$1.00 each, of which 600,000 shares were

subscribed by PFSL and 400,000 shares were subscribed by Ingo Worldwide Limited at par.

On 12 August 2004, Ingo Worldwide Limited disposed of its shareholding interests in PICFL by

transferring 100,000 shares to Mr. Khoo, our Company’s non-executive Director, for HK$1.00 in cash

and transferring 300,000 shares to PFSL for HK$1.00 in cash. The transfers were properly and legally

completed and settled.

On 23 March 2016, PFSL transferred its 90% shareholding interest in PICFL to Mr. B Lo for

HK$1.00 in cash. The consideration was determined with reference to the net liabilities of PICFL as

at 30 October 2015. Upon completion of the transfer, PICFL was held as to 90% by Mr. B Lo and 10%

held by Mr. Khoo Ken Wee, our non-executive Director.

During the Track Record Period and prior to the disposal by our Group on 23 March 2016, PICFL

did not generate any revenue and was only investment holding. As PICFL has not carried out any

active business during the Track Record Period and prior to the disposal by our Group on 23 March

2016, our Directors considered that it is appropriate to exclude PICFL from our Group. Even though

PICFL did not carry out any active business during the Track Record Period and prior to the disposal

by our Group on 23 March 2016, PICFL still had to make certain statutory filings or take statutory

procedures such as annual returns and audit of account. During the Track Record Period, PICFL

retained a compliance officer and Mr. Khoo as a director for (i) overseeing the statutory procedures;

and (ii) reviewing statutory filings and audited account, and a driver for business purpose of Mr. Khoo.

As a result of the disposal, our Group recorded a gain on disposal of approximately HK$3.6 million

for the year ended 31 March 2016 and will save approximately HK$0.6 million in staff salaries and

bonus annually. The gain on disposal was recognised directly in equity as deemed contribution from

Mr. B Lo. The Directors have confirmed that the remuneration paid to the three staff did not cover

services provided directly to other entities of the Group during the Track Record Period and the Group

would not bear any of these staff costs after the disposal of PICFL.


— 73 —

REORGANISATION

In preparation for the Listing, our Group has undergone the Reorganisation and the material steps

of the Reorganisation are as follows:

(i) Incorporation of TML

On 19 May 2015, TML was incorporated in the BVI as a limited liability company and is

authorised to issue a maximum of 50,000 shares of a single class each with a par value of US$1.00.

On 23 June 2015, Mr. B Lo and Mr. C Lo subscribed for, and TML allotted and issued, 571 and 429

shares, respectively. Upon completion of the subscription, TML was held as to 57.1% and 42.9% by

Mr. B Lo and Mr. C Lo, respectively.

(ii) Incorporation of our Company

On 3 August 2015, our Company was incorporated as an exempted company in the Cayman

Islands with an authorised share capital of HK$380,000.00 divided into 38,000,000 shares of HK$0.01

each. On the same date, one nil paid Share was allotted and issued to Craig Fulton as the initial

subscriber and transferred to TML on the same day.

(iii) Incorporation of DEGL

On 1 June 2015, DEGL was incorporated in the BVI as a limited liability company and is

authorised to issue a maximum of 50,000 shares of a single class with a par value of US$1.00. On 2

November 2015, one share was allotted and issued for cash at par to our Company as the initial

subscriber.

(iv) Transfer of shares in PICFL to Mr. B Lo

On 23 March 2016, PFSL transferred its 90% shareholding interest in PICFL to Mr. B Lo for

HK$1.00 in cash. The consideration was determined with reference to the net liabilities of PICFL as

at 30 October 2015. Upon completion of the transfer, PICFL was held as to 90% by Mr. B Lo and 10%

held by Mr. Khoo Ken Wee, our non-executive Director.

(v) Transfer of shares held by Mr. B Lo and Mr. C Lo in PFHL to DEGL

On 30 November 2016, Mr. B Lo and Mr. C Lo (as vendors and warrantors) and our Company

(as purchaser) entered into a sale and purchase agreement, pursuant to which Mr. B Lo and Mr. C Lo

agreed to transfer their respective shareholding interest in PFHL to DEGL as directed by our Company,

in consideration of crediting as fully paid the 1 nil paid Share issued to TML.


— 74 —

The following sets forth our Group’s corporate and shareholding structure immediately before

the Reorganisation:

57.1% 42.9%

100%

90% 10%

Mr. B. Lo Mr. C. Lo

PFHL

(HK)

PFSL

(HK)Mr. Khoo Ken Wee

PICFL

(HK)


— 75 —

The following is the shareholding structure of our Group upon completion of the Reorganisation

but before the Capitalisation Issue and Placing and taking no account of Shares that may be allotted

and issued upon the exercise of options to be granted under the Share Option Scheme, and assuming

the Offer Size Adjustment Option is not exercised:

57.1% 42.9%

100%

100%

100%

100%

Mr. B. Lo Mr. C. Lo

TML

(BVI)

Our Company

(Cayman Islands)

DEGL

(BVI)

PFHL

(HK)

PFSL

(HK)


— 76 —

The following is the shareholding structure of our Group immediately after the completion of the

Capitalisation Issue and Placing but taking no account of Shares that may be allotted and issued upon

the exercise of options to be granted under the Share Option Scheme and assuming the Offer Size

Adjustment Option is not exercised:

75% 25%

57.1% 42.9%

100%

100%

100%

Mr. B. Lo Mr. C. Lo

TML

(BVI)Public

Our Company

(Cayman Islands)

DEGL

(BVI)

PFHL

(HK)

PFSL

(HK)


— 77 —

BUSINESS

OVERVIEW

Our Group is based in Hong Kong and has been operating in the Hong Kong securities industry

under our Group’s existing name for over 20 years. We are principally engaged in the provision of (i)

securities dealing and brokerage service; (ii) placing and underwriting service; (iii) financing service

including securities and IPO margin financing; and (iv) asset management services. Our services

mainly relate to equity and debt securities traded on the Stock Exchange in Hong Kong. We also

provide ancillary services in relation to securities deposited in our name.

We conduct our abovementioned principal business activities through PFSL, the operating

subsidiary of our Company, which is a corporation licensed to carry on Type 1 (dealing in securities)

and Type 9 (asset management) regulated activities under the SFO. PFSL is a Stock Exchange

Participant under Category C and is currently holding three Stock Exchange Trading Rights.

During the Track Record Period, the majority of our revenue was from the provision of (i)

securities dealing and brokerage services and (ii) placing and underwriting services, representing in

total approximately 83.3%, 78.8%, 65.5% and 86.1% of our total revenue for the three financial years

ended 31 March 2016 and the four months ended 31 July 2016, respectively.

The below table sets out the revenue generated from of our core services during the Track Record

Period:

For the financial year ended 31 MarchFor the four months ended

31 July

2014 2015 2016 2015 2016

Revenue HK$’000

As a %of totalrevenue HK$’000




As a %of totalrevenue

(unaudited)

1) Commission income fromsecurities dealing andbrokerage services 12,717 23.3 10,225 24.1 10,918 26.7 5,513 66.4 1,282 5.2

2) Fee and commissionincome from placing andunderwriting activities 32,620 60.0 23,171 54.7 15,884 38.8 1,183 14.2 20,142 80.9

3) Interest income frommargin financing 5,028 9.2 5,006 11.8 4,245 10.4 1,174 14.1 2,344 9.4

4) Fund management fee 3,829 7.0 2,448 5.8 434 1.1 434 5.2 — —

5) Others (Note) 271 0.5 1,545 3.6 9,440 23.0 5 0.1 1,120 4.5

54,465 100.0 42,395 100.0 40,921 100.0 8,309 100.0 24,888 100.0

Note: Others include referral fees, handling fee and settlement fee.

BUSINESS

— 78 —

COMPETITIVE STRENGTHS

Our Directors are of the view that our Group generally has the following competitive advantages:

Long history of establishment with progressive business development

PFSL, our Group’s main operating subsidiary, has established securities brokerage business since

1988 and our Group started providing asset management services business in 2004. In around 2009,

our Group set up an online trading system for its securities trading, with a view to allowing its

customers to operate their trading activities interactively through our Group’s online trading system

without reliance on our Group’s dealing staff so as to let customers benefit from the lower brokerage

charges and ease of access to trades.

With a long history of establishment and a progressive business development, our Group has

built an effective operating system and a recognised brand name amongst its customers. Our Directors

believe that our Group can offer quality services to meet its customer’s needs in a constantly changing

financial market.

Experienced management

Our Group is managed by a team of experienced management who (i) formulate corporate

strategies; (ii) monitor compliance and day-to-day operations; and (iii) implement plans for business

development. The management team comprises mainly Responsible Officers and persons with over

five years of experience in the securities dealing and financial services industry. In particular, Mr. B

Lo, our chairman, our executive Director and a Responsible Officer of PFSL, has attained more than

25 years’ experience in the financial services industry. He is responsible for the formulation of

corporate strategy, overall management and business development and customer referrals. Ms. Tam Kit

Chun, one of the Responsible Officers for our Group’s Type 1 SFO regulated activity and the senior

dealing officer of PFSL, has over 38 years’ experience in the securities industry. She is responsible

for, among other things, monitoring the daily operation of settlement, dealing with regulatory

authorities and general administrative duties. With the extensive experience and market foresight, our

Directors believe that our Group can adapt and respond quickly to the changes of market conditions

and implement suitable measures in accordance with changing credit risks. Please refer to the section

headed “Directors, senior management and staff” in this prospectus for further details on the

experience of the Directors and the senior management of our Group.

Well-established relationship with customers and expanding customer base

Our Group has always been positioning itself as a securities house providing prompt and quality

service, and managing with a reliable risk management system. Our Group recognises that market

reputation and customers’ confidence in its services are keys to success, which will enable our Group

to retain existing customers and solicit customer referrals from its existing customers. In this regard,

our Group places great emphasis on winning customer loyalty by providing them with quality and

reliant services, and thus gradually has developed a diversified customer base over the years.

BUSINESS

— 79 —

Solid platform for placing and underwriting business

Our Group’s placing and underwriting business can leverage on its extensive securities customer

network which comprises institutional investors and retail customers. It also maintains good

relationship with other brokerage firms which may provide opportunities to our Group to act as

sub-underwriters or sub-placing agents for various new issues and fund-raising exercises in the

market. Our Group has also successfully retained several companies listed on the Main Board or GEM

or shareholders of companies listed on the Stock Exchange in its customer base, such that they or their

shareholders may consider appointing our Group as the placing agent, sub-placing agent, underwriter,

or sub-underwriter when they require funding activities.

Advanced computer system and technology

Our Group has invested in the upgrading of our computer system to enhance the technological

infrastructure to meet customers’ increasing needs and in an attempt to stay ahead when technological

upgrades for securities trading are introduced to the market. Our Group has established stable and

efficient online trading platform for our customers to access the securities market. Our Group’s trading

systems have been upgraded to OCG and are equipped with the new and advanced IT infrastructures,

servers and terminals as well as tailor-made computer screen interfaces for retrieving securities market

information to suit customers’ different requirements.

SECURITIES DEALING AND BROKERAGE SERVICES

Our Group provides securities dealings and brokerage services to customers for trading in

securities listed on the Stock Exchange. Our Group’s securities and brokerage services are provided

by our in-house AE (i.e. account executives that we have entered into employment contracts) and

self-employed AE. As at the Latest Practicable Date, our Group had three in-house AEs and eight

self-employed AEs. For remuneration, both in-house AEs and self-employed AEs will receive

commissions, however only in-house AEs will receive a base salary. Other than the remuneration

basis, the job duties of our in-house and self-employed AEs are primarily the same. For the three

financial years ended 31 March 2016, the four months ended 31 July 2016 and the period from 1

August 2016 up to the Latest Practicable Date, we identified six, three, four, nil and two incident(s)

of error trades, respectively, among which our Group suffered losses in five, three, three, nil and one

error trades. As a result of the error trades, we recognised a net loss of approximately HK$3,024,

HK$515, HK$13,777, nil and HK$1,420 respectively for the three financial years ended 31 March

2016, the four months ended 31 July 2016 and the period from 1 August 2016 up to the Latest

Practicable Date. For the three financial years ended 31 March 2016, the four months ended 31 July

2016 and the period from 1 August 2016 up to the Latest Practicable Date, among the mentioned error

trades, there was one, nil, one, nil and one error trade respectively which losses of approximately

HK$605, nil, HK$1,322, nil and HK$1,080, respectively, was borne by self-employed AEs.

BUSINESS

— 80 —

AEs are responsible for introducing customers, carrying out sales and dealing procedures,

management of customers’ account and general customer relationship. For the three financial years

ended 31 March 2016 and the four months ended 31 July 2016, revenue from our securities dealing

and brokerage services amounted to approximately HK$12.7 million, HK$10.2 million, HK$10.9

million and HK$1.3 million, respectively, which represents approximately 23.3%, 24.1%, 26.7% and

5.2% of our Group’s total revenue, respectively.

We set up our internet trading platform in around 2009. Since then, trading of securities can be

done by placing orders through telephone calls or through our Group’s internet platform. Such

platform provides our customers an additional channel to access and conduct trades. The internet

platform is connected to the Stock Exchange directly and is duly monitored. We will only take orders

or instructions from customers who have completed account opening procedures including the signing

of account opening forms and trading agreements. Our customers take full responsibility for all

trading decisions in their securities trading accounts and we are only responsible for the execution and

clearing of transactions in such accounts. Daily transaction statements will be sent to the customers

on the same day as they make the transaction by email or next trading day if by mail, depending on

the method that the customers have chosen when they opened their account. We will also send out

monthly statements to the customers. The proportion of orders for securities trading placed through

telephone calls or our Group’s internet platform during the Track Record Period is set out as below:

For the financial year ended 31 March

For the four months

ended 31 July2014 2015 2016 2016

% to total

transaction

value

% to total

securities

brokerage

and

commission

income

% to total

transaction

value

% to total

securities

brokerage

and

commission

income

% to total

transaction

value

% to total

securities

brokerage

and

commission

income

% to total

transaction

value

% to total

securities

brokerage

and

commission

income

Through telephone calls 98.6 98.8 98.0 98.5 94.8 95.9 97.0 97.4

Through internet

platform 1.4 1.2 2.0 1.5 5.2 4.1 3.0 2.6

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Our Directors believe that brokerage transactions conducted through the internet platform is

considerably lower than through telephone calls because our Group’s customers are mainly

accustomed to placing orders through the phone and prefer the personalised service as compared to

using internet trading.

During the Track Record Period and up to the Latest Practicable Date, our Group charged its

customers a fee of up to 2.0% of transaction value (subject to a minimum charge of HK$100, or

determined by customers and sales representative) for securities trading through telephone orders and

at a range between 0.1% and 0.2% of transaction value (subject to a minimum charge at a range

between HK$70 and HK$100) for online securities trading. The commission rate is determined based

on the customer’s transaction value, prior business relationships with our Group and the method of

placing orders. During the financial year ended 31 March 2015, our Group charged 1.0% brokerage

BUSINESS

— 81 —

commission in two major transactions where additional effort was required to locate purchasers of

shares in these two transactions. For the financial year ended 31 March 2016, our Group charged 2.0%

brokerage commission in two transactions where additional effort was required to locate purchasers

of shares in these two transactions. The customer that we charged 2.0% brokerage commission is a

substantial shareholder of a listed company. The transaction amount involved was approximately

HK$75.0 million and the services provided to this customer were to find investors that were willing

to take up a placing of these shares offered by the substantial shareholder.

As at 31 March 2014, 2015, 2016 and 31 July 2016, our Group had 4,004, 4,070, 4,224 and 4,254

securities accounts respectively.

The table below sets out the movement of the number of securities trading accounts during the

Track Record Period:

For the financial yearended 31 March

For thefour

monthsended

31 July

2014 2015 2016 2016

Number of accounts maintained at the

beginning of the financial year/respective

period 3,941 4,004 4,070 4,224

Number of accounts opened 83 83 172 35

— Cash accounts 76 80 166 23

— Margin accounts 7 3 6 12

Number of accounts closed 20 17 18 5

— Cash accounts 18 16 17 5

— Margin accounts 2 1 1 —

Number of accounts maintained at the end

of the financial year/respective period 4,004 4,070 4,224 4,254

Number of active accounts (Note) 694 722 718 408

Note: Accounts that at least one purchase and/or sale transaction have been carried out during the year/period are

considered as active accounts.

BUSINESS

— 82 —

For the three financial years ended 31 March 2016 and the four months ended 31 July 2016, our

Group’s five largest customers of its securities brokerage business in aggregate contributed

approximately 45.2%, 46.5%, 32.7% and 29.7% respectively of its securities brokerage commission

income.

The largest customer of our Group’s securities brokerage contributed approximately 21.7%,

21.8%, 13.7% and 13.0% of our Group’s securities brokerage commission income for the three

financial years ended 31 March 2016 and the four months ended 31 July 2016 respectively.

Our Group does not require all staff trading to be conducted in-house. However, we do require

our staff to report to our management any dealings conducted by our staff and their family members

at other brokerage firms.

PLACING AND UNDERWRITING SERVICES

Our Group acts as an underwriter or a sub-underwriter or a placing agent or a sub-placing agentfor companies listed or to be listed on the Stock Exchange or for shareholders of companies listed onthe Stock Exchange for their fund raising exercises such as IPO, rights issues, open offer or placingof new and/or existing shares, and debt securities. The placing or underwriting commission chargedby our Group is subject to negotiation and is generally in line with market practice. Our fees arechargeable upon successfully underwriting or sub-underwriting and/or placing shares or sub-placingand raising funds for our customer.

The below chart sets out the number of transactions that we have generated fee and commissionincome from placing and underwriting activities:

For the financial year ended 31 March For the four months ended 31 July

2014 2015 2016 2016

No. oftransactions Income

As a %of total

placing andunderwriting

incomeNo. of

transactions Income

As a %of total


incomeNo. of

transactions Income

As a %of total


incomeNo. of

transactions Income

As a %of total


incomeHK$’000

(Note)% HK$’000

(Note)% HK$’000

(Note)% HK$’000

(Note)%

- IPO 14 27,274 85.8 16 12,362 55.6 7 7,559 53.8 5 12,310 68.2- Rights issue/

Open offer3 3,912 12.3 2 4,169 18.8 2 1,951 13.9 1 2,328 12.9

- Placing of shares 1 600 1.9 5 4,735 21.3 2 1,138 8.1 4 2,677 14.8- Placing of debt securities Nil — — 2 950 4.3 1 3,405 24.2 1 736 4.1

Total 18 31,786 100.0 25 22,216 100.0 12 14,053 100.0 11 18,051 100.0

Note: Fee and commission income from placing and underwriting activities set out above exclude commission received fromsubscribers in the amount of approximately HK$0.8 million, HK$1.0 million, HK$1.8 million and HK$2.1 million forthe three financial years ended 31 March 2016 and the four months ended 31 July 2016 respectively.

BUSINESS

— 83 —

For the two years ended 31 March 2016 and the four months ended 31 July 2016, one of our

executive Directors, Mr. B Lo, was approached to undertake a total of 16 underwriting and placing

transactions for a total commitment amount of approximately HK$5,479 million and which we had to

turn down or reduce the underwriting commitment due to cash and liquid capital limitations. We do

not have the number of rejected underwriting and placing transactions for the year ended 31 March

2014 as we did not maintain a record for the rejected underwriting and placing transactions for the

year ended 31 March 2014. The average amount of underwriting commitment rejected by us was

approximately HK$342 million per transaction, which was higher than many of our actual

underwriting commitments completed during the Track Record Period. The reason for that was

because these rejected underwriting commitments were only indicative amounts which were subject

to further negotiations with customers on the actual underwriting commitments. It is the very fact that,

at the time of approach, our management considered that the commitment amount requested by

potential customers was too high such that we turned down the invitation or negotiated for a smaller

commitment amount.


Group generated placing and underwriting fee and commission of approximately HK$32.6 million,

HK$23.2 million, HK$15.9 million and HK$20.1 million, representing approximately 60%, 54.7%,

38.8% and 80.9% of our Group’s total turnover respectively.

For the three financial years ended 31 March 2016 and the four months ended 31 July 2016, the

total revenue generated from placing and underwriting activities and from Connected Persons of our

Company, employees of our Group and their respective associates was approximately HK$119,000,

HK$68,000, HK$18,000 and HK$150,000.

BUSINESS

— 84 —

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BUSINESS

— 85 —

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BUSINESS

— 86 —

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BUSINESS

— 87 —

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issu

e(c

)11

6,25

0,00

03.

5%4,

068,

750

(400

,000

)3,

668,

750

—

Lis

ted

Com

pany

FF

Pla

cing

ofde

bt

secu

riti

es

(a)

10,0

00,0

001%

——

—10

0,00

0

Lis

ted

Com

pany

Z

(als

oC

usto

mer

R)

Pla

cing

ofsh

ares

(a)

200,

000,

000

1%—

——

2,00

0,00

0

Lis

ted

Com

pany

GG

IPO

(b),

(d)

6,25

5,00

00.

75%

46,9

12—

46,9

12—

695,

000

2%13

,900

—13

,900

—

——

—9,

110

(Sel

ling

Con

cess

ion)

Lis

ted

Com

pany

HH

IPO

(b),

(d)

3,10

2,48

0F

ixed

120,

000

—12

0,00

0—

Lis

ted

Com

pany

IIIP

O(b

),(d

)N

/A

(Not

e3)

Fix

ed15

0,00

0—

150,

000

—

Lis

ted

Com

pany

JJIP

O(b

),(d

)91

,785

,000

0.5%

(Not

e4)

3,30

0,00

0(6

50,0

00)

2,65

0,00

0—

Lis

ted

Com

pany

KK

IPO

(b),

(d)

4,86

3,36

02%

97,2

67—

97,2

67—

BUSINESS

— 88 —

Issu

er

Nat

ure

of

tran

sact

ion

PF

SL

’sro

le

Tra

nsa

ctio

nva

lue:

Un

der

wri

tin

g

Com

mit

men

t/

Pla

cin

gam

oun

t

Com

mis

sion

rate

Un

der

wri

tin

g

Com

mis

sion

Les

s:

Su

b-u

nd

erw

riti

ng

Com

mis

sion

Net

Com

mis

sion

rece

ived

Pla

cin

g

Com

mis

sion

rece

ived

(Not

e1

)(N

ote

2)

(HK

$un

less

othe

rwis

est

ated

)(H

K$)

(HK

$)(H

K$)

(HK

$)

Lis

ted

Com

pany

LL

IPO

(b),

(d)

33,3

21,7

506.

0%1,

999,

305

(500

,000

)1,

499,

305

—

Lis

ted

Com

pany

MM

IPO

(b),

(d)

3,53

6,00

02.

0%70

,720

—70

,720

—

Lis

ted

Com

pany

NN

Pla

cing

ofsh

ares

(a)

18,1

25,0

002.

0%—

——

362,

500

14,2

56,7

46(1

,750

,000

)12

,506

,746

7,95

9,37

1

Not

es:

1.F

orth

epu

rpos

eof

this

tabl

e,IP

Oal

soin

clud

esth

ene

wli

stin

gof

the

shar

esof

the

issu

ers

byw

ayof

plac

ing

onth

eS

tock

Exc

hang

e.

2.(a

),(b

),(c

)&

(d)

deno

tepl

acin

gag

ent,

sub-

plac

ing

agen

t,un

derw

rite

ran

dsu

b-un

derw

rite

r,re

spec

tive

ly.

3.T

heun

derw

riti

ngco

mm

itm

ent

was

tobe

allo

cate

dan

dno

tifi

edby

the

rele

vant

join

tgl

obal

coor

dina

tors

inth

eir

sole

disc

reti

onw

hen

the

sub-

unde

rwri

ting

agre

emen

tw

as

exec

uted

.O

urG

roup

was

even

tual

lyno

tre

quir

edto

subs

crib

efo

ran

ysh

ares

.

4.T

heun

derw

riti

ngco

mm

issi

onw

asca

lcul

ated

base

don

the

gros

spr

ocee

ds.

BUSINESS

— 89 —

For

the

fin

anci

alye

aren

ded

31M

arch

2016

Issu

er

Nat

ure

of

tran

sact

ion

PF

SL

’sro

le

Tra

nsa

ctio

nva

lue:

Un

der

wri

tin

g

Com

mit

men

t/

Pla

cin

gam

oun

t

Com

mis

sion

rate

Un

der

wri

tin

g

Com

mis

sion

Les

s:

Su

b-u

nd

erw

riti

ng

Com

mis

sion

Net

Com

mis

sion

rece

ived

Pla

cin

g

Com

mis

sion

rece

ived

(Not

e1

)(N

ote

2)

(HK

$un

less

othe

rwis

est

ated

)(H

K$)

(HK

$)(H

K$)

(HK

$)

Lis

ted

Com

pany

OO

(als

oC

usto

mer

N)

Ope

nof

fer

(c)

63,0

52,0

982.

5%1,

576,

302

(728

,982

)84

7,32

0—

Lis

ted

Com

pany

PP

(als

oC

usto

mer

L)

Pla

cing

ofsh

ares

(a)

26,7

83,9

671.

5%—

——

401,

759

Lis

ted

Com

pany

QQ

IPO

(b),

(d)

19,7

64,0

002%

395,

280

—39

5,28

0—

Lis

ted

Com

pany

RR

IPO

(b),

(d)

2,30

0F

ixed

200,

000

—20

0,00

0—

Lis

ted

Com

pany

SS

(als

oC

usto

mer

K)

IPO

(a),

(c)

48,5

00,0

002.

5%2,

812,

500

(415

,000

)2,

397,

500

—

12,5

00,0

004.

0%50

0,00

0—

500,

000

—

——

—1,

406,

250

(sel

ling

conc

essi

on and

prae

cipi

um)

Lis

ted

Com

pany

PP

(als

oC

usto

mer

L)

Pla

cing

ofde

bt

secu

riti

es

(a)

227,

000,

000

1.5%

——

—3,

405,

000

Lis

ted

Com

pany

TT

IPO

(a),

(c)

68,4

00,0

002%

1,36

8,00

0(2

00,0

00)

1,16

8,00

0—

——

—13

6,80

0

(pra

ecip

ium

)

BUSINESS

— 90 —

Issu

er

Nat

ure

of

tran

sact

ion

PF

SL

’sro

le

Tra

nsa

ctio

nva

lue:

Un

der

wri

tin

g

Com

mit

men

t/

Pla

cin

gam

oun

t

Com

mis

sion

rate

Un

der

wri

tin

g

Com

mis

sion

Les

s:

Su

b-u

nd

erw

riti

ng

Com

mis

sion

Net

Com

mis

sion

rece

ived

Pla

cin

g

Com

mis

sion

rece

ived

(Not

e1

)(N

ote

2)

(HK

$un

less

othe

rwis

est

ated

)(H

K$)

(HK

$)(H

K$)

(HK

$)

Lis

ted

Com

pany

UU

Pla

cing

ofsh

ares

(a)

36,8

00,0

002.

0%—

——

736,

000

Lis

ted

Com

pany

VV

IPO

(d)

18,0

00,0

003%

540,

000

(450

,000

)90

,000

—

2,00

0,00

03%

60,0

00(5

0,00

0)10

,000

—

Lis

ted

Com

pany

NN

Ope

nof

fer

(c)

18,7

46,0

002%

374,

920

—37

4,92

0—

Lis

ted

Com

pany

WW

IPO

(b),

(d)

1,05

5,00

03%

or

HK

$40,

000,

whi

chev

eris

high

er

40,0

00—

40,0

00—

Lis

ted

Com

pany

XX

IPO

(b)

30,0

33,3

60F

ixed

——

—10

0,00

0

7,86

7,00

2(1

,843

,982

)6,

023,

020

6,18

5,80

9

Not

es:

1.F

orth

epu

rpos

eof

this

tabl

e,IP

Oal

soin

clud

esth

ene

wli

stin

gof

the

shar

esof

the

issu

ers

byw

ayof

plac

ing

onth

eS

tock

Exc

hang

e.

2.(a

),(b

),(c

)&

(d)

deno

tepl

acin

gag

ent,

sub-

plac

ing

agen

t,un

derw

rite

ran

dsu

b-un

derw

rite

r,re

spec

tive

ly.

BUSINESS

— 91 —

For

the

fou

rm

onth

sen

ded

31Ju

ly20

16

Issu

er

Nat

ure

of

tran

sact

ion

PF

SL

’sro

le

Tra

nsa

ctio

nva

lue:

Un

der

wri

tin

g

Com

mit

men

t/

Pla

cin

gam

oun

t

Com

mis

sion

rate

Un

der

wri

tin

g

Com

mis

sion

Les

s:

Su

b-u

nd

erw

riti

ng

Com

mis

sion

Net

Com

mis

sion

rece

ived

Pla

cin

g

Com

mis

sion

rece

ived

(Not

e1

)(N

ote

2)

(HK

$un

less

othe

rwis

est

ated

)(H

K$)

(HK

$)(H

K$)

(HK

$)

Lis

ted

Com

pany

Z

(als

oC

usto

mer

R)

Pla

cing

ofsh

ares

(a)

783,

114,

530

Fix

ed—

——

1,50

0,00

0

Lis

ted

Com

pany

YY

Pla

cing

ofsh

ares

(a)

30,2

40,0

002.

0%—

——

604,

800

Lis

ted

Com

pany

ZZ

Pla

cing

ofsh

ares

(b)

15,0

00,0

000.

5%—

——

75,0

00

Lis

ted

Com

pany

AA

AR

ight

sis

sue

(d)

77,6

00,0

003.

0%2,

328,

000

—2,

328,

000

—

Lis

ted

Com

pany

OO

Pla

cing

ofsh

ares

(a)

24,8

40,0

002.

0%—

——

496,

800

Lis

ted

Com

pany

BB

B

(als

oC

usto

mer

O)

IPO

(a),

(c)

21,9

96,4

802.

5%54

9,91

2—

549,

912

—

147,

836,

480

2.5%

5,77

5,00

0—

5,77

5,00

0—

(Not

e3)

——

—2,

028,

365

(pra

ecip

ium

)

Lis

ted

Com

pany

UU

Pla

cing

onde

bt

secu

riti

es

(a)

36,8

00,0

002.

0%—

——

736,

000

Lis

ted

Com

pany

CC

C

(als

oC

usto

mer

Q)

IPO

(a),

(c)

71,5

00,0

003%

ofth

e

plac

ing

proc

eeds

,

less

fixe

d

com

mis

sion of

HK

$500

,000

toot

her

unde

rwri

ter

1,81

0,00

0(5

61,0

00)

1,24

9,00

0—

BUSINESS

— 92 —

Issu

er

Nat

ure

of

tran

sact

ion

PF

SL

’sro

le

Tra

nsa

ctio

nva

lue:

Un

der

wri

tin

g

Com

mit

men

t/

Pla

cin

gam

oun

t

Com

mis

sion

rate

Un

der

wri

tin

g

Com

mis

sion

Les

s:

Su

b-u

nd

erw

riti

ng

Com

mis

sion

Net

Com

mis

sion

rece

ived

Pla

cin

g

Com

mis

sion

rece

ived

(Not

e1

)(N

ote

2)

(HK

$un

less

othe

rwis

est

ated

)(H

K$)

(HK

$)(H

K$)

(HK

$)

Lis

ted

Com

pany

DD

DIP

O(a

),(c

)3,

500,

000

0.5%

17,5

00—

17,5

00—

Lis

ted

Com

pany

EE

EIP

O(a

),(c

)2,

100,

000

1.0%

21,0

00—

21,0

00—

18,9

00,0

001.

0%18

9,00

0—

189,

000

—

Lis

ted

Com

pany

FF

F

(als

oC

usto

mer

P)

IPO

(a),

(c)

7,67

7,44

02.

0%15

3,54

9—

153,

549

—

69,1

17,4

402.

0%1,

382,

349

(864

,000

)51

8,34

9—

——

—38

4,00

0

(pra

ecip

ium

)

12,2

26,3

10(1

,425

,000

)10

,801

,310

5,82

4,96

5

Not

es:

1.F

orth

epu

rpos

eof

this

tabl

e,IP

Oal

soin

clud

esth

ene

wli

stin

gof

the

shar

esof

the

issu

ers

byw

ayof

plac

ing

onth

eS

tock

Exc

hang

e.

2.(a

),(b

),(c

)&

(d)

deno

tepl

acin

gag

ent,

sub-

plac

ing

agen

t,un

derw

rite

ran

dsu

b-un

derw

rite

r,re

spec

tive

ly.

3.T

heun

derw

riti

ngco

mm

issi

onw

asca

lcul

ated

base

don

the

gros

spr

ocee

ds.

BUSINESS

— 93 —

For the three financial years ended 31 March 2016 and the four months ended 31 July 2016,

revenue generated from the fund-raising activities participated by our Group on an underwritten basis

accounted for approximately 34.2%, 74.4%, 67.0% and 81.1% of the total placing and underwriting

commission income from selling shareholders/issuers/brokers respectively. During the Track Record

Period, our Group is not required to purchase any undersubscribed securities on its own account. For

the three financial years ended 31 March 2016 and the four months ended 31 July 2016, revenue

generated from fund-raising activities participated by our Group on best effort basis accounted for

approximately 65.8%, 25.6%, 33% and 18.9% of the total placing and underwriting commission

income from selling shareholders/issuers/brokers respectively. The commission charged by our Group

for our placing and underwriting services for the three financial years ended 31 March 2016 and the

four months ended 31 July 2016 included on a fixed fee basis and on a percentage basis ranging from

0.5% to 6.0%. The basis upon which commissions are calculated will vary widely from transaction to

transaction and are dependent on factors such as, among others, (i) our role and expected manpower

and work required to complete the deal, (ii) the volume and value and expected liquidity of the

securities involved, (iii) the potential risk of under-subscription (for transactions under underwritten

basis only), (iv) the agreed economics between other underwriters, and (v) the timing and market

situation at the time of the transaction. For the financial year ended 31 March 2014, our Group charged

commissions on the basis of 0.5% commission rate for two transactions as these related to transactions

where our Group’s role was mainly limited to acting as a sub-underwriter and/or sub-placing agent and

where we provided only limited or even no underwriting commitment. For the financial year ended 31

March 2015, our Group charged commissions on the basis of 0.5% commission rate for acting as

sub-placing agent and sub-underwriter in the IPO of Listed Company JJ as the 0.5% commission rate

was applied to the gross proceeds of that IPO, but not the transaction value undertaken by our Group.

For the four months ended 31 July 2016, we charged a commission on the basis of 0.5% commission

rate for two transactions where the placing amount or underwriting commitment was relatively low as

compared to our Group’s other placing and underwriting transactions. Our Group charged a customer

with 6.0% commission rate where the transaction related to an IPO which listed in February 2015,

during a period of high volatility in the financial markets and challenging time to raise capital, and

therefore our Group (together with other underwriters involved in the transaction) were able to

command a higher commission rate. In this transaction, our Group’s role was joint bookrunner, joint

lead manager and an underwriter.

During the financial year ended 31 March 2014, our Group participated in the IPO of Listed

Company F (“this IPO”) to locate investors. Underwriting commission of this IPO was determined by

various factors, including but not limited to the number of shares underwritten by the underwriters and

the performance, contribution of each underwriter to this IPO, level of commitment and quality of

investors. Although our Group confirmed Listed Company F that certain clients had given verbal

commitment for around 170 million shares in this IPO shares around August 2013, our Group was

eventually allocated around 104.2 million shares of Listed Company F for its investors. Based on the

above mentioned factors and the fact that our Group had confirmed Listed Company F verbal

commitment for subscription of around 170 million shares in this IPO, upon completion of the IPO our

Group was paid a fee of approximately HK$20.3 million, representing a small fraction of the total

commission paid to the underwriters of this IPO. Based on the initial commitment of around 170

million shares, the final offer price of Listed Company F and our income of approximately HK$20.3

million, the implied commission rate of this IPO is approximately 4.4% which is within our range of

commission rate during the Track Record Period.

BUSINESS

— 94 —

MARGIN FINANCING

Our Group’s provision of margin financing is conducted under our Type 1 regulated activity

(dealing in securities) licence granted by the SFC. Pursuant to the SFO, our Type 1 licence also allows

us to engage in securities margin financing in order to facilitate acquisitions or holdings of securities

by our licensed entity for our customers. Our margin financing is funded by internal cash flow and

bank financing. The weighted average interest rate on funds borrowed generally for the three financial

years ended 31 March 2016 and the four months ended 31 July 2016 was 2.65% per annum, 2.74% per

annum, 2.41% per annum and 2.72% per annum, respectively.

Credit facilities are offered by our Group to its customers who would like to purchase securities

listed on the Stock Exchange on a margin basis, which offers funding flexibility to our Group’s

customers. Our Group also provides IPO margin financing service and funding to customers for

application for IPOs. All financing, excluding IPO financing, extended to our Group’s customers for

margin financing purposes is secured by securities or debt instruments convertible into shares listed

on the Stock Exchange and pledged to our Group. Acceptable securities for pledging and their

respective margin ratios are reviewed and determined by one Responsible Officer and one management

team member on a case-by-case basis. The securities which are pledged to our Group may be repledged

to secure our Group’s bank loans. As advised by our Hong Kong Legal Advisers, our Group can legally

pledge our margin financing customers’ shares to secure bank loans. For the three financial years

ended 31 March 2016 and the four months ended 31 July 2016, the amount of revenue generated from

our margin financing services was approximately HK$5.0 million, HK$5.0 million, HK$4.2 million

and HK$2.3 million respectively, representing approximately 9.2%, 11.8%, 10.4% and 9.4% of our

Group’s total revenue.

During the Track Record Period, the interest rates charged to our customers ranged from 3.25%

to 10.25% p.a.

Margin Lending Policy and Limits

As part of the account opening procedure, a customer who requests for a margin trading account

will be granted a margin loan limit which is approved by two members of the margin lending

committee of PFSL, our main operating subsidiary. As at the Latest Practicable Date, the margin

lending committee consists of Mr. B Lo, Ms. Tam Kit Chun, Ms. Che Sau Ching and Mr. Lam Tak

Ming.

In order to decide the margin loan limit, the margin lending committee members will consider,

among other things, the credit reputation of the customer, the recommendation of the AE, past payment

records (if any) with our Group, stock value of securities held by our Group for the customer and other

financial supporting e.g. tax returns, bank statements or salaries advice and assess the liquidity,

volatility as well as the concentration of the securities collateral provided by margin clients.

All margin loan limits must be reviewed by the margin lending committee on a semi-annual

basis. When there is market volatility, the management may conduct a special review of the margin

loan limits and to decide if the margin loan limit needs to be adjusted.

BUSINESS

— 95 —

The adjusted margin loan limit must be approved by two members of margin lending committee

and will be shown on the customer’s statement.

Margin Ratio

The margin ratio adopted by our Group follows the ratio provided by Standard Chartered Bank.

Our margin lending committee has the authority to override the benchmark margin ratio provided by

Standard Chartered Bank. Subsequent to the adoption of the Standard Chartered Bank ratio in April

2015 and up to the Latest Practicable Date, there have been 26 occasions where we have overridden

the benchmark margin for our customers. In deciding whether not to override the benchmark ratio, our

margin lending committee considered various factors including, among others, the relationship with

the customer, the customer’s creditworthiness, prevailing market conditions and the quality, volatility

and liquidity of the securities collateral provided. Two members of our margin lending committee

review the margin ratio on a quarterly basis. Our customers may apply for a special margin ratio for

their account and such arrangement is required to be reviewed and approved by two members of our

margin lending committee. During the Track Record Period and up to the Latest Practicable Date, the

range of margin ratio adopted by our Group ranged from 10% to 70%.

Margin Monitoring and Call

It is the responsibility of our staff of our settlement department to monitor all customers’ margin

accounts to ensure the implementation of our Group’s margin lending policy and the compliance with

the relevant regulations of governing bodies. Staff from our settlement department will generate a

margin call report (“MCR”) on a daily basis which is reviewed by our Responsible Officers.

Responsible Officers will make a note on the MCR indicating which customers require immediate

top-up of their margin account and our AE will execute margin call accordingly on the subsequent day

as the MCR is generated. There are three circumstances where a margin call may occur:

(i) when the debit balances of the margin accounts exceed the permitted margin loan limit; or

(ii) when the accepted margin value of the stock is less than the debit balances in the margin

accounts, where accepted margin value is equal to market value times margin ratio; or

(iii) in the rare situation when the market is turbulent, the management would make intra-day

calls.

Our Group had made in aggregate 2,521, 1,447, 942 and 339 margin calls to customers during

the three financial years ended 31 March 2016 and the four months ended 31 July 2016 respectively.

None of the margin accounts of these customers have been liquidated due to the fact that (i) the margin

value of the stock was beyond the outstanding loan balance after the margin calls were made as a result

of an increase in the value of the stock involved; (ii) the customers had deposited adequate amount

or provided additional collateral assets to his margin accounts; or (iii) the customers had sold some

of their stocks. Our Group has not made any provisions for bad debts in relation to margin financing

during the Track Record Period.

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Procedures of margin call

We have adopted the following margin call procedures where margin calls are required:

(i) Staff from our settlement department will notify the respective AE to make margin calls to

the customers to request settlement of their unsettled shortfall position of their margin

accounts or when necessary to liquidate the pledged securities.

(ii) Staff from our settlement department is required to maintain a record of the margin call

which includes, among other things, time of the margin call being made, the channel of

communication used to contact the margin customer, customer’s feedback and/or

instruction for recovering the margin position (i.e. funds deposit, sell order, etc.).

(iii) Subsequent to the margin call, staff from our settlement department is required to check

whether the margin calls have been settled during the day.

(iv) Detailed records of the case history of margin calls for each individual customer are

maintained by our settlement department.

Records of margin calls are passed to our Responsible Officers for review on a daily basis. Our

Responsible Officers:

(i) will notify the respective AE that unless approval is granted by a member of the margin

lending committee, he/she should not allow the customer to place further buy orders

(including via our online services) without sufficient margin value of the stock being held

or even on an under-margin position;

(ii) may suspend the purchasing of securities of the customer in any channels, who is under a

margin call, upon notice to the respective AE; and

(iii) may issue demand letter to customers when they disregard the margin requirement

regarding their margin account position within 2 weeks.

Apart from our Responsible Officers’ notification, our BSS will also notify the AE that the

customer account has insufficient credit and any further buy order would be subject to electronic

approval of a Responsible Officer or by his/her delegates.

If a customer subject to a margin call is approved to further purchase of securities, the respective

AE must advise the customer to settle the margin call as soon as possible.

A customer’s margin account which is subject to a margin call will be restricted from placing any

further buy order under any of the following circumstances:

• after issuance of demand letter to the customer;

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• after issuance of notification from a Responsible Officer to the AE for the relevant account

over three times; or

• the loan outstanding balance exceeded the market value of the stock in the margin accounts.

Exception Handling

To further manage any potential risk relating to a margin account with a call position, the

following measures may also be implemented by our margin lending committee and/or Responsible

Officers, as the case may be:

• Margin accounts with a margin call position are not permitted to withdraw funds.

• Further purchases of securities for customer with outstanding margin call is discouraged.

However, an officer of the margin lending committee is allowed to grant approval to further

purchases of securities for customers with margin call after considering the following

factors:

— Previous margin call records;

— Previous settlement or default records;

— Evaluation on the proposed purchases (i.e. the total amount of purchases, quality of

the stock and the margin ratio etc.); and

— Any other financial supporting.

• An officer of the margin lending committee may grant a period of not more than 5 trading

days for customer to settle his margin call before forced sell out will be taken.

If there is any deviation from our Group’s margin lending policy, the circumstances which led

to the deviation were supported by written explanations approved by PFSL’s management.

Forced Liquidation

If a customer fails to deposit sufficient money or transferring funds/stocks or selling stock on

hand such that the account continues to show outstanding balance which is over the margin value of

the stock, our Responsible Officers have the right to liquidate only the customers’ securities, which

are limited to the securities collaterals in their margin accounts and sell all or any of such securities

at the market price available. In such circumstances, the AE may take forced sell-out action and the

liquidation will be reported to one of our Responsible Officers licensed for Type 1 regulated activities

upon execution. The AE will be notified beforehand when forced sell-out action is being taken by our

dealing department so as to avoid double selling of the securities position. The liquidation will

primarily be handled by our dealing department which will report the result to our Responsible

Officers upon execution. A daily statement will be sent to customers on the next trading day after the

liquidation. During the Track Record Period and up to the Latest Practicable Date, we have not had

any forced liquidation of customer’s assets.

BUSINESS

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As at 31 July 2016, our Group had 49 margin customer accounts which have recorded at leastone purchase and/or sale transaction of securities in the past twelve months. For the three financialyears ended 31 March 2016 and the four months ended 31 July 2016, interest income derived from ourGroup’s margin financing business accounted for approximately 9.2%, 11.8%, 10.4% and 9.4% of ourGroup’s total turnover respectively. As at the Latest Practicable Date, our Group offered the marginfacilities at the interest rate at a range from 3.25% to 10.25% p.a.


For thefour

monthsended

31 July

From1 August

2016to Latest

PracticableDate2014 2015 2016 2016

Maximum daily limit of loan(HK$’000) 319,000 340,500 345,200 358,700 361,250

Average daily margin loan position(HK$’000) 95,678 95,281 76,815 115,717 79,251

Average month-end margin loanbalance (HK$’000) 97,533 93,447 77,988 113,034 79,552

Average daily margin collateralvalue (HK$’000) (Note 3) 344,739 355,723 440,892 513,898 353,690

Average daily collateral coverage(times) (Note 3) 3.6 3.7 5.7 4.4 4.5

Average daily leverage ratio(Note 1) (Note 3) 27.8% 26.8% 17.4% 22.5% 22.4%

Average daily loan to margin ratio(Note 2) (Note 3) 59.3% 56.7% 51.2% 72.8% 82.4%

Notes

1. Average leverage ratio refers to the daily loan to collateral value ratio.

2. Average loan to margin ratio refers to the daily loan balance to margin value of securities collaterals and margin value

means margin ratio applied to the current market value of the relevant securities collaterals.

3 For a collateral asset which is an unlisted debt instrument convertible into listed securities, there is no readily available

market value of such unlisted debt instrument and therefore no margin value is available. The above ratios did not take

into account the market value or margin value of such unlisted debt instrument. Our management continuously monitors

the margin position of the relevant margin account. The principal amount of that unlisted debt instrument was over 800%

of the corresponding margin loan amount as at the Latest Practicable Date.

Our Group’s average month-end margin loan balances for the three financial years ended 31

March 2016 and the four months ended 31 July 2016 were approximately HK$97.5 million, HK$93.4

million, HK$78.0 million and HK$113.0 million respectively. Our Group’s exposure in margin

financing business were covered by securities collaterals. For the three financial years ended 31 March

2016 and the four months ended 31 July 2016, the average daily leverage ratio was approximately

27.8%, 26.8%, 17.4% and 22.5% respectively, and the average daily loan to margin ratio was

approximately 59.3%, 56.7%, 51.2% and 72.8% respectively.

BUSINESS

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maximum margin loan balance on a daily basis was approximately HK$139.9 million, HK$125.9

million, HK$115.1 million and HK$135.0 million respectively. The corresponding leverage ratio on

that date was approximately 39.4%, 34.2%, 22.1% and 25.5% respectively and the corresponding loan

to margin ratio on that date was approximately 81.9%, 72.7%, 60.2% and 95.2% respectively.

The range of individual margin loan balance, margin collateral value, collateral coverage,leverage ratio and loan to margin ratio during the Track Record Period are as follow:

For the financial year ended 31 MarchFor the four months

ended 31 July

2014 2015 2016 2016

Max Min Max Min Max Min Max Min

Individual margin loan balance

(HK$’000)

49,279 — 44,146 — 31,778 — 34,239 1

Individual margin collateral value

(HK$’000)

108,618 — 114,361 7 163,222 — 112,142 65

Individual collateral coverage (times) 53,887,800 — (Note 3) 2,984,788 — (Note 4) 12,838 — (Note 5) 2,533 — (Note 12)

Individual leverage ratio (Note 1&11) 115% (Note 6) 0% 1,196%(Note 4)

0% 217% (Note 7) 0% 466% (Note 12) 0%

Individual loan to margin ratio (Note

2&11)

936% (Note 8) 0% 59,490% (Note 8&9) 0% 4,429% (Note 10) 0% 1,420% (Note 12) 0%

Notes

1. Leverage ratio refers to loan to collateral value ratio

2. Loan to margin ratio refers to loan balance to margin value of securities collaterals and margin value means margin ratioapplied to the current market value of the relevant securities collaterals.

3. For the year ended 31 March 2014, the collateral coverage of a deceased customer was temporarily zero for less thana month before her margin account was finally settled.

4. For the year ended 31 March 2015, the collateral stocks of a connected client was suspended temporarily for seventrading days (with insignificant loan amount of less than HK$0.1 million), leading to approximately nil collateralcoverage and 1,196% leverage ratio temporarily. PFSL assigns zero margin collateral value to stocks that have beensuspended trading for more than two days.

5. For the year ended 31 March 2016, the collateral coverage of a client was temporarily zero for one trading day becausethe only collateral stock in its account was suspended. PFSL assigns zero margin collateral value to stocks that have beensuspended trading for more than two days.

6. For the year ended 31 March 2014, the leverage ratio of a customer was temporarily 115% for one trading day only.

7. For the year ended 31 March 2016, the leverage ratio of a customer was temporarily 217% for one trading day becausehe redeemed his collateral stock on one day and deposited fund to top up to shortfall on the other day.

8. PFSL adopted a new margin lending policy in February 2015 and adopted the margin ratio as provided by StandardChartered Bank in April 2015. Before that the Group assessed a client’s margin loan mainly based on the market valueof collaterals.

9 The relevant client purchased newly-listed stocks, margin value has not been assigned to the relevant stock and was takenas “nil”, leading to a high loan to margin rate. On the relevant day the market value of the collateral stock fully coveredthe margin loan balance. The client settled the majority of the margin loan in a few days.

10. For the year ended 31 March 2016, although the loan to margin ratio of a number of clients was high for a short periodof time caused by the relatively low margin value of collaterals, the market value of their collaterals was far higher thantheir loan balance.

11. The leverage ratio and loan to margin ratio where the market value or margin value of collaterals is zero is not shownin the above table.

12. The market value and margin value of the collateral stocks of a client fell below the loan amount during the four monthsended 31 July 2016. Sufficient additional collateral assets were subsequently provided.

BUSINESS

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For the three financial years ended 31 March 2016 and the four months ended 31 July 2016, one,

nine, thirty and three margin calls to one, four, fourteen and two customers respectively had been

withheld which related to total amount of shortfall in margin value of HK$2.7 million.

Reason to withhold those margin calls was mainly due to the fact that the relevant stock value

held by the customers increased on the date after the MCR was generated but before the margin call

was supposed to be made that the margin value of the stocks being held by the customers was

eventually beyond the outstanding amounts receivable from respective customers. Our Directors

confirm that there was no occasion where PFSL failed to comply with our margin lending policy in

respect of the individual customers’ margin account during the Track Record Period.

ASSET MANAGEMENT SERVICES

During the Track Record Period and up to 27 May 2015, our Group provided asset managementservices to one hedge fund, Customer B, pursuant to an investment management agreement dated 28January 2004 (and amended on 5 July 2006) entered into between PFSL and Customer B (“InvestmentManagement Agreement”). Pursuant to the Investment Management Agreement, we were appointed asthe investment manager and adviser of Customer B. Fees that we have charged for our assetmanagement services were based on 0.5% p.a. of the net asset value of the hedge fund as at the closeof business in each month. As the investment manager, we were responsible for identifying, evaluatingand reviewing the investments of the hedge fund and responsible for advising on its selection,evaluation, structuring and overseeing of its investments. For the three financial years ended 31 March2016 and the four months ended 31 July 2016, the amount of revenue generated from our assetmanagement services was approximately HK$3.8 million, HK$2.4 million, HK$0.4 million and nil andrepresenting approximately 7.0%, 5.8%, 1.1% and nil respectively of our Group’s total revenue.

Details of Customer B are set out below:

Fund type : Private placement fund

Investment objective : To generate income and growth through short tomedium term investments in, inter alia, equities, shortterm money market instruments, currencies and a fullrange of derivative products

Investment strategy : Bottom-up and fundamental approach in the investmentresearch and stock selection process

Target investors : Professional investors

Launch date : 2004

Initial assets under management : HK$14,050,000

Investment manager : PFSL

Management fee : 0.5% p.a. of the net asset value of the fund as at theclose of business in each month and payable annually

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Performance fee : 15% of the increase in net asset value as at thevaluation date, and payable annually

On 27 May 2015, PFSL entered into a novation agreement whereby the Investment Management

Agreement was novated to a new investment manager. Subsequent to the novation agreement, PFSL

ceased to provide asset management services to Customer B. To the best knowledge of our Directors,

Customer B requested for the novation as one of our asset management staff that was managing

Customer B had himself, after leaving the employment of our Group, set up their own asset

management company to manage Customer B. During the Track Record Period and up to the Latest

Practicable Date, our Group did not receive any complaints from Customer B.

In July 2016, PFSL has hired two staff, i.e. a chief investment officer and an assistant portfolio

manager, for the provision of the Type 9 regulated activity (asset management). The chief investment

officer has extensive experience in Type 9 regulated activity. Based on the discussions between our

Director with the two new asset management staff, it is expected that they will introduce and they have

introduced new client(s) to the Group and new assets under management to PFSL. For these new

clients, PFSL acts as an investment manager and provides wealth management services to these clients

on a discretionary basis pursuant to each client’s investment requirements, objectives and restrictions

as contained in the investment management agreement between PFSL and PFSL’s clients. Pursuant to

the employment contracts entered into with the two new asset management staff, they are subject to

a restrictive covenant which restricts them from soliciting any of our Group’s pre-existing customers

(other than those introduced by such employee) for business within 12 months after termination of

their employment with our Group.

As at the Latest Practicable Date, our Group has four asset management customers and the

discretionary funds managed by our Group amounted to approximately HK$113.3 million. The below

table sets out details of the investment management agreements entered into between PFSL and PFSL’s

clients:

Client A Client B Client C Client D

Date of agreement 9 August 2016 22 August 2016 1 September 2016 30 September 2016

Company/Individual Company Company Company Company

Relationship with our Group A subsidiary of an

existing placing and

underwriting customer

and an Independent

Third Party

An existing placing

and underwriting

customer and an

Independent Third

Party

An existing

customer of our

securities and

brokerage services

and an Independent

Third Party

None

Initial assets under management HK$35.0 million HK$3.0 million Approximately

HK$66.2 million

HK$10 million

Investment objective To achieve consistent,

positive returns through

investing in Greater

China securities with

long-term and structural

growth potential and

debt, derivative etc

To generate

absolute return by

bottom-up research

To generate income

from capital

appreciation

To generate absolute

return by long-short

strategy supported by

our precise strategy and

bottom up research

BUSINESS

— 102 —

Client A Client B Client C Client D

Discretionary Yes Yes Yes Yes

Investment strategy To mainly invest in

common stocks,

preferred stocks,

registered and

unregistered investment

funds, debt instruments,

fixed income products,

money market

instruments, equity

related interest and

instruments, derivative

instruments, and cash or

cash equivalent

investment issued in

Hong Kong

Mainly invest in

Hong Kong listed

stocks, bank

deposit,

government bonds

or equivalent

Mainly invest in

Hong Kong listed

stocks, bank

deposit,

government bonds

or equivalent

Invest in stocks with

(a) structural

opportunities emerging,

(b) turnaround

sector/companies;

(c) ultra-undervalued/

under owned, in the

long portfolio and

invest in (a) sectoral

downturn, (b)

over-priced/crowdedly

owned and (c) financial

difficulties in the short

portfolio.

Fees Management fee of

2.0% per annum

payable monthly

Management fee of

1.5% per annum

payable monthly

Management fee of

2.0% per annum

payable annually

Management fee of

1.5% per annum

payable monthly

Performance fee of up

to 20% payable

quarterly

Performance fee of

15% payable per

annum

Performance fee of

20% payable per

annum

Performance fee of 15%

payable per annum

For such wealth management services, PFSL may charge (i) an initial set up fee based on the

initial portfolio value; (ii) a management fee based of the net asset value of the assets being managed;

and (iii) a performance fee based on the increase in the net asset value as compared to the previous

valuation date.

In addition to introducing new clients and funds to be managed by PFSL, the two new asset

management staff involve in the promotion and marketing activities for our Group by, among other

things, providing weekly stock market commentary published in various local newspapers,

participating in radio broadcasts hosted by HK Radio and discussing the Hong Kong stock market.

Other Services

In addition to the above revenues, our Directors may on a case by case basis come across fund

raising related projects which require the introduction of other professional parties in which we may

request for a referral fee. For the financial year ended 31 March 2015, we referred an IPO sponsorship

project to an Independent Third Party to act as sponsor and we were paid a referral fee based on 10%

of their sponsorship fee in return. We also acted as an underwriter and placing agent for such deal.

For the financial year ended 31 March 2016, our Group completed one referral transaction for

which the contract was signed on 14 July 2015, generating a total revenue of approximately HK$9.4

million in relation to the referral of a potential investor to a controlling shareholder of a Hong Kong

listed company who is looking for purchasers of the controlling interest in such listed company. Such

referral fee represents 1.3% of the consideration of the controlling shareholder stake transacted. PFSL

understood the controlling shareholder’s intention to sell its controlling interest in the listed company

from the adviser of the controlling shareholder and PFSL understood from the adviser to the

BUSINESS

— 103 —

potential investor that they had an investor who was looking for business acquisition opportunities.Mr. B Lo has known the advisers to the controlling shareholder and investor for over 10 years throughprevious business dealings and is in regular contact to discuss potential business opportunities. Thepotential investor is an Independent Third Party and not connected to our Directors or any of theirrespective associates and has no previous business relationship with our Group. Our Group recognisedthe referral fee as revenue in January 2016 upon successful disposal of the equity interest by thecontrolling shareholder which took place on 13 January 2016. Our Directors confirm that allconditions under the transaction agreement signed and for the revenue recognition were fulfilled at therecognition date. The referral fee was a sum fixed between the controlling shareholder and our Group.

In September 2016, our Group also completed a referral transaction for the acquisition of acontrolling stake in a company listed on the Stock Exchange and recognised a referral fee income ofHK$6.8 million as revenue in September 2016 upon successful disposal of the equity interest by thecontrolling shareholders which took place on 8 September 2016. Our Directors confirm that allconditions under the transaction agreement signed and for the revenue recognition were fulfilled at therecognition date. Such referral fee was 2% of the transaction amount charged to each of the acquirerand controlling shareholders. The transaction was not referred to PFSL by other entity as thecontrolling shareholders are existing customers of PFSL. Mr. B Lo knew the controlling shareholders’intention to sell their controlling interest in the listed company as the controlling shareholders hadentered into discussions with a potential purchaser in relation to a possible disposal of the controllingshareholders’ shares in December 2015 but these negotiations were subsequently terminated. Theultimate beneficial shareholder of the acquirer is an existing brokerage customer of PFSL who hadindicated through discussion with Mr. B Lo that he was looking for investment opportunities.

Our Directors are of the view that the services involved in the placing of listed company’s sharesto individual investors are similar to the services involved in the referral of a potential investor foracquisition of controlling interests. The key difference is that the latter one is in relation to the salesof controlling stakes in a listed company while the former one is not. The revenue generated from suchreferral service is usually significant because of the volume and amount of shares involved. As abrokerage firm, our Group is not in a position to question the purpose of our client’s securities dealingso long as the transactions are conducted in a legitimate manner. As it is our Directors’ view that suchreferral services are similar to the placing of listed company’s shares, the pricing basis for suchreferral service is in general similar to our placing activities (i.e. as a percentage of commission overthe amount placed). The referral fee income from the controlling shareholders of the two referraltransactions above represents 1.3% and 2% of the consideration of the controlling stake transactedrespectively which falls within the range of our Group’s commission rate from the sellingshareholders/issuers/brokers for transactions of placing of shares which was between 0.5% to 3.0%during the Track Record Period, except for one transaction completed during the four months ended31 July 2016 with a fixed commission rate. On such basis, our Directors are of the view that such basesare consistent with industry norm.

On top of the abovementioned referral fee of approximately HK$6.8 million, our Group was alsoentitled to approximately HK$0.5 million professional fee and approximately HK$2.7 million loancommitment fee from the acquirer regarding the general offer. Such fees were recognised as revenuewhen services were rendered over the service period or facility availability period. The professionalfee was determined based on a mutually agreed amount stated in the appointment letter while the loancommitment fee was determined based on 3% of the total principal amount of the facility madeavailable to the acquirer. The loan facility available to the acquirer commenced on 5 October 2016 andended on 9 October 2016. Our Directors confirmed that all conditions under the loan agreement signedand for the revenue recognition were fulfilled at the recognition date. Other than the abovementionedreferral fees which were non-recurring fees, we do not have a track record of earning referral fees. OurDirectors believe that there is opportunity for the Group to receive similar referral fees in the future.

Our Group also provides ancillary services including application for new issues and nomineeservices such as collection of cash and scrip dividends. Our Group charges our customers handlingservice fees and dividend collection fees, which are recognised when the agreed services have beenprovided.

BUSINESS

— 104 —

In addition, during the financial year ended 31 March 2015, our Group was initially approachedto participate in a company’s IPO and was to be appointed as the sole bookrunner, sole underwriterand one of the joint lead managers in the IPO. However, at the request of that company and despiteservices being already partly rendered by our Group, the services of our Group were no longerrequired and it was mutually agreed that our Group would be paid a settlement fee of HK$1.0 million.The settlement fee of HK$1.0 million was agreed between the parties and with reference to thepotential revenue generated by our Group from the transaction. The settlement fee was booked as otherrevenue and was subsequently donated to charity.

Pursuant to a placing agreement entered into between our Group and a Hong Kong listedcompany in September 2015, our Group was initially appointed to place a certain number of sharesby 31 October 2015. Subsequently, the said placing did not take place by 31 October 2015, andthereafter the Hong Kong listed company agreed to pay a settlement fee of approximately HK$1.1million to our Group which is conditional upon the Hong Kong listed company failing to engage ourGroup to place a certain number of shares by 30 June 2016. During June 2016, our Group hasrecognised such settlement fee as other revenue as the Hong Kong listed company had failed to meetthe aforesaid condition.

PRICING

Our source of revenue is from fees paid by our customers in relation to our services and ischarged on a transaction basis. We do not enter into any long term service contract with our customers.The basis of the pricing for our services is as follows:

a. Dealing in securities: brokerage fees are set with reference to other competitors in theindustry.

b. Placing and underwriting transaction: placing and underwriting fees and commission are setbased on, among other things, (i) our role and expected manpower and work required tocomplete the deal, (ii) the volume and value and expected liquidity of the securitiesinvolved, (iii) the potential risk of under-subscription (for transactions under underwrittenbasis only), (iv) the agreed economics between other underwriters, and (v) the timing andmarket situation at the time of the transaction.

c. Margin financing: interest rates are set with reference to, among other things, level of risk,other available potential funding sources and other competitors in the industry.

d. Asset management: based on negotiation with potential customers and with reference toother market pricing.

The following is a summary of the fees (subject to adjustments after arm’s length negotiationwith customers) charged by our Group for different services for the three financial years ended 31March 2016 and the four months ended 31 July 2016:

For the financial year ended 31 MarchFour months

ended 31 July

2014 2015 2016 2016

Securities brokeragecommission







(Note 1)




(Note 2 )




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— 105 —

For the financial year ended 31 MarchFour months

ended 31 July

2014 2015 2016 2016

Placing or underwriting feeand commission





Margin financing interest Up to 9.25% p.a. Up to 9.25% p.a. Up to 10.25% p.a. Up to 8.25% p.a.

Asset management

- Management fee 0.5% p.a. of thenet asset value ofthe fund as at theclose of business

in each month andpayable annually

0.5% p.a. of thenet asset value ofthe fund as at theclose of business


0.5% p.a. of thenet asset value ofthe fund as at theclose of business


Note 3

- Performance fee 15% of theincrease in the net


and payableannually



and payableannually



and payableannually

Note 3

Other fees

Handling fees for ancillaryservices (such as scripthandling and settlementrelated services, inactiveaccount annual fees, IPOservices, dividend/bonusclaims, photocopying)









Dividend collection fee 0.3% of dividendamount, minimum












Notes:

1. Our Group charged 1% brokerage commission only in two major transactions where additional effort was required

to locate purchasers of shares in these two transactions.

2. Our Group charged 2% brokerage commission only in two transactions where additional effort was required to

locate purchasers of shares in these two transactions.

3 Our Group did not manage any funds for the period stated.

Commissions charged by our Group for securities dealings conducted through our internet

trading platform are typically lower than trades conducted through the telephone.

The actual rates charged to each customer for the above services are determined based on, among

other things, customer’s relationship history, the total amount of trading by the customer and the

negotiation between our Group and the customers. For pricing offered to connected parties, please

refer to the section headed “Continuing Connected Transactions” in this prospectus.

BUSINESS

— 106 —

OPERATIONAL FLOW

Account opening process

Our Group allows customers to open two types of accounts: (i) cash account and/or (ii) margin

account. The following flowchart illustrates the account opening process for both cash and margin

accounts:

Customer completes

account opening

documents and provides

supporting documents

Licensed Representatives

checks the documents

Licensed

Representative applies for

trading and /or credit limit

Responsible Officer

approves account

opening and trading

and / or credit limit

Original account opening

documents sent to

settlement department

Settlement department

input customer

information to customer

master system

Settlement department

checks the completeness

of the information and

documents

Does customer apply

for internet

trading account?Yes

No

Original account opening

document kept safe by

settlement department

Settlement Department

sends out password by email

Create online trading

account on BSS and

the BSS generates login

and trading password

BUSINESS

— 107 —

Licensed Representatives are responsible for opening customer accounts, handling customers’

enquiries and taking orders placed by customers. Customer account openings are processed by

Licensed Representatives and approved by one Responsible Officer and one management team

member. Customers’ proof of personal assets and source of capital are sometimes requested as part of

the account opening procedure. Our Group has developed and implemented the account opening

procedures in compliance with the Code of Conduct.

