ENL Group Holdings Limited 卓越物流集團控股有限公司

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

Application Proof of

ENL Group Holdings Limited卓越物流集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

WARNING

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

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change whichcan be material. By viewing this document, you acknowledge, accept and agree with ENL Group Holdings Limited (the“Company”), its sponsor, advisers or member of the underwriting syndicate that:

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

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

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

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

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

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

(g) neither the Company nor any of its affiliates, sponsor, advisers or underwriters is offering, or is soliciting offersto buy, any securities in any jurisdiction through the publication of this document;

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

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

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

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

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

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

ENL Group Holdings Limited卓越物流集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

[REDACTED]Number of [REDACTED] under the

[REDACTED]: [REDACTED] Shares (subject to the

[REDACTED])Number of [REDACTED] : [REDACTED] Shares (subject to [REDACTED])Number of [REDACTED] : [REDACTED] Shares (subject to [REDACTED]

and the [REDACTED])[REDACTED] : not more than HK$[REDACTED] per

[REDACTED] and expected to be not less thanHK$[REDACTED] per [REDACTED], plusbrokerage of 1%, SFC transaction levy of0.0027%, FRC transaction levy of 0.00015%and Stock Exchange trading fee of 0.005%(payable in full on application in Hong Kongdollars and subject to refund)

Nominal value : HK$0.01 per Share[REDACTED] : [REDACTED]

Sole Sponsor

[[REDACTED] and [REDACTED]]

[Insert logo]

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited takeno responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liabilitywhatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

A copy of this document, having attached thereto the documents specified in “Documents delivered to the Registrar of Companies in Hong Kong andavailable on display” in Appendix V to this document, has been registered by the Registrar of Companies in Hong Kong as required under section342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and FuturesCommission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this document or any other documents referredto above.

The [REDACTED] is expected to be determined by an agreement to be entered into between our Company and the [REDACTED] (for itself and onbehalf of the [REDACTED]) on the [REDACTED], which is expected to be on or around [REDACTED], and in any case no later than[REDACTED]. Investors applying for the [REDACTED] must pay, on application, the maximum [REDACTED] of HK$[REDACTED] for each[REDACTED] together with brokerage of 1%, SFC transaction levy of 0.0027%, FRC transaction levy of 0.00015% and Stock Exchange trading feeof 0.005% subject to refund if the [REDACTED] is lower than HK$[REDACTED].The [REDACTED] will be not more than HK$[REDACTED] andis currently expected to be not less than HK$[REDACTED], unless otherwise announced. If our Company and the [REDACTED] (for itself and onbehalf of the [REDACTED]) are unable to reach an agreement on the [REDACTED] by [REDACTED], the [REDACTED] (including the[REDACTED]) will lapse and will not proceed. In such case, a notice will be published on the Stock Exchange’s website at www.hkexnews.com andour Company’s website at enl-group.com.

The [REDACTED] (for itself and on behalf of the [REDACTED]) may, with the consent of our Company, reduce the number of [REDACTED] inthe [REDACTED] and/or the indicative [REDACTED] range below that stated in this document at any time on or prior to the morning of the last dayfor lodging applications under the [REDACTED]. In such case, a notice will be published in [South China Morning Post] (in English) and [HongKong Economic Times] (in Chinese) and on the Stock Exchange’s website at www.hkexnews.com and our Company’s website at enl-group.com notlater than the morning of the last day for lodging applications under the [REDACTED]. Further details are set out in “Structure of the[REDACTED]” and “How to apply for [REDACTED]” in this document.

Prior to making any investment decision, prospective investors should consider carefully all the information set out in this document, including therisk factors set out in “Risk factors” in this document.

The obligations of the [REDACTED] under the [REDACTED] to subscribe for, and to procure applicants to subscribe for, the [REDACTED], aresubject to termination by the [REDACTED] (for itself and on behalf of the [REDACTED]) if certain grounds arise prior to 8:00 a.m. on the[REDACTED]. Please refer to “[REDACTED] – [REDACTED] arrangements and expenses – [REDACTED] – Grounds for termination” in thisdocument for further details of such grounds for termination.

The [REDACTED] have not been and will not be registered under the U.S. Securities Act or the securities laws of any state in the United States, andmay not be offered, sold, pledged or transferred within the United States, except pursuant to an exemption from, or in a transaction not subject to, theregistration requirements of the U.S. Securities Act and in accordance with any applicable state securities laws in the U.S. The [REDACTED] arebeing offered and sold only outside of the United States in offshore transactions in reliance on Regulation S of the U.S. Securities Act.

ATTENTION

We have adopted a fully electronic application process for the [REDACTED]. We will not provide printed copies of this document or printedcopies of any [REDACTED] to the public in relation to the [REDACTED].

This document is available at the websites of the Stock Exchange (www.hkexnews.hk) and our Company (enl-group.com). If you require aprinted copy of this document, you may download and print from the website addresses above.

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

IMPORTANT

[REDACTED]

[REDACTED]


IMPORTANT

[REDACTED]


EXPECTED TIMETABLE

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[REDACTED]


EXPECTED TIMETABLE

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[REDACTED]


EXPECTED TIMETABLE

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IMPORTANT NOTICE TO INVESTORS

This document is issued by our Company solely in connection with the [REDACTED]and the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer tobuy any securities in any jurisdiction where such would be prohibited. No action has beentaken to permit a [REDACTED] of the [REDACTED] in any jurisdictions other than HongKong and no action has been taken to permit the distribution of this document in anyjurisdictions other than Hong Kong. The distribution of this document and the offering of the[REDACTED] in other jurisdictions are subject to restrictions and may not be made exceptas permitted under the applicable securities laws of such jurisdictions pursuant toregistration with or authorisation by the relevant securities regulatory authorities or anexemption therefrom.

You should rely only on the information contained in this document to make yourinvestment decision. Our Company has not authorised anyone to provide you with informationthat is different from what is contained in this document. Any information or representationnot made in this document must not be relied on by you as having been authorised by us, theSole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], any of our or theirrespective directors or any other persons or parties involved in the [REDACTED].

Page

Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

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

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Glossary of technical terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Forward-looking statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Information about this document and the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . 73

Directors and parties involved in the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Corporate information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Regulatory overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124


CONTENTS

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History, Reorganisation and corporate structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

Relationship with Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282

Connected transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

Directors and senior management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288

Substantial shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301

Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

Financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Future plans and [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397

Structure of the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409

How to apply for [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423

Appendix I — Accountant’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Appendix II — Unaudited pro forma financial information . . . . . . . . . . . . . II-1

Appendix III — Summary of the constitution of our Company andCayman Islands company law . . . . . . . . . . . . . . . . . . . . . . . III-1

Appendix IV — Statutory and general information . . . . . . . . . . . . . . . . . . . . . IV-1

Appendix V — Documents delivered to the Registrar of Companies inHong Kong and available on display . . . . . . . . . . . . . . . . . V-1


CONTENTS

– v –

This summary aims to give you an overview of the information contained in this

document. As this is a summary, it does not contain all of the information which may be

important to you and is qualified in its entirety, and should be read in conjunction with, the

full text of this document. You should read the whole document including the appendices

hereto, which constitutes an integral part of this document, before you decide to invest in the

[REDACTED].

There are risks associated with any investment. Some of the particular risks of investing

in the [REDACTED] are summarised in “Risk factors” in this document. You should read

that section carefully before you decide to invest in the [REDACTED].

OVERVIEW

We are a well-established freight forwarding and logistics service provider based in HongKong with a presence in the PRC. We provide international air and ocean freight forwardingservices to our customers. We also offer logistics and related value-added services, includingwarehousing, logistics, repackaging and labelling and palletising services, to our customers.

We were established in 1997 in Hong Kong with a focus on providing freight forwardingservices. In 2005, we expanded our freight forwarding business to the PRC. We further expandedour business to providing warehousing, logistics, repackaging and labelling and palletisingservices.

According to the Industry Report, the freight forwarding and logistics industry is highlyfragmented and competitive due to the presence of numerous small- to medium-sized players.There were approximately 40,000 and 7,000 freight forwarding services providers in the PRCand Hong Kong as at March 2022, respectively. Freight forwarders in Hong Kong can be dividedinto two tiers, namely tier-1 players who are generally international logistics services providerswith worldwide logistics network and business coverage, and tier-2 players who are generallylocal and regional players with networks covering specific logistics locations and categories ofgoods. In FY2022, the aggregate market share of the top five players of the tier-1 freightforwarding market in Hong Kong was approximately 13.0% in terms of revenue whereas theaggregate market share of the top five players of the tier-2 freight forwarding market in HongKong was approximately 5.5% in terms of revenue. In FY2022, our Group recorded a revenue ofapproximately HK$486.0 million for freight forwarding services with Hong Kong as departureport, which accounted for approximately 0.3% of the market share in the overall freightforwarding services market in Hong Kong and approximately 0.5% of the market share in thetier-2 freight forwarding services market in Hong Kong. In FY2022, our Group accounted for amarket share of approximately 0.03% with a revenue of approximately HK$506.0 million(equivalent to approximately RMB416.6 million) generated by our Group with the PRC asdeparture port.


SUMMARY

– 1 –

We now operate in Hong Kong as well as in the PRC through our subsidiary and branchesin Chongqing, Shanghai, Guangzhou and Shenzhen. According to the Industry Report,Chongqing and Shanghai are major trade hubs in the PRC in terms of air cargo throughput. In2021, the air cargo throughput in Shanghai and Chongqing amounted to approximately 4,366.0thousand tonnes and 479.0 thousand tonnes respectively, accounted for approximately 24.5% and2.7% of the overall air cargo throughput in the PRC, respectively. During 2016 to 2021, themarket size by revenue of freight forwarding services in Chongqing recorded a moderate growthfrom approximately RMB22,820.0 million in 2016 to approximately RMB26,220.0 million in2021, representing a CAGR of approximately 2.8% from 2016 to 2021 and the air cargothroughput in Chongqing recorded a positive growth with a CAGR of approximately 5.7% from2016 to 2021. It is estimated that the freight forwarding services market in Chongqing willincrease from approximately RMB27,062.5 million in 2022 to approximately RMB30,947.8million in 2026, representing a CAGR of approximately 3.4% during 2022 to 2026. According tothe Industry Report, Shanghai is also a major international transport centre in the PRC and therevenue generated by the air freight forwarding services market in Shanghai is in a leadingposition amongst other PRC provinces and cities. In overall, the freight forwarding servicesmarket in Shanghai recorded a moderate growth from approximately RMB64.0 billion in 2016 toapproximately RMB71.2 billion in 2021, representing a CAGR of approximately 2.2% during2016 to 2021. Air, sea and land freight forwarding services markets in Shanghai had generatedrevenue with CAGRs of approximately 6.9%, 0.5% and 4.6% during 2016 to 2021, respectively.It is expected that the freight forwarding services market in Shanghai will reach approximatelyRMB77.4 billion by 2026, representing a CAGR of approximately 2.3% during 2022 to 2026.

We collaborate with a global network of freight forwarder business partners in variousgeographical locations. We are an IATA cargo agent and a member of a number of logisticsnetworks. Such global network of freight forwarder business partners enables us to buildalliances with independent freight forwarders globally and to offer freight forwarding services toour customers on a wide portfolio of cargo routes.

OUR BUSINESS MODEL AND OPERATIONS

We are a freight forwarding and logistics service provider founded and based in Hong Kongwith a presence in the PRC. We provide international freight forwarding services (including airand ocean freight forwarding).

Our business model principally involves the provision of freight forwarding servicesthrough obtaining cargo spaces from airline carriers and shipping liners for delivery ofshipments consigned with us to the required destinations, and consolidating the consignedshipments to make a profit on the secured cargo spaces. We, as a co-loader, also on-sell ourcargo spaces which we have secured from our airline carriers and shipping liners to our fellowfreight forwarders at competitive prices. We also offer logistics and related value-added services,including warehousing, logistics and other ancillary logistics services to our customers.


SUMMARY

– 2 –

The following diagram illustrates our business model:

Our suppliers

Supply of

cargo spaces

Our Group

Our customers

Fellow freight

forwarders

Provision of

freight

forwarding

services

Airline carriers

Shipping liners

Fellow freight

forwarders

Direct

customers

and/or

logistics and

related

value-added

services

We determine our freight forwarding service fees payable by our customers on a cost-plusbasis by taking into account, among other things, the freight charges, terminal handling charges,fuel surcharges, security charges and other miscellaneous charges payable by us to our carriersplus a target profit margin, taking into account factors such as (i) the dimensions, weight, typeand value of consignments; (ii) the consignment schedule; (iii) the volume of cargo spacerequired; (iv) whether consolidation of cargo space or co-loading with other freight forwarders ispossible; (v) our other cost of services; (vi) the freight rates offered by our competitors; (vii)prevailing market demand and supply of cargo spaces; and (viii) general market conditions.

OUR COMPETITIVE STRENGTHS

We believe that the following principal strengths are crucial to our success and essential forour future growth: (i) our established and strong reputation in the freight forwarding andlogistics industry in Hong Kong and the PRC; (ii) our strong and established businessrelationships with airline carriers; (iii) we maintain a global network of freight forwarderbusiness partners serving worldwide cargo routes; (iv) we provide comprehensive freightforwarding and logistics and related value-added services in a cost and time efficient manner;and (v) we have an experienced and stable management team with extensive industry expertise.

OUR BUSINESS STRATEGIES

We intend to implement the following business strategies to strengthen our market positionand maintain our market competitiveness: (i) expand and improve our air freight forwardingservices; (ii) develop our own truck fleet; (iii) strengthen our ability to purchase cargo spaces tomeet customers’ demands; (iv) enhance our sales and marketing efforts and expand our customerbase; and (v) upgrade and strengthen our IT system.


SUMMARY

– 3 –

OUR CUSTOMERS

Our customers comprise freight forwarder customers who act on behalf of their ownshipper customers and direct customers, and are primarily located in Hong Kong, the PRC andthe U.S. During the Track Record Period, we maintained business relationship with over 3,000customers in aggregate. A majority portion of our revenue generated during the Track RecordPeriod was derived from our freight forwarder customers. During the Track Record Period, thepercentage of revenue attributable to our freight forwarder customers amounted to approximately90.0%, 82.4% and 88.0%, respectively, of our total revenue.

During the Track Record Period, our revenue generated from our top five customerscollectively accounted for approximately 65.2%, 32.1% and 36.8% of our total revenue,respectively, whilst our revenue generated from our largest customer, Customer A, accounted forapproximately 50.4%, 13.1% and 14.5% of our total revenue, respectively.

OUR SUPPLIERS

Our suppliers primarily include (i) suppliers of cargo spaces, which include airline carriers,shipping liners and fellow freight forwarders; (ii) overseas freight forwarder business partnersproviding freight forwarding services in geographical locations where we have not established apresence; and (iii) suppliers providing warehousing, trucking and other related logistics services.During the Track Record Period, we maintained business relationships with over 1,400 suppliersin aggregate.

During the Track Record Period, the purchases from our top five suppliers collectivelyaccounted for approximately 61.7%, 62.4% and 49.4% of our total freight and handling costsincurred, respectively; and the purchases from our largest supplier, Supplier A, accounted forapproximately 47.3%, 52.8% and 37.0% of our total freight and handling costs incurred,respectively.

OVERLAPPING OF CUSTOMERS AND SUPPLIERS

We maintain connections with over 1,000 freight forwarder business partners in over 160countries and regions, among which over 200 have been engaged by us on atransaction-by-transaction basis, to, among other things, handle and execute our customers’freight forwarding instructions in geographical locations where we have no presence. Suchfreight forwarder business partners may also engage us to provide freight forwarding services inHong Kong and the PRC. We may also on-sell our cargo space to such freight forwarderbusiness partners in the process of consolidation and co-loading. As such, some of our customersmay also be our suppliers and vice versa.


SUMMARY

– 4 –

During the Track Record Period, to the best of our Directors’ information, knowledge andbelief, there were a total of 238, 247 and 240 overlapping customers/suppliers, respectively.Seven of our customers which ranked top five during the Track Record Period were also oursuppliers, from whom we sourced cargo spaces, freight forwarding services and logistics andrelated services. Five of our suppliers which ranked top five during the Track Record Periodwere also our customers, to whom we provided forwarding services and logistics and relatedvalue-added services.

RELIANCE ON SUPPLIER A

Our suppliers of cargo spaces primarily include airline carriers, shipping liners and fellowfreight forwarders. During the Track Record Period, we collaborated with five airline partners inproviding air freight forwarding services, including Supplier A who was our largest supplier.During the Track Record Period, we relied on Supplier A primarily for air cargo spaces forshipments from the PRC or Hong Kong to the U.S. and our costs incurred to Supplier Aaccounted for approximately 47.3%, 52.8% and 37.0% of our total freight and handling costsincurred, respectively. Although we have established a stable business relationship with SupplierA for approximately 15 years, there is no assurance that Supplier A will continue to provide astable and adequate supply of cargo spaces to us on commercially reasonable terms or at all.

MATERIAL RISK FACTORS

There are risks associated with your investment in the [REDACTED], among which, therelatively material risks are: (i) our business operations may be adversely affected by theCOVID-19 pandemic; (ii) our business growth is susceptible to changes in macroeconomicand/or political conditions, including the Sino-U.S. trade war; (iii) our results of operations maybe adversely affected by the U.S. removal of Hong Kong’s preferential trade status; (iv) ourocean freight forwarding business and results of operations may be subject to adverse impactfrom the termination of the US-HK Shipping Agreement; and (v) we were exposed to customerconcentration risks and derived a significant portion of our revenue from our largest customer,Customer A, and expect to continue to be exposed to the risk of customer concentration duringand subsequent to the Track Record Period.

IMPACT OF THE COVID-19 OUTBREAK AND SINO-U.S. TRADE WAR ONMACRO-ENVIRONMENT AND FREIGHT FORWARDING INDUSTRY

The COVID-19 outbreak and Sino-U.S. trade war have brought about a negative impact onmost industries in the PRC and Hong Kong, including the freight forwarding industry in whichwe operate, mainly due to (i) the introduction of more stringent import and export procedures inthe PRC and Hong Kong; (ii) the mandatory quarantine requirements and travel restrictionsimposed by different countries around the world; (iii) the mandatory suspension of operations ofthe manufacturers in the PRC; (iv) the reduced international and inter-provincial flow of goods;and (v) the relocation of production base of some manufacturers from PRC to other Asiancountries.


SUMMARY

– 5 –

Despite the unprecedented disruptions caused to almost all industries, our Directors are ofthe view that the impact on the macro-environment will not have a lasting negative impact onour Group and that we are able to mitigate and manage the negative impact brought about by theCOVID-19 outbreak and Sino-U.S. trade war in light of the fact that (i) the more stringentimport and export procedures in the PRC and Hong Kong as a result of the COVID-19 outbreakonly caused additional administrative work and costs on the part of the freight forwarders. Withthe rapid growth of e-commerce and cross-border e-commerce activities, as well as the gradualrecovery of the global economy from the COVID-19 pandemic, it is expected that export andimport activities in both the PRC and Hong Kong will resume; (ii) the mandatory quarantinerequirements and travel restrictions imposed by different countries around the world as a resultof the COVID-19 pandemic restraint passenger travels internationally and within a country, andhence have a negative impact on the passenger flights industry and the manufacturing andlogistics businesses which are labour intensive. They, however, did not and will not have muchnegative impact on cargo transportation. It is expected that such requirements and restrictionswill likely ease off as and when the COVID-19 pandemic subsides; (iii) despite the mandatorysuspension of business operations in the PRC, given the nature of our business, we were able tocontinue to provide 24/7 services to our customers despite the suspension of our offices in thePRC. As such, our operations had not been materially and adversely affected. Further, as advisedby Frost & Sullivan, Shanghai is on track to resume production at key manufacturing sites frommid-April 2022 and businesses are expected to gradually return to normal in the third quarter of2022. The impact on the demand for our freight forwarding services in the PRC, especiallyShanghai, is considered to be temporary due to the lockdown and quarantine measures in thePRC and such demand is expected to recover quickly after the easing of COVID-19 controlmeasures in the PRC; (iv) the reduction in international and inter-provincial flow of goods wasprimarily due to the disruption of the global supply chain as a result of the COVID-19pandemic. As and when the COVID-19 pandemic gradually subsides, international andinter-provincial flow of goods will be back to normal and that the demand for freight forwardingservices, and logistics and related value-added services in both the PRC and Hong Kong willremain positive; and (v) although the relocation of the production base of some manufacturersfrom PRC to other Asian countries as a result of the Sino-U.S. trade war has led to a decrease inthe volume of export consignments from the PRC to the U.S. and the demand for the relevantfreight forwarding services for FY2020, foreign enterprises in the PRC have restored theirconfidence in conducting businesses in the PRC and the likelihood of substantial relocation ofproduction and warehouses out of the PRC is improbable in the future mainly attributable to thefact that (a) there are a number of reasons for manufacturers based in the PRC not to relocatetheir production base from the PRC; (b) foreign enterprises are optimistic about the businessoutlook and their operations in the PRC and have no plans of relocation out of the PRC ingeneral based on recent surveys; and (c) the amount of the PRC’s foreign direct investmentsinflows achieved a record high in 2021. For details, please refer to “Business – Effects of theCOVID-19 outbreak and Sino-U.S. trade war” in this document.


SUMMARY

– 6 –

WORST CASE SCENARIO UNDER COVID-19 OUTBREAK AND SINO-U.S. TRADEWAR

Our Directors are currently of the view that no material adverse effect on our Group’sbusiness operations and financial performance is expected to result from the COVID-19 outbreakand the Sino-U.S. trade war. In the unlikely event that we are to reduce or suspend all of ourbusiness operations for a prolonged period of time as a result of the COVID-19 outbreak and/orthe Sino-U.S. trade war, we estimate that our existing financial resources (including our bankbalances and cash) as at 31 March 2022 together with approximately HK$[REDACTED] millionfrom the [REDACTED] from the [REDACTED] designated as our general working capitalcould satisfy our necessary costs for not less than [11] months under such worst case scenario.

The key assumptions of such worst case scenario include: (i) we will not generate anyrevenue due to the suspension of business; (ii) our trade receivables as at 31 March 2022 will besettled within the range of our trade receivables turnover days during the Track Record Period;(iii) we will be required to settle our trade payables as at 31 March 2022 within the range of ourtrade payables turnover days during the Track Record Period; (iv) all of our staff will remainwith our Group without salary deduction; (v) the rental payments and other miscellaneouscharges would be paid in connection with our leased warehouses and offices; (vi) minimaloperating and administrative expenses will be incurred to maintain our operations at a minimumlevel (including basic maintenance cost and utilities expenses); (vii) there will be no furtherinternal or external financing from our Shareholders or financial institutions; (viii) ouroutstanding dividends will be fully settled and no further dividend will be declared and paidunder such situation; and (ix) the availability of approximately HK$[REDACTED] million fromthe [REDACTED] from the [REDACTED] designated as our general working capital.

The abovementioned extreme situation may or may not occur and is for illustrativepurposes only. Our Directors currently assess that the likelihood of such situation is remote. OurDirectors will continue to assess the impact of the COVID-19 outbreak and Sino-U.S. trade waron our Group’s business operations and financial performance and to closely monitor ourGroup’s exposure to the risks and uncertainties in this connection.

MARKET AND COMPETITION

The freight forwarding and logistics industry is highly fragmented and competitive due tothe presence of numerous small- to medium-sized players. There were approximately 40,000 and7,000 freight forwarding services providers in the PRC and Hong Kong as at March 2022,respectively. Freight forwarders in Hong Kong can be divided into two tiers, namely tier-1players who are generally international logistics services providers with worldwide logisticsnetwork and business coverage, and tier-2 players who are generally local and regional playerswith networks covering specific logistics locations and categories of goods.


SUMMARY

– 7 –

We face keen competition from numerous competitors operating on different scales in thefreight forwarding and logistics markets in Hong Kong and the PRC. However, havingmaintained a track record of over 24 years in the freight forwarding and logistics industry with astrategic presence in the PRC, we believe that we continue to be able to compete favourablywith our industry peers.

OUR CONTROLLING SHAREHOLDERS

Immediately following completion of the [REDACTED] and the [REDACTED] (withouttaking into account any Shares which may be issued pursuant to the exercise of the[REDACTED] and any options which may be granted under the Share Option Scheme), LuckyOasis will hold [REDACTED]% of the issued share capital of our Company.

Lucky Oasis is an investment holding company without any business operation and isowned by E&E, which is in turn owned by Mr. Wong, Mr. Chim and Mr. Shon as to 70.5%,23.5% and 6.0%, respectively.

Each of Mr. Wong, Mr. Chim, Mr. Shon, E&E and Lucky Oasis is our ControllingShareholder and will together form a group of Controlling Shareholders who are entitled tocontrol [REDACTED]% of the issued share capital of our Company immediately followingcompletion of the [REDACTED] and the [REDACTED] (without taking into account anyShares which may be issued pursuant to exercise of the [REDACTED] and any options whichmay be granted under the Share Option Scheme.

[REDACTED]

On 10 November 2020, E&E and the [REDACTED] entered into a memorandum ofunderstanding (the “MOU”) according to which it was the parties’ understanding that the[REDACTED] would enter into a definitive and binding agreement to subscribe for Shares uponconducting financial and legal due diligence on our Group and our business. Upon signing theMOU, the [REDACTED] paid a sum of HK$10.0 million which, pursuant to the MOU, shall beapplied as partial payment for the [REDACTED] should a definitive and binding agreement forthe [REDACTED] be entered into. Such partial payment shall be refunded to the [REDACTED]pursuant to the MOU should the parties fail to enter into a definitive and binding agreement forthe [REDACTED] by 31 December 2021.

On 8 March 2021, our Company and the [REDACTED] entered into a [REDACTED]agreement pursuant to which our Company agreed to allot and issue and the [REDACTED]agreed to subscribe for 1,333 Shares, representing 13.33% of the enlarged entire issued sharecapital of our Company at a consideration of HK$18.0 million. Such consideration wasdetermined after arm’s length negotiations between our Company and the [REDACTED] andtaking into account (i) the historical financial performance of our Group; (ii) the operatingperformance of our Group; (iii) the business prospects of our Group; and (iv) the then marketconditions of the air and ocean freight forwarding services industry in Hong Kong and the PRC.HK$10.0 million of the consideration was settled by way of fund transfer on 10 November 2020


SUMMARY

– 8 –

pursuant to the MOU and HK$2.0 million was settled by way of fund transfer on 29 April 2021.The remaining consideration of HK$6.0 million was settled by way of fund transfer on 14 May2021. As such, the consideration for the [REDACTED] was fully and irrevocably settled on 14May 2021. On 27 July 2021, our Company allotted and issued 1,333 Shares (representing13.33% of the enlarged issued share capital of our Company after completion of the[REDACTED]) to the [REDACTED]. After the aforesaid allotment and issue, our Companybecame owned by Lucky Oasis and the [REDACTED] as to 86.67% and 13.33%, respectively.Upon the [REDACTED], the [REDACTED] will hold [REDACTED]% shareholding in ourCompany.

KEY OPERATIONAL AND FINANCIAL INFORMATION

Selected information in our consolidated statements of profit or loss and othercomprehensive income

Year ended 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Revenue 485,523 578,977 1,033,545Gross profit 66,769 72,634 133,465Profit before income tax 42,994 33,518 95,694Profit for the year 35,006 25,438 75,851Total comprehensive income

for the year 33,580 27,291 76,948

The decrease in our net profit from FY2020 to FY2021 was primarily attributable to theincrease in our administrative expenses by approximately HK$14.6 million mainly due to (i) therecognition of our share-based compensation of approximately HK$10.4 million for FY2021 inrespect of the [REDACTED]; and (ii) the recognition of our [REDACTED] of approximatelyHK$[REDACTED] million for FY2021, partially offset by the increase in our gross profit byapproximately HK$5.9 million mainly in line with the increase in our revenue.

The significant increase in our net profit from FY2021 to FY2022 was primarilyattributable to the significant increase in our gross profit by approximately HK$60.8 millionmainly in line with the increase in our revenue.


SUMMARY

– 9 –

Revenue

Revenue by type of services


HK$’000 % HK$’000 % HK$’000 %

Freight forwardingservices 483,874 99.7 574,228 99.2 1,031,845 99.8– Air freight

forwarding 378,882 78.0 450,702 77.8 593,136 57.4– Ocean freight

forwarding 104,992 21.7 123,526 21.4 438,709 42.4Logistics and related

value-addedservices 1,649 0.3 4,749 0.8 1,700 0.2

Total 485,523 100.0 578,977 100.0 1,033,545 100.0

The increase in our total revenue from FY2020 to FY2021 was primarily attributable to (i)the increase in our revenue from the provision of air freight forwarding services from FY2020 toFY2021 primarily attributable to the increase in our revenue generated from customers(excluding Customer A) (“Other Customers”) by approximately HK$225.7 million mainly dueto (a) the increase in our air shipment volume of Other Customers from FY2020 to FY2021mainly as a result of a higher demand for the transportation of medical and medical-relatedproducts in view of (1) the surge in urgent demand for hygiene products in respect of theCOVID-19 pandemic; and (2) our ability to obtain cargo spaces from airline carriers despite thelimited supply of cargo spaces; and (b) the increase in our average air freight rate of OtherCustomers from FY2020 to FY2021 mainly as a result of the increase in the unit price of cargospace charged by airline carriers due to the shortage in supply of cargo spaces caused by theCOVID-19 pandemic, partially offset by the decrease in our revenue from the provision of airfreight forwarding services generated from Customer A by approximately HK$153.9 millionmainly due to the decrease in our air shipment volume from Customer A from FY2020 toFY2021 mainly as a result of the fact that, to the best of our Directors’ belief and knowledge,one of Customer A’s key customers (which is a U.S.-based multinational technology company)has relocated some of its warehouses from the PRC to Southern Asia, resulting in a significantdecline of orders from Customer A for FY2021; and (ii) the increase in our revenue from theprovision of ocean freight forwarding services from FY2020 to FY2021 primarily attributable tothe rebound of our average freight rate of ocean freight forwarding services from FY2020 toFY2021 mainly due to (a) the uncertainty over the global economy as a result of the intensifiedSino-U.S. trade war during FY2020; and (b) the supply insufficiency of shipment capacitycaused by the COVID-19 pandemic during FY2021 while we maintained relatively stable oceanshipment volume for FY2020 and FY2021, respectively.


SUMMARY

– 10 –

The increase in our total revenue from FY2021 to FY2022 was primarily attributable to (i)the increase in our revenue from the provision of air freight forwarding services from FY2021 toFY2022 mainly due to the increase in revenue generated from our Other Customers byapproximately HK$188.7 million mainly due to (a) the increase in our air shipment volume ofOther Customers mainly as a result of a higher demand for our air freight forwarding servicesfor the delivery of garment and fashion-related products, and electrical and electronic goodsmainly attributable to (1) the temporary suspension of manufacturing operations of certainfactories in the PRC as a result of the lockdown measures due to the outbreak of COVID-19during FY2021; and (2) the gradual recovery of the global and the U.S. economy from theCOVID-19 pandemic during FY2022; and (b) the increase in our average air freight rate ofOther Customers mainly as a result of the continuing surge of the air cargo price in the marketattributable to the ongoing disruptions and shortage in supply of cargo spaces caused by theCOVID-19 pandemic in Hong Kong and the PRC together with the gradual recovery of theglobal and the U.S. demand; and (ii) the increase in our revenue from the provision of oceanfreight forwarding services from FY2021 to FY2022 mainly due to (a) the strong increase in ourocean shipment volume mainly due to the significant increase in our ocean shipment orders ofgarments and fashion-related products, household products and furniture from our customersmainly attributable to (1) the temporary suspension of manufacturing operations of certainfactories in the PRC as a result of the lockdown measures due to the outbreak of COVID-19during FY2021; (2) the gradual recovery of the global and the U.S. economy from theCOVID-19 pandemic during FY2022; (3) the shift from air freight forwarding to ocean freightforwarding because of high freight price and capacity shortages in air cargos; and (4) ourincreased effort to provide our customers with competitive solutions to secure more freightforwarding orders; and (b) the increase in our average ocean freight rate mainly due to (1) theincrease in our average unit cost mainly driven by the strong and continuous increase in NorthAmerica ocean shipping rates charged by shipping liners during FY2022; and (2) the increase inour mark-ups in response to the surge of demand for our ocean freight forwarding services forthe export of goods mainly to North America.


SUMMARY

– 11 –

Air freight forwarding services


HK$’000 % HK$’000 % HK$’000 %

Export shipmentsThe U.S. 308,695 81.5 399,769 88.7 522,198 88.0Other export

destinations 59,897 15.8 44,520 9.9 60,185 10.3– Europe 34,379 9.1 26,211 5.8 22,879 3.9– Asia 18,311 4.8 11,969 2.7 29,422 5.0– Others 7,207 1.9 6,340 1.4 8,514 1.4

Subtotal 368,592 97.3 444,289 98.6 583,013 98.3Import shipments 10,290 2.7 6,413 1.4 10,123 1.7

Total 378,882 100.0 450,702 100.0 593,136 100.0


Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

’000kg HK$/kg ’000kg HK$/kg ’000kg HK$/kg


destinations 2,594 23.1 1,615 27.6 1,733 35.1– Europe 1,485 23.2 964 27.2 463 49.4– Asia 889 20.6 578 20.7 1,177 25.0– Others 220 32.8 73 86.8 93 91.5

Subtotal 12,134 30.4 8,387 53.0 8,570 68.0Import shipments 602 17.1 273 23.5 355 28.5

Total/Overall 12,736 29.7 8,660 52.0 8,925 66.5


SUMMARY

– 12 –

Export shipments – the U.S.