Order taking process by phone

The following flowchart illustrates the order taking and securities dealing procedures via

telephone calls:

Call in direct-line

(with phone recording)

Customer provides account

number and/or customer name

Validate client information

by using BSS

Recognition of cash or

margin account

Sufficient credit limit

Sufficient purchasing power,

cash or securities?

Yes No

No

Yes

Yes

No

Order is placed to the

Stock Exchange

Matching order

Execute and confirm order to

client if the order completes

Approved by AE or

Responsible Officer?

Customer to deposit

more funds or

discontinue the order

BUSINESS

— 108 —

As detailed above, the order taking process comprises various stages and checks so as to confirm

the identity of the customer and to ensure that a customer’s order falls within his or her trading or

credit limit. All checks are done by Licensed Representatives.

Internet trading

The following flowchart illustrates our Group’s internet trading procedures:

Login with customer specific username

and password

Sufficient purchasing power, cash or

securities?

Rejected by system

Order placed to the

Stock Exchange

Yes

No

No

Yes

Matching order

Execute and confirm order to

customer if order completes

Sufficient credit limit

BUSINESS

— 109 —

CUSTOMERS

Our Group’s customers for securities brokerage and margin financing services comprise

corporate and individuals from, among others, Hong Kong and the PRC. We do not accept any US

citizen as customers and therefore we do not subject to Foreign Account Tax Compliance Act (FATCA)

of the United States. Further, it is our Group’s policy not to accept any walk-in customers. Only parties

who have been referred to our Group by existing customers or our staff will be considered and allowed

to open a brokerage trading account with our Group. Customers of our Group’s underwriting and

placing business are companies listed or seeking to list on the Main Board or GEM or shareholders

of companies listed on the Stock Exchange or other SFO licensed entities that act as the main placing

agent or underwriters. During the Track Record Period, we only had one customer for our asset

management services. The fund is a private placement fund established in 2003 and an Independent

Third Party.

As at 31 March 2014, 2015, 2016 and 31 July 2016, we had a total of 4,004 (377 and 3,627

accounts belonging to corporate and individual customers respectively), 4,070 (394 and 3,676

accounts belonging to corporate and individuals customers respectively), 4,224 (407 and 3,817

accounts belonging to corporate and individuals customers respectively) and 4,254 (409 and 3,845

accounts belonging to corporate and individual customers respectively) securities and margin

accounts, respectively. Among these accounts, 90, 88, 87 and 87 accounts belonged to our Group’s

Connected Persons and employees and their associates as at 31 March 2014, 2015, 2016 and 31 July

2016 respectively, which implies that the increase in total number of accounts during the Track Record

Period are arising from independent customers. Movements of securities and margin accounts of our

Group’s individual and corporate customers including number of new accounts opened and accounts

closed during the Track Record Period:




For the four monthsended 31 July

2014 2015 2016 2016

Belongingto individual

customers

Belongingto corporate

customers Total


customers


customers Total


customers


customers Total


customers


customers Total

Brokerage and marginfinancing

— at the beginning ofthe financial year 3,569 372 3,941 3,627 377 4,004 3,676 394 4,070 3,817 407 4,224

— new accounts opened 76 7 83 65 18 83 152 20 172 33 2 35

— account closed 18 2 20 16 1 17 11 7 18 5 — 5

— at the end of thefinancial year 3,627 377 4,004 3,676 394 4,070 3,817 407 4,224 3,845 409 4,254


Group has completed 18, 25, 12 and 11 placing and underwriting transactions in relation to 18, 24, 11

and 11 listed companies respectively.

BUSINESS

— 110 —

The table below sets out the number of active customers and total number of customers of our

Group during the Track Record Period:


For thefour months

ended31 July

2014 2015 2016 2016

Number of active customers of our

Group (Note) 714 744 759 431

Total number of customers of our Group 3,827 3,872 4,051 4,084

Note: Active customers denote our Group’s customers from whom we have generated revenue during the stated period.

MAJOR CUSTOMERS


Group’s largest customer accounted for approximately 37.2%, 10.0%, 23.0% and 33.6% of our

Group’s total turnover respectively. Our Group’s top five largest customers, in aggregate, accounted

for approximately 64.4%, 40.3%, 52.1% and 63.9% of our Group’s total turnover respectively.

Top five largest customers

The tables below set out the approximate turnover from our Group’s five largest customers, the

service type, their relationship with our Group, and the year of becoming our customer, for the three

financial years ended 31 March 2016 and the four months ended 31 July 2016:

Financial year ended 31 March 2014

Notes

Income contributedto our Group’s

turnover% of total

turnover Service type

Year ofbecomingcustomer

HK$’000

Customer A 1 20,251 37.2% Placing and underwriting 2014

Customer B 2 4,400 8.1% Securities dealing and

brokerage and asset

management

2004

Customer C 3 4,066 7.5% Securities dealing and

brokerage and margin

financing

2002

Customer D 4 3,236 5.9% Placing and underwriting 2013

Customer E 5 3,143 5.8% Placing and underwriting 2014

BUSINESS

— 111 —


Notes


turnover% of total



HK$’000

Customer F 6 4,237 10.0% Placing and underwriting 2004

Customer G 7 3,536 8.3% Securities dealing andbrokerage and placing andunderwriting

2014

Customer H 8 3,375 8.0% Placing and underwriting 2014Customer I 9 3,000 7.1% Placing and underwriting 2014Customer B 2 2,946 6.9% Securities dealing and

brokerage and assetmanagement

2004


Notes


turnover% of



HK$’000

Customer J 10 9,430 23.0% Others (Note 19) 2015

Customer K 11 4,719 11.5% Placing and underwriting 2015Customer L 12 3,807 9.3% Placing and underwriting 2015Customer M 13 1,772 4.3% Securities dealing and

brokerage, placing andunderwriting, and marginfinancing

2004

Customer N 14 1,576 3.9% Placing and underwriting 2015

Four months ended 31 July 2016

Notes


turnover% of



HK$’000

Customer O 15 8,353 33.6% Placing and underwriting 2016

Customer F 6 2,328 9.4% Placing and underwriting 2004Customer P 16 1,920 7.7% Placing and underwriting 2016Customer Q 17 1,810 7.3% Placing and underwriting 2016Customer R 18 1,500 6.0% Placing and underwriting 2014

BUSINESS

— 112 —

Notes:

1) Customer A is a subsidiary of a company listed on the Main Board and is a licensed corporation under the SFO

to carry out type 1 (dealing in securities) and type 4 (advising on Securities) of the regulated activities under the

SFO. As at the Latest Practicable Date, the holding company of the customer had a market capitalisation of

approximately HK$21.2 billion.

2) Customer B is a hedge fund and an Independent Third Party.

3) Customer C is an individual and an Independent Third Party.

4) Customer D is a licensed corporation under the SFO to carry out type 1 (dealing in securities), type 4 (advising

on Securities), type 6 (advising on corporate finance) and type 9 (asset management) of the regulated activities

under the SFO.

5) Customer E is a company listed on GEM and is principally engaged in design and sale of a broad range of fine

jewelry products. As at the Latest Practicable Date, Customer E had a market capitalisation of approximately

HK$438.2 million.

6) Customer F is a licensed corporation under the SFO to carry out type 1 (dealing in securities), type 2 (dealing in

futures contracts), type 4 (advising on securities) and type 6 (advising on corporate finance) of the regulated

activities under the SFO.

7) Customer G is a company incorporated in Singapore carrying on the business of electrical works and an

Independent Third Party.

8) Customer H is a licensed corporation under the SFO to carry out type 1 (dealing in securities) and type 6 (advising

on corporate finance) of the regulated activities under the SFO.

9) Customer I is a company listed on GEM and operates dance centres in Hong Kong. As at the Latest Practicable

Date, Customer I had a market capitalisation of approximately HK$142.0 million.

10) Customer J is a company incorporated in the BVI and an Independent Third Party.

11) Customer K is a company listed on the Main Board and a one-stop integrated interior design solutions provider

based in Hong Kong. As at the Latest Practicable Date, Customer K had a market capitalisation of approximately

HK$835.0 million.

12) Customer L is a company listed on the Main Board and engaged in the supply of heat and electricity and the oil

production. As at the Latest Practicable Date, Customer L had a market capitalisation of approximately HK$378.2

million.

13) Customer M is an individual and an Independent Third Party.

14) Customer N is a company listed on GEM and is engaged in the financial services business, trading business,

including the trading of various brands of milk powder products to customers based in Hong Kong, and

information technology business. As at the Latest Practicable Date, Customer N had a market capitalisation of

approximately HK$155.5 million.

BUSINESS

— 113 —

15) Customer O is a company listed on the Main Board and is principally engaged in the provision of earthworks and

general construction works to the construction industry in Singapore. As at the Latest Practicable Date, Customer

O had a market capitalisation of approximately HK$487.6 million.

16) Customer P is a company listed on GEM and is an interior design and fit out solutions provider in Hong Kong.

As at the Latest Practicable Date, Customer P had a market capitalisation of approximately HK$201.6 million.

17) Customer Q is a company listed on GEM and is a food and beverage group with a primary focus on offering

western cuisine. As at the Latest Practicable Date, Customer Q had a market capitalisation of approximately

HK$1.2 billion.

18) Company R is a company listed on the Main Board and is principally engaged in mining for precious metals. As

at the Latest Practicable Date, Customer R had a market capitalisation of approximately HK$3.3 billion.

19) Others refer to referral services provided.

None of the Directors or their respective close associates or the existing Shareholders who own

more than 5% of our Company’s issued share capital, has any interest in any of our Group’s five

largest customers as at the Latest Practicable Date. All of the five largest customers for the three

financial years ended 31 March 2016 and the four months ended 31 July 2016 are Independent Third

Parties.

OPERATIONAL DATA

Securities dealing and brokerage


For thefour months

ended31 July

2014 2015 2016 2016

Number of active accounts (Note) 694 722 718 408

Number of transactions 38,347 24,665 23,931 4,451

Gross transaction value (HK$’000) 7,128,156 4,863,307 5,336,686 701,276

Average transaction value (HK$’000) 186 197 223 158

Average commission rate 0.18% 0.21% 0.20% 0.18%

Note: Active securities accounts represent our Group’s customers having carried out at least one purchase and/or sale

transaction during the year/respective period.

BUSINESS

— 114 —

Number of active securities accounts by number of transaction


For thefour months

ended31 July

2014 2015 2016 2016

Number of transaction of our securitiesaccounts

At least 1 purchase and/or saletransaction 109 161 129 149

2 to 3 purchase and/or sale transactions 144 128 160 1054 to 11 purchase and/or sale

transactions 200 207 195 9412 or over 12 purchase and/or sale

transactions 241 226 234 60

Total number of active securitiesaccounts (Note) 694 722 718 408


Number of active securities accounts by transaction volume


For thefour months

ended31 July

2014 2015 2016 2016

Transaction volume of our securitiesaccounts

Less than or equal to HK$100,000 210 247 181 177HK$100,001 to HK$500,000 176 152 187 106HK$500,001 to HK$1,000,000 73 81 82 42HK$1,000,001 to HK$5,000,000 127 137 138 53HK$5,000,001 to HK$10,000,000 28 35 50 13Over HK$10,000,000 80 70 80 17

Total number of active securitiesaccounts (Note) 694 722 718 408



BUSINESS

— 115 —

Number of active securities accounts by commission income

For the financial year ended31 March 2014



For the four months ended31 July 2016

Number ofactive

securitiesaccount

Commissionincome derived by

our Group

Number ofactive

securitiesaccount


our Group

Number ofactive

securitiesaccount


our Group

Number ofactive

securitiesaccount


our Group(HK$’000) % (HK$’000) % (HK$’000) % (HK$’000) %

Commission incomegenerated fromsecurities accounts

Less than or equal toHK$10,000 574 907 7.1 609 975 9.5 582 966 8.8 379 426 33.2

HK$10,001 to HK$50,000 80 1,796 14.1 81 1,928 18.9 99 2,262 20.7 27 607 47.3

HK$50,001 to HK$100,000 16 1,153 9.1 17 1,231 12.0 13 974 8.9 1 83 6.5

HK$100,001 to HK$500,000 18 3,007 23.6 13 3,030 29.6 21 3,767 34.5 1 166 13.0

Over HK$500,000 6 5,854 46.1 2 3,061 30.0 3 2,949 27.1 0 — —

Total (Note) 694 12,717 100.0 722 10,225 100.0 718 10,918 100.0 408 1,282 100.0



Margin financing


For thefour months

ended31 July

2014 2015 2016 2016

Average daily margin loan interest rate 5.26% p.a. 5.25% p.a. 5.53% p.a. 6.08% p.a.Average daily collateral coverage

(times) 3.6 3.7 5.7 4.4Collateral coverage (as at year/period

end) (times) 2.8 4.7 4.6 3.4

Number of margin accounts by interest income



31 July2014 2015 2016 2016

% % % %

Interest income generatedfrom customers’ accounts

Less than or equal toHK$5,000 12 25.5 13 31.7 15 34.9 11 36.7

HK$5,001 to HK$10,000 6 12.8 3 7.3 3 7.0 — —HK$10,001 to HK$50,000 12 25.5 10 24.4 12 27.9 7 23.3HK$50,001 to HK$100,000 3 6.4 2 4.9 2 4.7 6 20.0Over HK$100,000 14 29.8 13 31.7 11 25.5 6 20.0

Total number of accounts 47 100.0% 41 100.0% 43 100.0 30 100.0

BUSINESS

— 116 —

Placing and underwriting


For thefour months

ended31 July

2014 2015 2016 2016

Number of transactions 18 25 12 11Gross transaction value (HK$’000) 699,260 956,736 572,637 1,310,222Average commission rate 4.55% 2.32% 2.45% 1.38%

Connected parties trading

The table below sets out the breakdown of income by business activities from the Connected

Persons of the corresponding period and their associates for the three financial years ended 31 March

2016 and the four months ended 31 July 2015 and 2016.

Connected Persons of thecorresponding periodand their associates



2014 2015 2016 2015 2016

(unaudited)

Commission income from brokerage

service (HK$’000) 587 580 727 375 68

Approximate percentage of our Group’s

income from brokerage service 4.6% 5.7% 6.7% 6.8% 5.3%

Income from placing and underwriting

services (HK$’000) 119 65 18 18 150


income from placing and

underwriting 0.4% 0.3% 0.1% 1.5% 0.7%

Interest income from financing service

(HK$’000) 972 1,928 1,277 408 526


income from financing service 19.3% 38.5% 30.1% 34.8% 22.4%

Total income (HK$’000) 1,678 2,573 2,022 801 744


turnover 3.1% 6.1% 4.9% 9.6% 3.0%

The total income of connected persons of the corresponding period and their associates

accounted for approximately 3.1%, 6.1%, 4.9%, 9.6% and 3.0% of our Group’s turnover for the three

financial year ended 31 March 2016 and the four months ended 31 July 2015 and 2016 respectively.

BUSINESS

— 117 —

Pursuant to paragraph 12.2 of the Code of Conduct, employees should generally be required to

deal through the licensed corporation which they are employed under. The table below sets out the

breakdown of income by business activities generated from our employees and their associates for the

three financial years ended 31 March 2016 and the four months ended 31 July 2015 and 2016.

Employees and their associates (Note 1)



2014 2015 2016 2015 2016

(unaudited)

Commission income from brokerage

service (HK$’000) 836 1,152 953 500 92


income from brokerage service 6.6% 11.3% 8.7% 9.1% 7.2%

Interest income from financing service

(HK$’000) 994 2,123 1,227 376 524


income from financing service 19.8% 42.4% 28.9% 32.0% 22.4%

Total (HK$’000)(Note 2) 1,830 3,275 2,180 876 616


turnover 3.4% 7.7% 5.3% 10.5% 2.5%

Notes:

1. The figures in the table include income generated from the Connected Persons and their respective associates.

2. Most of our income generated from our employees and their associates derives from our Group’s brokerage service

and financing service. However, some employees and their associates also contributed to placing and underwriting

commission income to our Group.

SUPPLIERS AND VENDORS

Due to the nature of our Group’s principal business activities, our Group does not have suppliers.

Our Group engages IT vendors which facilitate the operation of its trading platform and the provision

of securities market information and price quotations. During the Track Record Period, we have

engaged system vendors recognised by the Stock Exchange to provide computer system, maintenance

service and for the provision of trading programs and related system support.

None of the Directors or their respective close associates or the existing Shareholders who own

more than 5% of our Company’s issued share capital, has any interest in any of our Group’s IT vendors

as at the Latest Practicable Date.

BUSINESS

— 118 —

SALES AND MARKETING

Our Group’s marketing is typically conducted through our Company’s website, word of mouth

as well as through our relationship with professional parties in the financial and related industry. As

it is our Group’s policy not to accept walk-in customers, marketing of our Group’s securities trading

services through public advertising is not of much benefit to our Group. Mr. B Lo, our executive

Director, will regularly attend and host functions to build a stronger network of professional parties

that potential customers may be referred to our Group. Licensed Representatives also regularly contact

customers to maintain good business relationship and to expand network by soliciting new customers

through referrals from existing customers.

Our Group considers customer referrals, the personal networks and relationships of our

management are sufficient to attract the kind of customers our Group currently targets in this regard.

QUALITY CONTROL

Our Group aims to continually improve the quality of our services. Our Group has also

established complaint handling procedures to deal with complaints and to ensure complaints are

promptly and fairly dealt with. During the Track Record Period, our Group received no complaints

from any of our customers.

Going forward, our Directors believe that our Group will continue to assist customers in making

investment decisions under different market conditions to maximize their returns and the Listing will

help to promote our Group’s corporate image and to enhance public awareness towards our services,

which will enable us to attract more customers and enrich our customer profile.

COMPETITION

Our Group competes with other SFC licensed entities carrying on the same types of regulated

activities as our Group. As at 31 October 2016, there were 586 Stock Exchange Participants in Hong

Kong of which 550 are trading participants and 36 are non-trading participants.

PFSL is a Category C Exchange Participant and competes mainly with local small and medium

sized brokerage firms of Category B and Category C in Hong Kong. According to the information from

the Stock Exchange, PFSL was ranked 217 out of 506 Exchange Participants and 244 out of 518

Exchange Participants based on the market share of the trading fee, transaction levy and investor

compensation levy (if applicable) for the period from 1 January 2015 to 31 December 2015 and from

1 January 2016 to 30 June 2016 respectively. The transaction fee and levy collected by PFSL

represented approximately 0.0122% of the total of the industry for the period from 1 January 2015 to

31 December 2015.

BUSINESS

— 119 —

Both local and international licensed corporations compete for fees and commissions. Since 1

April 2003, minimum brokerage commission rates in respect of securities and commodities trading in

Hong Kong have been deregulated, and therefore brokerage commissions are subject to market forces

and negotiations with customers and may become susceptible to downward pressure from time to time.

Market players have to adapt to this more competitive commission regime. Apart from pricing, our

Group also competes on customer relationship.

Our Directors are of the view that our Group makes every effort to compete effectively by (i)

striving to keep track of with the market to understand customers’ needs and tactics of its competitors,

(ii) seeking to capture new customers and delivering quality services up to the existing customers’

satisfaction, (iii) recruiting and retaining experienced staff in order to provide quality services to

customers, (iv) maintaining suitable professionals and management personnel to improve corporate

control, IT infrastructure, marketing strategies and technical expertise so as to cater any changes in

market conditions, and finally, (v) maintaining an efficient and lean cost structure in order to

maximise Shareholders’ returns.

As at the Latest Practicable Date, PFSL has a paid-up share capital of HK$10 million and liquid

capital of over HK$138 million, both of which have met the minimum requirements under the SFO.

Our Directors believe that our Group’s financial strength will be further enhanced with funds to be

raised from the Placing and after the Listing, it will be able to (i) access to the secondary fund-raising

market in Hong Kong, and (ii) as and when necessary obtain funding from financial institutions on

relatively favorable terms with its listing status. As such, our Directors believe that our Group’s

overall financial strength would become more comparable to small and medium sized listed companies

which involve in brokerage business in Hong Kong, who are the major competitors of our Group.

Our Directors are confident that the Listing will have positive impact on our Group’s brand

image and our Group will continue enhancing public awareness towards its services and brand.

Details of the competition that our Group faces are set out under the section headed “Industry

Overview” of this prospectus.

LICENCES AND TRADING RIGHTS

Under the SFO, a licensed corporation shall not carry on any regulated activity unless not less

than two Responsible Officers are approved by the SFC in relation to the regulated activity. PFSL has

and had at all material times complied with such requirement.

Following the commencement of the SFO on 1 April 2003, PFSL has been a licensed corporation

to carry on Type 1 (dealing in securities) and Type 9 (asset management) regulated activities under the

SFC since 12 Sep 2005. Pursuant to our Type 9 licence granted by the SFC, we are restricted from

providing a service of managing a portfolio of futures contracts for another person.

BUSINESS

— 120 —

The following table sets out the identities of the Responsible Officers for our Group’s regulated

businesses during the Track Record Period whose licences do not specify an expiry date:

As at the Latest Practicable Date, we had in total 5 staff that are licensed by the SFC as a

Responsible Officer under the SFO for regulated activity 1 and/or 9:

Name Licence No.RegulatedActivity 1

RegulatedActivity 9 Date licenced by SFC

LO Tak Wing, Benson AAW915 � � Since 12 Sep 2005

LAM Tim, Ricky ABF282 � � Since 12 Sep 2005

NG Man Sum ABN450 � Since 12 Sep 2005

TAM Kit Chun ABG141 � Since 12 Sep 2005

TSANG Kong Kit AIW318 � Since 2 Dec 2015

Total 5 2

As at the Latest Practicable Date, our Group has in total 19 staff and self-employed AEs that are

licensed by the SFC as a representative under the SFO for regulated businesses. Additional

information relating to our SFC licences and licenced staff is available on SFC’s website.

Self-employed AEs which carry out SFO regulated activities are also required to be licensed and they

maintain their SFO licences with our Group only.

As at the Latest Practicable Date, our Group held the following licences, certificates and

participantship to carry on the business activities as described in this prospectus. Each of the licences,

certificates and participantship does not specify an expiry date.

Licence/certificate/participantship Date of issue/effective date

Licence under SFO to carry on Type 1

(dealing in securities) regulated activity

1 April 2003

Licence under SFO to carry on Type 9

(asset management) regulated activity

1 April 2003

Stock Exchange Participant Certificate 2 April 2002

Stock Exchange Trading Right Certificates

Distinctive Nos. 318, 319 and 320

6 March 2000

BUSINESS

— 121 —

COMPLIANCE WITH LAWS AND REGULATIONS

Since its establishment and as confirmed by our Directors, PFSL has been able to obtain its

relevant licences and participantships and has not failed/received any objection from the SFC or other

relevant competent authorities during renewal of licenses and participantships. All of our staff

members and self-employed AEs that perform regulated activities are properly registered under the

SFO as either Licensed Representatives or Responsible Officers.

Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date

(i) our Group has obtained all necessary licences, permits or certificates from the relevant

governmental bodies necessary to conduct its operations in Hong Kong where our Group operates its

business, and (ii) our Group has been and is in compliance with all applicable laws and regulations

in all material respects, in the performance of its relevant business in Hong Kong where it operates

since its establishment. Details of the regulatory and licensing requirements are disclosed under the

section headed “Regulatory Overview” of this prospectus.

Our Directors further confirm that none of our existing or past Responsible Officers and

Licensed Representatives during the Track Record Period has been named as party to any SFC

disciplinary actions during the Track Record Period and up to the Latest Practicable Date.

LITIGATION

As at the Latest Practicable Date, neither our Company nor any of our subsidiaries is engaged

in any litigation or claims of material importance and no litigation or claims of material importance

is known to our Directors to be pending or threatened against our Company or any of our subsidiaries.

INFORMATION TECHNOLOGY

During the Track Record Period, our Group’s securities brokerage trading platform was operating

on Automatic Order Matching and Execution System (i.e., AMS/3) through the HKEx’s Open Gateway

(“OG”). With the HKEx’s commitment to strengthening the competitiveness of Hong Kong as a

leading global financial centre, the HKEx invested in core platforms, including connectivity networks,

a state-of-the-art data centre, and systems providing order matching, market data dissemination and

market access services and as a result, exchange participants such as PFSL, have an option to migrate

from OG to the OCG. PFSL migrated its market access system to the OCG in July 2015.

According to information from the HKEx, the key features of the OCG are (i) efficient

architecture, (ii) low latency, (iii) high resiliency and (iv) high capacity sessions. Our Group’s

currently operates 3 servers, namely (i) OCG which hosts database and BSS connectors, (ii) Orion

Market Data which receives HKEx market data; and (iii) a standby server. Subsequent to the

installation of the OCG, our Group can connect our BSS to OCG via “OCG Sessions”.

During the Track Record Period, there were no disruptions of the system which led to any

material disruption of our operations.

BUSINESS

— 122 —

CREDIT CONTROL AND RISK MANAGEMENT

Customers are assigned a trading limit and margin loan limit (if the customer also opens a margin

account) to reflect the degree of risk that our Group intends to take after considering customers’

background, financial situation, investment experience and type of trading account (i.e. cash account

or margin account). For cash accounts, the trading limit is subject to the available cash in a customer’s

account. For margin accounts, trading limits and margin loan limit are subject to the approval from

one Responsible Officer and one management team member.

Customer receivables for dealings in securities are settled on trading day + 2 days. Our Group

has from time to time identified those receivables which are not properly settled on the prescribed

settlement basis. The handling AE and our Group’s settlement department are responsible for

following up on the overdue amounts of receivables. As set out in our account opening forms, interest

will be charged on any amounts not settled on the trading day +2 days. For prolonged overdue

receivables, information will be referred to and reviewed by the management who will decide the

appropriate follow-up actions. Trade receivables that are considered uncollectible will be written off.

For each of the three financial years ended 31 March 2016 and the four months ended 31 July 2016,

we did not have any bad debts.

Licensed Representatives are responsible for monitoring customers’ securities and cash positions

to ensure no short sales transaction.

Operational control

Our Group’s operations and procedures manual covers controls on different aspects of its

business operations including but not limited to customer accounts operation, order execution,

customer settlement and liquidity risk.

Account Opening Procedures

When new accounts are opened, our AEs are required to take all reasonable steps to establish the

true identity of each of their customers. Our Group’s account opening policy requires that the AE

responsible for opening the account to conduct know your client (“KYC”) procedure such that he or

she is satisfied on reasonable grounds about the identity, address and contact details of the person or

entity ultimately responsible for the origination of instructions to operate the brokerage account. Our

Group’s KYC procedure requires the AEs to obtain copies of identification, address proof and, if

relevant, proof of funds and corporate documents such as Certificate of Incorporation and

Memorandum and Articles of Association. For corporate accounts, we may also conduct company

searches at public registries. For PRC customers, we will also request for a copy of their arrival card

to ensure they have entered Hong Kong legally. To ensure the AEs comply with the above, our AEs

are required to complete a checklist which are reviewed by our Responsible Officers.

Customer accounts operation

The operations and procedures manual specifies the steps and procedures that Licensed

Representatives must follow and information to be gathered from individual or corporation who

BUSINESS

— 123 —

wishes to open an account with PFSL. The settlement department would check the adequacy of

information provided and forward the same to Responsible Officers for approval. Customers account

documents should be kept and stored in a locked cabinet and should only be accessed by authorised

personnel. Operation of an account by a person other than the account holder is not allowed unless

proper authorisation could be obtained from customer and such third party can only be authorised to

place orders or instructions to purchase or sell securities while instructions to operate the fund or stock

movements are not allowed unless authorised by the account holder. Third party authorisation account

will be renewed on an annual basis depending on whether the customer wishes to continue to effect

such authorisation.

Order execution

Customer’s orders should be directly placed to the designated AE. No trading order is accepted

unless identity of the customer could be verified. Instructions from customers through telephone are

recorded in our Group’s telephone recording system and such records are kept for at least six months.

If a verbal instruction to place an order is received via an AE’s mobile phones, after placing order,

the AE must confirm the customer’s instructions with the office telephone system under which

recordings are available and our staff are required to fill in order ticket/trade blotter after the

customer’s confirmation.

Account details such as customer name or account number should always be identified at the time

of placing orders to the dealer or entering into the BSS. When an AE receives order from customers,

he or she should check trading limit or funds available to cover the order before placing the order

through the trading system and whether the customer has sufficient credit, cash or securities. For

orders placed by dealers via the trading system with or without customer account number is input,

dealing tickets must be properly time stamped. Some orders are placed without customer account

number in circumstances when (i) the front office system has yet shown the customer’s account details

after it was set up in the back office system; (ii) our AEs only have access to their own customers’

accounts and an AE receives an order from a customer of another AE who is on leave, the AE will need

to first check the customer’s trading limit, fund and stocks available in the account with our settlement

department before placing the order via a temporary account; and (iii) the AE has checked and written

down its customers’ trading position on the order ticket and the dealer is unable to retrieve the

customer’s account details within a short period of time. After each trading day, the AEs would

allocate the position purchased or sale proceeds to the respective accounts according to the

information stated on the order tickets. The AEs must inform the customers immediately after their

orders have been successfully placed and would endeavour to confirm promptly with the customer the

essential features of the transaction in accordance with paragraph 8.2 of the Code of Conduct.

Activities of Licensed Representatives are closely monitored by the Responsible Officers at all

times on a real time basis through our Group’s computer system. All dealing transactions performed

by Licensed Representatives are recorded in a daily report which is reviewed by the Responsible

Officers on daily basis. Any unusual trading activities will be immediately reported to the Responsible

Officers and appropriate actions will be taken.

BUSINESS

— 124 —

Customer settlement

Licensed Representatives who serve trading accounts are not allowed to process settlement to

ensure proper segregation of duties. Daily statement of accounts are mailed and/or emailed to our

Group’s customers on or before the end of next trading day and monthly statement of accounts are

mailed within one week after the end of the month to ensure our customers are well informed of the

movement of funds and stock positions.

Data protection

System users are assigned different levels of access authority according to their ranking and

needs. They are required to keep each password confidential and reset of passwords can only be

performed by the system administrator. Our Group has five Responsible Officers who are responsible

for i) securities dealing, ii) back office and compliance and iii) IT respectively. Management is

responsible for reviewing the access authorities periodically and any changes in access rights must be

approved by the management. Back-ups of all customers’ transactions are kept for at least seven years

and stored at our offices and/or in a place outside the office premises to be identified by our Group.

Margin Loan Concentration Risk Monitoring

To manage the potential of a margin loan concentration risk, our Group has implemented the

following procedures:

• Accounts of related margin customers (“Related Accounts”) are identified in the back office

system by the settlement department to calculate the margin loan concentration risk.

• Daily margin loan concentration report will be furnished to the Responsible Officer for

review.

• Should margin loan concentration (over 10% of margin loan from our Company is offered

to a group of related margin customersNote) exists, the Responsible Officer will inform the

respective AE to reduce the positions of customers or pass to the Management for

evaluation and approval.

• The Management must be aware of all the outstanding bank borrowings and overdrafts

secured by the pledging or deposit of securities collateral belonging to margin customers.

The amount of such outstanding should not exceed 120% of the value of outstanding margin

loans.

Note: Group of related margin customers are defined in section 42(3) of the FRR as any 2 or more margin clients of a licensed

corporation licensed for Type 1 or Type 8 regulated activity and

(a) where it is a group of 2 margin clients, one is the spouse of the other;

(b) where one or more of the margin clients are corporations, one is in control, either alone or with his spouse, of 35%

or more of the voting rights of that other margin client or each of the other margin clients (as the case may be);

or

(c) where the margin clients are corporations, they are members of the same group of companies.

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Collaterals Concentration Risk Monitoring

To manage the possibility of collateral concentration risk, daily collaterals concentration report

will be generated by our settlement department and furnished to one of the Responsible Officers for

review. If there is an indication of a collaterals concentration, the Responsible Officer will determine

whether to reduce the margin ratio of the shares concerned.

Liquid capital requirements and submission of financial returns under the FRR

Our Group is required to maintain at all times the liquid capital requirement as set out under the

FRR and, as at the Latest Practicable Date was HK$3,000,000 or the variable required liquid capital,

whichever the higher. Our accounts department is responsible for the preparation of the financial

returns and the computation of liquid capital in accordance with the requirements under the FRR on

a daily basis. The liquid capital computation is reviewed by our Responsible Officers to ensure that

our Group’s liquid capital is able to comply with the FRR requirements on an ongoing basis. The

monthly financial returns are submitted to our Responsible Officer for review and approval before

submission to the SFC no later than three weeks after each calendar month. During the Track Record

Period, our Group did not have any material non-compliance to the minimum liquid capital

requirement as set out by the SFC.

Risk management

AEs should review and monitor customer transactions (including ensuring whether a customer

has sufficient securities before processing sales orders), identify and report any discrepancy in the

daily report to the settlement department. At the end of each trading day, a Responsible Officer is

responsible for reviewing (i) customers’ securities position to ensure no short sales transaction and (ii)

reviewing customer outstanding position and portfolio to, among other things, identify any irregular

activities or unusual trades.

Responsible Officer will decide on the actions to be taken having considered various factors such

as account valuation status, past settlement record and quality of securities held. PFSL has the right

to sell custodians stock of relevant customers at any time to settle the outstanding amount.

Responsible Officers and/or the settlement department would review customers with margin accounts

from time to time to ensure margin account customers maintain sufficient funds for settlement. In the

event that there is insufficient funds or a potential margin call position, the AEs are notified

accordingly and required to follow up with the customer to request for funds to be deposited. For

margin financing, PFSL has the right to sell the stock of customers to cover any unsettled position.

Anti-money laundering

All the staff members of our Group are required to adhere to the requirements set out in the

Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance and the

SFC Guideline on Anti-Money Laundering and Counter Terrorist Financing (“AML Guideline”) and

any update in relation thereto.

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Our Group has adopted policies and procedures in its operations and procedures manual toidentify and detect money laundering activities, which include the following:

(i) Customer due diligence — our Licensed Representative is required to conduct initialactions to:

(a) identify the customer, i.e. know who the individual or legal entity is;

(b) verify the customer’s identity using reliable source documents, data or information;

(c) identify and verify beneficial ownership and control of the customer’s account and/orthe person on whose behalf a transaction is being conducted; and

(d) conduct ongoing due diligence and scrutiny, i.e. perform ongoing scrutiny of thetransactions and account throughout the course of the business relationship to ensurethat the transactions being conducted are consistent with their knowledge of thecustomer, its business and risk profile, taking into account, where necessary, thecustomer’s source of funds.

The above information is then subsequently reviewed by a Responsible Officer andsettlement staff for sufficiency before an account is allowed to open;

(ii) Retention of Records — our settlement staff are required to:

(a) maintain all necessary records on transactions, both domestic and international, for atleast seven years; and

(b) keep records on customer identification (both for existing and closed accounts),account files and business correspondence for at least seven years;

(iii) Handling of cash — payment in cash of more than HK$1,000 to the front office is notallowed and customer is required to make deposit into PFSL’s bank account in person;

(iv) Anti-money laundering and anti-terrorist financing trainings are provided to staff at regularintervals; and

(v) Settlement staff are required to report any suspicious transactions directly to thecompliance officer or a Responsible Officer for further action.

In reviewing whether or not a transaction may be considered as a money laundering activity, wedo not use an exception report to highlight potential money laundering but would have all transactionsreviewed on a daily basis by Responsible Officers. The average number of daily securities dealing andbrokerage transactions was less than 100 for the year ended 31 March 2016 and is not significant. Anytransactions which are inconsistent with the trading pattern of a customer and are complex, large orunusual or patterns of transactions that have no apparent economic or lawful purpose will behighlighted by our AEs to the Responsible Officers for further review and/or action.

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To ensure that our staff are compliant with our Group’s policies and procedures on anti-moneylaundering, we carry out random checks twice a year to review and reconcile stock and moneymovements.

The Directors confirmed that during the Track Record Period, our Group has not reported anysuspected or actual cases of money laundering to the Joint Financial Intelligence Unit.

INVESTMENT POLICY

Our Group’s investment objective is to generate a capital growth and income on investments and

the investments may include listed securities, corporate and government bonds, real estate and money

market instruments. Type of investment which can be considered will vary depend on market

conditions and circumstances and should require in depth analysis and justification with a rigorous and

comprehensive risk management. In addition, any potential investment need to consider the primary

operating needs of our Group.

Investments in the following are absolutely restricted as they are against our Group’s principles:

— Financial Action Task Force (on Money Laundering) (FATF) blacklisted companies

— Investment in countries with high country and political risk

— Restricted up to 20% of the issued share capital of any one issuer

— The value of our Group’s total investment in securities should not exceed 15% of the net

asset value of our Group, with a maximum of 10% for any one company or body corporate

To monitor and control our Group’s investment risks, we have established an Investment

Committee comprising two executive Directors, the finance controller and the chief accountant which

will oversee our Group’s investments. The duties of the Investment Committee will be to, among other

things, establish an investment approach, review the investment opportunities and selection and

establish investment parameters. The Investment Committee has the authority to approve investments

within HK$5,000,000 and any investments above that amount will require the approval of our board

of Directors.

INTERNAL CONTROL

Under the Code of Conduct, a licensee should have internal control procedures and financial and

operational capabilities which can be reasonably expected to protect its operations, customers and

other licensed or registered persons from financial loss arising from theft, fraud and other dishonest

acts, professional misconduct or omissions.

PFSL has adopted its operation and compliance manuals, setting out proper policies and

procedures to detect and prevent fraud and misconduct by employees, AEs and third parties. Two

Responsible Officers are responsible to review various aspects of our Group’s operations including,

among other things, daily transactions, margin call reports, CCASS report, staff trading reports and

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next day settlement reports every day. They will also periodically review the policies and procedures

to identify weaknesses and update the manuals. Its mission is to ascertain proper monitoring and

enforcement on the SFC regulations and internal policy and procedures.

Our Group has engaged an internal control reviewer (the “Internal Control Reviewer”) to prepare

an internal control review (the “Internal Control Review”) on our Group under a private engagement

to which our Group is a party. The terms of our engagement with the Internal Control Reviewer

restricted the disclosure or reference of the internal control reviewer’s identity in listing documents.

The Internal Control Reviewer is one of the “big-4” international accounting firms and a Hong Kong

certified public accountants practice registered under the HKICPA. The review fieldwork was

conducted between 15 July 2015 and 24 July 2015. The Internal Control Reviewer assessed the

Company’s internal controls as they exist at the time of their fieldwork and selected samples from

recent 3 to 6 months during their fieldwork. Following such review, our Group has adopted a revised

operations and procedures manual which has included recommendations from the Internal Control

Reviewer. Follow-up reviews on the remediation actions taken by our Company were conducted

between 29 December 2015 and 8 January 2016, on 24 February 2016 and on 5 December 2016

respectively. The scope of assessment includes the review of the control processes and procedures of

the following areas:-

i) Control environment

ii) Risk management

iii) Monitoring

iv) Information and communication

v) Financial organization structure

vi) Financial closing

vii) Reporting and disclosure

viii) Financial budgeting

ix) Revenue — securities brokerage and margin financing business

x) Revenue — placing and underwriting business

xi) Expenditure management

xii) Cash management and treasury

xiii) Human resources and payroll management

xiv) Regulatory compliance management

xv) General information technology controls

During the Internal Control Review, the Internal Control Reviewer performed such steps: (i)conducted interviews with relevant management and staff members and also assessed relevantdocumentation on site relating to our internal controls; (ii) performed walkthroughs of processes andsystems relating to our internal controls; (iii) performed tests of sample transactions to establishwhether our internal controls are operating as intended based on our own operating policies and

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procedures for the selected samples; iv) identified findings based on the results of walkthroughs and

sample tests performed in steps (ii) and (iii) above and developed recommendations for improvement,

where appropriate; and (v) conducted follow-up assessment(s) of remediation implemented by our

Group, discussed with the relevant management and staff members of our Company on the steps taken,

performed walkthroughs of revised control activities and obtained additional information to support

the remediation work in remediating the internal control weaknesses and issues as identified and

reported in step (iv) above.

Major findings and deficiencies identified in the internal control review report, the risk and

actual impact on our Group’s operations and the financial performance, the recommendations made by

the Internal Control Reviewer and the remediation actions taken by our Group are set out in the

following table:

Major findings and deficiencies

Risk and actualimpact on ourGroup’s operationsand the financialperformance Recommendations

Remediationactions taken byour Group

Corporate Controls Mechanism:

Written policies and procedures werenot established to deal with certainGEM Listing Rules requirements:

• Compliance with the CorporateGovernance Code;

• Directors’ dealing in securitiesof the listed issuer;

• Identification; monitoring andreview of notifiable andconnected transactions;

• Distribution of interim andannual reports and publicationof results;

• Handling and monitoring ofinsider information;price-sensitive and confidentialinformation; and

• Responding to enquiries fromregulatory authorities

The absence offormal policies andprocedures inrelation to the codeprovisions mayincrease the risk ofbreaching the GEMListing Rules ondisclosinginformation in theCorporateGovernance Report.

Our Group shouldestablish amechanismincluding policiesand procedures tohandle and monitorcompliance with thecertain GEM ListingRule requirements,and such policiesand proceduresshould be approvedby our Board

Our Group hasprepared the policiesto handle andmonitor compliancewith the certainGEM Listing Rulerequirements,pending approval byour Board before theListing.

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Risk Management

Formal risk assessment andmanagement mechanism notestablished by our Group

Without formalizingprocedures inidentifying risks thathinders theachievement of ourCompany’s businessobjectives, assessingthe likelihood ofthose risks arisingand their potentialimpact, it reducesour Company’spreparedness inmanaging risks andto meet the goals ofour Company

Without establishinga formalized riskmanagementmechanism, ourCompany could notensure that risks areproperly identified,assessed, monitoredand managed in aconsistent andregular manner, andcomply with therevised Appendix 15of the GEM ListingRules in the future

No actual impact onour Group’soperations and thefinancialperformance duringthe Track RecordPeriod wasidentified

Our Group shouldestablish a formalmechanism for riskassessment andmanagement

Our Groupestablished policiesand proceduresregarding riskassessment and theon-going riskmonitoring

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Information Technology:

Inadequate logical securities controlover the domain controller, generalledger system and the brokeragesystem

Inadequate controlsin the logicalsecurity settingsincrease the risk ofunauthorized accessor modification tosystem or data bymalicious users.Consequently,integrity of financialdata maintained inthose systems maynot be ensured

No unauthorizedaccess ormodification tosystem or data bymalicious usersduring the TrackRecord Period wasidentified

Our Group shouldstrengthen thelogical securityconfigurations toenhance therestriction of accessto the key systems

Our Groupstrengthened thelogical securityconfigurations,including passwordcomplexity,password age andaudit log policies,etc.

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Securities brokerage and margin financing Business:

Our Group did not issue manualreceipt to all the customers for thedeposit of their stock certificates atthe time of deposit although ourGroup send consolidated dailystatement to customers to serve as areceipt to customer

Without issuingmanual receipts tocustomers for theirstock deposit, thereis a lack of evidenceto support thecompleteness ofreceipt of physicalstock certificatesand each stockcertificate receivedfrom the customersis properly andtimely handled andinput into thesystem in order toavoid omission ofstock deposit andminimize the chanceof customer disputes

No omission ofstock deposit duringthe Track RecordPeriod wasidentified

Manual receiptsshould be issued tothe customers whenthey deposit thestock certificates asan evidence toensure thecompleteness ofreceipt of physicalstock certificates

Our Group issuedmanual receipts tothe customers toconfirm the depositthe stock certificates

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Underwriting and Placing Business

Lack of comprehensive riskassessment mechanism on potentialengagement of underwriting andplacing business

Withoutcomprehensive riskassessment onpotentialengagement, there isan increased riskthat the potentialengagement is notprofitable andcausing financiallosses to theCompany. Inaddition, withoutmaintaining properassessment evidenceon the assessment, itis difficult toascertain that thecontrols onassessment areproperly performed

No loss onunderwriting andplacing transactionwas recorded duringthe Track RecordPeriod

Our Group shouldestablish acomprehensive riskassessmentmechanism forengagementacceptance

Our Groupestablished a riskassessmentmechanism toevaluate potentialengagement ofunderwriting andplacing business

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Written policies and underwriting andplacing processes were notestablished by our Group

The absence ofwritten policies andprocedures onunderwriting andplacing processesmay lead toinconsistent practiceand increase the riskof invalidtransactions.Moreover, it wouldreduce the overalleffectiveness ofinternal controls asthe managementintended

No invalidtransaction occurredduring the TrackRecord Period

Policies andprocedures shouldbe established forall key underwritingand placingprocesses

Our Group adoptedpolicies andprocedures forunderwriting andplacing in January2016

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The Internal Control Reviewer confirmed that our Group has implemented internal control

policies as recommended by them and follow-up review was performed between 29 December 2015

to 8 January 2016, on 24 February 2016 and on 5 December 2016 respectively. The Sponsor has

reviewed the internal control recommendations made by the Internal Control Reviewer, the responses

and remediation actions taken by our Group and have discussed with the Internal Control Reviewer

on its follow up reviews. Based on the works performed, the Internal Control Reviewer confirms in

its remediation follow up review work that the remedial actions have been put in place by our Group

and no further exceptions / deficiencies were further identified in relation to those disclosed

deficiencies based on the follow-up testing work performed by the Internal Control Reviewer. Nothing

has come into the Internal Control Reviewer’s attention that the remedial actions taken by our Group

are not able to address the deficiencies identified in the Internal Control Review. The Sponsor, after

considering the above, concurs with the views of our Directors that the remedial actions taken by our

Group are effective and adequate to address the deficiencies identified in the Internal Control Review.

Our Directors confirmed that our Group had not experienced any significant loss arising from the

deficiencies of our Group’s internal control system during the Track Record Period and up to the

Latest Practicable Date and there had been no disciplinary action or reprimand by any regulatory

authority against our Group, our Directors or any of its staff.

Review conducted by the SFC and findings

As a licensed corporation under the SFO, PFSL is regulated by the SFC in respect of the

regulated activities conducted by it. During the Track Record Period, the SFC conducted one limited

review on the business activities of PFSL. The SFC raised various findings and PFSL had subsequently

replied to the SFC regarding measures taken to correct all the findings in the review conducted by the

SFC. The SFC replied on 16 February 2015 with no further comments on PFSL’s response. Our

Directors, having made all relevant enquiries, are not aware of any particular incidents or

irregularities that triggered the review. Our Directors have also confirmed that no review of business

activities of PFSL was conducted by the SFC since the last review conducted in 2014.

Based on a letter from the SFC to PFSL dated 6 November 2014, it was mentioned that in a

review conducted by the SFC on the business activities of PFSL in 2014, it was found that there were

areas where PFSL was advised to review its operation. PFSL had subsequently replied to the SFC

regarding measures taken to correct all the findings in the review conducted by the SFC. The SFC

replied on 16 February 2015 with no further comments on PFSL’s response, details of which are set

out in the following table.

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Findings Remedy

Handling of customer assets

Use of client securities tocover settlement shortfallwithout proper authorization

PFSL used stock holdings ofother customers to cover part ofthe settlement shortfall of salesexecuted by a customer withoutobtaining prior consents fromsuch customers, PFSL was inbreach of the requirements todeal with client securities underthe Securities and Futures(Client Securities) Rules

We have implemented a policythat clients are required todeliver share certificates to usbefore our AEs can execute sellorders and our settlement staffare required to check thesettlement status twice a day toensure settlement is correct

Safe custody of fund assets Only sole authorisation fromone of the three authorisedsignatories from personnel ofPFSL was required to authorisethe settlement instruction for thesettlement of trades of a fundmanaged by PFSL; or issue acheque for the fund for paymentof fees, including managementand performance fees, PFSL didnot comply with theManagement, Supervision andInternal Control Guidelines forPersons Registered with orLicenced by the SFC (“InternalControl Guidelines”) and didnot establish appropriate andeffective control proceduressuch as dual signatories toprotect fund assets frompotential theft, fraud and otheracts of misappropriation

The authorisation was changedfrom sole authorization to dualauthorization

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Securities margin lending

Inadequacies in margin lendingpolicy

Lending policy of PFSL did notprovide for all the requirementsas stipulated in the Code ofConduct, such as the proceduresto identify groups of relatedmargin clients. In particular, thefailure in complying with theaforesaid requirements led to anumber of deficiencies inPFSL’s margin lending practice,for examples: (i) form ofobjective proof of net income ornet worth; (ii) the maintenanceof appropriate detailed recordsto ensure that the case historyof margin calls for eachindividual client can be readilyestablished; and (iii) thecircumstances in whichdeviation from the policy maybe approved by management,specifying the approval limitsapplicable to each level ofmanagement

PFSL adopted a new lendingpolicy in February 2015

Lax margin call practice No relevant audit trail was

maintained to record the

circumstance and the

justification for allowing the

accounts with outstanding

margin shortfalls to execute

further purchases. Furthermore,

allowing payment out of margin

account with long outstanding

margin shortfall was not a

prudent margin lending practice.

PFSL’s margin call practice was

not in compliance with of the

Code of Conduct which requires

a licensed corporation or

registered person to collect

promptly from customers any

accounts due as margin

PFSL has adopted a new margin

call policy in February 2015

which requires the customers to

settle margin calls within 5 days

of a margin call.

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Lending to certain margin

accounts based on flat margin

rate without regard to the

quality of collateral

Certain margin accounts that

recorded outstanding balances

were granted with the approval

to borrow at a flat margin rate

of 30-50% of the market value

of securities collaterals that

applied to all individual

securities collaterals provided

by the clients to PFSL. The

margin loan balances of certain

margin accounts of these clients

were primarily secured by

illiquid stocks and/or GEM

stocks. Use of a flat rate to

calculate marginable value may

not provide a prudent basis for

initiating margin calls and for

protecting the capital of PFSL

since haircut has not been

appropriately provided to

account for the potential market

rises of the securities collateral

provided by the clients,

particularly if the securities

collateral have low market

turnover

At the end of March 2015,

PFSL has stopped using a flat

margin rate. For details of the

margin ratio adopted by our

Group, please refer to the

section headed “Business —

Margin Ratio” of this prospectus

Collateral concentration in

illiquid collaterals

Over 29% of the securities

collaterals provided by margin

customers were in 3 illiquid

collaterals. Seven of the top 20

margin accounts were mainly

secured by illiquid collaterals

The collateral concentration in

illiquid collaterals has

subsequently improved. PFSL

has adopted a new margin

lending policy on February 2015

which limits the types of

securities collateral that can be

provided

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Credit limits granted to margin

customers

PFSL did not maintain any

documentation on a customer’s

financial situation and analysis

of the customer’s past payment

records, nor obtained any

objective proof of net income or

net worth to justify the credit

limit granted. PFSL was not in

compliance with the Internal

Control Guidelines which

requires a licensed corporation

to set out objective criteria for

determining the credit limits

granted to clients

PFSL has adopted guidelines on

which management should

approve credit limits to margin

customers and will regularly

review the credit limits on

margin customers bi-annually

Margin call records PFSL did not maintain proper

records of margin calls. PFSL

was in breach of the record

keeping requirements under the

Securities and Futures (Keeping

of Records) Rules

PFSL has adopted a new margin

call policy in February 2015

which sets out the manner in

which margin calls should be

recorded

Operations of a cash customer account

Order instructions obtained from

a customer did not contain

sufficient details and PFSL did

not endeavor to confirm order

specifics with the customer

A mutual agreement was

reached between the customer

and PFSL that precise order

instructions will be sent via

email and by post to avoid

disputes

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Orders records

PFSL did not retain any order

records for some orders received

from spot customers (which

means customers who place

orders in person at the office

premises of PFSL). PFSL was

not in compliance with the

Internal Control Guidelines

which requires a licensed

corporation to promptly record

and time-stamp upon initiation

or receipt of orders from spot

clients

PFSL has implemented the

requirement that spot customer

are required to sign order

instructions and timestamp is

required to be put on the

instructions

Statement of account issued to customers

Samples of PFSL’s statement of

account provided to customers

(i) did not accurately reflect

details of fund movement in

customer’s account; (ii) did not

include details of charges in

relation to settlement related

services provided by PFSL; and

(iii) contained a clause that

referred to a repealed provision.

Insufficient steps were taken to

ensure compliance with the

Securities and Futures (Contract

Notes, Statements of Account

and Receipts) Rules and that the

information provided to clients

are accurate and not misleading

as required by the Code of

Conduct

PFSL has taken steps to enhance

the information provided to its

customers to show movement of

funds in the customer’s

statement of account

Liquid capital computation

There were computation errors

in calculation of the liquid

capital requirements resulting in

overstatement of PFSL’s liquid

capital which were not in

compliance with the FRR

PFSL has liaised with its back

office system provider to change

the presentation and format of

the statements so that the

information provided to its

clients were shown more

accurately

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Anti-money laundering and Counter Terrorist Financing (“AML/CTF”)

Third party withdrawal PFSL was not in compliancewith the AML Guidelines inregard to requests of third partytransfer and did not obtain anyinformation on the relationshipbetween a customer and a thirdparty payee; and the reason forthe third party payee withdrawalas well the justification forapproval by the managementwere not documented

PFSL has adopted procedures toensure proper documentation isobtained for third partywithdrawals

Identification information ofcorporations incorporatedoverseas

PFSL failed to obtain acompany search report or acertificate of incumbency orequivalent to verify theinformation of corporatecustomers incorporatedoverseas. PFSL was not incompliance with the customerdue diligence requirements asstipulated in the AMLGuidelines

PFSL has updated its accountsopening procedures to includeobtaining sufficient informationon corporate customersincorporated overseas

Licensing issue A licensed representative didnot perform any regulatedfunction in relation to theregulated activities of PFSL

An explanation was given to theSFC and no remedial action wasrequired

In the Internal Control Review, the internal control reviewer covered areas such as: (i) revenuesecurities brokerage and margin financing business — managing customer credit ; (ii) revenuesecurities brokerage and margin financing business — handling of client orders and dealing; (iii) cashmanagement and treasury; (iv) human resources and payroll management; and (v) regulatorycompliance management — policies and procedures to combat money laundering and terroristfinancing. The SFC had findings mainly in these areas in its previous limited review on the businessactivities of PFSL.

The internal control reviewer confirmed that our Group implemented internal control policies asrecommended by them. Based on the works performed, the Internal Control Reviewer confirms in itsremediation follow up review work that the remedial actions have been put in place by the Group andno further exceptions / deficiencies were further identified in relation to those disclosed deficienciesbased on the follow-up testing work performed by the Internal Control Reviewer. Nothing has comeinto the Internal Control Reviewer’s attention that the remedial actions taken by the Group are not ableto address the deficiencies identified in the SFC’s review. The Sponsor has reviewed the internalcontrol recommendations made by the internal control reviewer, the responses and remediation actionstaken by our Group and have discussed with the internal control reviewer on its follow up reviews.The Sponsor, after considering the above, concurs with the views of our Directors that the remedialactions taken by our Group are effective and adequate to address the deficiencies identified in SFC’sreview.

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Chinese Wall

As a securities house with a diversified range of businesses, our Group inevitably faces conflict

of competing interests. Our Group recognises the importance of managing such conflict of interests

so as to protect the interests of its customers and the staff. Accordingly, Chinese walls are established

within our Group to prevent material confidential information from being utilised improperly by

different divisions within our Company, hence preserving the integrity of its operations.

The Chinese wall is a theoretical barrier to ensure that price sensitive information of listed

companies not already disclosed to the public which is obtained in one part of our Group’s business

is not released to the other division of our Group. Our Group has developed and implemented policies

and procedures to safeguard insider information, and to ensure no improper trading shall occur. To

enforce the Chinese wall policy on an administrative level, our Group has established physical

segregation of different departments and activities in separate areas. As a general rule, staff engaged

in a particular operational activity should not enter the separate office area occupied by any other

operational activity within a Chinese wall except for a specific business purpose and confidential

information can only be communicated to those outside the Chinese wall on a need-to-know basis with

prior approval from the senior management. Customers are not allowed to enter the back office so as

to maintain a Chinese wall. As for information technology controls, files on our server are only

accessible by the relevant department staff involved and is secured by password access.

Segregation of duties

Our Group adopts segregation of duties to minimise the chance of collusion between different

departments:

Customer service — Commission charges and all account openings are processed by AEs with

further approval from one Responsible Officer and one management team member.

Sales — AEs are responsible for taking daily orders placed by customers and providing

investment advice to them when required. As part of our Group’s operational procedures, daily

statements are sent to customers to provide them with records of the transaction and from time to time

our compliance officer will review telephone recordings to review the quality of advice given.

Dealing — Dealing orders placed by customers will be input by AE of the dealing department

into the BSS which interfaced the Stock Exchange’s trading system. As part of the internal control,

error trade reports will be reviewed by the Responsible Officer. Error trade may be due to system or

human error. For any loss arising from error trades, the responsibility to bear the loss and any related

expenses rests with the party upon which erred. For details of our Group’s error trades, please refer

to the section headed “Business — Securities Dealing and Brokerage Services” in this prospectus.

In order to prevent the reoccurrence of error trade, management would alert all AE when error

trade occurred and remind them the importance of exercising customers’ orders with care. Verbal

warnings and/or warning letter would be given to the AE who repeatedly commits error trades.

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Management will also from time to time review the workflow of placing orders to ensure that

sufficient manpower to handle customers’ orders. Nevertheless, occurrence of error trade cannot be

totally eliminated even with proper measures in place as error trade is mainly the result of human

error.

Custody of customer assets — The settlement department handles customers’ monies and

securities assets. Our Group ensures that its customer’s assets are adequately safeguarded and properly

accounted for. Our Group has established procedural guideline, developed in accordance with the

relevant SFC regulations to protect its customer’s money and securities. All customers’ monies

received and held by our Group on behalf of clients must be held in a segregated trust account (and

must be designated as such) at a licensed bank within the meaning of the Banking Ordinance. The

segregated account must not be used for any other purposes other than for holding customer monies.

Customer monies must be deposited into the segregated trust account within one business day of

receipt unless those amounts will be used for settlement purposes within the next two business days.

Further no AE is allowed to handle customer fund deposits or transfer. For customer securities held

in custody for clients, it must be held separately from the assets of our Group and are deposited in safe

custody in Hong Kong Securities Clearing Company Limited (HKSCC) in a segregated account which

is designated as a trust account or client account. No securities held for customer may be lent to other

party by our Group. For withdrawal of customer monies, any request for monies to be paid directly

to a customer’s designated bank account in Hong Kong requires our settlement staff to fill in an

appropriate form. For withdrawal of customer monies to be paid to a third party account or a bank

account outside of Hong Kong, no third party payment or withdrawal is allowed except with the

specific written instructions from the client and the written approval given by our Responsible Officer.

Where there is any special or third party transaction requested by our client and we are unable to

satisfy that it is reasonable, we should consider any suspicion of money laundering/terrorist financing

and any need to make a report to the authority. Our Directors consider that PFSL’s internal controls

over payments to third parties are in compliance with the relevant requirements. For dealing with

securities within a client account, unless written authorization is obtained from the relevant client, our

AEs are only allowed to deal with client securities based on instructions from the relevant client.

Considering the above, the Directors are of the view that PFSL’s client securities are handled in

accordance with the Securities and Futures (Client Securities) Rules.

Account administration — Printing and mailing of customer statements are handled by staff

members of the settlement department. The process is almost completely computerized to minimize

time and costs and to maintain customer confidentiality.

Customer complaints — Our Group has applied certain procedures for handling complaints. All

complaints from customers relating to business shall be reported to and handled by the compliance

officer. Upon receipt of a complaint, our Group’s compliance officer would review the details of the

complaint and conduct investigation. Where necessary, the results of investigation may be reported to

the Board for taking appropriate actions. Ultimately, the compliance officer reverts to the customer

with investigation results and takes remedial action where appropriate.

Conflict of interests

It is our Group’s policies to ensure adequate level of staff awareness of issues relating to conflict

of interests and understanding of basic principles relating to customer priority, insider dealing,

BUSINESS

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confidentiality and staff dealing. The operation and compliance manuals address situations where two

or more interests are present and compete or conflict with each other. Staff must avoid actual or

potential conflict of interests whenever possible. Where a conflict cannot be avoided, staff must

ensure that the conflict is properly disclosed to the relevant parties and proper approval is sought from

the management of our Group before any action can be taken.

The Board will adopt the Code on Corporate Governance Practices as set out in Appendix 15 of

the GEM Listing Rules immediately before the Listing as additional corporate governance measures

to manage potential conflict of interests between our Group and our Directors such that in the event

that a Director has a conflict or potential conflict of interest in a matter, such Director shall declare

to the Board the nature of the matter, the relationship between the parties and the issue involved. In

the event that the Board has determined the conflict to be material, the matter shall not be dealt with

by way of circulation or by a committee but a Board meeting would be held. Such Director must

abstain from voting on such Board meeting and that he/she and his/her associates shall not be counted

in the quorum present at such Board meeting. Independent non-executive Directors who, and whose

associates, have no material interest in the transaction shall be present and take the lead at such Board

meeting.

Staff dealing

Our Group’s policy allows for employees to conduct staff dealing at PFSL and also at other

securities firm. To avoid actual and potential conflicts of interests and duties, staff members of our

Group are required to follow the staff dealing policy in the compliance manual. A copy of our Group’s

compliance manual and the operations and procedures manual will be given to and the receipt of which

will be acknowledged by the staff and AEs. The internal controls established to monitor staff dealing

include (i) requiring all staff dealings (including those transactions conducted at other brokerages) to

be approved by a Responsible Officer on a daily basis; (ii) the accounts of the staff and AEs are given

an identifying code; and (iii) activities reports of such accounts (both internal and external) are

reviewed daily by a Responsible Officer for irregular or extraordinary transactions. For the three

financial years ended 31 March 2016 and the four months ended 31 July 2016, dealings through staff

accounts accounted for approximately 3.4%, 7.7%, 5.3% and 2.5% of our Group’s total revenue. Staff

are required to disclose at all times his or her related accounts in PFSL and details of his or her outside

account(s) at the time he/she joins PFSL and any changes thereafter.

Staff and AEs must not engage in “front running” which includes personal dealing ahead of our

Group’s customer orders and customer priority must be observed. Similarly, staff is strictly forbidden

to facilitate or engage in “rat trading” by way of late preferential allocation of executed orders. Where

a staff is in receipt of advanced information not generally available to the public, he or she must not

engage in “insider dealing” which means they must not deal in any securities of a corporation or

procure another person to deal in such securities when in the possession of confidential price-sensitive

information relating to such corporation. Failure to comply the staff dealing rules may lead to

disciplinary action against the relevant staff or AEs by our management, termination of employment

of the staff or appointment of the AEs or reporting the case to the SFC and the Stock Exchange. Cross

trade between a staff account and a customer account is strictly forbidden.

BUSINESS

— 145 —

INTELLECTUAL PROPERTY RIGHTS

Our Group has been conducting and marketing its business in Hong Kong using the brand namePacific Foundations Securities Limited (太平基業證券有限公司). On 23 May 2016, our Groupregistered its trademark “ ” in Hong Kong in Class 36 for financial services, share broking etc.Detailed information of the intellectual property rights of our Group is set out in the section headed“Intellectual property” in Appendix IV to this prospectus. Given that there are no similar trademarkscurrently registered or applied for in Hong Kong and that the current trademark has been used by ourGroup since 1993, there is a remote risk that our Group has infringed the intellectual rights of anythird parties.

PROPERTIES

During the Track Record Period and as at the Latest Practicable Date, we did not own anyproperties. Our Group’s principal place of business is leased from an Independent Third Party andlocated at New World Tower II, 11/F, 16-18 Queen’s Road Central, Hong Kong. The period of our leaseis from 1 July 2015 to 30 June 2017. The rental cost (including service fees) of these premisesamounted to approximately HK$3.7 million, HK$3.9 million, HK$4.1 million and HK$1.4 million forthe three financial years ended 31 March 2016 and the four months ended 31 July 2016, respectively.No valuation report for this office space has been included in this prospectus as it is exempted undersection 6 of the Companies (Exemption of Companies and Prospectuses from Compliance withProvisions) Notice (Chapter 32L of the Laws of Hong Kong).

As at 31 July 2016, none of the properties leased by our Group had a carrying amount of 15%or more of our Group’s total assets. Thus, this prospectus is exempted from compliance with therequirements under Rules 8.01A and 8.01B of the GEM Listing Rules as well as the requirementsunder section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance inrelation to paragraph 34(1) of the Third Schedule to the Companies (Winding Up and MiscellaneousProvisions) Ordinance, with respect to the inclusion of a property valuation report in this prospectus.

INSURANCE

Pursuant to the requirements under the Securities and Futures (Insurance) Rules (Chapter 571AIof the Laws of Hong Kong), our Group has taken out insurance for our type 1 regulated activity forthe insured amount of HK$15 million. The insurance policy is obtained from the insurance broker andscheme administrator for the year ending 31 March 2017 as notified to Exchange Participants pursuantto the Circular to Licensed Corporations which are Participants of The Stock Exchange of Hong KongLimited and/or Hong Kong Futures Exchange Limited dated 28 April 2015.

In addition to the above mandatory insurance, we also maintain medical insurance and generalinsurance that covers office contents, business interruption, money, employee compensation andpublic liability. The aggregate premium of all of our insurance policies amounted to approximatelyHK$102,000, HK$108,000, HK$183,000 and HK$87,000, respectively, for the three financial yearsended 31 March 2016 and the four months ended 31 July 2016. As the major aspects of our operationshave been covered by insurance, we believe our Group has taken out adequate insurance in line withindustry standards to cover our assets and our employees. During the Track Record Period there wereno material insurance claims.

BUSINESS

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DIRECTORS

Our Board has ultimate responsibility for the management of our Company. The Board currently

consists of 6 Directors comprising two executive Directors, one non-executive Director, and three

independent non-executive Directors. The following table sets forth the information regarding the

members of the Board:

Name Age PositionDate of joiningour Group

Roles andresponsibilities

Relationshipwith otherDirectors/seniormanagement

Mr. Lo Tak WingBenson (羅德榮)

53 Chairman andexecutiveDirector

1 September1990

Formulation of corporatestrategy, overallmanagement and businessdevelopment andcustomer referrals

Sibling ofLo ShiuWingChester

Mr. Lo Shiu WingChester (羅紹榮)

51 ExecutiveDirector andchief executiveofficer

27 January 1999 General administration,human resources, businessoperations andcompliance

Sibling ofLo Tak WingBenson

Mr. Khoo Ken Wee(邱堅煒)

52 Non-executiveDirector

1 February 2016 Providing professionaladvice to our Group inrespect of ourmanagement andcorporate governance

N/A

Mr. Ng, Shu BunAndrew (伍樹彬)

55 Independentnon-executiveDirector

5 December 2016 Overseeing themanagementindependently

N/A

Mr. Mok, Kwai PuiBill (莫貴標)



N/A

Mr. Ma Wai HungVincent (馬偉雄)



N/A

DIRECTORS, SENIOR MANAGEMENT AND STAFF

— 147 —

Executive Directors

Mr. LO Tak Wing Benson (羅德榮) (“Mr. B Lo”), aged 53, is our chairman and executive

Director. Mr. B Lo was appointed as our Director on 3 August 2015 and was designated as our

executive Director and chairman of the Board on 1 February 2016. Mr. B Lo joined our Group in

September 1990 as a director of PFSL. He is responsible for the formulation of corporate strategy,

overall management and business development and customer referrals. After graduating with a

Bachelor of Arts in Urban Planning Studies from the University of Westminster (formerly known as

The Polytechnic of Central London) and conferred by the Council for National Academic Awards in

1985, Mr. B Lo joined our Group in 1990. Mr. B Lo has attained more than 25 years’ of experience

in the financial services industry. Mr. B Lo is a Responsible Officer of PFSL for Type 1 and Type 9

SFO Regulated Activities. He is currently a fellow member of the Hong Kong Securities and

Investment Institute. Mr. B Lo is also currently a director of the Ebenezer School & Home for the

Visually Impaired Limited.

During the three years immediately preceding the date of this prospectus, Mr. B Lo has not been

a director of any public company the securities of which are listed on any securities market in Hong

Kong or overseas. Mr. B Lo was a director of Power Team International Limited (力添國際有限公司)

which was dissolved by way of striking off under the then section 291(6) of the Predecessor

Companies Ordinance on 7 March 2003. Pursuant to the then section 291 of the Predecessor

Companies Ordinance, where the Registrar of Companies has reasonable cause to believe that a

company is not carrying on business or in operation, the Registrar may strike the name of the company

off the register after the expiration of a specified period.

Mr. B Lo confirmed that there was no wrongful act on his part leading to the above dissolution

and he is not aware of any actual or potential claim which has been or will be made against him as

a result of the dissolution of that company.

Mr. LO Shiu Wing Chester (羅紹榮) (“Mr. C Lo”), aged 51, was appointed as our Director on

3 August 2015 and was designated as our chief executive officer, executive Director and compliance

officer of our Company on 1 February 2016. Mr. C Lo joined our Group as a director of PFSL in

January 1999 and he became the managing director of PFSL in February 2008. He is responsible for

the administration of the information technology & trading system, handling litigation and enquiries

from the SFC and Stock Exchange, internal business control and credit control, the general

administration, human resources, business operations and compliance of our Group. Mr. C Lo obtained

his Bachelor of Engineering with Queen Mary’s College, University of London in August 1987. He

subsequently completed his Master of Science degree in Shipping, Trade and Finance with the City

University London in December 1988. Prior to joining our Group, Mr. C Lo worked as an accountant

in the Corporate Control Department of Philips Hong Kong Limited from July 1994 and was promoted

to senior accountant from January 1996 to December 1998. From July 1992 to February 1993, Mr. C

Lo was trained in the International Banking Division of Hang Seng Bank Limited and in February

1993, he was transferred to the Organisation and Methods Department and worked as an operations

and management officer with Hang Seng Bank Limited until June 1993.


— 148 —

During the three years immediately preceding the date of this prospectus, Mr. C Lo has not been


Kong or overseas. Mr. C Lo was a director of the following companies which were dissolved with

details as follows:

Name of companyPlace ofincorporation

Principal businessactivity prior todissolution

Date ofdissolution

Means ofdissolution

Reasons ofdissolution

(Note)

Better Flowers Limited

(花欣有限公司)

Hong Kong Florist 2 September

2005

Deregistration Cease to carry

on business

Irish Ball Limited Hong Kong Investment 18 July 2014 Deregistration Cease to carry

on business

Power Team

International Limited

(力添國際有限公司)

Hong Kong Investment 7 March 2003 Striking off Cease to carry

on business

Note: Pursuant to the then section 291AA of the Predecessor Companies Ordinance, an application for deregistration

can only be made if (a) all the members of such company agreed to such deregistration; (b) such company has

never commenced business or operation, or has ceased to carry on business or ceased operation for more than

three months immediately before the application; and (c) such company has no outstanding liabilities.

Mr. C Lo confirmed that there was no wrongful act on his part leading to the above dissolution

of the companies and he is not aware of any actual or potential claim which has been or will be made

against him as a result of the dissolutions of these companies.

Non-executive Director

Mr. KHOO Ken Wee (邱堅煒) (“Mr. Khoo”), aged 52, was appointed as our non-executive

Director of our Company on 1 February 2016. Mr. Khoo is a director of PICFL. He graduated from

The University of Oregon, United States of America in June 1985 with a Bachelor of Science degree.

Mr. Khoo subsequently obtained a Master degree in Economics from The California State University

at San Jose, United States of America in May 1989. From 1985 to 1988, Mr. Khoo joined the Singapore

Armed Forces as a Battery Recce Officer of the 21st Battalion Singapore Artillery. He was responsible

to act as a recce and survey officer. In 1988, Mr. Khoo worked for six months with Merrill Lynch’s

Consumer Markets department. From January 1989 to May 1989, Mr. Khoo worked at the Office of

City Policy Analysis for the City of San Jose, United States of America. He analysed the operating

budget of the City of San Jose, United States of America. Prior to joining our Group, Mr. Khoo worked

as a manager with Peregrine Capital Limited from May 1990 to March 1994 and he was responsible

in corporate finance work, including initial public offerings, rights issues, placements and financial

advisory work in Hong Kong, the PRC and overseas. From May 1994 to January 1998, Mr. Khoo

worked with Yamaichi International (H.K.) Limited as the head of Investment Banking Department,

Capital Markets Group. He was responsible for establishing corporate finance business and executing

corporate finance transactions.


— 149 —

From March 1998 to June 2002, Mr. Khoo was the managing director of Celestial Asia Securities

Holdings Limited (stock code: 1049) (“CASH”). During the appointment, Mr. Khoo contributed to

CASH and its group’s business development, particularly in the online financial services and various

technology development projects. He was also appointed as directors of the subsidiaries of the CASH

group, including Pricerite Group Limited (stock code: 996). From August 2000 to June 2002, Mr. Khoo

was also an executive director and chief executive officer of CASH Financial Services Group Limited

(formerly known as CASH on-line Limited) (“COL”) which was listed on the GEM with stock code

number 8122 in December 2000. In March 2008, COL’s listing was transferred to the Main Board of

the Stock Exchange under a new stock code 510.

Since August 2002, Mr. Khoo has been acting as a director of PICFL and he is responsible for

the supervision, management and direction of PICHL in providing business advisory services. Mr.

Khoo was a director of the following companies which were dissolved with details as follows:



Date ofdissolution

Means ofdissolution


(Note)

E-Marketing SolutionsHong Kong Limited

Hong Kong Provision ofe-marketing solutions

14 September2001

Deregistration Cease to carry onbusiness

Goldbase Capital Limited(才鈞興業有限公司)

Hong Kong Property holding 9 May 2003 Deregistration Cease to carry onbusiness

Cash E-Trade CommoditiesLimited (時富電子商品有限公司)

Hong Kong Online trading ofcommodity products

4 April 2002 Deregistration Cease to carry onbusiness

Cash E-Trade FinanceLimited (時富電子財務有限公司)

Hong Kong Online securitiesfinancing

27 September2002


Cash E-Trade ForexLimited (時富電子外滙有限公司)

Hong Kong Online Forex trading 4 April 2002 Deregistration Cease to carry onbusiness

Cash E-Trade SecuritiesLimited (時富電子證劵有限公司)

Hong Kong Online Securitiestrading

27 September2002


Cheerful Food & BeverageCompany Limited (時富食品及飲料有限公司)

Hong Kong Trading 24 November2000


Cheerful SeafoodsCompany Limited (時富海產有限公司)

Hong Kong Trading 24 November2000






Mr. Khoo confirmed that these was no wrongful act on his part leading to the above dissolutions




— 150 —

During the three years immediately preceding the date of this prospectus, Mr. Khoo has not been


Kong or overseas.

Independent non-executive Directors

Mr. NG Shu Bun Andrew (伍樹彬) (“Mr. Ng”), aged 55, was appointed as an independent

non-executive Director of our Company on 5 December 2016 to take effect on the Listing Date.

Mr. Ng has over 20 years’ experience in accounting practice and industry and he has held senior

positions in a number of blue-chip fast moving consumer goods (FMCG) multi-national organizations.

Mr. Ng worked for a number of companies among others, Trebor Bassett Ltd., Cadbury Beverages

Limited, Cadbury Schweppes Pty Ltd. and Coca Cola China Limited during the period between June

1990 and December 1999 and he was responsible for various senior finance and general management

roles with the respective company’s business units in the United Kingdom, Hong Kong and the PRC.

From June 2001 to October 2007, Mr. Ng worked for A.S. Watson & Co., Ltd. as finance director and

he was responsible for managing the finance and treasury functions of A.S. Watson Group’s Greater

China beverage operations.

Mr. Ng joined T.C. NG & Company CPA Limited in November 2007. Further, Mr. Ng became a

shareholder and director of T.C. Ng & Company CPA Limited in February 2009. In November 2007,

Mr. Ng, through TCN Consulting Services Limited, started to provide consulting and finance

outsourcing services.

Mr. Ng graduated from the University of Leeds in July 1984 with a Bachelor’s degree in

Economics. Mr. Ng was admitted as an associate member to the Institute of Chartered Accountants in

England and Wales in June 1990 and became a fellow of the institute in July 2004. Mr. Ng is also

currently a practicing member of the Hong Kong Institute of Certified Public Accountants. Mr. Ng

became a member of the Hong Kong Securities and Investment Institute in April 2013.

During the three years immediately preceding the date of this prospectus, Mr. Ng has not been


Kong or overseas.

Mr. MOK Kwai Pui Bill (莫貴標) (“Mr. Mok”), aged 55, was appointed as an independent


Mr. Mok has accumulated approximately 27 years of experience in auditing, accounting and

finance, and has held various management positions in companies listed on the Stock Exchange and

the United Kingdom. Mr. Mok began his career in public accounting in the United States. After

returning to Hong Kong in 1988, he joined Price Waterhouse (currently known as

PricewaterhouseCoopers) as a staff accountant and then was promoted to deputy manager from 1988

to 1993. From 1993 to 1995, he was acting in the position as a finance and administration manager

for a publication company. Mr. Mok then served as a finance manager of the PRC projects in Hong

Kong and China Gas Company Limited, a company listed on the Main Board (stock code: 0003) from

1995 to 1996. Mr. Mok joined the investment industry where he worked as an analyst in financial


— 151 —

services companies from 1996 to 1999. From 1999 to 2003, Mr. Mok acted as a vice president in equity

research in the investment arm of an insurance group. Mr. Mok then joined the property and hotel

industry where he acted as the chief financial officer of Far East Consortium International Limited

(“FEC”) from 2004 to 2010, a company listed on the Main Board (stock code: 0035). After FEC’s hotel

division was spun-off to form Kosmopolito Hotels International Limited (subsequently known as

Dorsett Hospitality International Limited; a company formerly listed on the Main Board and was

privatised and voluntarily delisted in 2015) in 2010 to become a company separately listed on the

Main Board, Mr. Mok was appointed as the president, an executive director, and a member of the

remuneration committee of Kosmopolito Hotel International Limited from 2010 to 2011. In October

2011, Mr. Mok resigned as the president and an executive director of Kosmopolito Hotels International

Limited and remained as a non-executive director till August 2012. Since November 2011, Mr. Mok

has been serving as the chief financial officer of Fortune Oil plc, a company was previously listed on

the London Stock Exchange (stock code on the London Stock Exchange: FTO). Since 2013, Mr. Mok

has also been serving as an independent non-executive Director of Grand Ming Group Holdings

Limited, a company listed on Main Board (Stock code: 1271).

Mr. Mok graduated from the University of Washington in the United States of America with a

Bachelor of Arts degree in June 1984 and obtained his master’s degree in Business Administration

from Seattle University in the United States of America in December 1987. Mr. Mok is a member of

the American Institute of Certified Public Accountants since July 1993 and a member of the HKICPA

since September 1994, respectively.

Save as disclosed above, Mr. Mok has not been a director of any public company the securities

of which are listed on any securities market in Hong Kong or overseas during the three years

immediately preceding the date of this prospectus. Mr. Mok was a director of the following companies

which were dissolved with details as follows:-



Date ofdissolution

Means ofdissolution


(Note)

Bloom Tank InternationalLimited (隆騰國際有限公司)

Hong Kong Investment holding 15.09.2000 Deregistration Never commencedbusiness

CME Trading Co. Limited(卓加貿易有限公司)


Star View Hong KongLimited (景星香港有限公司)






Mr. Mok confirmed that there was no wrongful act on his part leading to the above dissolutions




— 152 —

Mr. Ma Wai Hung Vincent (馬偉雄) (“Mr. Ma”), aged 51, was appointed as an independent


Mr. Ma is currently a director of Soma International Limited, a Hong Kong based toys

manufacturing and trading company, where he is involved in designing, marketing, manufacturing and

trading of toy products for the company.

Mr. Ma was the vice chairman and executive director of Aptus Holdings Limited (stock code:

8212) (currently known as Celebrate International Holdings Limited and formerly known as Hong

Kong Life Group Holdings Limited) (“Aptus”) from April 2002 to June 2003. From June 2003 to

September 2004, Mr. Ma acted as a non-executive director of Aptus. Mr. Ma was responsible for the

overall business development of the Aptus group of companies.

Mr. Ma received a Bachelor of Arts degree in Economics from the University of California at Los

Angeles, United States of America in June 1987 and a Master of Business Administration degree from

the Columbia University in New York, United States of America in May 1991. Mr. Ma is the

vice-chairman of the Hong Kong Exporters’ Association and he is also a General Committee Member

of the Toys Manufacturers’ Association of Hong Kong.

During the three years immediately preceding the date of this prospectus, Mr. Ma has not been


Kong or overseas. Mr. Ma was a director of the following companies which were dissolved with details

as follows:-



Date ofdissolution

Means ofdissolution


(Note)

Lake City InvestmentLimited (江城投資有限公司)

Hong Kong Hong Kong propertyinvestment

14.11.2003 Deregistration Cease to carry onbusiness

Rams International Limited(五羊國際有限公司)

Hong Kong Debenture holding 13.01.2006 Deregistration Debenturetransferred andcease to carry onbusiness

Silver Fair Far EastLimited (銀發遠東有限公司)

Hong Kong Trust investmentholding

21.09.2001 Striking off The trust dissolvedand cease to carryon business

Stevenson School AlumniAssociation Limited

Hong Kong Organising activitiesfor alumni in HongKong

08.01.2016 Deregistration Cease to carry onbusiness





Mr. Ma confirmed that there was no wrongful act on his part leading to the above dissolutions




— 153 —

Disclosure of relationships as required under Rule 17.50(2) of the GEM Listing Rules

Except for Mr. B Lo and Mr. C Lo, the two executive Directors of our Company, who are siblings,

each of our Directors and senior management are independent from and not related to any of our

Directors or senior management.

Save as disclosed above, each of the Directors confirm with respect to himself that: (i) he has

not held directorships in the last three years in other public companies the securities of which are

listed on any securities market in Hong Kong or overseas; (ii) he does not hold any other position in

our Company or any of its subsidiaries; (iii) save as disclosed in the section headed ‘‘C. Further

information about Directors, management and substantial shareholders’’ as set out in Appendix IV to

this prospectus, he/she does not have any interests in the Shares within the meaning of Part XV of the

SFO; (iv) there is no other information that should be disclosed for pursuant to Rule 17.50(2) of the

GEM Listing Rules; and (v) to the best of the knowledge, information and belief of the Directors

having made all reasonable enquiries, there are no other matters with respect to the appointment of

the Directors that need to be brought to the attention of the Shareholders

COMPANY SECRETARY

Mr. Lam Tak Ming (林德明) (“Mr. Lam”), aged 32, joined our Group in November 2015 as our

financial controller. He was appointed as company secretary on 1 February 2016. His major

responsibilities are to review the finance and accounting functions and oversee financial reporting

matters of our Group. Mr. Lam has over 9 years’ of experience in accounting and financial reporting.

In September 2007, Mr. Lam joined Grant Thorton Hong Kong Limited as a junior auditor and left in

December 2010 when he held the title of senior auditor. Mr. Lam then worked as a senior auditor to

an audit manager at BDO Limited from January 2011 until he joined our Group in November 2015.

Mr. Lam obtained a bachelor’s degree in Accountancy from the Hong Kong Polytechnic University in

December 2007. Mr. Lam has been a member of the Hong Kong Institute of Certified Public

Accountants since July 2013.

SENIOR MANAGEMENT

Our senior management comprises our executive Directors, our company secretary and the

following persons:

Name Age PositionDate of joiningour Group

Ms. Che Sau Ching 46 Chief accountant October 1989

Ms. Tam Kit Chun 62 Responsible Officer and senior

dealing officer

May 1992

Ms. Tsang Kong Kit 40 Responsible Officer and chief

information officer

September 2015


— 154 —

Our executive Directors and members of our senior management are responsible for the

day-to-day management of our business. The following table sets out certain information concerning

our senior management:

Ms. Che Sau Ching (池秀清) (“Ms. Che”), aged 46, is PFSL’s Chief Accountant. Her major

responsibilities are to review the finance and accounting functions and oversee financial reporting

matters of PFSL. Ms. Che has approximately 26 years of experience in accountancy. Ms. Che first

joined our Group in October 1989 until August 1993 and worked as a Senior Accounts Clerk. She

briefly left our Group to work as a social worker for the Hong Kong Single Parents Association from

June 1996 to February 1997. In February 1997, Ms. Che rejoined our Group and worked as an assistant

accountant. She was promoted as an accountant of our Group in October 1999 and has since continued

to work for our Group.

Ms. Tam Kit Chun (譚潔珍) (“Ms. Tam”), aged 62, is one of the Responsible Officers for our

Group’s Type 1 SFO regulated activity and was appointed as the senior dealing officer of PFSL on 5

December 2016. Ms. Tam joined our Group in 1992 and she has been with our Group since then. Ms.

Tam is, together with other Responsible Officers of our Group, responsible for, among other things,

monitoring the daily operation of settlement, dealing with regulatory authorities and general

administrative duties. Ms. Tam has over 38 years’ of experience in the securities industry. Prior to

joining our Group, she worked at the settlement department of another local securities brokerage firm.

In 1993, Ms. Tam was promoted as floor trader of our Group where she was responsible for executing

customers’ orders and general day to day sales and trading work. Ms. Tam obtained a certificate for

passing the brokers representatives examination awarded by the Stock Exchange in February 1993, she

has also passed the option trading officer & representative as well as the options clearing officer

examination awarded by the Stock Exchange in November 1994. Since April 1999, Ms. Tam has been

a member of the Hong Kong Securities and Investment Institute (formerly known as the Hong Kong

Securities Institute).

Ms. Tsang Kong Kit (曾江潔) (“Ms. Tsang”), aged 40, is one of the Responsible Officers for our

Group’s Type 1 regulated activity and she was appointed as the chief information officer and a

compliance officer of our Group’s operating subsidiary on 8 December 2015. Ms. Tsang is responsible

for overseeing and managing our Group’s information system, which includes designing and

constructing its IT infrastructure, implementing and maintaining its trading system and providing IT

support. She is also responsible for monitoring and advising PFSL on compliance and internal control

matters. Ms. Tsang has around 16 years’ of experience working in the Hong Kong securities industry.

Prior to joining our Group in September 2015, Ms. Tsang worked at Hani Securities (Hong Kong)

Limited (“Hani”) from 1999 to 2015 where she was head of information system and she was also one

of the Responsible Officers of Hani from June 2009 to 2015. She was a licensed representative for

Type 1, Type 4 and Type 9 SFO Regulated Activities. At Hani, she was responsible for the

computerization of the front and back office as well as compliance issues and information system

planning and implementation.

Ms. Tsang obtained a bachelor’s degree in Computing Studies at the Hong Kong Baptist

University in December 1999. She has been a certified financial planner of the Institute of Financial

Planners of Hong Kong since September 2009.


— 155 —

Compliance Officer

Mr. C Lo was appointed as the compliance officer of our Company on 1 February 2016. Please

refer to the paragraph headed “Directors” above in this section for details of the experience of Mr. C

Lo.

Authorised Representatives

Mr. B Lo and Mr. Lam Tak Ming are the authorised representatives of our Company.

BOARD COMMITTEES

Audit Committee

Our Company has established an audit committee pursuant to a resolution of our Directors passed

on 5 December 2016 in compliance with Rule 5.28 of the GEM Listing Rules and with the written

terms of reference in compliance with the Corporate Governance Code. The primary duties of our audit

committee are mainly (i) to make recommendations to the Board on the appointment and removal of

external auditors; (ii) to review and supervise the financial statements and material advice in respect

of financial reporting; (iii) to oversee internal control procedures and corporate governance of our

Company; (iv) to supervise internal control systems of our Group; and (v) to monitor any continuing

connected transactions. All members of our audit committee are appointed by the Board. Our audit

committee currently consists of all three of our independent non-executive Directors, namely Mr. Ng,

Mr. Ma and Mr. Mok. Mr. Mok is the chairman of our audit committee.

Remuneration Committee

Our Company has established a remuneration committee pursuant to a resolution of our Directors

passed on 5 December 2016 in compliance with the Rule 5.34 of the GEM Listing Rules and with

written terms of reference in compliance with the Corporate Governance Code. The primary duties of

the remuneration committee are mainly (i) to review and make recommendations to our Board on the

overall remuneration policy and structure relating to all Directors and senior management of our

Group; (ii) to review other remuneration-related matters, including benefits-in-kind and other

compensation payable to our Directors and senior management; and (iii) to review performance based

remunerations and to establish a formal and transparent procedure for developing policy in relation

to remuneration. Our remuneration committee currently consists of all three independent

non-executive Directors, namely Mr. Ma, Mr. Mok, Mr. Ng and Mr. B Lo. Mr. Ng is the chairman of

our remuneration committee.

Nomination Committee

Our Company has established a nomination committee pursuant to a resolution of our Directors

passed on 5 December 2016 with written terms of reference in compliance with the Corporate

Governance Code. The primary duties of our nomination committee are mainly (i) to review the

structure, size, composition and diversity of the Board on a regular basis; (ii) to identify individuals

suitably qualified to become Board members; (iii) to assess the independence of independent

non-executive Directors; (iv) to make recommendations to the Board on relevant matters relating to

the appointment or


— 156 —

re-appointment of Directors; and (v) to make recommendations to our Board regarding the candidates

to fill vacancies on our Board. Our nomination committee currently consists of all three independent

non-executive Directors, namely Mr. Mok, Mr. Ng, Mr. Ma and Mr. C Lo. Mr. Ma is the chairman of

our nomination committee.

REMUNERATION OF DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Remuneration policy

Our Directors and senior management receive compensation in the form of salaries in relation to

the performance of our Group. Our Group also reimburses them for expenses which are necessarily

and reasonably incurred for the provision of services to our Group or executing their functions in

relation to the business operations. Our Group regularly reviews and determines the remuneration and

compensation packages of its Directors and senior management, by reference to, among other things,

market level of salaries paid by comparable companies, the respective responsibilities of our Directors

and the performance of our Group. After Listing, our Company’s remuneration committee will review

and determine the remuneration and compensation packages of our Directors with reference to their

responsibilities, workload, the time devoted to our Group and the performance of our Group. The

Directors may also receive options to be granted under the Share Option Scheme.


total remuneration (including salaries and allowances, discretionary bonuses and contributions to

pension schemes) paid by us to our Directors were HK$4.3 million, HK$4.1 million, HK$4.5 million

and HK$0.7 million respectively. Under the arrangements currently in force, the aggregate

remuneration and benefits-in-kind to our Directors paid or payable (excluding any commission or

discretionary bonus) in respect of the financial year ending 31 March 2017 is estimated to be

approximately HK$2.3 million. Our Group’s principal policies concerning remuneration of Directors

and senior management are determined based on the duties, responsibilities, experiences, skills, time

commitment, performance of our relevant Directors or members of senior management and are made

with reference to those paid by comparable companies. Our executive Directors and senior

management may receive discretionary bonuses which shall be determined by our Board with regard

to the performance of the relevant executive Directors or members of senior management and the

operating results of our Group as a whole in respect of the financial year.

Our independent non-executive Directors receive compensation in the form of director fees. Each

of our executive Directors and independent non-executive Directors has entered into either a service

contract or letter of appointment with our Company for an initial term of one year with effect from

the Listing Date, which will continue thereafter until terminated by not less than three months’ notice

in writing.


— 157 —

The staff costs of our Group (including salaries, allowances and benefits, and contributions to

defined contribution retirement plans) for the three financial years ended 31 March 2016 and the four

months ended 31 July 2016 amounted to approximately HK$10.4 million, HK$10.2 million, HK$10.3

million and HK$2.4 million respectively.

The aggregate amount of salaries, bonus, and other allowances and benefits in kind paid by us

to the five highest paid employees during the three financial years ended 31 March 2016 and the four

months ended 31 July 2016 were approximately HK$5.8 million, HK$6.0 million, HK$5.7 million and

HK$1.2 million respectively.

Approximately HK$0.3 million, HK$0.3 million, HK$0.3 million and HK$0.1 million were paid

by our Group as contribution to the mandatory provident fund schemes in respect of such employees

for each of the three financial years ended 31 March 2016 and the four months ended 31 July 2016

respectively.

We participate in the mandatory provident fund scheme prescribed by the Mandatory Provident

Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for all of our employees, and we have

made the relevant contributions in accordance with the aforesaid laws and regulations. We also

provide medical benefits to them. Our employees are remunerated with monthly salaries and

discretionary bonuses based on individual performance, market performance, our Group’s profit as a

whole and comparable market level.

STAFF

As at 31 March 2014, 2015 and 2016 and as at 31 July 2016, our Group had 25, 25, 21 and 23

full-time employees, respectively. As at the Latest Practicable Date, the breakdown of our Group’s

full-time employees by principal functions is set out below:

As at the LatestPracticable Date

Management 3

Dealings Department 4

Administration Department 4

Settlement Department 4

Accounts Department 3

Sales Department 6

Total 24

Note: As at the Latest Practicable Date, we had 8 self-employed AEs which are not included in the above figures.


— 158 —

We intend to hire additional competent personnel to complement our expansion plans as and

when necessary.

Our relationship with employees

Our Directors believe that our Group has maintained good working relationships with our

employees. None of our employees are members of trade unions. We have not experienced any major

difficulties in recruiting suitable employees and have not experienced any material disruption to our

business operations arising from labour disputes in the past.

Staff training

We regularly arrange for our employees to attend professional training courses and seminars in

order to keep them abreast of developments in the financial industry and knowledgeable of the

relevant rules and regulations to which our Group must adhere. All Licensed Representatives and

Responsible Officers are required to undertake a certain amount of continuous professional training

in order to maintain their SFC licences to carry out regulated activities.

OUR GROUP’S RELATIONSHIP WITH STAFF

Our Group recognises the importance of a good relationship with its employees. The

remuneration payable to the employees includes salaries and allowances.

CORPORATE GOVERNANCE

Our Directors recognise the importance of good corporate governance in management and

internal procedures so as to achieve effective accountability. Our Group will comply with the revised

Corporate Governance Code and the associated GEM Listing Rules which were effective in 2012.

COMPLIANCE ADVISER

In accordance with Rule 6A.19 of the GEM Listing Rules, our Company has appointed Ample

Capital Limited to be the compliance adviser, who will have access to all relevant records and

information relating to our Company that it may reasonably require to properly perform its duties.

Pursuant to Rule 6A.23 of the GEM Listing Rules, our Company must consult with and, if necessary,

seek advice from the compliance adviser on a timely basis in the following circumstances:

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

(ii) where a transaction, which might be a notifiable or connected transaction, is contemplated

by our Company, including share issues and share repurchases;


— 159 —

(iii) where our Company proposes to use the proceeds of the Placing in a manner different from

that detailed in this prospectus or where the business activities, developments or results of

our Company deviate from any forecast, estimate (if any) or other information in this

prospectus; and

(iv) where the Stock Exchange makes an inquiry of our Company under Rule 17.11 of the GEM

Listing Rules.

The terms of appointment shall commence on the Listing Date and end on the date on which our

Company complies with Rule 18.03 of the GEM Listing Rules in respect of its financial results for the

second full financial year commencing after the Listing Date, or until the agreement is terminated,

whichever is the earlier.

SHARE OPTION SCHEME

We conditionally adopted the Share Option Scheme. The principal terms of the Share Option

Scheme are summarised under the section headed “Share Option Scheme” in Appendix IV to this

prospectus.


— 160 —

During the Track Record Period and prior to the Listing, our Group entered into various

transactions with certain parties which are connected persons as defined under the GEM Listing Rules

and these transactions are expected to continue after the Listing Date.

DISCONTINUED CONNECTED TRANSACTIONS

Brokerage, margin financing and placing services to Mr. Ma Wai Hung Vincent (“Mr. Ma”)

During the Track Record Period, Mr. Ma maintained a securities account with PFSL through

which he received brokerage, margin financing and placing services (“the Services”). On 23

November 2016, Mr. Ma closed his securities account with PFSL and our Directors confirmed that

they have no intention of entering into similar transactions with Mr. Ma after the Listing. The

provision of the Services to Mr. Ma and his associates (if applicable) by PFSL are discontinued

connected transactions. Below is a summary of the Services provided by our Group to Mr. Ma and the

revenue generated therefrom during the Track Record Period:

Historical amounts of revenue generated from the Services provided by our Group to Mr. Ma



31 July

2014 2015 2016 2016

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

HK$’000 HK$’000 HK$’000 HK$’000

Brokerage 0.6 N.M 0.3 N.M 0.2 N.M — N.A

Margin

financing — N.M — N.M — N.M — N.A

Placing

commission 0.3 N.M 0.2 N.M — N.M — N.A

Aggregateamount 0.9 N.M 0.5 N.M 0.2 N.M — N.A

N.M: Not meaningful


— 161 —

NON-EXEMPTED CONTINUING CONNECTED TRANSACTIONS

A. Brokerage, margin financing and placing services to Mr. Khoo Ken Wee (“Mr. Khoo”)

During the Track Record Period, Mr. Khoo maintained securities accounts with PFSL through

which he received the Services. PFSL will continue to provide the Services to Mr. Khoo after Listing.

Since Mr. Khoo will upon Listing be a Connected Person, the provision of the Services to Mr. Khoo

and his associates (if applicable) by PFSL will constitute continuing connected transactions. Below is

a summary of the Services provided by our Group to Mr. Khoo and the revenue generated therefrom

during the Track Record Period:

Historical amounts of the revenue generated from the Services provided by our Group to Mr.

Khoo



31 July

2014 2015 2016 2016

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

HK$’000 HK$’000 HK$’000 HK$’000

Brokerage 153 0.28% 67 0.16% 131 0.32% 11 0.04%

Margin

financing 137 0.25% 326 0.77% 387 0.95% 153 0.62%

Placing

commission 7 0.01% 25 0.06% 2 0.00% — N.A

Aggregateamount 297 0.55% 418 0.99% 520 1.27% 164 0.66%

During the Track Record Period, the maximum daily outstanding amount of financing to Mr.

Khoo were as follow:-


For the fourmonths

ended 31July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Maximum daily outstanding amount 9,635 10,469 10,192 9,703


— 162 —

Pursuant to the Khoo Connected Service Agreement entered with Mr. Khoo, PFSL may (but is

not obliged to), upon request, provide to Mr. Khoo (where applicable, including his associates) the

Services, on normal commercial terms and at rates comparable to rates offered to other clients of PFSL

who are Independent Third Parties and in accordance with the pricing policy of PFSL from time to

time. The Khoo Connected Service Agreement with Mr. Khoo will be for a period of 3 years from the

Listing Date which can be terminated by either party with 7 days’ prior written notice.

The general brokerage commission rates offered to Mr. Khoo (where applicable, including his

associates) were at rates of 0.15% or 0.2% whereas the brokerage commission rates offered to

Independent Third Parties were in the range of 0.05% to 1.00% generally. The margin financing

interest rates offered to Mr. Khoo (where applicable, including his associates) were at a rate of 5.25%

p.a. whereas the rates offered to Independent Third Parties were in the range of 5.25% p.a. to 10.25%

p.a..

The brokerage commission rates and margin financing rates offered to Mr. Khoo (where

applicable, including his associates) were within the range offered to Independent Third Parties. Our

Company considers that the rates offered to Mr. Khoo (where applicable, including his associates) are

based on normal commercial terms and at rates comparable to those rates offered to other clients of

our Group who are Independent Third Parties during the Track Record Period. Pursuant to Mr. Khoo

Connected Service Agreement the brokerage commission rates and margin financing rates has been set

at 0.15% and 5.25%, respectively. The rates offered to Mr. Khoo will be regularly reviewed and

adjusted such that the rates offered to the Connected Parties will not be more favourable than offered

to Independent Third Parties. After the Listing, when adjustment to the commission rates and margin

financing rates is needed for the reason that the rates no longer fall within normal commercial terms,

the change in rates will be determined by our Group’s independent non-executive Directors.

Annual caps for the revenue of Services to be provided to and the maximum daily outstanding

amount of margin financing to Mr. Khoo

Our Group estimates and proposes that the annual caps for the revenue of the Services to be

provided to Mr. Khoo pursuant to the Khoo Connected Service Agreement entered into by PFSL and

Mr. Khoo for each of the financial years ending 31 March 2017, 2018 and 2019 are to be HK$0.5

million, HK$0.5 million and HK$0.5 million, respectively (the “Mr. Khoo Revenue Annual Caps”).

Having considered the historical maximum daily outstanding amount of margin financing of Mr.

Khoo, our Group estimates and proposes that the annual aggregated caps for the maximum daily

outstanding amount of margin financing to be provided to Mr. Khoo for each of the financial year

ending 31 March 2017, 2018 and 2019 are to be HK$11 million, HK$11 million and HK$11 million,

respectively (the “Mr. Khoo Outstanding Annual Caps”).


— 163 —

Basis for determining Mr. Khoo Revenue Annual Caps and Mr. Khoo Outstanding Annual Caps

In determining the Mr. Khoo Revenue Annual Caps, our Directors have taken into consideration,

revenue amounts for historical transactions with Mr. Khoo, the trading volume of the overall market,

as well as the expected amounts of income generated from the provision of the Services to Mr. Khoo

for the three financial years ending 31 March 2019.

In determining the Mr. Khoo Outstanding Annual Caps, our Directors have taken into

consideration, (i) the largest maximum daily outstanding amount of margin financing during the Track

Record Period; and (ii) discussions with Mr. Khoo and his associates on their expected transaction for

the three financial years ending 31 March 2019.

GEM Listing Rules Implications

The applicable percentage ratios as defined in Rule 19.07 of the GEM Listing Rules calculated

with reference to Mr. Khoo Revenue Annual Caps on an annual basis, is less than 5% (and the annual

consideration is less than HK$3,000,000). The percentage ratios (other than the profits ratio), where

applicable, calculated by reference to Rule 19.07 of the GEM Listing Rules, for the Mr. Khoo

Outstanding Annual Caps are less than 25% but more than HK$10,000,000. As the applicable

percentage ratios as defined in Rule 19.07 of the GEM Listing Rules calculated with reference to the

Mr. Khoo Outstanding Annual Caps are less than 25% but more than HK$10,000,000, pursuant to

Rules 20.33, 20.34, 20.47, 20.53, 20.69 and 20.74 of the GEM Listing Rules, the transactions

contemplated under the Khoo Connected Service Agreement entered into between PFSL and Mr. Khoo

are subject to reporting, independent shareholders’ approval, annual review and announcement

requirements under Chapter 20 of the GEM Listing Rules.

Waiver from Stock Exchange

As the applicable percentage ratios (other than the profits ratio), where applicable, calculated by

reference to Rule 19.07 of the GEM Listing Rules, for the Mr. Khoo Outstanding Annual Caps are less

than 25% but more than HK$10,000,000, the transactions with Mr. Khoo under the Khoo Connected

Service Agreement entered into by PFSL with Mr. Khoo are subject to reporting, independent

shareholders’ approval, annual review and announcement requirements under Chapter 20 of the GEM

Listing Rules. Given their recurring nature and the fact that the agreement for each of the continuing

connected transactions mentioned in the paragraph headed “Brokerage, margin financing and placing

services to Mr. Khoo Ken Wee” in this section were entered into prior to the Listing Date, the

Directors consider that compliance with the announcement and independent shareholders’ approval

requirements would be burdensome and would add unnecessary administrative costs to our Company.

Accordingly, our Company, has applied for, and the Stock Exchange has granted to our Company, a

waiver from strict compliance with the announcement and independent shareholders’ approval

requirements of Chapter 20 of the GEM Listing Rules for the transactions with Mr. Khoo under the

Khoo Connected Service Agreement entered into by PFSL with Mr. Khoo.

Directors’ views

Having considered that the Services to be provided to Mr. Khoo are at rates comparable to those

offered to other clients of PFSL who are Independent Third Parties and in accordance with the policy


— 164 —

of PFSL from time to time, the Directors (including the independent non-executive Directors) are of

the view that the continuing connected transactions contemplated under the Khoo Connected Service

Agreement entered into between PFSL and Mr. Khoo (including the terms and conditions of the

relevant agreements) have been and will be in the ordinary and usual course of business of our Group,

on normal commercial terms and are fair and reasonable and in the interests of our Company and our

Shareholders as a whole.

Sponsor’s views

Having considered that the Services to be provided to Mr. Khoo are at rates comparable to those

offered to other clients of PFSL who are Independent Third Parties and in accordance with the policy

of PFSL from time to time, the Sponsor is of the view that the continuing connected transactions

contemplated under the Khoo Connected Service Agreement entered into between PFSL and Mr. Khoo

(including the terms and conditions of the relevant agreements) have been and will be in the ordinary

and usual course of business of our Group, on normal commercial terms and are fair and reasonable

and in the interests of our Company and our Shareholders as a whole.

B. Brokerage, margin financing and placing services to Mr. B Lo and Mr. C Lo and theirrespective associates (collectively, the “Lo’s Group”)

During the Track Record Period, each of Mr. B Lo and Mr. C Lo (including their respective

associates) (collectively, the Lo’s Group) maintained securities accounts with PFSL through which

they received the Services (as defined above). PFSL is going to continue to provide the Services to

the Lo’s Group after Listing. Since Mr. B Lo and Mr. C Lo will upon Listing be Connected Persons,

the provision of the Services to them and their respective associates by PFSL will constitute

continuing connected transactions. Below is a summary of the revenue generated from the Services

provided by our Group to the Lo’s Group during the Track Record Period:



31 July

2014 2015 2016 2016

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

Revenuefrom

services

% oftotal

revenue

HK$’000 HK$’000 HK$’000 HK$’000

Brokerage 433 0.8% 513 1.2% 595 1.45% 58 0.23%

Margin

financing 835 1.5% 1,601 3.8% 890 2.17% 372 1.50%

Placing

commission 112 0.2% 40 0.1% 16 0.04% 150 0.60%

Aggregateamount 1,380 2.5% 2,154 5.1% 1,501 3.67% 580 2.33%


— 165 —

During the Track Record Period, the maximum daily outstanding amount of financing to the Lo’s

Group were as follows:-


For the fourmonths

ended 31July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Maximum daily outstandingamount 24,431 45,966 33,659 32,326

As certain continuing connected transactions were entered or will be entered into with the parties

connected or otherwise associated with one another, the transactions entered or will be entered into

with such connected persons shall be categorised as same class of transactions and shall be aggregated

into a series of connected transactions for the purpose of calculating the considerations as referred to

in the table below under the column “Aggregation of Transactions”.

ConnectedPerson(s)

ConnectedRelationship Aggregation of Transactions

Mr. B Lo Sibling of

Mr. C Lo

Mr. B Lo and his associates (together with Mr. C Lo

and his associates, the Lo’s Group)

Mr. C Lo Sibling of

Mr. B Lo

Mr. C Lo and his associates (together with Mr. B Lo

and his associates, the Lo’s Group)

Pursuant to the Lo’s Group Connected Service Agreements entered with Mr. B Lo and Mr. C Lo,

PFSL may (but is not obliged to), upon request, provide to each of Mr. B Lo and Mr. C Lo (where

applicable, including their respective associates), the Services, on normal commercial terms and at

rates comparable to rates offered to other customers of PFSL who are Independent Third Parties and

in accordance with the pricing policy of PFSL from time to time. The Lo’s Group Connected Service

Agreement will be for a period of 3 years from the Listing Date which can be terminated by either

party with 7 days’ prior written notice.

The general brokerage commission rates offered to Lo’s Group were in the range of 0.10% to

0.25% whereas the brokerage commission rates offered to Independent Third Parties were in the range

of 0.05% to 1.00% generally. The margin financing interest rates offered to Lo’s Group were in the

range of 3.25% to 7.25% whereas the rates offered to Independent Third Parties were in the range of

5.25% to 10.25%.

The brokerage commission rates offered to Lo’s Group were within the range offered to

Independent Third Parties. For the margin financing interest rates, after considering the long business

relationship, historical transaction volume and credibility, our Group offered margin financing rates


— 166 —

of 3.25% to two connected parties of the Company among Lo’s Group. Other than these two connected

parties, the margin financing interest rates offered to Lo’s Group were in the range of 5.25% to 7.25%

which were within the range offered to Independent Third Parties. The two connected parties have

been our Group’s margin clients since April 1998 and January 2000 respectively, and have no default

history whereas our Group’s earliest Independent Third Parties’ margin account was opened in March

1998. For the year ended 31 March 2012, one of these two connected parties had contributed margin

interest income to our Group amounted to approximately HK$124,000 while the average margin

interest income from Independent Third Parties for that year was approximately HK$107,000. For the

year ended 31 March 2015, the other one of these two connected parties had contributed margin

interest income to our Group amounted to approximately HK$509,000 while the average margin

interest income from Independent Third Parties for that year was approximately HK$103,000. Based

on the long business relationship, historical transaction volume and credibility of the two connected

parties, our Company considers and the Sponsor concurs that the rates offered to Lo’s Group are based

on normal commercial terms and at rates comparable to those rates offered to other customers of our

Group who are Independent Third Parties during the Track Record Period. Pursuant to the Lo’s Group

Connected Service Agreement, the brokerage commission rates and margin financing rates has been

set at 0.15% and 5.25%, respectively. The rates offered to the Lo’s Group will be regularly reviewed

and adjusted such that the rates offered to the Connected Parties will not be more favourable than

offered to Independent Third Parties. After the Listing, when adjustment to the commission rates and

margin financing rates is needed for the reason that the rates no longer fall within normal commercial

terms, the change in rates will be determined by our Group’s independent non-executive Directors

having regard to the rates offered to Independent Third Parties.

Annual caps for the revenue of Services to be provided to and the maximum daily outstandingamount of margin financing to the Lo’s Group

Our Group estimates and proposes that the annual aggregated caps for the revenue of the Services

to be provided to Lo’s Group pursuant to the Lo’s Group Connected Service Agreement, entered into

by PFSL and each of Mr. B Lo and Mr. C Lo for each of the financial years ending 31 March 2017,

2018 and 2019 are to be HK$2.0 million, HK$2.0 million and HK$2.0 million, respectively (the “Lo’sGroup Revenue Annual Caps”).

Having considered the historical maximum daily outstanding amount of the Lo’s Group, our

Group estimates and proposes that the annual aggregated caps for the maximum daily outstanding

amount of margin financing to be provided to the Lo’s Group for each of the financial year ending 31

March 2017, 2018 and 2019 are to be HK$50 million, HK$50 million and HK$50 million, respectively

(the “Lo’s Group Outstanding Annual Caps”).

Basis for determining Lo’s Group Revenue Annual Caps and Lo’s Group Outstanding AnnualCaps

In determining the Lo’s Group Revenue Annual Caps, our Directors have taken into

consideration, revenue amounts for historical transactions with the Lo’s Group, the trading volume of

the overall market, as well as the expected amounts of income generated from the provision of the

Services to Lo’s Group for the three financial years ending 31 March 2019.


— 167 —

In determining the Lo’s Group Outstanding Annual Caps, our Directors have taken into

consideration, (i) the largest maximum daily outstanding amount of margin financing during the Track

Record Period; and (ii) discussions with various members of Lo’s Group and its associates on their

expected transaction for the three financial years ending 31 March 2019.

GEM Listing Rules Implications

The applicable percentage ratios as defined in Rule 19.07 of the GEM Listing Rules calculated

with reference to the Lo’s Group Revenue Annual Caps on an annual basis, is less than 25% (and the

annual consideration is less than HK$10,000,000). The percentage ratios (other than the profits ratio),

where applicable, calculated by reference to Rule 19.07 of the GEM Listing Rules, for the Lo’s Group

Outstanding Annual Caps are less than 25% but more than HK$10,000,000. Since the percentage ratios

(other than the profits ratio), where applicable, calculated by reference to Rule 19.07 of the GEM

Listing Rules, for the Lo’s Group Outstanding Annual Caps are less than 25% but more than

HK$10,000,000, pursuant to Rules 20.33, 20.34, 20.47, 20.53, 20.69 and 20.74 of the GEM Listing

Rules, the transactions contemplated under the Lo’s Group under the Lo’s Group Connected Service

Agreement entered into by PFSL with Mr. B Lo and Mr. C Lo are subject to reporting, independent

shareholders’ approval, annual review and announcement requirements under Chapter 20 of the GEM

Listing Rules.

Waiver from Stock Exchange

As the applicable percentage ratios (other than the profits ratio), where applicable, calculated by

reference to Rule 19.07 of the GEM Listing Rules, for the Lo’s Group Outstanding Annual Caps are

less than 25% but are more than HK$10,000,000, the transactions with the Lo’s Group under the Lo’s

Group Connected Service Agreement entered into by PFSL with Mr. B Lo and Mr. C Lo are subject

to reporting, independent shareholders’ approval, annual review and announcement requirements

under Chapter 20 of the GEM Listing Rules. Given their recurring nature and the fact that the

respective agreements for each of the continuing connected transactions mentioned in the paragraph

headed “Brokerage, margin financing and placing services to Mr. B Lo and Mr. C Lo and their

respective associates” in this section were entered into prior to the Listing Date, the Directors consider

that compliance with the announcement and independent shareholders’ approval requirements would

be burdensome and would add unnecessary administrative costs to our Company. Accordingly, our

Company, has applied for, and the Stock Exchange has granted to our Company, a waiver from strict

compliance with the announcement and independent shareholders’ approval requirements of Chapter

20 of the GEM Listing Rules for the transactions with the Lo’s Group under the Lo’s Group Connected

Service Agreement entered into by PFSL with Mr. B Lo and Mr. C Lo. Other than those rules in which

a waiver has been granted by the Stock Exchange, the Company will comply with all other relevant

requirement under Chapter 20 of the GEM Listing Rules.


— 168 —

Directors’ views

Having considered that (i) the long business relationship, historical transaction volume and

credibility of the two connected parties among the Lo’s Group who are offered margin financing rates

of 3.25%; and (ii) the Services to be provided to Lo’s Group during the Track Record Period were at

rates and amounts comparable to those offered to other customers of PFSL who are Independent Third

Parties and in accordance with the policy of PFSL from time to time, the Directors (including the

independent non-executive Directors) are of the view that the continuing connected transactions

contemplated under the Lo’s Group Connected Service Agreement entered into between, among

others, PFSL, Mr. B Lo and Mr. C Lo (including the terms and conditions of the relevant agreements,

the Lo’s Group Revenue Annual Caps and the Lo’s Group Outstanding Annual Caps) have been and

will be in the ordinary and usual course of business of our Group, on normal commercial terms and

are fair and reasonable and in the interests of our Company and the Shareholders as a whole.

Sponsor’s views

Having considered (i) the long business relationship, historical transaction volume and

credibility of the two connected parties among the Lo’s Group who are offered margin financing rates

of 3.25%; and (ii) the Services provided to the Lo’s Group during the Track Record Period were at

rates and amounts comparable to those offered to other customers of PFSL who are Independent Third

Parties and in accordance with the policy of PFSL from time to time, the Sponsor is of the view that

the continuing connected transactions contemplated under the Lo’s Group Connected Service

Agreement entered into between, among others, PFSL, Mr. B Lo and Mr. C Lo (including the terms

and conditions of the relevant agreements, the Lo’s Group Annual Caps and the Lo’s Group

Outstanding Annual Caps) have been and will be in the ordinary and usual course of business of our

Group, on normal commercial terms and are fair and reasonable and in the interests of our Company

and the Shareholders as a whole.


— 169 —

SUBSTANTIAL SHAREHOLDERS

Immediately following completion of the Placing and the Capitalisation Issue (without taking

into account the Shares which may be allotted and issued pursuant to the exercise of options that may

be granted under the Share Option Scheme and assuming the Offer Size Adjustment Option is not

exercised), the following persons/entities will have an interest or a short position in the Shares or

underlying Shares which would be required to be disclosed to our Company under the provisions of

Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of

the nominal value of any class of share capital carrying rights to vote in all circumstances at general

meetings of any member of our Group:

NameCapacity/Nature ofinterest

Number ofShares held after

the Placing

Percentage ofshareholding after

the Placing

TML Beneficial owner

(Note 1)

1,500,000,000

Shares

75%

Mr. B Lo Interest in controlled

corporate (Note 1)

1,500,000,000

Shares

75%

Mr. C Lo Interest in controlled

corporate (Note 1)

1,500,000,000

Shares

75%

Ms. Lui Wing Patsie Family Interest

(Note 2)

1,500,000,000

Shares

75%

Notes:

1. Mr. B Lo and Mr. C Lo beneficially own 57.1% and 42.9% equity interest in TML respectively. Therefore, Mr.

B Lo and Mr. C Lo are deemed to be interested in 1,500,000,000 Shares held by TML.

2. Ms. Lui Wing Patsie is the spouse of Mr. B Lo.

Save as disclosed above, our Directors are not aware of any person who will, immediately

following the Placing and the Capitalisation Issue (without taking into account the Shares which may

be allotted and issued pursuant to the exercise of options that may be granted under the Share Option

Scheme), have an interest or short position in the Shares or underlying Shares which would be required

to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or,

directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital

carrying rights to vote in all circumstances at general meetings of any member of our Group.


— 170 —

SIGNIFICANT SHAREHOLDERS

So far as our Directors are aware, save for the persons disclosed under the paragraph headed

“Substantial Shareholders” in this section, no persons individually and/or collectively will,

immediately following completion of the Placing and the Capitalisation Issue (without taking into

account the Shares which may be allotted and issued pursuant to the exercise of options that may be

granted under the Share Option Scheme and assuming the Offer Size Adjustment Option is not

exercised), be directly or indirectly interested in 5% or more of the voting power at the general

meetings of our Company and are therefore regarded as significant Shareholders under the GEM

Listing Rules.

UNDERTAKINGS

Each of our Controlling Shareholders has given certain undertakings in respect of the Shares held

by them to our Company, the Sponsor, the Joint Lead Managers, the Joint Bookrunners and the

Underwriters, details of which are set out under the section headed “Underwriting — Undertakings”

in this prospectus below. Each of our Controlling Shareholders has also given undertakings in respect

of the Shares to our Company and the Stock Exchange as required by Rules 13.16A(1) and 13.19 of

the GEM Listing Rules.


— 171 —

CONTROLLING SHAREHOLDERS

Immediately upon completion of the Placing and the Capitalisation Issue, without taking into

account any Shares which may be issued upon the exercise of the Offer Size Adjustment Option, the

allotment and issue of Shares upon the exercise of any options to be granted under the Share Option

Scheme, our Controlling Shareholders will be interested in 75.0% of our Company’s entire issued

share capital.

During the Track Record Period, save as disclosed in this prospectus, our Group did not have any

business dealings with the companies associated with or controlled by our Controlling Shareholders

and there was no overlapping of business between our Group and our Controlling Shareholders.

Our Directors, to the best of their knowledge, information and belief, have confirmed that, none

of the Controlling Shareholders, the Substantial Shareholders, our Directors and their respective close

associates is interested in any business which competes, or may compete, directly or indirectly, with

the business of our Company.

INDEPENDENCE FROM CONTROLLING SHAREHOLDERS

Having considered the following factors, our Directors believe that our Group is capable of

carrying on its business independently from our Controlling Shareholders after Listing.

Management independence

Our management and operational decisions are made by our Board and senior management. Our

Board comprises two executive Directors, one non-executive Director and three independent

non-executive Directors. The only overlapping directors between our Group and the Controlling

Shareholders are Mr. B Lo and Mr. C Lo who are also the directors of TML. We consider that our

Board and senior management will function independently from our Controlling Shareholders

because:

(a) each Director is aware of his fiduciary duties as a Director which require, among other

things, that he or she acts for the benefit and in the best interest of our Company and does

not allow any conflict between his duties as a Director and his personal interests;

(b) in the event that there is a potential conflict of interest arising out of any transaction to be

entered into between our Group and our Directors or their respective associates, the

interested Director(s) shall abstain from voting at the relevant board meetings of our

Company in respect of such transactions, and shall not be counted in forming quorum

subject to the provision of the Articles of Association; and

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

— 172 —

(c) all our senior management members are independent from our Controlling Shareholders.

Our Group has established our own production, management, finance, human resources,

administration, engineering, procurement, sales and marketing, quality control and research

and development divisions which are responsible for daily operations of our Group.

Operational independence

We do not share operation team, facilities and equipment with our Controlling Shareholders and

their associates. We have independent access to suppliers and customers and an independent

management team to handle our day-to-day operations. We are also in possession of all relevant

licenses necessary to carry on and operate our business and we have sufficient workforce to operate

independently from our Controlling Shareholders and their associates. Our Directors are of the view

that there is no operational dependence by us on our Controlling Shareholders.

Financial independence

We have an independent financial system and make financial decisions according to our own

business needs. As of the Latest Practicable Date, there are amounts due to Mr. B Lo and Mr. C Lo

which represent funds advanced to our Group’s working capital. As at 31 October 2016, the total

amount due to Mr. B Lo and Mr. C Lo is approximately HK$24.3 million, HK$6.1 million of which

was capitalised on 5 December 2016, and the remaining amount will be fully settled upon/before

Listing. Our Directors confirm that we will not rely on our Controlling Shareholders for financing

after the Placing as we expect that our working capital will be funded by our operating income and

bank borrowings.

DEED OF NON-COMPETITION

In connection with the Placing, each of our Controlling Shareholders (collectively, the

“Covenantors” and each a “Covenantor”) entered into a deed of non-competition with our Company

on 5 December 2016 pursuant to which each of the Covenantors has, among other things, undertaken

with our Company that at any time during the Effective Period (as defined below), such Covenantor

shall not, and shall procure that neither their respective close associates nor companies controlled by

the Covenantors (other than the members of our Group) will, directly or indirectly, be interested in or

engaged in any form of business, including but not limited to any joint venture, alliance, cooperation,

partnership which competes or is likely to compete directly or indirectly with our Group’s business

in any area in which our Group carries or may carry on business (“Restricted Activity”) from time to

time; nor provide support in any form to persons other than the members of our Group to engage in

business that constitute or may constitute direct or indirect competition with the businesses that our

Group is currently and from time to time carrying on.

Such non-competition undertaking does not apply to holding shares of a company which

conducts or is engaged in any Restricted Activity provided that, such shares are listed on a recognised

stock exchange and: (a) the total number of the shares held by the Covenantors and/or their respective

close associates (in aggregate) does not amount to more than 5% of the issued shares of such company;

and (b) the Covenantors and/or their respective associates are not entitled to appoint a majority of the

directors or management of that company.


— 173 —

The Deed of Non-Competition will take effect from the date on which dealing in our Shares first

commence on GEM and ceasing to have any effect upon the earliest of:

(i) the date on which a Covenantor, being a Controlling Shareholder, individually or

collectively with any other Covenantor(s) ceases to be interested, directly or indirectly, in

30% or more of our issued Shares, or otherwise ceased to be regarded as controlling

shareholder (as defined under the GEM Listing Rules from time to time) of our Company;

or

(ii) the date on which our Shares cease to be listed and traded on GEM or other recognised

stock exchange (the “Effective Period”).


— 174 —

You should read the following discussion and analysis of our Company’s financial condition

and results of operations together with the financial information as at and for the three financial

years ended 31 March 2016 and the four months ended 31 July 2016, and the accompanying notes

included in the Accountants’ Report set out in Appendix I to this prospectus. The Accountants’

Report has been prepared in accordance with Hong Kong Financial Reporting Standards. Potential

investors should read the whole of the Accountants’ Report set out in Appendix I to this prospectus

and not rely merely on the information contained in this section. The following discussion and

analysis contains forward-looking statements that involve risks and uncertainties. In evaluating

our business, please refer to the section headed “Risk Factors” in this prospectus.

OVERVIEW

During the Track Record Period and up to the Latest Practicable Date, our Group only had one

operating subsidiary, namely PFSL, which is incorporated in Hong Kong. PFSL is a licensed

corporation under the SFO to carry on Type 1 (dealing in securities) and Type 9 (asset management)

regulated activities. Our Group is based in Hong Kong and has been operating in the Hong Kong

securities industry under our Group’s existing name for over 20 years. We are principally engaged in

the provision of (i) securities dealing and brokerage service; (ii) placing and underwriting service; (iii)

financing service including securities and IPO margin financing; and (iv) asset management services.

Our services mainly relate to equity and debt securities traded on the Stock Exchange in Hong Kong.

We also provide ancillary services in relation to securities deposited in our name.

RECENT DEVELOPMENTS

Subsequent to the Track Record Period, the Hong Kong stock market has remained volatile. The

Hang Seng Index fluctuated between the lows of around 21,700 to a high of around 24,300 since 1

August 2016. The Directors believe that the Hong Kong financial market is still being affected by the

slowing economic growth in China and the effects of the 2016 US presidential elections on global

economics. This can be seen from the sudden volatility in the Hang Seng Index which dropped

approximately 494 points or approximately 2.2% from 22,909 points the day after 2016 US

presidential elections. However, within the five trade days after the 2016 US presidential elections,

no margin call was made to our Group’s margin clients except for the follow-up margin calls to margin

clients who were already under margin call position before the 2016 US presidential elections. Further,

other global uncertainties still remain such as after effects of the Brexit and the US Federal Reserve

stance on reducing, maintaining or increasing interest rates. Hong Kong, having its exchange rate

pegged to the US dollar will have similar positive and negative effects of tightening or loosening of

monetary policies. Comparing various statistics for the period from January to October 2016 to the

same period in 2015 indicates that there is still a weak market: average daily turnover by value being

lower by approximately 40.8%, average share traded per trading day being lower by approximately

13.3%, average number of trades per day lower by approximately 28.5% and the total funds raised

being lower by 59.1%.

Our Directors believe that we will continue to operate in a challenging and difficult financial

environment in Hong Kong in last quarter of 2016. For the three months ended 31 October 2016, our

average monthly revenue from our securities dealing and brokerage services remained lower at

approximately HK$0.6 million as compared to the monthly average of approximately HK$0.9 million

FINANCIAL INFORMATION

— 175 —

for the year ended 31 March 2016 and our average monthly revenue from margin financing of

approximately HK$0.5 million was higher than the monthly average of approximately HK$0.4 million

for the year ended 31 March 2016. Further, subsequent to the Track Record Period and up to the Latest

Practicable Date, our Group has completed seven placing and underwriting transactions, and two

transactions outstanding and expected to be completed in December 2016. For the placing and

underwriting transactions completed after the Track Record Period, our Group recognized a total

revenue of approximately HK$2.9 million. In September 2016, our Group also completed a referral

transaction for the acquisition of a controlling stake in a company listed on the Stock Exchange and

our Group generated a referral fee income of HK$6.8 million. We have also completed the general

offer on behalf of the acquirer and is entitled to a professional fee and a loan commitment fee of

approximately HK$3.2 million in aggregate. Further, our asset management operations have been

restarted and have, as at the Latest Practicable Date, secured four new asset management customers

with a total value of assets under management of approximately HK$113.3 million.

Some unaudited financial information of our Group, including our Group’s revenue for the three

months ended 31 October 2016, our Group’s assets, liabilities and indebtedness as at 31 October 2016,

are derived from our Group’s unaudited combined financial statements prepared by our Directors in

accordance with the Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the

HKICPA, which were reviewed by the Reporting Accountants in accordance with the Hong Kong

Standard on Review Engagements 2400 “Engagements to Review Historical Financial Statements”

issued by the HKICPA.

On 5 December 2016, the Shenzhen-Hong Kong Stock Connect has been launched.

On 5 December 2016, PFHL, a subsidiary of our Group, capitalised amount due to a Director of


BASIS OF PRESENTATION

The Reorganisation, as more fully explained in the section headed “History, Reorganisation and

Development” in the prospectus, was completed on 1 December 2016. Pursuant to a sale and purchase

agreement entered into among Mr. B Lo, Mr. C Lo and our Company, Mr. B Lo and Mr. C Lo

transferred their 100% equity interests in PFHL, which was the then ultimate holding company of

PFSL, to DEGL, a subsidiary of our Company. As a result, our Company became the holding company

of the companies now comprising our Group on 1 December 2016. Our Group is under common

control of Mr. B Lo and Mr. C Lo before and after the Reorganisation and throughout the Track Record

Period. As a result, our Group comprising our Company and its subsidiaries resulting from the

Reorganisation is regarded as a continuing entity.

The combined statements of profit or loss and other comprehensive income, combined statements

of changes in equity and combined statements of cash flows for the Track Record Period which include

the results, changes in equity and cash flows of the companies comprising our Group have been

prepared as if our Company had always been the holding company of our Group and the current group


— 176 —

structure had been in existence throughout the Track Record Period. The combined statements of

financial position of our Group as at 31 March 2014, 2015 and 2016 and 31 July 2016 have been

prepared to present the assets and liabilities of the companies now comprising our Group as if the

current group structure had been in existence as at those dates taking into account their respective date

of incorporation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In the application of our Group’s accounting policies, the management of our Company is

required to make estimates, judgements and assumptions about the carrying amounts of assets and

liabilities that are not readily apparent from other sources. The estimates and associated assumptions

are based on historical experience and other factors that are considered to be relevant. Actual results

may differ from these estimates. More information regarding our significant accounting policies and

the key sources of estimation uncertainty is set out in notes 4 and 5 to the Accountants’ Report in

Appendix I of this prospectus.

Significant accounting policies

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents

the amounts received or receivable for services provided in the normal course of business. Revenue

is recognised when it is probable that the economic benefits will flow to our Group and when revenue

can be measured reliably, on the following basis:

(i) Commission income from (a) securities dealing and brokerage services and (b) placing and

underwriting activities are recognised as income on a trade date basis when the relevant

transactions are executed;

(ii) Fee income from placing and underwriting activities and referral fee income are recognised

as income in accordance with the terms of the agreements when the relevant significant acts

have been completed (i.e. upon completion of the placing and underwriting transactions or

the referred transactions);

(iii) Interest income from a financial asset is recognised when it is probable that our Group will

earn the interest income; and

(iv) Fund management fee income, settlement fee income and handling fee income are

recognised as income when services are rendered.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to

the contractual provisions of the instruments.


— 177 —

Financial assets and financial liabilities are initially measured at fair value. Transaction costs

that are directly attributable to the acquisition or issue of financial assets and financial liabilities are

added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate,

on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or

financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

Our Group’s financial assets are classified into the following specified categories: financial

assets at fair value through profit or loss (“FVTPL”), available-for-sale financial assets and loans and

receivables. The classification depends on the nature and purpose of the financial assets and is

determined at the time of initial recognition. All regular way purchases or sales of financial assets are

recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or

sales of financial assets that require delivery of assets within the time frame established by regulation

or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument

and of allocating interest income or expense over the Track Record Period. The effective interest rate

is the rate that exactly discounts estimated future cash receipts or payments (including all fees paid

or received that form an integral part of the effective interest rate, transaction costs and other

premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a

shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments.

Financial assets at FVTPL

Financial assets are classified as at FVTPL, when the financial asset is held-for-trading.

A financial asset is classified as held-for-trading if:

• it has been acquired principally for the purpose of selling in the near term; or

• on initial recognition it is a part of a portfolio of identified financial instruments that our

Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on

remeasurement recognised in profit or loss.


— 178 —

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. Loans and receivables including accounts receivable and cash

and bank balances are measured at amortised cost using the effective interest method, less any

impairment.

Interest income is recognised by applying the effective interest rate, except for short-term

receivables where the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end

of each reporting period. Financial assets are considered to be impaired where there is objective

evidence that, as a result of one or more events that occurred after the initial recognition of the

financial asset, the estimated future cash flows of the financial assets have been affected.