The increase in our revenue from the provision of U.S. export air freight forwardingservices from FY2020 to FY2021 was primarily attributable to the significant increase in ouraverage U.S. air freight rate from FY2020 to FY2021 principally resulting from the surge of theunit price of cargo space charged by airline carriers due to the shortage in supply of cargospaces caused by the COVID-19 pandemic, partially offset by the significant drop of U.S. airexport shipment volume from Customer A from approximately 4.7 million kg for FY2020 toapproximately 0.8 million kg for FY2021 mainly due to the fact that, to the best of ourDirectors’ belief and knowledge, one of Customer A’s key customers (which is a U.S.-basedmultinational technology company) has relocated some of its warehouses from the PRC toSouthern Asia, resulting in a significant decline of orders from Customer A for FY2021.

The increase in our revenue from the provision of U.S. export air freight forwardingservices from FY2021 to FY2022 was primarily attributable to the increase in our average U.S.air freight rate from FY2021 to FY2022 mainly due to the continuing surge of the U.S. exportair cargo price in the market attributable to the ongoing disruptions and shortage in supply ofcargo spaces caused by the COVID-19 pandemic in Hong Kong and the PRC together with thegradual recovery of the U.S. demand.

Export shipments – other destinations

The decrease in our revenue from the provision of air freight forwarding services for theother export shipment destinations from FY2020 to FY2021, which was primarily attributable to(i) the decrease in our revenue from the provision of Europe export air freight forwardingservices from FY2020 to FY2021 mainly due to the decrease in our Europe air export shipmentvolume from FY2020 to FY2021 mainly due to (a) the significant drop of Europe air exportshipment volume from Customer A’s by approximately 0.3 million kg mainly as a result of thefact that one of Customer A’s key customers (which is a U.S.-based multinational technologycompany) has relocated some of its warehouses from the PRC to Southern Asia, resulting in asignificant decline of orders from Customer A for FY2021; and (b) the decrease in Europe airexport shipment volume from Other Customers by approximately 0.3 million kg mainly due tothe reduction of orders from our Other Customers for the export of consumer goods to Europedue to the lockdowns and extensive suspension of business in Europe as a result of theCOVID-19 pandemic; and (ii) the decrease in our revenue from the provision of Asia export airfreight forwarding services from FY2020 to FY2021 mainly due to the decrease in our Asia airexport shipment volume from FY2020 to FY2021 mainly due to the significant drop of Asia airexport shipment volume from Customer A’s by approximately 0.3 million kg mainly as a resultof the fact that one of Customer A’s key customers (which is a U.S.-based multinationaltechnology company) has relocated some of its warehouses from the PRC to Southern Asia,resulting in a significant decline of orders from Customer A for FY2021.


SUMMARY

– 13 –

The increase in our revenue from the provision of air freight forwarding services for theother export shipment destinations from FY2021 to FY2022 was primarily attributable to (i) theincrease in our revenue from the provision of Asia export air freight forwarding services mainlydue to (a) the increase in our Asia air export shipment volume from FY2021 to FY2022 mainlybecause of the increase in our customer orders for the delivery of electronic cigarette products toJapan; and (b) the increase in our average Asia air freight rate from FY2021 to FY2022 mainlyas a result of the increase in our mark-ups for the urgent orders for the delivery of electroniccigarette products to Japan for FY2022 which were targeted to sell during Tokyo Olympics 2020according to the best of our Directors’ knowledge and information; and (ii) the increase in ourrevenue from the provision of air freight forwarding services for the export to others mainly dueto (a) the increase in our air export shipment volume to others mainly because of the increase inour customer orders for the shipment of electronic goods to Mexico; and (b) the slight increasein our average air freight rate for the export to others mainly as a result of the continuing surgeof the air cargo price in the market attributable to the ongoing disruptions and shortage insupply of cargo spaces caused by the COVID-19 pandemic in Hong Kong and the PRC, partiallyoffset by the decrease in our revenue from the provision of Europe export air freight forwardingservices mainly due to the decrease in our Europe air export shipment volume mainly because ofthe shift of our customer orders from air freight forwarding to ocean freight forwarding mainlybecause of the strong increment in the air cargo price to Europe as considered by our customers.

Ocean freight forwarding services


HK$’000 % HK$’000 % HK$’000 %




Total 104,992 100.0 123,526 100.0 438,709 100.0


SUMMARY

– 14 –


Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

TEUs

HK$’000/

TEU TEUs

HK$’000/

TEU TEUs

HK$’000/

TEU


destinations 5,159 7.9 4,631 7.7 8,727 7.8– Europe 3,045 7.9 2,222 7.9 5,246 6.1– Asia 1,624 7.1 1,820 6.3 2,531 6.9– Others 490 10.4 589 11.1 950 19.4


Total/Overall 11,993 8.8 12,232 10.1 26,296 16.7

Export shipments – the U.S.

The increase in our revenue from the provision of U.S. export ocean freight forwardingservices from FY2020 to FY2021 was primarily attributable to (i) the increase in our averageU.S. ocean freight rate from FY2020 to FY2021 mainly due to the supply insufficiency ofshipment capacity caused by the COVID-19 pandemic during FY2021; and (ii) the increase inour U.S. ocean export shipment volume from FY2020 to FY2021 mainly due to the increase inU.S. ocean export demand from our customers for computer and parts, and household necessityproducts primarily in relation to work from home and lockdown measures in the U.S. as a resultof the COVID-19 pandemic during FY2021.

The increase in our revenue from the provision of U.S. export ocean freight forwardingservices from FY2021 to FY2022 was primarily attributable to (i) the strong increase in our U.S.ocean export shipment volume from FY2021 to FY2022 mainly due to a higher demand for ourU.S. ocean export freight forwarding services for the shipment of garments and fashion-relatedproducts, household products and furniture from our customers; and (ii) the increase in ouraverage U.S. ocean freight rate from FY2021 to FY2022 mainly due to (a) the strong andcontinuous increase in U.S. ocean shipping rates charged by shipping liners during FY2022; and(b) the increase in our mark-ups in response to the surge of demand for our ocean freightforwarding services for the export of goods to the U.S. accompanying with such skyrocketingU.S. ocean shipping rates charged by shipping liners.


SUMMARY

– 15 –

Export shipments – other destinations

The decrease in our revenue from the provision of ocean freight forwarding services for theother export shipment destinations from FY2020 to FY2021 was primarily attributable to thedecrease in our revenue from the provision of Europe export ocean freight forwarding servicesfrom FY2020 to FY2021 mainly due to the significant decline in our Europe ocean exportshipment volume from FY2020 to FY2021 mainly due to the fact that (i) one of Customer A’skey customers (which is a U.S.-based multinational technology company) has relocated some ofits warehouses from the PRC to Southern Asia, resulting in a significant decline of orders fromCustomer A for FY2021; and (ii) we received less orders from our Other Customers for theexport of consumer goods to Europe due to the lockdowns and extensive suspension of businessin Europe as a result of the COVID-19 pandemic.

The increase in our revenue from the provision of ocean freight forwarding services for theother export shipment destinations from FY2021 to FY2022 was primarily attributable to (i) theincrease in our revenue from the provision of Europe export ocean freight forwarding servicesfrom FY2021 to FY2022 mainly due to the increase in our Europe ocean export shipmentvolume mainly due to the substantial increase in our customer orders for the ocean shipment oftoys and games; (ii) the increase in our revenue from the provision of ocean freight forwardingservices for the export to others from FY2021 to FY2022 mainly due to (a) the increase in ourocean export shipment volume for the export to others mainly due to the increase in ourcustomer orders for the ocean shipment of garments and daily necessities primarily to Canada;and (b) the increase in our average ocean freight rate for the export to others from FY2021 toFY2022 mainly attributable to (1) the strong and continuous increase in North America oceanshipping rates charged by shipping liners during FY2022; and (2) the increase in our mark-upsin response to the surge of demand of ocean freight forwarding services for the export of goodsto other North American countries accompanying with such skyrocketing North America oceanshipping rates charged by shipping liners; and (iii) the increase in our revenue from theprovision of Asia export ocean freight forwarding services mainly due to the increase in our Asiaocean export shipment volume mainly as a result of the increase in our customer orders for theocean shipment of construction materials and equipment.


SUMMARY

– 16 –

Freight forwarding service revenue by location of shipment destination


HK$’000 % HK$’000 % HK$’000 %



Subtotal 468,181 96.8 563,134 98.1 1,018,184 98.7Import shipments 15,693 3.2 11,094 1.9 13,661 1.3

Total 483,874 100.0 574,228 100.0 1,031,845 100.0

Number of customers and revenue by customer category


Numberof

customers HK$’000 %

Numberof


Numberof


Freight forwardercustomers 937 436,941 90.0 1,059 476,819 82.4 852 909,606 88.0

Direct customers 972 48,582 10.0 798 102,158 17.6 968 123,939 12.0– Manufacturers 719 26,474 5.5 572 38,132 6.6 687 64,154 6.2– Trading

companies 253 22,108 4.5 226 64,026 11.0 281 59,785 5.8

Total 1,909 485,523 100.0 1,857 578,977 100.0 1,820 1,033,545 100.0


SUMMARY

– 17 –

Revenue by operating location


HK$’000 % HK$’000 % HK$’000 %

Hong Kong 241,194 49.7 393,247 67.9 580,410 56.2Shanghai 212,912 43.9 140,440 24.3 365,650 35.4Guangzhou 18,070 3.7 25,607 4.4 27,070 2.6Shenzhen 13,296 2.7 19,650 3.4 59,959 5.8Chongqing 51 – 33 – 456 –

Total 485,523 100.0 578,977 100.0 1,033,545 100.0

Cost of services


HK$’000 % HK$’000 % HK$’000 %

Freight and handlingcosts 390,022 93.1 483,093 95.4 868,919 96.5

Labour costs 27,215 6.5 21,774 4.3 30,019 3.3Other costs 1,517 0.4 1,476 0.3 1,142 0.2

Total 418,754 100.0 506,343 100.01 900,080 100.0


SUMMARY

– 18 –

Gross profit and gross margin

Gross profit and gross margin by type of services


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %

Freight forwardingservices 66,156 13.7 70,128 12.2 133,209 12.9

– Air freightforwarding 55,851 14.7 59,908 13.3 56,438 9.5

– Ocean freightforwarding 10,305 9.8 10,220 8.3 76,771 17.5

Logistics and relatedvalue-addedservices 613 37.2 2,506 52.8 256 15.1

Total/Overall 66,769 13.8 72,634 12.5 133,465 12.9

The increase in our gross profit from FY2020 to FY2022 was primarily in line with theincrease in our revenue.


SUMMARY

– 19 –

Gross profit and gross margin of our freight forwarding services by location of shipment

destination


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %


destinations 11,082 11.0 7,557 9.4 15,733 12.2– Europe 4,045 6.9 3,091 7.1 3,999 7.3– Asia 6,524 21.8 3,767 16.1 8,966 19.1– Others 513 4.2 699 5.4 2,768 10.3


Total/Overall 66,156 13.7 70,128 12.2 133,209 12.9

Gross profit and gross margin by customer category


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %

Freight forwardercustomers 58,128 13.3 53,643 11.3 113,599 12.5

Direct customers 8,641 17.8 18,991 18.6 19,866 16.0

Total/Overall 66,769 13.8 72,634 12.5 133,465 12.9


SUMMARY

– 20 –

Gross profit and gross margin by operating location


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %

Hong Kong 32,744 13.6 50,721 12.9 76,130 13.1Shanghai 28,965 13.6 14,581 10.4 44,491 12.2Guangzhou 3,072 17.0 3,901 15.2 4,589 17.0Shenzhen 1,978 14.9 3,426 17.4 8,177 13.6Chongqing 10 19.6 5 15.2 78 17.1

Total/Overall 66,769 13.8 72,634 12.5 133,465 12.9

Selected information in our consolidated statements of financial position

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Non-current assets 8,326 6,073 5,535Current assets 172,510 169,162 191,876Non-current liabilities 1,037 579 242Current liabilities 121,872 111,057 121,939Net current assets 50,638 58,105 69,937Net assets 57,927 63,599 75,230


SUMMARY

– 21 –

Selected information in our consolidated statements of cash flows


HK$’000 HK$’000 HK$’000

Operating cash flow beforeworking capital changes 44,443 48,740 102,481

Changes in working capital (1,754) (17,284) (48,137)Income tax paid (8,070) (8,256) (15,882)

Net cash generated from operatingactivities 34,619 23,200 38,462

Net cash generated from/(used in)investing activities (3,451) (953) (2,605)

Net cash generated from/(used in)financing activities (5,533) (64,921) (67,472)

Net increase/(decrease) in cash andcash equivalents 25,635 (42,674) (31,615)

Effect of changes in foreignexchange rates (2,319) 1,387 1,424

Cash and cash equivalents atbeginning of year 79,230 102,546 61,259

Cash and cash equivalents at endof year 102,546 61,259 31,068

The decrease in our net cash generated from operating activities from FY2020 to FY2021was primarily attributable to an increase in trade receivables of approximately HK$24.7 million.

Key financial ratios

Year ended/As at 31 March2020 2021 2022

Net profit margin 7.2% 4.4% 7.3%Current ratio 1.4 1.5 1.6Gearing ratio 3.4% 2.5% 22.8%Return on total assets 19.4% 14.5% 38.4%Return on equity 60.4% 40.0% 100.8%Interest coverage ratio 299.6 373.4 396.4


SUMMARY

– 22 –

The increase in our interest coverage ratio from FY2020 to FY2021 was primarilyattributable to the decrease in our finance costs from approximately HK$0.1 million for FY2020to approximately HK$90,000 for FY2021 mainly due to the reduction of the drawdown ofshort-term bank borrowings. The increase in our interest coverage ratio from FY2021 to FY2022was primarily attributable to the significant increase in our net profit.

REASONS AND BENEFITS FOR THE [REDACTED]

Our Directors consider that the [REDACTED] will benefit our Group in, among otherthings, (i) satisfying our funding needs for the implementation of our business strategies andexpansion plans; (ii) enhancing our corporate profile and reinforcing our brand awareness; (iii)enhancing our credibility with our customers and suppliers and our competitiveness among otherindustry players; and (iv) providing us with flexibility in obtaining additional funds to cater forour future financial needs from time to time. Please refer to “Future plans and [REDACTED] –Reasons and benefits for the [REDACTED]” in this document for further details.

[REDACTED]

We estimate we will receive [REDACTED] of approximately HK$[REDACTED] millionfrom the [REDACTED] after deducting [REDACTED] and commission and other estimatedexpenses paid and payable by us in connection with the [REDACTED], based on the mid-pointof the indicative [REDACTED] range of HK$[REDACTED] per [REDACTED] and assumingthe [REDACTED] is not exercised. We intend to use our [REDACTED] from the[REDACTED] for the following purposes:

Amount of [REDACTED]and approximate percentage Intended usage

HK$ million %

[REDACTED] [REDACTED] Expansion and improvement of our air freight forwardingservices

[REDACTED] [REDACTED] Development of our own truck fleet

[REDACTED] [REDACTED] Strengthening of our ability to purchase cargo spaces tomeet customers’ demands

[REDACTED] [REDACTED] Enhancement of our sales and marketing efforts

[REDACTED] [REDACTED] Upgrade and strengthening of our IT system

[REDACTED] [REDACTED] General corporate purposes and working capital


SUMMARY

– 23 –

DIVIDENDS AND DISTRIBUTABLE RESERVE

During the Track Record Period, we declared dividends of approximately HK$43.7 million,HK$50.0 million and HK$40.0 million, respectively. After the Track Record Period and up to theLatest Practicable Date, we did not propose and declare any dividend to our Shareholders. OurCompany currently does not have any predetermined dividend payout ratio. To the extent profitsare distributed as dividends, such profits will not be available to be reinvested in our operations.Our historical dividend distribution record may not be used as a reference or basis to determinethe level of dividends that may be declared or paid in the future. We cannot assure thatdividends will be paid in the future or as to the timing of any dividends that may be paid in thefuture.

The payment and the amount of any dividends of our Company, if paid, would depend onour results of operations, cash flows, financial position, statutory and regulatory restrictions onthe payment of dividends by us, future prospects and other factors that our Directors mayconsider relevant. Our Shareholders will be entitled to receive such dividends pro rata accordingto the amount paid up or credited as paid up on our Shares. The declaration, payment andamount of dividends will be subject to our Directors’ discretion. Dividends may be paid only outof our distributable profits as permitted under the relevant laws.

As at 31 March 2022, our Company had retained earnings of approximately HK$16.4million, being the distributable reserve available for distribution to our Shareholders.

[REDACTED] STATISTICS

The [REDACTED] comprises the following: (i) the [REDACTED] of initially[REDACTED] Shares in Hong Kong; and (ii) the [REDACTED] of initially [REDACTED]Shares, subject, in each case, to [REDACTED] on the basis as described in “Structure of the[REDACTED]” in this document. The following table sets out certain offering related data,assuming that the [REDACTED] has been completed:

Based on the[REDACTED]

ofHK$[REDACTED]

per[REDACTED]

Based on the[REDACTED]

ofHK$[REDACTED]

per[REDACTED]

Market capitalisation (Note 1)

HK$[REDACTED]million

HK$[REDACTED]million

Unaudited pro forma adjusted consolidated nettangible assets per Share (Note 2) [REDACTED] [REDACTED]


SUMMARY

– 24 –

Notes:

1. The calculation of our market capitalisation is based on [REDACTED] Shares which will be in issueimmediately following the completion of the [REDACTED] and the [REDACTED] (without taking intoaccount any Shares which may be allotted and issued upon any exercise of the [REDACTED] or anyoption which may be granted under the Share Option Scheme).

2. Our unaudited pro forma adjusted consolidated net tangible assets attributable to the owners of ourCompany per Share as at 31 March 2022 is calculated based on [REDACTED] Shares assuming in issueimmediately following the completion of the [REDACTED] and the [REDACTED] (without taking intoaccount any Shares which may be issued upon any exercise of the [REDACTED] or any option which maybe granted under the Share Option Scheme).

[REDACTED]

Our total [REDACTED], primarily consisting of fees paid or payable to professionalparties and [REDACTED] and commission, are estimated to be approximatelyHK$[REDACTED] million (based on the mid-point of the indicative [REDACTED] range ofHK$[REDACTED] per [REDACTED]), representing approximately [REDACTED]% of thegross proceeds from the [REDACTED]. Our total [REDACTED] primarily comprise (i) ourestimated [REDACTED] of approximately HK$[REDACTED] million; (ii) our estimated feesand expenses of legal advisers and reporting accountant of approximately HK$[REDACTED]million; and (iii) our other estimated fees and expenses of approximately HK$[REDACTED]million. During FY2021 and FY2022, we incurred [REDACTED] of approximatelyHK$[REDACTED] million and HK$[REDACTED] million, respectively, of whichapproximately HK$[REDACTED] million and HK$[REDACTED] million will be accounted foras a deduction in equity, respectively, and approximately HK$[REDACTED] million andHK$[REDACTED] million was charged to our profit or loss, respectively. We expect to furtherincur [REDACTED] amounting to approximately HK$[REDACTED] million, of whichapproximately HK$[REDACTED] million is expected to be accounted for as a deduction inequity and the remaining amount of approximately HK$[REDACTED] million is expected to berecorded as expenses for the year ending 31 March 2023. Our Directors are of the view that ourfinancial results for the year ending 31 March 2023 are expected to be adversely affected by our[REDACTED], the nature of which is non-recurring. Our Directors would also like to emphasisethat the amount of our [REDACTED] is a current estimate for reference only and the finalamount to be recognised in our consolidated financial statements is subject to adjustment basedon audit and the then changes in variables and assumptions.


SUMMARY

– 25 –

RECENT DEVELOPMENT AND MATERIAL ADVERSE CHANGE

Subsequent to the Track Record Period and up to the Latest Practicable Date, there was nomaterial change to our business model, revenue and cost structure.

Based on our unaudited consolidated management accounts for the one month ended 30April 2021 and 2022, our revenue remained relatively stable in April 2022 as compared to thatin April 2021, which was primarily attributable to the offsetting effect of (i) the slight drop ofour air and ocean shipment volume from approximately 0.8 million kg and 1,420 TEUs,respectively, in April 2021 to approximately 0.7 million kg and 1,270 TEUs, respectively, inApril 2022 mainly due to the unstable supply of air and ocean cargos attributable to the outbreakof Omicron variant; and (ii) the higher ocean freight rates charged by shipping liners in April2022 due to the skyrocketing increment in North America market ocean shipping rates. Ourgross margin increased in April 2022 as compared to that for FY2022, which was primarilyattributable to the difficulty of securing adequate supply of air and ocean cargos attributable tothe outbreak of Omicron variant in Hong Kong and the PRC.

Save for our non-recurring [REDACTED] recognised and to be recognised as expenses inour consolidated statements of profit or loss and other comprehensive income which areexpected to adversely affect our financial performance for the year ending 31 March 2023, ourDirectors do not expect to have any material adverse change in our financial or trading positionor prospect since 31 March 2022, being the date of which our latest audited financialinformation was prepared up to the date of this document and there had been no event since 31March 2022 which would materially affect the information shown in Appendix I to thisdocument.


SUMMARY

– 26 –

In this document, unless the context otherwise requires, the following terms shall have

the meanings set out below. Technical terms in relation to our Group’s industry and business

operations are explained in “Glossary of technical terms” in this document.

“Accountant’s Report” the accountant’s report prepared byPricewaterhouseCoopers addressed to our Company andthe Sole Sponsor as set out in Appendix I to thisdocument

“Advent” or “Sole Sponsor” Advent Corporate Finance Limited, a licensed corporationunder the SFO permitted to carry on Type 6 (advising oncorporate finance) regulated activity (as defined under theSFO), being the sole sponsor of the [REDACTED]

“affiliate(s)” any other person, directly or indirectly, controlling orcontrolled by or under direct or indirect common controlwith such specified person

“Articles of Association” or“Articles”

the amended and restated articles of association of ourCompany, conditionally adopted on [•] and with effectfrom the [REDACTED], a summary of which is set out inAppendix III to this document, and as amended,supplemented or otherwise modified from time to time

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

“Board” or “Board of Directors” the board of Directors of our Company

“business day” any day (other than a Saturday, Sunday or public holiday)on which banks in Hong Kong are generally open fornormal banking business

“BVI” the British Virgin Islands

“CAAC” the Civil Aviation Administration of China* (中國民用航空局)

“CAD” the Hong Kong Civil Aviation Department


DEFINITIONS

– 27 –

“[REDACTED]” [REDACTED]

“Cayman Companies Act” or“Companies Act”

the Companies Act (as revised) of the Cayman Islands, asamended, supplemented or otherwise modified from timeto time

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

“CCASS Clearing Participant(s)” a person admitted to participate in CCASS as a directclearing participant or a general clearing participant

“CCASS Custodian Participant(s)” a person admitted to participate in CCASS as a custodianparticipant


“CCASS Investor Participant(s)” a person admitted to participate in CCASS as an investorparticipant who may be an individual or joint individualsor a corporation


DEFINITIONS

– 28 –

“CCASS Participant(s)” a CCASS Clearing Participant, or a CCASS CustodianParticipant or a CCASS Investor Participant

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

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws ofHong Kong) as amended, supplemented or otherwisemodified from time to time

“Companies (WUMP) Ordinance”or “Companies (Winding Up andMiscellaneous Provisions)Ordinance”

the Companies (Winding Up and MiscellaneousProvisions) Ordinance (Chapter 32 of the Laws of HongKong) as amended, supplemented or otherwise modifiedfrom time to time

“Company” or “our Company” ENL Group Holdings Limited (卓越物流集團控股有限公司), an exempted company incorporated in the CaymanIslands on 19 January 2021 with limited liability

“Comprehensively SanctionedCountries”

Cuba, Iran, North Korea, Syria, the Crimea Region ofRussia/Ukraine and the self-proclaimed Donetsk People’sRepublic and Luhansk People’s Republic regions

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules,and unless the context otherwise requires, means Mr.Wong, Mr. Chim, Mr. Shon, E&E and Lucky Oasis

“core connected person(s)” has the meaning ascribed to it under the Listing Rules

“Countries Subject to InternationalSanctions”

any country or territory for which Relevant Jurisdictionsmaintain various forms of sanctions programs in place(albeit not a “general and comprehensive export, import,financial or investment embargo” within the meaning ofHKEx-GL101-19 issued by the Stock Exchange)

“COVID-19” a viral respiratory disease caused by the severe acuterespiratory syndrome coronavirus 2, which was firstreported in late 2019

“CSRC” China Securities Regulatory Commission* (中國證券監督管理委員會), a regulatory body in the PRC responsiblefor the supervision and regulation of the Chinese nationalsecurities markets


DEFINITIONS

– 29 –

“Deed of Indemnity” the deed of indemnity dated [•] and entered into by ourControlling Shareholders in favour of our Company,details of which are set out in “E. Other information – 1.Tax and other indemnities” in Appendix IV to thisdocument

“Deed of Non-competition” the deed of non-competition dated [•] and entered into byour Controlling Shareholders in favour of our Company,details of which are set out in “Relationship withControlling Shareholders – Deed of Non-competition” inthis document

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

“E&E” E & E Corporation Limited, a company incorporated inHong Kong with limited liability on 27 October 2005,being one of our Controlling Shareholders and owned asto 70.5%, 23.5%, 6.0% by Mr. Wong, Mr. Chim and Mr.Shon, respectively

“EIT” enterprise income tax of the PRC

“EN HK” Excel Network Limited (卓越國際貨運有限公司), acompany incorporated in Hong Kong with limited liabilityon 10 September 1997 and our indirect wholly-ownedsubsidiary

“EN SH” 卓越(上海)國際貨物運輸代理有限公司 (Excel Network(Shanghai) Limited*), a company established in the PRCwith limited liability on 24 October 2005 and our indirectwholly-owned subsidiary

“ENL Development” ENL Development Limited, a company incorporated in theBVI with liability limited by shares on 25 February 2021and our direct wholly-owned subsidiary

“ENL Line” ENL Line (China) Limited (超卓(中國)航運有限公司), acompany incorporated in Hong Kong with limited liabilityon 8 February 1999, and owned as to 75% and 25% byMr. Wong and Mr. Chim, respectively

“ENLGZ HK” ENL (Guangzhou) Logistics Limited (優網(廣州)物流有限公司), a company incorporated in Hong Kong with limitedliability on 4 September 2012 and a direct wholly-ownedsubsidiary of E&E


DEFINITIONS

– 30 –

“ENLSH HK” ENL (SHA) Logistics Limited (優網物流有限公司), acompany incorporated in Hong Kong with limited liabilityon 5 March 2001 and a direct wholly-owned subsidiary ofE&E before its dissolution on 12 November 2021

“ENSH CQB” 卓越(上海)國際貨物運輸代理有限公司重慶分公司 (ExcelNetwork (Chongqing) Limited*), being a branch of ENSH and established in the PRC on 9 April 2018

“ENSH GZB” 卓越(上海)國際貨物運輸代理有限公司廣州分公司 (ExcelNetwork (Guangzhou) Limited*), being a branch of ENSH and established in the PRC on 6 February 2013

“ENSH SZB” 卓越(上海)國際貨物運輸代理有限公司深圳分公司 (ExcelNetwork (Shanghai) Limited Shenzhen Branch*), being abranch of EN SH and established in the PRC on 23 April2007

“ENSZ HK” Excel Network (Shenzhen) Limited (卓越國際貨運(深圳)有限公司), a company incorporated in Hong Kong withlimited liability on 19 March 2004 and our indirectwholly-owned subsidiary

“EU” European Union

“Executive Order” the Executive Order 13936 entitled “The President’sExecutive Order on Hong Kong Normalization” signed bythe U.S. President on 14 July 2020

“extreme conditions” extreme conditions caused by a super typhoon asannounced by the Government of Hong Kong

“FRC” Financial Reporting Council

“Frost & Sullivan” Frost & Sullivan Limited, an international industryconsultant and an Independent Third Party

“FY2020” the financial year ended 31 March 2020



“GACC” the General Administration of Customs of the PRC*(中華人民共和國海關總署)


DEFINITIONS

– 31 –


“Group”, “our Group”, “we” or“us”

our Company and its subsidiaries (or our Company andany one or more of its subsidiaries, as the context mayrequire), or where the context so requires, in respect ofthe period before our Company became the holdingcompany of its present subsidiaries, such subsidiaries as ifthey were subsidiaries of our Company at the relevanttime



“HK$”, “HKD” or “HK dollar(s)” Hong Kong dollar, the lawful currency of Hong Kong

“HKFRS(s)” Hong Kong Financial Reporting Standard(s) promulgatedby HKICPA, as amended from time to time

“HKICPA” The Hong Kong Institute of Certified Public Accountants

“HKSCC” Hong Kong Securities Clearing Company Limited

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

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


“Hong Kong Legal Counsel” Ms. Ng Wing Shan, Queenie, barrister-at-law

“ICAO” International Civil Aviation Organisation

“Independent Third Party(ies)” individual(s) or a company(ies) who or which is(are) not aconnected person of our Company, any of its subsidiariesor any of their respective associates


DEFINITIONS

– 32 –

“Industry Report” the market research report provided by Frost & Sullivan,which was commissioned by our Group in relation to,among other things, the overview of the industries inwhich our Group operates or intends to operate

“International Sanctions” all applicable laws and regulations to economic sanctions,export controls, trade embargoes and wider prohibitionsand restrictions on international trade and investmentrelated activities, including those adopted, administeredand enforced by the U.S. Government, the EU and itsmember states, the UK, the UN or Government ofAustralia

“International Sanctions LegalAdvisers”

Hogan Lovells, our legal advisers as to InternationalSanctions laws in connection with the [REDACTED]


“KRW” Korean won, the lawful currency of the Republic of Korea

“Latest Practicable Date” [23 May] 2022, being the latest practicable date for thepurpose of ascertaining certain information in thisdocument prior to its publication


“Listing Committee” the listing committee of the Stock Exchange


“Listing Rules” the Rules Governing the Listing of Securities on the StockExchange, as amended, supplemented or otherwisemodified from time to time


DEFINITIONS

– 33 –

“Lucky Oasis” Lucky Oasis Global Limited, a company incorporated inthe BVI with limited liability on 25 August 2020, beingone of our Controlling Shareholders and a directwholly-owned subsidiary of E&E

“Main Board” the stock market (excluding the options market) operatedby the Stock Exchange which is independent from andoperated in parallel with GEM of the Stock Exchange

“Memorandum” or “Memorandumof Association”

the amended and restated memorandum of association ofour Company, conditionally adopted on [•] and with effectfrom the [REDACTED], a summary of which is set out inAppendix III to this document, and as amended,supplemented or otherwise modified from time to time

“MOF” Ministry of Finance of the PRC* (中華人民共和國財政部)

“MOFCOM” Ministry of Commerce of the PRC* (中華人民共和國商務部)

“MOT” Ministry of Transport of the PRC* (中華人民共和國交通運輸部)

“Mr. Chim” Mr. Chim Kwok Yung Ramthur, being the chairman of ourBoard, an executive Director and one of our ControllingShareholders

“Mr. Shon” Mr. Shon Il Seon, being an executive Director and one ofour Controlling Shareholders

“Mr. Wong” Mr. Wong Tat Shing, being the chief executive officer ofour Group, an executive Director and one of ourControlling Shareholders

“NDRC” National Development and Reform Commission of thePRC* (中華人民共和國國家發展和改革委員會)

“NPC” National People’s Congress of the PRC* (中華人民共和國全國人民代表大會)

“OFAC” the United States Department of the Treasury’s Office ofForeign Assets Control


DEFINITIONS

– 34 –




“person” any individual, corporation, partnership, limitedpartnership, proprietorship, association, limited liabilitycompany, firm, trust, estate or other enterprise or entity




DEFINITIONS

– 35 –



“PRC” or “China” the People’s Republic of China, which for the purpose ofthis document and for geographical reference only,excludes Hong Kong, the Macau Special AdministrativeRegion of the PRC and Taiwan (unless otherwiseindicated)

“PRC Legal Advisers” GFE Law Office, our legal advisers as to PRC law

“Predecessor CompaniesOrdinance”

the predecessor Companies Ordinance (Chapter 32 of theLaws of Hong Kong) as in force from time to time before3 March 2014

“[REDACTED]” the investment in our Company by the [REDACTED],details of which are set out in “History, Reorganisationand corporate structure – Reorganisation –[REDACTED]” in this document

“[REDACTED]” Oriental Prominence SPC, an exempted companyincorporated in the Cayman Islands with limited liabilityand registered as a segregated portfolio company on 28August 2020, acting for and on behalf of ProminenceValue Fund SP




DEFINITIONS

– 36 –

“Primary Sanctioned Activity” any activities in a Sanctioned Country or (i) with; or (ii)directly or indirectly benefiting or involving the propertyor interests in property of, a Sanctioned Target by ourCompany incorporated or located in a RelevantJurisdiction or which otherwise has a nexus with suchjurisdiction with respect to the relevant activity, such thatit is subject to the relevant sanctions law and regulation

“Prominence Value Fund SP” Prominence Value Fund SP, a segregated portfolio underthe [REDACTED]





“RA” regulated agent registered under the CAD

“RACSF” Regulated Air Cargo Screening Facilities

“RAR” the regulated agent regime incorporated under the HongKong Aviation Security Programme in March 2000, detailsof which are set out in “Regulatory overview – Regulatoryrequirements in Hong Kong – Aviation Security Ordinance(Chapter 494 of the Laws of Hong Kong)” in thisdocument

“Regulation S” Regulation S under the U.S. Securities Act


DEFINITIONS

– 37 –

“Relevant Jurisdiction” any jurisdiction that is relevant to our Company and hassanctions-related law or regulation restricting, amongother things, its nationals and/or entities which areincorporated or located in that jurisdiction from directlyor indirectly making assets or services available to orotherwise dealing in assets or certain countries,governments, person or entities targeted by such law orregulation

“Relevant Persons” our Company, together with our investors and ourShareholders and persons who might directly or indirectly,be involved in permitting the [REDACTED], tradingclearing and settlement of the Shares including the StockExchange and related group companies

“Relevant Regions” Burundi, Egypt, Lebanon, Myanmar, Russia (excludingCrimea region), Turkey, Ukraine (excluding Crimea, andthe self-proclaimed Donetsk People’s Republic andLuhansk People’s Republic regions) and Venezuela, whichare Countries Subject to International Sanctions relevantto our Group

“Reorganisation” the reorganisation of the companies within our Group asset out in “History, Reorganisation and corporatestructure” in this document

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

“SAFE” State Administration of Foreign Exchange of the PRC*(中華人民共和國國家外匯管理局)

“Sanctioned Country” any country or territory subject to a general andcomprehensive export, import, financial or investmentembargo under sanctions-related law or regulation of theRelevant Jurisdiction

“Sanctioned Person(s)” certain person(s) and identity(ies) listed on OFAC’sSpecially Designated Nationals and Blocked Persons Listor other restricted parties lists maintained by the U.S., theEU, the UN or Australia


DEFINITIONS

– 38 –

“Sanctioned Target” any person or entity (i) designated on any list of targetedpersons or entities issued under the sanctions-related lawor regulation of a Relevant Jurisdiction; (ii) that is, or isowned or controlled by, a government of a country subjectto International Sanctions; or (iii) that is the target ofsanctions under the law or regulation of a RelevantJurisdiction because of a relationship of ownership,control, or agency with a person or entity described in (i)or (ii)

“SAT” State Administration of Taxation of the PRC* (中華人民共和國國家稅務總局)

“SCNPC” Standing Committee of the National People’s Congress ofthe PRC* (中華人民共和國全國人民代表大會常務委員會)

“SDN” individuals and entities that are listed on the SDN List

“SDN List” the list of Specially Designated Nationals and BlockedPersons maintained by OFAC, which sets forth individualsand entities that are subject to its sanctions and restrictedfrom dealings with U.S. persons

“Secondary Sanctionable Activity” certain activity by our Company that may result in theimposition of sanctions against the Relevant Person(s) bya Relevant Jurisdiction (including designation as aSanctioned Target or the imposition of penalties), eventhough our Company is not incorporated or located in thatRelevant Jurisdiction and does not otherwise have anynexus with that Relevant Jurisdiction

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of theLaws of Hong Kong) as amended, supplemented orotherwise modified from time to time

“Share(s)” ordinary share(s) of par value HK$0.01 each in the sharecapital of our Company

“[REDACTED]” the [REDACTED] and the [REDACTED]


DEFINITIONS

– 39 –

“Share Option Scheme” the share option scheme approved and conditionallyadopted by our Company on [•], the principal terms ofwhich are set out in “D. Share Option Scheme” inAppendix IV to this document

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

[“[REDACTED]” or“[REDACTED]”]

[REDACTED]


“State Council” State Council of the PRC* (中華人民共和國國務院)


“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules

“Substantial Shareholder(s)” has the meaning ascribed to it under the Listing Rules

“Takeovers Code” The Codes on Takeovers and Mergers and ShareBuy-backs issued by the SFC, as amended, supplementedor otherwise modified from time to time

“Track Record Period” the financial period comprising FY2020, FY2021 andFY2022, respectively; and the phrase “during the TrackRecord Period”, followed by a series of figures orpercentages, refers to information relating to FY2020,FY2021 and FY2022, respectively

“TWD” New Taiwan dollar, the lawful currency of Taiwan

“UN” United Nations




DEFINITIONS

– 40 –

“U.S.” or “United States” the United States of America, its territories, itspossessions and all areas subject to its jurisdiction

“U.S. Government” the federal government of the United States, including itsexecutive, legislative and judicial branches

“US-HK Shipping Agreement” the U.S.-Hong Kong agreement for the reciprocalexemption with respect to taxes on income from theinternational operation of ships

“U.S. Securities Act” the United States Securities Act of 1933, as amended,supplemented or otherwise modified from time to time

“US$”, “USD” or “US dollar(s)” US dollar, the lawful currency of the United States

“WHO” World Health Organisation

“%” per cent

In this document, unless expressly stated or the context requires otherwise:

• all information and data is as at the Latest Practicable Date;

• certain amounts and percentage figures, including but not limited to, shareholdings

and operating data, may 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;

• all references to any shareholdings in our Company assume no exercise of the

[REDACTED] unless otherwise specified;

• English names marked with “*” are unofficial English translations of the Chinese

names of, among others, entities, laws or regulations or government authorities, that

do not have official English names. Such English translations are provided for

identification purposes only. If there is any inconsistency between the Chinese name

and the English translation, the Chinese name shall prevail; and

• if there is any inconsistency between this document and the Chinese translation of this

document, this document shall prevail.


DEFINITIONS

– 41 –

This glossary contains explanations of certain terms used in this document in connection

with our Group and our business. The terminology contained in this glossary and their given

meanings may not correspond to standard industry meaning or usage of these terms.

“air waybill” a non-negotiable document that applies to shipment by airfreight, serving as a contract between the shipper and theair freight carrier, a receipt by the carrier for goodsshipped and a non-negotiable document of title to thegoods which evidences the contract between the shipperand the carrier for carriage of goods over routes of thecarrier

“B2B” business-to-business

“B2C” business-to-customer

“bill of lading” a document that applies to shipment by ocean freight,serving as a contract between the shipper and the oceanfreight carrier, a receipt by the carrier for goods shipped,and a document of title to the goods which evidences thecontract between the shipper and the carrier for carriageof goods over routes of the carrier

“CAGR” compound annual growth rate

“cargo manifest” a document in which all the items loaded onto an aircraftor a vessel are listed for official and administrativepurposes

“carrier” an entity which transfers passengers or goods for a profit

“cbm” cubic metre(s)

“co-loading” the practice of combining consignments having the samedestination from more than one freight forwarder into oneunit load device on an aircraft or a container on a vessel

“consignee” one to whom a consignment is made, being the personnamed in an air waybill or a bill of lading to whom or towhose order the bill promises delivery


GLOSSARY OF TECHNICAL TERMS

– 42 –

“consignment(s)” goods or property sent by the aid of a common carrierfrom one person in one place to another person in anotherplace

“consignor” a person (usually the seller) named in the consignmentdocuments as the party responsible for initiating aconsignment to a consignee (usually the buyer) named inthe consignment documents

“consolidation” the process by which a number of consignments of goodsof different weights, volumes and sizes are groupedtogether into a single consignment for carriage in order tomaximise the utilisation of cargo space on an aircraft or avessel

“freight forwarder” one who assembles and consolidates shipments andperforms or provides for break-bulk and distributionoperations of shipments. A freight forwarder may act as aprincipal who assumes responsibility for the transportationfrom the place of receipt to the place of delivery byissuing its own house air waybill or bill of lading toindividual shippers whose goods it is consolidating, or asan agent, who is entrusted by shippers and consignees tohandle transportation of goods or related business in thenames of the shippers and consignees

“FSR” the Facility Security Requirements established by TAPA inrespect of warehouse security

“GDP” gross domestic product

“IATA” the International Air Transport Association, a tradeassociation with the world’s airlines founded in 1945

“IT” information technology

“kg” kilogram(s)

“m” metre(s)

“pallet” a flat transport structure that serves as the structuralfoundation of a unit load which enhances handling andstorage efficiencies



– 43 –

“palletisation” a process by which goods are bundled together on a palletin order to facilitate mechanical handling of stacked good

“sq.ft.” square feet

“sq.m.” or “m2” square metre(s)

“TAPA” the Transported Asset Protection Association, a non-profitorganisation founded in 1997 which sets securityrequirements in the global supply chain, including theFSR

“TEU” Twenty-foot Equivalent Unit, a standard of measurementused in container transport for describing the volume ofshipments and the capacity of container ships and forother statistical purposes, as well as for freight quotations

“tonne” metric ton, where one metric ton equals to 1,000 kg

“unit load” individual items or items in shipping containers combinedinto single units

“unit load device” a container which allows a large quantity of consignmentsto be bundled into one single unit for loading onto anaircraft; and each unit load device is subject to specificrequirements in terms of weight and volume in accordancewith the configurations of the aircraft



– 44 –

This document contains forward-looking statements that are, by their nature, subject tosignificant risks and uncertainties, including the risk factors described in this document. Theseforward-looking statements include, but are not limited to, statements relating to:

• our operations and business prospects;

• future developments, trends and competition in industries and markets in which weoperate;

• our business strategies and plans;

• prospective financial information regarding our business;

• our future financial condition and results of operations;

• future development of our business;

• our capital expenditure plans;

• general global economic conditions, in particular, the economic conditions of HongKong and the PRC; and

• changes to regulatory and operating conditions in the markets in which we operate.

In some cases we use words such as “believe”, “seek”, “intend”, “anticipate”, “estimate”,“project”, “plan”, “potential”, “will”, “may”, “should”, “expect” and other similar expressions toidentify forward looking statements. All statements other than statements of historical factsincluded in this document, including statements regarding our future financial position, strategy,projected costs and plans and objectives of management for future operations, are forwardlooking statements. Although we believe that the expectations reflected in those forward-lookingstatements are reasonable, we can give no assurance that those expectations will prove to havebeen correct, and you are cautioned not to place undue reliance on such statements.

Furthermore, these forward looking statements merely reflect our current view with respectto future events and are not a guarantee of future performance. Our financial condition maydiffer materially from the information contained in the forward looking statements as a result ofa number of factors, including, without limitation, factors disclosed in “Risk factors” andelsewhere in this document.

Subject to the requirements of applicable laws, rules and regulations, we do not have anyobligation and do not intend to update or otherwise revise the forward-looking statements in thisdocument, whether as a result of new information, future events or otherwise. Owing to suchrisks, uncertainties or assumptions, the forward-looking events and circumstances discussed inthis document might not occur in the way we expect, or at all. Accordingly, such statements arenot a guarantee of future performance and you should not place undue reliance on anyforward-looking statements. All forward-looking statements contained in this document arequalified by reference to this cautionary statement.


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Potential investors should consider carefully all the information set out in this document

and, in particular, should consider and evaluate the following risks associated with an

investment in our Company before making any investment decision in relation to our

Company. You should pay particular attention to the fact that our Company was incorporated

in the Cayman Islands and part of our Group has operations conducted outside Hong Kong

which are governed by a legal and regulatory environment which in some respects may differ

from that in Hong Kong. Any of the risks and uncertainties described below may have a

material adverse effect on our business, results of operations, financial condition or on the

trading price of our Shares, and may cause you to lose all or part of your investment.

We believe that there are certain risks and uncertainties in relation to our business andoperations, some of which are beyond our control. These risks and uncertainties can be broadlycategorised into: (i) risks relating to our business; (ii) risks relating to our industry; (iii) risksrelating to conducting business in Hong Kong and the PRC; (iv) risks relating to InternationalSanctions; (v) risks relating to the [REDACTED] and our Shares; and (vi) risks relating to thisdocument.

RISKS RELATING TO OUR BUSINESS

Our business operations may be adversely affected by the COVID-19 pandemic

An outbreak of respiratory illness caused by COVID-19, a novel coronavirus, was firstreported in late 2019 and continued to expand globally. The WHO has been closely monitoringthe situation as the new strain of coronavirus is considered highly contagious and is posing aserious public health threat on a global scale. On 30 January 2020, the WHO declared theoutbreak of COVID-19 a Public Health Emergency of International Concern (PHEIC).Subsequently, on 11 March 2020, the WHO further categorised COVID-19 as a pandemic.According to the WHO, COVID-19 had spread globally with the death toll and number ofinfected cases on the rise.

Since the outbreak, draconian measures have been imposed within the PRC and globally inan effort to contain COVID-19, including the closing of national borders in various countries,lockdowns of a vast number of cities across the world, travel restrictions and extensivesuspension of business operations and mandatory quarantine requirements on infectedindividuals and anyone deemed potentially infected. The COVID-19 pandemic is likely to havean adverse impact on the livelihood of the people all over the world and the global economy.Any economic downturn or slowdown and/or negative business sentiment could have an indirectpotential impact on the freight forwarding and logistics industry, and as a result, our businessoperations and financial performance may be adversely affected. Furthermore, according to theIndustry Report, the freight forwarding and logistics industry is subject to uncertainties underthe COVID-19 pandemic due to, among other things, (i) limited supply of cargo spaces due tothe prolonged suspension and/or cancellation of passenger flights and other carriers; (ii)slowdown in the global economy, in particular, the U.S. and decline in consumer consumption ofnon-essential goods; (iii) shutdown of manufacturing factories located in the PRC and Southeast


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Asia region; (iv) delay in launches of new products such as electronics and luxury goodsattributable to, among other things, disruption of global supply chains and uncertain consumersentiments; and (v) mandatory quarantine controls on vessels upon arrival at ports, which in turnare expected to adversely affect the demands for and the costs of freight forwarding and logisticsservices. Please refer to “Industry overview – Impact of the COVID-19 outbreak and Sino-U.S.trade war on freight forwarding and logistics industry in Hong Kong and the PRC” in thisdocument for further details.

In particular, owing to the extensive travel restrictions and border controls in place in anumber of countries and territories due to the COVID-19 pandemic which have resulted in thesuspension and/or cancellation of flights by a number of airline carriers as well as blank sailingsof vessels, as confirmed by Frost & Sullivan, there has been increased competition for thesupply of cargo spaces as well as an increase in the price of the cargo spaces. There is noguarantee that we will be able to obtain cargo spaces from our carrier partners at competitiveprices or at all. Should we fail to source cargo spaces on terms acceptable to us or should wefail to adjust the price we charge our customers for the provision of our freight forwardingservices taking into account any increased freight charges, our business performance, financialcondition and results of operations may be materially and adversely affected.

Save as disclosed in “Business – Effects of the COVID-19 outbreak and Sino-U.S. tradewar – (a) COVID-19 outbreak” in this document, our Directors are of the view that our Group’soperations had not been materially and adversely affected by the outbreak of COVID-19 as atthe Latest Practicable Date. However, if any of our employees are affected by the spread ofCOVID-19 and are unable to duly execute their duties in the provision of any of our services toour customers, this may have a material adverse impact on our operations and financialperformance. In addition, if the operations of any of our suppliers including our carrier partnersand fellow freight forwarders are adversely affected or disrupted by the COVID-19 pandemic toa material extent, they may not be able to supply cargo spaces and/or provide their services to usin a timely manner or at all, which may affect our ability to meet the demands of our customersand may result in a material adverse impact on our operations and financial condition.

We are uncertain as to when the COVID-19 pandemic will be contained, and we alsocannot predict whether its impact will be short-lived or long-lasting. If the COVID-19 outbreakis not effectively controlled, both globally and locally, our business operations and financialcondition may be materially and adversely affected as a result of the changes in the outlook ofthe freight forwarding and logistics industry, any slowdown in economic growth, negativebusiness sentiment or other factors that we cannot foresee.


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Our business growth is susceptible to changes in macroeconomic and/or political conditions,including the Sino-U.S. trade war

According to the Industry Report, business prospects in the freight forwarding and logisticsindustry are highly susceptible to any sudden changes in the macroeconomic and/or politicalconditions, both locally and globally, which could lead to a material adverse impact on thesupply and demand within the industry as well as disruptions to the business operations of themajor players along the value chain of the industry. These changes are all beyond our controland we will not be able to predict or gauge their nature, timing or significance on customersentiment. We cannot assure that any downturn brought about by such changes in themacroeconomic and/or political conditions will not result in any material adverse impact on ourbusiness, financial condition and results of operations.

In particular, the Sino-U.S. trade war has to a certain extent contributed to the uncertaintiessurrounding the freight forwarding and logistics industry since July 2018. According to theIndustry Report, since July 2018, the U.S. has implemented several rounds of import tariffs on avariety of products of Chinese origin. The PRC, in response to the U.S. tariffs, has also leviedrounds of tariffs on imports from the U.S. into the PRC. The Sino-U.S. trade war has causeduncertainties on the business prospects of the freight forwarding and logistics industry in thelong run. Furthermore, the Sino-U.S. trade war may continue to bring about negative impacts onthe global economy and in turn adversely affect the demands for freight forwarding and logisticsand related value-added services.

We principally provide freight forwarding services for the exports of shipments from thePRC and Hong Kong to various destinations including the U.S. and for the imports of shipmentto the PRC and Hong Kong from various destinations including the U.S. During the TrackRecord Period, our revenue attributable to our freight forwarding services for exports ofshipments to the U.S. amounted to approximately HK$367.5 million, HK$483.1 million andHK$889.1 million, respectively, representing approximately 75.9%, 84.1% and 86.2% of ourtotal revenue from freight forwarding services, respectively. For further details of the effects ofthe Sino-U.S. trade war on our business operations, please refer to “Business – Effects of theCOVID-19 outbreak and Sino-U.S. trade war – (b) Sino-U.S. trade war” in this document. Ourbusiness growth is susceptible to any material changes in the political and economic conditionsin the U.S., such as any further escalation of the Sino-U.S. trade war, which may adverselyaffect our business, financial condition and results of operations.

Our results of operations may be adversely affected by the U.S. removal of Hong Kong’spreferential trade status

On 14 July 2020, the U.S. Government issued the Executive Order which, among otherthings, formally determines that Hong Kong is no longer sufficiently autonomous to justifydifferential treatment in relation to the Mainland China and revokes Hong Kong’s preferentialtrade status. The Executive Order declares that Hong Kong no longer warrants treatment underU.S. law in the same manner as U.S. laws were applied to Hong Kong before 1 July 1997whereby the heads of executive departments and agencies are directed to begin the process of


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eliminating policy exemptions under U.S. law that give Hong Kong differential treatment inrelation to the Mainland China, including among others, the U.S.-Hong Kong Policy Act of1992, which allowed Hong Kong to enjoy lower trade tariffs and a separate customs frameworkin its dealings with the U.S. In terms of trade, the Executive Order revokes the licenceexceptions for exports to Hong Kong, re-exports to Hong Kong, and transfers (in-country) withinHong Kong of items that provide differential treatment compared to those licence exceptionsapplicable to exports to the Mainland China, re-exports to the Mainland China, and transfers(in-country) within the Mainland China. In other words, Hong Kong will now be treated thesame as the Mainland China for the purposes of, among other things, export controls andpossibly tariffs.

The removal of Hong Kong’s special trading status may expose Hong Kong-origin exportsto higher U.S. tariffs, as applied to the Mainland China. Without the preferential low U.S. tariffexposure, Hong Kong may lose its attractiveness as an exporting or a re-exporting hub forexports to the U.S. which may undermine the competitiveness of Hong Kong’s port and logisticsbusinesses. If Hong Kong loses its position as a logistics hub in Asia, the overall Hong Kongfreight forwarding and logistics industries may be adversely affected which may thereby have amaterial adverse impact on our business, financial condition and results of operations.

Our ocean freight forwarding business and results of operations may be subject to adverseimpact from the termination of the US-HK Shipping Agreement

Following the introduction of the Executive Order, on 19 August 2020, the U.S.Government announced the suspension or termination of three bilateral agreements between theU.S. and Hong Kong, including the US-HK Shipping Agreement. Subsequently, the U.S.Government formally announced in October 2020 to terminate the US-HK Shipping Agreementwith effect from 1 January 2021. The US-HK Shipping Agreement provides for exemption fromincome tax, on a reciprocal basis, of income derived by residents/companies of the other fromthe international operation of ships between the U.S. and Hong Kong. Following the terminationof the US-HK Shipping Agreement, both the Governments of U.S. and Hong Kong have ceasedto grant tax exemption to the income derived from international operation of ships by shippingcompanies of the other side. All Hong Kong residents and corporations are now denied thereciprocal tax exemption from international shipping income derived from trade with the U.S.and are subject to U.S. source “gross transportation income” (“USGTI”) tax on cargos deliveredto or from the U.S., and the USGTI tax will apply to a broad base of transportation income forHong Kong residents and corporations, which could significantly affect the taxation of theinternational operation of ships involving ports in the U.S.

As a result of the termination of the US-HK Shipping Agreement, the cost of trade betweenthe U.S. and Hong Kong, and the cost of freight generally, is likely to increase, which mayundermine the shipping business in both places. It is uncertain if the affected shippingcompanies will pass on their increased operating costs and the U.S. tax exposure, if applicable,to freight forwarders like our Group. If they do and we are unable to pass on the increased coststo our customers, our margins and results of operations would be adversely affected. On theother hand, if we pass on the increased costs to our customers, the customers’ demand on our


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ocean freight forwarding services may decrease as a result of higher ocean freight rates. Inaddition, shipping companies trading between the U.S. and the PRC or Asia may choose portsother than Hong Kong if they are adversely impacted by the tax exposure, which might result ina decline of demand of the ocean freight forwarding services in Hong Kong. The impact on thefreight forwarding industry as a result of the termination of the US-HK Shipping Agreementcontinues to unfold. Our business in particular ocean freight forwarding business, financialcondition and results of operations may be adversely affected as a result thereof.

We were exposed to customer concentration risks and derived a significant portion of ourrevenue from our largest customer, namely Customer A, and expect to continue to beexposed to the risk of customer concentration during and subsequent to the Track RecordPeriod

During the Track Record Period, a significant portion of our revenue was derived from ourlargest customer, namely Customer A, which is a U.S.-based company that principally engages inthe provision of freight forwarding services. During the Track Record Period, our revenuegenerated from our largest customer amounted to approximately HK$244.6 million, HK$76.0million and HK$149.4 million, respectively, accounting for approximately 50.4%, 13.1% and14.5% of our total revenue, respectively. Please refer to “Business – Customers – Our largestcustomer during the Track Record Period” in this document for further details.

During the Track Record Period, our customers generally engaged us on an as-needed basisand we did not enter into any long-term agreements with Customer A, our largest customerduring the Track Record Period, for our air and ocean freight forwarding services. Accordingly,Customer A is not committed to purchasing cargo spaces from us nor is it obliged to continue toengage us. There is no guarantee that we will be able to maintain our business relationship orreach commercial terms, which are comparable to that during the Track Record Period orcommercially reasonable, with Customer A in the future. We may also not be able to diversifythe composition of our customer base or to broaden our exposure to more new customers or toenter into transactions with our customers in size comparable to that of Customer A during theTrack Record Period. In the event that our business relationship with Customer A deteriorates,diminishes or discontinues in the future and we are unable to secure sufficient new orders fromour other customers or new customers in a timely manner or at all, our results of operations andwould be materially and adversely affected.

In addition, the financial condition and commercial success of our major customers(including Customer A) are susceptible to, among other things, any downturn in the globaleconomic conditions and/or negative business sentiments in the industry where they arepositioned, including any material political and economic changes arising from the Sino-U.S.trade war. There is no guarantee that our major customers (including Customer A) will remainfinancially sound in the future. Should any of our major customers (in particular Customer A)become insolvent or otherwise delay in or default in making timely payments to us or at all, ourcash flow position and financial position would be adversely affected.


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We generally do not enter into long-term agreements with our customers and may not beable to maintain a stable source of revenue

According to the Industry Report, in line with industry practice, our customers generallyengage us for our freight forwarding services and/or logistics and related value-added serviceson an as-needed basis, without entering into any long-term agreements with us. As such, ourcustomers are not committed to engaging us and there is no assurance that they will continue toengage our services or on terms favourable to us or which are commercially reasonable in thefuture. Owing to the absence of long-term agreements, the actual bookings made by ourcustomers from time to time may not be consistent with our forecasts or at a level comparable tothe past, which may thus result in uncertainties and potential volatility in relation to our revenueand profitability from time to time. Since our revenue attributable to our freight forwardingservices is highly susceptible to the fluctuations in our customers’ demands for our freightforwarding services, which in turn could be subject to political and economic conditions both inthe regions concerned and in the world, we cannot guarantee that we will be able to maintain astable source of revenue in the future.

In addition, whether or not our customers will continue to engage us is also dependentupon, among other things, our relationships with them as well as our ability to offer competitiveprices and quality services. We cannot assure you that we will be able to develop and maintainrobust and amicable relationships with our customers or that we will be able to provide ourcustomers with services at competitive prices and/or of satisfactory quality at all times. In theevent that our relationships with any of our customers deteriorate or that we are unable to offercompetitive prices and/or provide quality services to our customers, our customers may not bewilling to engage us for our services in the future, which would in turn result in a materialimpact on our revenue, business performance and profitability.

Our available cargo spaces may not always align with our customers’ demands

We generally obtain cargo spaces from our carrier partners on a need basis by way of adhoc cargo space arrangements under which our carrier partners are not obliged to guarantee anyallocation of cargo spaces to us in any quantity or at any pre-determined rates. As the cargospaces of our carrier partners are offered on a first-come-first-served basis, there is no guaranteethat we will be able to obtain adequate cargo spaces on a specific cargo route upon ourcustomers’ requests or at all. In the event that we are unable to source cargo spaces from ourcarrier partners in a timely manner, we may fail to carry out our customers’ consignmentinstructions and fulfil our contractual obligations, which could in turn result in a materialadverse impact on our business, financial condition and results of operations in the long run.

We also enter into air charter agreements with our airline partners in writing from time totime based on the projected shipment volumes of our customers and their expected needs for aircargo spaces or upon customers’ requests. In the event that we fail to properly gauge ourcustomers’ anticipated needs for air cargo spaces and have to cancel any chartered flights underour air charter agreements before their departure, we will be liable to pay a cancellation feewhich may adversely affect our business performance.


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We enter into block space agreements with our airline partners from time to time, pursuantto which we are committed to the purchase of a minimum quantity of air cargo spaces on amonthly basis. In the event that we are unable to meet our minimum purchase commitmentsunder our block space agreements, we may not be able to recover the costs of our excessunutilised cargo spaces, and our business performance and profitability may be adverselyaffected.

We relied on our largest supplier, namely Supplier A, for the supply of cargo spaces duringthe Track Record Period

During the Track Record Period, we relied on our largest supplier, namely Supplier A, forthe supply of cargo spaces. Our purchases from Supplier A amounted to approximatelyHK$184.4 million, HK$255.2 million and HK$321.6 million, respectively, accounting forapproximately 47.3%, 52.8% and 37.0% of our total freight and handling costs incurred,respectively. Please refer to “Business – Suppliers – Our largest supplier during the TrackRecord Period” in this document for further details.

Although we have established a stable business relationship with Supplier A forapproximately 15 years, there is no assurance that Supplier A it will continue to provide a stableand adequate supply of cargo spaces to us on commercially reasonable terms or at all. In theevent of interrupted supply of cargo spaces by Supplier A, we may not be able to securealternative suppliers that may meet our demands in a timely manner and our provision ofservices would be adversely affected. Our business, reputation and results of operations may beadversely affected as a result.

We require a substantial amount of working capital and we may not be able to maintain asufficient level of financial resources to sustain our business operations

We require a substantial level of working capital to run our daily business operations fromtime to time to cover, among other things, our freight and handling costs, labour costs and othercosts. In line with industry practice, we are generally required to provide bank guarantees infavour of our airline partners under our cargo agency agreements to guarantee the discharge ofour contractual obligations. Such bank guarantees are provided by our principal banks whichwould in turn require us to provide collaterals including but not limited to pledged bankdeposits. As at 31 March 2020, 2021 and 2022, the bank guarantees provided by us in favour ofour airline partners amounted to approximately HK$27.0 million, HK$27.7 million and HK$54.8million, respectively. Please refer to “Business – Suppliers – Bank guarantees” in this documentfor further details. As at 31 March 2020, 2021 and 2022, our bank balances and cash (includingrestricted bank deposits) amounted to approximately HK$134.2 million, HK$95.7 million andHK$91.8 million, respectively, of which, approximately HK$31.6 million, HK$34.4 million andHK$60.8 million were pledged in favour of our principal banks in connection with our cargoagency agreements, respectively. If we fail to maintain a sufficient level of financial resources tosustain our business operations and/or obtain bank guarantees as required by our airline partners,our financial condition and results of operations could be materially and adversely affected.


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Further, in addition to meeting our high working capital requirements and funding ourbusiness operations, we may require additional funds to respond to business challenges fromtime to time in the future. Our ability to obtain financing from external sources is dependentupon a number of factors, including general economic and capital market conditions, creditavailability from our banks or other lenders and investors’ confidence in us, many of which arebeyond our control. We cannot assure you that we will be able to obtain additional financing onterms that are acceptable to us or at all. In the event that external financing is not available onterms which are not favourable to us, our business development, results of operations andfinancial condition may be adversely affected.

Our freight and handling costs are subject to market fluctuations and we may not be ableto pass on the increase in our cost of services to our customers

Our freight and handling costs largely depend on market fluctuations which are beyond ourcontrol. During the Track Record Period, our freight and handling costs amounted toapproximately HK$390.0 million, HK$483.1 million and HK$868.9 million, respectively,representing approximately 93.1%, 95.4% and 96.5% of our total cost of services, respectively.If there is any substantial increase in our freight and handling costs and we are not able to passon any such increases to our customers, our cost of services and pressure on our operating cashflows will substantially increase and our business, gross margin and financial results may bematerially and adversely affected.

We generally source cargo spaces by entering into ad hoc cargo space arrangements and/orair charter agreements with our carrier partners or by co-loading with our freight forwarderbusiness partners, which will be subject to the prevailing market rates at the relevant time. Inthe event that such market rates are high, there is no guarantee that we will be able to pass onthe increase in our cost of services to our customers, which may materially and adversely affectour financial condition and results of operations.

We may not be able to maintain close relationships with our freight forwarder businesspartners

As a means to facilitate our provision of international freight forwarding services, wemaintain connections with over 1,000 freight forwarder business partners in more than 160countries and regions, among which over 200 have been engaged by us on atransaction-by-transaction basis primarily for handling and executing customer orders ingeographical locations where we have no presence. For details, please refer to “Business –Suppliers – Our freight forwarder business partners” and “Business – Suppliers – Our majorsuppliers” in this document. We cannot assure you that our relationships with our freightforwarder business partners will remain amicable and stable or that our freight forwarderbusiness partners will continue to provide services to us on commercially comparable terms or atall. Should any of our freight forwarder business partners cease their business relationships withus, our business performance and results of operations may be adversely affected.


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On the other hand, in line with industry practice, we may on-sell our cargo spaces to ourfreight forwarder business partners in the process of consolidation and co-loading. Accordingly,our fellow freight forwarders are also among our major customers. For details, please refer to“Business – Customers – Our major customers” and “Business – Overlapping of customers andsuppliers” in this document. During the Track Record Period, our revenue attributable to ourfreight forwarder customers amounted to approximately HK$436.9 million, HK$476.8 millionand HK$909.6 million, respectively, representing approximately 90.0%, 82.4% and 88.0% of ourtotal revenue, respectively. There is no guarantee that our freight forwarder customers willcontinue to engage us for our services in the future at a comparable level or at all. Should any ofour freight forwarder customers decide not to engage us for a comparable amount of services orat all, our business prospects, financial position and results of operations may be materially andadversely affected.

We rely on our suppliers to provide certain services to our customers and our business isdependent upon the service quality of our suppliers

We rely on our suppliers for their provisions of services in various aspects of our businessoperations. We source cargo spaces from our airline carriers, shipping liners as well as ourfellow freight forwarders. In locations where our Group does not have any presence, we rely onour overseas freight forwarder business partners to handle and execute customer orders. We alsoengage our trucking service providers and other suppliers for providing warehousing and otherrelated logistics services on a need basis. However, there is no guarantee that the service qualityof our suppliers is able to meet our customers’ requirements or is of satisfactory standards at alltimes. There may be instances where the freight carriers cannot reach the destination inaccordance with the prescribed schedule due to, among other things, weather condition, airtraffic control or administrative errors, resulting in potential delay in the delivery of theconsignments. There may also be occasions where damage is done to the goods in transit orwhere the warehouses of our service providers are not of satisfactory safety standards. In theevent that the service quality of our suppliers is unsatisfactory or we are unable to rectify orresolve the issues or find alternative suppliers in a timely manner, our reputation in the industryas well as our business performance and results of operations could be adversely affected.