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

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

• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

For certain categories of financial assets, such as accounts receivable, assets are assessed for

impairment on a collective basis even if they were not to be impaired individually. Objective evidence

of impairment for a portfolio of receivables could include our Group’s past experience of collecting

payments, an increase in the number of delayed payments and observable changes in national or local

economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is

the difference between the asset’s carrying amount and the present value of the estimated future cash

flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all

financial assets with the exception of accounts receivable, where the carrying amount is reduced

through the use of an allowance account. When accounts receivable is considered uncollectible, it is

written off against the allowance account. Subsequent recoveries of amounts previously written off are

credited to profit or loss. Changes in the carrying amount of the allowance account are recognised in

profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of

impairment loss decreases and the decrease can be related objectively to an event occurring after the

impairment was recognised, the previously recognised impairment loss is reversed through profit or

loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not

exceed what the amortised cost would have been had the impairment not been recognised.


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Financial liabilities

Financial liabilities including accounts payable, other payables, amounts due to Directors and

bank borrowings are subsequently measured at amortised cost using the effective interest method.


Interest expense is recognised on an effective interest basis other than those financial liabilities

classified as at FVTPL, of which the interest expense is included in net gains or losses.

Derecognition

Our Group derecognises a financial asset only when the contractual rights to the cash flows from

the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of

ownership of the asset to another party. If our Group neither transfers nor retains substantially all the

risks and rewards of ownership and continues to control the transferred asset, our Group continues to

recognise the asset to the extent of its continuing involvement and recognises an associated liability.

If our Group retains substantially all the risks and rewards of ownership of a transferred financial

asset, our Group continues to recognises the financial asset and also recognises a collateralised

borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying

amount and the sum of the consideration received and receivable and the cumulative gain or loss that

had been recognised in other comprehensive income and accumulated in equity is recognised in profit

or loss.

Our Group derecognises financial liabilities when, and only when, our Group’s obligations are

discharged, cancelled or they expire. The difference between the carrying amount of the financial

liability derecognised and the consideration paid and payable is recognised in profit or loss.

Key sources of estimation uncertainty

Impairment of accounts receivable

Our Group reviews its accounts receivable to assess impairment on a periodic basis. In

determining whether an impairment loss for accounts receivable arising from the business of dealing

in securities should be recognised in profit or loss, our Group first reviews the value of the securities

collateral received from the customers and customers’ collection history on an individual basis.

In determining whether an impairment loss for accounts receivable arising from the provisions

of placing and underwriting services should be recognised in profit or loss, our Group reviews the

customers’ current credit worthiness and past collection history.


— 180 —

The policy for collective impairment allowance for accounts receivable of our Group is based on

the evaluation of probability of default, loss given default and exposure at default of accounts and on

management’s judgement. A considerable amount of judgement is required in assessing the ultimate

realisation of these accounts receivable, including the current creditworthiness, and the past collection

history of each amount.

MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIALCONDITION

Due to the business nature of our Group, our business is transaction-driven and our turnover is

directly related to the number and size of the transactions undertaken by our Group on behalf of our

customers. In addition, our business focuses on the Hong Kong market. Therefore, our Directors

consider that the major factors affecting our turnover include:

(i) The performance of the securities market in Hong Kong;

(ii) The intensity of competition in Hong Kong;

(iii) The ability to secure underwriting and placing mandates;

(iv) The movement of interest rates; and

(v) The changes in the laws and regulations governing the securities industry in Hong Kong.

The performance of the securities market in Hong Kong

The Main Board and GEM are the two markets operated by the Stock Exchange for securities

trading. The Main Board provides a platform for the trading of securities of larger and more

established companies while the GEM provides a platform for the trading of growth companies.

Our turnover and financial performance are significantly affected by the general economic and

financial securities activities in Hong Kong and elsewhere around the world. We generate most of our

total revenue from the securities market in Hong Kong. Our business is affected by the inherent risks

associated with securities markets, such as market volatility, investment sentiments and supply of

liquidity.

Downturn in general economic conditions and adverse market conditions in Hong Kong and

elsewhere may result in declines in trading volume and fund raising exercises which consequently

could adversely affect our brokerage commission from securities brokerage business, fee income from

underwriting and placing businesses, interest income from margin financing business. Unfavorable

market conditions may also increase the risk of defaults in margin loans which we provide to our

customers. If we experience a period of sustained market downturn and are unable to reduce operating

expenses to match the decline in revenue, our business and financial performance may be materially

and adversely affected. On the other hand, on the basis that we can maintain our competitiveness as

described below, the higher the trading activities, the higher our turnover will be.


— 181 —

The intensity of competition in Hong Kong

The financial services industry is highly competitive. The Hong Kong stock market had created

strong demand for services in the local brokerage industry. Correspondingly, this has also lured new

participants in joining the industry and has led to intense competition in the industry. Our key

competitors are local and international financial services providers in Hong Kong which may have

greater financial resources, stronger brand recognition and service offerings and longer operating

history than us. As at 31 October 2016, there were 586 Stock Exchange participants in Hong Kong of

which 550 are trading participants and 36 are non-trading participants. New participants may enter

financial services industry provided that, among other things, they obtain the requisite licenses from

the regulatory authorities and comply with the financial resources requirements as specified by the

FRR. We may not be able to compete successfully with our competitors in all the business areas in

which we operate. If we are not able to maintain our position in the competitive business environment,

our business, financial conditions and results of operation may be materially and adversely affected.

Our turnover can improve if we can increase our market share and improve our brokerage commission

rates.

The ability to secure underwriting and placing mandates

During the Track Record Period, income arising from underwriting and placing business were our

largest source of income. Underwriting and placing transactions undertaken by us were conducted on

either fully underwritten or best effort basis. During the Track Record Period, we did not purchase any

unsubscribed portion of securities for our own account because of under-subscription. If we were to

participate in fund raising activities on a fully underwritten basis and we were to sell the securities

below the placing price at which we were committed to purchase after trading begins, we would have

suffered losses on sale of those securities. If the size and/or number of underwriting and/or placing

transactions decline due to volatile market conditions, our business and financial performance may be

materially and adversely affected.

As underwriting and placing transactions are non-recurring and may not occur on a regular basis,

our ability to secure underwriting and placing mandates is important to our financial performance.

Given the difference in nature, size and level of services demand required in respect of these

transactions, the revenue generated by providing services in underwriting and placing can fluctuate

significantly and is lumpy in nature.

The movement of interest rates

Our results of operation and financial condition are also affected by changes in interest rates. A

rise in interest rate will in general (i) affect investors’ appetite to invest, including in the securities

market thereby affecting market sentiment, which may affect our results of operations, and (ii) lower

the ability or willingness of our customers to raise funds from the stock market, which could lower

our underwriting and placing fee income. An increase in interest rates would increase the amount of

interest income from margin financing.


— 182 —

The changes in the laws and regulations governing the securities industry in Hong Kong

The laws and regulations governing the securities industry in Hong Kong may have impact on

our revenue. For example, new laws and regulations may be implemented to change the brokerage

commission structure. The amount of liquid capital requirement for our business which determines the

volume and size of transactions that we can conduct may also change. These may affect our revenue.

In addition, changes in other relevant laws (for example, the Companies Ordinance, the Companies

(miscellaneous Provisions) Ordinance, and the SFO) and regulations (for example the Listing Rules,

the GEM Listing Rules and the Takeovers Code) may affect listed companies’ abilities to conduct

corporate exercises, such as fund raising in the primary market including IPOs and secondary market

equity fund-raising.


— 183 —

RESULTS OF OPERATIONS OF OUR GROUP

The following table sets out our combined statements of profit or loss and other comprehensiveincome and other financial information for the three financial years ended 31 March 2016 and the fourmonths ended 31 July 2015 and 2016, as derived from the Accountants’ Report in Appendix I to thisprospectus.

Financial year ended31 March


2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000


RevenueCommission income from

securities dealing andbrokerage services 12,717 10,225 10,918 5,513 1,282

Fee and commission incomefrom placing and underwritingactivities 32,620 23,171 15,884 1,183 20,142

Interest income from marginfinancing 5,028 5,006 4,245 1,174 2,344

Fund management fee 3,829 2,448 434 434 —Others 271 1,545 9,440 5 1,120

Total revenue 54,465 42,395 40,921 8,309 24,888Bank interest income 6 6 9 3 2Gain on disposal of property and

equipment 3 800 — — —Other gains and losses 772 666 198 113 (49)

55,246 43,867 41,128 8,425 24,841Commission expenses (7,496) (3,673) (4,030) (1,565) (2,012)Depreciation expenses (739) (235) (241) (76) (46)Staff costs (10,403) (10,235) (10,343) (2,886) (2,430)Other operating expenses (13,094) (9,688) (10,617) (3,652) (3,130)Finance costs (416) (273) (272) (92) (87)Listing expenses — — (5,989) (1,106) (1,759)

Profit/(loss) before tax 23,098 19,763 9,636 (952) 15,377Income tax expense (4,769) (3,300) (2,753) (77) (2,842)

Profit/(loss) and totalcomprehensive income/(expense)for the year/period 18,329 16,463 6,883 (1,029) 12,535

Profit/(loss) and totalcomprehensive income/(expense)for the year/period attributableto:

Owners of our Company 18,399 16,532 6,955 (1,007) 12,535Non-controlling interests (70) (69) (72) (22) —

18,329 16,463 6,883 (1,029) 12,535

Note: For the financial year ended 31 March 2016, if the non-recurring referral fees and the one-off Listing expenses areexcluded, our Group would have a net profit of approximately HK$5.0 million (after considering the tax effect). Forthe four months ended 31 July 2016, if the one-off Listing expenses are excluded, our Group would have a net profitof approximately HK$14.3 million.


— 184 —

DESCRIPTION OF CERTAIN PROFIT OR LOSS ITEMS

During the three financial years ended 31 March 2016 and the four months ended 31 July 2015

and 2016, our Group recorded total revenue of approximately HK$54.5 million, HK$42.4 million,

HK$40.9 million, HK$8.3 million and HK$24.9 million respectively and generated profit/(loss) for the

year/period attributable to owners of our Company of approximately HK$18.4 million, HK$16.5

million, HK$7.0 million, HK$(1.0) million and HK$12.5 million respectively. Prospective investors

should note that the fluctuations of our Group’s past financial performance are as explained below.

Revenue

Our Group’s revenue comprises (i) commission income from securities dealing and brokerage

services; (ii) fee and commission income from placing and underwriting activities; (iii) interest

income from margin financing; (iv) fund management fee; and (v) income from our other services

provided.

Our Group’s total revenue decreased by approximately 22.2% from approximately HK$54.5

million for the financial year ended 31 March 2014 to approximately HK$42.4 million for the financial

year ended 31 March 2015 which was primarily due to the drop in fee and commission income from

placing and underwriting activities of approximately HK$9.4 million as a result of the decrease in

average commission rates charged by our Group.

Our Group’s total revenue slightly decreased by approximately 3.5% from approximately

HK$42.4 million for the financial year ended 31 March 2015 to approximately HK$40.9 million for

the financial year ended 31 March 2016. This was mainly a result of (i) a decrease in revenues

generated from our placing and underwriting services by approximately HK$7.3 million as we

participated in fewer placing and underwriting transactions and overall transaction value for the

financial year ended 31 March 2016 was lower, and (ii) a decrease in fund management fee of

approximately HK$2.0 million due to the termination of fund management contract with Customer B

in May 2015. Such decrease was then offset by the increase in referral fee recorded in other revenue

from approximately HK$0.3 million for the financial year ended 31 March 2015 to approximately

HK$9.4 million for the financial year ended 31 March 2016.

Our Group recorded total revenue for the four months ended 31 July 2016 of approximately

HK$24.9 million, representing an increase of approximately HK$16.6 million, or 199.5% from

approximately HK$8.3 million for the four months ended 31 July 2015. The significant increase in

revenue was mainly attributed to the increase in revenues generated from our placing and underwriting

services by approximately HK$19.0 million mainly as a result of the increase in both the number of

transactions and overall transaction value of placing and underwriting transactions participated by our

Group during the period. Such increase was partly offset by the decrease in commission income from

securities dealing and brokerage services from approximately HK$5.5 million for the four months

ended 31 July 2015 to approximately HK$1.3 million for the four months ended 31 July 2016.


— 185 —

Set out below is the breakdown and analyses of revenue by business activities for the three

financial years ended 31 March 2016 and the four months ended 31 July 2015 and 2016.


2014 2015 2016 2015 2016

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

% HK$’000 %

Commission incomefrom securitiesdealing andbrokerage services 12,717 23.3 10,225 24.1 10,918 26.7 5,513 66.4 1,282 5.2

Fee and commissionincome from placingand underwritingactivities 32,620 60.0 23,171 54.7 15,884 38.8 1,183 14.2 20,142 80.9

Interest income frommargin financing 5,028 9.2 5,006 11.8 4,245 10.4 1,174 14.1 2,344 9.4

Fund management fee 3,829 7.0 2,448 5.8 434 1.1 434 5.2 — 0.0

Others 271 0.5 1,545 3.6 9,440 23.0 5 0.1 1,120 4.5

Total revenue 54,465 100.0 42,395 100.0 40,921 100.0 8,309 100.0 24,888 100.0

Commission income from securities dealing and brokerage services

Our Group provides securities and brokerage services to customers for trading in securities listed

on the Stock Exchange which comprise of corporate and individual from, among others, Hong Kong

and the PRC. Our Group’s securities and brokerage services are provided by our in-house account

executives and self-employed account executives. Commission income from securities dealing and

brokerage services is recognised as income on a trade date basis.

Our commission income from securities dealing and brokerage services decreased by

approximately 19.6% from approximately HK$12.7 million for the financial year ended 31 March

2014 to approximately HK$10.2 million for the financial year ended 31 March 2015. The decrease was

principally due to the drop in overall transaction value of securities trading carried out by our Group

on behalf of customers from approximately HK$7.1 billion for the financial year ended 31 March 2014

to approximately HK$4.9 billion for the financial year ended 31 March 2015.

Commission income from securities dealing and brokerage services increased by approximately

6.8% from approximately HK$10.2 million for the financial year ended 31 March 2015 to

approximately HK$10.9 million for the financial year ended 31 March 2016. Average brokerage

commission rates were maintained at similar level of approximately 0.21% and 0.20% respectively for

the two financial years ended 31 March 2016. The increase in commission income from securities

dealing and brokerage services was mainly contributed by the bullish market sentiment during April

2015 to July 2015 which resulted in a significant increase in both the transaction value of securities

trading carried out by our Group on behalf of customers and commission income as compared to the

corresponding period in the previous year. Such increase was offset by the drop in both the transaction

value of securities trading carried out by our Group on behalf of customers and commission income

in the second half year of 2016 due to the bearish stock market condition in Hong Kong.


— 186 —

Commission income from securities dealing and brokerage services for the four months ended 31

July 2016 was approximately HK$1.3 million, representing a decrease of approximately HK$4.2

million, or 76.7% from approximately HK$5.5 million for the four months ended 31 July 2015. The

relatively high commission income from securities dealing and brokerage services for the four months

ended 31 July 2015 was mainly attributed to the bullish market sentiment during the period as

discussed above.

Fee and commission income from placing and underwriting activities

Hong Kong stock market is one of the major fund raising markets over the world. To grasp the

opportunities to serve our customers in fund raising activities, our Group acts as an underwriter or a

sub-underwriter or a placing agent or a sub-placing agent for companies listed or to be listed on the

Stock Exchange or for shareholders of companies listed on the Stock Exchange for their fund raising

exercises such as IPOs, rights issues, open offer or placing of new or existing shares or bonds. The

placing and underwriting fee and commission charged by our Group is subject to negotiation between

our Group and the customers and is generally in line with market practice. Our fees are chargeable

upon successful underwriting and/or placing and raising funds for our customers, unless otherwise

agreed with the customers that our Group is entitled to a settlement fee upon the lapse of agreements

and in such cases, the fee income is recognised as other revenue.

Apart from charging selling shareholders, issuers or brokers placing and/or underwriting fees and

commission, our Group may also receive commissions from securities subscribers in underwriting and

placing activities depending on the contract terms of each transaction and the commission from

securities subscribers may not increase/decrease in line with the fee and commission income from

selling shareholders, issuers or brokers.

Set out below is the breakdown of fee and commission income from placing and underwriting

activities:


2014 2015 2016 2015 2016

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

% HK$’000 %

Fee and commissionincome from sellingshareholders/issuers/brokers 31,786 97.4 22,216 95.9 14,053 88.5 997 84.3 18,051 89.6

Commission fromsecuritiessubscribers 834 2.6 955 4.1 1,831 11.5 186 15.7 2,091 10.4

32,620 100.0 23,171 100.0 15,884 100.0 1,183 100.0 20,142 100.0

For the three financial years ended 31 March 2016 and the four months ended 31 July 2015 and

2016, our Group generated placing and underwriting fee and commission income from selling

shareholders/issuers/brokers of approximately HK$31.8 million, HK$22.2 million, HK$14.1 million,


— 187 —

HK$1.0 million and HK$18.1 million respectively, representing approximately 97.4%, 95.9%, 88.5%,

84.3% and 89.6% of our Group’s total fee and commission income from placing and underwriting

activities respectively. Placing and underwriting fee and commission income was principally affected

by the number of transactions handled, the transaction value of securities and the commission rates.

The details of placing and underwriting transactions handled by our Group during the Track Record

Period are summarised as follows:

Financial year ended 31March


2014 2015 2016 2015(unaudited)

2016

Number of transactions 18 25 12 3 11

Transaction value (HK$’000) 699,260 956,736 572,637 46,550 1,310,222

Fee and commission income from

selling

shareholders/issuers/brokers

(HK$’000)

31,786 22,216 14,053 997 18,051

Average commission rates 4.55% 2.32% 2.45% 2.14% 1.38%

Placing and underwriting fee and commission income from selling shareholders/issuers/brokers

decreased by approximately 30.1% from approximately HK$31.8 million for the financial year ended

31 March 2014 to approximately HK$22.2 million for the financial year ended 31 March 2015 which

was mainly attributable to the decrease in average commission rates charged by our Group. During the

financial year ended 31 March 2014, our Group participated in an IPO of Listed Company F to locate

investors, based on the income of approximately HK$20.3 million over the actual transaction value of

approximately HK$278.2 million, the commission rate of such transaction is approximately 7.3%.

Such fee income has accounted for approximately 63.7% of the total placing and underwriting fee

from selling shareholders/issuers/brokers for the financial year ended 31 March 2014. As such, our

overall average commission rate for the financial year ended 31 March 2014 was much higher than that

for the financial year ended 31 March 2015 and 2016. Our Group received approximately HK$20.3

million from Listed Company F for its IPO transaction. Although our Group confirmed Listed

Company F that certain clients had given verbal commitment for around 170 million shares in this IPO

shares around August 2013, our Group was eventually allocated around 104.2 million shares of Listed

Company F for its investors. Based on the initial commitment of around 170 million shares, the final

offer price of Listed Company F and our income of approximately HK$20.3 million, the implied

commission rate of this IPO is approximately 4.4% which is within our range of commission rate

during the Track Record Period. Underwriting commission of this IPO was determined by various

factors, including but not limited to the number of shares underwritten by the underwriters and the

performance, contribution of each underwriter to this IPO, level of commitment and quality of

investors.

For the financial year ended 31 March 2016, though our Group achieved a slightly higher average

commission rate of approximately 2.45% as compared to the 2.32% for the financial year ended 31

March 2015, both the number of transactions and overall transaction value dropped significantly as


— 188 —

compared to those for the financial year ended 31 March 2015. As such, placing and underwriting fee

and commission income from selling shareholders/issuers/brokers decreased significantly by

approximately HK$8.2 million, or 36.7% from approximately HK$22.2 million for the financial year

ended 31 March 2015 to approximately HK$14.1 million for the financial year ended 31 March 2016.

For the four months ended 31 July 2016, both the number of transactions and overall transaction

value increased significantly as compared to those for the four months ended 31 July 2015. As such,

placing and underwriting fee and commission income from selling shareholders/issuers/brokers

increased significantly by approximately HK$17.1 million from approximately HK$1.0 million for the

four months ended 31 July 2015 to approximately HK$18.1 million for the four months ended 31 July

2016. During the four months ended 31 July 2016, our Group participated in a placing transaction of

Listed Company Z in which the transaction value was approximately HK$783.1 million, representing

approximately 59.8% of the total transaction value for the period, and our Group was entitled to a

fixed commission of approximately HK$1.5 million. The implied commission rate for this transaction

was approximately 0.2% only which resulted in the comparatively low average commission rate for

the four months ended 31 July 2016. The implied commission rate for this transaction was relatively

low because we were of the opinion that minimal effort would be required to complete the transaction.

Interest income from margin financing

Interest income from margin financing represents the interest income generated from the

provision of margin financing services to customers who would like to purchase securities listed on

the Stock Exchange (including securities listed on the GEM) on a margin basis, which offers funding

flexibility to our Group’s customers. During the Track Record Period, interest was charged by our

Group at the rate ranging from 3.25% to 10.25%.

Set out below is the average margin loan position and average margin interest rates charged by

our Group during the Track Record Period:


Four months ended31 July

2014 2015 2016 2015(unaudited)

2016

Average daily margin loan balance

(HK$’000)

95,678 95,281 76,815 65,266 115,717

Interest income from margin

financing (HK$’000)

5,028 5,006 4,245 1,174 2,344

Average interest rates* 5.26% 5.25% 5.53% 5.40% 6.08%

* Average interest rates for the four months ended 31 July 2015 and 2016 were annualised for illustrative purpose.

Our interest income from margin financing maintained at roughly the same level of

approximately HK$5.0 million for the two financial years ended 31 March 2015. The roughly same

interest income from margin financing was principally due to the fact that the average financing

provided by our Group and average interest rate offered to customers during the financial year ended

31 March 2015 were similar to those in the financial year ended 31 March 2014.


— 189 —

Our interest income from margin financing decrease by approximately 15.2% fromapproximately HK$5.0 million for the financial year ended 31 March 2015 to approximately HK$4.2million for the financial year ended 31 March 2016. The decrease in interest income from marginfinancing was principally due to the fact that the decrease in average financing provided by our Grouphad outweighed the slight increase in interest rate offered to customers during the financial year ended31 March 2016 as compared to those in the financial year ended 31 March 2015.

Our interest income from margin financing increased significantly by approximately 99.7% fromapproximately HK$1.2 million for the four months ended 31 July 2015 to approximately HK$2.3million for the four months ended 31 July 2016, which was mainly attributable to the increase inaverage financing provided by our Group during the period. Although there was a significant decreasein commission income from securities dealing and brokerage service for the four months ended 31 July2016 as compared to that for the four months ended 31 July 2015, our margin financing business wasnot adversely affected. Interest income from margin financing is mainly driven by the margin loanbalance and interest rates charged by our Group, and margin clients utilising our margin facilities maynot conduct securities trading actively due to their personal investment strategies which is evidencedby the fact that for the four months ended 31 July 2016, our Group has recorded margin interestincome of approximately HK$1.6 million from the top five margin clients whereas the brokeragecommission income from them was only approximately HK$0.1 million. As such, the fluctuation ofcommission income from securities dealing and brokerage service and interest income from marginfinancing may not be in the same direction.

Fund management fee

Pursuant to an investment management agreement dated 28 January 2004 (as amended on 5 July2006) entered into between PFSL and a hedge fund, the Customers B, we were appointed as theinvestment manager and adviser for the fund and responsible for identifying, evaluating and reviewingits investments and responsible for advising it in relating to the selection, evaluation, structuring andoverseeing of its investments.

Our Group is entitled to management fee at 0.5% per annum of the net asset value of the fundeach month and performance fee at 15% of the increase in net asset value of the fund as at thevaluation date according to the investment management agreement.

Our fund management fee decreased by approximately 36.1% from approximately HK$3.8million for the financial year ended 31 March 2014 to approximately HK$2.4 million for the financialyear ended 31 March 2015 which was mainly attributable to the decrease in performance fee receiveddue to the fact that the performance of the fund was not as good as previous year.

On 27 May 2015, PFSL entered into a novation agreement with Customer B and PFSL ceased toprovide asset management services to the fund. As such, total fund management fee decreasedsignificantly from approximately HK$2.4 million for the financial year ended 31 March 2015 toapproximately HK$0.4 million for the financial year ended 31 March 2016.

During the four months ended 31 July 2016, our Group did not manage any funds on behalf ofthird parties and therefore no fund management fee was recognised.


— 190 —

Others

Others represented handling fee for application for new shares and foreign shares and bonds

custody and handling services, referral fee and settlement fee income.

Other revenue for the financial year ended 31 March 2014 represented handling fee received.

During the financial year ended 31 March 2015, our Group recorded handling fee of approximately

HK$0.2 million, referral fee of approximately HK$0.3 million and a settlement fee income of HK$1.0

million. Our Group was initially approached to participate in a company’s IPO and was to be appointed

as the sole bookrunner, sole underwriter and one of the joint lead managers in the IPO. However, at

the request of that company and despite services being already partly rendered by our Group, the

services of our Group were no longer required and it was mutually agreed that our Group would be

paid a settlement fee of HK$1.0 million.

For the financial year ended 31 March 2016, other revenue mainly consisted of a referral fee of

approximately HK$9.4 million. During January 2016, our Group completed one referral transaction

for which the contract was signed on 14 July 2015, generating a total revenue of approximately

HK$9.4 million in relation to the referral of a potential investor to a controlling shareholder of a Hong

Kong listed company who is looking for purchasers of a controlling interest in such listed company.

Our Group is entitled to the referral fee upon successful disposal of the equity interest by the

controlling shareholder and the referral fee charged by our Group is a sum fixed between the selling

shareholder and our Group.

For the four months ended 31 July 2016, other revenue represented a settlement fee in the amount

of approximately HK$1.1 million. Pursuant to a placing agreement entered into between our Group

and a Hong Kong listed company in September 2015, our Group was initially appointed to place a

certain number of shares by 31 October 2015. Subsequently, the said placing did not take place by 31

October 2015, and thereafter the Hong Kong listed company agreed to pay a settlement fee of

approximately HK$1.1 million to our Group which is conditional upon the Hong Kong listed company

failing to engage our Group to place a certain number of shares by 30 June 2016. During June 2016,

our Group has recognised such settlement fee as other revenue as the Hong Kong listed company had

failed to meet the aforesaid condition.


— 191 —

Other income, gains and losses



2014 2015 2016 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

Bank interest income 6 6 9 3 2

Gain on disposal of property and

equipment 3 800 — — —

Other gains and losses:

Interest on accounts receivables 237 254 293 108 92

Settlement and handling fee 378 281 356 186 163

Fair value gain/(loss) on

held-for-trading investment — 97 (514) (181) (306)

Sundry income 157 34 63 — 2

781 1,472 207 116 (47)

Other income, gains and losses mainly consisted of bank interest income, gain on disposal of

property and equipment, interest charged on overdue accounts receivable (at 5% plus prime rate),

settlement and handling fee income from other services provided by our Group which are mainly

related to stocks settlement and clearing and dividend collection services, and fair value gain/loss on

held-for-trading investment.

Other income, gains and losses increased by approximately 88.5% from approximately HK$0.8

million for the financial year ended 31 March 2014 to HK$1.5 million for the financial year ended 31

March 2015. This was mainly because our Group has recorded gain from disposal of a motor vehicle

of HK$0.8 million and fair value gain on held-for-trading investment amounted to approximately

HK$0.1 million during the financial year ended 31 March 2015 while there were no such items in the

previous year.

Contrary to that for the financial year ended 31 March 2015, there was no gain on disposal of

property and equipment but a fair value loss on held-for-trading investment of approximately HK$0.5

million was recorded during the financial year ended 31 March 2016. As such, total other income,

gains and losses decreased significantly from approximately HK$1.5 million for the financial year

ended 31 March 2015 to approximately HK$0.2 million for the financial year ended 31 March 2016.

Other income, gains and losses for the four months ended 31 July 2015 was approximately

HK$116,000. For the four months ended 31 July 2016, fair value loss on held-for-trading investment

increased from approximately HK$181,000 for the four months ended 31 July 2015 to approximately

HK$306,000, which has resulted in a net loss of approximately HK$47,000 in total other income, gains

and losses for the period.


— 192 —

Commission expenses

Commission expenses represent commission paid to our Group’s AEs (including in-house AEs

and self-employed AEs) and commission paid to sub-placing agents or sub-underwriters engaged by

our Group for the fund raising exercises participated by our Group during the Track Record Period.

Set out below are the breakdowns of commission expenses:

Financial year ended 31March


2014 2015 2016 2015 2016

HK$’000 HK$’000 HK$’000

HK$’000

(unaudited) HK$’000

Commission to AEs 3,176 1,907 2,166 1,565 346

Commission to sub-placing

agents and sub-underwriters 4,320 1,766 1,864 — 1,666

7,496 3,673 4,030 1,565 2,012

Our commission expenses to AEs decreased by approximately 40.0% from approximately

HK$3.2 million for the financial year ended 31 March 2014 to approximately HK$1.9 million for the

financial year ended 31 March 2015 mainly due to the fact that transaction value of securities trading

conducted by our AEs for which they were entitled to commission during the financial year ended 31

March 2015 decreased significantly as compared to that for the financial year ended 31 March 2014.

On the contrary, as a result of the bullish market sentiment during April 2015 to July 2015 which

led to an increase in overall transaction value of securities trading conducted by our AEs for which

they were entitled to commission during the financial year ended 31 March 2016 as compared to that

for the financial year ended 31 March 2015, our commission expenses to AEs increased by

approximately 13.6% from approximately HK$1.9 million for the financial year ended 31 March 2015

to approximately HK$2.2 million for the financial year ended 31 March 2016.

Commission expenses to AEs for the four months ended 31 July 2016 was approximately HK$0.3

million, representing a decrease of approximately HK$1.2 million, or 77.9% from approximately

HK$1.6 million for the four months ended 31 July 2015. The relatively high commission expenses to

AEs for the four months ended 31 July 2015 was mainly attributed to the bullish market sentiment

during the period as discussed above.

Commission expenses to sub-placing agents and sub-underwriters for the three financial years

ended 31 March 2016 and the four months ended 31 July 2015 and 2016 were approximately HK$4.3

million, HK$1.8 million, HK$1.9 million, HK$nil and HK$1.7 million respectively. The

decrease/increase in commission expenses to sub-placing agents and sub-underwriters for the

respective year was affected by our Group’s extent of engaging sub-placing agents or sub-underwriters

to assist in the distribution of shares after considering, among others, on our (i) FRR position and (ii)

ability to seek for adequate placees.


— 193 —

Staff costs

Staff costs consist of (i) salaries and bonus; (ii) contributions to Mandatory Provident Fund; and

(iii) allowance for the Directors and employees of our Group.



2014 2015 2016 2015 2016

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

(unaudited)

Salaries and bonus, excluding

Directors’ emoluments 5,598 5,651 5,319 1,991 1,620

Contributions to Mandatory

Provident Fund, excluding

Directors’ contribution to

Mandatory Provident Fund 234 230 224 79 78

Allowances 288 285 331 — —

Directors’ emoluments

- Fees — — — — —

- Salaries 2,400 2,400 2,400 800 720

- Bonus 1,840 1,620 2,020 — —

- Contributions to Mandatory

Provident Fund 43 49 49 16 12

10,403 10,235 10,343 2,886 2,430

Total staff costs for the three financial years ended 31 March 2016 maintained at a stable level

of approximately HK$10.4 million, HK$10.2 million and HK$10.3 million respectively. The slight

decrease/increase was mainly affected by the amount of bonus payments and monthly salaries to our

Directors and staff. In addition, the decrease in total staff costs from approximately HK$2.9 million

for the four months ended 31 July 2015 to approximately HK$2.4 million for the four months ended

31 July 2016 was also contributed by the fact that total staff costs for the four months ended 31 July

2015 included staff costs of PICFL of approximately HK$0.2 million whereas there was no such

amount for the four months ended 31 July 2016 due to the disposal of PICFL in March 2016.

We had 25, 25, 21 and 23 in-house employees as at 31 March 2014, 2015 and 2016 and 31 July

2016 respectively. Staff are key assets of our Group and staff costs (including Directors’

remuneration) is a major expense item of our Group which accounted for an aggregate of

approximately 32.8%, 42.9%, 41.0%, 35.3% and 31.9% of our total administrative and operating

expenses (i.e. excluding finance costs, listing expenses and income tax expense) for the three financial

years ended 31 March 2016 and the four months ended 31 July 2015 and 2016 respectively.


— 194 —

Sensitivity analysis of staff costs

The following table illustrates the impact on our Group’s profit/loss before tax and net profit/loss

resulted from the changes in the average staff costs for the Track Record Period. The income tax

expenses are calculated by using the statutory income tax rate of 16.5%. It is assumed that all income

and expenses, other than staff costs and income tax expenses, remain unchanged.



2014 2015 2016 2015 2016

(unaudited)

Percentage change in staff costs +/-5% +/-5% +/-5% +/-5% +/-5%

Impact on profit/loss before tax

(HK$’000) -/+520 -/+512 -/+517 +/-144 -/+122

Percentage change in profit/loss

before tax -/+2.3% -/+2.6% -/+5.4% +/-15.1% -/+0.8%

Impact on profit/loss for the

year/period (HK$’000) -/+434% -/+428 -/+432 +/-120 -/+102

Percentage change in profit/loss for

the year/period -/+2.4% -/+2.6% -/+6.3% +/-11.7% -/+0.8%


2016, if staff costs increased by 5%, assuming all other income and expenses, other than income tax

expenses, remain unchanged, our Group’s profit/(loss) before tax would have been approximately

HK$22.6 million, HK$19.3 million, HK$9.1 million, HK$(1.1) million and HK$15.3 million

respectively, and our Group’s net profit/(loss) would have been approximately HK$17.9 million,

HK$16.0 million, HK$6.5 million, HK(1.1) million and HK$12.4 million respectively.


2016, if staff costs decreased by 5%, assuming all other income and expenses, other than income tax

expenses, remain unchanged, our Group’s profit/(loss) before tax would have been approximately

HK$23.6 million, HK$20.3 million, HK$10.2 million, HK$(0.8) million and HK$15.5 million

respectively, and our Group’s net profit/(loss) would have been approximately HK$18.8 million,

HK$16.9 million, HK$7.3 million, HK$(0.9) million and HK$12.6 million respectively.

Breakeven analysis

For the three financial years ended 31 March 2016 and the four months ended 31 July 2016, if

staff costs increased by 211%, 193%, 80% and 618% respectively, assuming all other income and

expenses, other than income tax expenses, remain unchanged, our Group’s profit before tax would

have dropped to approximately HK$1.1 million, HK$0 million, HK$1.4 million and HK$0.4 million

respectively, and our Group’s net profit would have dropped to approximately HK$0.


— 195 —

For the four months ended 31 July 2015, if staff costs decreased by 43%, assuming all other

income and expenses, other than income tax expenses, remain unchanged, our Group’s loss before tax

would have been a profit before tax of approximately HK$0.3 million, and our Group’s net loss would

have been approximately HK$0.

Other operating expenses

Financial year ended 31 MarchFour months ended

31 July

2014 2015 2016 2015 2016

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

(unaudited)

Air-condition and management fees 335 353 372 122 130

Bank charges 206 157 198 105 45

Donations to charities 168 1,118 481 100 —

Electricity 80 77 74 19 18

Entertainment expenses 1,354 1,142 1,601 377 458

Insurance expenses 102 108 183 48 87

Legal and professional fees 170 220 407 86 483

Motor vehicle expenses 133 140 116 42 36

Office expenses 163 149 187 39 39

Office rent and rates 3,332 3,536 3,696 1,230 1,276

Project service fee 5,000 — — — —

Record management fees 56 57 67 22 23

Repair and maintenances 100 154 90 7 32

Subscription fees 240 557 1,225 528 58

Telephone expenses 115 111 100 32 29

Stock information expenses 948 917 768 249 226

Sundry expenses 592 892 1,052 646 190

13,094 9,688 10,617 3,652 3,130

Other operating expenses primarily consist of air-condition and management fees, donations,

entertainment expenses, legal and professional fees (mainly consisted of auditors’ remuneration and

general legal consultancy service fee), office rent and rates, project service fee, subscription fees,

stock information expenses and various miscellaneous office expenses.

During the financial year ended 31 March 2014, our Group incurred an one-off project service

fee amounted to HK$5.0 million in relation to analyzing, exploring business opportunity and possible

setting up of an office in China (Shanghai) Pilot Free Trade Zone (the “SHFTZ”) by engaging an

independent third party for consultancy services, including but not limited to introducing and

explaining the pros and cons of SHFTZ to our Group; explaining the preferential policies, rules and

regulations of SHFTZ and how it can benefit our Group; analyzing and preparing a report on the


— 196 —

finance industry in China; explaining corporate establishment procedures and preparing a report on

SHFTZ and procedures for setting up a securities presence in China etc. After considering the

manpower and financial resource allocation of our Group, the Directors ultimately decided to maintain

our Group’s focus on the Hong Kong stock market and thus the business plan was eventually

terminated. By excluding such one-off item, other operating expenses for the financial year ended 31

March 2014 would be approximately HK$8.1 million. The increase in other operating expenses of

approximately HK$1.6 million, or 19.7%, from approximately HK$8.1 million (excluding the one-off

item) for the financial year ended 31 March 2014 to approximately HK$9.7 million for the financial

year ended 31 March 2015 was mainly due to the increase in donation to charities of approximately

HK$1.0 million made by our Group.

For the financial year ended 31 March 2016, our Group’s other operating expenses was

approximately HK$10.6 million, representing an increase of approximately HK$0.9 million, or 9.6%,

from approximately HK$9.7 million for the financial year ended 31 March 2015. This was mainly

attributable to (i) the increase in entertainment expense of approximately HK$0.5 million, (ii) the

increase in office rent and rates of approximately HK$0.2 million as a result of the renewal of rental

agreement in July 2015, and (iii) the increase in subscription fee of approximately HK$0.7 million as

a result of the subscription of securities market research report for the period from January 2015 to

December 2015 with monthly cost of approximately HK$0.1 million, and such increase was partly

offset by the decrease in donation to charities of approximately HK$0.6 million.

Our Group’s other operating expenses decreased by approximately 14.3% from approximately

HK$3.7 million for the four months ended 31 July 2015 to approximately HK$3.1 million for the four

months ended 31 July 2016. This was mainly attributable to (i) the decrease in donations of

approximately HK$0.1 million, (ii) the decrease in subscription fees of approximately HK$0.5 million

as a result of the lapse of subscription of securities market research report in December 2015 as

mentioned above, and such decrease was partly offset by the increase in legal and professional fees

of approximately HK$0.4 million.

Income tax expenses

Income tax expenses represent the amounts of Hong Kong profit tax paid/payable. Hong Kong

profit tax is calculated at 16.5% of the estimated assessable profit for the Track Record Period.

The effective tax rate for the three financial years ended 31 March 2016 and the four months

ended 31 July 2016 was approximately 20.6%, 16.7%, 28.6% and 18.5% respectively.

The effective tax rate for the financial year ended 31 March 2014 was much higher than the

statutory tax rate of 16.5%. This was mainly attributed to project service fee of HK$5.0 million

incurred during the year ended 31 March 2014 which was non-deductible for tax purpose in

accordance with the relevant tax rules.


— 197 —

The effective tax rate for the financial year ended 31 March 2016 and the four months ended 31

July 2016 was higher than the statutory tax rate of 16.5%. This was mainly attributed to the listing

expenses of approximately HK$6.0 million and HK$1.8 million incurred during the financial year

ended 31 March 2016 and the four months ended 31 July 2016 respectively being recorded in the

books of our Company with no income generated during the year, thus was non-deductible for tax

purpose.

For the four months ended 31 July 2015, our Group’s operating subsidiary, PFSL, recorded a

profit before tax of approximately HK$0.4 million and was subject to Hong Kong profit tax of

approximately HK$77,000. The loss before tax of our Group of approximately HK$1.0 million for the

period was mainly the combined effect of profit before tax of PFSL, the listing expenses of

approximately HK$1.1 million incurred and the operating loss of PICFL.

Profit/loss and total comprehensive income/expense for the year/period

Our Group’s profit and total comprehensive income decreased by approximately 10.2% from

approximately HK$18.3 million for the financial year ended 31 March 2014 to approximately

HK$16.5 million for the financial year ended 31 March 2015 which was primarily due to the drop in

total revenue of approximately HK$12.1 million. Such drop in revenue was partly offset by the

decrease in commission expenses of approximately HK$3.8 million, decrease in other operating

expenses of approximately HK$3.4 million and decrease in income tax expense of approximately

HK$1.5 million.

For the financial year ended 31 March 2016, our Group’s profit and total comprehensive income

was approximately HK$6.9 million, representing a decrease of approximately HK$9.6 million, or

58.2%, from approximately HK$16.5 million for the financial year ended 31 March 2015. Such

decrease was mainly because we incurred listing expenses of approximately HK$6.0 million for the

financial year ended 31 March 2016. For the financial year ended 31 March 2016, if the non-recurring

referral fees and the one-off Listing expenses are excluded, our Group would have a net profit of

approximately HK$5.0 million (after considering the tax effect).

For the four months ended 31 July 2016, our Group’s profit and total comprehensive income was

approximately HK$12.5 million, representing an increase of approximately HK$13.6 million from the

net loss of approximately HK$1.0 million for the four months ended 31 July 2015. The significantly

improved financial result was primarily due to the increase in total revenue of approximately HK$16.6

million. If the one-off Listing expenses are excluded, our Group would have a net profit of

approximately HK$14.3 million for the four months ended 31 July 2016.


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LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

During the Track Record Period, our Group’s operations were generally financed through a

combination of shareholders’ equity, fund advanced from Directors, internally generated cash flows

and bank borrowings.

The following table summarises our cash flows for the years/periods indicated:



2014 2015 2016 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

Net cash generated by/(used in)

operating activities 59,436 27,286 (25,975) 21,501 27,581

Net cash generated by/(used in)

investing activities 19 621 (5,262) (107) (118)

Net cash (used in)/generated by

financing activities (25,378) (4,624) 4,696 1,967 (38)

Net increase/(decrease) in cash and

cash equivalents 34,077 23,283 (26,541) 23,361 27,425

Cash and cash equivalents at the

beginning of year/period 5,905 39,982 63,265 63,265 36,724

Cash and cash equivalents at the end

of year/period 39,982 63,265 36,724 86,626 64,149

Cash flows generated by/(used in) operating activities

Cash flows from operating activities reflects profit/loss before tax for the years/periods adjusted

for depreciation, gain on disposal of property and equipment, unrealised gain/loss arising on change

in fair value of held-for-trading investment, the effects of cash flows arising from increases or

decreases in held-for-trading investment, rental and utility deposits, accounts receivables,

prepayments, bank balance held on behalf of customers, accounts payables, other payables, accruals

and tax payments. We have classified customers’ monies as cash held on behalf of customers under

segregated bank accounts under the current assets section of the combined statements of financial

position and we are not allowed to use customers’ monies to settle our own obligations.

For the financial year ended 31 March 2014, we had net cash generated by operating activities

of approximately HK$59.4 million which was primarily attributed to profit before tax of

approximately HK$23.1 million, decrease in accounts receivable of approximately HK$28.3 million,

decrease in cash held on behalf of customers of approximately HK$1.1 million, increase in accounts

payable of approximately HK$2.4 million and increase in other payables and accruals of



— 199 —

For the financial year ended 31 March 2015, we had net cash generated by operating activities

of approximately HK$27.3 million which was primarily attributed to profit before tax of

approximately HK$19.8 million, decrease in accounts receivable of approximately HK$13.0 million

and increase in accounts payable of approximately HK$38.8 million which was then offset by the

increase in held-for-trading investment of approximately HK$1.9 million, increase in cash held on

behalf of customers of approximately HK$28.4 million, decrease in other payables and accruals of

approximately HK$4.0 million and income tax paid of approximately HK$9.0 million. The increase in

accounts payable as at 31 March 2015 was mainly due to the increase in accounts payable to cash

clients which was mainly driven by the amount of cash held on behalf of clients by our Group and the

aggregate amount of securities that cash clients sold and remained outstanding as at that year end.

For the financial year ended 31 March 2016, we had net cash used in operating activities of

approximately HK$26.0 million which was primarily attributed to increase in accounts receivable of

approximately HK$13.3 million, increase in prepayment of approximately HK$1.8 million, decrease

in accounts payable of approximately HK$44.0 million and income tax paid of approximately HK$1.7

million which was then offset by profit before tax of approximately HK$9.6 million, increase in other

payables and accruals of approximately HK$2.7 million and decrease in cash held on behalf of

customers of approximately HK$21.7 million. The decrease in accounts payable as at 31 March 2016

was mainly due to the decrease in accounts payable to cash clients which was mainly driven by the

amount of cash held on behalf of clients by our Group and the aggregate amount of securities that cash

clients sold and remained outstanding as at that year end.

For the four months ended 31 July 2015, we had net cash generated by operating activities of

approximately HK$21.5 million which was primarily attributed to decrease in accounts receivable of

approximately HK$30.2 million and decrease in cash held on behalf of customers of approximately

HK$12.8 million which was then offset by increase in prepayment of approximately HK$1.0 million,

decrease in accounts payable of approximately HK$17.1 million and decrease in other payables and

accruals of approximately HK$2.7 million.

For the four months ended 31 July 2016, we had net cash generated by operating activities of

approximately HK$27.6 million which was primarily attributed to profit before tax of approximately

HK$15.4 million, decrease in accounts receivable of approximately HK$10.8 million and increase in

accounts payable of approximately HK$15.8 million which was then offset by increase in prepayment

of approximately HK$1.3 million, increase in cash held on behalf of customers of approximately

HK$9.9 million and decrease in other payables and accruals of approximately HK$3.6 million.

Explanations of fluctuations of the major assets and liabilities are set out in the sub-section

headed “Discussion of Major Assets and Liabilities Items” in this section.

Cash flows generated by/(used in) investing activities

Cash flows from investing activities mainly comprise cash flows for bank deposit pledged for our

banking facilities, purchase of/proceeds from disposal of/deposit paid for property and equipment.


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Net cash inflows from investing activities for the financial year ended 31 March 2015 of

approximately HK$621,000 represented the net effect of proceeds from disposal of property and

equipment of HK$800,000 and cash outflow for the purchase of property and equipment of

approximately HK$179,000.

For the financial year ended 31 March 2016, we had net cash outflows of approximately HK$5.3

million which mainly represented the cash outflows for bank deposit pledged for our banking facilities

of HK$5.0 million.

For the four months ended 31 July 2015 and 2016, we had net cash outflows of approximately

HK$0.1 million and HK$0.1 million respectively which represented the cash outflows for purchase of

property and equipment.

Cash flows (used in)/generated by financing activities

Net cash used in financing activities for the financial year ended 31 March 2014 was due to the

repayment of bank borrowings of HK$10.0 million and repayment to directors of approximately

HK$15.4 million.

For the two financial years ended 31 March 2016 and the four months ended 31 July 2015 and

2016, our Group recorded net cash outflows of approximately HK$4.6 million, net cash inflows of

approximately HK$4.7 million, net cash inflows of approximately HK$2.0 million and net cash

outflows of approximately HK$38,000 respectively from financing activities which represented the

net effect of cash flows arising from advance from or repayment to Directors.

Working capital

Our Directors confirm that our Group has sufficient working capital for its requirements for at

least the next 12 months from the date of this prospectus taking into account the existing financial

resources available to us, the available banking facilities, the estimated net proceeds from the Placing

and cash flows from operations.

Financial resources

Prior to the completion of the Placing, our operations and investments were generally financed

through a combination of shareholders’ equity, fund advanced from Directors, internally generated

cash flows and bank borrowings. As at 31 July 2016, our Group had cash and cash equivalents of

approximately HK$64.1 million. We intend to finance our future operation, capital expenditure and

other capital requirements with the cash generated from business operation, cash and cash equivalents

available, credit facilities from banks and the net proceeds of the Placing.

As all of our Group’s operation is in Hong Kong, most of our revenue from external customers

of our Group are derived from activities in Hong Kong. Our Directors consider that we will have

sufficient foreign exchange, primarily from the conversion of Hong Kong dollars generated from our

operations, to meet our foreign exchange liabilities as they become due.


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COMBINED STATEMENTS OF FINANCIAL POSITION

As at 31 March 2014, 2015 and 2016, 31 July 2016 and 31 October 2016, our Group had net

assets of approximately HK$96.0 million, HK$112.4 million, HK$123.4 million, HK$135.9 million

and HK$142.9 million respectively. Details of the components are set out as follow:

As at 31 MarchAs at

31 JulyAs at

31 October2014 2015 2016 2016 2016

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

(unaudited)

Non-current assetsProperty and equipment 407 351 282 473 459Deposits placed with stock exchange

and clearing house 675 675 675 630 630Available-for-sale investment 68 68 — — —Rental and utility deposits 1,113 1,141 1,100 1,100 1,100Deposit paid for office equipment — — 119 — —

Total non-current assets 2,263 2,235 2,176 2,203 2,189

Current assetsHeld-for-trading investment — 2,043 1,529 1,223 771Accounts receivable 123,352 110,379 123,655 112,887 98,002Prepayments and other receivables 337 516 2,270 3,542 4,940Tax recoverables — 1,479 473 — —Cash and bank balances 78,180 129,911 86,667 124,036 261,826

Total current assets 201,869 244,328 214,594 241,688 365,539

Current liabilitiesAccounts payable 56,968 95,718 51,688 67,537 188,535Other payables and accruals 8,684 4,729 7,406 3,812 7,696Amounts due to Directors 28,311 23,687 24,319 24,281 24,251Tax payables 4,203 — — 2,369 4,318Bank borrowings 10,000 10,000 10,000 10,000 —

Total current liabilities 108,166 134,134 93,413 107,999 224,800

Net current assets 93,703 110,194 121,181 133,689 140,739

Net assets 95,966 112,429 123,357 135,892 142,928


— 202 —

As at 31 MarchAs at

31 JulyAs at

31 October2014 2015 2016 2016 2016

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

(unaudited)

EquityShare capital — — — — —Reserves 96,230 112,762 123,357 135,892 142,928

Equity attributable to owners of our

Company 96,230 112,762 123,357 135,892 142,928

Non-controlling interests (264) (333) — — —

Total equity 95,966 112,429 123,357 135,892 142,928

DISCUSSION OF MAJOR ASSETS AND LIABILITIES ITEMS

Current assets comprised mainly accounts receivable and cash and bank balances. Whencompared to the amount recorded as at 31 March 2014, accounts receivable decreased byapproximately 10.5% from approximately HK$123.4 million as at 31 March 2014 to approximatelyHK$110.4 million as at 31 March 2015. Cash and bank balances increased by approximately 66.2%from approximately HK$78.2 million as at 31 March 2014 to approximately HK$129.9 million as at31 March 2015. When compared to the amount recorded as at 31 March 2015, accounts receivableincreased by approximately 12.0% from approximately HK$110.4 million as at 31 March 2015 toapproximately HK$123.7 million as at 31 March 2016. Cash and bank balances decreased byapproximately 33.3% from approximately HK$129.9 million as at 31 March 2015 to approximatelyHK$86.7 million as at 31 March 2016 which was mainly attributed to the decrease in cash held in ourGroup’s house accounts (including the pledged bank deposit) and cash held on behalf of customers byapproximately HK$21.5 million and HK$21.7 million respectively. When compared to the amountrecorded as at 31 March 2016, accounts receivable decreased by approximately 8.7% fromapproximately HK$123.7 million as at 31 March 2016 to approximately HK$112.9 million as at 31July 2016 and further decreased by approximately 13.2% to approximately HK$98.0 million as at 31October 2016. Cash and bank balances increased by approximately 43.1% from approximatelyHK$86.7 million as at 31 March 2016 to approximately HK$124.0 million as at 31 July 2016 andfurther increased by approximately 111.1% to approximately HK$261.8 million as at 31 October 2016.The significant increase in cash and bank balances as at 31 October 2016 was mainly attributed to theincrease in cash held on behalf of customers by approximately HK$132.4 million from approximatelyHK$54.9 million as at 31 July 2016 to approximately HK$187.3 million as at 31 October 2016.

Current liabilities comprised mainly accounts payable, amounts due to Directors and bankborrowings. Accounts payable increased by approximately 68.0% from approximately HK$57.0million to HK$95.7 million as at 31 March 2014 and 2015 respectively and decreased byapproximately 46.0% to HK$51.7 million as at 31 March 2016. Accounts payable increased byapproximately 30.7% to HK$67.5 million as at 31 July 2016 and further increased by approximately179.2% to approximately HK$188.5 million as at 31 October 2016. The significant increase in


— 203 —

accounts payable as at 31 October 2016 was mainly due to the increase in accounts payable to cashclients which was mainly driven by the amount of cash held on behalf of clients by our Group and theaggregate amount of securities that cash clients sold and remained outstanding as at that date. Amountsdue to Directors were approximately HK$28.3 million, HK$23.7 million, HK$24.3 million, HK$24.3million and HK$24.3 million as at 31 March 2014, 2015 and 2016, 31 July 2016 and 31 October 2016respectively. Bank borrowings remained at HK$10.0 million as at 31 March 2014, 2015 and 2016 and31 July 2016. The bank borrowings were fully settled in September 2016 and thus had nil balance asat 31 October 2016.

Our net current assets were approximately HK$93.7 million, HK$110.2 million, HK$121.2million, HK$133.7 million and HK$140.7 million as at 31 March 2014, 2015 and 2016, 31 July 2016and 31 October 2016 respectively. The continuous increase was mainly a result of the profit generatedduring the respective year/period. Our Group has no material non-current assets. Consequently, the netassets of our Group maintained at similar level of the net current assets at approximately HK$96.0million, HK$112.4 million, HK$123.4 million, HK$135.9 million and HK$142.9 million as at 31March 2014, 2015 and 2016, 31 July 2016 and 31 October 2016 respectively.

Held-for-trading investment

Held-for-trading investment represents equity securities listed outside Hong Kong which ismeasured at fair value. This is acquired by our Group and is intended to be disposed at appropriatetiming.

Accounts receivable

Accounts receivable include receivable from clearing house, cash clients and margin clients andaccounts receivable arising from the placing and underwriting business. The following table sets outthe breakdown of accounts receivables as at the dates indicated:

As at 31 March As at 31 July

2014 2015 2016 2016

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

Accounts receivable arising from the business ofdealing in securities

Clearing house 5,876 4.8 7,988 7.2 4,044 3.3 88 0.1

Cash clients 8,128 6.6 26,343 23.9 7,482 6.1 18,892 16.7

Margin clients 108,986 88.3 75,580 68.5 111,989 90.5 92,787 82.2

Accounts receivable arising from the placing andunderwriting business 362 0.3 468 0.4 140 0.1 1,120 1.0

123,352 100.0 110,379 100.0 123,655 100.0 112,887 100.0

Less: Impairment — — — —

123,352 110,379 123,655 112,887

The settlement terms of accounts receivable from cash clients and clearing house arising from

the business of dealing in securities are on a T+2 settlement basis.


— 204 —

Accounts receivable from cash clients arising from the business of dealing in securities mainlyrepresent purchase transactions by clients that are executed but not yet settled in cash pursuant to theT+2 settlement basis. For cash account clients balances not settled within the T+2 period, our Groupcharges overdue interests at interest rates of 5% over prime rate per annum. Accounts receivable fromcash clients increased from approximately HK$8.1 million as at 31 March 2014 to approximatelyHK$26.3 million as at 31 March 2015, and decreased to approximately HK$7.5 million as at 31 March2016. As at 31 July 2016, accounts receivable from cash clients increased from approximately HK$7.5million as at 31 March 2016 to approximately HK$18.9 million. Such increase/decrease was due to theincreasing/decreasing amount of purchased securities pending for settlement as at the respectivereporting dates.

The balances with clearing house mainly represent the amount receivable in respect of tradeswhich are pending for settlement due to the T+2 settlement basis. Accounts receivable from theclearing house was approximately HK$5.9 million, HK$8.0 million, HK$4.0 million and HK$0.1million as at 31 March 2014, 2015 and 2016 and 31 July 2016 respectively. The increase/decrease inbalances was mainly due to the increase/decrease in trades pending settlement which are normally duewithin two trading days after the trade date.

All accounts receivable from clearing house and cash clients are included in “neither past norimpaired” category. The management believes that no impairment allowance is necessary in respectof these balances as the balances are considered fully recoverable.

Accounts receivable from margin clients relate to securities purchased on margin basis by clientshaving margin accounts with our Group. Accounts receivable from margin clients are secured bypledged securities, repayable on demand and bearing interest at a rate ranged from 3.25% to 9.25%,3.25% to 9.25%, 3.25% to 10.25% and 3.25% to 8.25% per annum for the three financial years ended31 March 2016 and the four months ended 31 July 2016 respectively. The credit facility limits tomargin clients are determined by the discounted market value of the collateral securities accepted byour Group. Our Group maintains a list of approved stocks for margin lending at a specifiedloan-to-collateral ratio. Any excess in the lending ratio will trigger a margin call which the customershave to settle.

Accounts receivable arising from the business of dealing in securities from margin clientsdecreased by approximately HK$33.4 million, or 30.7%, from approximately HK$109.0 million as at31 March 2014 to approximately HK$75.6 million as at 31 March 2015, and increased byapproximately HK$36.4 million, or 48.2% to approximately HK$112.0 million as at 31 March 2016.As at 31 July 2016, accounts receivable from margin clients decreased by approximately HK$19.2million, or 17.1% to approximately HK$92.8 million. Such balances represent the aggregate amountof securities that margin clients purchased on credit and remained outstanding as at those days. Theincrease/decrease in accounts receivable from margin clients as at the respective reporting dates wasmainly due to the fact that the amount of securities that the margin clients purchased on credit andremained outstanding was higher/lower than that as at the previous reporting dates.

Accounts receivable from margin clients as at 31 March 2014, 2015 and 2016 and 31 July 2016were secured by the margin clients’ securities, which were pledged to PFSL as collateral with fairvalue of approximately HK$305.0 million, HK$371.4 million, HK$525.9 million and HK$330.4million respectively. Our Group is not prohibited to sell the collateral upon customers’ default orrepledge the collaterals upon receiving customers’ authorisation.


— 205 —

All accounts receivable from margin clients are included in “neither past due nor impaired”

category. As at 31 March 2014, 2015 and 2016 and 31 July 2016, 100%, 100%, 100% and 77% of the

outstanding balances, respectively, were secured by sufficient collateral on an individual basis. For the

margin loans with insufficient collateral as at 31 July 2016, sufficient additional collateral assets have

been provided subsequently. Management of our Group has assessed the market value of the pledged

securities of each individual customer that has margin shortfall as at the end of each reporting period

and considered that no impairment allowance is necessary taking into consideration of client’s credit

quality, subsequent repayment of monies and subsequent additional collateral assets. Our Directors

confirmed that there had been no forced liquidation of pledged securities during the Track Record

Period and no impairment loss was incurred during the same period.

Accounts receivable arising from the placing and underwriting business are repayable in

accordance with the contract terms and represented unsettled fee income as at the reporting dates in

relation to our underwriting and placing business.

Included in our Group’s accounts receivable arising from the placing and underwriting business

as at 31 July 2016 is a debt with carrying amount of approximately HK$1.1 million which is past due

as at the reporting date for which our Group has not provided for impairment loss because the issuer

is of good credit. Our Group does not hold any collateral over this balance.

Ageing of accounts receivable arising from the placing and underwriting business which are past

due but not impaired:

As at 31 MarchAs at

31 July20162014 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

0-60 days past due — — — 1,120

Except as described above, all accounts receivables arising from the placing and underwriting

business are included in “neither past due nor impaired” category. The management believes that no

impairment allowance is necessary in respect of these balances because these issuers or lead

underwriters are of good credit.

Accounts receivable from margin clients include accounts receivable from the Directors of our

Company of approximately HK$11,964,000, HK$7,694,000, HK$10,098,000 and HK$3,341,000 as at

31 March 2014, 2015 and 2016 and 31 July 2016, respectively.

Accounts receivable from margin clients include accounts receivable from a family member of

a Director of approximately HK$4,333,000, HK$5,058,000, HK$12,273,000 and HK$7,924,000 as at

31 March 2014, 2015 and 2016 and 31 July 2016, respectively.


— 206 —

Accounts receivable from margin clients include accounts receivable from entity controlled by

the Directors of our Company of approximately HK$169,000, nil, HK$1,620,000 and HK$1,316,000

as at 31 March 2014, 2015 and 2016 and 31 July 2016, respectively.

Accounts receivable from cash clients include accounts receivable from entity significantly

influenced by the Directors of our Company of approximately nil, HK$151,000, nil and nil as at 31

March 2014, 2015 and 2016 and 31 July 2016, respectively.

As at the Latest Practicable Date, other than the accounts receivable of approximately HK$1.0

million arising from the placing and underwriting business as at 31 July 2016 was remained

outstanding, all accounts receivable from cash clients and clearing house arising from the business of

dealing in securities and accounts receivable arising from the placing and underwriting business as at

31 July 2016 had been subsequently settled.

Margin account customers who purchased securities on credit are not required to settle their

margin financing loans within any specific period so long as our Group continues to grant the margin

facilities or the value of margin financing loan and collaterals remain within the agreed leverage ratio.

Our Group will in return charge the margin account customers interest on the outstanding margin

financing loan. As such, the subsequent settlement status of such receivables as at a particular date is

of no significance and not meaningful.

Prepayments

Prepayments refer to prepaid operating expenses and deferred listing expenses incurred for issue

of new shares which will be capitalised and deducted from our Group’s share premium upon the

completion of the Listing. The increase in prepayments as at 31 March 2016 as compared to that at

31 March 2015 was mainly due to the deferred listing expenses of approximately HK$2.0 million

recognised during the financial year ended 31 March 2016. As at 31 July 2016, total prepayments

further increased by approximately 56.0% to approximately HK$3.5 million. The increase in

prepayments was mainly due to (i) the increase in deferred listing expenses by approximately HK$0.4

million; and (ii) the prepaid general legal and compliance advisory service fee of approximately

HK$0.7 million while there was no such item as at 31 March 2016. Basis of allocation of listing

expenses between profit or loss and equity was in accordance with relevant accounting standards,

details of which were set out in the paragraph headed “Impact of Listing Expenses” in this section.

Tax recoverables/payables

Our Group recorded tax payables of approximately HK$4.2 million, tax recoverables of

approximately HK$1.5 million and HK$0.5 million and tax payables of approximately HK$2.4 million

respectively as at 31 March 2014, 2015 and 2016 and 31 July 2016. Hong Kong profits tax is

calculated at 16.5% of the estimated assessable profit for the Track Record Period. The current tax

assets or payables represented provision for Hong Kong profits tax for the respective year after

subtracting provisional tax paid.


— 207 —

Cash and bank balances

Our cash and bank balances primarily relate to (i) cash on hand and bank balances of our Group

(including pledged bank deposit); and (ii) cash held on behalf of customers. The following table sets

out the breakdown of cash and bank balances as at the dates indicated:

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Bank balance - house accounts 39,982 63,252 36,724 64,142

Cash on hand — 13 — 7

39,982 63,265 36,724 64,149

Pledged bank deposit — — 5,000 5,000

Cash held on behalf of customers 38,198 66,646 44,943 54,887

78,180 129,911 86,667 124,036

Bank balances bear interest at the prevailing market rates and are deposited with banks in Hong

Kong.

Our Group maintains segregated bank accounts to hold customers’ deposits arising from normal

business transactions. We recognised the corresponding amount in accounts payable. The cash held on

behalf of customers is restricted and governed by the Securities and Futures (Client Money) Rules

under the Securities and Future Ordinance.

As a result of the renewal of banking facilities with bank in February 2016, the personal

guarantee executed by Mr. B Lo as required by the previous facilities letter was released on 1 March

2016 and replaced by the pledge of our Group’s bank deposit. As such, bank deposit of HK$5.0 million

was classified as pledged bank deposit as at 31 March 2016 and 31 July 2016.

Our Group’s cash and bank balances (excluding cash held on behalf of customers) increased from

approximately HK$40.0 million as at 31 March 2014 to HK$63.3 million as at 31 March 2015. The

increase was mainly contributed by the net cash inflows from operating activities, which was primarily

attributed to the profit before tax of approximately HK$19.8 million and the increase of accounts

payable of approximately HK$38.8 million during the year.


— 208 —

Our Group’s cash and bank balances (including pledged bank deposit but excluding cash held on

behalf of customers) decreased from approximately HK$63.3 million as at 31 March 2015 to HK$41.7

million as at 31 March 2016. The decrease was mainly contributed by the net cash outflows from

operating activities during the year, which was primarily a result of the decrease in accounts payable

of approximately HK$44.0 million.

Our Group’s cash and bank balances (including pledged bank deposit but excluding cash held on

behalf of customers) increased from approximately HK$41.7 million as at 31 March 2016 to HK$69.1

million as at 31 July 2016. The increase was mainly contributed by the net cash inflows from operating

activities during the period, which was primarily attributed to the profit before tax of approximately

HK$15.4 million, the decrease in accounts receivable of approximately HK$10.8 million and the

increase in accounts payable of approximately HK$15.8 million.

The cash held on behalf of customers as at 31 March 2014, 2015 and 2016 and 31 July 2016 was

approximately HK$38.2 million, HK$66.6 million, HK$44.9 million and HK$54.9 million

respectively.

Accounts payable

Accounts payable primarily include payable to clearing house, cash clients and margin clients

arising from the business of dealing in securities. The following table sets out the breakdown of

accounts payable as at the dates indicated:

As at 31 March As at 31 July

2014 2015 2016 2016

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

Accounts payable arising from the business

of dealing in securities

Clearing house 7,903 13.9 3,834 4.0 — 0.0 8,062 11.9

Cash clients 43,953 77.1 82,391 86.1 50,945 98.6 57,285 84.9

Margin clients 5,112 9.0 9,493 9.9 743 1.4 2,190 3.2

56,968 100.0 95,718 100.0 51,688 100.0 67,537 100.0

Accounts payable arising from the business of dealing in securities as at a particular day is

principally affected by (i) the cash deposits placed with us by our customers at their respective

accounts for trading purpose; and (ii) the amount owing to customers who had sold shares through

their respective account at our Group within the T+2 period which had not been settled.

Accounts payable arising from the business of dealing in securities to clearing house represent

trades pending settlement arising from business of dealing in securities transactions which are

normally due within two trading days after the trade date.