We may not execute consolidation and co-loading of cargos effectively to maximise ourprofit from a given cargo space

In order to maximise our utilisation of cargo spaces in terms of both volume and weight, inproviding our air freight forwarding services, we generally consolidate a number of cargos ofdifferent dimensions and weight from different customers into a unit load device. We may alsoon-sell our excess cargo spaces to other freight forwarders who act on behalf of their ownshipper customers by way of co-loading. For details, please refer to “Business – Our operatingprocedures – Our freight forwarding services – Cargo consolidation” in this document. However,our ability to carry out consolidation of cargos effectively is subject to a variety of factors,including the size, dimensions, weight and volume of the consignments, the popularity of thecargo route as well as the departure schedule of the carrier. There may also be occasions wherewe are unable to on-sell all of our excess cargo spaces to our fellow freight forwarder


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customers. In the event that we fail to fully and effectively utilise a given cargo space by way ofconsolidation or co-loading, we may have to bear the costs of our excess cargo spaces and ourbusiness, financial condition and results of operations may be adversely affected.

Failure to retain our experienced management team and duly licensed personnel mayhinder our business prospects

Our experienced senior management team, which is led by our executive Directors, Mr.Wong, Mr. Chim and Mr. Shon, has contributed significantly to our success with their leadershipand extensive expertise and know-how in the freight forwarding and logistics industry over theyears. Each of our executive Directors, namely Mr. Chim, Mr. Wong and Mr. Shon has vastexperience in the freight forwarding and logistics industry. For details of the qualifications ofour executive Directors and senior management team, please refer to “Directors and seniormanagement” in this document. Collectively, our executive Directors, together with our seniormanagement team, are responsible for devising and overseeing the implementation of ourbusiness and development strategies. In the event that any members of our senior managementteam ceases employment with us, there is no guarantee that we will be able to recruit acompetent replacement with comparable knowledge, skill and experience in a prompt manner orat all, which may have a material and adverse impact on our ability to grow and sustain ourbusiness.

The success of our business operations also hinges on our experienced and duly licensedpersonnel to deliver customised solutions in accordance with our customers’ needs in a flexible,cost-efficient and prompt manner. As at the Latest Practicable Date, we had two and four staffmembers who have been duly licensed to handle dangerous cargos in our operating entities inthe PRC and in Hong Kong, respectively. We believe that the level of experience and skills ofour employees in relation to the freight forwarding and logistics industry is an indispensablefactor contributing to our Group’s success. If any key members of our operations team departsfrom our Group, we may not be able to recruit a suitable substitute who possesses equivalentexperience and skills in a timely manner or at all, which could potentially hinder our businessoperations and prospects.

Seasonality factors may have an impact on our revenue

The demand for freight forwarding and logistics services is generally affected byseasonality factors. According to the Industry Report, there may be a higher demand for freightforwarding and logistics services in the second half of a calendar year, in particular before theChristmas and the Lunar New Year holidays due to a higher level of trading activities prior toand during festive seasons. Our Directors also recognise that factors such as market trends,festive items and promotional discounts may affect the demand of certain goods at certain timeduring the year. As a result, any comparison of our revenue and results of operations from periodto period at any given time may not be indicative of our business performance.


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Our business is prone to disruptions in the business activities of our suppliers of cargospaces, particularly our carrier partners, caused by conditions beyond our control

During the Track Record Period, our revenue attributable to freight forwarding servicesamounted to approximately HK$483.9 million, HK$574.2 million and HK$1,031.8 million,respectively, representing approximately 99.7%, 99.2% and 99.8% of our total revenue,respectively. The provision of our freight forwarding services is dependent upon whether or notwe are able to source sufficient cargo spaces from our suppliers, in particular our carrierpartners, to meet our customers’ demands. As such, we believe that any disruptions or downturnin the aviation or shipping industry and the business activities of our carrier partners will have anegative impact on our business operations. According to the Industry Report, the aviation andshipping industries and the business operations of our carrier partners are susceptible to varioustypes of disruptions, including but not limited to (i) suspension or cancellation of cargo routesdue to extreme weather conditions, pandemic outbreak or technical failure; (ii) labour strikes atports or terminals arising from labour disputes and/or disagreement between management andlabour; (iii) large-scale political or industrial movements at transportation hubs or ports; (iv)serious financial difficulties suffered by our carrier partners; and (v) general economic andpolitical conditions globally. According to the Industry Report, the global aviation and shippingindustries and the business activities of airline carriers and shipping companies have beenheavily disrupted amid the COVID-19 pandemic which was first reported in late 2019. Shouldthe COVID-19 pandemic remain uncontrolled for a prolonged period of time or any of suchother disruptions materialise or persist in the aviation industry and/or the business operations ofour carrier partners, we may not be able to obtain adequate cargo spaces from alternativesuppliers to meet our customers’ demands in time and/or at commercially reasonable rates,which may materially and adversely affect our business, reputation and results of operations.

Our revenue is susceptive to downturn in the business activities of our fellow freightforwarder caused by conditions beyond our control

Our customers comprise freight forwarder customers who act on behalf of their ownshipper customers and direct customers, primarily based in Hong Kong, the PRC and the U.S.During the Track Record Period, our revenue attributable to freight forwarder customersamounted to approximately HK$436.9 million, HK$476.8 million and HK$909.6 million,respectively, representing approximately 90.0%, 82.4% and 88.0% of our total revenue,respectively. As such, our business is susceptible to any downturn in the business activities ofour freight forwarders customers which may be brought about by factors beyond our controlsuch as the global and regional economic conditions and the prevailing market circumstances ofthe freight forwarding industry. In the event that there is a decline in the demand for our freightforwarding services from our freight forwarders customers, our business prospects, financialcondition and results of operations could be adversely affected.


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Our business operations may be affected if we fail to renew our licences or certifications

We have obtained certain licences and certifications which our Directors consider arematerial to our business operations. Please refer to “Business – Licences, permits and approvals”in this document for further details. In the event that we fail to renew any of our licences orcertifications which are material to our business operations, our business operations may bedisrupted accordingly, which may materially and adversely affect our business, prospects,financial condition, results of operations and reputation.

We cannot assure you that the insurance policies we have taken out are always able tocover all losses we sustain from potential claims in the course of our business operations

Since we are subject to inherent risks arising out of our business operations, we maintaininsurance coverage in relation to our business that is adequate and customary for our industry,including but not limited to air freight liability insurance, key management life insurance andproperty all risks insurance and public liability insurance for our warehouse. In particular, wehave taken out an air freight liability insurance policy administered by IATA, which ourDirectors consider to be sufficient to cover claims against us from our customers in respect ofany damage to or loss in connection with any damage to our customers’ goods caused by ournegligence. However, we have not taken out any ocean freight insurance policy during the TrackRecord Period. For details of our insurance policies, please refer to “Business – Insurance” inthis document. Our Directors confirm that, during the Track Record Period and up to the LatestPracticable Date, we did not experience any material claim from any third party nor did wemake any material insurance claim in the course of our operations.

We cannot assure you that the insurance policies we have taken out are always able tocover all losses we sustain from potential claims in the course of our business operations. Incases where the loss for which we are liable exceeds our insured limits or falls outside of thescope of our insurance coverage, such as where such loss is caused by natural disasters or actsof war, we may be required to compensate the relevant party for such loss out of our own funds.We also cannot assure you that we will not face legal claims from relevant parties in respect oflosses which may not be adequately covered by our insurance policies, in which case, ourbusiness, financial condition and results of operations could be adversely affected.

Our business strategies and expansion plans may not be successful as planned or yield thedesired results

We intend to implement various business strategies to strengthen our market position andenhance our competitiveness in the freight forwarding and logistics industry and have devisedour expansion plans which we intend to fund with our [REDACTED] from the [REDACTED].Please refer to “Business – Our business strategies” and “Future plans and [REDACTED] –[REDACTED]” in this document for details. Our business strategies and expansion plans areformulated based on, among other things, our assessment of the prevailing market circumstancesand the competitive landscape of the industry. In particular, we intend to utilise approximatelyHK$[REDACTED] million, representing approximately [REDACTED]% of our [REDACTED]


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from the [REDACTED], to finance our expansion of our air freight forwarding services which,includes the acquisition and installation of cargo x-ray screening equipment with a view toseizing potential business opportunities arising from the new RACSF scheme launched by theCAD to comply with the new air cargo security standards initiated by the ICAO, which aims tostrengthen air cargo security by imposing a mandatory off-airport security screening on all aircargos with effect from June 2021.

While we believe that our expansion plans will help us to achieve our strategic goals, ourstrategies and expansion plans may not be successful as we planned or such expansion may notyield the desired results due to factors beyond our control.

Failure in our IT system in the course of our business operations could adversely affect ourreputation, business operations and prospects

As a smooth and efficient operation of our freight forwarding and logistics business whichrequires a high data processing capability and the availability of real-time statistics, we have inplace an IT system to facilitate our business operations. In the course of our business operations,a wide range of information and data in relation to our customers’ consignments areelectronically recorded on our freight forwarding system, which typically include nature, weightand volume of the goods, ports of origin and destination, carrier number and estimated time ofarrival. For further details of our IT system, please refer to “Business – Information technology”in this document. As confirmed by our Directors, during the Track Record Period and up to theLatest Practicable Date, we did not experience any malfunctioning of or failure in our IT systemwhich had a material adverse impact on our business operations. Nevertheless, we aresusceptible to risks relating to technical failure or improper performance of our IT system andour reputation and business operations could be adversely affected if we fail to respond to suchfailure and recover the relevant data in a timely and prompt manner.

We believe that the effectiveness of our information and operational management lies in ourability to keep abreast of the latest technological developments in terms of the availableupgrades to our IT system. However, since our IT system is operated and maintained by ourthird-party service provider, there is no assurance that we will be able to make prompt andcost-effective enhancements to our IT system or at all or that our IT system will be comparableto those operated or maintained by our fellow freight forwarders, which may render our servicesless competitive and adversely affect our reputation and business prospects. There is also noassurance that our IT service provider will respond to us and provide assistance promptly in theevent of technical failure. We are also susceptible to risks of cyber-attacks such as hacking orother technical disruptions, which may materially and adversely affect our business, financialcondition and results of operations.


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We may face overseas regulatory risks in managing operations and expanding our scope ofbusiness globally

As at the Latest Practicable Date, we operated local offices in five cities, namely HongKong, Shanghai, Chongqing, Shenzhen and Guangzhou. In locations where we do not havepresence, we generally engage our overseas freight forwarder business partners to provide ourcustomers with freight forwarding services on a wide portfolio of cargo routes around the globe.We maintain connections with over 1,000 freight forwarders in more than 160 countries andregions, among which over 200 have been engaged by us on a transaction-by-transaction basis.Our overseas freight forwarder business partners are subject to the laws, regulations and policiesof different jurisdictions depending on the locations where they maintain their operations. Ifthere is any changes in the laws or regulatory or licensing requirements applicable to ouroverseas freight forwarder business partners, we may not be able to adjust our operations orcooperation with our overseas freight forwarder business partners accordingly, which mayadversely affect our business prospects and reputation. Further, as we offer a wide portfolio ofcargo routes to our customers internationally, we are also susceptible to risks associated withsuch cargo routes, including but not limited to foreign exchange risks and political risks in therelevant country or region.

We may fail to identify referral consignments which carry goods of dangerous or illicitnature

Our freight forwarder business partners may engage us as their overseas freight forwarderbusiness partner for the provision of freight forwarding services in locations where we haveestablished our presence (i.e. the PRC or Hong Kong). We generally do not conduct inspectionof the cargo consignments to verify their physical content against that as declared in the relevantdeclaration forms and have no control over the consignments. Even if we perform randomverification and x-ray inspections on the consignments, there is no guarantee that we will beable to identify referral consignments which comprise dangerous goods or goods of illicit nature,as a result of which we may be subject to investigations for violation of applicable laws andregulations and our reputation and results of operations may be materially and adverselyaffected.

We lease a number of properties for our business operations and are exposed to risks inrelation to unpredictable and increasing rental costs and relocation costs

We have entered into lease agreements for a number of properties in Hong Kong and thePRC with one of our connected persons and other landlords who are Independent Third Partiesfor our business operations as at the Latest Practicable Date. For details, please refer to“Business – Property” and “Connected transaction” in this document.


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We cannot assure you that our landlords will renew the lease agreements with us upon theirexpiry or that our landlords will not raise our rent or impose more stringent payment terms uponrenewal of the lease agreements, which could adversely affect our profitability and results ofoperations. Further, if the proposed terms under any renewed lease agreements are notacceptable to us, we may have to consider looking for alternative office premises and/orwarehouses in the rental market for relocation and may thus incur relocation costs. There is alsono guarantee that we will be able to relocate our operations in a timely manner or at all, and anysuch relocation may cause disruption to our business operations. In the event that we fail to lookfor alternative office premises and/or warehouses that suit our operational needs, we may haveto concede to the increase in our rental costs and/or more stringent payment terms under therenewed lease agreement(s), which will in turn adversely affect our financial position and resultsof operations.

RISKS RELATING TO OUR INDUSTRY

We face fierce competition in the freight forwarding and logistics industry in which weoperate

According to the Industry Report, the freight forwarding and logistics industry is highlyfragmented and competitive due to the presence of numerous small- to medium-sized players.We face keen competition from numerous competitors operating on different scales in the freightforwarding and logistics market, in particular Hong Kong and the PRC. Please refer to “Industryoverview” and “Business – Market and competition” in this document for further details. In viewof the fierce competition, we may have to adjust our profit margin and adopt a more competitivepricing strategy in order to maintain our position in the market. In the event that we fail todifferentiate ourselves from our competitors both locally and/or globally, we may not be able tomaintain our customer base and market share and our business, financial condition and results ofoperations may be adversely affected.

Natural disasters, epidemics, pandemics, acts of war, terrorist attacks and other eventscould materially and adversely affect the freight forwarding and logistics industry

Natural disasters, epidemics, pandemics, acts of war, terrorist attacks, political unrest,strikes and other events which are beyond our control, may lead to global or regional economicinstability, which may in turn materially and adversely affect local economies, internationaltrade and terminal or port facilities. These events may also lead to closure of terminal or portsor transportation stoppage and disrupt cargo flows, thereby results in material interruptions inour provision of freight forwarding services and adversely affect our business, financialcondition and results of operations.

In addition, an outbreak of epidemic or pandemic, such as that of COVID-19, could causegeneral consumption or the demands for specific products to decline, which could result in acorresponding decline in the demands for our freight forwarding services and logistics andrelated value-added services. Owing to the COVID-19 pandemic, measures including the closingof national borders in various countries, lockdowns of a vast number of cities across the world,


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travel restrictions and extensive suspension of business operations have been imposed from timeto time globally since early 2020. According to the Industry Report, the COVID-19 pandemichas been hitting hard on the global aviation industry and shipping industry leading to majorcancellation of flights and vessels and disruption to the availability of cargo routes and spaces,as a result of which, there has been a certain extent of negative impact on the global freightforwarding and logistics industry. Any negative downturn in the freight forwarding and logisticsindustry could materially and adversely affect our business, financial condition and results ofoperations.

Further, owing to the threats of terrorist attacks such as suicide bombings and massshootings in major cities around the world, there has been in place tightened security proceduresand requirements at major airports and ports. Frequent terrorist attacks have negative impacts onthe freight forwarding and logistics industry, including but not limited to increased security andinsurance costs, port delays and flight cancellations. Any threats of future terrorist attack mayincrease our cost of operations and reduce demands for our services, which may result inadverse impacts on our financial condition and results of operations.

We are exposed to foreign exchange risks

During the Track Record Period, we received payments from our customers and settledpayments to our suppliers in Hong Kong dollar, Renminbi, US dollar and/or Euro, depending onwhere our customers and suppliers are located. We are thus exposed to certain foreign exchangerisks in respect of the depreciation or appreciation amongst these currencies. Nevertheless,during the Track Record Period, we did not maintain any hedging policies or foreign currencyforward contracts to address such foreign exchange risks. In the event that foreign exchangerates in respect of these currencies experience a high degree of volatility, we cannot assure youthat we will be able to procure any specific foreign exchange control measures to mitigate suchrisks, which may materially and adversely affect our financial performance and results ofoperations.

Increases in fuel prices may reduce our profitability and adversely affect our businessoperations

During the Track Record Period, our freight and handling costs amounted to approximatelyHK$390.0 million, HK$483.1 million and HK$868.9 million, respectively, representingapproximately 93.1%, 95.4% and 96.5% of our total cost of services, respectively. Fuelsurcharges are one of the primary components of our freight and handling costs. Therefore,increases in fuel prices may result in material fluctuations in our freight and handling costs. Fuelprices could fluctuate significantly and are prone to a number of economic and political factorsthat are beyond our control, particularly political instability in the oil-producing regions.Increases in fuel prices will lead to corresponding increases in prices of cargo spaces and mayresult in significant increase in our cost of services. Unless we are able to pass on suchincreased costs to our customers, our profitability, results of operations and financial conditioncould be adversely affected.


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We are exposed to the risk of disintermediation

The evolution of internet and the rise of digital platforms over the years have enormouslyincreased market transparency whereby customers are given access to a wider scope of choices,leading to the displacement of many traditional intermediaries. In a disintermediated supplychain, the consumer transacts directly with the manufacturer without the intermediaries.Disintermediation often results in costs, and sometimes also time, reduction. The risk ofdisintermediation exists in all industries including the freight forwarding industry in which weoperate. Any decrease in demand for our freight forwarding and related logistics services due todisintermediation could adversely affect our business, financial condition and results ofoperations.

RISKS RELATING TO CONDUCTING BUSINESS IN HONG KONG AND THE PRC

Our business is prone to changes in Hong Kong’s political, economic and social conditions,laws, regulations and policies

Our business prospects, financial condition and prospects of the industry in which weoperate will depend, to some degree, upon the stability of the political, economic and regulatoryconditions in Hong Kong. Any adverse developments in the political, economic and regulatoryenvironment including prolonged and/or widespread economic slowdown as well as large-scalepolitical and social movements in Hong Kong would affect our business and profitability.Furthermore, according to the Industry Report, the Hong Kong local economy has beenadversely affected by the COVID-19 pandemic since the first half of 2020 and is expected tocontinue to experience certain short-term economic slowdown. Any material adverse changes inthe political, economic and regulatory conditions in Hong Kong may adversely affect the freightforwarding and logistics industry in Hong Kong and in turn materially and adversely affect ourbusiness, financial condition, results of operations and/or prospects.

The economic, political and social conditions and government policies of the PRC mayaffect our business

As at the Latest Practicable Date, we conducted our operations in four cities in the PRC,namely Shanghai, Chongqing, Shenzhen and Guangzhou. As a majority of our assets, operationsand revenue are located in or derived from our operations in the PRC, our business, financialcondition and results of operations are subject, to a significant degree, to the economic,political, social and regulatory environment in the PRC. The PRC economy differs from theeconomies of most developed countries in many aspects, including but not limited to thepolitical structure, extent of government involvement, level of development, growth rate, leveland control of capital investment and reinvestment, control of foreign exchange and allocation ofresources.


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The PRC government has, in recent years, taken various actions to introduce market forcesfor economic reform, to reduce state ownership of productive assets and to promote theestablishment of sound corporate governance in business entities. These reforms have resulted insignificant economic growth and social development of the PRC. However, most of theseeconomic reform measures are unprecedented or experimental and may be adjusted, modified orimproved from time to time or may be applied to a different extent from industry to industry oracross different regions of the PRC. We cannot predict whether the resulting changes will haveany adverse impacts on our current or future business, financial condition or results ofoperations. In addition to these economic reforms and measures, the PRC government continuesto play a significant role in regulating the economy and the industries by issuing industrialpolicies and retains significant control over the PRC’s economic growth through the allocationof resources, monetary policies and preferential treatments to particular industries or enterprises.We cannot assure you that the PRC economy will continue to grow, or that if there is growth,such growth will be steady and uniform. Any economic slowdown may have a negative effect onour business, financial condition, and results of operations. Further, the long-term impacts ofCOVID-19 on the PRC economy is yet to be known. Any prolonged slowdown in the PRCeconomy may reduce the demands for our freight forwarding and logistics services and thusmaterially and adversely affect our business and results of operations.

The PRC government’s control of foreign currency conversion and restrictions on theremittance of Renminbi out of the PRC may limit our foreign exchange transactions

The PRC government imposes controls on the convertibility of Renminbi into foreigncurrencies and the conversion and remittance of foreign currencies in the PRC are subject toforeign exchange regulations in the PRC. A portion of our revenue is denominated in Renminbi.There is no assurance that we will, at a certain exchange rate, maintain a sufficient level offoreign currencies to meet our foreign exchange requirements. Insufficiency of foreigncurrencies may restrict our ability to obtain sufficient foreign currencies for dividend paymentsto our Shareholders or otherwise satisfy our other foreign currency denominated obligations.

Under the existing foreign exchange regulations in the PRC, foreign exchange transactionsunder the current account conducted by us, such as dividend payments, do not require priorapproval from the SAFE but we are required to present documentary evidence of the relevanttransactions to and conduct them at designated foreign exchange banks in the PRC which arelicensed to carry out foreign exchange businesses. However, approval from the SAFE orregistration with appropriate governmental authorities is required where Renminbi is to beconverted into foreign currency and remitted out of the PRC to pay capital expenses such as therepayment of loans denominated in foreign currencies.


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In light of the flood of capital outflows of the PRC in 2016 due to the weakening ofRenminbi, the PRC government has imposed more restrictive foreign exchange policies andstepped up scrutiny of major outbound capital movements. More restrictions and substantialvetting process are put in place by the SAFE to regulate cross-border transactions falling underthe capital account. The PRC government may at its discretion further restrict access to foreigncurrencies in the future for current account transactions. Whilst, following the completion of the[REDACTED], we will be able to pay dividends in foreign currencies without prior approvalfrom the SAFE under the current foreign exchange regulations by complying with certainprocedural requirements, there is no assurance that these foreign exchange policies regardingpayment of dividends in foreign currencies will continue in the future. If current foreignexchange policies change and we fail to obtain approval from the SAFE for our conversion offoreign currencies, we may not be able to obtain sufficient foreign currencies to make dividendpayments to our Shareholders and/or our business operations may be adversely affected.

The PRC’s regulation of loans to and direct investments in PRC entities by offshore holdingcompanies may delay our use of or prevent us from using the [REDACTED] of the[REDACTED] to make loans or additional capital contributions to our PRC subsidiary,which could materially and adversely affect our liquidity and our ability to fund andexpand our business

As an offshore holding company of our PRC subsidiary, any funds we transfer to our PRCsubsidiary, either as a shareholder loan or as an increase in registered capital, are subject toapproval by or registration with relevant governmental authorities in the PRC. According to therelevant PRC regulations on foreign-invested enterprises in the PRC, any change in theregistered capital of our PRC subsidiary is subject to the requirement of making necessaryfilings in the enterprise registration system and registration with the relevant governmentalauthorities in the PRC. In addition, any foreign loan provided by us to our PRC subsidiary isrequired to be registered with the SAFE, or its local counterparts. We may not be able tocomplete such filings or registrations on a timely basis, if at all, with respect to future capitalcontributions or foreign loans by us directly to our PRC subsidiary. If we fail to complete suchregistration, our ability to use the [REDACTED] of the [REDACTED] may be adverselyaffected, which could materially and adversely affect our liquidity and our ability to fund andexpand our business.

On 30 March 2015, the SAFE promulgated the Circular on Reforming the ManagementApproach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises*(國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知) (the “SAFE Circular19”), which took effect on 1 June 2015 and was amended on 30 December 2019. The SAFECircular 19 launched a nationwide reform of the administration of the settlement of the foreignexchange capital of foreign-invested enterprises and allows foreign-invested enterprises to settletheir foreign exchange capital at their discretion, but continues to prohibit foreign-investedenterprises from using Renminbi funds converted from their foreign exchange capital forexpenditures beyond their business scope. On 9 June 2016, the SAFE promulgated the Circularon Reforming and Standardising the Administrative Provisions on Capital Account ForeignExchange* (國家外匯管理局關於改革和規範資本項目結匯管理政策的通知) (the “SAFE


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Circular 16”). The SAFE Circular 19 and the SAFE Circular 16 continue to prohibitforeign-invested enterprises from, among other things, using Renminbi funds converted fromtheir foreign exchange capital for expenditure beyond their business scope, unless otherwiseprovided, securities investment and other types of investment and financing (except forguaranteed bank products), providing loans to non-affiliated enterprises or constructing orpurchasing real estate not for self-use (except for real estate enterprises). The SAFE Circular 19and the SAFE Circular 16 may significantly limit our ability to transfer to and use in the PRCthe [REDACTED] from the [REDACTED], which may materially and adversely affect ourbusiness, financial condition and results of operations.

We face foreign exchange risks specific to Renminbi

The exchange rate of the Renminbi fluctuates against the Hong Kong dollar, U.S. dollarand other foreign currencies and is affected by, among other factors, the policies of the PRCgovernment and changes in international and domestic political and economic conditions. Thevalue of Renminbi has been under pressure of appreciation in recent years. Owing to, amongother things, international pressure on the PRC to allow more flexible exchange rates forRenminbi, the economic situation and financial market development in the PRC and abroad andthe balance of payment situation in the PRC, the PRC government has decided to proceed furtherwith the reform of the Renminbi exchange rate regime and to enhance the flexibility ofRenminbi exchange rates.

We are unable to predict how market forces and the policies of the PRC government willcontinue to impact Renminbi exchange rates going forward. In light of the trend towardsRenminbi internationalisation, the PRC government may announce further changes to theexchange rate system, and we cannot assure you that the Renminbi will not appreciate ordepreciate significantly in value against the Hong Kong dollar, U.S. dollar or other foreigncurrencies. Any appreciation or depreciation in the value of Renminbi or other foreign currenciesthat our operations are exposed to may adversely affect our business. Further, changes in foreignexchange rates may have an impact on the value of, and any dividends payable on, the Shares inHong Kong dollars. In such events, our business, financial condition, results of operations andgrowth prospects may be materially and adversely affected.

The uncertainties surrounding the interpretation and enforcement of the laws andregulations in the PRC may adversely affect our business

Our business operations in the PRC are governed by the legal system of the PRC, which isestablished upon written statutes, regulations, circulars, administrative directives and theinterpretation thereof by certain state organs and organisations. Prior court decisions may becited for reference but have limited precedential value. Since the late 1970s, the PRCgovernment has promulgated laws and regulations dealing with economic matters such as foreigninvestment, corporate organisation and governance, commerce, taxation and trade. However, asthese laws and regulations are relatively new and continue to evolve, interpretation andenforcement of these laws and regulations may involve uncertainties and different degrees ofinconsistency. Some of the laws and regulations are still in the developmental stage and are


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therefore subject to changes. Further, a number of laws, regulations and policies in the PRChave only been recently adopted, and thus, their implementation, interpretation and enforcementmay involve a certain degree of uncertainties due to the lack of established practice available forreference. We cannot predict the effect of future legal developments in the PRC, including thepromulgation of new laws, changes in existing laws or their interpretation or enforcement, or thepre-emption of local regulations by national laws. As a result, there is substantial uncertainty asto the legal protection available to us and our Shareholders. Further, due to the limited volumeof published cases and the non-binding nature of prior court decisions, the outcome of disputeresolution may not be as consistent or predictable as in other jurisdictions, which may limit thelegal protection available to us and our Shareholders. We cannot assure you that any litigation orregulatory enforcement action in the PRC will not be protracted or result in substantial costs andthe diversion of resources and management attention.

Inflation in the PRC could adversely affect our profitability and growth

The economy of the PRC has experienced significant growth over the past several decades,which has led to, among other things, inflation and increased labour costs. Over the years, thePRC government has introduced various measures in certain sectors to avoid overheating of theeconomy, including tightening bank lending policies and increasing bank interest rates. However,according to the Industry Report, the overall economy and the average wage level in the PRCare expected to continue to grow. If inflation intensifies in the PRC, which is likely to lead tomaterial increases in labour costs, including both wages and employee benefits, our profitabilityand results of operations may be materially and adversely affected, unless we are able to pass onthese costs to our customers by increasing our freight forwarding charges and charges forlogistics and other value-added services.

The Labour Contract Law of the PRC* (中華人民共和國勞動合同法) (the “Labour ContractLaw”), the Social Insurance Law of the PRC* (中華人民共和國社會保險法) (the “SocialInsurance Law”) and other labour-related regulations may adversely affect our business,financial condition and results of operations

The Labour Contract Law came into effect on 1 January 2008 and was amended on 28December 2012. Under the Labour Contract Law, an employer is obliged to sign an unfixed-termlabour contract with any employee who has worked for the employer for 10 consecutive years.Further, if an employee requests or agrees to renew a fixed-term labour contract that has alreadybeen entered into twice consecutively, the resulting contract must have an unfixed term, withcertain exceptions. The employer must pay monetary compensation to an employee where alabour contract is terminated or expires in accordance with the Labour Contract Law, except forcertain situations which are specifically regulated.


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In addition, the PRC government has issued various labour-related regulations to furtherprotect the rights of employees. According to such laws and regulations, employees are entitledto annual leave ranging from five to 15 days and are able to be compensated for any untakenannual leave days in the amount of three times their daily salary, subject to certain exceptions.In the event that we decide to change our employment or labour practices, the Labour ContractLaw and its implementation rules may also limit our ability to effect those changes in a mannerthat we believe to be cost-effective.

Moreover, according to the Social Insurance Law, which came into effect on 1 July 2011and was amended in December 2018, and the Regulations on the Administration of HousingProvident Funds, which came into effect on 3 April 1999 and was last amended in March 2019,we are obliged to contribute to social insurance for all of our employees who have establishedlabour relations with us and housing provident funds for our PRC employees who haveestablished labour relations with us amounts equal to certain percentages of their salaries up to amaximum amount specified by the local government from time to time in the locations where weoperate.

As the interpretation and implementation of the Labour Contract Law, the Social InsuranceLaw and other related new regulations are still evolving, our employment and social insurancepractices may not be at all times deemed in compliance with the new regulations. If we aresubject to severe penalties or if we incur significant liabilities in connection with labour disputesor investigations, our business and financial condition may be adversely affected.

RISKS RELATING TO INTERNATIONAL SANCTIONS

We could be adversely affected as a result of our provision of services in relation toconsignments to and/or from certain countries/regions that are, or become subject to,sanctions administered by the U.S., the EU, the UK, the UN, Australia and other relevantsanctions authorities

The U.S. and other jurisdictions or organisations, including the EU, the UK, the UN andAustralia, have, through executive order, passing of legislation or other governmental means,implemented measures that impose economic sanctions against such countries, or againsttargeted industry sectors, groups of companies or persons, and/or organisations within suchcountries.

During the Track Record Period, we provided freight forwarding services to our freightforwarder customers who acted on behalf of their direct shipper customers for the shipment ofgoods to and from the Relevant Regions. During the Track Record Period, our revenue derivedfrom the provision of services in relation to consignments to and/or from these Relevant Regionsamounted to approximately HK$0.9 million, HK$1.7 million and HK$0.7 million, respectively,representing approximately 0.2%, 0.3% and 0.1% of our total revenue, respectively.


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Whilst Burundi, Egypt, Lebanon, Myanmar, Russia (excluding Crimea region), Turkey,Ukraine (excluding Crimea, and the self-proclaimed Donetsk People’s Republic and LuhanskPeople’s Republic regions) and Venezuela were subject to certain limited sanctions during theTrack Record Period, none of them was subject to a general and comprehensive export, import,financial or investment embargo under sanctions related law or regulation of a RelevantJurisdiction (i.e., none of them was a Comprehensively Sanctioned Country). As advised by ourInternational Sanctions Legal Advisers after performing the procedures they consider necessary,we did not violate relevant sanctions as a result of Primary Sanctioned Activity or SecondarySanctionable Activity during the Track Record Period. However, new requirements orrestrictions could come into effect which might increase the scrutiny on our business or result inone or more of our business activities being deemed to have violated the International Sanctions.Our business and reputation could be adversely affected if the authorities of the United States,the EU, the UK, the UN, Australia or any other jurisdictions were to determine that any of ouractivities constitutes a violation of the sanctions they impose or provides a basis for a sanctionsdesignation of our Group.

RISKS RELATING TO THE [REDACTED] AND OUR SHARES

There was no public market for our Shares prior to the [REDACTED] and an activetrading market for our Shares may not develop or sustain

Prior to the [REDACTED], there was no public market for our Shares. Follow thecompletion of the [REDACTED], the Stock Exchange will be the only market whereby ourShares are publicly traded. We cannot assure you that (i) there will be an active trading marketfor our Shares; or (ii) if an active trading market does develop, it will be sustainable followingthe completion of the [REDACTED].

Prospective investors should also note that the initial range of the [REDACTED] wasdetermined as a result of negotiations between our Company and the [REDACTED] (for itselfand on behalf of the [REDACTED]) and may differ significantly from the market price of ourShares following the completion of the [REDACTED]. If an active trading market for ourShares does not develop or is not sustainable after the [REDACTED], the market price and theliquidity of our Shares could be materially and adversely affected.

Our Shares are subject to possible price and trading volume volatility

The market price and the trading volume of our Shares may be highly volatile. Factors suchas variations in our earnings, cash flows and revenue, and announcements of new investmentsand/or strategic alliances could cause the market price and the trading volume of our Shares tochange suddenly and substantially. Furthermore, stock markets and the shares of some listedcompanies in Hong Kong have experienced substantial price volatility in the past. It is likelythat our Shares may be subject to the broad market and industry fluctuations in market price andtrading volume which may not be related to the financial or business performance of ourCompany from time to time.


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Our Directors retain discretion as to how our Company will use our [REDACTED] fromthe [REDACTED], and potential investors may not necessarily agree with how we will usethem

We plan to use our [REDACTED] from the [REDACTED] for (i) expanding andimproving our air freight forwarding services; (ii) developing our own truck fleet; (iii)strengthening our ability to purchase cargo spaces to meet customers’ demands; (iv) enhancingour sales and marketing efforts and expanding our customer base; (v) upgrading andstrengthening our IT system; and (vi) general corporate purposes and working capital. Fordetails of our intended [REDACTED], please refer to “Future plans and [REDACTED]” in thisdocument. However, our Directors will have discretion as to the actual application of our[REDACTED] from the [REDACTED], and thus may use our [REDACTED] from the[REDACTED] in a manner with which prospective investors may or may not agree and/orwhich may not yield a favourable return. You are entrusting your funds to our management, uponwhose judgement you must depend, for the specific uses we will make of our [REDACTED]from the [REDACTED].

Potential investors will experience immediate and substantial dilution as a result of the[REDACTED] and may experience further dilution as a result of future equity financings

The [REDACTED] of our Shares is substantially higher than the net tangible book valueper Share immediately prior to the [REDACTED]. Thus, potential investors may experience animmediate dilution when they purchase our [REDACTED] in the [REDACTED]. If we are todistribute our net tangible assets to the Shareholders immediately following the [REDACTED],potential investors would receive less than the amount they have paid for their Shares.

For purposes of, among others, business expansion or strategic acquisitions our Companymay proceed with in the future, we may need to raise additional funds through issuing securitiesor equity-linked securities of our Company other than on a pro-rata basis to existingShareholders. Such new securities may also confer rights and privileges that take priority overthose conferred by the [REDACTED]. In addition, prospective investors should also note thatthe exercise of any options to granted and any issuance of Shares under the Share OptionScheme in the future may result in further dilution of their shareholding in our Company.

The interests of our Controlling Shareholders may not always coincide with our interestsand those of our other Shareholders

Immediately following the completion of the [REDACTED] and the [REDACTED](assuming the [REDACTED] is not exercised and without taking into account any Shares whichmay be allotted and issued upon the exercise of any options which may be granted under theShare Option Scheme), our Controlling Shareholders will in aggregate hold approximately[REDACTED]% of the issued share capital of our Company. Our Controlling Shareholderstherefore may have significant influence over our Company, including matters relating to ourmanagement, decisions and policies regarding acquisitions, mergers, expansion plans,consolidation and sales of all or substantially all of our assets, election of our Directors and


RISK FACTORS

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other significant corporate actions. The interests of our Controlling Shareholders may not alignwith those of our other Shareholders. We cannot rule out the possibility that our ControllingShareholders may exercise their substantial influence over our Company and cause our Companyto enter into transactions or take, or fail to take, other actions or make decisions which conflictwith the best interests of our other Shareholders.

Future sales or market perception of sales of a substantial number of our Shares on thepublic market could materially and adversely affect the trading price of our Shares

After the completion of the [REDACTED], future sales of a substantial number of ourShares or other securities relating to our Shares on the public market, the issuance of newShares or other securities relating to our Shares, or the market perception that such sales ofissuances may occur, could adversely affect the market price of our Shares and our ability toraise future capital at a favourable time and price.

The Shares owned by our Controlling Shareholders are subject to certain lock-up periods.There is no assurance that following the expiry of such restrictions, the Controlling Shareholderswill not dispose of their Shares. Furthermore, the Shares owned by the [REDACTED] are notsubject to any lock-up period restrictions. Any significant disposal of our Shares by any of ourControlling Shareholders or the [REDACTED] may adversely affect the prevailing market priceof our Shares. We cannot predict the effect of any future sales or market perception of sales of asubstantial number of our Shares on the public market on the market price of our Shares.

Prospective investors may experience difficulties in enforcing their shareholders’ rightsbecause our Company is incorporated in the Cayman Islands, and the laws of the CaymanIslands relating to the protection of minority shareholders’ interests may differ from that ofHong Kong or other jurisdictions

Our Company is incorporated in the Cayman Islands and our affairs are governed by theMemorandum of Association, the Articles of Association, the Companies Act and common lawapplicable in the Cayman Islands. The laws of the Cayman Islands may be different from that ofHong Kong or other jurisdictions where prospective investors may be located. Consequently,minority Shareholders may not enjoy the same rights under the laws of Hong Kong or such otherjurisdictions. For the summary of the Cayman Islands law on the protection of minorityShareholder in general, please refer to “3. Cayman Islands company law” in Appendix III to thisdocument.

If securities or industry analysts do not publish research or reports or cease publishingresearch or reports about our business, or if they adversely change their recommendationsor publish negative reports regarding our Shares, the market price and the trading volumeof our Shares may decline

The trading market for our Shares will be influenced by research and reports that securitiesor industry analysts publish in relation to our Company or our business. There is no assurance


RISK FACTORS

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that such research and reports will cover us favourably or at all. If one or more analystadversely changes their recommendations regarding our Shares or publish negative opinions onour Company, the market price of our Shares may decline. If any analyst ceases coverage of ourCompany or fails to regularly publish reports on us, we may lose visibility in the financialmarkets, which, in turn, may cause the market price or the trading volume of our Shares todecline.

Prospective investors should not rely on any information contained in press articles orother media regarding our Company and the [REDACTED]

Prior to the publication of this document, there may have been press articles and mediacoverage regarding our Company and the [REDACTED], which may include certain financialinformation, financial projections and other information about us which do not appear in thisdocument. Therefore, we do not accept any responsibility for or guarantee or make anyrepresentation as to the appropriateness, accuracy, completeness or reliability of any suchinformation. Prospective investors should not place reliance on any of such information inmaking their investment decisions in relation to our Shares.

Prior dividends declaration may not be indicative of our future dividend policy

The declaration of dividends will be subject to the discretion of our Board, our Articles ofAssociation and the applicable laws and regulations. Any declaration of final dividend by ourCompany shall also be subject to the approval of our Shareholders in a Shareholders’ meeting.For details of our Company’s dividend payments during and after the Track Record Period,please refer to “Financial information – Dividends and distributable reserve” in this document.The declaration and distribution of dividends during the Track Record Period should not beregarded as an indication that we will declare and distribute dividends in such manner or at suchtime in the future, or will declare and pay any dividends in the future at all. Whether dividendswill be distributed and the amount of any dividend to be declared and distributed in the futurewill be at the discretion of our Directors and will depend on, among other things, our results ofoperations, cash flows and financial conditions, operating and capital requirements and futureprospects, and our constitutional documents and the laws of the Cayman Islands.

Owing to the time gap between pricing and trading of our Shares, there is a risk that theprice of our Shares may fall before trading of our Shares begins

The [REDACTED] of our Shares will be determined on the [REDACTED], which isexpected to be on or about [REDACTED] 2022. However, trading of our Shares on the MainBoard will not commence until 9:00 a.m. on the [REDACTED], which is expected to be a shortperiod after the [REDACTED]. During this period, holders of our Shares may not be able to sellor otherwise deal in our Shares. Accordingly, holders of our Shares may be subject to the riskthat trading price of our Shares may fall before trading of our Shares begins due to adversemarket conditions or other adverse development arising during the period between the[REDACTED] and the date on which trading of our Shares will begin.


RISK FACTORS

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RISKS RELATING TO THIS DOCUMENT

Prospective investors should not unduly rely on facts, statistics and forecasts derived fromofficial government publications contained in this document

This document contains certain facts, statistics and data that have been derived fromofficial government sources and publications and other sources. Our Company believes thesources of these facts and statistics are reliable and appropriate, and has no reason to believethat such information is false or misleading or is rendered so by any omission of facts. OurCompany has taken reasonable care in extracting and reproducing such statistics and facts.However, there is no guarantee as to the quality or reliability of such information. The statisticsand facts from these sources have not been prepared nor have they been independently verifiedby our Company, our Directors, the Sole Sponsor, [the [REDACTED]], [the [REDACTED],] the[REDACTED] or any of their respective affiliates or advisers or any other party involved in the[REDACTED] (other than Frost & Sullivan in respect of the Industry Report) and therefore, ourCompany makes no representation as to the accuracy or completeness of such facts, statisticsand data. Prospective investors should not place undue reliance on these facts and statistics. Dueto possibly flawed or ineffective collection methods or discrepancies between publishedinformation, market practice and other problems, the statistics contained in this document maynot be accurate or comparable to statistics produced in other publications or for othereconomies. There is no guarantee that they are stated or compiled on the same basis or with thesame degree of accuracy as the case may be elsewhere. In any event, prospective investorsshould consider how much weight they should attach to such information when making theirinvestment decisions in relation to our Shares.

Forward-looking statements contained in this document may not be accurate and henceprospective investors should not place undue reliance on such statements

This document contains certain forward-looking statements relating to our Company thatare based on the beliefs of our Directors as well as assumptions based on the informationcurrently available to them. When used in this document, the words “anticipate”, “believe”,“forecast”, “estimate”, “intend”, “plan”, “potential” and similar expressions, as they relate to ourDirectors, our Company or our Group, are intended to identify forward-looking statements. Suchstatements reflect the current views of our Directors regarding future events, operations,liquidity and capital resources. These statements are subject to certain known and unknownrisks, uncertainties and assumptions, including the other risk factors as described in thisdocument, and may not materialise or may change. Prospective investors should not unduly relyon such forward-looking statements.


RISK FACTORS

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[REDACTED]


INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

– 73 –

[REDACTED]



– 74 –

[REDACTED]



– 75 –

[REDACTED]



– 76 –

[REDACTED]



– 77 –

[REDACTED]



– 78 –

DIRECTORS

Name Address Nationality

Executive Directors

Mr. Wong Tat Shing(黃達成)

Flat A, 12/F, Block 1Dragon View83 Chung Hau StreetHo Man TinKowloonHong Kong

Chinese

Mr. Chim Kwok YungRamthur (詹國勇)

Flat 11, 28/FWai Ming HouseYuk Ming CourtTseung Kwan ONew TerritoriesHong Kong

Chinese

Mr. Shon Il Seon(孫一善)

Room 1202No. 9, Lane 788, Hongxu RoadMinhang DistrictShanghaithe PRC

Republic ofKorea


DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

– 79 –

Independent non-executive Directors

Ms. Yao Qing(姚青)

Flat A, 6/F, Block 6Oscar By The Sea8 Pung Loi RoadTseung Kwan ONew TerritoriesHong Kong

Chinese

Mr. Ng Ming Kwan(吳銘軍)

Flat A, 17/FWiseman Building11–17 Fort StreetNorth PointHong Kong

Chinese

Mr. Kuan Hong Kin Daniel(關匡建)

2/F, Block BNo. 649, Tsing Chuen WaiTuen MunNew TerritoriesHong Kong

Chinese

Further information about our Directors and other senior management members are set outin “Directors and senior management” in this document.



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PARTIES INVOLVED IN THE [REDACTED]

Sole Sponsor Advent Corporate Finance LimitedSuites 1008-8A, 10th FloorOcean CentreHarbour CityKowloonHong Kong

Licensed corporation under the SFO to carry out

type 6 (advising on corporate finance) regulated

activity (as defined in the SFO)

[[REDACTED] and [REDACTED]] [REDACTED]

Legal advisers to our Company As to Hong Kong law:

David Fong & Co.Unit A, 12/F, China Overseas Building139 Hennessy RoadWanchai, Hong Kong

As to PRC law:

GFE Law OfficeUnits 3409–3412Guangzhou CTF Finance CenterNo. 6 Zhujiang Road EastZhujiang New TownGuangzhou, PRC

As to Cayman Islands law:

ApplebySuites 4201–03 & 1242/F, One Island East18 Westlands RoadQuarry Bay, Hong Kong

As to International Sanctions law:

Hogan Lovells11th FloorOne Pacific Place88 QueenswayHong Kong



– 81 –

Legal advisers to the Sole Sponsor[,[REDACTED]

As to Hong Kong law:

MinterEllison LLPLevel 32, Wu Chung House213 Queen’s Road EastHong Kong

As to PRC law:

Beijing Dentons Law Offices, LLP16–21F, Tower BZT International CenterNo. 10, Chaoyangmen NandajieChaoyang DistrictBeijing, China

Auditor and Reporting Accountant PricewaterhouseCoopersCertified Public Accountants and RegisteredPublic Interest Entity Auditor22/F Prince’s BuildingCentralHong Kong

Industry consultant Frost & Sullivan LimitedSuite 1706One Exchange Square8 Connaught PlaceHong Kong

Compliance Adviser Advent Corporate Finance LimitedSuites 1008-8A, 10th FloorOcean CentreHarbour CityKowloonHong Kong

Licensed corporation under the SFO to carry out

type 6 (advising on corporate finance) regulated

activity (as defined in the SFO)

[REDACTED] [REDACTED]



– 82 –

Registered office 71 Fort StreetPO Box 500George TownGrand CaymanKY1-1106Cayman Islands

Headquarters and principal office ofbusiness in Hong Kong

Unit A&C4/F., King Win Factory Building65–67 King Yip StreetKwun TongKowloonHong Kong

Company secretary Ms. Hung Yat Ka PeggyCertified Public Accountant

Flat B, 21/FBlock 8Sea Crest Villa Phase 318 Castle Peak RoadTsing Lung TauN.T., Hong Kong

Authorised representatives Mr. Chim Kwok Yung RamthurFlat 11, 28/F, Wai Ming HouseYuk Ming CourtTseung Kwan ON.T., Hong Kong

Ms. Hung Yat Ka PeggyFlat B, 21/FBlock 8Sea Crest Villa Phase 318 Castle Peak RoadTsing Lung TauN.T., Hong Kong

Members of audit committee Mr. Ng Ming Kwan (Chairman)

Ms. Yao Qing

Mr. Kuan Hong Kin Daniel


CORPORATE INFORMATION

– 83 –

Members of remuneration committee Ms. Yao Qing (Chairlady)

Mr. Ng Ming Kwan


Members of nomination committee Mr. Chim Kwok Yung Ramthur (Chairman)

Ms. Yao Qing

Mr. Ng Ming Kwan


Cayman Islands principal shareregister and transfer office

[REDACTED]

Hong Kong branch share registrarand transfer office

[REDACTED]

Principal bankers China Construction Bank (Asia) Corporation Ltd.Suite 2508–1425/F, Tower 6The Gateway, Harbour CityKowloon, Hong Kong

Citibank, N.A., Hong Kong Branch21/F, Citi TowerOne Bay East83 Hoi Bun Road, Kwun TongKowloon, Hong Kong

DBS (Hong Kong) LimitedInstitutional Banking Group16th Floor, The Center99 Queen’s Road CentralCentral, Hong Kong

Company’s website enl-group.com(information of this website does not form part ofthis document)


CORPORATE INFORMATION

– 84 –

This section of this document contains information relating to the industry in which we

operate. Certain information and statistics contained in this section have been derived from

various official and publicly available sources. In addition, certain information and statistics

set forth in this section have been extracted from a market research report commissioned by

us and prepared by Frost & Sullivan, an independent industry consultant. We believe that the

sources of such information and statistics are appropriate and have taken reasonable care in

extracting and reproducing such information and statistics. We have no reason to believe that

such information or statistics are false or misleading in any material respect or that any fact

has been omitted that would render such information or statistics false or misleading in any

material respect. However, such information and statistics have not been independently

verified by us, the Sole Sponsor, the [[REDACTED], the [REDACTED]], any of the

[REDACTED], our or their respective directors and officers or any other persons or parties

involved in the [REDACTED] (which for the purpose of this paragraph, excludes Frost &

Sullivan). No representation is given as to the accuracy or completeness of such information

and statistics.

SOURCE AND RELIABILITY OF INFORMATION

Our Group commissioned Frost & Sullivan, an independent market search company, toconduct an analysis of, and to report on, the freight forwarding, warehousing and auxiliarylogistics services market in Hong Kong and the PRC. A total fee of approximately HK$1.2million was charged by Frost & Sullivan for the preparation of the Industry Report. The IndustryReport has been prepared by Frost & Sullivan independent of our Group’s influence. Except asotherwise noted, the information and statistics set forth in this section have been extracted fromthe Industry Report. The payment of such amount was not conditional on our Group’s successful[REDACTED] or on the results of the Industry Report.

Frost & Sullivan is an independent global consulting firm founded in 1961, and offersindustry research, market strategies and provides growth consulting and corporate training on avariety of industries.

The Industry Report includes information on the freight forwarding, warehousing andauxiliary logistics services market in Hong Kong and the PRC. The information contained in theIndustry Report is derived by means of data and intelligence gathering which include: (i)desktop research; and (ii) primary research, including interviews with key stakeholders includingbut not limited to freight forwarding’s works service providers and industry experts in HongKong and the PRC.

Information gathered by Frost & Sullivan has been analysed, assessed and validated usingFrost & Sullivan’s in-house analysis models and techniques. According to Frost & Sullivan, thismethodology ensures a full circle and multilevel information sourcing process, whereinformation gathered can be cross-referenced to ensure accuracy. All statistics are based on theinformation available as at the date of the Industry Report. Other sources of information,


INDUSTRY OVERVIEW

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including government, trade associations or market place participants, may have provided someof the information on which the analysis or data is based.

Save for the foreseeable impact of adverse events such as the outbreak of COVID-19, Frost& Sullivan developed its estimates or forecast on the following principal bases and assumptions:(i) it is assumed that the global economy maintains a steady growth during the forecast period;(ii) the social, economic and political environment in Hong Kong and the PRC will remainstable during the forecast period; (iii) market drivers, namely supportive government policies,development of the Greater Bay Area and enhancement of logistics facilities, would continue todrive the growth of the freight forwarding, warehousing and auxiliary logistics services marketin Hong Kong and the PRC during the forecast period; and (iv) the outbreak of COVID-19 inHong Kong and the PRC and overseas markets are under effective control in the long run with agradual resumption of economic performance thereafter, with reference to the same assumptionstaken by the International Monetary Fund in preparation of the World Economic Outlookpublished in October 2021.

Such market forecast has taken into account the impacts of the COVID-19 outbreak andSino-U.S. trade war on the import and export, freight forwarding services and warehousing andauxiliary logistics services in Hong Kong and the PRC, details as set out in “Impact of theCOVID-19 outbreak and Sino-U.S. trade war on freight forwarding and logistics industry inHong Kong and the PRC” in this section below.

OVERVIEW OF MACROECONOMIC ENVIRONMENT

Total import and export value in Hong Kong

The import value and export value in Hong Kong recorded a positive growth at CAGRs ofapproximately 5.8% and 6.7%, respectively, from 2016 to 2021. Along with the trade conflictsbetween the U.S. and the PRC, as well as the outbreak of COVID-19 in December 2019, theimport value and export value in Hong Kong had decreased in 2020. The import value andexport value in Hong Kong had strongly rebounded by approximately 24.3% and 26.3% in 2021,respectively, and are expected to continue their growth afterwards at CAGRs of approximately5.1% and 5.5%, respectively, from 2022 to 2026.

Total import and export value (Hong Kong), 2016–2026E

2016 2017 2018 2019 2020 2021 2022E 2023E 2026E2025E2024E

4,008.4

3,588.2

4,357.0

3,875.9

4,721.4

4,158.14,415.4

3,988.74,269.8

3,927.5

5,307.84,960.7

5,573.25,233.5

5,863.05,510.9

6,162.15,808.5

6,488.66,139.5

6,813.06,477.1

2016–2021CAGR

Import value

Export value

5.8%

2022E–2026E

5.1%

6.7% 5.5%

7,000

5,000

6,000

3,000

4,000

1,000

2,000

0

Billion HK$

Import value

Export value

Source: Census and Statistics Department of Hong Kong, Frost & Sullivan


INDUSTRY OVERVIEW

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Total import and export value in the PRC

The PRC is one of the major manufacturing bases in the world, through which variousproducts are exported to the rest of the world. Supported by the global demand, the export valueof the PRC witnessed a stable growth from approximately RMB13.8 trillion in 2016 toapproximately RMB21.7 trillion in 2021, representing a CAGR of approximately 9.5%.Supported by the rising living standard in the PRC, the demand for imported goods wasincreasing. The import value of the PRC rose strongly from approximately RMB10.5 trillion in2016 to approximately RMB17.4 trillion in 2021, with a CAGR of approximately 10.6%.

The outbreak of COVID-19 in late 2019 has disrupted the global economy, but thepandemic has been effectively controlled in the PRC and most of the factories in the PRC haveresumed operations since April 2020 after the lifting of the nationwide lockdown measuresimposed by the PRC government. Therefore, the import value and export value in the PRC sawslower growth in 2020. The export value and import value in the PRC had strongly surged byapproximately 21.2% and 21.7% in 2021, respectively, and it is expected that the export andimport value in the PRC will further recover after the pandemic and witness growth at CAGRsof approximately 7.3% and 8.0%, respectively, from 2022 to 2026.

Total import and export value (the PRC), 2016–2026E

2016–2021CAGR

Import value

Export value

10.6%

2022E–2026E

8.0%

9.5% 7.3%

35

30

25

20

10

5

15

0

Trillion RMB

Import value

Export value

2016 2017 2018 2019 2020 2021 2022E 2023E 2026E2024E 2025E

10.5

13.812.5

15.314.1

16.414.3

17.2

14.3

17.9 17.4

21.7

18.8

23.2

20.3

24.9

22.0

26.7

23.7

28.6

25.6

30.7

Source: National Bureau of Statistics of the PRC, Frost & Sullivan

Cargo throughput by air, water and road transport (outward and inward freight movement)in Hong Kong

According to the Airports Council International, Hong Kong International Airport is thesecond largest air cargo centre in 2020 in terms of air cargo throughput. Owing to the increasingamount of trade volume in the PRC and Southeast Asia, the air cargo throughput in Hong Kongincreased from approximately 4,521.0 thousand tonnes in 2016 to approximately 4,703.5thousand tonnes in 2019. The slight decline of cargo throughput by air transport in Hong Kongin 2019 was mainly attributable to the heightened trade tension between the U.S. and the PRCwhich has adversely affected the export volume from Hong Kong. The decrease in air cargothroughput in 2020 was due to the drop in air cargo handling capacity as a result of the


INDUSTRY OVERVIEW

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implementation of quarantine measures and border controls in Hong Kong during the COVID-19outbreak. As the COVID-19 outbreak had been under control in Hong Kong in 2021, theassociated quarantine measures were relaxed in 2021. Together with the global economyrecovery and the rising global merchandise trade, the air cargo throughput in Hong Kongincreased from approximately 4,420.0 thousand tonnes in 2020 to approximately 4,987.0thousand tonnes in 2021. Driven by the (i) establishment of the Greater Bay Area and expeditedtrade activities; (ii) enhanced logistics facilities; and (iii) increasing cross-border e-commerce,the industry outlook of the air freight forwarding industry in Hong Kong remains positive and isexpected to continue to grow in the near future. In particular, the air cargo throughput in HongKong is expected to rise at a CAGR of approximately 2.5% from 2022 to 2026.

Cargo throughput by air, water (Note) and road transport (Hong Kong), 2016–2026E

2016 2017 2018 2019

21,904.0 22,310.0 21,616.0 20,404.0 19,099.0

92,646.0

Air Seaborne River Road

104,656.0 93,991.0 101,992.0 100,111.0

164,084.0

176,889.0

164,550.0161,324.0

149,174.0

4,521.0

4,937.4

5,017.9 4,703.54,420.0

283,155.0

308,792.4

285,174.9 288,423.5

272,804.0

2020 2021 2022E 2023E 2024E 2025E 2026E

20,845.0

64,475.0 64,797.3

149,256.0

4,987.0

239,563.0

21,053.4

151,047.1

5,116.6

242,009.4

65,121.2

21,263.9

152,859.6

5,239.3

244,484.0

65,446.8

21,476.5

154,693.9

5,370.2246,987.4

65,774.1

21,691.2

156,550.2

5,504.4

294,515.9

66,102.9

21,908.1

158,428.8

5,642.0

252,081.8 CAGR 2022E–2026E

Air 2.5%

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

Seaborne 1.2%

River 0.5%

Road 1.0%

Total 1.0%

2016–2021

0.2%

(1.9)%

(7.0)%

(1.0)%

(3.3)%

Thousand tonnes

Note: Water transport includes seaborne and river transportation.

Source: CAD, Frost & Sullivan

For the other ways of transportation, seaborne and road cargo throughput in Hong Kongrecorded a decline during 2016 to 2021 from approximately 164,084.0 thousand tonnes and21,904.0 thousand tonnes in 2016 to approximately 149,256.0 thousand tonnes and 20,845.0thousand tonnes in 2021, respectively, representing CAGRs of approximately (1.9%) and (1.0%),respectively. Meanwhile, river cargo throughput in Hong Kong recorded a moderate growth fromapproximately 92,646.0 thousand tonnes in 2016 to approximately 100,111.0 thousand tonnes in2020. The positive performance of river cargo transportation in Hong Kong in recent years wasmainly due to the increasing cost of cross-border road transportation. The drop in river cargothroughput in Hong Kong to approximately 64,475.9 thousand tonnes in 2021 was due to thedecrease in number of river vessel arrivals and the decrease in their total capacity. The totalcargo throughput in Hong Kong is expected to increase at a CAGR of approximately 1.0% from2022 to 2026, reaching approximately 252,081.8 thousand tonnes.

Cargo throughput by air, water and road transport (outward and inward freight movement)in the PRC

Attributable to the rapid development of e-commerce worldwide, the domestic and overseasdemands for Chinese products have been constantly increasing in recent years. From 2016 to2021, the cargo throughput by air transport in the PRC increased from approximately 15,104.0


INDUSTRY OVERVIEW

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thousand tonnes in 2016 to approximately 17,828.0 thousand tones in 2021, representing aCAGR of approximately 3.4%. Chongqing and Shanghai are major trade hubs in the PRC interms of air cargo throughput. The air cargo throughput in Chongqing and Shanghai alsorecorded positive growth during 2016 to 2021 with CAGRs of approximately 5.7% and 2.4%,respectively. The air cargo throughput in Shenzhen and Guangzhou increased at a CAGR ofapproximately 6.9% and 4.4%, respectively, from 2016 to 2021. The decrease of air cargothroughput in Shanghai since 2018 was due to the impact of the Sino-U.S. trade war which hasaffected the demand for international air cargo services in Shanghai, being a major internationaltransport centre in the PRC. Cargo throughput by air transport in the PRC recorded a declinefrom 17,100.0 thousand tonnes in 2019 to 16,075.0 thousand tonnes in 2020 due to the impact ofCOVID-19 and the decrease in the demand for freight forwarding as a result of slowdown inglobal economy while it regained the growth momentum in 2021 and attained approximately17,828.0 thousand tonnes the same year. With the recovery of trading activities and theeconomic growth, the air cargo throughput in the PRC is expected to increase at a CAGR ofapproximately 4.3% from 2022 to 2026.

Cargo throughput by air transport (Chongqing, Shanghai,Shenzhen, Guangzhou, the PRC), 2016–2026E

2016 2017 2018 2019

8,094.6

1,651.5

Chongqing Shanghai GuangzhouShenzhen Rest of the PRC

1,125.9

3,869.0

363.0

15,104.0

8,636.7

1,780.4

1,158.9

4,232.0

369.0

16,177.0

9,070.8

1,890.8

1,218.4

4,176.0

384.0

16,740.0

9,425.8

1,920.0

1,283.2

4,058.0

413.0

17,100.0

8,478.8

1,759.5

1,398.7

4,025.0

413.016,075.0

9,369.9

2,044.9

1,568.2

4,366.0

479.0

17,828.0

9,838.4

2,177.8

1,660.7

4,549.4

516.4

18,742.7

10,281.1

2,304.1

1,757.0

4,722.3

549.4

19,613.9

10,743.7

2,421.6

1,853.6

4,887.6

578.0

20,484.5

11,194.9

2,545.1

1,931.5

5,044.0

606.9

21,322.4

11,665.1

2,657.1

1,995.2

5,200.4

634.2

22,152.0

2020 2021 2022E 2023E 2024E 2025E 2026E

CAGR 2022E–2026E

Chongqing 5.3%

24,000

22,000

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

Shanghai 3.4%

Shenzhen 4.7%

Guangzhou 5.1%

Rest of the PRC 4.3%

2016–2021

5.7%

2.4%

6.9%

4.4%

3.0%

Total 4.3%3.4%

Thousand tonnes


Benefited from the steady global economic development, the positive external tradingperformance has driven the growth of port cargo throughput by water transport in the PRC. Thedecrease in port cargo throughput by water transport in Shanghai and Chongqing in 2019 and2020 was mainly due to the Sino-U.S. trade conflict which weakened the demand for watertransport in Shanghai and Chongqing. During 2016 to 2021, port cargo throughput by watertransport in the PRC recorded an increase at a CAGR of approximately 5.1%. The port cargothroughput by water transport in Shenzhen and Guangzhou increased at a CAGR ofapproximately 4.7% and 8.7%, approximately, from 2016 to 2021. Going forward, the port cargothroughput by water transport in the PRC is expected to increase at a CAGR of approximately5.7% from 2022 to 2026.


INDUSTRY OVERVIEW

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Port cargo throughput by water transport (Chongqingand Shanghai, the PRC), 2016–2026E

2016 2017 2018 2019

10,607.8

411.0

Chongqing Shanghai GuangzhouShenzhen Rest of the PRC

700.112,113.5

10,978.8

500.5750.6

12,644.2

11,398.7

594.0731.0

13,179.3

12,252.0

606.2663.5

13,950.8

12,856.5

612.4651.1

14,550.0

13,745.0

623.7698.3

15,543.4

14,542.2

676.7709.5

16,421.5

15,385.6

734.2720.9

17,351.1

16,278.0

796.6732.4

18,335.3

17,222.1

864.3744.1

19,377.3

18,221.0

937.8756.0

20,480.9

2020 2021 2022E 2023E 2024E 2025E 2026E

CAGR 2022E–2026E

Chongqing 2.5%

21,000

18,000

15,000

12,000

9,000

6,000

3,000

0

Shanghai 1.6%

Shenzhen 4.2%

Guangzhou 8.5%

Rest of the PRC 5.8%

2016–2021

2.7%

(0.1)%

4.7%

8.7%

5.3%

Total 5.7%5.1%

Million tonnes

Source: Frost & Sullivan

Note: Port cargo comprises seaborne cargo and river cargo. River cargo refers to a cargo transported by vesselsplying beyond the river trade limits, whereas seaborne cargo refers to a cargo carried by a ship, or a ship

that has left port.

International merchandise trade value

Driven by the positive economic performance of the developed countries, the internationalmerchandise trade value has experienced a steady growth during 2015 to 2020, fromapproximately US$16,555.7 billion in 2015 to approximately US$17,418.3 billion in 2020,representing a CAGR of approximately 1.0%. Due to the Sino-U.S. trade war since July 2018,the global trade performance has been adversely affected and recorded a slight decline inmerchandise trade value in 2019.

With the impact of the COVID-19 pandemic worldwide, it is expected that the merchandisetrade value will further decrease in 2020. However, it is estimated that the global economy willrecover in 2021 and hence driving the performance of international merchandise trade during2021 to 2025, reaching approximately US$22,871.4 billion in 2025, representing a CAGR ofapproximately 5.4%.

International merchandise trade value (global), 2015–2025E

2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E

16,555.7 16,044.017,739.9

19,472.418,933.0

17,418.318,550.5

19,663.520,646.7

21,679.0

2025E

22,871.4

2015–2020

CAGR 1.0%

2021E–2025E

5.4%

30,000

25,000

20,000

15,000

10,000

5,000

0

Billion US$

Source: World Trade Organisation, Frost & Sullivan


INDUSTRY OVERVIEW

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Cargo transportation

The capacity of cargo transportation in a specific location (such as the PRC and HongKong) is difficult to be quantified as there is no designated primary base for each physicalflight. Hence, it is not feasible to allocate capacity to a specific location, given the flight routesto and from Hong Kong are determined by market demand. Instead, the cargo transportationcapacity is generally computed per airline. For example, Cathay Pacific has a cargo capacity ofapproximately 12,066 available cargo tonne kilometres in 2021. Additionally, the cargotransportation capacity has declined across the industry. Air traffic companies have beenrevamping passenger flights to serve as cargo flights since 2020. There is a tendency for airtraffic providers to shift their focus to flying freight to make up for lost passenger revenue,which in turn increase the cargo transportation capacity amidst the COVID-19 outbreak.

OVERVIEW OF FREIGHT FORWARDING AND LOGISTICS SERVICES MARKET INHONG KONG AND THE PRC

Introduction of freight forwarding services market

Freight forwarding and logistics refers to the physical flow of goods from the point oforigin to the destination and generally includes a series of processes and services such astransportation, storage and warehousing, cargo handling, packaging, distribution processing,distribution, information processing, as well as security checking. In general, the typicalmodules of freight forwarding and logistics services vary based on the modes of transport (e.g.land – road and railway, water and air) in the PRC and Hong Kong.