— 209 —

Accounts payable to cash clients and margin clients are repayable on demand except where

certain balances represent trade pending settlement or deposits received from clients for their trading

activities under the normal course of business.

Accounts payable arising from the business of dealing in securities to cash clients and margin

clients, in aggregate, increased from approximately HK$49.1 million as at 31 March 2014 to

approximately HK$91.9 million as at 31 March 2015 and decreased to approximately HK$51.7 million

as at 31 March 2016. As at 31 July 2016, accounts payable to cash clients and margin clients increased

to approximately HK$59.5 million. Out of these balances, accounts payable to cash clients and margin

clients, in aggregate, amounted to approximately HK$38.2 million, HK$66.6 million, HK$44.9 million

and HK$54.9 million as at 31 March 2014, 2015 and 2016 and 31 July 2016 respectively were payable

to clients in respect of the trust and segregated bank balances received which were held for clients in

the course of conducting the regulated activities. The increase or decrease in accounts payable to cash

clients and margin clients during the Track Record Period was mainly driven by the amount of cash

held on behalf of clients by our Group and the aggregate amount of securities that cash clients and

margin clients sold and remained outstanding as at that year/period end date.

Accounts payable to cash clients include amounts payable to the Directors of our Company of

approximately HK$4,906,000, HK$7,054,000, HK$1,526,000 and HK$2,922,000 as at 31 March 2014,

2015 and 2016 and 31 July 2016, respectively.

Accounts payable to margin clients include accounts payable to a Director of our Company of

approximately nil, HK$243,000, nil and nil as at 31 March 2014, 2015 and 2016 and 31 July 2016,

respectively.

Accounts payable to margin clients include amounts payable to the entity controlled by our

Company’s Directors of approximately nil, HK$6,959,000, nil and nil as at 31 March 2014, 2015 and

2016 and 31 July 2016, respectively.

As at the Latest Practicable Date, excluding those related to customers trust bank balances, all

accounts payable as at 31 July 2016 have been subsequently settled.

Amounts due to Directors

Amounts due to Directors represented fund advanced from Directors which are unsecured,

repayable on demand, and non-interest bearing. Approximately HK$6.1 million of the amounts due to

Directors was capitalised on 5 December 2016, and the remaining amounts will be fully settled

upon/before Listing.

Other payables and accruals

Other payables and accruals mainly comprised accrued commission expense, accrued staff costs

(including salaries, bonus and contributions to Mandatory Provident Fund), accrued legal and

professional fees, accrued listing expenses, subscription fees payables and amounts payables to sundry

creditors.


— 210 —

During the financial year ended 31 March 2014, our Group incurred one-off project service fee

amounted to HK$5.0 million and recorded service fee payables of the same amount as at 31 March

2014. The amount was subsequently settled during the financial year ended 31 March 2015. As such,

the balance of other payables and accruals significantly decreased by approximately HK$4.0 million

from approximately HK$8.7 million as at 31 March 2014 to approximately HK$4.7 million as at 31

March 2015.

Other payables and accruals were approximately HK$4.7 million and HK$7.4 million as at 31

March 2015 and 2016 respectively. The increase in balances was mainly attributed to the accrual of

listing expenses of approximately HK$3.8 million as at 31 March 2016 while no such item was

recorded as at 31 March 2015.

Other payables and accruals decreased from approximately HK$7.4 million as at 31 March 2016

to approximately HK$3.8 million as at 31 July 2016. The decrease in balances was mainly attributed

to the decrease in accrued listing expenses of approximately HK$0.8 million and the decrease in

accrued commission expenses, salary and bonus to Directors and employees from approximately

HK$2.4 million as at 31 March 2016 to approximately HK$0.1 million as at 31 July 2016 as our Group

used to make accrual on discretionary bonus in March every year.

Banking facilities and bank borrowings

As at 31 March 2014, 2015 and 2016 and 31 July 2016, our Group had banking facilities totaling

HK$50.0 million, HK$50.0 million, HK$55.0 million and HK$55.0 million respectively granted by a

bank in Hong Kong. As at 31 March 2014 and 2015, the banking facilities are secured by first fixed

charges over listed shares of certain margin clients amounting to approximately HK$45.9 million and

HK$43.0 million respectively and a personal guarantee executed by Mr. B Lo for HK$55.0 million

(plus interest and other charges). As at 31 March 2016 and 31 July 2016, the banking facilities are

secured by first fixed charges over listed shares of certain margin clients amounting to approximately

HK$38.5 million and HK$42.3 million respectively and the pledge of our Group’s bank deposit of

HK$5.0 million and HK$5.0 million respectively.

As at 31 March 2014, 2015 and 2016 and 31 July 2016, our Group had utilised HK$10.0 million

of the aforesaid banking facilities. The bank loan bears interest at 2% per annum over Hong Kong

inter-bank offered rate as at 31 March 2014, 2% per annum over the bank’s cost of funding as at 31

March 2015 and 2016 and 31 July 2016.

Dividend policy

Subject to the Companies Law, through a general meeting, we may declare dividends in any

currency, but no dividend may be declared in excess of the amount recommended by our Board. Our

Memorandum and Articles of Association provides that dividends may be declared and paid out of our

profits. With the sanction of an ordinary resolution, dividends may also be declared and paid out of

our share premium account or any other fund or account which can be authorised for this purpose in

accordance with the Companies Law and our Memorandum and Articles of Association.


— 211 —

Our Directors will declare dividends, if any, in Hong Kong dollars with respect to our Shares on

a per-Share basis and will pay such dividends in Hong Kong dollars. Our Group does not have a

specific dividend payment policy/payment ratio and the amount of dividends to be distributed to our

Shareholders will depend upon our earnings and financial condition, operating requirements, capital

requirements and any other conditions that our Directors may deem relevant and will be subject to the

approval of our Shareholders. During the Track Record Period, we did not declare any dividends.

Our Board has the absolute discretion to decide whether to declare or distribute dividends in any

year and we will re-evaluate our dividend policy annually. There is no assurance that dividends of such

amount or any amount will be declared or distributed each year or in any year.

Off balance sheet arrangements

We do not have any outstanding derivative instrument, off-balance sheet guarantee or foreign

currency forward contract. We do not engage in trading activities involving non-exchange traded

contracts.

IMPACT OF LISTING EXPENSES

The listing expenses represent the fees and costs incurred for issue of new Shares and getting the

existing and new Shares listed on the GEM. As the issue of new Shares is the issue of an equity

instrument, whilst the listing of existing and new Shares is not, the listing expenses that are not clearly

separable are required to be allocated between the two transactions using the proportion of the number

of new Shares to be issued to the total number of Shares in issue upon Listing. Since the number of

new Shares to be issued represents 25% of the total number of Shares in issue upon Listing, listing

expenses that are not clearly separable are allocated to equity and the profit or loss on a 25/75

proportion.

It is expected that a sum of approximately HK$19.3 million relating to the Listing will be

recognised by our Group based on a Placing Price of HK$0.15 per Placing Share, being the mid-point

of the indicative range of Placing Price and assuming the Offer Size Adjustment Option is not

exercised, of which approximately HK$6.7 million is directly attributable to the issue of new Shares

and would be accounted for as a deduction from equity, while the remaining balance of approximately

HK$12.6 million is charged to the profit or loss of our Group. Among the remaining balance of

approximately HK$12.6 million, HK$6.0 million and HK$1.8 million was charged to the profit or loss

of our Group for the financial year ended 31 March 2016 and the four months ended 31 July 2016

respectively while HK$4.8 million will be charged to the profit or loss of our Group for the eight

months ending 31 March 2017.

Our Directors wish to emphasis that the aforesaid amount is a current estimate for reference only

and the final amount to be recognised in equity and the profit or loss for the financial year ending 31

March 2017 is subject to adjustment and the then changes in estimates and assumptions.


— 212 —

INDEBTEDNESS

As at 31 October 2016, being the latest practicable date for the purpose of this statement of

indebtedness, our Group had outstanding indebtedness of amounts due to Directors of approximately

HK$24.3 million, which were unsecured, unguaranteed and non-interest bearing. Approximately

HK$6.1 million of which was capitalised on 5 December 2016, and the remaining amounts will be

settled upon/before Listing. As at 31 October 2016, our Group had banking facilities totaling HK$55.0

million granted by a bank in Hong Kong which was secured by first fixed charges over listed shares

of certain margin clients amounting to approximately HK$14.6 million and the pledge of our Group’s

bank deposit of HK$5.0 million. As at 31 October 2016, none of these banking facilities were utilised

by our Group.

Save as disclosed above and apart from intra-group liabilities and normal trade payables, as at

31 October 2016, being the latest practicable date for the purpose of this statement of indebtedness,

our Group had no outstanding mortgages, charges, debentures, debt securities, term loans, other

borrowings or indebtedness in the nature of borrowings, including bank overdraft, and liabilities under

acceptances or acceptance credits or hire purchase commitments or any guarantee or other material

contingent liabilities.

Our Directors have confirmed that there have been no material defaults in payment during the

Track Record Period.

CONTRACTUAL COMMITMENTS

Operating lease commitments

As at 31 March 2014, 2015 and 2016 and 31 July 2016, our Group had commitments for future

minimum lease payments under a non-cancellable operating lease which fails due as follows:

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Within one year 3,601 3,807 4,068 3,390

In the second to fifth years inclusive 450 4,990 678 —

4,051 8,797 4,746 3,390


— 213 —

Capital commitments

As at 31 March 2014, 2015 and 2016 and 31 July 2016, our Group had the following capital

commitments:

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Capital expenditure in respect of

acquisition of office equipment

contracted for but not provided in the

combined financial statements — — 118 —

DISTRIBUTABLE RESERVES

Our Company was incorporated on 3 August 2015 and has not carried out any business since the

date of our incorporation save for the transactions related to the Reorganisation. Accordingly, there

was no reserve available for distribution to the Shareholders as at 31 July 2016.

KEY FINANCIAL RATIOS

As at/Financial yearended 31 March

As at/Fourmonths

ended31 July

20162014 2015 2016

Net profit margin 33.7% 38.8% 16.8% 50.4%

Net profit margin before interest and tax 43.2% 47.3% 24.2% 62.1%

Return on equity* 19.1% 14.6% 5.6% 27.7%

Return on total assets* 9.0% 6.7% 3.2% 15.4%

Current ratio 1.9 1.8 2.3 2.2

Interest coverage 56.5 73.4 36.4 177.7

Net debt to equity ratio N/A N/A N/A N/A

Gearing ratio 39.9% 30.0% 27.8% 25.2%

* Return on equity and return on total assets for the four months ended 31 July 2016 were annualised for illustrative

purpose.

Net profit margin is calculated by dividing net profit for the year or period by revenue of the

respective year or period. Net profit margin increased from approximately 33.7% for the financial year

ended 31 March 2014 to approximately 38.8% for the financial year ended 31 March 2015. This was

mainly due to the inclusion of one-off project service fee of HK$5.0 million for the financial year


— 214 —

ended 31 March 2014 while no such item was incurred for the financial year ended 31 March 2015.

Net profit margin decreased from approximately 38.8% for the financial year ended 31 March 2015

to approximately 16.8% for the financial year ended 31 March 2016. This was principally due to the

decrease in net profit from approximately HK$16.5 million for the financial year ended 31 March 2015

to approximately HK$6.9 million for the financial year ended 31 March 2016 which was mainly

because we incurred listing expenses of approximately HK$6.0 million during the financial year ended

31 March 2016. Net profit margin increased from approximately 16.8% for the financial year ended

31 March 2016 to approximately 50.4% for the four months ended 31 July 2016. This was principally

due to the significantly improved overall financial performance for the four months ended 31 July

2016 which was mainly a result of increase in total revenue.

Net profit margin before interest and tax is calculated by dividing net profit before interest and

tax for the year or period by revenue of the respective year or period. Net profit margin before interest

and tax was approximately 43.2%, 47.3%, 24.2% and 62.1% for the three financial years ended 31

March 2016 and the four months ended 31 July 2016 respectively. The pattern of fluctuation and

reasons for such fluctuation on net profit margin before interest and tax were similar to that for net

profit margin as discussed above.

Return on equity is calculated by dividing net profit for the year or period (on an annualised

basis) by total equity at the end of the respective year or period. Return on equity of our Group was

approximately 19.1%, 14.6%, 5.6% and 27.7% for the three financial years ended 31 March 2016 and

the four months ended 31 July 2016 respectively. The relatively high return on equity ratio for the four

months ended 31 July 2016 was attributable to the better overall performance for that period. The

relatively low return on equity ratio for the financial year ended 31 March 2016 was mainly

attributable to the decrease in net profit for the financial year ended 31 March 2016 as discussed

above.

Return on total assets is calculated by dividing net profit for the year or period (on an annualised

basis) by total assets at the end of the respective year or period. Return on total assets decreased from

approximately 9.0% for the financial year ended 31 March 2014 to approximately 6.7% for the

financial year ended 31 March 2015 which was primarily due to (i) the better overall performance for

the financial year ended 31 March 2014; and (ii) the increase in total assets from approximately

HK$204.1 million as at 31 March 2014 to approximately HK$246.6 million as at 31 March 2015 as

a result of the significant increase in cash and bank balances. Return on total assets decreased from

approximately 6.7% for the financial year ended 31 March 2015 to approximately 3.2% for the

financial year ended 31 March 2016, and increased from approximately 3.2% for the financial year

ended 31 March 2016 to approximately 15.4% for the four months ended 31 July 2016. Such

fluctuation on return on total assets ratio for the financial year ended 31 March 2016 and four months

ended 31 July 2016 was mainly driven by the decrease or increase in net profit for the respective year

or period as discussed above.

Current ratio is calculated by dividing current assets by current liabilities as at the end of the

respective year or period. Current ratio was approximately 1.9 times, 1.8 times and 2.3 times as at 31

March 2014, 2015 and 2016 respectively. The increase in current ratio as at 31 March 2016 was in line


— 215 —

with the decrease in total current liabilities which was mainly driven by the decrease in accountspayable balances. Current ratio as at 31 July 2016 was approximately 2.2 times which was similar tothat as at 31 March 2016 because of the similar proportion of increase in both current assets andcurrent liabilities.

Interest coverage is calculated by dividing net profit before interest and tax for the year or periodby finance costs of the respective year or period. Interest coverage was approximately 56.5 times, 73.4times, 36.4 times and 177.7 times for the three financial years ended 31 March 2016 and the fourmonths ended 31 July 2016 respectively which indicated our Group’s strong ability to pay-off financecosts incurred for the respective year or period. The relatively low interest coverage ratio for thefinancial year ended 31 March 2016 was attributed to the decrease in net profit before interest and tax.

Net debt to equity ratio is calculated by dividing net debt (i.e. total debt less cash and bankbalances (excluding cash held on behalf of customers)) by total equity as at the end of the respectiveyear or period. Total debt included amounts due to Directors of our Company and bank borrowings.No net debt to equity ratio was presented as our Group’s cash and bank balances (excluding cash heldon behalf of customers) was greater than total debt as at the end of the respective year or period.

Gearing ratio is calculated by dividing total debt by total equity as at the end of the respectiveyear or period. Total debt included amounts due to Directors of our Company and bank borrowings.Gearing ratio was approximately 39.9%, 30.0%, 27.8% and 25.2% as at 31 March 2014, 2015 and 2016and 31 July 2016 respectively. The decreasing trend of gearing ratio was mainly due to the increasingof total equity mainly as a result of the profit generated during the respective year or period.

FINANCIAL RISKS

Our Groups’ financial instruments comprise held-for-trading investment, available-for-saleinvestment, loans and receivables and financial liabilities at amortised cost. The risks associated withthese financial instruments mainly include market risk, credit risk and liquidity risk. Our policies onhow to mitigate these risks are set out below:

Market risk

Interest rate risk

At the end of each reporting period, the cash flow interest rate risk mainly arises from ourGroup’s bank balances (house account) and bank borrowings, which are financial instruments carriedat variable interest rates. Based on the year or period end interest-bearing bank balances (houseaccount) and bank borrowings, if interest rates had been 50 basis points higher and all other variableswere held constant, our Group’s profit for the three financial years ended 31 March 2016 and the fourmonths ended 31 July 2016 would increase by approximately HK$125,000, HK$222,000, HK$132,000and HK$82,000, respectively. The management of our Group assessed that a decrease in interest ratesis not likely and will not affect our Group’s cash flow interest rate risk.

Currency risk

Currency risk is the risk of loss due to adverse movements in foreign exchange rates relating toforeign currency deposits with banks. Our Group’s foreign exchange rate risk is not material as foreigncurrency deposits with banks are minimal.


— 216 —

Other price risk

Price risk is the risk that the fair value or future cash flows of our Group’s held-for-trading

investment will fluctuate as a result of changes in market prices (other than those arising from interest

rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer,

or all factors affecting equity instruments traded in the market.

The management of our Group manages the risk exposure by closely monitoring the investment

and will consider hedging the risk exposure should the need arise.

The management of our Group has utilized the effect of stock price variation on profit to manage

and analyze the price risk. If the equity price of the held-for-trading investment had been 10%

higher/lower, and held other variables constant, the profit for the three financial years ended 31 March

2016 and the four months ended 31 July 2016 would increase/decrease by approximately nil,

HK$204,000, HK$153,000 and HK$122,000 respectively.

Credit risk

At the end of each reporting period, our Group’s maximum exposure to credit risk which will

cause a financial loss to our Group due to failure to discharge an obligation by the counterparties is

arising from the carrying amount of the respective recognised financial assets as stated in the

combined statements of financial position.

In order to minimise the credit risk, the management of our Group has delegated a team

responsible for determination of credit limits, credit approvals and other monitoring procedures to

ensure that follow-up action is taken to recover overdue debts. In addition, our Group holds collateral

to cover its credit risks associated with its accounts receivable from margin clients and reviews the

recoverable amount of each individual accounts receivable at the end of each reporting period to

ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the

Directors of our Company consider that our Group’s credit risk is significantly reduced.

As at 31 March 2014, 2015 and 2016 and 31 July 2016, our Group has concentration of credit

risk on accounts receivable as 63%, 69%, 64% and 65%, respectively, of the total accounts receivable

was due from top five largest customers and 5%, 7%, 3% and 0% respectively of the total accounts

receivable was due from clearing house.

As at 31 March 2014, 2015 and 2016 and 31 July 2016, our Group has concentration of credit

risk on liquid funds as bank balances are deposited with two banks, two banks, one bank and one bank

respectively. The credit risk on liquid funds and accounts receivable from clearing house is limited

because the counterparties are banks and a clearing house with high credit ratings assigned by

international credit-rating agencies.

Other than concentration of credit risk on liquid funds and accounts receivable, our Group does

not have any other significant concentration of credit risk.


— 217 —

Liquidity risk

In the management of the liquidity risk, our Group monitors and maintains a level of cash and

cash equivalents deems adequate by management to finance our Group’s operations and mitigate the

effects of fluctuations in cash flow.

The tables below present the cash flows payable by our Group within the remaining contractual

maturities at the end of each reporting period. The amounts disclosed in the tables are the contractual

undiscounted cash flows. The tables include both interest and principal cash flows. To the extent that

the interest rates are floating, the undiscounted amount is derived from interest rate at the end of each

respective reporting period.

Weighted

average

interest rate On demand

Less than

3 months

Total

undiscounted

cash flow

Carrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2014

Other payables — — 228 228 228

Accounts payable arising from the

business of dealing in securities

Clearing house — — 7,903 7,903 7,903

Cash clients 0.01 33,662 10,291 43,953 43,953

Margin clients 0.01 5,112 — 5,112 5,112

Bank borrowings 2.65 — 10,063 10,063 10,000

Amounts due to directors — 28,311 — 28,311 28,311

67,085 28,485 95,570 95,507

Weighted

average


Less than

3 months

Total

undiscounted

cash flow

Carrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2015




Clearing house — — 3,834 3,834 3,834

Cash clients 0.01 40,450 41,941 82,391 82,391

Margin clients 0.01 9,373 120 9,493 9,493

Bank borrowings 2.74 — 10,069 10,069 10,000

Amounts due to Directors — 23,687 — 23,687 23,687

73,510 56,291 129,801 129,732


— 218 —

Weighted

average


Less than

3 months

Total

undiscounted

cash flow

Carrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2016




Cash clients 0.01 43,970 6,975 50,945 50,945

Margin clients 0.01 726 17 743 743

Bank borrowings 2.41 — 10,060 10,060 10,000


69,015 17,216 86,231 86,171

Weighted

average


Less than

3 months

Total

undiscounted

cash flow

Carrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 July 2016




Clearing house — — 8,062 8,062 8,062

Cash clients 0.01 48,584 8,701 57,285 57,285

Margin clients 0.01 2,190 — 2,190 2,190

Bank borrowings 2.72 — 10,068 10,068 10,000


75,055 27,020 102,075 102,007

Fair value measurements

Our Directors consider that the carrying amounts of financial assets and financial liabilities

recorded at amortised cost in the combined statements of financial position and approximate their fair

values.

Our Group’s held-for-trading investment is measured at fair value at the end of each reporting

period. It is traded in active liquid markets and its fair value is determined with reference to quoted

market bid prices.


— 219 —

Fair value hierarchy as at 31 March 2015

Level 1 Level 2 Level 3 Total

HK$’000 HK$’000 HK$’000 HK$’000

Financial assets

Held-for-trading investment 2,043 — — 2,043



HK$’000 HK$’000 HK$’000 HK$’000

Financial assets


Fair value hierarchy as at 31 July 2016


HK$’000 HK$’000 HK$’000 HK$’000

Financial assets


There were no transfers between Level 1 and 2 during the Track Record Period.

The total gains and losses for the two financial years ended 31 March 2016 and the four months

ended 31 July 2016 included an unrealised gain of approximately HK$97,000, an unrealised loss of

approximately HK$514,000 and an unrealised loss of approximately HK$306,000 relating to financial

assets that are measured at fair value. Such fair value gains and losses are included in other gains and

losses.

DISCLOSURE REQUITED UNDER THE GEM LISTING RULES

Our Directors have confirmed that as at the Latest Practicable Date, there are no circumstances

which would give rise to a disclosure requirement under Rule 17.15 to 17.21 of the GEM Listing

Rules.

TAXATION

Our Company is incorporated in the Cayman Islands as an exempted company with limited

liability under the Companies Law and, accordingly, is exempted from the payment of the Cayman

Islands income tax.

Our profits arising in or derived from Hong Kong are subject to Hong Kong profits tax. Provision

for Hong Kong profits tax has been calculated at the applicable rates of 16.5% for the three financial

years ended 31 March 2016 and the four months ended 31 July 2016, on the estimated assessable

profits of our companies operating in Hong Kong.


— 220 —

For the income tax paid by our Group during the Track Record Period, please refer to note 12

of Appendix I to this prospectus.

RELATED PARTY TRANSACTIONS

With respect to the related party transactions set out in note 31 to the Accountants’ Report

contained in Appendix I to this prospectus, our Directors confirm that these transactions were

conducted on normal commercial terms and/or that such terms that were no less favorable to us that

terms available from Independent Third Parties which are fair and reasonable and in the interest of the

Shareholders as a whole.

SUSTAINABILITY OF OUR GROUP’S BUSINESS

Since 1 April 2016, our Group’s financial performance continued to be negatively affected by,

among other things, the overall negative market sentiment about the (i) uncertain global economies,

and (ii) bearish outlook on the PRC economy. As such, our Group’s business, which to a certain extent

is correlated to the financial health of the local and global financial markets, has been affected. We

consider that the volatility of the financial markets, in particular in Asia, will continue to post a

challenging business environment for our Group. Notwithstanding the aforesaid, for the four months

ended 31 July 2016 we have managed to complete 11 placing and underwriting transactions that

generated revenue of approximately HK$20.1 million and our Directors are positive of the future

prospects of the financial services industry and believe our Group’s business will remain sustainable

into the near future.

We have a successful track record of operating in the Hong Kong financial market for over 20years and successfully operate through past difficult business/financial environments

Our Group’s history can be traced back to the 1990s. Since then our Group has weathered various

financial crisis, in particular, the Asian stock market collapse in 1997 and more recently the global

financial crisis in 2008 and in 2012. Over the years we have adapted to the dynamic financial

conditions by diversifying our business model to position our Group to meet the future demands of

the financial market and to allow our customers to capitalize on opportunities as they arise in the

market. Despite the depressed markets conditions continuing in 2016, especially affecting our

securities dealing and brokerage services, our Group has been able to further establish itself as a

contender in the market for a larger market share in the placing and underwriting services. During the

Track Record Period, our Group has focused on developing its placing and underwriting services,

which has allowed it to complete 18, 25, 12 and 11 placing and underwriting transactions. Subsequent

to the Track Record Period and up to the Latest Practicable Date, our Group has continued to capitalize

on its previous success and has completed seven placing and underwriting transactions.

Our Directors further believe that our Group’s established brand and proven business model will

continue to provide us with an edge in market competitiveness, enabling our business viability and to

grow our business over time, taking into account the anticipated capital contribution from the Listing

proceeds.


— 221 —

We have established a list of long-term customers

The financial markets in 2016 continues to present a difficult and challenging market for both

our Group and our customers. Our Directors targets to provide personalized and efficient services.

Over the years we have established and maintained a steady list of long-term customers many of whom

have had business relationship with our Group for many years. These long-term customers have

formed the backbone of our Group’s operations from which can generate stable revenues and from

which we believe we can build a strong platform not only for our brokerage services but also for our

placing and underwriting services and asset management services. As part of our Group’s expansion

plans, it will continue to increasing its customer base in particular with the intention to increase high

net worth customers from the PRC. Our Directors believe that through continued support from our

customers we will be able to capitalize on referrals made to our Group in terms of adding to our list

of brokerage customers and on any placing and underwriting deals that may also be introduced to us.

Finally, the number of customer accounts maintained by our Group increased from 4,004 as at

31 March 2014 to 4,224 as at 31 March 2016, representing a CAGR of approximately 2.7%, and this

further increased to 4,254 as at 31 July 2016. Our Directors believe that this evidences our ability to

thrive and prosper in the midst of prevailing difficult business/financial environment.

It should also be noted that the total number of brokerage transactions, despite decreasing from

38,347 for the financial year ended 31 March 2014 to 23,931 for the financial year ended 31 March

2016, it had a higher average transaction value for the financial year ended 31 March 2016 as

compared to the figure for the two financial years ended 31 March 2015. Our Directors believe that

the overall market has been adversely affected and this can be seen from the year on year decrease in

average daily turnover value and average number of trades per day of 44.9% and 31.0%, respectively

as reported by the Stock Exchange for the eight months ended 31 August 2016 as compared to the same

period in 2015. Details of our Group’s operating data is set out in the sub-section headed “Operational

Data” in the section headed “Business” of this prospectus.

As part of our Group’s future plans, we propose to hire new AEs who will be tasked to increase

our number of brokerage customers, in particular high net worth customers from China, which we

expect will assist us in the overall expansion of our Group’s brokerage business.

We have further expanded our range of placing and underwriting transactions and expect thatwe will be able to capture a large market share with the goodwill established from our pasttransactions and the additional funds from the Listing

Over the years, our Group has managed to slowly expand the scale of services such that we are

now able to be involved in transactions involving capital raising amounts of over HK$1.0 billion as

compared to one of the earlier deals in our Group’s history raising approximately HK$30 million.

During the Track Record Period, we have successfully completed 66 underwriting/sub-underwriting

and placing/sub-placing transactions in relation to 58 companies listed on the Stock Exchange

(representing approximately of 3.0% the total number of companies listed on the Stock Exchange as

at 31 October 2016). Subsequent to the Track Record Period and up to Latest Practicable Date, we

have completed seven placing and underwriting transactions. Please refer to the sub-section headed


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“Summary — Recent Developments” for further information. Taking into consideration our Group’s

performance during the Track Record Period and up to the Latest Practicable Date, our Directors

believe that our Group’s established footprint in the capital market in Hong Kong as well as its

established business relationship with various listed companies, sponsors and other HKEx participants

will provide the foundation from which our Group can capture further capital fund raising

opportunities in tandem with the continued growth of the HKEx platform. Our Directors believe that

with the additional funds raised from the Listing, it will enable our Group to participate in additional

placing and underwriting transactions which our Group currently may not have been able to undertake

due to limitation of liquid capital.

Our Directors believe that with the ever-increasing number of companies listed on the Stock

Exchange (growing from 978 in 2002 to 1,943 as at 31 October 2016), other opportunities will present

itself to enable our Group to capitalize on the financial funding requirements of the capital markets.

We have a manageable operating cost structure and capable of meeting our financial and

operating lease commitments

We operate on a manageable operating cost structure, with most of our cost component being

predictable. Other than commission expenses and staff costs which are considered as directly

correlated to our Group’s revenue stream, rental cost (including service fees) represent the most

significant component of our other operating cost and accounted for approximately 11.6%, 16.3%,

16.1% and 18.5% of our total administrative and operating costs (i.e. excluding finance costs, listing

expenses and income tax expense) in aggregate for the three financial years ended 31 March 2016 and

the four months ended 31 July 2016, respectively.

Through the inception of existing tenancy of tenure of two years (from July 2015 to June 2017),

we have essentially locked into an important share of our significant cash outflow involved with

operating lease payments, and insulated ourselves against any unpredictable escalation of rental rates

which may arise in the foreseeable future. With that recent Government policies to curb property

prices, such policies may contribute to a lowering of future rental rates which will benefit us by

reducing our operating lease payments. Our business continued to be profitable throughout the Track

Record Period, and we managed to cover all our operating expenditure. Our Directors believe we shall

continue to be able to meet all our financial and operating lease commitments as and when they fall

due.

Our Directors believe we will be able to continue to sustain a healthy profit margin

We attribute the general improvement in profitability as the result of our endeavor in recent years

of selecting quality customers of our different business services, developing business relationship with

them in providing quality service and enhancing our revenue stream with a higher proportion of fee

and commission income from placing and underwriting activities commanding a generally higher

profit margin.


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For each of the three years ended 31 March 2016 and the four months ended July 2016, our net

profit margins were 33.7%, 38.8%, 16.8% and 50.4% respectively. After excluding the non-recurring

referral income of HK$9.4 million and non-recurring listing expense of HK$6.0 million, our net profit

margin for the year ended 31 March 2016 was 12.2%. Despite the decrease in net profit margin in the

financial year ended 31 March 2016, our Directors believe that our Group still achieved a healthy

stable net profit during the Track Record Period due to the stable customer base that our Group has

amassed over the years.

Despite the lower revenue from securities dealing brokerage services for the four months ended

31 July 2016 as compared to the same period in 2015, our Group’s placing and underwriting revenue

for the same period has already surpassed the total placing and underwriting revenue generated for the

year ended 31 March 2016. Therefore, our Directors believe our current business strategy of

increasing focus on placing/underwriting activities will generally allow our Group to achieve a higher

profit margin, accommodate ourselves to the changing market environment, with a view of catering

to the middle to upper spectrum of the market segment. In addition, upon successfully listing and

raising of capital from the Listing we will reinforce our financial capability as well as our reputation

to enhance potential customers’ perception and confidence. As such, our Directors believe that the

strategies to be implemented by our Group to further expand its placing and undertaking services,

margin financing and asset management business with the net proceeds from the Listing will allow our

Group to continue to sustain a healthy profit margin for the foreseeable future.

Taking into consideration the above factors, our Directors are of the view that we have

established a sustainable business model positioned not only to capitalize on forthcoming

opportunities in the financial market but also we have established a deep root and strong foothold in

the Hong Kong market enabling our Group to weather any adverse markets conditions in the future.

MATERIAL ADVERSE CHANGE

Save as disclosed in the section headed “Recent Developments” and “Impact of Listing

Expenses” in this section, our Directors confirm that there has been no material adverse change in the

financial or trading positions or the prospects of our Group since 31 July 2016, being the date of our

Company’s latest audited financial statements as set out in Appendix I to this prospectus and up to the

date of this prospectus.

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED COMBINED NET TANGIBLE

ASSETS

The unaudited pro forma statement of adjusted combined net tangible assets of our Group, which

has been prepared in accordance with Rule 7.31 of the GEM Listing Rules, is to illustrate the effect

of the listing on our Group’s combined net tangible assets, as of 31 July 2016 as if the listing had taken

place on 31 July 2016. It has been prepared for illustrative purpose only, and because of its

hypothetical nature, may not give a true picture of the financial positions of our Group after the listing

or at any future dates. For details, please refer to Appendix II to this prospectus.


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BUSINESS OBJECTIVE

The business objective of our Group is to increase our Group’s exposure and scale of operationsin Hong Kong within the capital markets and try and capture a larger market share.

BUSINESS STRATEGIES

To achieve our business objective, we propose to:

1. Develop our brokerage services with a focus on enlarging our customer base and targetinghigh net worth customers from the PRC who are suited to investing in small to mediumcapitalization companies listed on the Stock Exchange by ways of (i) enhancing ourGroup’s reputation through providing customer focused services and getting listed on theStock Exchange so as to attract potential referrals from existing customers; (ii) extendingour Group’s marketing activities by making more active contact with professional partiesand existing customers to maintain good business relationship, participating or sponsoringinvestment related events and to expand network by soliciting new customers throughreferrals with a focus on high net worth customers from the PRC; (iii) promoting ourinternet trading platform to existing customers with the aim to gain potential referrals fornon-Hong-Kong customers (including customers from the PRC and overseas); and (iv)increasing our number of in-house AEs by two in 2017 to cope with the expected expansionof brokerage services with a focus on increasing our potential candidates base withestablished relationships and relevant experience with high net worth individuals from thePRC. By enlarging our customer base, we believe that this will allow us to strengthen ourGroup’s underwriting and placing activities and also to strengthen our pool of potentialcustomers on our asset management services as well as allow us to also offer competitivemargin financing (including IPO margin financing) packages which can organically lead togrowth in our brokerage services. During the Track Record Period and the period from 1August 2016 to the Latest Practicable Date, there were 6, 26, 23, 8 and 3 new PRC clientsrespectively who have opened securities accounts in our Group, which have accounted forapproximately 8.2%, 32.5%, 14.3%, 25.0% and 13.6% of the total new clients during therespective year/period.

2. Develop our placing and underwriting services through establishing new relationships andmaintain existing relationships with other investment banks and professionals in theindustry so that we may gain access to more placing and underwriting opportunities and indoing so, increase our market share in Hong Kong; and establish new relationship andmaintain existing relationships with listed companies in Hong Kong to market our Group’sfund raising capabilities and obtain a better understanding of the needs of the listedcompanies in the secondary market. During the Track Record Period, we have completed18, 25, 12 and 11 placing and underwriting transactions with an aggregate value ofapproximately HK$699 million, HK$957 million, HK$573 million and HK$1,310 million,respectively. For comparison purposes, for the three years ended 31 December 2015, theoverall equity funds raised in the market, as per the HKEX Fact Book 2015, wasapproximately HK$379 billion, HK$942 billion and HK$1,116 billion. During the TrackRecord Period, we have assisted only a small portion of companies out of those companiesthat conducted equity fund raising activities and as such our Directors believe there stillexists ample opportunities for our Group to strive and expand;

BUSINESS OBJECTIVES AND STRATEGIES

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3. Enhance PFSL’s revolving capital resources, through the additional monies received fromthe Listing which will allow PFSL to increase its overall liquid capital position and increasePFSL’s margin financing (including IPO margin financing) abilities. Subsequent to theTrack Record Period and up to the Latest Practicable Date, PFSL has completed a total ofseven placing and underwriting transactions and generated total placing and underwritingrevenue of approximately HK$2.9 million. Having considered the recent success of and thedemand for our Group’s placing and underwriting services, our Directors believe that thereis potential for PFSL to solidify itself as a major participant and contender to assistcompanies in their fund raising needs; and

4. Enhance our Group’s quality of service offered to our customers by upgrading our Group’sIT systems as well as increasing the capital markets knowledge and development of ourstaff to enable them to appropriately and efficiently deal with customers and their needs.By doing so, we believe we will be able to build our reputation in the market for providingcustomer focused services.

IMPLEMENTATION PLANS

In pursuance of the business objectives set out above, the implementation plans of our Group areset out below for each of the six-month periods until 31 March 2019. Investors should note that thefollowing implementation plans are formulated on the bases and assumptions referred to in theparagraphs headed “Bases and Assumptions” below. These bases and assumptions are inherentlysubject to many uncertainties and unpredictable factors, in particular the risk factors set forth in thesection headed “Risk Factors” of this prospectus.

From theLatest

PracticableDate to

31 March2017

For the six months ending % of netproceeds

(approximate)30 September

201731 March

201830 September

201831 March

2019 TotalHK$ million HK$ million HK$ million HK$ million HK$ million HK$ million

Expansion of margin financingservice (Note 1) 7.5 15.0 15.0 10.9 — 48.4 87.0%

Upgrade of our Group’s ITSystems (Note 2) — 0.4 0.4 0.4 0.5 1.7 3.0%

General working capital 5.6 — — — — 5.6 10.0%

13.1 15.4 15.4 11.3 0.5 55.7 100.0%

Note:

1. As margin receivable, subject to FRR calculation, is classified as liquid assets under the FRR, the funds designated formargin financing also has the effect of improving our liquid capital and thus raising our capacity of undertakingunderwriting activities.

2. Our Group intends to use approximately HK$1.7 million as initial set-up cost and monthly service expenses for theupgrade of our Group’s accounting, front office and back office systems.

Among the services that our Group is principally engaged in, namely (i) securities dealing andbrokerage, (ii) placing and underwriting, (iii) financing service including securities and IPO marginfinancing and (iv) asset management services, the resources for financing service needed in terms ofcapital is the highest because our Group needs to grant margin loan to the margin customers using itscapital. As such, the major part of the proceeds from the Listing will be used for margin financing


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(including IPO margin financing) business instead of the other services provided by our Group. OurGroup’s margin financing has increased in terms of average daily loan outstanding from approximatelyHK$76.8 million for the financial year ended 31 March 2016 to approximately HK$115.7 million forthe four months ended 31 July 2016. As set out in the sub-section headed “Securities and IPO MarginFinancing” in the section headed “Industry Overview” of this prospectus, there was an increasingdemand of margin financing services from the market in recent years as evidenced by the increasingnumber of active margin customers (increased from 135,201 as at 31 December 2011 to 241,948 as at31 December 2015, representing a CAGR of approximately 15.7%) and the increasing amounts ofreceivables from margin customers (increased from HK$50,171 million as at 31 December 2011 toHK$145,307 million as at 31 December 2015, representing a CAGR of approximately 30.5%). Withthe additional capital from the Listing, our Directors believe that this will allow our customers whorely on margin financing to capitalise on the increasing market trend and therefore benefitting ourGroup in terms of brokerage commission as well as margin financing income. Our Directors believethat by expanding the margin financing (including IPO margin financing) business, securities dealingand brokerage services will also be expanded.

BASES AND KEY ASSUMPTIONS OF FUTURE PLANS

Our Directors have adopted the following principal assumptions in the preparation of the futureplans up to 31 March 2019:

(a) there will be no material changes in the existing political, legal, fiscal, social or economicconditions in Hong Kong, or in any other places in which any member of our Group carrieson its business or will carry on its business;

(b) our Group will have sufficient financial resources to meet the planned capital expenditureand business development requirements during the period to which the business objectivesrelated;

(c) there will be no material changes in the bases or rates of taxation in Hong Kong or in anyother places in which any member of our Group operates or will operate;

(d) there will be no material changes in legislation or regulations whether in Hong Kong orelsewhere materially affecting the business carried on by our Group;

(e) there will be no significant changes in our Group’s business relationship with its existingstrategic and business partners;

(f) there will be no significant changes in our Group’s business relationship with its majorcustomers;

(g) there will be no material changes in the funding required for each of the scheduledachievements as outlined in the paragraph headed “Implementation Plan” in this section;and

(h) our Group will not be materially affected by the risk factors as set out in the section headed“Risk factors” in this prospectus.


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REASONS FOR THE PLACING

Although our Group has no urgent funding requirement, our Directors believe that the additional

capital raised for our Company from the Listing, is crucial for the on-going expansion of our Group’s

placing and underwriting and margin financing services. By increasing the number of placing and

underwriting transactions undertaken by our Group, the number of our Group’s high net worth clients

and overall increase in securities trading by our high net worth clients, our Group will potentially be

able to increase its market share of brokerage revenue and capture a large share of fund raising

conducted by companies listed on the Stock Exchange.

The business objective of our Group is to increase its exposure and scale of operations in Hong

Kong through implementing the business strategies as set out in the section headed “Business

Objective and Strategies” of this prospectus. Our Directors believe the estimated net proceeds from

the Placing of HK$55.7 million based on a Placing Price of HK$0.15 per Placing Share (being the

mid-point of the Placing Price range between HK$0.14 per Placing Share and HK$0.16 per Placing

Share) (after deducting the related underwriting fees and expenses payable in relation to the Listing)

will, among other things, increase our Group’s capital resources and help our Group to implement and

achieve its business strategies.

Our Group’s ability to take up underwriting commitment for placing and underwriting activities

and extend margin financing loan are limited by our Group’s financial resources and the FRR

requirements. A licensed corporation shall at all times maintain positive liquid capital which is not less

than its required liquid capital as stipulated in section 6 of the FRR. The FRR sets out the computation

of a number of variables in respect of all the liquid assets and ranking liabilities of a licensed

corporation and its liquid assets must exceed its ranking liabilities (i.e. positive liquid capital). Among

the variables, the underwriting commitment made by our Group is one of the factors in calculating

FRR and would reduce liquid capital. For example, during the Track Record Period, our Group

encountered a number of occasions in which our Group had taken up some underwriting commitments,

and after taking into account (i) the haircut percentages specified in the FRR rules; (ii) certain

assumptions made by our Group (note) in our scenario analysis, any additional underwriting deals may

lead to our liquid capital falling below the HK$3 million minimum requirement under the FRR of the

SFO. Given that we have adopted a prudent approach to compliance with the FRR, our Directors

believe that our Group’s ability to meet the liquid capital requirements outweigh the benefit of

undertaking new placing and underwriting if additional risks arise that may lead PFSL being unable

to meet the liquid capital requirements. As such, it was difficult for us to not only extend large amount

of margin loans to clients (such as IPO margin financing) but also undertake more underwriting

commitments without sub-underwriting part of the commitments to other firms. Therefore, our

Directors consider that the net proceeds raised from the Placing are crucial to the implementation of

our business strategies of increasing our overall liquid capital position and increasing PFSL’s fund

raising and margin financing abilities.

Note: In light of the uncertainty over the market prices and public interests in the securities underwritten by our Group and

the overall market sentiment, when considering our financial resources, we made certain assumptions with regards to

(i) the market value of securities underwritten; (ii) percentage of securities under-subscribed; and (iii) market value of

shares held by our margin clients.

REASONS FOR THE PLACING AND USE OF PROCEEDS

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In addition to the capital resources from the Placing, the Directors decided to proceed with equity

financing in the form of a Listing for the purpose of our business expansion instead of debt financing

considering the following factors and benefits to our Company, its shareholders and stakeholders:

(1) provide a fund-raising platform for our Company, thereby enabling us to raise the capital

required to finance future growth and expansion without reliance on the Controlling

Shareholders to do so. Such platform would allow our Company to gain direct access to the

capital market for equity to fund its existing and future expansion to maximize Shareholder

return;

(2) enhance liquidity of the Shares by achieving the listing status of the Shares which will be

freely traded on the Stock Exchange when compared to the limited liquidity of the Shares

that are privately held before the Listing;

(3) enable the Company to enhance its corporate profile, increase its overall market exposure

and obtain indirect complimentary advertising thereby increasing its ability to retain

existing staff and attract new staff, attract strategic investors for investment in and forming

strategic partnerships directly with the Company;

(4) enhance the transparency and corporate governance practices of our Group’s operation;

(5) as part of a group of private companies, our Company, without a listing status, would be

difficult to obtain further bank borrowings without additional guarantees or other form of

tangible security to be provided by the Controlling Shareholders. With a listing status, we

could obtain additional borrowings using our corporate states so as to relieve the financial

pressure on our Controlling Shareholders and to maximise our gearing efficiency.

(6) increasing our Group’s working capital through debt will increase our Group’s cash but willalso lead to a correspondingly increase to our liabilities and thus have nil effect on ourliquid capital position whereas increasing working capital through equity will only have anincrease effect on our liquid capital position;

(7) the regular financial reporting requirement under the GEM listing rules can enable banksto evaluate and monitor our Group’s financial health more efficiently and therefore isexpected to smoothen the approval process for any future additional bank borrowings. Thebetter accessibility to banking facilities allow us more flexibility in management of thecashflow of our business that can be affected by factors including those set out in thesection headed “Risk Factors” in this prospectus;

(8) any additional funds raised by the way of debt financing, may subject our Group to variouscovenants which may restrict our ability to pay dividends or obtain additional financing.Servicing such debt obligations could be burdensome or our operations. If we fail to timelyservice the debt obligations or are unable to comply with any of these covenants, we couldbe in default under such debt obligations and our liquidity and financial condition could bematerially and adversely affected; and


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(9) given the uncertain interest rate movement going forward (which may expose our Group to

higher borrowing costs in the future via debt financing), our Directors believe that our

financial performance and liquidity may be negatively affected due to its principal and

interest payments, if we proceed with debt financing to fund our business expansion.

Our Directors believe that the whole securities industry has substantially evolved throughout the

previous two decades such that: (i) the number of companies listed on the SEHK from 2002 to 2015

has increased by approximately 90% from 978 to 1,866; (ii) the total market capitalisation of

companies listed on the SEHK from 2002 to 2015 has increased approximately 421% from HK$4,735

billion to HK$24,684 billion; and (iii) annual daily trading turnover has increased approximately

1,428% from HK$7 billion in 2002 to HK$106 billion in 2015. In line with the SEHK’s aim to be the

global exchange of choice across asset classes both for Chinese and international clients seeking China

exposure, our Directors believe that through a Listing our Group is well positioned to expand and grow

together with the SEHK.

Please refer to the paragraph headed “Business Objective and Strategies — Implementation

Plans” of this prospectus.

USE OF PROCEEDS

Our Directors consider that net proceeds from the Placing are crucial for financing our Group’s

business strategies. Details of our corporate strategies and business plans are set forth in the paragraph

headed “Business Objective and Strategies — Implementation Plans” of this prospectus. Our Directors

estimate that the net proceeds from the Placing (after deducting estimated expenses payable by our

Group in connection with the Listing) will be approximately HK$55.7 million based on a Placing Price

of HK$0.15 per Placing Share (being the mid-point of the Placing Price range between HK$0.14 and

HK$0.16 per Placing Share, assuming the Offer Size Adjustment Option is not exercised). It is at

present intended that the net proceeds will be applied as follows:

• approximately HK$48.4 million or approximately 87.0% of the net proceeds will be used

to for the expansion of our margin financing services. As margin receivable, subject to FRR

calculation is classified as liquid assets under the FRR, the funds designated for margin

financing also has the effect of improving our liquid capital and thus raising our capacity

of undertaking underwriting activities;

• approximately HK$1.7 million or approximately 3.0% of the net proceeds will be used to

upgrade our IT systems; and

• approximately HK$5.6 million or approximately 10.0% of the net proceeds will be used as

general working capital of our Group.


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If the Placing Price is set at the high-end of the indicative Placing Price range at HK$0.16 per

Share, the net proceeds from the Placing will increase to approximately HK$60.5 million. If the

Placing Price is set at the low-end of the indicative Placing Price range at HK$0.14 per Share, the net

proceeds from the Placing will decrease to approximately HK$50.9 million. If the Placing Price is

finally determined to be less than HK$0.15 (being the mid-point of the indicative range of the Placing

Price), our Group will reduce the proposed use of net proceeds on a pro rata basis and will finance

such shortfall by internal cash resources, working capital and/or other financing, as and when

appropriate. If the Placing Price is finally determined to be more than HK$0.15, our Group will

increase the proposed amounts of net proceeds based on a pro rata basis.

If the Offer Size Adjustment Option is exercised in full, the additional net proceeds received

from the placing of the additional Shares allotted and issued will be allocated in accordance with the

above allocations on a pro rata basis. For details of the Offer Size Adjustment Option, please refer to

the paragraph headed “Structure and Conditions of the Placing — Offer Size Adjustment Option” of

this prospectus.

To the extent that the net proceeds from the Placing are not immediately required for the above

purposes, it is the present intention of our Directors that such net proceeds will be placed as short-term

deposits with authorised banks and/or financial institutions in Hong Kong. Our Directors consider that

the net proceeds from the Placing together with the internal resources of our Group will be sufficient

to finance the implementation of our Group’s business plans as set out in the paragraph headed

“Business Objectives and Strategies — Implementation Plans” of this prospectus.

Investors should be aware that any part of the business plans of our Group may or may not

proceed according to the timeframe as described under the paragraph headed “Business Objectives and

Strategies — Implementation Plans” of this prospectus due to various factors such as changes in

customers’ demand and changes in market conditions. Under such circumstances, our Directors will

evaluate carefully the situations and will hold the funds as short-term deposits in authorised banks

and/or financial institutions in Hong Kong until the relevant business plan materialises.


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Assuming the Placing becomes unconditional, the Offer Size Adjustment Option is not exercised,

and without taking into account any Shares which may be issued upon exercise of any option granted

under the Share Option Scheme, the authorised and issued share capital of our Company immediately

following the Capitalisation Issue and the Placing will be as follows:

HK$

Authorised share capital

8,000,000,000 Shares 80,000,000.00

The total number of issued Shares immediately following the Placing will be as follows:

1 Share in issue as at the date hereof 0.01

1,499,999,999 Shares to be issued under the Capitalisation Issue 14,999,999.99

500,000,000 Shares to be issued under the Placing (before any exercise

of the Offer Size Adjustment Option) (Note)

5,000,000.00

2,000,000,000 Shares in total (before any exercise of the Offer Size

Adjustment Option) (Note)

20,000,000.00

Note: If the Offer Size Adjustment Option is exercised in full, then 75,000,000 additional Shares will be issued resulting

in a total issued share capital of 2,075,000,000 Shares with an aggregate nominal value of HK$20,750,000.

MINIMUM PUBLIC FLOAT

Pursuant to Rule 11.23(7) of the GEM Listing Rules, at the time of the Listing and at all times

thereafter, our Company must maintain the “minimum prescribed percentage” of 25% of the issued

share capital of our Company in the hands of the public (as defined in the GEM Listing Rules).

RANKING

The Placing Shares will rank equally with all the Shares in issue and will qualify for all

dividends or other distributions declared, made or paid after the date of this prospectus except in

respect of the Capitalisation Issue.

SHARE OPTION SCHEMES

Our Company has conditionally adopted the Share Option Scheme, the major terms of which are

set out in the paragraphs headed “Appendix IV — Statutory and General Information — Share Option

Scheme” of this prospectus.

SHARE CAPITAL

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GENERAL MANDATE TO ISSUE SHARES

Subject to the Placing becoming unconditional, our Directors have been granted a general

unconditional mandate to allot and issue and deal with the unissued Shares with an aggregate nominal

value of not more than the sum of:

(a) 20% of the number of issued Shares immediately following the completion of the

Capitalisation Issue and the Placing (not including Shares which may be issued under the

Offer Size Adjustment Option or Shares which may be allotted and issued pursuant to the

exercise of options granted or which may be granted under the Share Option Scheme); and

(b) the number of Shares repurchased by our Company (if any) pursuant to the general mandate

to repurchase Shares as described below.

Our Directors may, in addition to the Shares which they are authorised to issue under the general

mandate, allot, issue and deal in the Shares pursuant to a rights issue, scrip dividends or similar

arrangements or options granted or to be granted under the Share Option Scheme or any other option

scheme or similar arrangement for the time being adopted.

This mandate does not cover Shares to be allotted, issued, or dealt with under a rights issue or

pursuant to the exercise of the Offer Size Adjustment Option or the options which has been or may

be granted under the Share Option Scheme. This general mandate will remain in effect until:

(i) the conclusion of the next annual general meeting of our Company;

(ii) the expiration of the period within which our Company’s next annual general meeting is

required to be held by the Articles or any applicable law of the Cayman Islands;

(iii) the time when such mandate is revoked, varied or renewed by an ordinary resolution of the

Shareholders in a general meeting, whichever occurs the earliest.

Further information on this general mandate is set forth under the paragraph headed “Appendix

IV — Statutory and General Information — Further Information about Our Company” of this

prospectus.

GENERAL MANDATE TO REPURCHASE SHARES

Subject to the conditions set forth in the section headed “Structure and Conditions of the

Placing” of this prospectus being fulfilled, our Directors have been granted a general mandate to

exercise all the powers of our Company to purchase on the Stock Exchange or on any other stock

exchange on which the securities of our Company may be listed and which is recognised by the SFC

and the Stock Exchange for this purpose, such number of Shares as will represent up to 10% of the

number of issued Shares immediately following completion of the Placing and the Capitalisation

Issue.

SHARE CAPITAL

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JOINT LEAD MANAGERS

Ample Orient Capital LimitedPing An Securities Limited

UNDERWRITERS

Ample Orient Capital LimitedChaoShang Securities LimitedPing An Securities LimitedWealth Link Securities Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

The Underwriting Agreement

Pursuant to the Underwriting Agreement, our Company are offering the Placing Shares forsubscription by way of placing to selected professional, institutional or other investors in Hong Kongat the Placing Price subject to the terms and conditions in the Underwriting Agreement and thisprospectus.

Subject to, among other conditions, the Stock Exchange granting the listing of, and permissionto deal in, our Shares in issue and to be issued as mentioned in this prospectus (including any Shareswhich may fall to be issued pursuant to the Capitalisation Issue, exercise of options to be grantedunder the Share Option Scheme and/or upon the exercise of the Offer Size Adjustment Option) and tocertain other conditions set out in the Underwriting Agreement being fulfilled or waived on or beforethe dates and times specified in the Underwriting Agreement, the Underwriters have severally agreedto subscribe for or purchase or procure subscribers or purchasers for their respective applicableproportions of the Placing Shares on the terms and conditions of the Underwriting Agreement and thisprospectus.

Grounds for termination

The Joint Lead Managers (for themselves and on behalf of the Underwriters) shall have theabsolute right to terminate the underwriting arrangements with immediate effect pursuant to theUnderwriting Agreement by notice in writing given to our Company at any time prior to 8:00 a.m.(Hong Kong time) on the Listing Date (the “Termination Time”), if any of the following events shalloccur prior to the Termination Time:

(a) there develops, occurs, exists or comes into force:

(i) any change or development involving a prospective change or development in, or anyevent or series of events resulting or likely to result in or representing any prospectivechange or development in, local, national, regional or international financial,political, military, industrial, legal, economic, currency market, credit, fiscal orregulatory or market matters or conditions (including, without limitation, conditionsin stock and bond markets, money and foreign exchange markets, credit markets, andinterbank markets, a change in the system under which the value of the Hong Kong

UNDERWRITING

— 234 —

currency is linked to that of the currency of the United States or a devaluation of the

Renminbi against any foreign currencies) in or affecting Hong Kong, the Cayman

Islands, the BVI, or any other jurisdiction relevant to any member of our Group (each

a “Relevant Jurisdiction”); or

(ii) any new law or regulation or any change or development involving a prospective

change in any existing law or regulation, or any change or development involving a

prospective change in the interpretation or application thereof by any court or other

competent authority in or affecting any Relevant Jurisdiction; or

(iii) any event or series of events in the nature of force majeure (including, without

limitation, acts of government, labour disputes, strikes, lock-outs, fire, explosion,

flooding, earthquake, civil commotion, riots, public disorder, declaration of a national

or international emergency, acts of war, riot, public disorder, acts of terrorism

(whether or not responsibility has been claimed), acts of God, epidemic, pandemic,

outbreak of disease (including without limitation Severe Acute Respiratory

Syndromes (SARS), H5N1, H1N1, H7N9)), economic sanctions, in or affecting any of

the Relevant Jurisdictions; or

(iv) any local, national, regional or international outbreak or escalation of hostilities

(whether or not war is or has been declared) or other state of emergency or calamity

or crisis in or affecting any of the Relevant Jurisdictions; or

(v) (A) any moratorium, suspension, restriction or limitation on trading in securities

generally on the Stock Exchange, the New York Stock Exchange, the NASDAQ Global

Market or the London Stock Exchange; or (B) a general moratorium on commercial

banking activities in any of the Relevant Jurisdictions declared by the relevant

authorities, or a disruption in commercial banking activities or foreign exchange

trading or securities settlement or clearance services procedures or matters in or

affecting any of the Relevant Jurisdictions; or

(vi) any change or development or event involving a prospective change in taxation or

exchange controls (or the implementation of any exchange control), currency

exchange rates or foreign investment regulations in any of the Relevant Jurisdictions;

or

(vii) any imposition of economic sanction or withdrawal of trading privileges, in whatever

form, directly or indirectly, by, or for, any of the Relevant Jurisdictions; or

(viii) any adverse change or development or event or a prospective adverse change or

development or event in our Group’s assets, liabilities, profit, losses, performance,

condition, business, financial, earnings, trading position, prospects, properties, results

of operations, general affairs, shareholders’ equity, management, position or

condition, financial or otherwise, whether or not arising in the ordinary course of

business, as determined by the Joint Lead Managers in their sole and absolute

discretion; or

UNDERWRITING

— 235 —

(ix) the commencement by any judicial, regulatory, governmental or political body or

organisation of any action, claim or proceedings against any Director or an

announcement by any judicial, regulatory, governmental or political body or

organisation that it intends to take any such action; or

(x) a Director being charged with an indictable offence or prohibited by operation of law

or otherwise disqualified from taking part in the management of a company; or

(xi) the chairman or chief executive officer of our Company vacating his office in

circumstances where the operations of our Group may be adversely affected, save and

except for health reasons; or

(xii) save as disclosed in this prospectus, a contravention by any member of our Group of

the GEM Listing Rules or any applicable laws or regulations in the Cayman Islands,

Hong Kong and the BVI; or

(xiii) an order or petition is presented for the winding up or liquidation of our Company or

any of our subsidiaries, or our Company or any of our subsidiaries make any

composition or arrangement with its creditors or enter into a scheme of arrangement

or any resolution is passed for the winding-up of our Company or any of our

subsidiaries or a provisional liquidator, receiver or manager is appointed over all or

part of the assets or undertaking of our Company or any of our subsidiaries or

anything analogous thereto occurs in respect of our Company or any of our

subsidiaries; or

(xiv) a valid demand by any creditor for repayment or payment of any of our Company’s

indebtednesses exceeding the sum of HK$5,000,000 or those of any of our

subsidiaries or in respect of which our Company or any of our subsidiaries is liable

prior to its stated maturity; or

(xv) any loss or damage sustained by our Company or any of our subsidiaries as a result

of a breach of its respective obligations or non-compliance with the applicable laws

and regulations (howsoever caused and whether or not the subject of any insurance or

claim against any person); or

(xvi) any litigation or claim of material importance being threatened or instigated against

our Company or any of our subsidiaries or any of the Directors; or

(xvii) a prohibition on our Company for whatever reason from allotting the Placing Shares

pursuant to the terms of the Placing; or

(xviii) non-compliance by our Group or our Directors of this prospectus (of any other

documents used in connection with the contemplated Placing of the Placing Shares)

or any aspect of the Placing with the GEM Listing Rules or any other applicable law

or regulation; or

UNDERWRITING

— 236 —

(xix) other than with the approval of the Joint Lead Managers (such approval not to be

unreasonably withheld or delay), the issue or requirement to issue by our Company of

any supplement or amendment to this prospectus (or to any other documents used in

connection with the contemplated Placing of our Shares) pursuant to the Companies

(Winding Up and Miscellaneous Provision) Ordinance or the GEM Listing Rules; or

(xx) any event which give rise or would give rise to liability on the part of our Company

pursuant to the indemnity provisions in the Underwriting Agreement; or

(xxi) any change or prospective change in, or a materialisation of, any of the risks set out

in the section headed “Risk Factors” in this Prospectus, and which, individually or in

the aggregate, in the sole opinion of the Sponsor and the Joint Lead Managers (for

themselves and on behalf of the other Underwriters), (A) has or may have or will have

or is likely to have a materially adverse effect, whether directly or indirectly, on the

assets, liabilities, business, general affairs, management, shareholders’ equity, profits,

losses, trading position or other condition or prospects of our Company or our

subsidiaries as a whole; or (B) has or may have or will have or is likely to have a

material adverse effect on the success or the level of indication of interest in the

Placing; or (C) makes, may make or will or is likely to make it impracticable or

inadvisable or in expedient for any part of the Underwriting Agreement or the Placing

to proceed or to be performed or implemented as envisaged or to market the Placing;

or (D) makes or may make or will or is likely to make it inadvisable or inexpedient

to proceed with the Placing or the delivery of the Placing Shares on the terms and in

the manner contemplated by this prospectus; or

(b) there has come to the notice of the Sponsor and/or the Joint Lead Managers or any of the

Underwriters after the date of the Underwriting Agreement:

(i) that any statement contained in this prospectus and other Placing Documents (as

defined in the Underwriting Agreement), the formal notice or any announcements in

the agreed form issued or used by or on behalf of our Company in connection with the

Placing (including any supplement or amendment thereto) was, when it was issued, or

has or may become untrue or incorrect or misleading in a material respect, or any

expression of opinion, intention or expectation contained therein is not fair and honest

and based on reasonable assumptions with reference to the facts and circumstances

then subsisting, when taken as a whole; or

(ii) that any matter has arisen or has been discovered which, had it arisen or been

discovered immediately before the date of this prospectus which would or might

constitute a material omission from this prospectus and/or in any notices or

announcements issued or used by or on behalf of our Company in connection with the

Placing (including any supplement or amendment (iii) thereto); or

UNDERWRITING

— 237 —

(iii) that any of the warranties given by our Company or the covenantors or the

Underwriting Agreement is (or would when repeated be) untrue, inaccurate or

misleading or having been breached; or

(iv) that any matter, event, act or omission which gives or is likely to give rise to any

liability of a material nature of our Company or the covenantors out of or in

connection with any breach, inaccuracy and/or incorrectness of the warranties as set

out in the Underwriting Agreement and/or pursuant to the indemnities given by our

Company, the covenantors or any of them under the Underwriting Agreement; or

(v) that any breach of any of the obligations or undertakings of any party to the

Underwriting Agreement to be material in the context of the Placing (other than the

Sponsor, the Joint Bookrunners, the Joint Lead Managers or the Underwriters); or

(vi) that our Company withdraws this prospectus; or

(vii) that approval by the Listing Division of the listing of, and permission to deal in, our

Shares to be issued under the Placing is refused or not granted, other than subject to

customary conditions, on or before the date of approval of the listing, or if granted,

the approval is subsequently withdrawn, qualified (other than by customary

conditions) or withheld; or

(viii) that any of the experts described under the paragraph headed “Other Information —

Qualifications of experts and Consents of experts” in Appendix IV to this prospectus

has withdrawn its respective consent to the issue of this prospectus with the inclusion

of its reports, letters, summaries of valuations and/or opinions (as the case may be)

and references to its name included in the form and context in which it respectively

appears.

Undertakings

Under Rule 13.16A(1) of the GEM Listing Rules, no further Shares or securities convertible into

our equity securities (whether or not a class already listed) may be issued by our Company or form

the subject of any agreement to such an issue within six months from the Listing Date (whether or not

such issue of Shares or our securities will be completed within six months from the Listing Date),

except in the circumstances prescribed by Rule 13.16A(1) of the GEM Listing Rules.

We have undertaken to the Sponsor, the Joint Bookrunners, the Joint Lead Managers, and the

Underwriters under the Underwriting Agreement that, and our each of our executive Directors and

Controlling Shareholders have undertaken to the Joint Bookrunners, the Joint Lead Managers, and the

Underwriters to procure, that except pursuant to the Placing and the Capitalisation Issue, (1) our

Company will not without the prior written consent of the Joint Lead Managers and unless in

compliance with the GEM Listing Rules, (i) at any time after the date of the Underwriting Agreement

up to and including the date falling six months after the Listing Date (the “First Six-month Period”),

offer, allot, issue, agree to allot or issue, sell, lend, assign, contract to allot, issue or sell, sell any

option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any

UNDERWRITING

— 238 —

options, rights or warrants to purchase or subscribe for, lend or otherwise transfer or dispose of, either

directly or indirectly, or repurchase any of the share capital or other securities of our Company or any

interest therein (including but not limited to any securities convertible into or exercisable or

exchangeable for or that represent the right to receive any such share capital or securities or any

interest therein), or enter into any swap, derivative, repurchase, lending, pledge or other arrangement

that transfers to another, in whole or in part, any of the economic consequences of subscription or

ownership of such share capital or such other securities, in cash or otherwise, or publicly disclose that

our Company will or may enter into any of the foregoing transactions (whether or not such transaction

will be completed in the aforesaid period); and (ii) at any time during the six-month period

immediately following the First Six-Month Period (the “Second Six-Month Period”), issue or grant

(conditionally or unconditionally) any options or right to subscribe for or otherwise convert into or

exchange for Shares or securities of our Company or of any of its subsidiaries so as to result in any

of the Controlling Shareholders ceasing to be a controlling Shareholder; and (2) in the event of an

issue or disposal of any Shares or any interest therein or any voting right or any other right attaching

thereto during the Second Six-month Period (whether or not such transaction will be completed in the

aforesaid period), it shall take all reasonable steps to ensure that any such transaction, agreement, or

as the case may be, announcement will not create a disorderly or false market in the securities of our

Company.

Under Rule 13.16A(1) of the GEM Listing Rules, each of our Controlling Shareholders, namely

Mr. B Lo, Mr. C Lo and TML, has undertaken to the Stock Exchange that except pursuant to the

Placing that they shall not, and shall procure that the relevant registered holder(s) shall not (i) at any

time during the period commencing on the date by reference to which disclosure of the shareholding

of our Controlling Shareholders is made in this prospectus and ending on the date which is six months

from the Listing Date, dispose of, nor enter into any agreement to dispose of or otherwise create any

options, rights, interest or encumbrances in respect of, any of our securities in respect of which it is

shown by this prospectus to be the beneficial owners; and (ii) at any time during the period of six

months commencing on the date on which the period referred to in paragraph (i) above expires,

dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests

or encumbrances in respect of, any of our securities referred to in paragraph (i) above if, immediately

following such disposal or upon the exercise or enforcement of such options, rights, interests or

encumbrances, they would then cease to be our Company’s controlling shareholders (as defined under

the GEM Listing Rules).