Major modules of freight forwarding and logistics services in the PRC and Hong Kong

Typical modules of services

Freight forwarding Warehousing Value-added services

Road

Water

Air

Mod

es o

f tr

ansp

ort

• Trucking and related services such

as fleet management and route

planning

• Coastal shipping

• Inland water transportation

• Air freight transportation

• Warehousing related to

inland distribution

• Less-than-truckload

transshipment operations

• Container freight stations

• Inland container depots

• Port-based warehousing and storage

• Air freight transshipment

• Courier

• Cold chain

• Freight

forwarding

• Packaging

• Consultancy

• Freight forwarding

• Freight consolidation

• Non-vessel-operating

common carrier

• Customs clearance

• Express and courier services

• Freight forwarding

• Customs clearance

• Freight consolidation

• Packaging

• Consultancy


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Introduction of third-party logistics services

A third-party logistics service provider (3PL) is a logistics service contractor which offersone or a few outsourced specialised logistics services. These logistics service contractors areusually freight forwarding and warehousing and value-added services providers. The contractorsfacilitate the movement of parts and materials from suppliers to manufacturers and finishedproducts from manufacturers to distributors and end-customers. Specialised services offered bythird-party logistics service providers (3PLs) include services such as air, road and watertransportation, warehousing, cross-docking, inventory management, packaging and freightforwarding, etc.

Co-loading refers to the practice of combining consignments from more than one freightforwarder having the same destination in a unit load device on an aircraft or a container on avessel.

It is not uncommon for freight forwarders to consolidate their shipments by way ofco-loading in order to maximise the utilisation of cargo spaces and to achieve optimal costefficiency.

Consolidation refers to the process by which a number of consignments of goods ofdifferent weights, volumes and sizes are grouped together into a single consignment for carriagein order to maximise the utilisation of cargo spaces on an aircraft or a vessel.

Major service categories under third-party logistics services

Freight forwarding services and warehousing services are the major service categoriesunder third-party logistics services:

Freight forwarding services: involve different modes of transport carriers, such as airfreight, ocean freight and road freight. Freight forwarding services typically include pick-up atorigins, customs clearance, international export and import clearance, consolidation, packing,inventory management and delivery to end-customers.

Warehousing and auxiliary services: include inbound and outbound order processing,inventory services, labelling, barcoding, re-packing, storage, pick-and-pack services, inventorymanagement and control services, etc.


INDUSTRY OVERVIEW

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Value chain of freight forwarding and logistics services market

Freight forwarders serve consignor at the origin and at the destination of the shipmentthroughout the entire logistics operation. Prior to delivery, the freight forwarder will arrange forcargo space bookings, cartage for crating and consolidation at the service provider’s facility anddelivery to airport at the origin for loading. The service continues when the cargo arrives at thecargo terminal of its destination where agency or partner of the freight forwarder will provideservices including crate breakdown, storage, distribution and delivery to the consignee throughwarehousing and land freight transportation services providers.

Value chain of freight forwarding and logistics services market

Upstream

Industry value chain of air and ocean freight forwarding, warehousing and auxiliary services

Midstream Downstream

VendorAir/ocean

freightforwarder

Inboundwarehousing/

landtransportation

Air/oceanterminaloperation

at the origin

Air/oceantransportation

Air/oceanterminaloperation

at the destination

Outboundwarehousing/

landtransportation

Consumer

• Customers

• Shipping carrier

• Cargo handling company

• Ground transportation service

provider

• Land transportation company

• Warehousing company

• Freight forwarder

• Individual shipper

• Corporate shipper

Market size of land, air and sea freight forwarding services in Hong Kong

Benefitted from the proliferation of e-commerce platforms and more frequent tradingactivities with neighbouring Asian cities, revenue generated from land, air and sea freightforwarding services in Hong Kong grew moderately from approximately HK$136.5 billion in2016 to approximately HK$155.8 billion in 2021, representing a CAGR of approximately 2.7%.The decline in revenue in 2019 was mainly due to Sino-U.S. trade war which has impacted theinternational trade volume and the demand for freight forwarding services in Hong Kong. In2021, approximately 48.3% of the total revenue generated by freight forwarding services inHong Kong was from exporting services.

Due to the impact of the COVID-19 pandemic worldwide, international trade activities andthe demand and supply for freight forwarding services have both been weakened. The decreasein air cargo throughput is offset by the rising air cargo space price as a result of the surge inexport demand for face masks and other medical supplies from March to June 2020 whichenhanced the competition for air cargo spaces, which in turn led to an increase in the overallmarket size of air freight forwarding services in Hong Kong from approximately HK$50.5billion in 2019 to approximately HK$63.9 billion in 2020. By 2026, the land, air and sea freightforwarding services market in Hong Kong is expected to reach approximately HK$164.6 billion,representing a CAGR of approximately 3.1% during 2022 to 2026.


INDUSTRY OVERVIEW

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Revenue of land, air and sea freight forwarding services (Hong Kong), 2016–2026E

2016 2017 2018 2019 2020 2021 2022E 2023E 2026E

48.9

136.5144.8

152.3142.5

153.1 155.8145.5

153.0 156.5164.6

55.3 58.650.5 63.9 64.2

52.057.6 59.2

63.1

67.5 69.2 73.3 72.0 70.5 71.1 72.5 74.075.4 78.7

20.1 20.3 20.4 20.0 18.7 20.5 21.0 21.4 21.9

2024E 2025E

160.6

61.1

77.2

22.3 22.8

Total

CAGR 2016–2021

2.7%

2022E–2026E

3.1%


Sea freight forwarding services

Land freight forwarding services

5.6% 5.0%

1.0% 2.1%

0.4% 2.1%

180

160

140

120

100

80

60

40

20

0

Billion HK$


Revenue of freight forwarding services bymovement of freight (Hong Kong), 2021

Import

Export



48.3%

51.7%

Source: CAD, Frost & Sullivan

Note: Freight forwarding services include pick-up at origins, customs clearance, international export andimport clearance, consolidation, packing, inventory management and delivery to end customers.

Air cargo space price index in Hong Kong

During 2015 to 2018, the air cargo space price index in Hong Kong experienced a slightincrease from 98.8 in 2015 to 135.1 in 2018. The air cargo space price index decreased byapproximately 25.7% from 1 April 2019 to 30 September 2019, which was due to Hong Kongbeing affected by the uncertainties over the global economy and trade conflict during the periodand the overall air freight market in Hong Kong remained unpredictable because of the globalpolitical landscape and the negotiation of trade conflict between the PRC and the U.S.

With the outbreak of COVID-19, the cargo throughput by air transport in Hong Kongfurther declined and the average air cargo space price decreased from approximately US$3.1/kgin January 2020 to approximately US$2.6/kg in February 2020, representing a decrease ofapproximately 16.1%. Due to the surge in export demand for face masks and other medicalsupplies from March to June 2020, the air cargo space price recorded a rapid increase toapproximately US$4.5/kg in June 2020. Together with the resumption of electronics products inthe PRC, automotive factories in Germany began to re-open in April 2020, which enhanced themarket dynamics as they grapple with the higher rates of air cargo space in Hong Kong whilesourcing parts for manufacturing. The growth in air cargo space price slowed down in June2020, reaching approximately US$4.5/kg. In the second half of 2020, the price is stabilisedwithin the range of approximately US$3.4/kg and approximately US$5.4/kg in the forecastedperiod, given the lack of overall air cargo capacity due to the grounding of many passengerservices and the resumption of consumer spending in North America and Europe. November andDecember are generally the peak season for air freight forwarding in Hong Kong as variousshopping promotions take place that consumer spending in North America and Europe hasrapidly returned while companies have been going through a restocking cycle, which in turnincrease the demand for air freight forwarding services. The surge in air cargo space prices in


INDUSTRY OVERVIEW

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November and December is also a result of the lack of overall air cargo capacity due to thegrounding of many passenger services, which decrease the supply of air cargo spacesaccordingly. The air cargo space price in Hong Kong has increased from approximatelyUS$2.60/kg in 2019 to approximately US$4.40/kg in 2020.

With the resumption of economy and rising merchandise trades, the demand for air cargospace price in Hong Kong continued to rise accordingly in 2021. Given that COVID-19 wouldnot disappear in the near future, the current quarantine rules are expected to be in force in 2022,which would limit the air cargo capacity. As such, the air cargo space price in Hong Kongremained high at approximately US$4.70/kg in 2021. In particular, the air cargo space price inHong Kong surged in April 2021 and May 2021, due to the ongoing supply chain disruption andstrong demand for consumption goods in the summer.

Air cargo space price index (Hong Kong to worldwide), 2015–2021

0

50

100

150

200

0

5

10

15

Price index

(2014=100)

2015

98.8 107.3120.1

135.1

102.1

2.60

166.0

4.40

177.3

4.703.503.112.782.56

2016 2017 2018 2019 2020 2021

US$/kg

Price index of air cargo space Price of air cargo space (US$/kg)


Note: The data is calculated for the year ended 31 March. For example, 2017 refers to the period from 1 April2017 to 31 March 2018.

Market size of land, air and sea freight forwarding services in the PRC

In recent years, the freight forwarding services market in the PRC has been graduallygrowing, mainly driven by the positive performance of domestic economy and the increasingdemand for made-in-China products from foreign countries. During 2016 to 2021, the overallrevenue generated by land, air and sea freight forwarding services increased from approximatelyRMB1,184.0 billion in 2016 to approximately RMB1,460.2 billion in 2021, representing aCAGR of approximately 4.3%. Meanwhile, revenue attributable to air freight forwardingservices in the PRC has recorded the highest growth rate, with a CAGR of approximately 7.4%during 2016 to 2021, which is mainly due to the rapid development of aviation facilities in thePRC. In 2021, approximately 55.5% of the total revenue generated by freight forwardingservices in the PRC was from exporting services.


INDUSTRY OVERVIEW

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The outbreak of COVID-19 in the PRC in late 2019 has impacted the overall economy andled to the decrease in cargo throughput in the PRC. In particular, the rise in air cargo priceduring the COVID-19 outbreak due to the surge in demand for medical goods and decrease innumber of air flight has offset the decrease in air freight forwarding movements, which in turnlead to a rise in the revenue attributable to air freight forwarding services in the PRC. Thesignificant decrease in the attributable to land freight forwarding services in the PRC in 2020 isdue to the lockdown of cities during the first quarter of 2020 as a result of the COVID-19outbreak, which has restricted the land transportation services. The freight forwarding servicesmarket in the PRC in 2020 had experienced a decline and recovered afterwards in 2021. By2026, it is expected that the overall market in the PRC will reach approximately RMB1,768.6billion with a CAGR of 5.9% during 2022 to 2026.

Revenue of land, air and sea freight forwarding services (Mainland China), 2016–2026E

Total

CAGR 2016–2021

4.3%

2022E–2026E

5.9%




7.4% 4.0%

5.0% 6.2%

1.4% 5.4%


Revenue of freight forwarding services bymovement of freight (Mainland China), 2021

Import

Export

Sea freight forwarding servicesLand freight forwarding services

55.5%

44.5%

2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2026E

1,184.01,267.0 1,315.5

1,387.6 1,377.61,460.2 1,405.8

1,523.01,684.7

54.158.0 59.7

61.1 74.877.2 79.3

82.489.2

828.7 879.5 901.5 940.3 995.7 1,059.9 985.7 1,080.01,195.0

301.2 329.5 354.3 386.2 307.1 323.1 340.8 360.6

2025E

1,598.185.9

1,130.0

382.2 400.5

1,768.692.6

1,255.5

420.5

1,8001,6001,4001,2001,000

800600400200

0

Billion RMB


Market size of land, air and sea freight forwarding services in Shanghai

Supported by the high air cargo processing capability of Shanghai airports, the revenuegenerated by the air freight forwarding services market in Shanghai is in a leading positionamongst other PRC provinces and cities. In overall, the freight forwarding services market inShanghai recorded a moderate growth from approximately RMB64.0 billion in 2016 toapproximately RMB71.2 billion in 2021, representing a CAGR of approximately 2.2% during2016 to 2021. Air, sea and land freight forwarding services markets in Shanghai has generatedrevenue with CAGRs of approximately 6.9%, 0.5% and 4.6% during 2016 to 2021, respectively.Following the rapid increase in air cargo space prices during April to May 2020 and duringNovember and December 2020 due to the surge in demand for medical goods, the revenueattributable to air freight forwarding services in Shanghai increased from approximatelyRMB13.8 billion in 2019 to approximately RMB17.4 billion in 2020.


INDUSTRY OVERVIEW

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After the decline in the revenue attributable to sea and land freight forwarding services inShanghai in 2020 due to COVID-19, these two sectors are expected to recover from the start of2021, meanwhile the demand for air freight forwarding services will restore to a normal level asthe demand for medical goods is expected to decrease after the alleviated situation of COVID-19in the PRC. As a result, it is expected that the freight forwarding services market in Shanghaiwill reach approximately RMB74.0 billion by 2026, representing a CAGR of 2.4% during 2022to 2026.

Revenue of land, air and sea freight forwarding services (Shanghai), 2016–2026E



2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2026E2025E

64.068.8 67.3 64.6 66.0

71.267.4 68.9

72.2

12.914.1 14.0 13.8 17.4

18.017.1 17.5

18.5

47.9 51.4 50.0 46.5 45.2 49.2 46.2 47.1 48.9

3.2 3.3 3.3 4.3 3.4 4.0 4.1 4.3 4.8

74.0

19.1

49.9

5.0

70.5

17.9

48.0

4.6

2016–2021

Total

CAGR

2.2%

2022E–2026E

2.4%




6.9% 2.8%

0.5% 1.9%

4.6% 5.1%

80

70

60

50

40

30

20

10

0

Billion RMB

Note: Freight forwarding services includes pick-up at origins, customs clearance, international export andimport clearance, consolidation, packing, inventory management and delivery to end customers


Market size of land, air and sea freight forwarding services in Chongqing

During 2016 to 2021, the market size by revenue of freight forwarding services inChongqing recorded a moderate growth from approximately RMB22,820.0 million in 2016 toapproximately RMB26,220.0 million in 2021, representing a CAGR of approximately 2.8%. Thedecline in 2019 was due to the Sino-U.S. trade war which has affected the overall tradeperformance in the PRC, including Chongqing. The rapid growth of the revenue attributable toair freight forwarding services in Chongqing in 2018 and 2019 was mainly due to the completionof the fourth phase expansion of Chongqing Jiangbei International Airport since 2017.

With the outbreak of COVID-19 and its negative impact on the overall domestic economyin the PRC, the revenue of land, air and sea freight forwarding services in Chongqing decreasedfrom approximately RMB24,320.0 million in 2019 to approximately RMB23,110.0 million in2020. The significant decrease in the revenue attributable to land freight forwarding services inChongqing in 2020 is due to the lockdown of cities during the first quarter of 2020 as a result ofthe COVID-19 outbreak, which has restricted the land transportation services. The freightforwarding services market in Chongqing had recovered in 2021 and is expected to increase


INDUSTRY OVERVIEW

– 97 –

from approximately RMB25,490.0 million in 2022 to approximately RMB28,895.3 million in2026, representing a CAGR of 3.2% during 2022 to 2026.

Revenue of land, air and sea freight forwarding services (Chongqing), 2016–2026E

2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2026E2025E

22,820.025,450.0

26,880.024,320.0

23,110.0

26,220.0 25,490.0 26,375.928,895.3

16,620.018,860.0

19,560.016,500.0 15,900.0

18,500.0 17,390.017,772.5

19,083.1

5,200.0 5,520.0 6,200.0 6,580.0 5,700.0 6,100.0 6,400.0 6,800.0 7,705.0

2016–2021


2.8%

2022E–2026E

3.2%

CAGR

Total

10.1% 5.5%

Sea freight forwarding services 2.2% 2.3%

Land freight forwarding services 3.2% 4.7%

30,000

25,000

20,000

15,000

10,000

5,000

0

Million RMB

1,000.01,070.0

1,120.01,240.0

1,510.01,620.0 1,700.0 1,803.4

2,107.228,124.4

18,617.6

7,500.0

2,006.827,410.0

18,216.8

7,300.0

1,893.2




Market drivers of freight forwarding services market

(a) Supportive government policies

Supportive government policies drive the growth of the freight forwarding services marketin the PRC and Hong Kong. Due to stable economy environment and urban development in thePRC, the demand for freight forwarding services is rising. In order to develop logistics hubs indifferent key cities, the PRC government announced the National Logistics Hub Distribution andConstruction Plan (國家物流樞紐佈局和建設規劃) (the “Plan”) in 2018 which aims to build 30modern national logistics hubs by 2020 and 150 modern national logistics hubs by 2025. Also,the Plan aims to reduce logistics costs to under 12% of the PRC GDP by 2025 which wasapproximately 14.7% in 2019. As at December 2021, 70 national logistics hubs had beenconstructed, covering 29 provinces of the PRC. These policies aim to build up a efficient logisticnetwork across the PRC and enhance the service level of the industry which drive thedevelopment of freight forwarding services market in the PRC.

In the 2019 Policy Address, the Hong Kong government proposed to provide tax concessionfor ship lessors and leasing manager to develop ship leasing business and to provide taxconcessionary measures to attract commercial principals of the maritime industry to set upoffices in Hong Kong. The government also injected HK$200 million into the Maritime andAviation Training Fund in 2019 to enhance the training and nurturing of talent for the sectors.Moreover, the government is seeking to (i) streamline regulations with a view to facilitating theoperation of protection and indemnity club for shipowners in Hong Kong; and (ii) set upregional desks of the Hong Kong Shipping Registry (the “HKSR”) in selected Economic TradeOffices and liaison units to render more direct and prompter support to shipowners at the ports


INDUSTRY OVERVIEW

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concerned and to promote the HKSR. Under the encouraging policies in Hong Kong, morefreight forwarding services providers would base their operations in Hong Kong, which would inturn support the growth of the industry.

(b) Development of the Greater Bay Area

In February 2019, the State Council of the PRC has launched the “Outline DevelopmentPlan for the Guangdong – Hong Kong – Macao Greater Bay Area” (the “Outline DevelopmentPlan”) (粵港澳大灣區發展規劃綱要) which sets forth the development of the Greater Bay Area.The Outline Development Plan aims to build a modern comprehensive transport system toprovide support for socio-economic development of the Greater Bay Area. In particular, theestablishment of the Greater Bay Area enhances the network between Hong Kong and the PRCcities, which greatly encourages business activities and logistics services between Hong Kongand other cities in the Pearl River Delta region. The Greater Bay Area development allows fullintegration of transport networks in the region, including enhancing the internationalcompetitiveness of the Pearl River Delta port cluster and building world-class airport cluster.The regional transportation development allows service providers to seize opportunities andbuild a strategic co-operation platform for sea, land and air transport. In particular, the Transportand Housing Bureau of Hong Kong and the CAAC agreed in February 2019 to expand theircurrent air services arrangement, which allows designated airlines of both sides to enter intocode-sharing arrangements with operators of all types of land transport (including rail services,passenger vehicles and coaches) and sea transport between Hong Kong and the Pearl River Deltaregion. The development of transportation network would further enhance freight forwardingservices market in the Greater Bay Area.

(c) Enhancement of logistic facilities

Along with the increasing freight movement and improvement of overall logisticsefficiency, both the PRC and Hong Kong governments have planned the construction of andconstructed various mega infrastructure to support such demand. The PRC government hasdeveloped large-sized transportation infrastructure in major cities, such as the Beijing DaxingInternational Airport in 2019. Also, the PRC government has planned the development of 22national logistic hubs across different provinces by 2020 to enhance the logistics network in keyareas of the PRC, including the JingJinJi Metropolitan Region, the Yangtze River Delta and theGreater Bay Area. Other than logistics facilities on the national level, Hong Kong also hasdeveloped regional infrastructure to strengthen its function as a regional logistics hub. Forexample, the expansion of the Hong Kong International Airport would further increase the airtraffic volume, whereas the Tuen Mun – Chek Lap Kok Link that connects the northwest NewTerritories with the Hong Kong – Zhuhai – Macao Bridge would significantly shorten thedistance and reduce the cost for the flow of goods between Hong Kong and the PRC cities in thePearl River Delta region. Such advanced facilities would further strengthen the PRC and HongKong’s logistics efficiency and support the development of freight forwarding services.


INDUSTRY OVERVIEW

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Future trends and outlook of freight forwarding and logistics services market

(a) Evolution of specialised logistics services

Along with the rapidly developing e-commerce trend in the PRC and Hong Kong, peopletend to purchase various products through e-commerce platforms, including electronic products,household appliances, fresh food, etc. Hence, the demand for specialised logistics services suchas handling of fragile and time-sensitive items are increasing. Also, the demand for cold chainlogistics services is emerging in the PRC and Hong Kong as well. The cold chain and logisticsservices in the PRC are still in its early stage of development. However, the PRC government isputting a stronger emphasis on food safety and healthcare which would possibly accelerate thedevelopment of cold chain logistics services in the PRC as well.

(b) Automation of logistics and warehouse management

The freight forwarding and logistics services market is considered a labour-intensiveindustry which relies on manual labour to handle and schedule shipments, deliver cargos fromsupply chain to end-customers. Also, warehouse workers need to perform repetitive processes,such as receiving, picking and packing cargos. Furthermore, due to the increasing wage level ofworkers and operation costs, some logistics service providers have adopted advanced robots andautomation machines to reduce reliance on labours and tackle the increasing labour costs inwarehousing and distribution centres. The adoption of robotics and automation technologyenhances warehouse operational efficiency by reducing processing time and minimising humanerrors, and better utilises storage capacity.

(c) Application of data analytics and big data for logistics industry

Freight forwarding and logistics services providers are increasingly adopting big data anddata analysis to manage fleets, optimise resource consumption and improve operationalefficiency. In particular, the application of radio-frequency identification (RFID) tags andcomputer chips allows freight forwarder to keep track of warehouse inventory, while theintegration of real time global positioning system (GPS), fleet and labour schedules, real-timeroad data and weather data has optimised delivery route and time that overall improves serviceperformance and quality. Freight forwarding and logistics service providers adopting dataanalytics and big data can have efficient control over supply chain activities and make suitablestrategic decisions, and outperform their competitors by efficient operation management.

(d) Strengthening of air cargo security

To enhance the level of aviation security, the ICAO has announced a new policy directionto strengthen air cargo security which requires all air cargos to be subjected to mandatorysecurity screening by 30 June 2021. In order to help the industry to prepare for the new policy,the CAD has introduced the RASCF scheme in October 2018 to enable and regulate air cargoscreening at off-airport locations. The set-up of off-airport x-ray screening facilities will allowair cargos to be screened at the existing warehouses or premises of the air freight forwarders


INDUSTRY OVERVIEW

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before they are transported to the airport for loading onto the aircrafts. Therefore, the demandfor off-airport security screening services is expected to increase in the future.

Market opportunities of freight forwarding services market

(a) Rapid expansion of e-commerce platforms

E-commerce is expected to continue to expand in the years to come, particularly since thedevelopment of a ‘new normal’ shopping behaviour as a result of the global travel restrictionsand quarantine requirements due to the COVID-19 outbreak. The strong growth of e-commercetransactions in the PRC and Hong Kong has provided a huge boost to the demand for freightforwarding and logistics services, including express delivery and warehousing services.According to the National Bureau of Statistics of the PRC (中華人民共和國國家統計局), thenational online retail sales increased from approximately RMB5.2 trillion in 2016 toapproximately RMB13.1 trillion in 2021. Also, the gross merchandise value of e-commerce inHong Kong surged from approximately HK$25.4 billion to approximately HK$56.3 billionduring 2016 to 2021, representing a CAGR of approximately 17.3%. In addition, the large-scalee-commerce platforms (e.g. JD.com) also have developed in-house logistics facilities to enhancetheir service capacity and market presence.

(b) Growth of industrial sector in the PRC

The PRC is one of the major manufacturing bases in the world that manufactures a widerange of products, such as apparels, electronics, chemicals and exports to various overseasmarkets. Hong Kong plays an important role for re-export of products from the PRC to the restof the world. The strong growth of large-scale manufacturers in the PRC also requires acomprehensive supply chain to secure stable sources of materials and equipment to meet theproduction demand, including those imported raw materials. Therefore, the development ofmanufacturing sector is expected to drive the demand for logistics services in the PRC and HongKong.

Market challenges of freight forwarding services market

(a) Intensified regional competition

The PRC government has reduced tax on logistics enterprises and encouraged advancedlogistics management system to accelerate industry reform to enhance the development oflogistics industry in the PRC to keep up with the rapid domestic economic development.Moreover, the airports in Guangzhou, Chongqing and Shanghai have expanded from 2015 to2020, which has increased competition within PRC. As a result, such development of logisticsinfrastructure in the PRC would enhance its competitiveness and performance which wouldcreate potential pressure on the Hong Kong freight forwarding service market. Moreover, thefreight forwarding services industry in the PRC and Hong Kong also have to compete with otherlogistics hubs in Asia, such as Singapore and Japan.


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(b) Rising operational costs

Freight forwarding services industry is a labour intensive industry which would require alot of labour forces on cargo handling, delivery and warehousing services. In addition, theincreasing wages of workers in the PRC and Hong Kong would increase the labour cost of theindustry directly. Warehousing requires large spaces for efficient operations which would createa huge financial burden to the market participants. With the increasing labour cost, along withthe land cost, small-scale market participants may face fierce competition. As the freightforwarding industry is highly competitive, the price competition among market players and theincreasing operational costs may add pressure to and hinder the development of marketparticipants.

Average monthly wages of logistics-related personnel in Hong Kong

According to the Census and Statistics Department of Hong Kong, the average monthlywages of logistics-related personnel in Hong Kong saw a moderate growth from approximatelyHK$16,950 per month in 2016 to approximately HK$18,750 per month in 2021, representing aCAGR of approximately 2.0%. The growth of average monthly wages is mainly due to theincrease in level of minimum wage level in Hong Kong, as well as the increasing demand forworkers in the industry.

Average monthly wages of logistics-related personnel (Hong Kong), 2016–2021

0

16,500

17,000

18,000

17,500

19,000

18,500

HK$

16,950

17,500

18,350

18,90018,700 18,750

2016 2017 2018 2019 20212020

2.0%CAGR

2016–2021


Note: Logistics-related personnel include workers engaging in the import and export trade sector, as well asother transportation, storage, postal and courier services sector.


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Average monthly wages of logistics-related personnel in the PRC

According to the National Bureau of Statistics of the PRC, the average monthly wages oflogistics-related personnel in the PRC has registered a strong growth from approximatelyRMB5,672 per month in 2016 to approximately RMB7,967 per month in 2020, representing aCAGR of approximately 8.9%. The increasing wage is attributable to the improving livingstandard and economic development, as well as the continuous demand for workers in the PRC.

Average monthly wages of logistics-related personnel (the PRC), 2016–2021

0

6,500

6,000

7,000

8,000

7,500

RMB

5,672

6,108

6,904

7,683

7,967

2016 2017 2018 2019 2021

8.9%CAGR

2016–2020


Note: Logistics-related personnel refers to workers in the traffic, storage and mail business.

OVERVIEW OF WAREHOUSING AND AUXILIARY LOGISTICS SERVICES MARKETIN HONG KONG AND THE PRC

Market size of warehousing and auxiliary logistics services in Hong Kong

Warehousing and auxiliary logistics services generally involve inventory management andservices, such as labelling, re-packaging and coding services, which also contribute to anindispensable part of the entire integrated freight forwarding and logistics services market. Therevenue generated from warehousing and auxiliary logistics services recorded an increase fromapproximately HK$8.1 billion in 2016 to approximately HK$12.5 billion in 2021, representing aCAGR of approximately 9.0% during 2016 to 2021, primarily due to the surging rents offactories/warehouses and the rising needs for logistics services in Hong Kong. The outbreak ofCOVID-19 led to the slowdown in demand for warehousing which was partially offset by thesudden surge in demand for the storage of medical supplies in 2020. The revenue generated fromwarehousing and auxiliary logistics services in Hong Kong has declined from approximatelyHK$10.0 billion in 2019 to approximately HK$9.8 billion in 2020.

In response to changing customer demands, freight forwarders also provide morevalue-added services such as warehousing, distribution, total logistics and supply chainmanagement solutions. The revenue derived from warehousing and auxiliary logistics services inHong Kong is expected to reach approximately HK$15.5 billion by the end of 2026, representinga CAGR of approximately 4.3% during 2022 to 2026.


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Revenue of warehousing and auxiliary logistics services (Hong Kong), 2016–2026E

2017 2018 2019 2020 2021 2022E 2023E 2025E2024E

8.19.1

9.8 10.0 9.8

12.5 13.1 13.7 14.315.514.9

CAGR

2016–2021

9.0%

2022E–2026E

4.3%20

15

10

5

0

Billion HK$

2016 2026E


Market size of warehousing and auxiliary logistics services in the PRC

Pricing pressures due to increased competition and lower growth in demand fromdownstream markets following the outbreak of COVID-19 has placed downward pressure onindustry revenue growth. The revenue of warehousing and auxiliary logistics services in the PRChas therefore increased from approximately RMB551.9 billion in 2016 to approximatelyRMB634.2 billion in 2021, representing a CAGR of approximately 2.8%.

Going forward, with the continuous expansion of e-commerce market and improvingstandard and digitalisation of warehousing services in the PRC, the revenue of warehousing andauxiliary logistics services in the PRC is estimated to grow at a CAGR of approximately 5.7%during 2022 to 2026.

Revenue of warehousing and auxiliary logistics services (the PRC), 2016–2026E

551.9 582.1613.0 639.9 620.4 634.2 656.4 686.6

726.4

820.8770.7

CAGR

2016–2021

2.8%

2022E–2026E

5.7%1,000

750

500

250

0

Billion RMB

2017 2018 2019 2020 2021 2022E 2023E 2025E2024E2016 2026E



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Market drivers of warehousing and auxiliary logistics services

(a) Accelerated e-commerce activities

Over the past few years in the PRC and Hong Kong, the booming e-commerce has fueledthe expansion of warehousing where e-commerce platforms such as Taobao, JD.com andPinduoduo have expanded their warehouse network in view of increasing gross merchandisevalue registered every year. The gross merchandise value of e-commerce in the PRC increasedfrom approximately RMB26.1 trillion in 2016 to approximately RMB43.7 trillion in 2021, at aCAGR of approximately 10.9%, which contributes to the increasing needs for logistics, freightforwarding and warehousing services. In Hong Kong, e-commerce is developing rapidly as moreretailers set up omnichannel presence, while consumption patterns have gradually shifted online.The gross merchandise value of e-commerce in Hong Kong surged from approximately HK$25.4billion to approximately HK$56.3 billion during 2016 to 2021, representing a CAGR ofapproximately 17.3%. As consumers demand for faster and more efficient deliveries, majorwarehouse operators are making investments in automated storage and retrieval systems whichwill likely contribute to more efficient and responsive supply chains and greater productivity.Aside from increasing transaction volume, the categories of e-commerce goods have also beenbroadened. In light of the increasing demand for transportation of frozen food, cold chainwarehousing services involving cold storage, sorting and packaging, distribution, andinformation circulation have become increasingly common.

(b) Adoption of systematic management platform

A systematic and centralised management platform is crucial for business decision. Severalwarehouse management systems (WMS), warehouse control system (WCS) and enterpriseresource planning (ERP) software have been developed to cater to different business needs,which improve the process of handling in-and-outbound of goods, replenishment, sorting anddelivery and shipping operations. These platforms are capable of handling multiple shippers andmultiple warehouses in scattered locations in a centralised cloud system and are widely adoptedby leading logistic companies. For instance, by leveraging Cisco’s ability on information systemdesign and execution, DHL has engaged Cisco to develop sensor devices and the warehousemanagement systems (WMS) behind the scene, unleashing a higher level of operationalefficiency on tracking inventory on item level. As such, with increasing demand for trading andwarehousing along with the growing business complexity, warehouse management systems(WMS) is set to be a driver to increase throughput on cargo handling across Hong Kong and thePRC.

(c) Supportive government policies

The PRC government has rolled out a series of policies that underpin the development ofthe warehousing market. Strategically, the government has set up cross-border e-commerce zonesin 22 main cities such as Beijing in 2018 and 24 more in second-tier cities such as Shijiazhuangin 2020, with a view to increasing foreign companies’ engagement and their investment, whichin turn would stimulate the demand for construction of warehouses and hence the overall


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throughput. Financially, the government offered preferential tax rate to bulk commodity storagefacilities in both 2018 and 2020. The government announced on 8 February 2022 thatcross-border e-commerce comprehensive pilot zones will be set up in 27 more cities and regions,including Erdos in Inner Mongolia, Qingyuan, Chaozhou and Jieyang in Guangdong, andKashgar (Kashi) in Xinjiang. Specific implementation plans will be issued by theprovincial-level governments of the cities or regions concerned. The government also hasmapped out development plans regarding technology advancement, realisation of unmannedintelligent warehousing, amelioration of supplementary infrastructure, land supplies andutilisation, which collectively drive the growth of the business. Hong Kong as a strategic portfor the PRC, has benefitted from the establishment of the Greater Bay Area which amplifies theconnectivity between Hong Kong and the PRC cities, favouring business activities and logisticsservices between Hong Kong and other cities in the Pearl River Delta region.

Market trends of warehousing and auxiliary logistics services

(a) Improvement on warehouse layout and dynamics

There are multiple breakthroughs that reshape the operations of warehouses. Vertical LiftModules (VLMs) and push-back warehousing are designed to accommodate the needs of denseand high throughput of service providers, where standard pallets racking could reach a height ofat least 15 metres or more and several times deeper than previous single deck settings, ensuringthe optimisation of storage volume and space. Complementing and facilitating the operation,robotic palletisers and depalletisers are deployed to programme machinery to handle large-scalemovement of stack and unstack products, while automated storage and retrieval systems assist inbuffering, storing, and retrieving products and inventory on demand, leveraging their capabilityto reach elevated positions and handle as much as 5,500 pounds of package which could not bedone manually. Accordingly, the refinement of warehouse design and application of automationcontribute to augmented efficiency, accuracy and reduction in approximately 80% to 90% oflabour cost and recordable injuries. Furthermore, with the reduction of the number of on-sitelabours, warehousing companies could further expand their scope of warehousing goods toproducts such as hazardous chemicals, freezing or light sensitive commodities.

(b) Assimilation of advanced technologies into warehousing

The emergence of Internet of Things (IoT), artificial intelligence (AI) and 5G network havecollectively established the backbone of a new business model for warehousing. IoT leveragesradio frequency identification (RFID) to connect between electronic gadgets to fosterinter-device interaction while artificial intelligence (AI) and 5G underpin machine automation,deep-learning, connectivity, speed and reliability of network. Instead of gathering data manually,apparatus such as sensors, radio frequency identification (RFID) wearables, telematic devices,global positioning system (GPS) devices and robots are deployed with a view to storing andprocessing surrounding data which in turn translate to actionable intelligence. IoT-enabledwarehousing provides real-time and transparent data such as cargo lead times and tracked routes,identifies defects promptly, forecasts demand, and streamlines inventory management. Inparticular, JD Logistics, one of the leading Chinese logistics service providers, launched Asia’s


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largest integrated smart logistics centre in Dongguan in December 2019. Its self-developedwarehouse software system facilitates daily operations such as scheduling, coordination and datamonitoring. The automatic sorting system and stereoscopic storage area help improve efficiencyand better utilise warehouse spaces. In a long run, the demand for high-valued customisedlogistics services is increasingly common. Service providers could garner competitiveadvantages by leveraging a comprehensive database and advanced technologies to actualise aprogressive business operation model.

Market opportunities of warehousing and auxiliary logistics services

(a) Advancement of complementary technologies

The “Made in China 2025” initiatives and the Hong Kong Productivity Council haverespectively mapped out the importance of and development plan for the adoption of industrialArtificial intelligence of things (AIoT). The value chain of Artificial intelligence of things(AIoT) system has become increasingly mature, ranging from upstream extensive research anddevelopment of radio frequency identification (RFID) and machine learning chips, to midstreammanufacturing of apparatus and turnkey solution providers, which in turn contribute to laying arobust foundation on downstream applications especially for the logistics and warehouse sector.

(b) Land supply for use of warehousing

With a view to accommodating the increasing e-commerce and logistics activities, both thePRC and Hong Kong governments ensure ample quantities of land for warehousing uses arereleased in the market each year. To further supplement the introduction of these lands, the HongKong and PRC governments have also established surrounding infrastructure and transportationmeans for ease of convenience, securing the proximity and competitive advantages of theon-going land supplies.

Market threats of warehousing and auxiliary logistics services

(a) Demand fluctuation subject to economic circumstance

Similar to many other industries, warehousing service providers incur substantial fixedoperating costs such as costs on warehouse renting, labour, transportation vehicles,administration, information system software etc. Erratic demand during recession may poseconsiderable challenges on market participants with overwhelming idle resources, while thenature of seasonality of e-commerce trading also plays a significant role which impacts theperformance of the warehousing industry. Small companies may find the urge to adoptwarehouse management systems (WMS) to cope with the oscillation, which requires hefty costfor upgrading.


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(b) Implementation of RACSF scheme

The CAD has launched the RACSF scheme in October 2018, in which warehousing andstorage service providers may invest capital to install specific cargo x-ray screening equipmentat off-airport locations to comply with the new air cargo security standards initiated by theICAO. As customers are increasingly concerned about the complex handling procedures, sizeablewarehousing companies that are able to integrate regulated air cargo security screening facilitiesand operations into warehousing services on-site shall garner competitive advantage throughoffering streamlined and turnkey services.

Average monthly rental cost of warehousing space in Hong Kong

The average monthly rental cost per sq.m. of warehousing space in Hong Kong hasincreased over the past five years. Kowloon rental price has had the highest growth, withapproximately HK$181 per sq.m. recorded in 2016 increased to approximately HK$215 persq.m. in 2021, representing a CAGR of approximately 2.4%. The comparatively higher level ofindustrial building concentration in the Kowloon districts, such as the Kwun Tong and ShamShui Po industrial area, coupled with the active revitalisation programme for industrial buildingsin Kowloon, have contributed to a higher rental rate, resulting in the highest rental cost amongthe three regions. Meanwhile, in Hong Kong Island, rental price increased from approximatelyHK$175 per sq.m. recorded in 2016 to HK$197 per sq.m. in 2021, representing a CAGR ofapproximately 3.5%. The New Territories has registered the most affordable rate, withapproximately HK$128 per sq.m. recorded in 2016 increased to HK$156 per sq.m. in 2021,representing a CAGR of approximately 4.0%.

0

160

140

180

220

200

HK$ per sq.m.

175

128

181

185

134

189

204

194

146154

205

210 215

197

156

208

193

152

2021

2.4%Hong Kong Island

Kowloon

New Territories

Hong Kong Island

Kowloon

New Territories

3.5%

4.0%

CAGR 2016–2021

2016 2017 2018 2019 2020

Source: Rating and Valuation Department of Hong Kong, Frost & Sullivan


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Average monthly rental cost of warehousing space in the PRC

The average monthly rental cost per sq.m. of warehousing space in the PRC has seen anincrease over the past five years. Shanghai exhibits a higher rental owing to the geographicaland strategic advantage of logistic ports, where the average monthly rental cost increased fromapproximately RMB39.67 per sq.m. in 2016 to approximately RMB46.01 per sq.m. in 2021, witha CAGR of approximately 3.0%. Chongqing’s average monthly rental cost has seen an increasefrom approximately RMB23.82 per sq.m. in 2016 to approximately RMB25.18 per sq.m. in2021, with a CAGR registered at approximately 1.1%.

0

60

40

RMB per sq.m.

3.0%Shanghai

Chongqing

Shanghai

Chongqing 1.1%

CAGR 2016–2021

46.01

25.18

2021

39.67

23.82

2016

40.02

24.40

2017

25.69

41.05

2018

25.56

45.68

2019

45.85

24.90

2020


Average monthly salary of employed person of warehousing services in Hong Kong

In Hong Kong, both the monthly salaries of warehouse managers and clerks have seen astable increase in the past five years. The average monthly salary of a warehouse managerincreased from approximately HK$38,900 in 2016 to approximately HK$43,452 in 2021,representing a CAGR of approximately 2.2%. The average monthly salary of a warehouse clerkincreased from approximately HK$13,114 in 2016 to approximately HK$15,939 in 2021, with aCAGR of approximately 4.0%.

0

50,000

40,000

30,000

20,000

10,000

HK$

38,900

13,114

40,101

14,054 14,687

41,468

15,500

42,316 43,45242,434

15,427 15,939

2.2%Warehouse manager

Warehouse clerk

Warehouse manager

Warehouse clerk 4.0%

CAGR 2016–2021

20212016 2017 2018 2019 2020



INDUSTRY OVERVIEW

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Average monthly salary of employed person of warehousing services in the PRC

The average monthly salaries of warehouse managers and warehouse clerks in the PRChave both seen an increase in the past five years. The average monthly salary of a warehousemanager increased from approximately RMB11,267 in 2016 to approximately RMB16,982 in2021, representing a CAGR of approximately 8.6%, largely owing to the demand forhigh-calibre individuals to operate and handle advanced systems and software. The averagemonthly salary of a warehouse clerk increased from approximately RMB4,768 in 2016 toapproximately RMB5,475 in 2021, with a CAGR of approximately 2.8%.

0

30,000

20,000

10,000

RMB

11,267

4,768

13,483

4,771

15,473

4,848 5,180

15,611

8.6%Warehouse manager

Warehouse clerk

Warehouse manager

Warehouse clerk 2.8%

CAGR 2016–2021

5,475

16,982

5,310

16,392

20212016 2017 2018 2019 2020

COMPETITIVE LANDSCAPE AND ENTRY BARRIERS OF FREIGHT FORWARDINGSERVICES IN HONG KONG AND THE PRC

Ranking of freight forwarders by revenue in Hong Kong

The tier-1 freight forwarding services providers in Hong Kong generally record the annualrevenue of more than HK$1.5 billion. They are generally global leading mega logistics groupswith widespread worldwide logistics network and business coverage. In addition, they have highlevel vertical and horizontal integration whereby they generally serve as air and marine carriersas well, with in-house international freight transportation capability and capacity.

The tier-2 freight forwarding services providers in Hong Kong are generally local andregional players with networks covering certain focused logistics locations and categories ofgoods. They have relatively less diversified services portfolio with freight forwarding as a keyrevenue source. Leading tier-2 market participants are becoming more capable of offering a widerange of transportation and logistics services to the customers and serve as integrated logisticssolution providers, while small- and medium-sized tier-2 market participants still centre onfreight forwarding and basic value-added services.

As at March 2022, there were approximately 1,300 air freight forwarding servicesproviders, 2,300 ocean freight forwarding services providers and 7,000 freight forwardingservices providers in Hong Kong.


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In Hong Kong, the leading market players, i.e. tier-1 players, are usually internationallogistics services providers and the aggregate market share of the top five players in the freightforwarding market in Hong Kong in terms of revenue in FY2022 was approximately 13.0%. Themarket dominance of international enterprises is primarily attributable to their integratedlogistics services offerings, economies of scale and extensive industry experience.

In FY2022, our Group recorded revenue of approximately HK$486.0 million (being therevenue generated by our Group for freight forwarding services with Hong Kong as departureport) and had a market share of approximately 0.3% in the overall freight forwarding services inHong Kong.

Ranking of freight forwarders by revenue (Hong Kong), FY2022

Rank Market participants Estimated revenue in FY2022 (Billion HK$)

Estimated market share in FY2022 (%)

1 Company A 5.0 3.2

3.0

2.6

2.4

1.7

13.0

100.0

4.7

4.0

3.8

2.7

20.2

155.8

Company B

Company C

Company D

Company E

Sub-total

Total

Year ofestablishment

1980

1969

1907

1981

1971

2

3

4

5


Notes: Freight forwarding services refer to the provision of air, ocean and land freight forwarding services.

The estimated revenue in FY2022 refers to the revenue generated by market participants with HongKong as the departure port for FY2022.

Company A is a global transport and logistics company based in Switzerland and founded in 1890. It islisted on the SIX Swiss Exchange.

Company B is a subsidiary of a German multinational package delivery and supply chain managementcompany listed on the London Stock Exchange.

Company C is an American multinational package delivery and supply chain management companylisted on the New York Stock Exchange.

Company D is engaged in the provision of third party logistics, freight services, warehouse operationsand supply chain solutions. It is based in Hong Kong and listed on the Stock Exchange.

Company E is an American multinational courier delivery services company headquartered in Memphisand listed on the New York Stock Exchange.


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Ranking of tier-2 freight forwarders by revenue in Hong Kong

The tier-2 freight forwarders are generally local and regional players with networkscovering certain focused logistics locations and categories of goods, and have relatively lessdiversified services portfolio with freight forwarding as a key revenue source. The leading tier-2players are becoming more capable of offering a wide range of transportation and logisticsservices to the customers and serve as integrated freight forwarding and logistics servicesproviders. Our Group is classified as the tier-2 freight forwarding services providers.

In FY2022, the total revenue of the freight forwarding services of the tier-2 players inHong Kong amounted to approximately HK$90,364 million, and the market is highly fragmentedwith the top five market participants accounting for an aggregate of approximately 5.5% of themarket share in terms of revenue.

In FY2022, our Group recorded revenue of approximately HK$486.0 million (being therevenue generated by our Group for freight forwarding services with Hong Kong as departureport) and accounted for a market share of approximately 0.5% in the tier-2 freight forwardingservices market in Hong Kong.

Ranking of tier-2 freight forwarders by revenue (Hong Kong), FY2022

Rank Market participants Estimated revenue in FY2022 (Million HK$)


1 Company F 1,700.0 1.9

1.0

0.9

0.9

0.8

5.5

100.0

875.2

835.3

811.6

739.5

4,961.6

90,364.0

Company G

Company H

Company I

Company J

Sub-total

Total

Year of establishment

1989

1981

1979

2000

2002

2

3

4

5



The estimated revenue in FY2022 refers to the revenue generated by market participants with HongKong as the departure port for FY2022.

Company F, headquartered in Hong Kong and founded in 1989, provides integrated logistics services. Itoffers international freight forwarding, airfreight, origin logistics, international hub, container haulageand distribution, cold chain logistics, liner shipping agency and freight consulting services.

Company G, headquartered in Hong Kong and founded in 1981, is an integrated logistics serviceprovider engaging in ocean and air freight forwarding, warehousing as well as e-commerce logisticssolutions services.

Company H, headquartered in Hong Kong and founded in 1979, provides various logistic andtransportation services, including ocean freight, air freight, cross-border haulage between Hong Kongand the PRC, warehousing, cargo inspection, inland container depot operation, container freight stationoperation, third party logistics and insurance brokerage, etc.


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Company I, headquartered in Hong Kong and founded in 1999 is a freight forwarding services providerbased in Hong Kong and engaged in air export and import freight forwarding services.

Company J, headquartered in Hong Kong and founded in 2000, is a long-established freight forwarderheadquartered in Hong Kong, with sales force in Hong Kong and six regional offices in the PRC. It islisted on the Stock Exchange.

Ranking of freight forwarders by revenue in the PRC

As at March 2022, there were approximately 40,000 land, air and sea freight forwardingservices providers in the PRC. The top five freight forwarding service providers in the PRC interms of revenue accounted for a market share of approximately 12.1% of the market share inFY2022.

Our Group accounted for a market share of approximately 0.03% with revenue ofapproximately RMB416.6 million (equivalent to approximately HK$506.0 million) (being therevenue generated by our Group for freight forwarding services with the PRC as the departureport) in FY2022.

Ranking of freight forwarders by revenue (the PRC), FY2022

Rank Market participants Estimated revenue in FY2022 (RMB Billion)


1 Company K 82.4 5.6

1.9

1.7

1.5

1.4

12.1

100.0

27.7

24.2

21.5

20.8

176.6

1,460.20

Company L

Company M

Company N

Company O

Sub-total

Total

2

3

4

5



The estimated revenue in FY2022 refers to the revenue generated by market participants with the PRCas the departure port for FY2022.

Company K is a leading freight forwarding service provider in the PRC established in 2003, engagingin air, sea, rail freighting forwarding, warehousing and terminal services. It is listed on the StockExchange and the Shanghai Stock Exchange.

Company L establishes its freight forwarding business mainly within the PRC by establishing internetplatform to facilitate trades. It is listed on the Shanghai Stock Exchange.

Company M has been offering freight forwarding services and maritime logistics for more than 25years, covering most continent around the globe. It is listed on the Shanghai Stock Exchange.

Company N is a world wide freight forwarding service provider with presence in over 58 countries andterritories and it is headquartered in Hong Kong.

Company O is an integrated third-party logistics enterprise providing general warehousing and logisticsand freight forwarding services in multimodal transport encompassing air, land and sea.


INDUSTRY OVERVIEW

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Factors of competition

(a) Scale of operation and financial resources

Scale of operation and financial capability serve as key factors of competition in thelogistics market, including freight forwarding services in Hong Kong and the PRC. Leadingmarket players may have the capability to provide vertically integrated logistic service rangingfrom freight forwarding, warehousing, storage, distribution and courier services to clients whichenable them to enjoy better cost advantage over other market players. In the meantime, marketparticipants are required to be financially capable for business operations and facility upgrade inorder to maintain their competitiveness in the market. Moreover, market participants are usuallyrequired to have adequate cashflow for depositing cash with banks for issuance of bankguarantees to directly reserve cargo spaces with airlines.

(b) Extensive operational experiences

Having a profound understanding of various logistics requirements for different industries,such as fast-moving consumers goods, electronic parts, pharmaceutical and perishable goods, arecrucial for market players to outcompete other players in the freight forwarding markets in HongKong and the PRC. For example, temperature sensitive and fragile products require marketparticipants to demonstrate in-depth industry know-how to deliver the products safely in themost effective and efficient way. Market players who can leverage their industry knowledge andexperience would be more successful in the industry. Such level of operational experienceswould also allow market players to provide high quality services and satisfy customers’ variousneeds.

(c) Experienced management team

A team of highly experience management team, with their industry expertise and leadershipskills, has the capability to provide more comprehensive freight forwarding services of higherquality to customers and to capture more potential opportunities in the market. Furthermore, thesenior management team, who has more extensive market and industry knowledge, can providemore flexible operational strategies to meet the market development and trends, which is alsoone of the key factors of competition in the market. On the other hand, the experiencedmanagement team could leverage their business connections with airlines and shippingcompanies to reserve cargo spaces in a timely manner.


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Entry barriers

(a) Substantial initial capital investment

Substantial amount of capital is required when new market entrants establish their businessin the freight forwarding service markets in Hong Kong and the PRC for, among other thingsprocurement of specific machineries and vehicles, warehouse and facility spaces rental, as wellas worker recruitment for daily operations. In addition, market players are usually required todeposit cash with banks for issuance of bank guarantees in order to reserve airline cargo spaces.Existing market participants, with established business and operations, may enjoy economies ofscale which enable them to better control cost and capital usage. Therefore, market entrantswithout sufficient capital investment may not be able to compete with the existing players.

(b) Relationship with upstream suppliers and downstream customers

In order to offer a more competitive price and better time arrangement for transportation,established freight forwarders in Hong Kong and the PRC generally have established stable andhealthy business relationships with the airline carriers and shipping companies. New marketentrants without an extensive business network may not be able to build such level of businessrelationship with other industry stakeholders and may not be able to compete with the existingmarket participants. Moreover, the leading market players may have an extensive global businessnetwork with overseas and regional-focused freight forwarders worldwide which enables them tosatisfy customers’ needs on various delivery destinations more efficiently. In addition, newmarket entrants may not be able to join the international freight forwarder networks which aregenerally subject to stringent approval requirements including but not limited to fulfilment ofspecific financial ratios as well as regular and ongoing peer review. New market entrants withlimited efficiency and standing may not have such network and customers may prefer workingwith the existing players.

(c) Service offerings

Existing freight forwarding market players, with better financial resources and experience,generally have the capability to provide a wide range of value-added services to customers, suchas pick-up collection, transportation, customs clearance and delivery services. Meanwhile, themarket entrants, with limited resources, may only be able to provide value-added services of alimited scope to customers. Existing market players which are able to provide one-stop servicesmay generally be more preferred by customers limited service offerings may not be able tocompete.


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IMPACT OF THE COVID-19 OUTBREAK AND SINO-U.S. TRADE WAR ON FREIGHTFORWARDING AND LOGISTICS INDUSTRY IN HONG KONG AND THE PRC

COVID-19 outbreak

In December 2019, there was an outbreak of COVID-19 worldwide, which is anticipated tobring a short-term impact to the global economy, including Hong Kong and the PRC. Due to theoutbreak of COVID-19, a number of industries, such as tourism, public transportation, food andbeverage, manufacturing and logistics, have been adversely affected, which has led to thedisruption of the global supply chain as a large number of manufacturers in the PRC havetemporarily suspended their operations or have only maintained limited operations, as well asthe reduction in distribution and retail sector, resulting in cancellation of sales contracts andshipping contracts. The freight forwarding and logistics industry in general was negativelyaffected by the outbreak of COVID-19, due to, among other things, reduced international andinter-provincial flow of goods, unavailability of workers across the PRC due to extensive travelrestrictions and mandatory quarantine requirement, the temporary closure of factories in the firstquarter of 2020 and more stringent import and export procedures in place due to the COVID-19outbreak, which increases the administrative costs of freight forwarders. After the PRC hasadopted semi-city lockdown and/or closed door community management measures, the surgingnumber of confirmed cases of COVID-19 in the PRC appeared to have slowed down graduallysince March 2020. On the other hand, driven by the surge in export/re-export demand for facemasks and other medical supplies from Hong Kong and the PRC to the U.S. and Europe, thedemand for air cargo spaces, warehousing and storage spaces in Hong Kong and the PRC andthe export/import of such products from/into the Hong Kong and PRC, as well as air cargoprices, experienced a rapid increase in April 2020 and May 2020 due to the urgency of needs.

The WHO is working in collaboration with scientists, enterprises and global healthorganisations to speed up the pandemic response. In particular, Pfizer and BioNTech presentedpreliminary data on 9 November 2020 indicating that their coronavirus vaccine was over 90percent effective. On 11 December 2020, the U.S. Food and Drug Administration issued the firstemergency use authorisation (EUA) for a vaccine for the prevention of COVID-19 caused bysevere acute respiratory syndrome coronavirus 2 (SARS-CoV-2) in individuals 16 years of ageand older. The emergency use authorisation allows the Pfizer-BioNTech COVID-19 Vaccine tobe distributed in the U.S. With the launch of vaccines, the impact of COVID-19 is likely todiminish and the global economy would recover in the near future.

According to World Economic Outlook Report published by the International MonetaryFund (the “IMF”) in October 2020, the global economy in terms of nominal GDP is projected tocontract by approximately 4.4% in 2020, representing an upward revision from an estimate ofapproximately (4.9)% made in June 2020. Although COVID-19 would not disappear until themass reception of vaccine, the increasing public awareness and social distancing measures haveproved to be effective in combating COVID-19. Frost & Sullivan is of the view that theCOVID-19 would be effectively controlled in the long run.


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The freight forwarding industry in Hong Kong and the PRC is subject to uncertaintiesunder the COVID-19 outbreak including but not limited to: (i) limited supply of cargo spacesdue to the prolonged suspension and/or cancellation of passenger flights and other carriers; (ii)slowdown in the global economy, in particular, the U.S. and decline in consumer consumption ofnon-essential goods; (iii) shutdown of manufacturing factories located in the PRC and SoutheastAsia regions; (iv) delay in launches of new products such as electronics and luxury goodsattributable to, among other things, disruption of global supply chains and uncertain customersentiments; and (v) mandatory quarantine controls on vessels upon arrival at ports.

From the start of July 2020, Hong Kong had the third wave of COVID-19 outbreak and theHong Kong government has imposed several suppressive measures to control the situation, suchas restricting dine-in during dinner time, closing down sport facilities and cinemas, etc. In lateNovember 2020, Hong Kong experienced the fourth wave of COVID-19 outbreak and the dailyrecorded cases have risen to more than 100, being the highest level since July 2020. The HongKong government has re-imposed suppressive measures, such as restricting dine-in after 6 pm,closing down beauty and massage parlours and sport facilities, etc. Some new measures havealso been implemented, such as increasing penalty amount for violating public gatheringregulation and introducing “Leave Home Safe” contact tracing app.

In early 2022, Hong Kong had been heavily hit by the fifth wave of the outbreak ofCOVID-19 due to Omicron variant. The Hong Kong government has tightened the quarantinemeasures for Hong Kong-based air cargo crews. After the fifth wave of the outbreak ofCOVID-19 in Hong Kong, it is expected that the quarantine measures in Hong Kong will begradually relaxed and the operations of the freight forwarding and logistics industry in HongKong will then return to normal and will not be materially affected in the near future.

Since March 2022, the PRC has been heavily struck by the outbreak of Omicron variantwith daily cases rising to the peak of nearly 30,000 cases in mid-April 2022. The CAACimposed certain circuit breaker on inbound flights, in order to contain the number of passengerswith COVID-19 that arrive in the PRC.

In addition, the PRC government has imposed lockdown and quarantine measures forcertain cities, including some major cities with considerable logistics throughput, such asShanghai, Guangzhou and Shenzhen, due to the spread of Omicron variant. During the lockdownperiod in Shanghai, (i) for air cargo freight in Shanghai, all air freight forwarders must apply forauthorisation to perform daily pickup services. As a result of the labour shortages under theimposition of city-wide quarantine and lockdown measures, some international airlines hadcancelled cargo flights to/from Shanghai Pudong International Airport. Besides, all custombrokers at Shanghai Pudong International Airport were required to work from home, whileclearance of cargo freights which require special and manual inspection was not available duringthe lockdown period; and (ii) for ocean cargo freight in Shanghai, all container yards has beentemporarily shut down, resulting in a considerable amount of freight in Shanghai beingtemporarily put on hold. The air and ocean cargo freight in Guangzhou and Shenzhen were notmaterially affected given the relatively low number of reported COVID-19 cases as at the LatestPracticable Date.


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Owing to the fact that the number of reported COVID-19 cases in Shanghai had reached thepeak at mid-April 2022 and Shanghai is currently in the progress of effectively containing thespread of Omicron variant, Shanghai is on track to resume production at key manufacturing sitesfrom mid-April 2022 and businesses are expected to gradually return to normal in the thirdquarter of 2022. Up to the Latest Practicable Date, most of the manufacturing operations andbusinesses in the PRC outside Shanghai were not materially affected by the outbreak of Omicronvariant in the PRC.

In addition, e-commerce has greatly enhanced the connectivity between retailers ormanufacturers and customers which allows the consumers to gain access to various categoriesand types of confectioneries on the same e-commerce platform, thus achieving better productpromotion and development by enlarging customer base. Accordingly, it is expected that thebooming of e-commerce would facilitate the integration of physical stores and e-commerce andsupport the growth of other sales channels, which in turn drive the freight forwarding andlogistics industry. With the outbreak of COVID-19, there is a growing demand in thee-commerce sector as more people order online in order to avoid the spread of disease throughphysical contacts and inconvenience caused by disrupted transportation, closure of offices,suspension of public facilities and certain isolated areas. For instance, e-commerce companies,Alibaba and JD.com, have racked up around US$134 billion in sales across their platformsduring the Singles Day shopping event in 2021 in the PRC, both setting new records. The risingcross-border e-commerce would increase the demand for freight forwarding and logisticsservices in Hong Kong and the PRC. It is expected that the e-commerce market will continue togrow in the future even after the COVID-19 outbreak becomes under effective control.

Hence the outbreak of COVID-19 is expected to cause a short-term economic slowdown butmay not affect the markets in Hong Kong and the PRC in the long run. Frost & Sullivan alsoremains positive to the growth of the freight forwarding and logistics services market in HongKong and the PRC in the long run.

Sino-U.S. trade war

Since July 2018, the U.S. has implemented several rounds of import tariffs ranging from10% to 25% on certain products notably steel, aluminum, ores, chemicals, fertiliser, plastic,rubber, electronic products and wood. The PRC, in response to the U.S. tariffs, has continuallyimposed and increased tariffs on products imported from the U.S. as a counter measurement. Asa result, the significant tariff imposed has led to a plummet on trading volume between the twomajor economies, hence dampening the demand for trading activities and hence subduingdemand for import and export, and cross-border freight forwarding services and consequentiallyleading to a reduction in the needs for warehousing and auxiliary logistics services, particularlyin the PRC, as the U.S. continues to look for import and export alternatives from other regions,such as the South East Asia. The Sino-U.S. trade war has, to a certain extent, contributed to theuncertainties surrounding the freight forwarding and logistics industry. The Sino-U.S. trade warhas brought about continuous impact on the global economy and in particular, somemanufacturers based in the PRC have relocated to or shifted part of their production to otherregions, such as other Asian countries, amidst the trade war. As such, there has been a decrease


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in the volume of export consignments from the PRC to the U.S. and the demand for the relevantfreight forwarding services accordingly.

The U.S. and the PRC entered into a phase one economic and trade agreement on 15January 2020 with a view to deescalating the Sino-U.S. trade war. Pursuant to the phase onetrade agreement which came into effect on 14 February 2020, the countries agreed on, amongother things, expanding bilateral trade in the future through reducing U.S. tariffs and increasingpurchases of certain U.S. products and services by the PRC by approximately US$200 billion forthe two-year period from 1 January 2020 to 31 December 2021. According to the U.S.Department of Commerce, the PRC’s import and export value with the U.S. reachedapproximately US$560.1 billion in 2020, with an increase of approximately 0.4% compared tothe import and export value in the previous year, and it reached approximately US$657.4 billionin 2021. The phase one trade agreement is expected to benefit, among other things, the freightforwarding logistics industry by the two countries gradually resuming and promoting tradeactivities between them in the coming years.

Overall impacts

The COVID-19 outbreak and Sino-U.S. trade war have brought about a negative impact onmost industries in the PRC and Hong Kong, including the freight forwarding industry, mainlydue to (i) the introduction of more stringent import and export procedures in the PRC and HongKong; (ii) the mandatory quarantine requirements and travel restrictions imposed by differentcountries around the world; (iii) the mandatory suspension of operations of the manufacturers inthe PRC; (iv) the reduced international and inter-provincial flow of goods; and (v) the relocationof production base from PRC to other Asian countries.

(i) More stringent import and export procedures and requirements in the PRC andHong Kong

With an aim to control and contain the COVID-19 outbreak, more stringent import andexport procedures and requirements have been put in place in the PRC and Hong Kong. Inaddition, the PRC promulgated the new Export Control Law of the People’s Republic ofChina (中華人民共和國出口管制法) (“Export Control Law”), which came into force inDecember 2020. Export Control Law is the first comprehensive and consolidated exportcontrol law in the PRC that provides for export controls in respect of dual-use items,military products, nuclear products, other goods, technologies, services and items thatrelate to protecting national security and interests and fulfilling international obligationsrelating to non-proliferation. The enforcement of Export Control Law is expected to entail amore stringent custom cargo clearance process and a potentially lengthier lead time forcargo inspection prior to the transportation. In spite of the stringent requirement, there arefew policy directions that alleviate the lead time required during logistics transports, suchas the Single E-lock Scheme. The Single E-lock Scheme facilitates intermodaltransshipment of cargos between Hong Kong and Guangdong province through GPS deviceto reduce duplicate inspection on the same shipment by both customs authorities at theboundary. The introduction of more stringent import and export procedures and


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requirements including a more stringent custom cargo clearance process may have causedadditional administrative work and costs on the part of the freight forwarders, suchprocedures and requirements are, however, hardly regarded as a barrier or hurdle for theultimate customers in the long run particularly amid the rapid growth of e-commerce,which has become a ‘new normal’ shopping behaviour around the world.

(ii) Mandatory quarantine requirements and travel restrictions

Mandatory quarantine requirements and travel restrictions have been imposed bydifferent countries around the world as a result of the COVID-19 pandemic. Suchrequirements and restrictions restraint passenger travels internationally and within acountry, and hence have a negative impact on the passenger flights industry andmanufacturing and logistics businesses which are labour intensive. They, however, did notand will not have much negative impact on cargo transportation. Save for, as discussedabove, the cancellation of certain cargo flights to/from Shanghai Pudong InternationalAirport as a result of the lockdown and quarantine measures in Shanghai due to the recentoutbreak of Omicron variant in April 2022, the cancellation of aircrafts was mainly seen inthe passenger segment while the COVID-19 pandemic did not result in large-scalecancellation of cargo aircrafts.

(iii) Mandatory suspension of operations of the manufacturers in the PRC

Pursuant to the nationwide lockdown measures imposed by the PRC government as aresult of the COVID-19 outbreak, the operations of the manufacturers in the PRC wererequired to suspend mandatory in March 2020. The freight forwarding and logisticsindustry in general was negatively affected by the outbreak of COVID-19, due to, amongother things, the temporary closure of factories in the first quarter of 2020. In view that thepandemic has been effectively controlled in the PRC and most of the factories in the PRChave resumed operations since April 2020, the import value and export value in the PRCexperienced a slower further growth in 2020. Following the global economic recovery, thetotal import and export value in the PRC increased in 2021.

Since March 2022, the PRC has been heavily struck by the outbreak of Omicronvariant with daily cases rising to the peak of nearly 30,000 cases in mid-April 2022. Inaddition, the PRC government has imposed lockdown and quarantine measures for certaincities, including some major cities with considerable logistics throughput, such asShanghai, Guangzhou and Shenzhen, due to the spread of Omicron variant. As discussedabove, up to the Latest Practicable Date, most of the manufacturing operations andbusinesses in the PRC outside Shanghai were not materially affected by the outbreak ofOmicron variant in the PRC. Shanghai is on track to resume production at keymanufacturing sites from mid-April 2022 and businesses are expected to gradually return tonormal in the third quarter of 2022. The impact on the demand for freight forwardingservices in the PRC, especially Shanghai, is considered to be temporary due to thelockdown and quarantine measures in the PRC and such demand is expected to recoverquickly after the easing of COVID-19 control measures in the PRC. Thus, it is expected


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that the export and import value in the PRC will recover after the pandemic is controlledand will further grow at CAGRs of approximately 8.0% and 7.3%, respectively, from 2022to 2026. The impact arising therefrom is not expected to have a long lasting effectparticularly when the COVID-19 pandemic is under control.