Note of Rule 13.16A(1) of the GEM Listing Rules provides that our Controlling Shareholders are

free to purchase additional securities and dispose of securities thus purchased in the period

commencing on the date by reference to which disclosure of the shareholding of the Controlling

Shareholder is made in this prospectus and ending on the date which is 1 year from the Listing Date,

subject to compliance with the requirements of Rule 11.23 of the GEM Listing Rules to maintain an

open market in the securities and a sufficient public float.

UNDERWRITING

— 239 —

Under Rule 13.19 of the GEM Listing Rules, our Controlling Shareholders have also undertaken

to the Stock Exchange, our Company, the Sponsor, the Joint Bookrunners, the Joint Lead Managers

and the Underwriters that (i) in the event that our Controlling Shareholders or any of their close

associates pledges or charges any direct or indirect interest in the relevant Shares in favour of an

authorised institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)),

as security for a bona fide commercial loan or pursuant to any right or waiver grated by the Stock

Exchange pursuant to Rule 13.18(4) of the GEM Listing Rules, at any time during the period

commencing on the date of this prospectus and ending on the date which is six months from the Listing

Date, he/it must inform our Company, the Sponsor, the Joint Bookrunners, the Joint Lead Managers

and the Underwriters immediately thereafter, disclosing the details specified in Rules 17.43(1) to (4)

of the GEM Listing Rules; and (ii) having pledged or charged any interest in Shares under (i) above,

he/she must inform our Company immediately in the event that he/she becomes aware that the pledgee

or chargee has disposed of or intended to dispose of such interest and of the number of Shares affected.

Total commission, fee and expenses

In connection with the Placing, the Underwriters will receive a gross underwriting commission

of 3.5% of the aggregate Placing Price of all Placing Shares according to the arrangement of the

Underwriting Agreement, out of which they will pay any sub-underwriting commissions and

praecipium.

In connection with the Listing and the Placing, the total expenses, including the listing fees, the

underwriting commission, the SFC transaction levy, the Stock Exchange trading fee, legal and other

professional fees, printing and other expenses, to be borne by our Company is estimated to be

approximately HK$19.3 million based on a Placing Price of HK$0.15 per Placing Share, being the

mid-point of the indicative range of Placing Price and assuming the Offer Size Adjustment Option is

not exercised.

Underwriters’ interest in our Company.

Save as provided for under the Underwriting Agreement and disclosed otherwise in this

prospectus, none of the Sponsor, the Joint Bookrunners, the Joint Lead Managers and the Underwriters

or any of its directors, employees or associates has any shareholding interests in any member of our

Group nor has any right or option to subscribe for or nominate persons to subscribe for any Shares.

SPONSOR’S INTEREST AND INDEPENDENCE

Save as disclosed in this prospectus, and for advisory and documentation fee paid and to be paid

to Ample Capital Limited as the Sponsor in connection with the Listing and as our compliance adviser

with effect from the Listing Date, Ample Capital Limited nor any of its close associates has or may,

as a result of the Listing and the Placing, have any interest in any class of securities of our Company

or any other members of our Group (including options or rights to subscribe for such securities).

UNDERWRITING

— 240 —

No director or employee of Ample Capital Limited who is involved in providing advice to our

Company has or, as a result of the Listing and/or the Placing, may have any interest in any class of

securities of our Company or any other members of our Group (including options or rights to subscribe

for such securities). No director or employee of Ample Capital Limited has any directorship in our

Company or any other members of our Group.

The Sponsor satisfies the independence criteria applicable to sponsors as set forth in Rule 6A.07

of the GEM Listing Rules.

UNDERWRITING

— 241 —

CONDITIONS OF THE PLACING

The Placing will be conditional upon, among others:

(i) the Stock Exchange granting the listing of, and permission to deal in, the Shares in issue

and the Shares to be allotted and issued pursuant to the Placing and the Capitalisation Issue

(including any Shares which may be allotted and issued pursuant to the exercise of the Offer

Size Adjustment Option and the options which may be granted under the Share Option

Scheme) on the business day preceding the Listing Date (or such other date as the Joint

Lead Managers (for themselves and on behalf of the Underwriters) and our Company may

agree) and such listing and permission not subsequently being revoked prior to 8:00 a.m.

on the Listing Date;

(ii) the Price Determination Agreement between our Company and the Joint Lead Managers (for

themselves and on behalf of the Underwriters) being entered into on or before the Price

Determination Date; and

(iii) the obligations of the Underwriters under the Underwriting Agreement becoming

unconditional (including the waiver of any condition(s) by the Sponsor and/or the Joint

Lead Managers (for themselves and on behalf of the Underwriters) and the Underwriting

Agreement not being terminated in accordance with the terms of that agreement or

otherwise).

The consummation of the Placing is conditional upon, among other things, the placing becoming

unconditional and not having been terminated in accordance with their respective terms.

If such conditions have not been fulfilled or waived by the Sponsor and/or the Joint Lead

Managers (where appropriate) (for themselves and on behalf of the Underwriters) prior to the times

and dates specified, the Placing will lapse and the Stock Exchange will be notified immediately.

Notice of the lapse of the Placing will be published by our Company on the website of the Stock

Exchange at www.hkexnews.hk and our Company’s website at www.pfs.com.hk on the next Business

Day following such lapse.

THE PLACING

500,000,000 Placing Shares are being offered pursuant to the Placing, representing in aggregate

25% of the enlarged issued share capital of our Company immediately after the Capitalisation Issue

and completion of the Placing (without taking into account of any Shares which may be allotted and

issued pursuant to the exercise of any options which may be granted under the Share Option Scheme

and/or upon the exercise of the Offer Size Adjustment Option).


— 242 —

The Placing is fully underwritten by the Underwriters (subject to the terms and conditions of the

Underwriting Agreement and also subject to the Placing Price being fixed by the Price Determination

Agreement). Pursuant to the Placing, it is expected that the Underwriters, on behalf of our Company,

will conditionally place 500,000,000 Placing Shares at the Placing Price to selected individual,

professional and institutional investors in Hong Kong.

OFFER SIZE ADJUSTMENT OPTION

Pursuant to the Underwriting Agreement, our Company has granted to the Underwriters, the

Offer Size Adjustment Option, which is exercisable by the Joint Lead Managers (for themselves and

on behalf of the Underwriters) in their sole and absolute discretion, (i) on or before the business day

immediately before the date of the allotment results announcement, or (ii) within 30 days from the date

of the Prospectus, whichever is earlier, to require our Company to allot and issue up to 75,000,000

additional Shares at the Placing Price, representing 15% of the total number of Shares initially

available for subscription under the Placing. Any such additional Shares may be issued to cover any

excess demand in the Placing at the absolute discretion of the Joint Lead Managers. If the Offer Size

Adjustment Option is not exercised by then, the Offer Size Adjustment Option shall lapse and cannot

be exercised on any future date.

For the avoidance of doubt, the purpose of the Offer Size Adjustment Option is to provide

flexibility for the Underwriters to meet any excess demand in the Placing. The Offer Size Adjustment

Option will not be used for price stabilisation purposes and will not be subject to the Securities and

Futures (Price Stabilizing) Rules of the SFO (Chapter 571W of the Laws of Hong Kong). No purchase

of the Shares in the secondary market will be effected to cover any excess demand in the Placing

which will only be satisfied by the exercise of the Offer Size Adjustment Option in full or in part.

We will disclose in our allotment results announcement whether and to what extent the Offer Size

Adjustment Option has been exercised, and will confirm in the announcement that, if the Offer Size

Adjustment Option is not exercised by then, the Offer Size Adjustment Option will lapse and cannot

be exercised on any future date. The allotment results announcement will be published on the website

of the Stock Exchange at www.hkexnews.hk and our website at www.pfs.com.hk.

In the event that the Offer Size Adjustment Option is exercised in full, 75,000,000 additional

Shares will be issued resulting in a total number of 2,075,000,000 Shares in issue and the shareholding

of the Shareholders will be diluted by approximately 3.6%. If the Offer Size Adjustment Option is

exercised in full, the additional net proceeds received from the placing of the additional Shares

allotted and issued will be allocated in accordance with the allocations as disclosed in the section

headed “Reasons for the Placing and Use of Proceeds” of this prospectus, on a pro-rata basis.

BASIS OF ALLOCATION

Allocation of the Placing Shares to selected individual, professional and institutional investors

will be based on a number of factors, including the level and timing of demand and whether or not

it is expected that the relevant investors are likely to purchase further Shares or hold or sell their

Shares after the Listing. Such allocation is intended to result in a distribution of the Placing Shares


— 243 —

which would lead to the establishment of a solid professional and institutional shareholder base to the

benefit of our Company and the Shareholders as a whole. In particular, the Placing Shares will be

allocated pursuant to Rule 11.23(8) of the GEM Listing Rules, that not more than 50% of the Shares

in public hands at the time of Listing will be owned by the three largest public Shareholders. There

will not be any 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 ultimate

beneficiary is disclosed, without the prior written consent of the Stock Exchange. Details of the

Placing will be announced in accordance with Rules 10.12(4), 16.08 and 16.16 of the GEM Listing

Rules.

PLACING PRICE

The Placing Price will be fixed by the Price Determination Agreement on the Price Determination

Date, which is expected to be on or before Wednesday, 28 December 2016. If the Joint Lead Managers

(for themselves and on behalf of the Underwriters) and our Company are unable to reach an agreement

on the Placing Price by Wednesday, 28 December 2016, the Placing will not become unconditional and

will not proceed. If, the Joint Lead Managers (for themselves and on behalf of the Underwriters) and

with the consent of our Company consider it appropriate (for instance, if the level of interest is below

the indicative Placing Price range), the indicative Placing Price range may be reduced below that

stated in this prospectus at any time prior to the Price Determination Date. In such a case, our

Company will, as soon as practicable following the decision to make such reduction, cause to be

published on the website of the Stock Exchange at www.hkexnews.hk and our Company’s website at

www.pfs.com.hk an announcement of such change on or before the Price Determination Date.

Prospective investors of the Placing Shares should be aware that the Placing Price to be determined

on the Price Determination Date may be, but is currently not expected to be, lower than the indicative

Placing Price range stated in this prospectus.

The Placing Price will not be more than HK$0.16 per Placing Share (and is expected to be not

less than HK$0.14 per Placing Share). The Placing Price will fall within the indicative Placing Price

range as stated in this prospectus unless otherwise announced. Based on the maximum Placing Price

of HK$0.16 per Share plus 1.0% brokerage, 0.005% Stock Exchange trading fee and 0.0027% SFC

transaction levy, investors shall pay a total of approximately HK$3,232.25 for every board lot of

20,000 Shares.

If for any reason the Price Determination Date is changed, our Company will as soon as

practicable cause to be published on the website of the Stock Exchange at www.hkexnews.hk and our

Company’s website at www.pfs.com.hk a notice of the change and if applicable the revised date.

The net proceeds from the Placing of New Shares based on the Placing Price of HK$0.15 per

Share (being the mid-point of the stated range of the Placing Price) are estimated to be approximately

HK$55.7 million, after deduction of the underwriting commission and other expenses relating to the

Placing and the Listing payable by our Company.


— 244 —

An announcement of the levels of indication of interest in the Placing and the basis of allocation

of the Placing Shares is expected to be published on the website of the Stock Exchange at

www.hkexnews.hk and our Company’s website at www.pfs.com.hk on Thursday, 5 January 2017.

SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

Application has been made to the Stock Exchange for listing of and permission to deal in the

Shares in issue and to be issued as mentioned in this prospectus. Subject to the granting of the listing

of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus on

GEM and the compliance with the stock admission requirements of HKSCC, the Shares will be

accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect

from the Listing Date, or any other date as determined by HKSCC. Settlement of transactions between

participants of the Stock Exchange is required to take place in CCASS on the second Business Day

after any trading day. Investors should seek the advice of their stockbroker or other professional

adviser for details of those settlement arrangements as such arrangements will affect their rights and

interests.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational

Procedures in effect from time to time.

All necessary arrangements have been made for the Shares to be admitted into CCASS.

DEALINGS AND SETTLEMENT

Dealings in the Shares on GEM are expected to commence at 9:00 a.m. on Friday, 6 January

2017. Shares will be traded in board lots of 20,000 Shares each and are freely transferable.


— 245 —

12 December 2016

The Directors

PF Group Holdings Limited

Ample Capital Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) related

to PF Group Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred

to as the “Group”), for each of the financial years ended 31 March 2014, 2015 and 2016 and the four

months ended 31 July 2016 (the “Relevant Periods”) for inclusion in the prospectus of the Company

dated 12 December 2016 (the “Prospectus”) in connection with the placing and listing of the shares

of the Company on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the

“Hong Kong Stock Exchange”).

The Company was incorporated and registered as an exempted company with limited liability in

the Cayman Islands on 3 August 2015. Pursuant to a group reorganisation as more fully explained in

the section headed “History, Reorganisation and Development” in the Prospectus, the Company has

become the holding company of the subsidiaries now comprising the Group since 1 December 2016.

The Company and its subsidiaries have adopted 31 March as their financial year end date. As at

the date of this report, the Company has direct or indirect interest in the following subsidiaries

comprising the Group:

Equity attributable to the Group

Name of subsidiaryPlace ofincorporation

Date ofincorporation

Issued and fullypaid-up sharecapital

At 31 MarchAt 31

JulyAt the

date of thereport Principal activities2014 2015 2016 2016

Direct

Dynamic Express

Global Limited

(“DEGL”)

The British Virgin

Islands (“BVI”)

1 June

2015

United States Dollars

(“US$”) 1

N/A N/A 100% 100% 100% Investment holding

Indirect

Pacific Foundation

Holdings Limited

(“PFHL”)

Hong Kong 7 October

1993

Hong Kong Dollars

(“HK$”) 7

100% 100% 100% 100% 100% Investment holding

APPENDIX I ACCOUNTANTS’ REPORT

— I-1 —

Equity attributable to the Group

Name of subsidiaryPlace ofincorporation

Date ofincorporation

Issued and fullypaid-up sharecapital

At 31 MarchAt 31

JulyAt the

date of thereport Principal activities2014 2015 2016 2016

Pacific Foundation

Securities Limited

(“PFSL”)

Hong Kong 17 June

1987

HK$10,000,000 100% 100% 100% 100% 100% Provision of (i)

securities dealing and

brokerage services;

(ii) placing and

underwriting service;

(iii) financing service

including securities

and initial public

offering (“IPO”)

margin financing; and

(iv) asset

management services.

Pacific Innovest

Corporate Finance

Limited

(“PICFL”)

Hong Kong 5 August

2002

HK$1,000,000 90% 90% 0%

(Note)

0% 0%

(Note)

Investment holding

Note: The Group disposed of all its equity interests in PICFL on 23 March 2016 as more fully explained in note 25 of Section

F below.

The statutory consolidated financial statements of PFHL and its subsidiaries, PFSL and PICFL

(prior to the disposal on 23 March 2016), for each of the financial years ended 31 March 2014, 2015

and 2016 were prepared in accordance with the Hong Kong Financial Reporting Standards (the

“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The statutory consolidated financial statements of PFHL and its subsidiaries for the year ended

31 March 2014 was audited by Tam, Hui, Tse & Ho CPA Limited, a firm of certified public accountants

registered in Hong Kong in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The statutory consolidated financial statements of PFHL and its subsidiaries for each of the financial

years ended 31 March 2015 and 2016 were audited by us in accordance with Hong Kong Standards

on Auditing issued by the HKICPA.

The statutory financial statements of the following subsidiaries were audited by the following

certified public accountants registered in Hong Kong. These statutory financial statements were

prepared in accordance with the HKFRSs:

Name of subsidiary Financial periods Auditors

PFSL For the year ended 31 March 2014

For the year ended 31 March 2015


C.W. Leung & Co.

Deloitte Touche Tohmatsu


PICFL For the year ended 31 March 2014



Tam, Hui, Tse & Ho CPA Limited




— I-2 —

The Group disposed of all its equity interests in PICFL on 23 March 2016.

No audited financial statements have been prepared for the Company and DEGL as there are no

statutory audit requirements in the Cayman Islands and BVI.

For the purpose of this report, the directors of PFHL have prepared consolidated financial

statements of PFHL and its subsidiaries for the four months ended 31 July 2016 in accordance with

HKFRSs (the “PFHL July 2016 HKFRS Financial Statements”) and the directors of the Company

and DEGL have prepared the management accounts from the date of their respective dates of

incorporation to 31 July 2016 in accordance with accounting policies which conform with HKFRSs

(the “HKFRS Management Accounts”). We have carried out an independent audit on the PFHL July

2016 HKFRS Financial Statements and HKFRS Management Accounts in accordance with Hong Kong

Standards on Auditing issued by the HKICPA.

We have examined, and carried out additional audit procedures as considered necessary, on the

statutory consolidated financial statements of PFHL for the financial years ended 31 March 2014, 2015

and 2016, PFHL July 2016 Financial Statements and HKFRS Management Accounts (collectively

referred to as the “Underlying Financial Statements”) for the Relevant Periods in accordance with

the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The Financial Information as set out in this report has been prepared from the Underlying

Financial Statements, on the basis set out in note 2 of Section F below, after making adjustments as

the directors of the Company considered necessary in preparation of this report for inclusion in the

Prospectus.

The Underlying Financial Statements are the responsibility of the directors of the relevant

companies who approved their issue. The directors of the Company are responsible for the contents

of the Prospectus in which this report is included. It is our responsibility to compile the Financial

Information set out in this report from the Underlying Financial Statements, to form an independent

opinion on the Financial Information, and to report our opinion to you.

In our opinion, on the basis of presentation set out in note 2 of Section F below, the Financial

Information gives, for the purpose of this report, a true and fair view of the financial position of the

Group as at 31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016 and of the Company

as at 31 March 2016 and 31 July 2016 and of the financial performance and cash flows of the Group

for the Relevant Periods.


— I-3 —

The comparative combined statement of profit or loss and other comprehensive income,

combined statement of cash flows and combined statement of changes in equity of the Group for the

four months ended 31 July 2015 together with the notes thereon have been extracted from the Group’s

unaudited financial information for the same period (the “PFHL July 2015 Financial Information”)

which was prepared by the directors of PFHL solely for the purpose of this report. We conducted our

review on the PFHL July 2015 Financial Information in accordance with Hong Kong Standard on

Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent

Auditor of the Entity” issued by the HKICPA. Our review of the PFHL July 2015 Financial

Information consists of making enquiries, primarily of persons responsible for financial and

accounting matters, and applying analytical and other review procedures. A review is substantially less

in scope than an audit conducted in accordance with the Hong Kong Standards on Auditing and

consequently does not enable us to obtain assurance that we would become aware of all significant

matters that might be identified in an audit.

Accordingly, we do not express an audit opinion on the PFHL July 2015 Financial Information.

Based on our review, nothing has come to our attention that causes us to believe that the PFHL July

2015 Financial Information is not prepared, in all material respects, in accordance with the accounting

policies consistent with those used in the preparation of the Financial Information which conform with

HKFRSs.


— I-4 —

A. COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

INCOME



Notes 2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

RevenueCommission income from securities

dealing and brokerage services 12,717 10,225 10,918 5,513 1,282Fee and commission income from

placing and underwriting activities 6 32,620 23,171 15,884 1,183 20,142Interest income from margin financing 5,028 5,006 4,245 1,174 2,344Fund management fee 3,829 2,448 434 434 —Others 7 271 1,545 9,440 5 1,120

Total revenue 54,465 42,395 40,921 8,309 24,888Bank interest income 6 6 9 3 2Gain on disposal of property and

equipment 3 800 — — —Other gains and losses 772 666 198 113 (49)

55,246 43,867 41,128 8,425 24,841Commission expenses 8 (7,496) (3,673) (4,030) (1,565) (2,012)Depreciation expenses (739) (235) (241) (76) (46)Staff costs 9 (10,403) (10,235) (10,343) (2,886) (2,430)Other operating expenses (13,094) (9,688) (10,617) (3,652) (3,130)Finance costs 10 (416) (273) (272) (92) (87)Listing expenses — — (5,989) (1,106) (1,759)

Profit (loss) before tax 11 23,098 19,763 9,636 (952) 15,377Income tax expense 12 (4,769) (3,300) (2,753) (77) (2,842)

Profit (loss) and total comprehensive

income (expense) for the year/period 18,329 16,463 6,883 (1,029) 12,535

Profit (loss) and total comprehensive

income (expense) for the year/period

attributable to:Owners of the Company 18,399 16,532 6,955 (1,007) 12,535Non-controlling interests (70) (69) (72) (22) —

18,329 16,463 6,883 (1,029) 12,535


— I-5 —

B. COMBINED STATEMENTS OF FINANCIAL POSITION

As at 31 MarchAs at

31 JulyNotes 2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Non-current assetsProperty and equipment 14 407 351 282 473Deposits placed with stock exchange and

clearing house 15 675 675 675 630Available-for-sale investment 16 68 68 — —Rental and utility deposit 1,113 1,141 1,100 1,100Deposit paid for office equipment — — 119 —

Total non-current assets 2,263 2,235 2,176 2,203

Current assetsHeld-for-trading investment 17 — 2,043 1,529 1,223Accounts receivable 18 123,352 110,379 123,655 112,887Prepayments 337 516 2,270 3,542Tax recoverables — 1,479 473 —Cash and bank balances 19 78,180 129,911 86,667 124,036

Total current assets 201,869 244,328 214,594 241,688

Current liabilitiesAccounts payable 20 56,968 95,718 51,688 67,537Other payables and accruals 8,684 4,729 7,406 3,812Amounts due to directors 21 28,311 23,687 24,319 24,281Tax payables 4,203 — — 2,369Bank borrowings 22 10,000 10,000 10,000 10,000

Total current liabilities 108,166 134,134 93,413 107,999

Net current assets 93,703 110,194 121,181 133,689

Net assets 95,966 112,429 123,357 135,892

EquityShare capital 23 — — — —Reserves 96,230 112,762 123,357 135,892

Equity attributable to:Owners of the Company 96,230 112,762 123,357 135,892Non-controlling interests (264) (333) — —

Total equity 95,966 112,429 123,357 135,892


— I-6 —

C. STATEMENT OF FINANCIAL POSITION

Notes

As at31 March 2016

As at31 July 2016

HK$’000 HK$’000

Non-current asset

Investment in a subsidiary — —

Current asset

Deferred listing expenses 2,013 2,399

Total assets 2,013 2,399

Current liabilities

Other payables and accruals 3,807 2,982

Amount due to related parties 26 4,195 7,165

8,002 10,147

Net current liabilities (5,989) (7,748)

Net liabilities (5,989) (7,748)

Equity

Share capital 23 — —

Accumulated losses (5,989) (7,748)

Equity attributable to owners of the Company (5,989) (7,748)


— I-7 —

D. COMBINED STATEMENTS OF CHANGES IN EQUITY

Equity attributable to ownersof the Company Non-

controllinginterests Total

Sharecapital

Otherreserves

Retainedprofits Sub-total

HK$’000

(Note 23)

HK$’000

(Note 24)

HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2013 — — 77,831 77,831 (194) 77,637

Profit and total comprehensive

income for the year — — 18,399 18,399 (70) 18,329

At 31 March 2014 — — 96,230 96,230 (264) 95,966



At 31 March 2015 — — 112,762 112,762 (333) 112,429



Disposal of subsidiary (Note 25) — 3,640 — 3,640 405 4,045

At 31 March 2016 — 3,640 119,717 123,357 — 123,357


income for the period — — 12,535 12,535 — 12,535

At 31 July 2016 — 3,640 132,252 135,892 — 135,892

Unaudited

At 1 April 2015 — — 112,762 112,762 (333) 112,429

Loss and total comprehensive

expense for the period — — (1,007) (1,007) (22) (1,029)

At 31 July 2015 — — 111,755 111,755 (355) 111,400


— I-8 —

E. COMBINED STATEMENTS OF CASH FLOWS



2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

OPERATING ACTIVITIESProfit (loss) before tax 23,098 19,763 9,636 (952) 15,377Adjustment for:

Bank interest income (6) (6) (9) (3) (2)Interest expense 416 273 272 92 87Depreciation charge 739 235 241 76 46Gain on disposal of property and equipment (3) (800) — — —Unrealised (gain) loss arising on change in

fair value of financial assets classified as

held-for-trading — (97) 514 181 306

Operating cash flows before movement in

working capital 24,244 19,368 10,654 (606) 15,814Decrease in deposits placed with stock

exchange and clearing house — — — — 45Decrease (increase) in bank balances - client

accounts 1,149 (28,448) 21,703 12,815 (9,944)Increase in held-for-trading investment — (1,946) — — —(Increase) decrease in rental and utility

deposit (7) (28) 41 (7) —Decrease (increase) in accounts receivable 28,343 12,973 (13,276) 30,178 10,768Increase in prepayments (199) (179) (1,754) (1,018) (1,272)Increase (decrease) in accounts payable 2,380 38,750 (44,030) (17,056) 15,849Increase (decrease) in other payables and

accruals 4,744 (3,955) 2,697 (2,716) (3,594)

CASH GENERATED FROM (USED IN)

OPERATIONS 60,654 36,535 (23,965) 21,590 27,666Income tax paid (808) (8,982) (1,747) — —Interest paid (416) (273) (272) (92) (87)Bank interest received 6 6 9 3 2

NET CASH GENERATED BY (USED IN)

OPERATING ACTIVITIES 59,436 27,286 (25,975) 21,501 27,581


— I-9 —



2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

INVESTING ACTIVITIESIncrease in pledged bank deposit — — (5,000) — —Proceeds from disposal of available-for-sale

investment — — 68 — —Net cash outflow on disposal of a subsidiary — — (39) — —Proceeds from disposal of property and

equipment 95 800 — — —Purchase of property and equipment (76) (179) (172) (107) (118)Increase in deposit paid for office equipment — — (119) — —

NET CASH GENERATED BY (USED IN)

INVESTING ACTIVITIES 19 621 (5,262) (107) (118)

FINANCING ACTIVITIESRepayment of bank borrowings (10,000) — — — —Advance from directors — 397 4,696 1,967 —Repayment to directors (15,378) (5,021) — — (38)

NET CASH (USED IN) GENERATED BY

FINANCING ACTIVITIES (25,378) (4,624) 4,696 1,967 (38)

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS 34,077 23,283 (26,541) 23,361 27,425

CASH AND CASH EQUIVALENTS AT THE

BEGINNING OF YEAR/PERIOD 5,905 39,982 63,265 63,265 36,724

CASH AND CASH EQUIVALENTS AT THE

END OF YEAR/PERIODrepresented by cash and bank balances -

house accounts 39,982 63,265 36,724 86,626 64,149

Additional disclosure:Cash flow from interest received 5,034 5,012 4,254 1,177 2,346


— I-10 —

F. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

The Company is incorporated in the Cayman Islands on 3 August 2015.

Its immediate holding company is Thoughtful Mind Limited, a company incorporated in the BVI

with limited liability on 19 May 2015. Its ultimate controlling parties are Mr. Lo Tak Wing, Benson

and Mr. Lo Shiu Wing, Chester who have always been acting in concert in respect of the business

presented in the Financial Information (“Controlling Shareholders”).

The Company does not have any principle activities and acts as an investment holding company

since its incorporation. Its major operating subsidiary is PFSL. PFSL is a licensed corporation for the

following regulated activities under the Hong Kong Securities and Future Ordinance:

Type 1: Dealing in Securities

Type 9: Asset Management

Its principal activities are engaged in provision of (i) securities dealing and brokerage services;

(ii) placing and underwriting service; (iii) financing service including securities and IPO margin

financing; and (iv) asset management services.

The address of the registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box

2681, Grand Cayman, KY1-1111, Cayman Islands. Principal place of business of the Company is 11/F,

New World Tower II, 16-18 Queen’s Road Central, Central, Hong Kong.

The Financial Information is presented in Hong Kong Dollars, which is also the functional

currency of the Company and its subsidiaries.

The Financial Information contained in this Accountants’ Report does not constitute the statutory

annual financial statements of PFHL for any of the financial years ended 31 March 2015 and 31 March

2016. Further information relating to these statutory financial statements required to be disclosed in

accordance with section 436 of the Hong Kong Companies Ordinance is as follows:

As PFHL is a private company, PFHL is not required to deliver its financial statements to the

Registrar of Companies, and has not done so.

The auditor of PFHL has reported on these financial statements for the years ended 31 March

2015 and 31 March 2016. The auditor’s reports were unqualified; did not include a reference to any

matters to which the auditor drew attention by way of emphasis; and did not contain a statement under

either section 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance.


— I-11 —

2. BASIS OF PRESENTATION OF FINANCIAL INFORMATION

The group reorganisation, as more fully explained in the section headed “History, Reorganisation

and Development” in the Prospectus, was completed on 1 December 2016. Pursuant to a sale and

purchase agreement entered into among Controlling Shareholders and the Company, Controlling

Shareholders transferred their 100% equity interests in PFHL, which was the then ultimate holding

company of PFSL to DEGL, a subsidiary of the Company. As a result, the Company became the

holding company of the companies now comprising the Group on 1 December 2016. The Group is

under common control of Controlling Shareholders before and after the Reorganisation and throughout

the Relevant Periods. As a result, the Group comprising the Company and its subsidiaries resulting

from the Reorganisation is regarded as a continuing entity.

The combined statements of profit or loss and other comprehensive income, combined statements

of changes in equity and combined statements of cash flows for the Relevant Periods which include

the results, changes in equity and cash flows of the companies comprising the Group have been

prepared as if the Company had always been the holding company of the Group and the current group

structure had been in existence throughout the Relevant Periods. The combined statements of financial

position of the Group as at 31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016 have

been prepared to present the assets and liabilities of the companies now comprising the Group as if

the current group structure had been in existence as at those dates taking into account their respective

date of incorporation.

3. APPLICATION OF NEW AND AMENDMENTS TO HKFRSS

For the purpose of preparing and presenting the Financial Information for the Relevant Periods,

the Group has consistently applied the Hong Kong Accounting Standards (“HKASs”), HKFRSs,

amendments and interpretations (hereinafter collectively referred to as the “HKFRSs”) which are

effective for the accounting period beginning on 1 April 2015 throughout the Relevant Periods.

The Group has not early applied the following new and amendments to HKFRSs that have been

issued but are not yet effective.

HKFRS 9 Financial Instruments2

HKFRS 15 Revenue from Contracts with Customers2

HKFRS 16 Leases3

Amendments to HKFRS 2 Classification and Measurement of Share-based Payment

Transactions2

Amendments to HKFRS 10

and HKAS 28

Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture4


— I-12 —

Amendments to HKFRS 15 Clarifications to HKFRS 15 Revenue from Contracts with

Customers2

Amendments to HKAS 7 Disclosure Initiative1

Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses1

1 Effective for annual periods beginning on or after 1 January 2017.



4 Effective for annual periods beginning on or after a date to be confirmed.

Except as described below, the directors of the Company do not anticipate that the application

of the new and amendments to HKFRSs will have material impact on the Financial Information.


— I-13 —

HKFRS 9 Financial instruments

HKFRS 9 issued in 2009 introduced new requirements for the classification and measurement of

financial assets. HKFRS 9 was subsequently amended in 2010 to include requirements for the

classification and measurement of financial liabilities and for derecognition, and further amended in

2013 to include the new requirements for general hedge accounting. Another revised version of

HKFRS 9 was issued in 2014 mainly to include a) impairment requirements for financial assets and

b) limited amendments to the classification and measurement requirements by introducing a ’fair value

through other comprehensive income’ (FVTOCI) measurement category for certain simple debt

instruments.

Key requirements of HKFRS 9 are described below:

• All recognised financial assets that are within the scope of HKAS 39 Financial Instruments:

Recognition and Measurement are subsequently measured at amortised cost or fair value.

Specifically, debt investments that are held within a business model whose objective is to

collect the contractual cash flows, and that have contractual cash flows that are solely

payments of principal and interest on the principal outstanding are generally measured at

amortised cost at the end of subsequent accounting periods. Debt instruments that are held

within a business model whose objective is achieved both by collecting contractual cash

flows and selling financial assets, and that have contractual terms of the financial asset give

rise on specified dates to cash flows that are solely payments of principal and interest on

the principal amount outstanding, are measured at FVTOCI. All other debt investments and

equity investments are measured at their fair value at the end of subsequent accounting

periods. In addition, under HKFRS 9, entities may make an irrevocable election to present

subsequent changes in the fair value of an equity investment (that is not held-for-trading)

in other comprehensive income, with only dividend income generally recognised in profit

or loss.

• With regard to the measurement of financial liabilities designated as at fair value through

profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial

liability that is attributable to changes in the credit risk of that liability is presented in other

comprehensive income, unless the recognition of the effects of changes in the liability’s

credit risk in other comprehensive income would create or enlarge an accounting mismatch

in profit or loss. Changes in fair value of financial liabilities attributable to changes in the

financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Under

HKAS 39, the entire amount of the change in the fair value of the financial liability

designated as fair value through profit or loss was presented in profit or loss.

• In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss

model, as opposed to an incurred credit loss model under HKAS 39. The expected credit

loss model requires an entity to account for expected credit losses and changes in those


— I-14 —

expected credit losses at each reporting date to reflect changes in credit risk since initial

recognition. In other words, it is no longer necessary for a credit event to have occurred

before credit losses are recognised.

• The new general hedge accounting requirements retain the three types of hedge accounting.

However, greater flexibility has been introduced to the types of transactions eligible for

hedge accounting, specifically broadening the types of instruments that qualify for hedging

instruments and the types of risk components of non-financial items that are eligible for

hedge accounting. In addition, the effectiveness test has been overhauled and replaced with

the principle of an ‘economic relationship’. Retrospective assessment of hedge

effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s

risk management activities have also been introduced.

The directors of the Company anticipate that the application of HKFRS 9 in the future may have

an impact on amounts reported in respect of the Group’s financial assets, (e.g. impairment on accounts

receivable) resulting from early provision of credit losses. However, it is not practicable to provide

a reasonable estimate of the effect of HKFRS 9 until the Group performs a detailed review.

HKFRS 15 Revenue from contracts with customers

HKFRS 15 was issued to establish a single comprehensive model for entities to use in accounting

for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue

recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related

Interpretations when it becomes effective.

The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer

of promised goods or services to customers in an amount that reflects the consideration to which the

entity expects to be entitled in exchange for those goods or services. Specifically, the Standard

introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer

• Step 2: Identify the performance obligations in the contract

• Step 3: Determine the transaction price

• Step 4: Allocate the transaction price to the performance obligations in the contract

• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is

satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation

is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal

with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15.


— I-15 —

The directors of the Company anticipate that the application of HKFRS 15 in the future may have

an impact on the amounts reported have an impact on amounts reported (e.g. fee and commission

income on placing and underwriting activities) as the timing of revenue recognition may be affected

by the new standard, and more disclosures relating to revenue is required. However, it is not

practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Group performs a

detailed review.

HKFRS 16 Leases

This new standard provides a comprehensive model for the identification of lease arrangements

and their treatment in the financial statements of both lessors and lessees. As the Group does not

engage in any lease arrangements as a lessor, it will be impacted by the new standard due to its role

as a lessee.

The standard provides a single lessee accounting model, requiring lessees to recognise assets and

liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low

value.

A lessee is required to recognise a right-of-use asset and a lease liability at the commencement

of lease arrangement. Right-of-use asset includes the amount of initial measurement of lease liability,

any lease payment made to the lessor at or before the lease commencement date, estimated cost to be

incurred by the lessee for dismantling or removing the underlying assets from and restoring the site,

as well as any other initial direct cost incurred by the lessee. Lease liability represents the present

value of the lease payments. Subsequently, depreciation and impairment expenses, if any, on the

right-of-use asset will be charged to profit or loss following the requirements of HKAS 16 — Property,

Plant and Equipment, while lease liability will be increased by the interest accrual, which will be

charged to profit or loss, and deducted by lease payments.

Total operating lease commitment of the Group in respect of office premises with terms more

than 12 months as at 31 July 2016 amounted to approximately HK$3,390,000. The management of the

Group do not expect the adoption of HKFRS 16 as compared with the current accounting policy would

result in significant impact on the Group’s results but it is expected that certain portion of these lease

commitments will be required to be recognised in the consolidated statement of financial position as

right-of-use assets and lease liabilities.

4. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The Financial Information has been prepared in accordance with the following accounting

policies which conform with HKFRSs. In addition, the Financial Information includes applicable

disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong

Kong Limited and by the Hong Kong Companies Ordinance.


— I-16 —

Basis of preparation

The Financial Information has been prepared on the historical cost basis except for the held-for-

trading investment that is measured at fair value, at the end of each reporting period, as explained in

the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange for

goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date, regardless of whether that

price is directly observable or estimated using another valuation technique. In estimating the fair value

of an asset or a liability, the Group takes into account the characteristics of the asset or liability if

market participants would take those characteristics into account when pricing the asset or liability at

the measurement date. Fair value for measurement and/or disclosure purposes in this Financial

Information is determined on such a basis, except for leasing transactions that are within the scope of

HKAS 17 “Leases”.

In addition, for financial reporting purposes, fair value measurements are categorised into Level

1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and

the significance of the inputs to the fair value measurement in its entirety, which are described as

follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or

liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are

observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of combination

The Financial Information incorporates the financial information of the Company and

subsidiaries controlled by the Company. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate

that there are changes to one or more of the three elements of control listed above.


— I-17 —

Combination of a subsidiary begins when the Group obtains control over the subsidiary andceases when the Group loses control of the subsidiary. Specifically, income and expenses of asubsidiary acquired or disposed of during the year or period are included in the combined statementsof profit or losses from the date the Group gains control until the date when the Group ceases tocontrol the subsidiary.

When necessary, adjustments are made to the financial statements of the subsidiaries to bringtheir accounting policies into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating totransactions between members of the Group are eliminated in full on combination.

Investment in subsidiaries

Investment in subsidiaries are included in the Company’s statement of financial position at costless accumulated impairment losses, if any.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and representsthe amounts received or receivable for services provided in the normal course of business. Revenueis recognised when it is probable that the economic benefits will flow to the Group and when revenuecan be measured reliably, on the following basis:

(i) Commission income from (a) securities dealing and brokerage services and (b) placing andunderwriting activities are recognised as income on a trade date basis;

(ii) Fee income from placing and underwriting activities and referral fee income are recognisedas income in accordance with the terms of the agreements when the relevant significant actshave been completed;

(iii) Interest income from a financial asset is recognised when it is probable that the economicbenefits will flow to the Group and the amount of income can be measured reliably. Interestincome from a financial asset is accrued on a time basis by reference to the principaloutstanding and at the effective interest rate applicable, which is the rate that exactlydiscounts the estimated future cash receipts through the expected life of the financial assetto that asset’s net carrying amount on initial recognition; and

(iv) Fund management fee income, settlement fee income and handling fee income arerecognised as income when services are rendered.

Property and equipment

Property and equipment are stated in the combined statements of financial position at cost lesssubsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property and equipment lesstheir residual values over their estimated useful lives, using straight-line method. The estimated usefullives, residual values and depreciation method are reviewed at the end of each reporting period, withthe effect of any changes in estimate accounted for on a prospective basis.


— I-18 —

An item of property and equipment is derecognised upon disposal or when no future economicbenefits are expected to arise from the continued use of the asset. Any gain or loss arising on thedisposal or retirement of an item of property and equipment is determined as the difference betweenthe sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially allthe risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the leaseterm.

Foreign currencies

Transactions in currencies other than the functional currency of the group entity (foreigncurrencies) are recognised at the rates of exchanges prevailing at the dates of the transactions. At theend of each reporting period, monetary items denominated in foreign currencies are retranslated at therates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreigncurrencies are retranslated at the rates prevailing at the date when the fair value was determined.Non-monetary items that are measured in terms of historical cost in a foreign currency are notretranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation ofmonetary items, are recognised in profit or loss in the period in which they arise.

Employee benefits

Payments to the Mandatory Provident Fund Scheme are recognised as an expense whenemployees have rendered service entitling them to the contributions.

Taxation

Income tax expense represents the tax currently payable.

The tax currently payable is based on taxable profit for the year or period. Taxable profit differsfrom “profit before tax” as reported in the combined statements of profit or loss and othercomprehensive income because of items of income or expense that are taxable or deductible in otheryears or periods and items that are never taxable or deductible. The Group’s current tax is calculatedusing tax rates that have been enacted or substantively enacted by the end of each reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets andliabilities in the Financial Information and the corresponding tax base used in the computation oftaxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.Deferred tax assets are generally recognised for all deductible temporary differences to the extent thatit is probable that taxable profits will be available against which those deductible temporarydifferences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporarydifference arises from the initial recognition (other than in a business combination) of assets andliabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition,deferred tax liabilities are not recognised if the temporary difference arises from the initial recognitionof goodwill.


— I-19 —

Deferred tax liabilities are recognised for taxable temporary differences associated withinvestments in subsidiaries, except where the Group is able to control the reversal of the temporarydifference and it is probable that the temporary difference will not reverse in the foreseeable future.Deferred tax assets arising from deductible temporary differences associated with such investmentsare only recognised to the extent that it is probable that there will be sufficient taxable profits againstwhich to utilise the benefits of the temporary differences and they are expected to reverse in theforeseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period andreduced to the extent that it is no longer probable that sufficient taxable profits will be available toallow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in theperiod in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that havebeen enacted or substantively enacted by the end of each reporting period.

The measurement of deferred tax assets and liabilities reflects the tax consequences that wouldfollow from the manner in which the Group expects, at the end of each reporting period, to recoveror settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items thatare recognised in other comprehensive income or directly in equity, in which case, the current anddeferred tax are also recognised in other comprehensive income or directly in equity respectively.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set offcurrent tax assets against current tax liabilities and when they relate to income taxes levied by thesame taxation authority and the Group intends to settle its current tax assets and liabilities on a netbasis.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party tothe contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction coststhat are directly attributable to the acquisition or issue of financial assets and financial liabilities areadded to or deducted from the fair value of the financial assets or financial liabilities, as appropriate,on initial recognition. Transaction costs directly attributable to the acquisition of financial assets orfinancial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into the following specified categories financial assetsat fair value through profit or loss (“FVTPL”), available-for-sale (“AFS”) financial assets and loansand receivables. The classification depends on the nature and purpose of the financial assets and is


— I-20 —

determined at the time of initial recognition. All regular way purchases or sales of financial assets are

recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or

sales of financial assets that require delivery of assets within the time frame established by regulation

or convention in the marketplace.


The effective interest method is a method of calculating the amortised cost of a debt instrument

and of allocating interest income or expense over the relevant period. The effective interest rate is the

rate that exactly discounts estimated future cash receipts or payments (including all fees paid or

received that form an integral part of the effective interest rate, transaction costs and other premiums

or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period,

to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments.

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is held-for-trading.

A financial asset is classified as held-for-trading if:

• it has been acquired principally for the purpose of selling in the near term; or

• on initial recognition it is a part of a portfolio of identified financial instruments that the

Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on

remeasurement recognised in profit or loss.

AFS financial assets

AFS financial assets are non-derivatives that are either designated as AFS or are not classified

as loans and receivables, held-to-maturity investments or financial assets at FVTPL.

Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to

receive the dividends is established.

AFS equity investments that do not have a quoted market price in an active market and whose

fair value cannot be reliably measured and derivatives that are linked to and must be settled by

delivery of such unquoted equity investments are measured at cost less any identified impairment

losses at the end of each reporting period (see accounting policy in respect of impairment loss on

financial assets below).


— I-21 —

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. Loans and receivables including accounts receivable and cash

and bank balances are measured at amortised cost using the effective interest method, less any

impairment.

Interest income is recognised by applying the effective interest rate, except for short-term

receivables where the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end

of each reporting period. Financial assets are considered to be impaired where there is objective

evidence that, as a result of one or more events that occurred after the initial recognition of the

financial asset, the estimated future cash flows of the financial assets have been affected.

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

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

• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

For certain categories of financial assets, such as accounts receivable, assets are assessed for

impairment on a collective basis even if they were assessed not to be impaired individually. Objective

evidence of impairment for a portfolio of receivables could include the Group’s past experience of

collecting payments, an increase in the number of delayed payments and observable changes in

national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is

the difference between the asset’s carrying amount and the present value of the estimated future cash

flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all

financial assets with the exception of accounts receivable, where the carrying amount is reduced

through the use of an allowance account. When accounts receivable is considered uncollectible, it is

written off against the allowance account. Subsequent recoveries of amounts previously written off are

credited to profit and loss. Changes in the carrying amount of the allowance account are recognised

in profit or loss.


— I-22 —

For financial assets carried at cost, the amount of the impairment loss is measured as the

difference between the asset’s carrying amount and the present value of the estimated future cash

flows discounted at the current market rate of return for a similar financial asset. Such impairment loss

will not be reversed in subsequent periods.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of

impairment loss decreases and the decrease can be related objectively to an event occurring after the

impairment was recognised, the previously recognised impairment loss is reversed through profit or

loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not

exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by a group entity are classified as either financial liabilities

or as equity in accordance with the substance of the contractual arrangements and the definitions of

a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity

after deducting all of its liabilities. Equity instruments issued by the Company or its subsidiary are

recognised at the proceeds received, net of direct issue costs.

No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the

Company’s own equity instruments.


Financial liabilities including accounts payable, other payables, amounts due to directors and

bank borrowings are subsequently measured at amortised cost using the effective interest method.


Interest expense is recognised on an effective interest basis other than those financial liabilities

classified as at FVTPL, of which the interest expense is included in net gains or losses.


— I-23 —

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from

the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of

ownership of the asset to another party. If the Group neither transfers nor retains substantially all the

risks and rewards of ownership and continues to control the transferred asset, the Group continues to

recognise the asset to the extent of its continuing involvement and recognises an associated liability.

If the Group retains substantially all the risks and rewards of ownership of a transferred financial

asset, the Group continues to recognise the financial asset and also recognises a collateralised

borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying

amount and the sum of the consideration received and receivable and the cumulative gain or loss that

had been recognised in other comprehensive income and accumulated in equity is recognised in profit

or loss.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are

discharged, cancelled or they expire. The difference between the carrying amount of the financial

liability derecognised and the consideration paid and payable is recognised in profit or loss.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, the management of the Company is

required to make estimates, judgements and assumptions about the carrying amounts of assets and

liabilities that are not readily apparent from other sources. The estimates and associated assumptions

are based on historical experience and other factors that are considered to be relevant. Actual results

may differ from these estimates.

The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised if the revision

affects only that period or in the period of the revision and future periods if the revision affects both

current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation

uncertainty at the end of each reporting period, that may have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year or period.


— I-24 —

Impairment of accounts receivable

The Group reviews its accounts receivable to assess impairment on a periodic basis. In

determining whether an impairment loss for accounts receivable arising from the business of dealing

in securities should be recognised in profit or loss, the Group first reviews the value of the securities

collateral received from the customers and customers’ collection history on an individual basis.

In determining whether an impairment loss for accounts receivable arising from the provisions

of placing and underwriting services should be recognised in profit or loss, the Group reviews the

customers’ current credit worthiness and past collection history.

The policy for collective impairment allowance for accounts receivable of the Group is based on

the evaluation of probability of default, loss given default and exposure at default of accounts and on

management’s judgement. A considerable amount of judgement is required in assessing the ultimate

realisation of these accounts receivable, including the current creditworthiness, and the past collection

history of each amount.

Income taxes

There are certain transactions and activities during the ordinary course of business for which the

ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from

the amounts that were initially estimated, such differences will impact the current income tax in the

period during which such a determination is made.

6. FEE AND COMMISSION INCOME FROM PLACING AND UNDERWRITING

ACTIVITIES



2014 2015 2016 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

Fee and commission income from selling

shareholders/issuers/brokers 31,786 22,216 14,053 997 18,051

Commission income from subscribers 834 955 1,831 186 2,091

32,620 23,171 15,884 1,183 20,142


— I-25 —

7. OTHER REVENUE



2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000


Settlement fee income — 1,000 — — 1,120Referral fee income — 330 9,430 — —Handling fee income 271 215 10 5 —

271 1,545 9,440 5 1,120

8. COMMISSION EXPENSES



2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

Commission to account executives 3,176 1,907 2,166 1,565 346Commission to sub-placing agents and

sub-underwriters 4,320 1,766 1,864 — 1,666

7,496 3,673 4,030 1,565 2,012

9. STAFF COSTS



2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$’000

Salaries and bonus 5,598 5,651 5,319 1,991 1,620Contributions to Mandatory Provident

Fund 234 230 224 79 78Allowances 288 285 331 — —Directors’ emoluments (note 27)

- Fees — — — — —- Salaries 2,400 2,400 2,400 800 720- Bonus 1,840 1,620 2,020 — —- Contributions to Mandatory


10,403 10,235 10,343 2,886 2,430


— I-26 —

Staff and directors’ bonus are discretionary and determined with reference to the Group’s and

individuals’ performance.

The Group operates the Mandatory Provident Fund Scheme Ordinance for all qualified

employees. The Group contributes certain percentage of relevant payroll costs to the scheme, and the

contribution is matched by employees but subject to a maximum amount for each employee. The assetsof the scheme are held separately from those of the Group, in funds under the control of trustees.

10. FINANCE COSTS



2014 2015 2016 2015 2016


HK$’000

Interest on bank borrowings whollyrepayable within five years 416 273 272 92 87

The weighted average interest rate on funds borrowed generally are 2.65%, 2.74%, 2.41%, 2.73%and 2.72% for each of the financial years ended 31 March 2014, 2015 and 2016 and four months ended31 July 2015 (unaudited) and 31 July 2016 respectively.

11. PROFIT (LOSS) BEFORE TAX



2014 2015 2016 2015 2016


HK$’000

Net foreign exchange loss (gain) 11 18 — 9 (2)

Minimum lease payments paid underoperating lease in respect of rentedpremises 3,667 3,889 4,068 1,352 1,406

Auditor’s remuneration 140 220 304 83 80

Legal and professional fees 30 — 103 3 403

Donation 168 1,118 481 100 —

Project service fee (Note) 5,000 — — — —

Entertainment expenses 1,354 1,142 1,601 377 458

Unrealised (gain) loss arising on changein fair value of financial assetsclassified as held-for-trading — (97) 514 181 306

Note: Project service fee represents a fee paid to conduct a feasibility study in relation to the Shanghai-Hong Kong

Stock Connect.


— I-27 —

12. INCOME TAX EXPENSE



2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000


Current tax:

Hong Kong Profits Tax 4,769 3,300 2,753 77 2,842

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for the RelevantPeriods.

The tax charge for the years or periods can be reconciled to profit (loss) before tax per thecombined statements of profit or loss and other comprehensive income as follows:



2014 2015 2016 2015 2016HK$’000 HK$’000 HK$’000 HK$’000


Profit (loss) before tax 23,098 19,763 9,636 (952) 15,377

Tax at the statutory tax rate of16.5% 3,811 3,261 1,590 (157) 2,537

Tax effect of deductible temporarydifferences not recognised 122 136 (3) (10) (36)

Utilisation of deductible temporarydifferences previously notrecognised (41) (38) — — —

Tax effect of expenses notdeductible for tax purpose 1,042 121 1,204 252 341

Tax effect of income not taxable fortax purpose (1) (149) (2) (1) —

Tax concession (10) (20) (20) (7) —Others (154) (11) (16) — —

Income tax expense for theyear/period 4,769 3,300 2,753 77 2,842

13. EARNINGS PER SHARE

Earnings per share information is not presented as its inclusion, for the purpose of this report,is not considered meaningful due to the preparation of the statements of profit or loss and othercomprehensive income of the Group for Relevant Periods is on a combined basis as disclosed in note2.


— I-28 —

14. PROPERTY AND EQUIPMENT

Motorvehicle

Furniture andequipment

Leaseholdimprovement Total

HK$’000 HK$’000 HK$’000 HK$’000

COSTBalance at 1 April 2013 1,548 2,993 52 4,593Additions — 76 — 76Disposals — (154) — (154)

Balance at 31 March 2014 1,548 2,915 52 4,515Additions — 179 — 179Disposals (1,548) — — (1,548)

Balance at 31 March 2015 — 3,094 52 3,146Additions — 172 — 172

Balance at 31 March 2016 — 3,266 52 3,318Additions — 237 — 237

Balance at 31 July 2016 — 3,503 52 3,555

ACCUMULATEDDEPRECIATION

Balance at 1 April 2013 1,032 2,368 31 3,431Depreciation expense 516 212 11 739Eliminated on disposals of

assets — (62) — (62)

Balance at 31 March 2014 1,548 2,518 42 4,108Depreciation expense — 225 10 235Eliminated on disposals of

assets (1,548) — — (1,548)

Balance at 31 March 2015 — 2,743 52 2,795Depreciation expense — 241 — 241

Balance at 31 March 2016 — 2,984 52 3,036Depreciation expense — 46 — 46

Balance at 31 July 2016 — 3,030 52 3,082

CARRYING VALUESAs at 31 March 2014 — 397 10 407

As at 31 March 2015 — 351 — 351

As at 31 March 2016 — 282 — 282

As at 31 July 2016 — 473 — 473


— I-29 —

The above items of property and equipment are depreciated on a straight-line basis at the

following rates per annum:

Motor vehicle 33%

Furniture and equipment 20%

Leasehold improvement Over the term of the lease

15. DEPOSITS PLACED WITH STOCK EXCHANGE AND CLEARING HOUSE

As at 31 MarchAs at

31 July2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Deposits with Hong Kong Stock

Exchange 300 300 300 300Stamp duty with Hong Kong Stock

Exchange 75 75 75 30Deposits with Hong Kong Securities

Clearing Company Limited:Admission fee 150 150 150 150Guarantee fund 150 150 150 150

675 675 675 630

16. AVAILABLE-FOR-SALE INVESTMENT

Available-for-sale investment include:

As at 31 MarchAs at

31 July2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Unlisted equity securities 68 68 — —

Analysed for reporting purpose as:

Non-current assets 68 68 — —

As at 31 March 2014 and 31 March 2015, the Group holds 1.8% of the ordinary share capital of

a company incorporated in the Cayman Islands. The unlisted equity securities were stated at cost as

the investments do not have a quoted market price in an active market and the directors of the

Company are of the opinion that their fair values cannot be measured reliably.


— I-30 —

On 8 March 2016, the Group disposed of all its interests in the unlisted equity securities to a third

party at cash consideration of approximately HK$68,000.

17. HELD-FOR-TRADING INVESTMENT

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Held-for-trading investment include:

Equity securities listed outside Hong

Kong at fair value — 2,043 1,529 1,223

18. ACCOUNTS RECEIVABLE

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Accounts receivable arising from the

business of dealing in securities:

- Clearing house 5,876 7,988 4,044 88

- Cash clients 8,128 26,343 7,482 18,892

- Margin clients 108,986 75,580 111,989 92,787

Accounts receivable arising from the

placing and underwriting business 362 468 140 1,120

123,352 110,379 123,655 112,887

Less: Impairment — — — —

123,352 110,379 123,655 112,887

Accounts receivable from clearing house and cash clients represent trades pending settlement

arising from business of dealing in securities transactions which are normally due within two trading

days after the trade date. All accounts receivable from clearing house and cash clients are included in

“neither past due nor impaired” category. The management believes that no impairment allowance is

necessary in respect of these balances as the balances are considered fully recoverable.


— I-31 —

Accounts receivable from margin clients are repayable on demand and bearing interest at a rate

of 3.25% to 9.25% per annum as at 31 March 2014, 3.25% to 9.25% per annum as at 31 March 2015,

3.25% to 10.25% as at 31 March 2016 and 3.25% to 8.25% as at 31 July 2016. The credit facility limits

to margin clients are determined by the discounted market value of the collateral securities accepted

by the Group. The Group maintains a list of approved stocks for margin lending at a specified

loan-to-collateral ratio. A margin call may occur when the balances of the accounts receivable from

margin clients exceed the permitted margin loan limit, or when the discounted market value of the

collateral security is less than the balances of the accounts receivable from margin clients.

Accounts receivable from margin clients as at 31 March 2014, 31 March 2015, 31 March 2016

and 31 July 2016 were secured by the margin clients’ securities, which were pledged to PFSL as

collateral with fair value of approximately HK$304,963,000, HK$371,449,000, HK$525,854,000 and

HK$330,430,000, respectively. The Group is not prohibited to sell the collaterals upon customers’

default or repledge the collaterals upon receiving customers’ authorisation. All accounts receivable

from margin clients are included in “neither past due nor impaired” category. As at 31 March 2014,

2015 and 2016 and 31 July 2016, 100%, 100%, 100% and 77% of the outstanding balances,

respectively, were secured by sufficient collateral on an individual basis. Management of our Group

has assessed the market value of the pledged securities of each individual customer that has margin

shortfall as at the end of each reporting period and considered that no impairment allowance is

necessary taking into consideration of client’s credit quality, additional collateral provided and

subsequent repayment of monies.

Accounts receivable from margin clients includes accounts receivable from directors of the

Company of approximately HK$11,964,000, HK$7,694,000, HK$10,098,000 and HK$3,341,000 as at

31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, respectively.

Accounts receivable from margin clients includes accounts receivable from a family member of

a director of approximately HK$4,333,000, HK$5,058,000, HK$12,273,000 and HK$7,924,000 as at

31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, respectively.

Accounts receivable from margin clients includes accounts receivable from entity controlled by

the directors of the Company of approximately HK$169,000, nil, HK$1,620,000 and HK$1,316,000 as

at 31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, respectively.

Accounts receivable from cash clients includes accounts receivable from entity significantly

influenced by the directors of the Company of approximately nil, HK$151,000, nil and nil as at 31

March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, respectively.

No ageing analysis is disclosed for accounts receivable arising from the business of dealing in

securities as in the opinion of directors of the Company, the ageing analysis does not give additional

value in view of the nature of broking business.

Accounts receivable arising from the placing and underwriting services business are repayable

in accordance with the contract terms.


— I-32 —

The following is an aged analysis of accounts receivable arising from the placing and

underwriting business presented based on the date of rendering services:

31 March2014

31 March2015

31 March2016

31 July2016

HK$’000 HK$’000 HK$’000 HK$’000

0-60 days 362 318 100 1,120

61-90 days — — 40 —

91-120 days — 150 — —

362 468 140 1,120

Included in the Group’s accounts receivable arising from the placing and underwriting business

as at 31 July 2016 is a debtor with carrying amount of approximately HK$1,120,000 which is past due

as at the reporting date for which the Group has not provided for impairment loss because the issuer

is of good credit. The Group does not hold any collateral over this balance. The age of this receivable

is 31 days.

Ageing of accounts receivable arising from the placing and underwriting business which are past

due but not impaired:

31 March2014

31 March2015

31 March2016

31 July2016

HK$’000 HK$’000 HK$’000 HK$’000

0-60 days past due — — — 1,120

Except as described above, all accounts receivables arising from the placing and underwriting

business are included in “neither past due nor impaired” category. The management believes that no

impairment allowance is necessary in respect of these balances because these issuers or lead

underwriters are of good credit.


— I-33 —

19. CASH AND BANK BALANCES

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Bank balance - house accounts 39,982 63,252 36,724 64,142

Cash on hand — 13 — 7

39,982 63,265 36,724 64,149

Pledged bank deposit — — 5,000 5,000

Cash held on behalf of customers 38,198 66,646 44,943 54,887

78,180 129,911 86,667 124,036

Bank balances represent demand deposits at bank which bear interest at the prevailing market

rates.

The Group maintains segregated bank accounts to hold customers’ deposits arising from normal

business transactions. The Group has recognised the corresponding amount in accounts payable. The

cash held on behalf of customers is restricted and governed by the Securities and Futures (Client

Money) Rules under the Securities and Futures Ordinance.

As at 31 March 2016 and 31 July 2016, the Group has pledged deposits at bank of HK$5,000,000

to secure banking facilities granted to the Group.

20. ACCOUNTS PAYABLE

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000


business of dealing in securities:

- Clearing house 7,903 3,834 — 8,062

- Cash clients 43,953 82,391 50,945 57,285

- Margin clients 5,112 9,493 743 2,190

56,968 95,718 51,688 67,537


— I-34 —

Accounts payable to clearing house represent trades pending settlement arising from business of

dealing in securities transactions which are normally due within two trading days after the trade date.

The accounts payable to cash clients and margin clients are repayable on demand except where

certain balances represent trade pending settlement or deposits received from clients for their trading

activities under the normal course of business. Only the excessive amounts over the required deposits

stipulated are repayable on demand.

Accounts payable to cash clients includes amounts payable to directors of the Company of

approximately HK$4,906,000, HK$7,054,000, HK$1,526,000 and HK$2,922,000 as at 31 March 2014,

31 March 2015, 31 March 2016 and 31 July 2016, respectively.

Accounts payable to margin clients includes accounts payable to a director of the Company of

approximately nil, HK$243,000, nil and nil as at 31 March 2014, 31 March 2015, 31 March 2016 and

31 July 2016, respectively.

Accounts payable to margin clients includes amounts payable to the entity controlled by the

Company’s directors of approximately nil, HK$6,959,000, nil and nil as at 31 March 2014, 31 March

2015, 31 March 2016 and 31 July 2016, respectively.

Accounts payable arising from the business of dealing in securities are interest-bearing, except

for amounts representing pending trades payable to the clearing house, cash clients and margin clients.

No ageing analysis is disclosed for accounts payable arising from the business of dealing in

securities as in the opinion of directors of the Company, the ageing analysis does not give additional

value in view of the nature of broking business.

21. AMOUNTS DUE TO DIRECTORS

Director As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Lo Tak Wing, Benson 10,121 2,857 6,199 6,161

Lo Shiu Wing, Chester 18,120 18,120 18,120 18,120

Khoo Ken Wee 70 2,710 — —

28,311 23,687 24,319 24,281

The amounts due to directors are non-trading in nature, unsecured, repayable on demand and

non-interest bearing.

As represented by the directors of the Company, the amounts due to directors will be settled or

capitalised upon/prior to listing.


— I-35 —

22. BANK BORROWINGS

As at 31 MarchAs at

31 July

2014 2015 2016 2016

HK$’000 HK$’000 HK$’000 HK$’000

Secured bank loan 10,000 10,000 10,000 10,000

The bank loan is secured by listed shares of certain margin clients upon receiving client’s

authorisation amounting to approximately HK$45,932,000, HK$42,972,000, HK$38,455,000 and

HK$42,327,000 as at 31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, respectively.

The bank loan is also secured by a personal guarantee from one of the controlling Shareholders as at

31 March 2014 and 2015. The personal guarantee was released on 1 March 2016 and the bank loan

is secured by pledged bank deposits amounting to HK$5,000,000 as at 31 March 2016 and 31 July

2016. The bank loan bears interest at a range from 2.50% to 2.65%, 2.65% to 2.82%, 2.41% to 2.82%

and 2.40% to 2.85% per annum during each of the financial years ended 31 March 2014, 2015 and

2016 and four months ended 31 July 2016, respectively.

23. SHARE CAPITAL

The Company was incorporated on 3 August 2015 and therefore there was no issued share capital

shown in the combined statements of financial position as at 31 March 2014 and 2015. As at the date

of incorporation and up to the end of reporting period, the authorised share capital was HK$380,000

divided into 38,000,000 shares at par value of HK$0.01 each. One share was issued at par value of

HK$0.01 but not yet paid as at 31 March 2016 and 31 July 2016.

24. OTHER RESERVE

The reserve represents deemed capital contribution from one of the Controlling Shareholders

during the disposal of a subsidiary as mentioned in note 25.


— I-36 —

25. DISPOSAL OF A SUBSIDIARY

On 23 March 2016, PFSL disposed its 90% shareholding interest in PICFL to Mr. Lo Tak Wing,

Benson, one of the Controlling Shareholders, for HK$1 in cash.

Analysis of assets and liabilities over which control was lost:

HK$’000

Other receivables 1,902

Cash and bank balances 39

Accruals (20)

Amounts due to directors (5,966)

Net liabilities disposed of (4,045)

Gain on disposal of a subsidiary:

Consideration received —

Net liabilities disposed of 4,045

Non-controlling interests (405)

Gain on disposal recognised as deemed capital contribution from

one of the Controlling Shareholders 3,640

Net cash outflow arising on disposal:

Cash consideration —

Less: bank balances and cash disposed of (39)

(39)


— I-37 —

26. AMOUNT DUE TO RELATED PARTIES

The Company had the following balance with related parties during the Relevant Periods:

As at

31 March2016

31 July2016

HK$’000 HK$’000

Amount due to PFHL 4,045 —

Amount due to PFSL 150 7,165

4,195 7,165

The amount due to related parties are non-trading in nature, unsecured, repayable on demand and

non-interest bearing.

27. DIRECTORS’ EMOLUMENTS

The emoluments paid or payable by the entities comprising the Group, to each of the directors

of the Company who are also directors or senior management of the entities comprising the Group

during the Relevant Periods and subsequently appointed as directors of the Company, were as follows:

For the financial year ended 31 March 2014

NameDirector

feeSalary andallowances

Contributionto retirement

benefitschemes Bonuses Total(i)

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

Lo Tak Wing, Benson — 1,200 15 1,500 2,715

Lo Shiu Wing, Chester — 960 15 320 1,295

Khoo Ken Wee — 240 13 20 273

— 2,400 43 1,840 4,283


— I-38 —


Name Director feeSalary andallowances



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

Lo Tak Wing, Benson — 1,200 18 800 2,018

Lo Shiu Wing, Chester — 960 18 800 1,778

Khoo Kee Wee — 240 13 20 273

— 2,400 49 1,620 4,069





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

Lo Tak Wing, Benson — 1,200 18 1,000 2,218

Lo Shiu Wing, Chester — 960 18 1,000 1,978

Khoo Ken Wee — 240 13 20 273

— 2,400 49 2,020 4,469

For the four months ended 31 July 2015 (unaudited)




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

Lo Tak Wing, Benson — 400 6 — 406

Lo Shiu Wing, Chester — 320 6 — 326

Khoo Ken Wee — 80 4 — 84

— 800 16 — 816


— I-39 —

For the four months ended 31 July 2016




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

Lo Tak Wing, Benson — 400 6 — 406

Lo Shiu Wing, Chester — 320 6 — 326

Khoo Ken Wee — — — — —

— 720 12 — 732

(i)The Group did not operate any share option scheme during the Relevant Periods.

The directors’ emoluments shown above were mainly for their services as directors of the

Company and subsidiary undertaking.

On 3 August 2015, Mr. Lo Tak Wing, Benson and Mr. Lo Shiu Wing, Chester have been appointed

as directors of the Company. On 1 February 2016, Mr. Khoo Ken Wee has been appointed as a director

of the Company.

On 5 December 2016, Mr. Ng Shu Bun Andrew, Mr. Mok Kwai Pui, Bill and Mr. Ma Wai Hung,

Vincent have been appointed as independent non-executive directors of the Company to take effect on

the listing date.

The bonuses are discretionary and determined with reference to the Group’s and the individuals’

performance.

During the Relevant Periods, no directors of the Company waived any emoluments and no

emoluments were paid by the Group to any of the directors of the Company as an inducement to join

or upon joining the Group or as compensation for loss of office.


— I-40 —

28. HIGHEST PAID INDIVIDUALS

Of the five individuals with the highest emoluments in the Group, two out of the five individuals

were directors of the Company whose emoluments are included in the disclosures in note 27 above.

The emolument of the remaining three individuals were as follows:



2014 2015 2016 2015 2016


HK$’000

Basic salaries andallowances 1,601 1,524 766 279 460

Bonuses 160 588 686 630 —

Contribution toretirement benefit 45 51 38 12 18

1,806 2,163 1,490 921 478

Their emoluments were within the following band:

Number of employees



2014 2015 2016 2015(unaudited)

2016

Nil - HK$1,000,000 3 3 3 3 3

Bonuses are discretionary and determined with reference to the Group’s and the individuals’

performance. No emoluments have been paid to these individuals as an inducement to join or upon

joining the Group or as compensation for loss of office during the Relevant Periods.


— I-41 —

29. OPERATING LEASE COMMITMENTS

As at 31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, the Group had

commitments for future minimum lease payments under a non-cancellable operating lease which falls

due as follows:

As at 31 MarchAs at

31 July20162014 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

Within one year 3,601 3,807 4,068 3,390

In the second to fifth years inclusive 450 4,990 678 —

4,051 8,797 4,746 3,390

30. CAPITAL COMMITMENTS

As at 31 MarchAs at

31 July20162014 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

Capital expenditure in respect of

acquisition of office equipment

contracted for but not provided in the

combined financial statements — — 118 —


— I-42 —

31. RELATED PARTY TRANSACTIONS

During the Relevant Periods, the Group entered into the following transactions with related

parties:

Commission income from securities dealing andbrokerage services received and receivable from

financial year ended31 March

four months ended31 July

2014 2015 2016 2015 2016

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

(unaudited)

Directors of the Company 191 158 242 180 13

Family member of a director of

the Company 149 108 148 58 32

Entity controlled by the directors

of the Company 13 39 98 13 —

Entity controlled by a family

member of a director of the

Company — — 11 — —

Entity significantly influenced

by the directors of the

Company 5 24 7 2 2

Fee and commission income from placing andunderwriting activities received and receivable from



2014 2015 2016 2015 2016

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

(unaudited)

Directors of the Company 7 25 2 2 —


the Company 66 5 — — 80


of the Company — — 7 7 70


— I-43 —

Interest income from margin financing receivedand receivable from



2014 2015 2016 2015 2016

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

(unaudited)

Directors of the Company 167 558 414 122 165


the Company 45 624 340 101 173


of the Company 5 35 35 — 11

Sub-underwriting commission expenses paid andpayable to



2014 2015 2016 2015 2016

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

(unaudited)

Director of the Company 840 50 45 — —


the Company 1,239 50 45 — —

The Group sold furniture and equipment with carrying value of HK$92,000 to the Company’s

director at a consideration of HK$95,000 during the year ended 31 March 2014.

The balances with related parties as at 31 March 2014, 31 March 2015, 31 March 2016 and 31

July 2016 have been disclosed in notes 18, 20, 21 and 26.


— I-44 —

Compensation of key management personnel

The remuneration of directors and other members of key management during the years or periods

were as follows:



2014 2015 2016 2015 2016

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

(unaudited)

Short term employee benefits 4,880 4,660 5,060 1,013 933

Contributions to Mandatory


4,953 4,743 5,145 1,040 956

32. CAPITAL MANAGEMENT

The Group manages its capital to ensure that it will be able to continue as a going concern while

maximising the return to shareholders through the optimisation of the debt and equity balance. The

Group’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of the Group consists of bank borrowings, cash and cash equivalents,

amounts due to directors and equity attributable to owners of the Company (comprising issued share

capital and retained profits).

PFSL is registered with the Hong Kong Securities and Futures Commission (“SFC”) for the

business in which it operates and is subject to liquid capital requirements under the Hong Kong

Securities and Futures (Financial Resources) Rules (“SF(FR)R”). Under the SF(FR)R, it is required

to maintain liquid capital in excess of HK$3 million or 5% of the total adjusted liabilities, whichever

is higher. PFSL had complied with the capital requirements imposed by the SF(FR)R throughout the

Relevant Periods.

Other than PFSL, the Group is not subject to any externally imposed capital requirements.

Gearing ratio

The management of the Group reviews the capital structure during the Relevant Periods on an

ongoing basis. As part of this review, the management of the Group considers the cost of capital and

the risks associated with each class of capital.


— I-45 —

The gearing ratio at the end of each reporting periods are as follows:

As at 31 MarchAs at

31 July20162014 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

Debt (note 1) 38,311 33,687 34,319 34,281

Equity (note 2) 95,966 112,429 123,357 135,892

Debt to equity ratio 39.9% 30.0% 27.8% 25.2%

Notes:

(1) Debt represent amounts due to directors of the Company and bank loans as detailed in note 21 and 22.

(2) Equity includes all capital and reserves.

33. SEGMENT REPORTING

The chief operating decision maker (“CODM”) of the Group, being the management of the

Group, regularly review revenue analysis by major services for the Relevant Periods to make decisions

about resource allocation. No discrete financial information other than revenue is regularly provided

to the CODM. The management assesses the performance of the Group based on the revenue and profit

as presented in the combined statements of profit or loss and other comprehensive income.

No segment assets or liabilities is presented as the CODM does not review segment assets and

liabilities.

Revenue from major services

The Group provides five types of services:

(a) securities dealing and brokerage services, which primarily generate commission on

securities dealing;

(b) placing and underwriting services, which primarily generate fee and commission from

equity and bond placing and underwriting;

(c) financing services, including securities and IPO margin financing, which generate interest

income from margin clients;

(d) asset management services, which primarily generate fund management fee; and

(e) other services, which primarily generate handling fees and referral fees income.


— I-46 —

The following is an analysis of the Group’s revenue from its major services.



2014 2015 2016 2015 2016

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

(unaudited)

Securities dealing and brokerage

services 12,717 10,225 10,918 5,513 1,282

Placing and underwriting

services 32,620 23,171 15,884 1,183 20,142

Interest income from margin

clients 5,028 5,006 4,245 1,174 2,344

Asset management services 3,829 2,448 434 434 —

Other services 271 1,545 9,440 5 1,120

54,465 42,395 40,921 8,309 24,888

Revenue reported above represents revenue generated from external customers during the

Relevant Periods.

Geographical information

The Group’s non-current assets are located in Hong Kong. The Group operates in Hong Kong and

its revenue are derived from its operations in Hong Kong.

Information about major customers

Revenue from major customers during the Relevant Periods contributing over 10% of the total

revenue of the Group are as follows:



2014 2015 2016 2015 2016

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

Customer 1 N/A1 N/A1 9,430 N/A1 N/A1

Customer 2 N/A1 N/A1 4,719 N/A1 N/A1

Customer 3 20,251 N/A1 N/A1 N/A1 N/A1

Customer 4 N/A1 N/A1 N/A1 N/A1 8,353

1 No revenue is generated from the customer in the relevant year.


— I-47 —

No other single customers contributed 10% or more to the Group’s revenue during the Relevant

Periods.

34. FINANCIAL INSTRUMENTS

Categories of financial instruments

As at 31 MarchAs at

31 July20162014 2015 2016

HK$’000 HK$’000 HK$’000 HK$’000

Financial assets

Fair value through profit or loss

- held-for-trading investment — 2,043 1,529 1,223

Available-for-sale investment 68 68 — —

Loans and receivables (including cash

and cash equivalents) 201,532 240,290 210,322 236,923


Financial liabilities at amortised cost 95,507 129,732 86,171 102,007

Financial risk management objectives and policies

The Group’s risk management objectives are to achieve a proper balance between risks and

yield, minimise the adverse impacts of risks on the Group’s operating performance, and

maximize the benefits of the shareholders. Based on these risk management objectives, the

Group’s basic risk management strategy is to identify and analysis the various risks the Group’s

exposure to, and to establish an appropriate tolerance for risk management practice, so as to

monitor, notify and respond to the risks regularly and effectively and to control risks at an

acceptable level.

The risks the Group’s exposed to in daily operating activities mainly include market risk

(including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The

Group has established policies and procedures accordingly to identify and analyse the risks. The

Group has set up appropriate risk indicators, risk limits, risk policies and internal control

process. The Group also manages risks with information system on a continuous monitoring

basis.

There has been no change to the types of the Group’s exposure in respect of financial

instruments or the manner in which it manages and measures the risks.


— I-48 —

Market risk

Interest rate risk

At the end of each reporting period, the cash flow interest rate risk mainly arises from the

Group’s bank balances (house account) and bank borrowings, which are financial instruments carried

at variable interest rates. Based on the year end interest-bearing bank balances (house account) and

bank borrowings, if interest rates had been 50 basis points higher and all other variables were held

constant, the Group’s profit for the financial years ended 31 March 2014, 31 March 2015 and 31

March 2016 and four months ended 31 July 2016 would increase by approximately HK$125,000,

HK$222,000, HK$132,000 and HK$82,000, respectively. The management of the Group assessed that

a decrease in interest rates is not likely and will not affect the Group’s cash flow interest rate risk.

Currency risk

Currency risk is the risk of loss due to adverse movements in foreign exchange rates relating to

foreign currency deposits with banks. The Group’s foreign exchange rate risk is not material as foreign

currency deposits with banks are minimal.

Other price risk

Price risk is the risk that the fair value or future cash flows of the Group’s held-for-trading

investment will fluctuate as a result of changes in market prices (other than those arising from interest

rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer,

or all factors affecting equity instruments traded in the market.

The management of the Group manage the risk exposure by closely monitoring the investment

and will consider hedging the risk exposure should the need arise.

The management of the Group has utilised the effect of stock price variation on profit to manage

and analyse the price risk. If the equity price of the held-for-trading investment had been 10%

higher/lower, and held other variables constant, the profit for the financial years ended 31 March

2014, 31 March 2015 and 31 March 2016 and four months ended 31 July 2016 would increase/decrease

by nil, HK$204,000, HK$153,000 and HK$122,000, respectively.

Credit risk

At the end of each reporting period, the Group’s maximum exposure to credit risk which will

cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is

arising from the carrying amount of the respective recognised financial assets as stated in the

combined statements of financial position and statement of financial position, respectively.


— I-49 —

In order to minimise the credit risk, the management of the Group has delegated a team

responsible for determination of credit limits, credit approvals and other monitoring procedures to

ensure that follow-up action is taken to recover overdue debts. In addition, the Group holds collateral

to cover its credit risks associated with its accounts receivable from margin clients as mentioned in

note 18 and reviews the recoverable amount of each individual accounts receivable at the end of each

reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this

regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

As at 31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, the Group has

concentration of credit risk on accounts receivable as 63%, 69%, 64% and 65% respectively, of the

total accounts receivable was due from top five largest customers and 5%, 7%, 3% and 0%

respectively of the total accounts receivable was due from a clearing house.

As at 31 March 2014, 31 March 2015, 31 March 2016 and 31 July 2016, the Group has

concentration of credit risk on liquid funds as bank balances are deposited with two banks, two banks,

one bank and one bank respectively. The credit risk on liquid funds and accounts receivable from

clearing house is limited because the counterparties are banks and a clearing house with high credit

ratings assigned by international credit-rating agencies.

Other than concentration of credit risk on liquid funds and accounts receivable, the Group does

not have any other significant concentration of credit risk.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and

cash equivalents deems adequate by management to finance the Group’s operations and mitigate the

effects of fluctuations in cash flows.


— I-50 —

The tables below present the cash flows payable by the Group within the remaining contractual

maturities at the end of each reporting period. The amounts disclosed in the tables are the contractual

undiscounted cash flows. The tables include both interest and principal cash flows. To the extent that

interest rates are floating, the undiscounted amount is derived from interest rate at the end of each

respective reporting period.

Weightedaverage

interest rateOn

demand

Lessthan 3

months

Totalundiscounted

cash flowCarrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2014


Accounts payable arising

from the business of

dealing in securities

- Clearing house — — 7,903 7,903 7,903

- Cash clients 0.01 33,662 10,291 43,953 43,953

- Margin clients 0.01 5,112 — 5,112 5,112

Bank borrowings 2.65 — 10,063 10,063 10,000


67,085 28,485 95,570 95,507

Weightedaverage

interest rate On demandLess than3 months

Totalundiscounted

cash flowCarrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2015




dealing in securities:

- Clearing house — — 3,834 3,834 3,834

- Cash clients 0.01 40,450 41,941 82,391 82,391

- Margin clients 0.01 9,373 120 9,493 9,493

Bank borrowings 2.74 — 10,069 10,069 10,000


73,510 56,291 129,801 129,732


— I-51 —

Weightedaverage


Totalundiscounted

cash flowCarrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2016





- Cash clients 0.01 43,970 6,975 50,945 50,945

- Margin clients 0.01 726 17 743 743

Bank borrowings 2.41 — 10,060 10,060 10,000


69,015 17,216 86,231 86,171

Weightedaverage


Totalundiscounted

cash flowCarrying

amount

% HK$’000 HK$’000 HK$’000 HK$’000

As at 31 July 2016





- Clearing house — — 8,062 8,062 8,062

- Cash clients 0.01 48,584 8,701 57,285 57,285

- Margin clients 0.01 2,190 — 2,190 2,190

Bank borrowings 2.72 — 10,068 10,068 10,000


75,055 27,020 102,075 102,007

Fair value measurements

The directors of the Company consider that the carrying amounts of financial assets and financial

liabilities recorded at amortised cost in the combined statements of financial position approximate

their fair values.


— I-52 —

The Group’s held-for-trading investment (see note 17) are measured at fair value at the end of

each reporting periods. It is traded in active liquid markets and its fair value is determined with

reference to quoted market bid prices.



HK$’000 HK$’000 HK$’000 HK$’000

Financial assets




HK$’000 HK$’000 HK$’000 HK$’000

Financial assets


Fair value hierarchy as at 31 July 2016


HK$’000 HK$’000 HK$’000 HK$’000

Financial assets


There were no transfers between Level 1 and 2 in the Relevant Periods.

The total gains and losses for the financial years ended 31 March 2014, 31 March 2015, 31 March

2016 and 31 July 2016 included nil, an unrealised gain of HK$97,000, an unrealised loss of

HK$514,000 and an unrealised loss of HK$306,000 relating to financial assets that are measured at

fair value (see note 11).

35. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The Group offsets the following financial assets and financial liabilities since it currently has a

legally enforceable right to set off the balances, and intends either to settle on a net basis, or to realise

the balances simultaneously.

Under the agreement signed between the Group and the selected customers, money obligations

receivable and payable with the same customers on the same settlement date are settled on net basis.

Under the continuous net settlement, money obligations receivable and payable with Hong Kong

Securities Clearing Company Limited and other brokers on the same settlement date are settled on a

net basis.


— I-53 —

Financial assets and financial liabilities subject to offsetting

The gross amounts of the recognised financial assets and financial liabilities and their netamounts as presented in the statement of financial position are as follows:

As at 31 March 2014

Grossamounts ofrecognised

financialassets

Gross amountsof recognised

financialliabilities set

off in thecombined

statement offinancialposition

Net amountsof financial

assetspresented in

the combinedstatement of

financialposition

Related amounts not setoff in the statement of

financial position

Netamount

Financialinstruments

Financialcollateral

receivedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Type of financialassets

Deposits placed withstock exchange andclearing house 675 — 675 (675) — —

Accounts receivablearising from thebusiness of dealingin securities:- Clearing house 29,302 (23,426) 5,876 — — 5,876- Cash clients 12,257 (4,129) 8,128 (3,258) — 4,870- Margin clients 133,841 (24,855) 108,986 — (108,986) —

Gross

amounts of

recognised

financial

liabilities

Gross amounts

of recognised

financial

assets set off

in the

combined

statement of

financial

position

Net amounts

of financial

liabilities

presented in

the combined

statement of

financial

position

Related amounts not set

off in the statement of

financial position

Net

amount

Financial

instruments

Financial

collateral

pledgedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Type of financial

liabilitiesAccounts payable

arising from the

business of dealing

in securities:- Clearing house 31,329 (23,426) 7,903 (675) — 7,228- Cash clients 48,082 (4,129) 43,953 (3,258) — 40,695- Margin clients 29,967 (24,855) 5,112 — — 5,112


— I-54 —

As at 31 March 2015

Gross

amounts of

recognised

financial

assets

Gross amounts

of recognised

financial

liabilities set

off in the

combined

statement of

financial

position

Net amounts

of financial

assets

presented

in the

combined

statement of

financial

position



financial position

Financial

instruments

Financial

collateral

received

Net

amountHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Type of financial

assetsDeposits placed with

stock exchange and

clearing house 675 — 675 (675) — —Accounts receivable

arising from the

business of dealing

in securities:- Clearing house 36,597 (28,609) 7,988 — — 7,988- Cash clients 44,664 (18,321) 26,343 (3,473) — 22,870- Margin clients 83,504 (7,924) 75,580 — (75,580) —

Gross

amounts of

recognised

financial

liabilities

Gross amounts

of recognised

financial

assets set off

in the

combined

statement of

financial

position

Net amounts

of financial

liabilities

presented

in the

combined

statement of

financial

position



financial position

Financial

instruments

Financial

collateral

pledged

Net

amountHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Type of financial

liabilitiesAccounts payable

arising from the

business of dealing

in securities:- Clearing house 32,443 (28,609) 3,834 (675) — 3,159- Cash clients 100,712 (18,321) 82,391 (3,473) — 78,918- Margin clients 17,417 (7,924) 9,493 — — 9,493


— I-55 —

As at 31 March 2016

Gross

amounts of

recognised

financial

assets

Gross amounts

of recognised

financial

liabilities set

off in the

combined

statement of

financial

position

Net amounts

of financial

assets

presented

in the

combined

statement of

financial

position



financial position

Financial

instruments

Financial

collateral

received

Net

amount

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

Type of financial

assets

Deposits placed with

stock exchange and

clearing house 675 — 675 — — 675

Accounts receivable

arising from the

business of dealing

in securities:

- Clearing house 12,521 (8,477) 4,044 — — 4,044

- Cash clients 9,115 (1,633) 7,482 (3,434) — 4,048

- Margin clients 116,055 (4,066) 111,989 — (111,989) —

Gross

amounts of

recognised

financial

liabilities

Gross amounts

of recognised

financial

assets set off

in the

combined

statement of

financial

position

Net amounts

of financial

liabilities

presented

in the

combined

statement of

financial

position



financial position

Financial

instruments

Financial

collateral

pledged

Net

amount

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

Type of financial

liabilities

Accounts payable

arising from the

business of dealing

in securities:

- Clearing house 8,477 (8,477) — — — —

- Cash clients 52,578 (1,633) 50,945 (3,434) — 47,511

- Margin clients 4,809 (4,066) 743 — — 743


— I-56 —

As at 31 July 2016

Gross

amounts of

recognised

financial

assets

Gross amounts

of recognised

financial

liabilities set

off in the

combined

statement of

financial

position

Net amounts

of financial

assets

presented

in the

combined

statement of

financial

position



financial position

Financial

instruments

Financial

collateral

received

Net

amount

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

Type of financial

assets

Deposits placed with

stock exchange and

clearing house 630 — 630 (630) — —

Accounts receivable

arising from the

business of dealing

in securities:

- Clearing house 13,956 (13,868) 88 (88) — —

- Cash clients 27,193 (8,301) 18,892 (763) — 18,129

- Margin clients 100,205 (7,418) 92,787 — (76,724) 16,063

Gross

amounts of

recognised

financial

liabilities

Gross amounts

of recognised

financial

assets set off

in the

combined

statement of

financial

position

Net amounts

of financial

liabilities

presented

in the

combined

statement of

financial

position



financial position

Financial

instruments

Financial

collateral

pledged

Net

amount

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

Type of financial

liabilities

Accounts payable

arising from the

business of dealing

in securities:

- Clearing house 21,930 (13,868) 8,062 (718) — 7,344

- Cash clients 65,586 (8,301) 57,285 (763) — 56,522

- Margin clients 9,608 (7,418) 2,190 — — 2,190


— I-57 —

G. DIRECTORS’ EMOLUMENTS

Under the arrangements presently in force, the aggregate remuneration payable to the directors

of the Company for the year ending 31 March 2017, excluding discretionary bonus and share-based

payment, if any, is estimated to be approximately HK$2,295,000.

H. SUBSEQUENT EVENTS

On 5 December 2016, the Company increased its authorised share capital to HK$80,000,000

divided into 8,000,000,000 shares of HK$0.01 each which rank pari passu in all aspects with the

existing shares.

On 5 December 2016, the Company has conditionally approved and adopted the share option

scheme. The principal terms of the share option scheme are summarised under the section headed

“Share Option Scheme” in Appendix IV to the Prospectus. No share options were granted up to the

date of report.

On 5 December 2016, PFHL capitalised amount due to a director of approximately HK$6.1

million.

The group reorganisation, as more fully explained in the section headed “History, Reorganisation

and Development” in the Prospectus, was completed on 1 December 2016. The Company became the

holding company of the companies now comprising the Group on 1 December 2016.

I. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Group, the Company or any of its subsidiaries have been

prepared in respect of any period subsequent to 31 July 2016 and up to the date of this report.

Yours faithfully,


Certified Public Accountants

Hong Kong


— I-58 —

The following information does not form part of the Accountants’ Report prepared by Deloitte

Touche Tohmatsu, Certified Public Accountants, the reporting accountant of the Company, as set forth

in Appendix I to this prospectus, and is included herein for information only. The unaudited pro forma

financial information should be read in conjunction with the section entitled ‘‘Financial Information’’

in this prospectus and the ‘‘Accountants’ Report’’ set forth in Appendix I to this prospectus.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets of the Group

prepared in accordance with Rule 7.31 of the GEM Listing Rules is for illustrative purposes only, and

is set out below to illustrate the effect of the Placing on the net tangible assets of the Group

attributable to the owners of the Company as of 31 July 2016 as if the Placing had taken place on 31

July 2016.

This unaudited pro forma statement of adjusted net tangible assets has been prepared for

illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the

combined net tangible assets of the Group as at 31 July 2016 or at any future dates following the

Placing. It is prepared based on the combined net assets of the Group as at 31 July 2016 as set out

in the Accountant’s Report of the Group, the text of which is set out in Appendix I to this prospectus,

and adjusted as described below. The unaudited pro forma statement of adjusted net tangible assets

does not form part of the Accountant’s Report.

Auditedcombined net

tangible assetsof the Group

attributable tothe owners

of theCompany as at

31 July2016

(Note 1)

Estimated netproceeds from

the Placing(Note 2)

Unaudited proforma adjusted

combined nettangible assets

of the Groupattributable tothe owners ofthe Company

as at31 July

2016

Unauditedpro forma

adjustedcombined

net tangibleassets of the

Groupattributable to

the ownersof the

Company as at31 July

2016 perShare

(Note 3)

HK$’000 HK$’000 HK$’000 HK$

Based on the minimum

indicative Placing Price

of HK$0.14 per Share 135,892 58,625 194,517 0.097

Based on the maximum

indicative Placing Price

of HK$0.16 per Share 135,892 68,275 204,167 0.102

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

— II-1 —

Notes:

1. The audited combined net tangible assets attributable to the owners of the Company as at 31 July 2016 is extracted

from the Accountants’ Report set out in Appendix I to this prospectus, which is based on the audited combined

net assets of the Group attributable to the owners of the Company as at 31 July 2016 of approximately HK$135.9

million.

2. The estimated net proceeds from the Placing are based on 500,000,000 Share to be issued at the indicative Placing

Price of HK$0.14 per Share and HK$0.16 per Share after deduction of the underwriting fees and other related

expenses (excluding approximately HK$7.7 million which have been incurred up to 31 July 2016) paid/payable

by the Company but takes no account of any Shares which may be allotted and issued or repurchased by the

Company pursuant to the General Mandate to Issue Shares or the General Mandate to Repurchase Shares or any

Shares which may be issued upon exercise of Offer Size Adjustment Option or exercise of options which may be

granted under Share Option Scheme as described in the section headed “Share Capital” in this prospectus.

3. The unaudited pro forma adjusted combined net tangible assets of the Group attributable to owners of the

Company as at 31 July 2016 per Share is arrived at after the adjustments referred to in the preceding paragraphs

and on the basis that 2,000,000,000 Shares were in issue assuming that the Placing and Capitalisation Issue has

been completed on 31 July 2016 but takes no account of any Shares which may be allotted and issued or

repurchased by the Company pursuant to the General Mandate to Issue Shares or the General Mandate to

Repurchase Shares or any Shares which may be issued upon exercise of Offer Size Adjustment Option or exercise

of options which may be granted under Share Option Scheme as described in the section headed ‘‘Share Capital’’

in this prospectus.

4. The unaudited pro forma adjusted combined net tangible assets of the Group attributable to owners of the

Company as at 31 July 2016 does not take into account the effect of any trading result or other transaction of the

Group subsequent to 31 July 2016. In particular, the unaudited pro forma adjusted combined net tangible assets

of the Group attributable to owners of the Company does not take into account of the effect of capitalisation of

approximately HK$6.1 million due to a director on 5 December 2016. Had the effect of the capitalisation of

approximately HK$6.1 million on 5 December 2016 been taken into account, the unaudited pro forma adjusted

combined net tangible assets of the Group attributable to the owners of the Company as at 31 July 2016 per Share

would be HK$0.100 and HK$0.105, based on the indicative Placing Price of HK$0.14 per Share and HK$0.16 per

Share, respectively, on the basis that 2,000,000,000 Shares were in issue assuming that the Placing and

Capitalisation Issue has been completed on 31 July 2016.


— II-2 —

B. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of the independent reporting accountants’ assurance report received

from Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, the reporting accountants

of our Company, in respect of the Group’s unaudited pro forma financial information prepared for the

purpose of incorporation in this prospectus.

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE

COMPILATION OF PRO FORMA FINANCIAL INFORMATION

To the Directors of PF Group Holdings Limited

We have completed our assurance engagement to report on the compilation of pro forma financial

information of PF Group Holdings Limited (the “Company”) and its subsidiaries (hereinafter

collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for

illustrative purposes only. The pro forma financial information consists of the pro forma statement of

adjusted combined net tangible assets as at 31 July 2016 and related notes as set out on pages II-1 to

II-2 of Appendix II to the prospectus issued by the Company dated 12 December 2016 (the

“Prospectus”). The applicable criteria on the basis of which the Directors have compiled the pro forma

financial information are described on pages II-1 to II-2 of Appendix II to the Prospectus.

The pro forma financial information has been compiled by the Directors to illustrate the impact

of the proposed placing on the Group’s financial position as at 31 July 2016 as if the proposed placing

had taken place at 31 July 2016. As part of this process, information about the Group’s financial

position has been extracted by the Directors from the Group’s financial information for the two

financial years ended 31 July 2016, on which an accountants’ report set out in Appendix I to the

Prospectus has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance

with paragraph 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market

of The Stock Exchange of Hong Kong Limited (the “GEM Rules”) and with reference to Accounting

Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars”

(“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).


— II-3 —

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the “Code of Ethics

for Professional Accountants” issued by the HKICPA, which is founded on fundamental principles of

integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms that

Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services

Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality

control including documented policies and procedures regarding compliance with ethical

requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the GEM Rules,

on the pro forma financial information and to report our opinion to you. We do not accept any

responsibility for any reports previously given by us on any financial information used in the

compilation of the pro forma financial information beyond that owed to those to whom those reports

were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance

Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial

Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting

accountants plan and perform procedures to obtain reasonable assurance about whether the Directors

have compiled the pro forma financial information in accordance with paragraph 7.31 of the GEM

Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or

opinions on any historical financial information used in compiling the pro forma financial

information, nor have we, in the course of this engagement, performed an audit or review of the

financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to

illustrate the impact of a significant event or transaction on unadjusted financial information of the

Group as if the event had occurred or the transaction had been undertaken at an earlier date selected

for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome

of the event or transaction at 31 July 2016 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has

been properly compiled on the basis of the applicable criteria involves performing procedures to

assess whether the applicable criteria used by the Directors in the compilation of the pro forma

financial information provide a reasonable basis for presenting the significant effects directly

attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

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


— II-4 —

— the pro forma financial information reflects the proper application of those adjustments to

the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the

reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of

which the pro forma financial information has been compiled, and other relevant engagement

circumstances.

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

information.

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

for our opinion.

Opinion

In our opinion:

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

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

(c) the adjustments are appropriate for the purposes of the pro forma financial information as

disclosed pursuant to paragraph 7.31(1) of the GEM Rules.


Certified Public Accountants

Hong Kong

12 December 2016


— II-5 —

Set out below is a summary of certain provisions of the Memorandum and Articles of Association

of our Company and of certain aspects of Cayman company law.

Our Company was incorporated in the Cayman Islands as an exempted company with limited

liability on 3 August 2015 under the Companies Law. The Memorandum of Association (the

“Memorandum”) and the Articles of Association comprise its constitution.

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum states, inter alia, that the liability of members of our Company is limited

to the amount, if any, for the time being unpaid on the Shares respectively held by them and

that the objects for which our Company is established are unrestricted (including acting as

an investment company), and that our Company shall have and be capable of exercising all

the functions of a natural person of full capacity irrespective of any question of corporate

benefit, as provided in section 27(2) of the Companies Law and in view of the fact that our

Company is an exempted company that our Company will not trade in the Cayman Islands

with any person, firm or corporation except in furtherance of the business of our Company

carried on outside the Cayman Islands.

(b) Our Company may by special resolution alter its Memorandum with respect to any objects,

powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were adopted on 5 December 2016 with effect from the Listing Date. The following

is a summary of certain provisions of the Articles:

(a) Directors

(i) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Law and the Memorandum and Articles

and to any special rights conferred on the holders of any shares or class of shares, any share

may be issued with or have attached thereto such rights, or such restrictions, whether with

regard to dividend, voting, return of capital, or otherwise, as our Company may by ordinary

resolution determine (or, in the absence of any such determination or so far as the same may

not make specific provision, as the board may determine). Subject to the Companies Law,

the rules of any Designated Stock Exchange (as defined in the Articles) and the

Memorandum and Articles, any share may be issued on terms that, at the option of our

Company or the holder thereof, they are liable to be redeemed.

The board may issue warrants conferring the right upon the holders thereof to

subscribe for any class of shares or securities in the capital of our Company on such terms

as it may from time to time determine.

APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW

— III-1 —

Subject to the provisions of the Companies Law and the Articles and, where

applicable, the rules of any Designated Stock Exchange (as defined in the Articles) and

without prejudice to any special rights or restrictions for the time being attached to any

shares or any class of shares, all unissued shares in our Company shall be at the disposal

of the board, which may offer, allot, grant options over or otherwise dispose of them to such

persons, at such times, for such consideration and on such terms and conditions as it in its

absolute discretion thinks fit, but so that no shares shall be issued at a discount.

Neither our Company nor the board shall be obliged, when making or granting any

allotment of, offer of, option over or disposal of shares, to make, or make available, any

such allotment, offer, option or shares to members or others with registered addresses in

any particular territory or territories being a territory or territories where, in the absence of

a registration statement or other special formalities, this would or might, in the opinion of

the board, be unlawful or impracticable. Members affected as a result of the foregoing

sentence shall not be, or be deemed to be, a separate class of members for any purpose

whatsoever.

(ii) Power to dispose of the assets of our Company or any subsidiary

There are no specific provisions in the Articles relating to the disposal of the assets

of our Company or any of its subsidiaries. The Directors may, however, exercise all powers

and do all acts and things which may be exercised or done or approved by our Company

and which are not required by the Articles or the Companies Law to be exercised or done

by our Company in general meeting.

(iii) Compensation or payments for loss of office

Pursuant to the Articles, payments to any Director or past Director of any sum by way

of compensation for loss of office or as consideration for or in connection with his

retirement from office (not being a payment to which the Director is contractually entitled)

must be approved by our Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are provisions in the Articles prohibiting the making of loans to Directors.

(v) Financial assistance to purchase shares of our Company or its subsidiaries

Subject to compliance with the rules and regulations of the Designated Stock

Exchange (as defined in the Articles) and any other relevant regulatory authority, our

Company may give financial assistance for the purpose of or in connection with a purchase

made or to be made by any person of any shares in our Company. There is no provision in

the Articles that prohibits our Company from giving financial assistance for the purchase

shares of its subsidiaries.


— III-2 —

(vi) Disclosure of interests in contracts with our Company or any of its subsidiaries

A Director may hold any other office or place of profit with our Company (except that

of the auditor of our Company) in conjunction with his office of Director for such period

and, subject to the Articles, upon such terms as the board may determine, and may be paid

such extra remuneration therefor (whether by way of salary, commission, participation in

profits or otherwise) in addition to any remuneration provided for by or pursuant to any

other Articles. A Director may be or become a director or other officer of, or otherwise

interested in, any company promoted by our Company or any other company in which our

Company may be interested, and shall not be liable to account to our Company or the

members for any remuneration, profits or other benefits received by him as a director,

officer or member of, or from his interest in, such other company. Subject as otherwise

provided by the Articles, the board may also cause the voting power conferred by the shares

in any other company held or owned by our Company to be exercised in such manner in all

respects as it thinks fit, including the exercise thereof in favour of any resolution

appointing the Directors or any of them to be directors or officers of such other company,

or voting or providing for the payment of remuneration to the directors or officers of such

other company.

Subject to the Companies Law and the Articles, no Director or proposed or intended

Director shall be disqualified by his office from contracting with our Company, either with

regard to his tenure of any office or place of profit or as vendor, purchaser or in any other

manner whatsoever, nor shall any such contract or any other contract or arrangement in

which any Director is in any way interested be liable to be avoided, nor shall any Director

so contracting or being so interested be liable to account to our Company or the members

for any remuneration, profit or other benefits realised by any such contract or arrangement

by reason of such Director holding that office or the fiduciary relationship thereby

established. A Director who to his knowledge is in any way, whether directly or indirectly,

interested in a contract or arrangement or proposed contract or arrangement with our

Company shall declare the nature of his interest at the meeting of the board at which the

question of entering into the contract or arrangement is first taken into consideration, if he

knows his interest then exists, or in any other case, at the first meeting of the board after

he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the

board approving any contract or arrangement or other proposal in which he or any of his

close associates (as defined in the Articles) is materially interested, but this prohibition

shall not apply to any of the following matters, namely:

(aa) any contract or arrangement for giving to such Director or his close associate(s)

any security or indemnity in respect of money lent by him or any of his close

associates or obligations incurred or undertaken by him or any of his close

associates at the request of or for the benefit of our Company or any of its

subsidiaries;


— III-3 —

(bb) any contract or arrangement for the giving of any security or indemnity to a third

party in respect of a debt or obligation of our Company or any of its subsidiaries

for which the Director or his close associate(s) has himself/themselves assumed

responsibility in whole or in part whether alone or jointly under a guarantee or

indemnity or by the giving of security;

(cc) any contract or arrangement concerning an offer of shares or debentures or other

securities of or by our Company or any other company which our Company may

promote or be interested in for subscription or purchase, where the Director or

his close associate(s) is/are or is/are to be interested as a participant in the

underwriting or sub-underwriting of the offer;

(dd) any contract or arrangement in which the Director or his close associate(s) is/are

interested in the same manner as other holders of shares or debentures or other

securities of our Company by virtue only of his/their interest in shares or

debentures or other securities of our Company; or

(ee) any proposal or arrangement concerning the adoption, modification or operation

of a share option scheme, a pension fund or retirement, death, or disability

benefits scheme or other arrangement which relates both to Directors, his close

associates and employees of our Company or of any of its subsidiaries and does

not provide in respect of any Director, or his close associate(s), as such any

privilege or advantage not accorded generally to the class of persons to which

such scheme or fund relates.

(vii) Remuneration

The ordinary remuneration of the Directors shall from time to time be determined by

our Company in general meeting, such sum (unless otherwise directed by the resolution by

which it is voted) to be divided amongst the Directors in such proportions and in such

manner as the board may agree or, failing agreement, equally, except that any Director

holding office for part only of the period in respect of which the remuneration is payable

shall only rank in such division in proportion to the time during such period for which he

held office. The Directors shall also be entitled to be prepaid or repaid all travelling, hotel

and incidental expenses reasonably expected to be incurred or incurred by them in attending

any board meetings, committee meetings or general meetings or separate meetings of any

class of shares or of debentures of our Company or otherwise in connection with the

discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of our Company

or who performs services which in the opinion of the board go beyond the ordinary duties

of a Director may be paid such extra remuneration (whether by way of salary, commission,

participation in profits or otherwise) as the board may determine and such extra


— III-4 —

remuneration shall be in addition to or in substitution for any ordinary remuneration as a

Director. An executive Director appointed to be a managing director, joint managing

director, deputy managing director or other executive officer shall receive such

remuneration (whether by way of salary, commission or participation in profits or otherwise

or by all or any of those modes) and such other benefits (including pension and/or gratuity

and/or other benefits on retirement) and allowances as the board may from time to time

decide. Such remuneration may be either in addition to or in lieu of his remuneration as a

Director.

The board may establish or concur or join with other companies (being subsidiary

companies of our Company or companies with which it is associated in business) in

establishing and making contributions out of our Company’s monies to any schemes or

funds for providing pensions, sickness or compassionate allowances, life assurance or other

benefits for employees (which expression as used in this and the following paragraph shall

include any Director or ex-Director who may hold or have held any executive office or any

office of profit with our Company or any of its subsidiaries) and ex-employees of our

Company and their dependents or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or

irrevocable, and either subject or not subject to any terms or conditions, pensions or other

benefits to employees and ex-employees and their dependents, or to any of such persons,

including pensions or benefits additional to those, if any, to which such employees or

ex-employees or their dependents are or may become entitled under any such scheme or

fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the

board considers desirable, be granted to an employee either before and in anticipation of,

or upon or at any time after, his actual retirement.

(viii) Retirement, appointment and removal

At each annual general meeting, one third of the Directors for the time being (or if

their number is not a multiple of three, then the number nearest to but not less than one

third) will retire from office by rotation provided that every Director shall be subject to

retirement at an annual general meeting at least once every three years. The Directors to

retire in every year will be those who have been longest in office since their last re-election

or appointment but as between persons who became or were last re-elected Directors on the

same day those to retire will (unless they otherwise agree among themselves) be determined

by lot. There are no provisions relating to retirement of Directors upon reaching any age

limit.

The Directors shall have the power from time to time and at any time to appoint any

person as a Director either to fill a casual vacancy on the board or as an addition to the

existing board. Any Director appointed to fill a casual vacancy shall hold office until the

first general meeting of members after his appointment and be subject to re-election at such


— III-5 —

meeting and any Director appointed as an addition to the existing board shall hold office

only until the next following annual general meeting of our Company and shall then be

eligible for re-election. Neither a Director nor an alternate Director is required to hold any

shares in our Company by way of qualification.

A Director may be removed by an ordinary resolution of our Company before the

expiration of his period of office (but without prejudice to any claim which such Director

may have for damages for any breach of any contract between him and our Company) and

may by ordinary resolution appoint another in his place. Unless otherwise determined by

our Company in general meeting, the number of Directors shall not be less than two. There

is no maximum number of Directors.

The office of director shall be vacated:

(aa) if he resigns his office by notice in writing delivered to our Company at the

registered office of our Company for the time being or tendered at a meeting of

the Board;

(bb) becomes of unsound mind or dies;

(cc) if, without special leave, he is absent from meetings of the board (unless an

alternate director appointed by him attends) for six (6) consecutive months, and

the board resolves that his office is vacated;

(dd) if he becomes bankrupt or has a receiving order made against him or suspends

payment or compounds with his creditors;

(ee) if he is prohibited from being a director by law;

(ff) if he ceases to be a director by virtue of any provision of law or is removed from

office pursuant to the Articles.

The board may from time to time appoint one or more of its body to be managing

director, joint managing director, or deputy managing director or to hold any other

employment or executive office with our Company for such period and upon such terms as

the board may determine and the board may revoke or terminate any of such appointments.

The board may delegate any of its powers, authorities and discretions to committees

consisting of such Director or Directors and other persons as the board thinks fit, and it may

from time to time revoke such delegation or revoke the appointment of and discharge any

such committees either wholly or in part, and either as to persons or purposes, but every

committee so formed shall, in the exercise of the powers, authorities and discretions so

delegated, conform to any regulations that may from time to time be imposed upon it by the

board.


— III-6 —

(ix) Borrowing powers

The board may exercise all the powers of our Company to raise or borrow money, to

mortgage or charge all or any part of the undertaking, property and assets (present and

future) and uncalled capital of our Company and, subject to the Companies Law, to issue

debentures, bonds and other securities of our Company, whether outright or as collateral

security for any debt, liability or obligation of our Company or of any third party.

Note: These provisions, in common with the Articles in general, can be varied with the sanction of a

special resolution of our Company.

(x) Proceedings of the Board

The board may meet for the despatch of business, adjourn and otherwise regulate their

meetings as they think fit. Questions arising at any meeting shall be determined by a

majority of votes. In the case of an equality of votes, the chairman of the meeting shall have

an additional or casting vote.

(xi) Register of Directors and Officers

The Companies Law and the Articles provide that our Company is required to maintain

at its registered office a register of directors and officers which is not available for

inspection by the public. A copy of such register must be filed with the Registrar of

Companies in the Cayman Islands and any change must be notified to the Registrar within

sixty (60) days of any change in such directors or officers.

(b) Alterations to constitutional documents

The Articles may be rescinded, altered or amended by our Company in general meeting by

special resolution. The Articles state that a special resolution shall be required to alter the

provisions of the Memorandum, to amend the Articles or to change the name of our Company.

(c) Alteration of capital

Our Company may from time to time by ordinary resolution in accordance with the relevant

provisions of the Companies Law:

(i) increase its capital by such sum, to be divided into shares of such amounts as the

resolution shall prescribe;

(ii) consolidate and divide all or any of its capital into shares of larger amount than its

existing shares;


— III-7 —

(iii) divide its shares into several classes and without prejudice to any special rights

previously conferred on the holders of existing shares attach thereto respectively any

preferential, deferred, qualified or special rights, privileges, conditions or restrictions

as our Company in general meeting or as the directors may determine;

(iv) sub-divide its shares or any of them into shares of smaller amount than is fixed by the

Memorandum, subject nevertheless to the provisions of the Companies Law, and so

that the resolution whereby any share is sub-divided may determine that, as between

the holders of the shares resulting from such sub-division, one or more of the shares

may have any such preferred or other special rights, over, or may have such deferred

rights or be subject to any such restrictions as compared with the others as our

Company has power to attach to unissued or new shares; or

(v) cancel any shares which, at the date of passing of the resolution, have not been taken,

or agreed to be taken, by any person, and diminish the amount of its capital by the

amount of the shares so cancelled.

Our Company may subject to the provisions of the Companies Law reduce its share capital

or any capital redemption reserve or other undistributable reserve in any way by special

resolution.

(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Law, all or any of the special rights attached to the shares or any

class of shares may (unless otherwise provided for by the terms of issue of that class) be varied,

modified or abrogated either with the consent in writing of the holders of not less than

three-fourths in nominal value of the issued shares of that class or with the sanction of a special

resolution passed at a separate general meeting of the holders of the shares of that class. To every

such separate general meeting the provisions of the Articles relating to general meetings will

mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting)

shall be two persons holding or representing by proxy not less than one-third in nominal value

of the issued shares of that class and at any adjourned meeting two holders present in person or

by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares

of the class shall be entitled to one vote for every such share held by him.

The special rights conferred upon the holders of any shares or class of shares shall not,

unless otherwise expressly provided in the rights attaching to the terms of issue of such shares,

be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(e) Special resolution-majority required

Pursuant to the Articles, a special resolution of our Company must be passed by a majority

of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote

in person or, in the case of such members as are corporations, by their duly authorised

representatives or, where proxies are allowed, by proxy at a general meeting of which notice of


— III-8 —

not less than twenty-one (21) clear days and not less than ten (10) clear business days specifying

the intention to propose the resolution as a special resolution, has been duly given. Provided that

if permitted by the Designated Stock Exchange (as defined in the Articles), except in the case

of an annual general meeting, if it is so agreed by a majority in number of the members having

a right to attend and vote at such meeting, being a majority together holding not less than

ninety-five per cent. (95%) in nominal value of the shares giving that right and, in the case of

an annual general meeting, if so agreed by all Members entitled to attend and vote thereat, a

resolution may be proposed and passed as a special resolution at a meeting of which notice of

less than twenty-one (21) clear days and less than ten (10) clear business days has been given.

A copy of any special resolution must be forwarded to the Registrar of Companies in the

Cayman Islands within fifteen (15) days of being passed.

An ordinary resolution is defined in the Articles to mean a resolution passed by a simple

majority of the votes of such members of our Company as, being entitled to do so, vote in person

or, in the case of corporations, by their duly authorised representatives or, where proxies are

allowed, by proxy at a general meeting held in accordance with the Articles.

(f) Voting rights

Subject to any special rights or restrictions as to voting for the time being attached to any

shares by or in accordance with the Articles, at any general meeting on a poll every member

present in person or by proxy or, in the case of a member being a corporation, by its duly

authorised representative shall have one vote for every fully paid share of which he is the holder

but so that no amount paid up or credited as paid up on a share in advance of calls or installments

is treated for the foregoing purposes as paid up on the share. A member entitled to more than one

vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided by way

of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates

purely to a procedural or administrative matter to be voted on by a show of hands in which case

every member present in person (or being a corporation, is present by a duly authorised

representative), or by proxy(ies) shall have one vote provided that where more than one proxy

is appointed by a member which is a clearing house (or its nominee(s)), each such proxy shall

have one vote on a show of hands.

If a recognised clearing house (or its nominee(s)) is a member of our Company it may

authorise such person or persons as it thinks fit to act as its representative(s) at any meeting of

our Company or at any meeting of any class of members of our Company provided that, if more

than one person is so authorised, the authorisation shall specify the number and class of shares

in respect of which each such person is so authorised. A person authorised pursuant to this

provision shall be deemed to have been duly authorised without further evidence of the facts and


— III-9 —

be entitled to exercise the same powers on behalf of the recognised clearing house (or its

nominee(s)) as if such person was the registered holder of the shares of our Company held by

that clearing house (or its nominee(s)) including, where a show of hands is allowed, the right to

vote individually on a show of hands.

Where our Company has any knowledge that any shareholder is, under the rules of the

Designated Stock Exchange (as defined in the Articles), required to abstain from voting on any

particular resolution of our Company or restricted to voting only for or only against any

particular resolution of our Company, any votes cast by or on behalf of such shareholder in

contravention of such requirement or restriction shall not be counted.

(g) Requirements for annual general meetings

An annual general meeting of our Company must be held in each year, other than the year

of adoption of the Articles (within a period of not more than fifteen (15) months after the holding

of the last preceding annual general meeting or a period of eighteen (18) months from the date

of adoption of the Articles, unless a longer period would not infringe the rules of any Designated

Stock Exchange (as defined in the Articles)) at such time and place as may be determined by the

board.

(h) Accounts and audit

The board shall cause true accounts to be kept of the sums of money received and expended

by our Company, and the matters in respect of which such receipt and expenditure take place, and

of the property, assets, credits and liabilities of our Company and of all other matters required

by the Companies Law or necessary to give a true and fair view of our Company’s affairs and

to explain its transactions.

The accounting records shall be kept at the registered office or at such other place or places

as the board decides and shall always be open to inspection by any Director. No member (other

than a Director) shall have any right to inspect any accounting record or book or document of

our Company except as conferred by law or authorised by the board or our Company in general

meeting. However, an exempted company shall make available at its registered office in

electronic form or any other medium, copies of its books of account or parts thereof as may be

required of it upon service of an order or notice by the Tax Information Authority pursuant to

the Tax Information Authority Law (2009 Revision) of the Cayman Islands.

A copy of every balance sheet and profit and loss account (including every document

required by law to be annexed thereto) which is to be laid before our Company at its general

meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report,

shall not less than twenty-one (21) days before the date of the meeting and at the same time as

the notice of annual general meeting be sent to every person entitled to receive notices of general

meetings of our Company under the provisions the Articles; however, subject to compliance with

all applicable laws, including the rules of the Designated Stock Exchange (as defined in the

Articles), our Company may send to such persons summarised financial statements derived from


— III-10 —

our Company’s annual accounts and the directors’ report instead provided that any such person

may by notice in writing served on our Company, demand that our Company sends to him, in

addition to summarised financial statements, a complete printed copy of our Company’s annual

financial statement and the directors’ report thereon.

Auditors shall be appointed and the terms and tenure of such appointment and their duties

at all times regulated in accordance with the provisions of the Articles. The remuneration of the

auditors shall be fixed by our Company in general meeting or in such manner as the members

may determine.

The financial statements of our Company shall be audited by the auditor in accordance with

generally accepted auditing standards. The auditor shall make a written report thereon in

accordance with generally accepted auditing standards and the report of the auditor shall be

submitted to the members in general meeting. The generally accepted auditing standards referred

to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the

financial statements and the report of the auditor should disclose this fact and name such country

or jurisdiction.

(i) Notices of meetings and business to be conducted thereat

An annual general meeting shall be called by notice of not less than twenty-one (21) clear

days and not less than twenty (20) clear business days and any extraordinary general meeting at

which it is proposed to pass a special resolution shall (save as set out in sub-paragraph (e) above)

be called by notice of at least twenty-one (21) clear days and not less than ten (10) clear business

days. All other extraordinary general meetings shall be called by notice of at least fourteen (14)

clear days and not less than ten (10) clear business days. The notice must specify the time and

place of the meeting and, in the case of special business, the general nature of that business. In

addition notice of every general meeting shall be given to all members of our Company other

than such as, under the provisions of the Articles or the terms of issue of the shares they hold,

are not entitled to receive such notices from our Company, and also to the auditors for the time

being of our Company.

Notwithstanding that a meeting of our Company is called by shorter notice than that

mentioned above if permitted by the rules of the Designated Stock Exchange, it shall be deemed

to have been duly called if it is so agreed:

(i) in the case of a meeting called as an annual general meeting, by all members of our

Company entitled to attend and vote thereat; and

(ii) in the case of any other meeting, by a majority in number of the members having a

right to attend and vote at the meeting, being a majority together holding not less than

ninety-five per cent (95%) in nominal value of the issued shares giving that right.


— III-11 —

All business shall be deemed special that is transacted at an extraordinary general meeting

and also all business shall be deemed special that is transacted at an annual general meeting with

the exception of the following, which shall be deemed ordinary business:

(aa) the declaration and sanctioning of dividends;

(bb) the consideration and adoption of the accounts and balance sheet and the reports of the

directors and the auditors;

(cc) the election of directors in place of those retiring;

(dd) the appointment of auditors and other officers;

(ee) the fixing of the remuneration of the directors and of the auditors;

(ff) the granting of any mandate or authority to the directors to offer, allot, grant options

over or otherwise dispose of the unissued shares of our Company representing not

more than twenty per cent (20%) in nominal value of its existing issued share capital;

and

(gg) the granting of any mandate or authority to the directors to repurchase securities of

our Company.

(j) Transfer of shares

All transfers of shares may be effected by an instrument of transfer in the usual or common

form or in a form prescribed by the Designated Stock Exchange (as defined in the Articles) or

in such other form as the board may approve and which may be under hand or, if the transferor

or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature

or by such other manner of execution as the board may approve from time to time. The instrument

of transfer shall be executed by or on behalf of the transferor and the transferee provided that

the board may dispense with the execution of the instrument of transfer by the transferee in any

case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain

the holder of the share until the name of the transferee is entered in the register of members in

respect thereof. The board may also resolve either generally or in any particular case, upon

request by either the transferor or the transferee, to accept mechanically executed transfers.

The board in so far as permitted by any applicable law may, in its absolute discretion, at

any time and from time to time transfer any share upon the principal register to any branch

register or any share on any branch register to the principal register or any other branch register.

Unless the board otherwise agrees, no shares on the principal register shall be transferred

to any branch register nor may shares on any branch register be transferred to the principal

register or any other branch register. All transfers and other documents of title shall be lodged


— III-12 —

for registration and registered, in the case of shares on a branch register, at the relevant

registration office and, in the case of shares on the principal register, at the registered office in

the Cayman Islands or such other place at which the principal register is kept in accordance with

the Companies Law.

The board may, in its absolute discretion, and without assigning any reason, refuse to

register a transfer of any share (not being a fully paid up share) to a person of whom it does not

approve or any share issued under any share incentive scheme for employees upon which a

restriction on transfer imposed thereby still subsists, and it may also refuse to register any

transfer of any share to more than four joint holders or any transfer of any share (not being a fully

paid up share) on which our Company has a lien.

The board may decline to recognise any instrument of transfer unless a fee of such

maximum sum as any Designated Stock Exchange (as defined in the Articles) may determine to

be payable or such lesser sum as the Directors may from time to time require is paid to our

Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in

respect of only one class of share and is lodged at the relevant registration office or registered

office or such other place at which the principal register is kept accompanied by the relevant

share certificate(s) and such other evidence as the board may reasonably require to show the right

of the transferor to make the transfer (and if the instrument of transfer is executed by some other

person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice by

advertisement in a relevant newspaper and, where applicable, any other newspapers in

accordance with the requirements of any Designated Stock Exchange (as defined in the Articles),

at such times and for such periods as the board may determine and either generally or in respect

of any class of shares. The register of members shall not be closed for periods exceeding in the

whole thirty (30) days in any year.

(k) Power for our Company to purchase its own shares

Our Company is empowered by the Companies Law and the Articles to purchase its own

Shares subject to certain restrictions and the Board may only exercise this power on behalf of

our Company subject to any applicable requirements imposed from time to time by any

Designated Stock Exchange (as defined in the Articles).

(l) Power for any subsidiary of our Company to own shares in our Company and financial

assistance to purchase shares of our Company

There are no provisions in the Articles relating to ownership of shares in our Company by

a subsidiary.


— III-13 —

Subject to compliance with the rules and regulations of the Designated Stock Exchange (as

defined in the Articles) and any other relevant regulatory authority, our Company may give

financial assistance for the purpose of or in connection with a purchase made or to be made by

any person of any shares in our Company.

(m) Dividends and other methods of distribution

Subject to the Companies Law, our Company in general meeting may declare dividends in

any currency to be paid to the members but no dividend shall be declared in excess of the amount

recommended by the board.

The Articles provide dividends may be declared and paid out of the profits of our Company,

realised or unrealised, or from any reserve set aside from profits which the directors determine

is no longer needed. With the sanction of an ordinary resolution dividends may also be declared

and paid out of share premium account or any other fund or account which can be authorised for

this purpose in accordance with the Companies Law.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise

provide, (i) all dividends shall be declared and paid according to the amounts paid up on the

shares in respect whereof the dividend is paid but no amount paid up on a share in advance of

calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be

apportioned and paid pro rata according to the amount paid up on the shares during any portion

or portions of the period in respect of which the dividend is paid. The Directors may deduct from

any dividend or other monies payable to any member or in respect of any shares all sums of

money (if any) presently payable by him to our Company on account of calls or otherwise.

Whenever the board or our Company in general meeting has resolved that a dividend be

paid or declared on the share capital of our Company, the board may further resolve either (a)

that such dividend be satisfied wholly or in part in the form of an allotment of shares credited

as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive

such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled

to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid

up in lieu of the whole or such part of the dividend as the board may think fit. Our Company may

also upon the recommendation of the board by an ordinary resolution resolve in respect of any

one particular dividend of our Company that it may be satisfied wholly in the form of an

allotment of shares credited as fully paid up without offering any right to shareholders to elect

to receive such dividend in cash in lieu of such allotment.

Any dividend, interest or other sum payable in cash to the holder of shares may be paid by

cheque or warrant sent through the post addressed to the holder at his registered address, or in

the case of joint holders, addressed to the holder whose name stands first in the register of our

Company in respect of the shares at his address as appearing in the register or addressed to such

person and at such addresses as the holder or joint holders may in writing direct. Every such

cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to

the order of the holder or, in the case of joint holders, to the order of the holder whose name


— III-14 —

stands first on the register in respect of such shares, and shall be sent at his or their risk and

payment of the cheque or warrant by the bank on which it is drawn shall constitute a good

discharge to our Company. Any one of two or more joint holders may give effectual receipts for

any dividends or other moneys payable or property distributable in respect of the shares held by

such joint holders.

Whenever the board or our Company in general meeting has resolved that a dividend be

paid or declared the board may further resolve that such dividend be satisfied wholly or in part

by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be

invested or otherwise made use of by the board for the benefit of our Company until claimed and

our Company shall not be constituted a trustee in respect thereof. All dividends or bonuses

unclaimed for six years after having been declared may be forfeited by the board and shall revert

to our Company.

No dividend or other monies payable by our Company on or in respect of any share shall

bear interest against our Company.

(n) Proxies

Any member of our Company entitled to attend and vote at a meeting of our Company is

entitled to appoint another person as his proxy to attend and vote instead of him. A member who

is the holder of two or more shares may appoint more than one proxy to represent him and vote

on his behalf at a general meeting of our Company or at a class meeting. A proxy need not be

a member of our Company and shall be entitled to exercise the same powers on behalf of a

member who is an individual and for whom he acts as proxy as such member could exercise. In

addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is

a corporation and for which he acts as proxy as such member could exercise if it were an

individual member. Votes may be given either personally (or, in the case of a member being a

corporation, by its duly authorised representative) or by proxy.

(o) Call on shares and forfeiture of shares

Subject to the Articles and to the terms of allotment, the board may from time to time make

such calls upon the members in respect of any monies unpaid on the shares held by them

respectively (whether on account of the nominal value of the shares or by way of premium). A

call may be made payable either in one lump sum or by installments. If the sum payable in

respect of any call or instalment is not paid on or before the day appointed for payment thereof,

the person or persons from whom the sum is due shall pay interest on the same at such rate not

exceeding twenty per cent. (20%) per annum as the board may agree to accept from the day

appointed for the payment thereof to the time of actual payment, but the board may waive

payment of such interest wholly or in part. The board may, if it thinks fit, receive from any


— III-15 —

member willing to advance the same, either in money or money’s worth, all or any part of the

monies uncalled and unpaid or installments payable upon any shares held by him, and upon all

or any of the monies so advanced our Company may pay interest at such rate (if any) as the board

may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may

serve not less than fourteen (14) clear days’ notice on him requiring payment of so much of the

call as is unpaid, together with any interest which may have accrued and which may still accrue

up to the date of actual payment and stating that, in the event of non-payment at or before the

time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which

the notice has been given may at any time thereafter, before the payment required by the notice

has been made, be forfeited by a resolution of the board to that effect. Such forfeiture will

include all dividends and bonuses declared in respect of the forfeited share and not actually paid

before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the

forfeited shares but shall, notwithstanding, remain liable to pay to our Company all monies

which, at the date of forfeiture, were payable by him to our Company in respect of the shares,

together with (if the board shall in its discretion so require) interest thereon from the date of

forfeiture until the date of actual payment at such rate not exceeding twenty per cent. (20%) per

annum as the board determines.

(p) Inspection of register of members

Pursuant to the Articles the register and branch register of members shall be open to

inspection for at least two (2) hours during business hours by members without charge, or by any

other person upon a maximum payment of HK$2.50 or such lesser sum specified by the board,

at the registered office or such other place at which the register is kept in accordance with the

Companies Law or, upon a maximum payment of HK$1.00 or such lesser sum specified by the

board, at the Registration Office (as defined in the Articles), unless the register is closed in

accordance with the Articles.

(q) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when the

meeting proceeds to business, but the absence of a quorum shall not preclude the appointment

of a chairman.

Save as otherwise provided by the Articles the quorum for a general meeting shall be two

members present in person (or, in the case of a member being a corporation, by its duly

authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting


— III-16 —

(other than an adjourned meeting) convened to sanction the modification of class rights the

necessary quorum shall be two persons holding or representing by proxy not less than one-third

in nominal value of the issued shares of that class.

A corporation being a member shall be deemed for the purpose of the Articles to be present

in person if represented by its duly authorised representative being the person appointed by

resolution of the directors or other governing body of such corporation to act as its representative

at the relevant general meeting of our Company or at any relevant general meeting of any class

of members of our Company.

(r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the Articles relating to rights of minority shareholders in relation

to fraud or oppression. However, certain remedies are available to shareholders of our Company

under Cayman law, as summarised in paragraph 3(f) of this Appendix.

(s) Procedures on liquidation

A resolution that our Company be wound up by the court or be wound up voluntarily shall

be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available

surplus assets on liquidation for the time being attached to any class or classes of shares (i) if

our Company shall be wound up and the assets available for distribution amongst the members

of our Company shall be more than sufficient to repay the whole of the capital paid up at the

commencement of the winding up, the excess shall be distributed pari passu amongst such

members in proportion to the amount paid up on the shares held by them respectively and (ii)

if our Company shall be wound up and the assets available for distribution amongst the members

as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be

distributed so that, as nearly as may be, the losses shall be borne by the members in proportion

to the capital paid up, or which ought to have been paid up, at the commencement of the winding

up on the shares held by them respectively.

If our Company shall be wound up (whether the liquidation is voluntary or by the court) the

liquidator may, with the authority of a special resolution and any other sanction required by the

Companies Law divide among the members in specie or kind the whole or any part of the assets

of our Company whether the assets shall consist of property of one kind or shall consist of

properties of different kinds and the liquidator may, for such purpose, set such value as he deems

fair upon any one or more class or classes of property to be divided as aforesaid and may

determine how such division shall be carried out as between the members or different classes of

members. The liquidator may, with the like authority, vest any part of the assets in trustees upon

such trusts for the benefit of members as the liquidator, with the like authority, shall think fit,

but so that no contributory shall be compelled to accept any shares or other property in respect

of which there is a liability.


— III-17 —

(t) Untraceable members

Pursuant to the Articles, our Company may sell any of the shares of a member who is

untraceable if (i) all cheques or warrants in respect of dividends of the shares in question (being

not less than three in total number) for any sum payable in cash to the holder of such shares have

remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, our

Company has not during that time received any indication of the existence of the member; and

(iii) our Company has caused an advertisement to be published in accordance with the rules of

the Designated Stock Exchange (as defined in the Articles) giving notice of its intention to sell

such shares and a period of three (3) months, or such shorter period as may be permitted by the

Designated Stock Exchange (as defined in the Articles), has elapsed since the date of such

advertisement and the Designated Stock Exchange (as defined in the Articles) has been notified

of such intention. The net proceeds of any such sale shall belong to our Company and upon

receipt by our Company of such net proceeds, it shall become indebted to the former member of

our Company for an amount equal to such net proceeds.

(u) Subscription rights reserve

The Articles provide that to the extent that it is not prohibited by and is in compliance with

the Companies Law, if warrants to subscribe for shares have been issued by our Company and

our Company does any act or engages in any transaction which would result in the subscription

price of such warrants being reduced below the par value of a share, a subscription rights reserve

shall be established and applied in paying up the difference between the subscription price and

the par value of a share on any exercise of the warrants.

3. CAYMAN ISLANDS COMPANY LAW

Our Company is incorporated in the Cayman Islands subject to the Companies Law and,

therefore, operates subject to Cayman law. Set out below is a summary of certain provisions of

Cayman company law, although this does not purport to contain all applicable qualifications and

exceptions or to be a complete review of all matters of Cayman company law and taxation, which may

differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(a) Operations

As an exempted company, our Company’s operations must be conducted mainly outside the

Cayman Islands. Our Company is required to file an annual return each year with the Registrar

of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised

share capital.

(b) Share capital

The Companies Law provides that where a company issues shares at a premium, whether

for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on those

shares shall be transferred to an account, to be called the “share premium account”. At the option


— III-18 —

of a company, these provisions may not apply to premiums on shares of that company allotted

pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any

other company and issued at a premium. The Companies Law provides that the share premium

account may be applied by the company subject to the provisions, if any, of its memorandum and

articles of association in (a) paying distributions or dividends to members; (b) paying up

unissued shares of the company to be issued to members as fully paid bonus shares; (c) the

redemption and repurchase of shares (subject to the provisions of section 37 of the Companies

Law); (d) writing-off the preliminary expenses of the company; and (e) writing-off the expenses

of, or the commission paid or discount allowed on, any issue of shares or debentures of the

company.

No distribution or dividend may be paid to members out of the share premium account

unless immediately following the date on which the distribution or dividend is proposed to be

paid, the company will be able to pay its debts as they fall due in the ordinary course business.

The Companies Law provides that, subject to confirmation by the Grand Court of the

Cayman Islands (the “Court”), a company limited by shares or a company limited by guarantee

and having a share capital may, if so authorised by its articles of association, by special

resolution reduce its share capital in any way.

The Articles includes certain protections for holders of special classes of shares, requiring

their consent to be obtained before their rights may be varied. The consent of the specified

proportions of the holders of the issued shares of that class or the sanction of a resolution passed

at a separate meeting of the holders of those shares is required.

(c) Financial assistance to purchase shares of a company or its holding company

Subject to all applicable laws, our Company may give financial assistance to Directors and

employees of our Company, its subsidiaries, its holding company or any subsidiary of such

holding company in order that they may buy Shares in our Company or shares in any subsidiary

or holding company. Further, subject to all applicable laws, our Company may give financial

assistance to a trustee for the acquisition of Shares in our Company or shares in any such

subsidiary or holding company to be held for the benefit of employees of our Company, its

subsidiaries, any holding company of our Company or any subsidiary of any such holding

company (including salaried Directors).

There is no statutory restriction in the Cayman Islands on the provision of financial

assistance by a company to another person for the purchase of, or subscription for, its own or its

holding company’s shares. Accordingly, a company may provide financial assistance if the

directors of the company consider, in discharging their duties of care and acting in good faith,

for a proper purpose and in the interests of the company, that such assistance can properly be

given. Such assistance should be on an arm’s-length basis.


— III-19 —

(d) Purchase of shares and warrants by a company and its subsidiaries

Subject to the provisions of the Companies Law, a company limited by shares or a company

limited by guarantee and having a share capital may, if so authorised by its articles of

association, issue shares which are to be redeemed or are liable to be redeemed at the option of

the company or a shareholder and the Companies Law expressly provides that it shall be lawful

for the rights attaching to any shares to be varied, subject to the provisions of the company’s

articles of association, so as to provide that such shares are to be or are liable to be so redeemed.

In addition, such a company may, if authorised to do so by its articles of association, purchase

its own shares, including any redeemable shares. However, if the articles of association do not

authorise the manner and terms of purchase, a company cannot purchase any of its own shares

unless the manner and terms of purchase have first been authorised by an ordinary resolution of

the company. At no time may a company redeem or purchase its shares unless they are fully paid.

A company may not redeem or purchase any of its shares if, as a result of the redemption or

purchase, there would no longer be any issued shares of the company other than shares held as

treasury shares. A payment out of capital by a company for the redemption or purchase of its own

shares is not lawful unless immediately following the date on which the payment is proposed to

be made, the company shall be able to pay its debts as they fall due in the ordinary course of

business.

Shares purchased by a company shall be treated as cancelled unless, subject to the

memorandum and articles of association of the company, the directors of the company resolve

to hold such shares in the name of the company as treasury shares prior to the purchase. Where

shares of a company are held as treasury shares, the company shall be entered in the register of

members as holding those shares, however, notwithstanding the foregoing, the company shall not

be treated as a member for any purpose and shall not exercise any right in respect of the treasury

shares, and any purported exercise of such a right shall be void, and a treasury share shall not

be voted, directly or indirectly, at any meeting of the company and shall not be counted in

determining the total number of issued shares at any given time, whether for the purposes of the

company’s articles of association or the Companies Law. Further, no dividend may be declared

or paid, and no other distribution (whether in cash or otherwise) of the company’s assets

(including any distribution of assets to members on a winding up) may be made to the company,

in respect of a treasury share.

A company is not prohibited from purchasing and may purchase its own warrants subject

to and in accordance with the terms and conditions of the relevant warrant instrument or

certificate. There is no requirement under Cayman Islands law that a company’s memorandum or

articles of association contain a specific provision enabling such purchases and the directors of

a company may rely upon the general power contained in its memorandum of association to buy

and sell and deal in personal property of all kinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in

certain circumstances, may acquire such shares.


— III-20 —

(e) Dividends and distributions

With the exception of section 34 of the Companies Law, there is no statutory provisions

relating to the payment of dividends. Based upon English case law, which is regarded as

persuasive in the Cayman Islands, dividends may be paid only out of profits. In addition, section

34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the

company’s memorandum and articles of association, the payment of dividends and distributions

out of the share premium account (see paragraph 2(m) above for further details).

(f) Protection of minorities

The Cayman Islands courts ordinarily would be expected to follow English case law

precedents which permit a minority shareholder to commence a representative action against or

derivative actions in the name of the company to challenge (a) an act which is ultra vires the

company or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers

are themselves in control of the company, and (c) an irregularity in the passing of a resolution

which requires a qualified (or special) majority.

In the case of a company (not being a bank) having a share capital divided into shares, the

Court may, on the application of members holding not less than one fifth of the shares of the

company in issue, appoint an inspector to examine into the affairs of the company and to report

thereon in such manner as the Court shall direct.

Any shareholder of a company may petition the Court which may make a winding up order

if the Court is of the opinion that it is just and equitable that the company should be wound up

or, as an alternative to a winding up order, (a) an order regulating the conduct of the company’s

affairs in the future, (b) an order requiring the company to refrain from doing or continuing an

act complained of by the shareholder petitioner or to do an act which the shareholder petitioner

has complained it has omitted to do, (c) an order authorising civil proceedings to be brought in

the name and on behalf of the company by the shareholder petitioner on such terms as the Court

may direct, or (d) an order providing for the purchase of the shares of any shareholders of the

company by other shareholders or by the company itself and, in the case of a purchase by the

company itself, a reduction of the company’s capital accordingly.

Generally claims against a company by its shareholders must be based on the general laws

of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as

established by the company’s memorandum and articles of association.

(g) Management

The Companies Law contains no specific restrictions on the power of directors to dispose

of assets of a company. However, as a matter of general law, every officer of a company, which

includes a director, managing director and secretary, in exercising his powers and discharging his

duties must do so honestly and in good faith with a view to the best interests of the company and

exercise the care, diligence and skill that a reasonably prudent person would exercise in

comparable circumstances.


— III-21 —

(h) Accounting and auditing requirements

A company shall cause proper books of account to be kept with respect to (i) all sums of

money received and expended by the company and the matters in respect of which the receipt and

expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the assets

and liabilities of the company.

Proper books of account shall not be deemed to be kept if there are not kept such books as

are necessary to give a true and fair view of the state of the company’s affairs and to explain its

transactions.

(i) Exchange control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

(j) Taxation

Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands,

our Company has obtained an undertaking from the Governor-in-Cabinet:

(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on

profits, income, gains or appreciation shall apply to our Company or its operations;

and

(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall

not be payable on or in respect of the shares, debentures or other obligations of our

Company.

The undertaking for our Company is for a period of twenty years from 25 August 2015.

The Cayman Islands currently levy no taxes on individuals or corporations based upon

profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax

or estate duty. There are no other taxes likely to be material to our Company levied by the

Government of the Cayman Islands save certain stamp duties which may be applicable, from time

to time, on certain instruments executed in or brought within the jurisdiction of the Cayman

Islands. The Cayman Islands are not party to any double tax treaties.

(k) Stamp duty on transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands

companies except those which hold interests in land in the Cayman Islands.


— III-22 —

(l) Loans to directors

There is no express provision in the Companies Law prohibiting the making of loans by a

company to any of its directors.

(m) Inspection of corporate records

Members of our Company will have no general right under the Companies Law to inspect

or obtain copies of the register of members or corporate records of our Company. They will,

however, have such rights as may be set out in our Company’s Articles.

An exempted company may maintain its principal register of members and any branch

registers at such locations, whether within or without the Cayman Islands, as the directors may,

from time to time, think fit. A branch register shall be kept in the same manner in which a

principal register is by the Companies Law required or permitted to be kept. The company shall

cause to be kept at the place where the company’s principal register is kept a duplicate of any

branch register duly entered up from time to time. There is no requirement under the Companies

Law for an exempted company to make any returns of members to the Registrar of Companies

of the Cayman Islands. The names and addresses of the members are, accordingly, not a matter

of public record and are not available for public inspection. However, an exempted company

shall make available at its registered office, in electronic form or any other medium, such register

of members, including any branch register of members, as may be required of it upon service of

an order or notice by the Tax Information Authority pursuant to the Tax Information Authority

Law (2009 Revision) of the Cayman Islands.

(n) Winding up

A company may be wound up compulsorily by order of the Court voluntarily; or, under

supervision of the Court. The Court has authority to order winding up in a number of specified

circumstances including where it is, in the opinion of the Court, just and equitable to do so.

A company may be wound up voluntarily when the members so resolve in general meeting

by special resolution, or, in the case of a limited duration company, when the period fixed for

the duration of the company by its memorandum or articles expires, or the event occurs on the

occurrence of which the memorandum or articles provides that the company is to be dissolved,

or, the company does not commence business for a year from its incorporation (or suspends its

business for a year), or, the company is unable to pay its debts. In the case of a voluntary winding

up, such company is obliged to cease to carry on its business from the time of passing the

resolution for voluntary winding up or upon the expiry of the period or the occurrence of the

event referred to above.

For the purpose of conducting the proceedings in winding up a company and assisting the

Court, there may be appointed one or more than one person to be called an official liquidator or

official liquidators; and the Court may appoint to such office such qualified person or persons,


— III-23 —

either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to

such office, the Court shall declare whether any act hereby required or authorised to be done by

the official liquidator is to be done by all or any one or more of such persons. The Court may

also determine whether any and what security is to be given by an official liquidator on his

appointment; if no official liquidator is appointed, or during any vacancy in such office, all the

property of the company shall be in the custody of the Court. A person shall be qualified to accept

an appointment as an official liquidator if he is duly qualified in terms of the Insolvency

Practitioners Regulations. A foreign practitioner may be appointed to act jointly with a qualified

insolvency practitioner.

In the case of a members’ voluntary winding up of a company, the company in general

meeting must appoint one or more liquidators for the purpose of winding up the affairs of the

company and distributing its assets. A declaration of solvency must be signed by all the directors

of a company being voluntarily wound up within twenty-eight (28) days of the commencement

of the liquidation, failing which, its liquidator must apply to Court for an order that the

liquidation continue under the supervision of the Court.

Upon the appointment of a liquidator, the responsibility for the company’s affairs rests

entirely in his hands and no future executive action may be carried out without his approval. A

liquidator’s duties are to collect the assets of the company (including the amount (if any) due

from the contributories), settle the list of creditors and, subject to the rights of preferred and

secured creditors and to any subordination agreements or rights of set-off or netting of claims,

discharge the company’s liability to them (pari passu if insufficient assets exist to discharge the

liabilities in full) and to settle the list of contributories (shareholders) and divide the surplus

assets (if any) amongst them in accordance with the rights attaching to the shares.

As soon as the affairs of the company are fully wound up, the liquidator must make up an

account of the winding up, showing how the winding up has been conducted and the property of

the company has been disposed of, and thereupon call a general meeting of the company for the

purposes of laying before it the account and giving an explanation thereof. At least twenty-one

(21) days before the final meeting, the liquidator shall send a notice specifying the time, place

and object of the meeting to each contributory in any manner authorised by the company’s

articles of association and published in the Gazette in the Cayman Islands.

(o) Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamations approved

by a majority in number representing seventy-five per cent. (75%) in value of shareholders or

class of shareholders or creditors, as the case may be, as are present at a meeting called for such

purpose and thereafter sanctioned by the Court. Whilst a dissenting shareholder would have the

right to express to the Court his view that the transaction for which approval is sought would not

provide the shareholders with a fair value for their shares, the Court is unlikely to disapprove

the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf

of management.


— III-24 —

(p) Compulsory acquisition

Where an offer is made by a company for the shares of another company and, within four

(4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which

are the subject of the offer accept, the offeror may at any time within two (2) months after the

expiration of the said four (4) months, by notice in the prescribed manner require the dissenting

shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply

to the Court within one (1) month of the notice objecting to the transfer. The burden is on the

dissenting shareholder to show that the Court should exercise its discretion, which it will be

unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror

and the holders of the shares who have accepted the offer as a means of unfairly forcing out

minority shareholders.

(q) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association

may provide for indemnification of officers and directors, except to the extent any such provision

may be held by the court to be contrary to public policy (e.g. for purporting to provide

indemnification against the consequences of committing a crime).

4. GENERAL

Conyers Dill & Pearman, our Company’s special legal counsel on Cayman Islands law, have sent

to our Company a letter of advice summarising certain aspects of Cayman Islands company law. This

letter, together with a copy of the Companies Law, is available for inspection as referred to in the

paragraph headed “Documents Available for Inspection” in Appendix V. Any person wishing to have

a detailed summary of Cayman Islands company law or advice on the differences between it and the

laws of any jurisdiction with which he is more familiar is recommended to seek independent legal

advice.


— III-25 —

A. FURTHER INFORMATION ABOUT OUR COMPANY

1. Incorporation of our Company

Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted

company with limited liability on 3 August 2015. Our Company has established a place of business

in Hong Kong at 11/F, New World Tower II, 16-18 Queen’s Road Central, Hong Kong and was

registered as a non-Hong Kong company under Part 16 of the Companies Ordinance on 17 March

2016. In connection with such registration, Mr. B Lo and Mr. Lam Tak Ming have been appointed as

the authorised representatives of our Company for acceptance of service of process and notices on

behalf of our Company in Hong Kong.

As our Company is incorporated in the Cayman Islands, its operations are subject to the Cayman

Islands company law and its constitution, which comprises of a memorandum of association and the

articles of association. A summary of certain provisions of its constitution and relevant aspects of the

Cayman Islands company law is set out in Appendix III to this prospectus.

2. Changes in authorised and issued share capital of our Company

Our Company was incorporated in the Cayman Islands on 3 August 2015. Upon incorporation,

1 nil paid Share was issued to Craig Fulton and such Share was transferred to TML for HK$0.01 on

the same date.

The authorised share capital of our Company as at the date of its incorporation was

HK$380,000.00 divided into 38,000,000 shares of HK$0.01 each.

On 1 December 2016, our Company credited as fully paid the one nil paid Share held by TML

at the direction of Mr. B Lo and Mr. C Lo in consideration of their transfer of the entire issued capital

of PFHL to DEGL.

On 5 December 2016, our Company increased its authorised share capital to HK$80,000,000

divided into 8,000,000,000 Shares of HK$0.01 each which rank pari passu in all respects with the

existing shares. Immediately following completion of the Capitalisation Issue and the Placing, the

authorised capital of our Group will be HK$80,000,000 divided into 8,000,000,000 Shares of HK$0.01

each, of which 2,000,000,000 Shares will be in issue, fully paid or credited as fully paid and

6,000,000,000 remain unissued.

3. Resolutions in writing of the Sole Shareholder passed on 5 December 2016

Pursuant to the resolutions in writing passed by the Sole Shareholder on 5 December 2016:

(a) our Company approved and adopted the new Memorandum with immediate effect and the

new Articles with effect from the Listing Date;

(b) the authorised share capital of our Company was increased from HK$380,000 divided into

38,000,000 Shares of HK0.01 each to HK$80,000,000 divided into 8,000,000,000 Shares of

HK$0.01 each by the creation of an additional 7,962,000,000 Shares;

APPENDIX IV STATUTORY AND GENERAL INFORMATION

— IV-1 —

(c) conditional on the Listing Committee of the Stock Exchange granting the listing of, and

permission to deal in the Shares in issue and to be issued as mentioned in this prospectus

and on the obligations of the Underwriters under the Underwriting Agreement becoming

unconditional and not being terminated in accordance with the terms of the Underwriting

Agreement or otherwise, in each case on or before the day falling 30 days after the date of

this prospectus:

(i) the Placing was approved and our Directors were authorised to allot and issue the New

Shares under the Placing;

(ii) the rules of the Share Option Scheme, the principal terms of which are set out in the

paragraph headed “Share Option Scheme” below, were approved and adopted and our

Directors were authorised to grant options to subscribe for the Shares thereunder and

to allot, issue and deal with the Shares pursuant to the exercise of options which may

be granted under the Share Option Scheme and to take all such steps as may be

necessary, desirable or expedient to carry into effect the Share Option Scheme;

(iii) conditional on the share premium account of our Company having sufficient balance,

or otherwise being credited as a result of the Placing, our Directors were authorised

to capitalise approximately HK$14,999,999.99 standing to the credit of the share

premium account of our Company by applying such sum in paying up in full at par

1,499,999,999 Shares for allotment and issue to the Shareholders whose names appear

on the register of members of our Company at the close of business on 5 December

2016 (or as each of them may direct) in proportion (as nearly as possible without

involving fractions so that no fraction of a Share shall be allotted and issued) to their

then existing shareholdings in our Company, and the Shares allotted and issued shall

rank pari passu in all respects with the then existing issued Shares;

(iv) a general unconditional mandate was given to our Directors to exercise all powers of

our Company to allot, issue and deal with, otherwise than by way of rights issue, scrip

dividend schemes or similar arrangements in accordance with the Articles of

Association of our Company, or pursuant to the exercise of any options which have

been or may be granted under the Share Option Scheme, or under the Placing or the

Capitalisation Issue, Shares with an aggregate nominal amount of not exceeding the

sum of (aa) 20% of the number of issued Shares immediately following completion of

the Placing and the Capitalisation Issue (excluding Shares which may be allotted and

issued pursuant to the exercise of the options which may be granted under the Share

Option Scheme or Shares which may be issued under the Offer Size Adjustment

Option); and (bb) the number of Shares which may be purchased by our Company

pursuant to the authority granted to our Directors until the conclusion of the next

annual general meeting of our Company, or the date by which the next annual general

meeting of our Company is required by the Articles of Association of our Company

or any applicable Cayman Islands law to be held, or the passing of an ordinary

resolution by the Shareholders revoking or varying the authority given to our

Directors as set out in this paragraph (iv), whichever occurs first; and


— IV-2 —

(v) a general unconditional mandate (the “Repurchase Mandate”) was given to our

Directors to exercise all powers of our Company to purchase the Shares with an

aggregate nominal amount of not exceeding 10% of the number of issued Shares

immediately following completion of the Placing and the Capitalisation Issue

(excluding Shares which may be allotted and issued pursuant to the exercise of the

options which may be granted under the Share Option Scheme or Shares which may

be issued under the Offer Size Adjustment Option) until the conclusion of the next

annual general meeting of our Company, or the date by which the next annual general

meeting of our Company is required by the articles of association of our Company or

any applicable Cayman Islands law to be held, or the passing of an ordinary resolution

by the Shareholders in general meeting revoking or varying the authority given to our

Directors as set out in this paragraph (v), whichever occurs first.

4. Group reorganisation

The companies comprising our Group underwent a reorganisation to rationalise our Group’s

structure in preparation for the listing of the Shares on the Stock Exchange. Please refer to the section

headed “History, Reorganisation and Development” in this prospectus for further details.

5. Changes in share capital of subsidiaries

Our Company’s subsidiaries are referred to in the Accountants’ Report, the text of which is set

out in Appendix I to this prospectus. Save as set out in the section headed “History, Reorganisation

and Development” above, there has been no alteration in the share capital of any of the subsidiaries

of our Company within the two years preceding the date of this prospectus.

Save for the subsidiaries mentioned in Appendix I to this prospectus, our Company has no other

subsidiaries.

6. Repurchase by our Company of our own securities

This paragraph includes information required by the Stock Exchange to be included in this

prospectus concerning the repurchase by our Company of our own securities.

(a) Provisions of the GEM Listing Rules

The GEM Listing Rules permit companies with a primary listing on the Stock Exchange to

repurchase their securities on the Stock Exchange subject to certain restrictions, the most

important of which are summarised below:

(i) Shareholders’ approval

All proposed repurchases of securities (which must be fully paid up in the case of

shares) by a company listed on the Stock Exchange must be approved in advance by an

ordinary resolution of the shareholders, either by way of general mandate or by specific

approval of a particular transaction.


— IV-3 —

Note: Pursuant to a resolution in writing passed by the Sole Shareholder on 5 December 2016, the

Repurchase Mandate was given to our Directors to exercise all powers of our Company to purchase

Shares on the Stock Exchange or any other stock exchange on which the securities of our Company

may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, of up

to 10% of the number of issued Shares immediately following completion of the Placing and the

Capitalisation Issue (excluding Shares which may be allotted and issued pursuant to the exercise of

the options which may be granted under the Share Option Scheme or Shares which may be issued

under the Offer Size Adjustment Option). The Repurchase Mandate will expire at the conclusion of

the next annual general meeting of our Company, or the date by which the next annual general

meeting of our Company is required by the articles of association of our Company or any applicable

Cayman Islands law to be held, or the passing of an ordinary resolution by the Shareholders in

general meeting revoking or varying the authority given to our Directors, whichever occurs first.

(ii) Source of funds

Repurchases must be paid out of funds legally available for the purpose in accordance

with our Company’s Memorandum and Articles of Association, the applicable laws and

regulations of the Cayman Islands and the GEM Listing Rules. A listed company may not

repurchase its own securities on the Stock Exchange for a consideration other than cash or

for settlement otherwise than in accordance with the trading rules of the Stock Exchange

from time to time. Under Cayman Islands law, any repurchases by our Company may only

be made out of profits of our Company, or out of share premium account, or out of the

proceeds of a fresh issue of share made for the purpose of the repurchase, or, if so

authorised by its articles of association and subject to the provisions of the Companies Law,

out of capital. Any premium payable on a purchase over the par value of the shares to be

purchased must be provided for out of profits of our Company or from sums standing to the

credit of our Company’s share premium account, or, if so authorised by its articles of

association and subject to the provisions of the Companies Law, out of capital.

(iii) Core connected parties

The GEM Listing Rules prohibit our Company from knowingly repurchasing our

Shares on GEM from a “core connected person” (as defined in the GEM Listing Rules),

which includes a Director, chief executive or substantial shareholder of our Company or

any of its subsidiaries or a close associate of any of them and a core connected person shall

not knowingly sell Shares to our Company on GEM.

(b) Reasons for repurchases

Our Directors believe that it is in the best interests of our Company and the Shareholders

for our Directors to have general authority from the Shareholders to enable our Company to

repurchase Shares in the market. Such repurchases may, depending on market conditions and

funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or

earnings per Share and will only be made if our Directors believe that such repurchases will

benefit our Company and the Shareholders.


— IV-4 —

(c) Funding of repurchases

In repurchasing securities, our Company may only apply funds legally available for such

purpose in accordance with its Memorandum and Articles of Association, the GEM Listing Rules

and the applicable laws of the Cayman Islands.

On the basis of the current financial position of our Group as disclosed in this prospectus

and taking into account the current working capital position of our Group, our Directors consider

that, if the Repurchase Mandate were to be exercised in full, it might have a material adverse

effect on the working capital and/or the gearing position of our Group as compared with the

position disclosed in this prospectus. However, our Directors do not propose to exercise the

Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse

effect on the working capital requirements of our Group or the gearing levels which in the

opinion of our Directors are from time to time appropriate for our Group.

The exercise in full of the Repurchase Mandate, on the basis of 2,000,000,000 Shares in

issue immediately after the listing of the Shares on the Stock Exchange, would result in up to

200,000,000 Shares being repurchased by our Company during the period in which the

Repurchase Mandate remains in force.

(d) General

None of our Directors nor, to the best of their knowledge having made all reasonable

enquiries, any of their respective close associates (as defined in the GEM Listing Rules) has any

present intention to sell any Shares to our Company or its subsidiaries if the Repurchase Mandate

is exercised.

Our Directors have undertaken to the Stock Exchange that, so far as the same may be

applicable, they will exercise the Repurchase Mandate in accordance with the GEM Listing Rules

and the applicable laws of the Cayman Islands.

No core connected person (as defined in the GEM Listing Rules) has notified our Company

that he has a present intention to sell Shares to our Company, or has undertaken not to do so if

the Repurchase Mandate is exercised.

If, as a result of a securities repurchase, a Shareholder’s proportionate interest in the voting

rights of our Company is increased, such increase will be treated as an acquisition for the

purpose of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in

concert (as defined in the Takeovers Code) could obtain or consolidate control of our Company

and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers

Code. Save as aforesaid, our Directors are not aware of any consequences which would arise

under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase

Mandate.


— IV-5 —

B. FURTHER INFORMATION ABOUT THE BUSINESS OF OUR GROUP

1. Summary of material contracts

The following contracts (not being contracts in the ordinary course of business) have been

entered into by members of our Group within the three years preceding the date of this prospectus and

are or may be material:

(a) the agreement dated 30 November 2016 entered into among our Company, Mr. B Lo, Mr.

C Lo and DEGL relating to the transfer of the entire issued share capital of PFHL in

consideration of crediting as fully paid the 1 nil paid Share issued by our Company to TML;

(b) the Deed of Indemnity;

(c) the Deed of Non-Competition;

(d) the Underwriting Agreement.

2. Intellectual property

(a) Trademark

As at the Latest Practicable Date, our Group had registered the following trademark:

Trademark Trademark No.

Registered

Owner

Place of

Registration Class

Date of

registration Expiry date

303476593 PFHL Hong Kong 36 23 May 2016 19 July 2025

(b) Domain Name

As at the Latest Practicable Date, our Group had registered the following domain name:

Domain Name Date of Registration Expiry Date

www.pfs.com.hk 22 May 2000 16 August 2017


— IV-6 —

Information contained in the above website do not form part of this prospectus.

Save as disclosed above, there are no other trade or service marks, registered designs,

patents or other intellectual or industrial property rights which are material to the business of our

Group.

C. FURTHER INFORMATION ABOUT DIRECTORS, MANAGEMENT AND SUBSTANTIAL

SHAREHOLDERS:

1. Interests and short positions of Directors and chief executive in the shares, underlying

shares and debentures of our Company and its associated corporations

Immediately following completion of the Capitalisation Issue and the Placing and taking no

account of any Shares which may be issued upon the exercise of the Offer Size Adjustment Option,

any Shares which may be allotted and issued upon the exercise of any options which may be granted

under the Share Option Scheme, the interests and short positions of our Directors and chief executive

of our Company in the Shares, underlying Shares and debentures of our Company or its associated

corporations (within the meaning of Part XV of the SFO) which, once the Shares are listed, will have

to be notified to our Company and the Stock Exchange under Divisions 7 and 8 of Part XV of the SFO

(including interests and short positions which they are taken or deemed to have under such provisions

of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register

as referred to therein, or pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities

transactions by our Directors to be notified to our Company and the Stock Exchange, will be as

follows:

Name of Director Capacity/nature of interestNumber of

Shares

Approximatepercentage of

interest in ourCompany

Mr. B Lo Interest in controlled

corporation (Note)

1,500,000,000

(long position)

75.0%

Mr. C Lo Interest in controlled

corporation (Note)

1,500,000,000

(long position)

75.0%

Note: TML is beneficially owned by Mr. B Lo and Mr. C Lo as to 57.1% and 42.9%, respectively. As such Mr. B Lo and

Mr. C Lo are deemed to be interested in the Shares held by TML under the SFO.

Mr. B Lo and Mr. C Lo, being the Controlling Shareholders are interested in the corporate

reorganisation referred to in the paragraph headed “Group reorganisation” above.


— IV-7 —

2. Interests and short positions of Substantial Shareholders in the shares, underlying sharesand debentures of our Company and its associated corporations

Immediately following completion of the Capitalisation Issue and the Placing and taking into no

account of any Shares which may be issued upon the exercise of the Offer Size Adjustment Option,

any Shares which may be allotted and issued upon the exercise of any options granted under the Share

Option Scheme, so far as it is known to the Directors, the following person, not being a Director or

chief executive of our Company, will have an interest or short position in the Shares and underlying

Shares of our Company which would fall to be disclosed to our Company under the provisions of

Divisions 2 and 3 of Part XV of the SFO, or, who is interested, directly or indirectly, in 10% or more

of the nominal value of any class of share capital carrying rights to vote in all circumstances at general

meetings of any member of our Group:

Name Capacity/nature of interestNumber of

Shares

Approximatepercentage of

interest in ourCompany

Ms. Lui Wing Patsie Family Interest (Note) 1,500,000,000

(long position)

75.0%

TML Beneficial Interest 1,500,000,000

(long position)

75.0%

Note:

Ms. Lui Wing Patsie is the spouse of Mr. B Lo.

3. Particulars of Directors’ service agreements

For details of the service agreement or appointment letter (as the case may be) that each Director

has entered into with our Company and the emoluments paid to our Directors during the Track Record

Period, please refer to the section headed “Directors, senior management and staff — Remuneration

of Directors, senior management and staff” of this prospectus.

4. Directors’ remuneration

The aggregate of the remuneration (including salaries and allowance, if any) paid and benefits

in kind granted by our Group to our Directors in respect of the three financial years ended 31 March

2016 and four months ended 31 July 2016 were approximately HK$4.3 million, HK$4.1 million,

HK$4.5 million and HK$0.7 million, respectively.

Under the arrangements currently in force, the aggregate emoluments (excluding any

discretionary bonus, if any, payable to the Director) payable by our Group to and benefits in kind

receivable by our Directors for the financial year ending 31 March 2017 is estimated to be



— IV-8 —

None of our Directors or any past directors of any member of our Group has been paid any sum

of money for the three financial years ended 31 March 2016 and the four months ended 31 July 2016

(i) as an inducement to join or upon joining our Company or (ii) for loss of office as a director of any

member of our Group or of any other office in connection with the management of the affairs of any

member of our Group.

There has been no arrangement under which a Director has waived or agreed to waive any

emoluments for the three financial years ended 31 March 2016 and the four months ended 31 July

2016.

After Listing, our Company’s remuneration committee will review and determine the

remuneration and compensation packages of the Directors with reference to their responsibilities,

workload, the time devoted to our Group and the performance of our Group. The Directors may also

receive options to be granted under the Share Option Scheme.

5. Agency fees or commissions received

Information on the agency fees or commissions payable to the Underwriter is set out in the

section headed “Underwriting — Total Commission, Fee and Expenses” of this prospectus.

Save as disclosed herein and in the section headed “Directors, Senior Management and Staff” and

Appendix I to this prospectus, none of our Directors or experts (as named in the paragraph headed

“Consents of Experts” in this Appendix) received or will be entitled to receive any commissions,

discounts, brokerages or other special terms in connection with the issue of any Share of our Company

within three years immediately preceding the date of this prospectus.

6. Related party transactions

During the three years preceding the date of this prospectus, our Group was engaged in related

party transactions as described in note 31 of Appendix I of this prospectus.

7. Disclaimers

Save as disclosed in this prospectus:

(a) and taking no account of any Shares which may be taken up or acquired under the Placing

or any Shares which may be allotted and issued upon the exercise of any options which may

be granted under the Share Option Scheme, our Directors are not aware of any person who

immediately following completion of the Placing and the Capitalisation Issue will have an

interest or short position in the Shares and underlying Shares which would fall to be

disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO

or who is, either directly or indirectly, interested in 10% or more of the nominal value of

any class of share capital carrying rights to vote in all circumstances at the general meetings

of our Company or any other members of our Group;


— IV-9 —

(b) none of our Directors of chief executive of our Company has for the purpose of Divisions

7 and 8 of Part XV of the SFO or the GEM Listing Rules, nor is any of them taken to or

deemed to have under Divisions 7 and 8 of Part XV of the SFO, an interest or short position

in the shares, underlying shares and debentures of our Company or any associated

corporations (within the meaning of the SFO) or any interests which will have to be entered

in the register to be kept by our Company pursuant to section 352 of the SFO or which will

be required to be notified to our Company and the Stock Exchange pursuant to Rules 5.46

to 5.67 of the GEM Listing Rules once the Shares are listed on the Stock Exchange;

(c) none of our Directors nor the experts named in the paragraph headed “Consents of Experts”

below has been interested in the promotion of, or has any direct or indirect interest in any

assets acquired or disposed of by or leased to, any member of our Group within the three

years immediately preceding the date of this prospectus, or which are proposed to be

acquired or disposed of by or leased to any member of our Group nor will any Director

apply for Placing Shares either in his/her own name or in the name of a nominee;

(d) none of our Directors is materially interested in any contract or arrangement subsisting at

the date of this prospectus which is significant in relation to the business of our Group

taken as a whole; and

(e) none of the experts named in the paragraph headed “Consents of Experts” below has any

shareholding in any company in our Group or the right (whether legally enforceable or not)

to subscribe for or to nominate persons to subscribe for securities in any company in our

Group.

SHARE OPTION SCHEME

8. Share Option Scheme

Our Company has conditionally approved and adopted the Share Option Scheme pursuant to

written resolutions passed by the Sole Shareholder on 5 December 2016. The following is a summary

of the principal terms of the Share Option Scheme but does not form part of, nor was it intended to

be, part of the Share Option Scheme nor should it be taken as affecting the interpretation of the rules

of the Share Option Scheme:

The terms of the Share Option Scheme are in accordance with the provisions of Chapter 23 of

the GEM Listing Rules.

(a) Purpose of the Share Option Scheme

The purpose of the Share Option Scheme is to advance the interests of our Company and the

Shareholders by enabling our Company to grant options to attract, retain and reward the eligible

persons and to provide the eligible persons an incentive or reward for their contribution to our Group

and by enabling such persons’ contribution to further advance the interests of our Group.


— IV-10 —

(b) Participants of the Share Option Scheme and Eligibility Criteria

The eligible persons of the Share Option Scheme to whom options may be granted by the Board

shall include (collectively “Eligible Persons”):

(i) any directors (whether executive or non-executive and whether independent or not) and any

employee (whether full time or part time) of our Group (collectively “Employee”);

(ii) any consultants or advisers (in the areas of legal, technical, financial or corporate

managerial) of our Group (whether on an employment or contractual or honorary basis or

otherwise and whether paid or unpaid); any provider of goods and/or services to our Group;

any customer of our Group; or any holder of securities issued by any member of our Group

(collectively “Business Associate”); and

(iii) any other person, who at the sole discretion of the Board, has contributed to our Group (the

assessment criteria of which are (1) such person’s contribution to the development and

performance of our Group; (2) the quality of work performed by such person for our Group;

(3) the initiative and commitment of such person in performing his duties; (4) the length

of service or contribution of such person to our Group; and (5) such other factors as

considered to be applicable by the Board).

The Board may in its absolute discretion specify such conditions as it thinks fit when granting

an option to an Eligible Person (including, without limitation, as to any minimum period an option

must have been held or the minimum period of service or relationship with any member of our Group

to be achieved before an option can be exercised (or any part thereof), to the extent of the option which

can be exercised at any material time, or any performance criteria which must be satisfied by the

Eligible Person, our Company, and its subsidiaries, before an option may be exercised), provided that

such conditions shall not be inconsistent with any other terms and conditions of the Share Option

Scheme and the relevant requirements under the applicable laws or the GEM Listing Rules.

(c) Life of the Share Option Scheme

Our Company may, by ordinary resolution in general meeting, or the Board may, at any time

terminate the operation of the Share Option Scheme and in such event no further option shall be

offered or granted but in all other respects the provisions of the Share Option Scheme shall remain in

full force and effect and options granted prior to such termination shall continue to be valid and

exercisable in accordance with the Share Option Scheme. Subject to the aforesaid, the Share Option

Scheme shall be valid and effective for a period of ten years commencing from the date of adoption,

after which period no further options will be offered or granted but the provisions of the Share Option

Scheme shall remain in full force and effect in all other respects with respect to options granted during

the life of the Share Option Scheme.


— IV-11 —

(d) Subscription Price

The subscription price in respect of any option shall, subject to any adjustments made pursuant

to the terms of the Share Option Scheme, be a price determined by the Board and notified to each

grantee and shall be at least the highest of:

(i) the closing price per Share as stated in the Stock Exchange’s daily quotation sheet on the

offer date for the grant of the option (which is deemed to be the date of grant if the offer

for the grant of the option is accepted by the Eligible Person), which must be a day on

which the Stock Exchange is open for the business of dealing in securities;

(ii) the average of the closing prices per Share as stated in the Stock Exchange’s daily quotation

sheets for the five Business Days (any days which securities are traded on the Stock

Exchange) immediately preceding the offer date; and

(iii) the nominal value of the Share on the date of grant.

(e) Acceptance of Offers

An offer shall remain open for acceptance by the Eligible Person concerned for such period as

determined by the Board, being a date not later than ten Business Days after the offer date by which

the Eligible Person must accept the offer or be deemed to have declined it, provided that no such offer

shall be open for acceptance after the tenth anniversary of the date of adoption of the Share Option

Scheme or after the Share Option Scheme has been terminated in accordance with the provisions of

the Share Option Scheme.

The amount payable by the grantee to our Company on acceptance of the offer shall be a nominal

amount to be determined by the Board.

(f) Maximum number of Shares available for Subscription

(i) The total number of Shares which may be issued upon exercise of all options to be granted

under the Share Option Scheme and any other share option schemes of our Company shall

not in aggregate exceed 10% of the total number of Shares of 2,000,000,000 Shares in issue

as at the date of Listing unless our Company obtains a fresh approval from the Shareholders

pursuant to paragraph (f)(ii) below.

(ii) Our Company may seek approval of Shareholders in general meeting to renew the 10% limit

set out in paragraph (f)(i) above such that the total number of Shares in respect of which

options may be granted by the Board under the Share Option Scheme and any other share

option schemes of our Company in issue shall not exceed 10% of the total number of Shares

in issue as at the date of approval of the renewed limit.


— IV-12 —

(iii) Our Company may grant options to specified participant(s) beyond the 10% limit set out in

paragraph (f)(i) above provided that the options granted in excess of such limit are

specifically approved by the Shareholders in general meeting and the participants are

specifically identified by our Company before such approval is sought. In seeking such

approval, a circular must be sent to the Shareholders containing the required details in

accordance with Chapter 23 of the GEM Listing Rules.

(iv) Notwithstanding the foregoing and subject to the paragraph (g) below, the maximum

number of Shares in respect of which options may be granted under the Share Option

Scheme together with any options outstanding and yet to be exercised under the Share

Option Scheme and any other share option schemes of our Company in issue shall not

exceed 30% (or such higher percentage as may be allowed under the GEM Listing Rules)

of the total number of Shares in issue from time to time.

(g) Maximum entitlement of each Eligible Person

The total number of Shares issued and to be issued upon exercise of the options granted to each

Eligible Person (including both exercised and outstanding options under the Share Option Scheme) in

the twelve-month period expiring on the offer date must not exceed 1% of the issued share capital of

our Company.

Where any further grant of options to an Eligible Person would result in excess of such limit shall

be subject to the approval of the Shareholders at general meeting with such Eligible Person and his

associates abstaining from voting.

In seeking such approval, a circular must be sent to the Shareholders containing the required

details in accordance with Chapter 23 of the GEM Listing Rules.

(h) Grants of Options to certain connected persons

(i) Any grant of options to a core connected person (as defined under the GEM Listing Rules)

or any of its associates must be approved by the independent non-executive Directors

(excluding any independent non-executive Director who is also a proposed grantee of the

options).

(ii) Subject to paragraph (h)(i) above, where options are proposed to be granted to a Substantial

Shareholder or an independent non-executive Director or any of their respective associates,

and the proposed grant of options will result in the total number of Shares issued and to be

issued upon exercise of all options already granted and to be granted (including options

exercised, cancelled and outstanding) to such person in the twelve-month period up to and

including the date of such grant representing in aggregate over 0.1 per cent of the issued

share capital of our Company and having an aggregate value, based on the closing price of

the Shares at the date of each grant, in excess of HK$5 million, such grant of options must

be subject to the approval of the Shareholders at general meeting. The connected person

involved in such proposed grant of options and all other connected persons must abstain

from voting in such general meeting (except that any connected person may vote against the

proposed grant provided that his intention to do so has been stated in the relevant circular

to the Shareholders).


— IV-13 —

In seeking such approval, a circular must be sent to the Shareholders containing the required

details in accordance with Chapter 23 of the GEM Listing Rules.

Any change in the terms of the options granted to a Substantial Shareholder or an independent

non-executive Director of our Company, or any of their respective associates must also be approved

by the Shareholders in general meeting, at which the relevant Eligible Person and his associates shall

abstain from voting.

(i) Restrictions on the time of grant of Options

Our Board shall not offer the grant of an option to any Eligible Person:

(a) after inside information has come to the knowledge of our Company until such inside

information has been announced pursuant to the relevant requirements of the GEM Listing

Rules; or

(b) during the period commencing one month immediately preceding the earlier of:

(i) the date of the Board meeting (as such date is first notified to the Stock Exchange in

accordance with the GEM Listing Rules) for the approval of our Company’s results for

any year, half-year, quarter-year period or any other interim period (whether or not

required under the GEM Listing Rules); and

(ii) the deadline for our Company to publish an announcement of its results for any year,

half-year or quarter-year period under the GEM Listing Rules or any other interim

period (whether or not required under the GEM Listing Rules), and ending on the date

of the results announcement. The period during which no option may be granted will

cover any period of delay in the publication of results announcement. “Inside

Information” has the meaning defined in the SFO.

(j) Time of exercise of Option

An option may be exercised in accordance with the terms of the Share Option Scheme at any time

during a period to be notified by the Board to the grantee which the Board may in its absolute

discretion determine, save that such period shall not be more than ten years from the date of

acceptance of the offer (subject to the provisions for early termination in accordance with the Share

Option Scheme) (the “Option Period”).

(k) Rights are personal to Grantee

An option shall be personal to the grantee and shall not be assignable nor transferable, and no

grantee shall in any way sell, transfer, assign, charge, mortgage, encumber or create any interest (legal

or beneficial) in favour of any third party over or in relation to any option or attempt to do so. Any

breach of the foregoing shall entitle our Company to cancel any outstanding option or part thereof

granted to such grantee.


— IV-14 —

(l) Rights on ceasing employment

In the case of the grantee being an employee or a director of our Group leaves the services of

our Group by reason other than death or on one or more of the grounds specified in paragraph (q)(v),

or because his employing company ceases to be a member of our Group, the grantee may exercise the

option up to his entitlement at the date of cessation (to the extent he is entitled to exercise at the date

of cessation but not already exercised) within a period being the earlier of (i) three months (or such

other period as the Board may determine) following the date of such cessation, which date shall be

the last actual working day with our Group whether salary is paid in lieu of notice or not or the last

date of appointment as director of our Group, as the case may be, or (ii) the expiration of the relevant

Option Period. Any options not so exercised shall lapse and terminate at the end of the said period

provided that in any such case, our Directors in their absolute discretion may otherwise determine

subject to such conditions or limitations as our Directors may decide.

(m) Rights on Death

In the case of the grantee ceases to be an Eligible Person by reason of death, he or (as the case

may be) his personal representatives may exercise all or part of his options (to the extent he is entitled

to exercise at the date of cessation but not already exercised) within a period being the earlier of (i)

six months after he so ceases to be an Eligible Person or (ii) the expiration of the relevant Option

Period. Any options not so exercised shall lapse and terminate at the end of the said period provided

that in any such case, our Directors in their absolute discretion may otherwise determine subject to

such conditions or limitations as our Directors may decide.

(n) Rights on a General Offer

(i) If, in consequences of any general offer made to the holders of Shares (being an offer made

in the first instance on a condition such that, if it is satisfied, the offeror will have control

of our Company) or otherwise, any person shall have obtained control (as defined in the

Takeovers Code) of our Company, then our Directors shall as soon as practicable thereafter

notify every grantee accordingly and each grantee shall be entitled to exercise all or any of

his options (to the extent he is entitled but not exercised) at any time before the earlier of

(1) the expiry of the Option Period, or (2) the fourteenth day following the date on which

the general offer becomes or is declared unconditional to exercise any option in whole or

in part, and to the extent that it has not been so exercised, any options shall upon the expiry

of such period cease and terminate provided that if, during such period, such person

becomes entitled to exercise rights of compulsory acquisition of Shares and gives notice in

writing to any holders of Shares that he intends to exercise such rights, options shall be and

remain exercisable until the earlier of (1) the expiry of the Option Period or (2) the

fourteenth day from the date of such notice and, to the extent that any options which have

not been exercised upon the expiry of such period, shall thereupon cease and terminate.

(ii) If a general offer by way of a scheme of arrangement is made to all the Shareholders and

the Share Option Scheme has been approved by the necessary number of Shareholders at

the requisite meetings, our Company shall forthwith notify all the grantees and any grantee

(or his personal representatives) may thereafter (but before such time as shall be notified


— IV-15 —

by our Company) by notice in writing to our Company exercise the option (to the extent he

is entitled but not exercised) to its full extent or to the extent specified in such notice. Any

options which have not been exercised upon the expiry of such period as specified in the

notice shall thereupon cease and terminate.

(o) Rights on Winding-up

In the event that a notice is given by our Company to the Shareholders to convene a general

meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily

wind-up our Company other than for the purposes of a reconstruction, amalgamation or scheme of

arrangement, our Company shall on the same date as or soon after it dispatches such notice to each

member of our Company give notice thereof to all grantees (together with a notice of the existence

of the provisions of this paragraph) and thereupon, each grantee (or his personal representatives) shall

be entitled to exercise all or any of his options at any time not later than two Business Days prior to

the proposed general meeting of our Company by giving notice in writing to our Company,

accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in

respect of which the notice is given whereupon our Company shall as soon as possible and, in any

event, no later than the Business Day immediately prior to the date of the proposed general meeting

referred to above, allot and issue such number of Shares to the grantee credited as fully paid which

falls to be issued on such exercise and register the grantee as holder thereof in the branch register of

members of our Company maintained in Hong Kong.

(p) Right on a compromise or scheme of arrangement

Other than a general offer or a scheme of arrangement contemplated in paragraphs (n)(i) and

(n)(ii), if a compromise or arrangement between our Company and the Shareholders or creditors is

proposed for the purposes of or in connection with a scheme for the reconstruction of our Company

or its amalgamation with any other company or companies, our Company shall give notice thereof to

the grantee (together with a notice of the existence of the provisions of this paragraph) on the same

date or soon after it dispatches the notice to each member or creditor of our Company summoning the

meeting to consider such a compromise or arrangement, and thereupon the grantee (or his personal

representatives) may by notice in writing to our Company accompanied by the remittance for the

aggregate subscription price in respect of the number of option exercised under such notice (such

notice to be received by our Company not later than two Business Days prior to the proposed meeting)

either to its full extent or to the extent specified in such notice, and our Company shall as soon as

possible and in any event no later than the Business Day immediately prior to the date of the proposed

meeting referred to above, allot and issue such number of Shares credited as fully paid, to the grantee

which falls to be issued on such exercise and register the grantee as holder thereof in the branch

register of members of our Company maintained in Hong Kong.


— IV-16 —

(q) Lapse of Option

The right to exercise an option shall lapse automatically (to the extent not already exercised)

immediately upon the earliest of:

(i) subject to paragraphs (l)-(p), the expiry of the Option Period;

(ii) the expiry of any of the periods referred to in paragraphs (l)-(n);

(iii) subject to paragraph (o), the date of the commencement of the winding up of our Company;

(iv) subject to the scheme of arrangement becoming effective, the expiry of the period referred

to in paragraph (p);

(v) in the event that the grantee is an employee or a director of our Group, the date on which

the grantee ceases to be an Eligible Person by reason of summary dismissal for misconduct

or other breach of the terms of his employment or directorship or other contract constituting

him an Eligible Person, or appears either to be unable to pay or to have no reasonable

prospect of being able to pay his debts or has become insolvent or has made any

arrangements or composition with his creditors generally or on which he has been convicted

of any criminal offence involving his integrity or honesty or (if so determined by the Board)

on any other ground on which an employer or a company would be entitled to terminate his

employment or directorship at common law or pursuant to any applicable laws or under the

grantee’s service contract with our Company or the relevant subsidiary of our Company. A

resolution of the Board or the board of directors of the relevant subsidiary of our Company

to the effect that the employment or other relevant contract of a grantee has or has not been

terminated on one or more of the grounds specified in this paragraph (q)(v) shall be

conclusive and binding on the grantee;

(vi) the date on which the grantee ceases to be an Eligible Person by reason of termination of

his relationship (whether by appointment or otherwise) with our Group or on any one or

more of the following grounds (other than by reason of death or on one or more of the

grounds specified in sub-paragraph (q)(v)) that he has become unable to pay his debts

(within the meaning of the Bankruptcy Ordinance) or has become otherwise insolvent or has

made any arrangement or composition with his creditors generally, or arrangement or

composition with his creditors generally, or has been convicted of any criminal offence

involving his integrity or honesty or (if so determined by the Board) has committed any act

which is prejudicial to or not in the interests of our Company or any company in our Group.

A resolution of the Board or the board of directors of the relevant subsidiary of our

Company to the effect that the relationship with a grantee (other than an employee or a

director of our Group) has or has not been terminated and as to the date of such termination

shall be conclusive and binding on the grantee;


— IV-17 —

(vii) the date on which the grantee commits a breach of paragraph (k); or

(viii) the date on which the option is cancelled by the Board as provided in paragraph (u).

Our Company shall owe no liability to any grantee for the lapse of any option under this

paragraph (q).

(r) Ranking of Shares

The Shares to be allotted and issued upon the exercise of an option shall be subject to the

Memorandum, the Articles and the laws of the Cayman Islands for the time being in force and shall

rank pari passu in all respects with the fully-paid Shares in issue of our Company as at the date of

allotment and will entitle the holders to participate in all dividends or other distributions paid or made

on or after the date of allotment other than any dividend or other distribution previously declared or

recommended or resolved to be paid or made if the record date therefor shall be on or before the date

of allotment, provided always that when the date of exercise of the option falls on a date upon which

the register of members of our Company is closed then the exercise of the options shall become

effective on the first Business Day on which the register of members of our Company is re-opened.

(s) Reorganisation of Capital Structure

In the event of any alteration to the capital structure of our Company whilst any option remains

exercisable, arising from capitalisation of profits or reserves, rights issue, consolidation,

re-classification or subdivision of Share or reduction of the share capital of our Company in

accordance with the legal requirements or requirements of the Stock Exchange, other than any

alteration in the capital structure of our Company as a result of an issue of Shares as consideration

in a transaction to which our Company is a party, adjustment (if any) shall be made to:

(i) the number or nominal amount of Shares subject to the option so far as unexercised; and/or

(ii) the subscription price for the Shares subject to the option so far as unexercised; and/or

(iii) the Shares to which the option relates; and/or

(iv) the method of exercise of the options; and/or

(v) the maximum number of Shares referred to in paragraphs (f), (g) and (h)(ii) above; and/or

(vi) any combination thereof as the auditors or the independent financial adviser to our

Company (acting as expert not arbitrator) shall at the request of our Company certify in

writing to the Board either generally or as regards any particular grantee that the

adjustments are in compliance with Rule 23.03(13) of the GEM Listing Rules and the notes

thereto.


— IV-18 —

Any such adjustments must give a grantee the same proportion of the equity capital of our

Company as to which that grantee was previously entitled, and any adjustments so made shall be in

compliance with the GEM Listing Rules and such applicable guidance and/or interpretation of the

GEM Listing Rules from time to time issued by the Stock Exchange (including, without limitation, the

‘‘Supplemental Guidance on GEM Listing Rule 23.03(13) and the Notice immediately after the Rule’’

attached to the letter of the Stock Exchange dated 5 September 2005 to all issuers relating to the Share

Option Scheme) but no such alterations shall be made the effect of which would be to enable a Share

to be issued at less than its nominal value. The capacity of the auditors or the independent financial

adviser to our Company in this paragraph is that of experts and not of arbitrators and their certification

shall, in the absence of manifest error, be final and binding on our Company and the grantees. The

costs of the auditors or the independent financial adviser to our Company shall be paid by our

Company. Notice of such adjustment shall be given to the grantees by our Company.

(t) Alteration to the Share Option Scheme and the terms of Options granted under the Share

Option Scheme

The Board may from time to time in its absolute discretion waive or amend any terms of the

Share Option Scheme at such time and in such manner as it deems desirable to the extent permissible

under the provisions of the GEM Listing Rules in relation to the Share Option Scheme and all

applicable laws in respect thereof.

For the avoidance of doubt, except with the prior approval of the Shareholders in general meeting

(with the Eligible Persons and their associates abstaining from voting), the Board may not amend:

(i) any of the provisions of the Share Option Scheme relating to matters contained in Rule

23.03 of the GEM Listing Rules to the advantage of the Eligible Persons or grantees;

(ii) any terms and conditions of the Share Option Scheme which are of a material nature or any

terms of options granted except where such alteration take effect automatically under the

existing terms of the Share Option Scheme; and

(iii) any provisions on the authority of the Board in relation to any alteration to the terms of the

Share Option Scheme.

No such amendments shall be altered to the advantage of grantees except with the prior approval

of the Shareholders in general meeting (with Eligible Persons and their respective associates abstained

from voting). No such alterations shall operate to affect adversely the terms of issue of any option

granted or agreed to be granted prior to such alterations except with the consent or sanction in writing

of such majority of the grantees as would be required of the Shareholders under the Articles for the

time being of our Company for a variation of the rights attached to the Shares, provided that this

restriction should not apply to any amendment made by the Board at the request of the Stock Exchange

or other regulatory body for the purpose of ensuring that the Share Option Scheme complies with,

among other applicable laws, the requirements of such exchange or other regulatory body on which


— IV-19 —

the Shares are in the course of being listed or from time to time listed or which may have or exercise

regulatory powers or jurisdiction in relation to our Company. Any amended terms of the Share Option

Scheme or options shall still comply with the relevant requirements of Chapter 23 of the GEM Listing

Rules (subject to such waiver as may be granted by the Stock Exchange from time to time) and shall

automatically take effect on all outstanding options.

(u) Cancellation of Options granted

The Board may cancel an option granted but not exercised with the approval of the grantee of

such option. No compensation shall be payable to the grantee for cancellation of the options granted

but not exercised.

(v) Termination

Our Company, by ordinary resolution in general meeting, or the Board may, at any time terminate

the operation of the Share Option Scheme and in such event no further option will be offered but in

all other respects the provisions of the Share Option Scheme shall remain in full force and effect and

options granted prior to such termination shall continue to be valid and exercisable in accordance with


As at the date of this prospectus, no option has been granted or agreed to be granted by our

Company under the Share Option Scheme.

(w) Performance targets

Save as determined by the Board and provided in the offer of grant of the options, there is no

performance target that must be achieved before the options can be exercised.

OTHER INFORMATION:

9. Estate duty/other indemnity

Our Directors have been advised that no material liability for estate duty in Hong Kong is likely

to fall on our Company or any of its subsidiaries.

Mr. B Lo, Mr. C Lo and TML (collectively, the “Indemnifiers”) also have, under the terms of a

Deed of Indemnity, given joint and several indemnities to our Group in respect of, among other things,

any amount which any member of our Group becomes liable to pay after the date of the Deed of

Indemnity being:

(a) any duty which is or hereafter becomes payable by any member of our Group by virtue of

section 35 of the Estate Duty Ordinance, or under the provisions of section 43 of the Estate

Duty Ordinance by reason of the death of any person and by reason of the assets of our

Group members;


— IV-20 —

(b) any amount recovered against any member of our Group under provisions of section 43(7)

of the Estate Duty Ordinance in respect of any duty payable under section 43(1)(c) or 43(6)

of the Estate Duty Ordinance by reason of the death of any person and by reason of the

assets of our Group members;

(c) any amount of duty which any member of our Group is obliged to pay by virtue of section

43(1)(c) of the Estate Duty Ordinance;

(d) any taxation which might be payable by any member of our Group in respect of any income,

profits, gains, transactions, events, matters or things earned, accrued, received, entered into

or occurring on or up to the Listing Date; and

(e) any and all expenses, payments, sums, outgoings, fees, demands, claims, damages, losses,

costs (including but not limited to legal and other professional costs), charges, liabilities,

fines, penalties (‘‘Costs’’) in connection with any failure, delay or defects of corporate or

regulatory compliance under, or any breach of any provision of, the Predecessor Companies

Ordinance, the Companies Ordinance or any other applicable laws, rules or regulations or

tenancy agreements on or before the date on which the Placing becomes unconditional.

The Deed of Indemnity does not however cover any claim and the Indemnifiers shall be under

no liability in respect of any taxation or liability:

(a) to the extent that provision has been made for such taxation in the audited combined

accounts of any members of our Group for the three financial years ended 31 March 2016

and the four months ended 31 July 2016 and the audited accounts of PFHL and PFSL for

each of the three financial years ended 31 March 2016 and the four months ended 31 July

2016;

(b) such taxation or liability would not have arisen but for any act or omission by any member

of our Group voluntarily effected without the prior written consent or agreement of the

Indemnifiers (such consent or agreement not to be unreasonably withheld or delayed) and

otherwise than in the ordinary course of business after the Listing Date;

(c) the taxation arises or is incurred as a result of any retrospective change in law or the

interpretation or practice thereof and/or a retrospective increase of tax rates coming into

force after the Listing Date;

(d) such taxation or liability for which any member of our Group is primarily liable as a result

of transactions entered into in the ordinary course of business after the Listing Date; and

(e) provision or reserve made for such taxation in the audited combined accounts of any

members of our Group for the three financial years ended 31 March 2016 and the four

months ended 31 July 2016 and the audited accounts of PFHL and PFSL for each of the

three financial years ended 31 March 2016 and the four months ended 31 July 2016 is

established to be an over-provision or an excessive reserve.


— IV-21 —

10. Litigation

Save as disclosed herein, neither our Company nor any of its subsidiaries is engaged in any

litigation or arbitration of material importance and no litigation or claim of material importance is

known to our Directors to be pending or threatened against our Company or any of its subsidiaries.

11. Sponsor

The Sponsor has made an application for and on behalf of our Company to the Stock Exchange

for the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this

prospectus, including the Placing Shares and any Shares which may fall to be allotted and issued

pursuant to (a) the Capitalisation Issue; and (b) the exercise of options which may be granted under


The Sponsor has confirmed to the Stock Exchange that it satisfies the independence test as

stipulated under rule 6A.07 of the GEM Listing Rules.

Our Company has entered into an agreement with the Sponsor, pursuant to which our Company

agreed to pay HK$3.8 million to the Sponsor to act as the sponsor to our Company for purposes of

the Placing.

12. Compliance adviser

In accordance with the requirements of the GEM Listing Rules, our Company has appointed

Ample Capital Limited as its compliance adviser to provide consultancy services to our Company to

ensure compliance with the GEM Listing Rules for a period commencing on the Listing Date and

ending on the date on which our Company complies with the GEM Listing Rules in respect of its

financial results for the second full financial year ending 31 March 2019.

13. Preliminary expenses

The preliminary expenses of our Company are approximately HK$53,000 and are payable by our

Company.

14. Promoter

Our Company has no promoter.


— IV-22 —

15. Qualifications of experts

The following are the respective qualifications of the experts who have given their opinion or

advice which is contained in this prospectus:

Name Qualification

Ample Capital Limited A licensed corporation under the SFO to carry out type 4

(advising in securities) type 6 (advising on corporate finance)

and type 9 (asset management) regulated activities as defined

under the SFO

Deloitte Touche Tohmatsu Certified public accountants

Conyers Dill & Pearman Cayman Islands attorneys-at-law

Robertsons Solicitors, Hong Kong SAR

16. Consents of experts

Each of the Ample Capital Limited, Deloitte Touche Tohmatsu, Conyers Dill & Pearman and

Robertsons has given and has not withdrawn their respective written consents to the issue of this

prospectus with the inclusion of their letters, reports, and/or valuation certificate opinion and/or

references to their names (as the case may be) in the form and context in which they respectively

appear.

None of the Ample Capital Limited, Deloitte Touche Tohmatsu, Conyers Dill & Pearman and

Robertsons has any shareholding interest in any members of our Group or the right (whether legally

enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any members

of our Group.

17. Financial adviser

We have appointed Veda Capital Limited (“Veda”) as our financial adviser in respect of the

Listing. The appointment of Veda was not made pursuant to the requirements of the GEM Listing

Rules, and is separate and distinct from the appointment of the Sponsor (which is required to be made

by our Company pursuant to the GEM Listing Rules). The Sponsor is responsible for fulfilling its

duties as sponsor to our Company’s application to the Stock Exchange for Listing, and the Sponsor

has not relied on any of the work performed by Veda in fulfilling those duties. The roles of Veda in

the Listing are different from that of the Sponsor, and include principally the following aspects:

— advise and assist our Company on the selection and hiring of working parties involved in

the Listing process, and the coordination of the working parties;

— advise our Company on the structure, timing and strategy of the Listing including the

Reorganisation and Listing group structure; and


— IV-23 —

— advise our Company on the financial aspects of the Listing process including our financial

condition and our planned use of Listing proceeds.

18. Binding Effect

This prospectus shall have the effect, if application is made in pursuance hereof, of rendering all

persons concerned bound by all the provisions (other than the penalty provisions) of sections 44A and

44B of the Companies Ordinance so far as applicable.

19. Taxation of holders of Shares

(a) Hong Kong

Hong Kong stamp duty will be payable by the purchaser on every purchase and by the seller

on every sale of the Shares. The duty is charged at the current rate of 0.2% of the consideration

or, if higher, the fair value of the Shares being sold or transferred (the buyer and seller each

paying half of such stamp duty). In addition, a fixed duty of HK$5 is currently payable on any

instrument of transfer of shares.

(b) Under the Cayman Islands law currently in force, there is no stamp duty payable in the

Cayman Islands on transfers of Shares except for those companies which hold interests in

land in the Cayman Islands.

(c) Consultation with professional advisers

Intending holders of the Shares are recommended to consult their professional advisers if

they are in doubt as to the taxation implications of subscribing for, purchasing, holding or

disposing of or dealing in the Shares or exercising rights attaching to them. It is emphasised that

none of our Company, our Directors or the other parties involved in the Placing will accept

responsibility for any tax effect on, or liabilities of, holders of Shares resulting from their

subscription for, purchase, holding or disposal of or dealing in Shares or exercise of any rights

attaching to them.

20. Miscellaneous

(a) Save as disclosed herein:-

(i) Within the three years immediately preceding the date of this prospectus:-

(aa) no share or loan capital of our Company or of any of its subsidiaries has been

issued, agreed to be issued or is proposed to be issued fully or partly paid either

for cash or for a consideration other than cash; and

(bb) no commissions, discounts, brokerages (other than under the Underwriting

Agreement) or other special terms have been granted in connection with the issue

or sale of any share or loan capital of our Company or any of its subsidiaries;


— IV-24 —

(ii) no share or loan capital of our Company or any of its subsidiaries is under option or

is agreed conditionally or unconditionally to be put under option;

(iii) Save as disclosed in the section headed “Financial Information — Recent

Developments” and “Financial Information — Impact of Listing Expenses” in this

prospectus, our Directors confirm that there has been no material adverse change in

the financial or trading positions or the prospects of our Group since 31 July 2016,

being the date of our Company’s latest audited financial statements as set out in

Appendix 1 to this prospectus and up to the date of this prospectus;

(iv) There has not been any interruption in the business of our Group which may have or

have had a significant effect on the financial position of our Group in the 24 months

preceding the date of this prospectus;

(v) Our Company has no founders shares, management shares or deferred shares;

(vi) none of the equity and debt securities of our Company is listed or dealt with on any

other stock exchange nor is any listing or submission to deal being or proposed to be

sought;

(vii) none of our Directors nor any of the persons whose names are listed in paragraph

headed “Qualifications Of Experts” in this Appendix has received any commissions,

discounts, agency fees, brokerages or other special terms in connection with the issue

or sale of any share or loan capital of any member of our Group;

(viii) all necessary arrangements have been made to enable the Shares to be admitted into

CCASS.

(ix) Subject to the provisions of the Companies Law, the principal register of members of

our Company will be maintained in the Cayman Islands by Codan Trust Company

(Cayman) Limited and a branch register of members of our Company will be

maintained in Hong Kong by Union Registrars Limited. Unless the Directors

otherwise agree, all transfers and other documents of title of the Shares must be

lodged for registration with and registered by, our Company’s branch share registrar

in Hong Kong and may not be lodged in the Cayman Islands.

(x) No company within our Group is presently listed on any stock exchange or traded on

any trading system.

(xi) the English text of this prospectus shall prevail over the Chinese text.

21. Bilingual Prospectus

The English language and Chinese language versions of this prospectus are being published

separately in reliance upon the exemption provided in Section 4 of the Companies (Exemption of

Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of

Hong Kong).


— IV-25 —

A. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this prospectus delivered to the Registrar of Companiesin Hong Kong for registration were (i) the written consents referred to in the section headed “Statutoryand General Information — Other Information — Qualifications and Consents of Experts” inAppendix IV to this prospectus and (ii) copies of the material contracts referred to in the sectionheaded “Statutory and General Information — Further Information about The Business of our Group— Summary of Material Contracts” in Appendix IV to this prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Robertsons,at 57/F, The Center, No. 99 Queen’s Road Central, Hong Kong during normal business hours up to andincluding the date which is 14 days from the date of this prospectus:

1. the Memorandum and Articles of Association of our Company;

2. the Accountants’ Report prepared by Deloitte Touche Tohmatsu, the text of which is set outin Appendix I to this prospectus;

3. the consolidated audited accounts of PFHL and its subsidiary for the three years ended 31March 2016;

4. the statement of adjustments of the Company for the year ended 31 March 2016 and fourmonths ended 31 July 2016;

5. the report on the unaudited pro forma financial information of our Group prepared byDeloitte Touche Tohmatsu, the text of which is set out in Appendix II to this prospectus;

6. the rules of the Share Option Scheme;

7. the letter prepared by Conyers Dill & Pearman summarising certain aspects of CaymanIslands company law referred to in Appendix III to this prospectus;

8. the Companies Law;

9. the material contracts referred to in the paragraph headed “Further Information about TheBusiness of our Group — Summary of Material Contracts” in Appendix IV to thisprospectus;

10. the written consents referred to in the paragraph headed “Other Information — Consents ofExperts” in Appendix IV to this prospectus;

11. the service contracts referred to in the paragraph headed “Further Information aboutDirectors, Management and Substantial Shareholders — Directors — Particulars of ServiceContracts” in Appendix IV to this prospectus; and

12. the Hong Kong Legal Opinion prepared by Robertsons in respect of certain laws andregulations applicable to our operations in Hong Kong.

APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES AND AVAILABLE FOR INSPECTION

— V-1 —

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