(iv) Reduced international and inter-provincial flow of goods

The disruption of the global supply chain due to the COVID-19 outbreak as well asthe rising protectionist sentiment in recent years, have reduced international andinter-provincial flow of goods. The total export value worldwide peaked at 2018 atapproximately US$19.3 trillion, with a CAGR of approximately 5.6% during 2015 to 2018,and subsequently declined at a CAGR of approximately (5.5)% during 2018 to 2020.

It is expected that the outbreak of COVID-19 is unlikely to affect the growth of themacroeconomic development in the PRC and Hong Kong in the long run, and thatinternational and inter-provincial flow of goods will be on the rising trend as and whenCOVID-19 pandemic gradually subsides. The total export value worldwide is expected toreach approximately US$24.0 trillion in 2022.

International trade protectionism, such as trade war, is one of the main contributors tothe global trade slowdown in recent years. Considering the increasing level of economyvolatility in the past few years, trade barriers, including imposing tariffs and non-tariffbarriers to trade, are increasingly used to protect their domestic industries against foreignimports. Weakening multilateral trading system cause an increase in length of time requiredto transport goods as a more complicated custom clearance procedure is often required andthere is rising cost particularly on tariffs that dampens the market sentiment of tradingactivities.

The Sino-U.S. trade war is a prominent example of trade protectionism. Hong Kong asa transshipment port facilitating import and export activities particularly between the PRCand foreign countries has been negatively impacted by the Sine-U.S. trade war, as exportsfrom the PRC passing through Hong Kong to the U.S. are still subject to the tariff rate thatapplies to the PRC. In particular, the U.S. imports into Hong Kong were approximatelyHK$212.9 billion, equivalent to less than 5% of Hong Kong’s total imports in 2019, anddown approximately 7.9% from 2018.

Going forward, the future development of trade protectionism is still likely todetermine the future growth of the industry. For instance, the president of the U.S., has notissued any new measures or imposed any new tax on any new Chinese products sinceSeptember 2020, while the export volume from the PRC to the U.S. has regained growthmomentum, with a year-on-year growth recorded at approximately 8.1% during 2019 to2020. The U.S. revocation of Hong Kong’s special status may as well affect the preferentialstatus of Hong Kong.


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Nevertheless, on the positive side, Hong Kong is benefitted by the “first-sales rule”.According to the Hong Kong Trade Development Council, the use of the rule has risen alot. With the first-sales rule, exports to the U.S. that go through more than one location willbe charged duties based on the price of the initial sales. For example, when a Chineseexporter sells goods to a Hong Kong re-exporter at a lower price, then the Hong Kongre-exporter sells at a higher price to a U.S. importer, the tariff will be based on the firsttransaction. As such, the tariff paid could be lowered when there is a throughput via HongKong. On the other hand, international trade barrier has also stimulated domestic demandwhere it is more feasible for downstream industries to source from domestic supplierswhenever possible, propelling the demand for domestics freight forwarding andwarehousing services.

It is anticipated that once the outbreak of COVID-19 is effectively controlled andnotwithstanding the impact from the Sino-U.S. trade war, the outlook of the demand forfreight forwarding services, and logistics and related value-added services in both the PRCand Hong Kong will remain positive.

(v) Relocation of production base from PRC to Southeast Asian countries

Attributable to the growing availability of skilled labour and lower labour cost,countries, such as Vietnam, Malaysia, India and Indonesia, become few additional optionsof manufacturing outsourcing locations and take up a share of production from the PRC.Additionally, the trade dispute between the U.S. and the PRC has escalated the cost ontariffs and hinder the transfer of technology from the U.S. to the PRC, which has led to ashift of production facilities from the PRC to other countries. The relocation of theproduction base of some manufacturers from the PRC to other Asian countries as a result ofthe Sino-U.S. trade war has led to a decrease in the volume of export consignments fromthe PRC for FY2020. It serves as a market challenge to the export activities from the PRCas a origin, subsequently threatening the demand for freight forwarding, warehousing andauxiliary services. Nevertheless, the manufacturing industry in the PRC is underpinned bythe developed, comprehensive and agglomerated local supply base with abundant skilledlabour, strategic development partners, and logistics and supply chain network. Attributedto the advanced infrastructure and favourable government policies in the PRC, brandowners still opt the PRC as the manufacturing base for high-end products, such assophisticated integrated circuit, semiconductor and electronic vehicles. The provision ofintegrated manufacturing solutions in the PRC serve as an impetus to the export activitiesand freight forwarding services and alleviates the impact of production base relocation.

In addition, foreign enterprises in the PRC have restored their confidence inconducting businesses in the PRC and the likelihood of substantial relocation of productionand warehouses out of the PRC is improbable in the future mainly attributable to the factthat (i) there are a number of reasons for manufacturers based in the PRC not to relocatetheir production base from the PRC, including (a) a large internal consumer market in thePRC; (b) availability of experienced and skilled labour with lower cost of labour; (c)comprehensive supply chains; and (d) extensive network of transport infrastructure; (ii)


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foreign enterprises are optimistic about the business outlook and their operations in thePRC and have no plans of relocation out of the PRC in general based on recent surveysconducted by certain prestigious U.S. and European chambers of commerce in the PRC in2021; and (c) the amount of the PRC’s foreign direct investments (the “FDI”) inflowsachieved a record high of approximately US$173.5 billion in 2021 representing ayear-on-year increase of approximately 20.2% and about 43,370 new foreign-investedenterprises were registered during January to November in 2021, representing ayear-on-year increase of approximately 29.3%. For further details, please refer to “Business– Customers – Our business sustainability and customer demand for freight forwardingservices” in this document.


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This section summarises the main laws and regulations that are applicable to our businessin the principal jurisdictions we operate.

REGULATORY REQUIREMENTS IN HONG KONG

Aviation Security Ordinance (Chapter 494 of the Laws of Hong Kong)

The Aviation Security Ordinance makes provisions for the prevention and suppression ofacts of violence against civil air transport. It constitutes the comprehensive legislation for theimplementation of aviation security conventions and agreements promulgated by the ICAO. Tosafeguard international civil aviation against acts of unlawful interference, the ICAO has laiddown standards and recommended practices in Annex 17 to the Convention on InternationalCivil Aviation (the “Annex 17”) on security measures required to be implemented by contractingstates. To adhere to the measures in Annex 17 regarding air cargo security, a regulated agentregime (“RAR”) was incorporated under the Hong Kong Aviation Security Programme in March2000.

Under the RAR, cargo handling agents, freight forwarders or any other entities that conductbusinesses with airline carriers can apply to the CAD to be registered as a RA. A RA is requiredto comply with the requirements for the prevention of any unauthorised carriage of explosivesand incendiary devices in the consignments of cargo intended for carriage by air.

A RA should ensure that appropriate security control measures acceptable by the CAD areimplemented on cargo for carriage by air. Upon acceptance of a consignment of cargo from aknown consignor, documentation and appearance checks should be performed by a RA, ensuringthat no explosives or incendiary devices are contained in the cargo. Alternatively, if a RAaccepts a consignment of cargo from an unknown consignor, it may request cargo terminaloperators (“CTOs”) to perform security checks on the consignment. Documents of theconsignment of cargo, including air waybill, shipper’s letter of instruction and cargo manifestshould be kept for 31 days after the consignment is flown. A RA should also protect all knowncargo from unlawful interference until such air cargo is accepted by airlines for air carriage andsegregate all known cargo from unknown cargo.

Each RA must have at least two staff members who have either attended and completed asecurity training programme acceptable to the CAD or have passed the RA Revalidation Testorganised by the CAD. The relevant passing notifications and training certificates carry avalidity of three years.

As at the Latest Practicable Date, EN HK was registered as a RA.


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In view of the increasing concern of air safety and security, the ICAO has announced inSeptember 2016 that it aims to phase out all cargo consignors that are not subject to theapproval of the authority for aviation security by 30 June 2021. To comply with the ICAO’s newpolicy, the CAD has implemented the following two measures:

Validation of Known Consignors by the CAD

Under the previous policy of the RAR, consignors are only recognised by RAs as“Known Consignor” (“KC”) or “Account Consignor” (“AC”) by submitting a declaration ofcompliance to RAs, whereby RAs maintain a register of recognised KCs and ACs. To meetthe ICAO’s new requirements, consignors will either have to:

• be approved by the CAD as “validated” KCs; or

• be an “unknown consignor” with all their cargos subject to 100% securityscreening prior to being loaded onto a commercial aircraft.

Applications for registration as a validated KC must be submitted to the CAD before 1March 2021. Validated KCs may be exempted from compulsory screening before cargos areloaded onto aircrafts as long as the integrity of cargo can be maintained in the entire supplychain. Any consignors that were unable to be approved by the CAD before 1 March 2021would be treated as unknown consignors and their cargos would be subject to compulsoryscreening by CTOs or RACSFs. All existing KCs and ACs who were previously recognisedby RAs had ceased effect starting from 1 March 2021 and became unknown consignors ifthey were not successfully validated by the CAD.

Enhanced Cargo Security Screening Capacity

Under the previous quality control requirement of the RAR, only 1% of the cargos ofKCs and ACs were required to be x-ray screened by RAs. Following the ICAO’s tightenedair security policy direction, the CAD had put in place a transition arrangement andrequired all RAs to gradually increase the screening percentage of known cargos consignedby existing KCs and/or ACs which had not been validated by CAD to 100% in phasesbefore 30 June 2021. The transition arrangement commenced in January 2020 and wasdivided into four phases:

• phase one: from January 2020 to April 2020, whereby 25% of cargos must bex-ray screened;

• phase two: from May 2020 to August 2020, whereby 40% of cargos must bex-ray screened;


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• phase three: from September 2020 to February 2021, whereby 70% of cargosmust be x-ray screened; and

• phase four: from March 2021 to June 2021, whereby all cargos must be x-rayscreened.

During the transition period, RAs were required to submit screening summary reportsto the CAD on a monthly basis, failure of which would result in suspension orderegistration of RA status.

To cope with the increased screening demand, the CAD has further introduced theRACSFs scheme to facilitate x-ray screening of air cargo at off-airport locations. RACSFsequipped with x-ray facilities accepted by the CAD can provide alternative screeninglocations for RAs to conduct security checks apart from having the cargo monitored atCTOs. Under the RACSFs scheme, upon the acceptance of cargo from unknown consignors,RAs should transport the cargo to a RACSF for security screening, documentation andappearance checks at the premises of a RACSF. Similar to the current RAR, both RAs andRACSFs are responsible for the secure transportation of the screened cargo from RACSFsto CTOs or airlines, so that there will be no unlawful interference before the cargo isaccepted for airlines. All security screening logs and copies of security screening receiptsfor every consignment of air cargo screened must be kept for at least three months afterscreening. Any x-ray images or recordings of screened cargos should also be maintained forat least 31 days after screening is conducted.

RAs and warehouse operators who wish to offer off-airport x-ray screening facilitycan register with the CAD to become RACSFs. Each RASCF shall have two persons asNominated Persons for Cargo Security, who have completed RACSF security trainingprogramme acceptable to the CAD, to be held accountable for overseeing the effectiveimplementation of cargo security operations and compliance with the requirements in theRACSF Programme. The training certificates carry a validity of three years.

As at the Latest Practicable Date, the ICAO’s tightened air security policy directionwas fully implemented, and the CAD has recognised 152 RACSFs to conduct air cargosecurity screening at off-airport locations.


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Dangerous Goods (Consignment by Air) (Safety) Ordinance and Dangerous Goods(Consignment by Air) (Safety) Regulations (Chapters 384 and 384A of the Laws of HongKong)

The Dangerous Goods (Consignment by Air) (Safety) Ordinance (the “DGO”) governs thecontrol, in the interests of safety, the preparation, packing, marking, labelling and offering ofdangerous goods for carriage by air. Dangerous goods, that are capable of posing threats tohealth, safety, property or the environment when transported by air, are defined in the DGO asany article or substance which is listed in the Technical Instructions for the Safe Transport ofDangerous Goods by Air published by the ICAO (the “Technical Instructions”) and any articleor substance not so listed but having properties corresponding to those of one of the generalclassifications of articles and substances in the Technical Instructions. The ICAO has classifieddangerous goods into nine classes, including:

• Class 1 – Explosives;

• Class 2 – Gases;

• Class 3 – Flammable liquids;

• Class 4 – Flammable solids; substances liable to spontaneous combustion; substanceswhich, in contact with water, emit flammable gases;

• Class 5 – Oxidising substances and organic peroxides;

• Class 6 – Toxic and infectious substances;

• Class 7 – Radioactive material;

• Class 8 – Corrosive substances; and

• Class 9 – Miscellaneous dangerous substances and articles.

Under the Dangerous Goods (Consignment by Air) (Safety) Regulations (the “DGR”), asubsidiary legislation of the DGO, all consignors, including shippers and freight forwarders,must ensure that all dangerous goods are properly classified, packed, marked, labelled anddocumented according to the requirements set out in the Technical Instructions before consignedfor carriage by air. Any person who contravenes the DGR commits an offence and is liable onconviction on indictment to a fine of HK$250,000 and imprisonment of two years or onsummary conviction to a fine of HK$50,000 (level five) and imprisonment of one year. Also,every consignment of dangerous goods by air should be accompanied by an air waybill and ashipper’s declaration for dangerous goods (the “Shipper’s Declaration”). Such Shipper’sDeclaration must be signed by a person who has completed dangerous goods training within thepast 24 months. Any untrained person signing the declaration is liable to a fine of HK$25,000(level four) and imprisonment of six months.


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As required by the DGR, staff member of freight forwarders should attend trainingprogrammes before performing the functions of processing cargo containing dangerous goods,the failure of which will constitute an offence, and both the freight forwarder and the staffmember who does not complete the necessary training are liable to a fine of HK$25,000 (levelfour) and imprisonment of six months. Further, a freight forwarder commits an offence if it failsto ensure that each member of its staff has received training before processing cargo (notcontaining dangerous goods) or handling, loading or storing cargo, and is liable to a fine ofHK$25,000 (level four) and imprisonment of six months.

In addition, every director and officer concerned in the management of the shipper orfreight forwarder which commits an offence, may be convicted of the like offence as specifiedunder the DGO.

The Warsaw Convention

The Warsaw Convention is the Convention for the Unification of Certain Rules Relating toInternational Carriage by Air signed at Warsaw in 1929. It unifies the rules and regulatesliability, in the event of accident, for international carriage by air of persons, luggage or goodsperformed by aircraft. The Warsaw Convention has undergone various amendments and wasfinally superseded by the Montreal Convention, formally known as the Convention for theUnification of Certain Rules for International Carriage by Air, which was signed in 1999 andcame into force in 2003.

The Montreal Convention

The Montreal Convention calls for greater international uniformity of legislation in relationto liabilities of airline and international carriage of passengers, baggage and cargo. The MontrealConvention is applicable to the international carriage of cargo by air between two state partieswhich are parties to it.

The provisions of the Montreal Convention are set out in Schedule 1A to the Carriage byAir Ordinance (Chapter 500 of the Laws of Hong Kong) (the “CAO”), so far as they relate tothe rights and liabilities of carriers, carriers’ servants and agents, passengers, consignors,consignees and other persons, and subject to the CAO, have the force of law in relation to anycarriage by air to which the Montreal Convention applies, irrespective of the nationality of theaircraft performing that carriage.


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Under Schedule 1A to the CAO, a carrier is liable for the destruction or loss of, or damageto cargo only if the damage is caused during the carriage by air. However, the carrier will not beliable if and to the extent that it proves that the destruction, loss of or damage to the cargoresulted from one or more of the following situations:

• inherent defect, quality or vice of that cargo;

• defective packing of that cargo performed by a person other than the carrier or itsservants or agents;

• an act of war or an armed conflict; or

• an act of public authority carried out in connection with the entry, exit or transit ofthe cargo.

For any action that is brought against the servants or agents of a carrier in relation to thedamage caused during the carriage by air, such servants or agents, if they prove that they haveacted within the scope of their employment, they shall be entitled to avail themselves of theconditions and limits of liability which the carrier itself is entitled to invoke under the MontrealConvention. Such provision shall not apply if the damage was proved to be caused (i) with anintent to cause damage or recklessly; and (ii) with knowledge that damage would probablyresult. The aggregate of the amounts recoverable from the carrier, its servants and agents shallnot exceed the limits as stipulated in the CAO.

Import and Export Ordinance (Chapter 60 of the Laws of Hong Kong)

The Import and Export Ordinance (the “IEO”) provides for the regulation and control of (i)articles being imported into or exported from Hong Kong; and (ii) the handling and carriage ofarticles within Hong Kong which have been imported to Hong Kong or which may be exportedfrom Hong Kong and any matter incidental to or connected with the foregoing. The IEO alsoempowers any member of the Customs and Excise Department of Hong Kong (the “CSD”) tostop, board and search any vessel, aircraft or vehicle that carries goods imported into orexported from Hong Kong and protect Hong Kong against smuggling.

Under the Import and Export (Registration) Regulations (Chapter 60E of the Laws of HongKong) (the “IER”), a subsidiary legislation of the IEO, persons who import or export any articleother than an exempted article into or from Hong Kong shall lodge with the Commissioner ofCustoms and Excise (the “Commissioner”) an accurate and complete import or exportdeclaration within 14 days after the importation or exportation of such article. Any importer orexporter who knowingly or recklessly lodges declarations that are inaccurate in any materialparticulars is liable on summary conviction to a fine of HK$10,000 (level three). Further, anyfailure to file the import or export declaration within the stipulated time without reasonableexcuse is an offence and is liable on summary conviction to a fine of HK$2,000 (level one) anda daily fine of HK$100, commencing from the day following the date of conviction.


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For the imports or exports of prohibited articles, strategic commodities and reservedcommodities, consignors should obtain the necessary licences, permits and certificates from therelevant departments of the Hong Kong government to prevent any contravention of the IEO.

To facilitate the import and export of goods into and from Hong Kong, shipping companies,airlines and freight forwarders can register under the transhipment cargo exemption scheme (the“Exemption Scheme”), of which certain transhipment cargo is exempted from the import andexport licensing requirements under regulation 6 of the Import and Export (General) Regulations(Chapter 60A of the Laws of Hong Kong), a subsidiary legislation of the IEO. The ExemptionScheme applies to transhipment cargo containing goods, including pharmaceutical products,frozen or chilled meat and poultry, Chinese herbal medicines, powdered formula, roughdiamonds or other conditions specified by the Director-General of Trade and Industry (the“Director-General”). Any violation to the conditions imposed by the Director-Generalconstitutes an offence and the shipping companies, airlines or freight forwarders are liable onconviction to a fine of HK$500,000 and imprisonment of two years. The Director-General mayalso revoke or suspend any exemption granted to the importers or exporters.

As at the Latest Practicable Date, EN HK was registered under the Exemption Scheme.

Importers, exporters or freight forwarders shall be liable for the acts and omissionscommitted by their agents and may be prosecuted for any offence committed by the agents as ifthe importers, exporters or freight forwarders had committed the offence in relation to theExemption Scheme.

Dutiable Commodities Ordinance (Chapter 109 of the Laws of Hong Kong)

The Dutiable Commodities Ordinance (the “DCO”) governs the law relating to the taxationand control, and the licensing of dealings in liquors, tobacco, hydrocarbon oil, methyl alcoholand other substances. Under the DCO, any person who wishes to import, export and removedutiable commodities should apply for, among others, an import and export licence (the “Importand Export Licence”) from the CSD. The Import and Export Licence carries a validity of oneyear and shall be renewed on a yearly basis. Importers or exporters of dutiable commodities whofail to possess a valid licence are in contravention of the DCO and are liable to a maximum fineof HK$1 million and imprisonment of two years.

Importers and exporters of zero-rated duty liquors, i.e. liquors with an alcoholic strength ofnot more than 30% by volume measured at a temperature of 20 degree Celsius, and wine are notrequired to apply for the Import and Export Licence for the imports or exports of such liquors.


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Telecommunications Ordinance (Chapter 106 of the Laws of Hong Kong)

The Telecommunications Ordinance (the “TO”) governs the licensing and control oftelecommunications, telecommunications services and telecommunications apparatus andequipment. Any business entity who wishes to (i) deal in radiocommunications transmittingapparatus (“RTA”); and (ii) import into or export from Hong Kong RTA should apply for a radiodealer licence (unrestricted), the failure of which is an offence and is, in respect of (i), liable onconviction on indictment to a fine of HK$100,000 (level six) and imprisonment of five years; oron summary conviction to a fine of HK$50,000 (level five) and imprisonment of two years; andin respect of (ii), liable on summary conviction to a fine of HK$25,000 (level four) andimprisonment for 12 months.

For persons who do not possess a radio dealer licence (unrestricted), but wish to importinto or export from Hong Kong any RTA, they should apply for an import or export permit fromthe Communications Authority (the “CA”). Each import or export permit covers one shipment ofRTA only. RTA in transit and RTA which is air transhipment cargo are exempted from the permitrequirement. In cases of other types of transhipment cargo, the importer, exporter or freightforwarder may submit a transhipment notification form to the CA, specifying the place wherethe RTA are stored temporarily in Hong Kong. Each notification form covers one shipment ofRTA only and such form does not authorise the importer, exporter or freight forwarder to use ortrade in RTA in Hong Kong. Any RTA dealer who breaches the foregoing provisions under theTO is liable on summary conviction to a fine of HK$25,000 (level four) and imprisonment of 12months.

EN HK has obtained the radio dealer licence (unrestricted) since 1 November 2017.

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

The Factories and Industrial Undertakings Ordinance (the “FIUO”) provides for the safetyand health protection to workers in industrial undertakings, including without limitations tocargo and container undertakings, factories and other industrial workplaces. The FIUO imposesgeneral duties on the proprietor (including persons for the time being having the management orcontrol of the business carried on in industrial undertakings and occupiers of such industrialundertakings) to ensure that, so far as is reasonably practicable, the health and safety at work ofall persons employed him at the industrial undertaking.

A proprietor who contravenes the duties required by the FIUO commits an offence and isliable to a fine of HK$500,000. Any proprietor who violates the requirement laid out in theFIUO wilfully and without reasonable excuse commits an offence and is liable to a fine ofHK$500,000 and imprisonment of six months.


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Under the FIUO, there are over 30 sets of subsidiary regulations covering various aspectsof hazardous work activities in factories, buildings and engineering construction sites, cateringestablishments, cargo and container handling undertakings and other industrial workplaces,detailing the safety and health standards on work situations, plant and machinery, process andsubstances.

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

The Occupational Safety and Health Ordinance (the “OSHO”) provides for the safety andhealth protection to employees in workplaces, in both industrial and non-industrial undertakings.Employers must, as far as reasonably practicable, ensure the safety and health of their workers,by adopting the following measures:

• provide or maintain plant and systems of work that are safe and without risks tohealth;

• make arrangements for ensuring safety and absence of risks to health in connectionwith the use, handling, storage or transport of plant or substances;

• provide such information, instruction, training and supervision as may be necessary toensure the safety and health at work of the employees;

• as regards any workplace under the employer’s control, maintain the workplace in acondition that is safe and without risks to health or maintain means of access to andegress from the workplace that are safe and without any such risks; and

• provide or maintain a working environment for the employees that is safe and withoutrisks to health.

Any failure to comply with the conditions above constitutes an offence and the employer isliable on conviction to a fine of HK$200,000. An employer who fails to do so intentionally,knowingly, or recklessly commits an offence and is liable on conviction to a fine of HK$200,000and imprisonment of six months.

The Commissioner for Labour may issue an improvement notice on employers or occupiersof premises against contravention of the OSHO or the FIUO; or a suspension notice againstactivity or condition or use of workplace which may cause imminent risk of death or seriousbodily injury. Failure to comply with such notices without reasonable excuse constitutes anoffence and the employer or occupier is liable on conviction to a fine of HK$200,000 andHK$500,000, respectively, and imprisonment of 12 months. A further fine of HK$50,000 per dayis imposed during which the employer or occupier knowingly and intentionally fails to complywith the suspension notice.


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Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong)

Regulations concerning transfer pricing between associated enterprises can be found in theInland Revenue Ordinance (the “IRO”) and the comprehensive double taxation agreements (the“DTAs”) between Hong Kong and other countries or territories, including the PRC.

Under section 60 of the IRO, where it appears to an assessor that for any year ofassessment any person chargeable with tax has not been assessed or has been assessed at lessthan the proper amount, the assessor may, within the year of assessment or within six years afterthe expiration thereof, assess such person at the amount or additional amount at which,according to his judgement, such person ought to have been assessed, and, provided that wherethe non-assessment or under-assessment of any person for any year of assessment is due to fraudor willful evasion, such assessment or additional assessment may be made at any time within 10years after the expiration of that year of assessment.

Section 61A of the IRO stipulates that where it would be concluded that the person(s)entered into or carried out transactions for the sole or dominant purpose to obtain a tax benefit(which means the avoidance or postponement of the liability to pay tax or the reduction in theamount thereof), liability to tax of the relevant person(s) will be assessed (a) as if thetransaction or any part thereof had not been entered into or carried out; or (b) in such othermanner as the supervising authority considers appropriate to counteract the tax benefit whichwould otherwise be obtained.

The DTAs contain provisions mandating the adoption of arm’s length principle for pricingtransactions between associated enterprises. The arm’s length principle uses the transactions ofindependent enterprises as a benchmark to determine how profits and expenses should beallocated for the transactions between associated enterprises. The basic rule for DTAs purposesis that profits tax charged or payable should be adjusted, where necessary, to reflect the positionwhich would have existed if the arm’s length principle had been applied instead of the actualprice transacted between the enterprises.

The Departmental Interpretation and Practice Notes No. 45 - Relief from Double Taxationdue to Transfer Pricing or Profit Reallocation Adjustments issued by the Inland RevenueDepartment in April 2009 makes it available that where double taxation arises as a result oftransfer pricing adjustments made by the tax authorities of another country, a Hong Kongtaxpayer may potentially claim relief under the tax treaty between Hong Kong and that country(countries that entered into tax arrangements with Hong Kong includes the PRC).


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The Inland Revenue Department also issued Departmental Interpretation and Practice NotesNo. 46 (“DIPN 46”) in December 2009 on Transfer Pricing Guidelines - Methodologies andRelated Issues. As stated in DIPN 46, transfer pricing documentation is not mandatory under theIRO and the taxpayers are not expressly required to create specific documents showingcompliance with the arm’s length principle. The Inland Revenue Department further issuedDepartmental Interpretation and Practice Notes No. 48 in July 2020 which provides a mechanismfor taxpayers to pre-agree their transfer pricing arrangements with the Inland RevenueDepartment.

In July 2018, the Inland Revenue (Amendment) (No. 6) Ordinance 2018 (the “AmendmentBill”) was enacted to introduce a legislative framework to codify how the pricing for the supplyof goods and services between associated parties should be determined and implemented.Codified international transfer pricing principles include, amongst others, the arm’s lengthprinciple for provision between associated persons, the separate enterprises principle forattributing income or loss of non-Hong Kong resident person, and the three-tier transfer pricingdocumentation relating to the master file, local file and country-by-country reporting.

Based on the Amendment Bill, a person who has a Hong Kong tax advantage if taxed onthe basis of a non-arm’s length provision (the “advantaged person”) will have income adjustedupwards or loss adjusted downwards. The advantaged person’s income or loss is to be computedas if arm’s length provision had been made or imposed instead of the actual provision. If theadvantaged person fails to prove to the satisfaction of the assessor of the Inland RevenueDepartment that the amount of the person’s income or loss as stated in the person’s tax return isan arm’s length amount, the assessor of the Inland Revenue Department must estimate an amountas the arm’s length amount and, taking into account the estimated amount (a) make anassessment or additional assessment on the person; or (b) issue a computation of loss, or revise acomputation of loss resulting in a smaller amount of computed loss, in respect of that personpursuant to section 50AAF of the IRO.

Regulations on the impositions of taxes on property, earnings and profits are also includedin the IRO. As our Group conducts its business in Hong Kong, we are subject to the profits tax.Under the IRO, profits tax are charged on a person’s or a corporation’s assessable profits(excluding profits arising from the sale of capital assets) derived from or arising in Hong Kongin relation to such person’s or corporation’s trade, profession or business every year. As at theLatest Practicable Date, the standard tax rate for corporations was 8.25% on assessable profitsup to HK$2 million and 16.5% on any part of assessable profits over HK$2 million.

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

The Employees’ Compensation Ordinance (the “ECO”) establishes a no-fault andnon-contributory employee compensation system for work injuries and lays down the rights andobligations of employers and employees in respect of injuries or death caused by accidentsarising out of and in the course of employment, or by prescribed occupational diseases.


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Under the ECO, if an employee sustains an injury or dies as a result of an accident arisingout of and in the course of his employment, his employer is in general liable to paycompensation even if the employee might have committed acts of faults or negligence when theaccident occurred. Similarly, an employee who suffers incapacity arising from an occupationaldisease is entitled to receive the same compensation as that payable to employees injured inoccupational accidents.

Section 40 of the ECO provides that all employers must take out insurance policy to covertheir liabilities both under the ECO and at common law for injuries at work in respect of allemployees (including full-time and part-time employees) for an amount not less than theapplicable amount specified under the ECO.

An employer who fails to comply with the ECO to secure an insurance cover is liable onconviction upon indictment to a fine of HK$100,000 (level six) and imprisonment of two years;or on summary conviction to a fine of HK$100,000 (level six) and imprisonment of one year.

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

The Minimum Wage Ordinance (the “MWO”) sets out a prescribed minimum wage at anhourly wage rate for employees who are engaged under an employment contract (apart fromemployees who are covered by section 7 of the MWO). The current statutory minimum wage isHK$37.5 per hour.

Any provision in the employment contract which extinguishes or reduces the rights,benefits or protection as provided by the MWO to the employee is void.

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

The Mandatory Provident Fund Schemes Ordinance (the “MPFSO”) provides for theestablishment, registration, supervision and management of a non-governmental mandatoryprovident fund schemes for the purpose of funding benefits on retirement for members of theworkforce in Hong Kong. Employers are required to enrol their regular employees, aged at least18 but under 65 years of age and employed for a continuous period of 60 days or more in aMandatory Provident Fund scheme (“MPF Scheme”) within the first 60 days of employment.

Subject to the current maximum and minimum levels of relevant income (HK$30,000 andHK$7,100 per month), both employers and their employees are required to contribute 5% of theemployee’s relevant income to the MPF Scheme on a monthly basis. For employees whoserelevant income exceeds the maximum level, the amount contributed to the MPF Scheme by boththe employers and employees will be capped at HK$1,500 per month.


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REGULATORY REQUIREMENTS IN THE PRC

Laws and regulations relating to foreign investment

Foreign-invested enterprises in the PRC must follow all the applicable PRC laws andregulations and must not engage in activities detrimental to the PRC’s public interest.

i. The foreign investment negative list

Investment activities in the PRC by foreign investors are principally governed by TheSpecial Administrative Measures (Negative List) for Access of Foreign Investment (2021version) (《外商投資准入特別管理措施(負面清單)(2021年版)》) (the “Negative List”), whichwas promulgated by the MOFCOM and the NDRC on 27 December 2021 and became effectiveon 1 January 2022, and Catalogue of Industries for Encouraging Foreign Investment (2020version) (《鼓勵外商投資產業目錄(2020年版)》) (the “Encouraging List”), which waspromulgated by the MOFCOM and the NDRC on 27 December 2020 and became effective on 27January 2021. The Negative List unifies the special administrative measures for foreigninvestment access, such as equity requirements and executive requirements. The areas beyondthe Negative List are managed in accordance with the principle of consistency between domesticand foreign investment. The Encouraging List sets out the encouraged industries for foreigninvestment. According to the Negative List and the Encouraged List, industry involvingnon-vessel operating common carry is encouraged for foreign investment, while the internationalfreight forwarding business is not included in both the Negative and the Encouraging List.

ii. Laws relating to foreign-invested enterprises

Prior to 1 January 2020, the establishment procedures, verification and approvalprocedures, registered capital requirements, foreign exchange control, accounting practices,taxation, labour matters and all other relevant matters of a wholly foreign-owned enterprise shallbe subject to the Wholly Foreign-owned Enterprise Law of the PRC* (中華人民共和國外資企業法) (the “Wholly Foreign-owned Enterprise Law”), which was promulgated by the NPC on 12April 1986 and amended on 31 October 2000 and 3 September 2016, and its implementationregulations, which were promulgated on 12 December 1990 by the Ministry of Foreign Tradeand Economic Cooperation* (中華人民共和國對外貿易與經濟合作部) (now known as theMOFCOM) and last amended on 19 February 2014. Where the establishment of a foreign-ownedenterprise is not subject to the implementation of special management measures for access asstipulated by the state, the examination and approval matters stipulated in Article 6, Article 10and Article 20 of the Wholly Foreign-owned Enterprise Law shall be subject to filingadministration. Special management measures for access stipulated by the state shall bepromulgated by the State Council or promulgated with approval by the State Council.


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On 15 March 2019, the NPC promulgated the Foreign Investment Law of the PRC* (中華人民共和國外商投資法) (the “Foreign Investment Law”), and on 26 December 2019, the StateCouncil promulgated the Implementation Regulations of the Foreign Investment Law* (中華人民共和國外商投資法實施條例), both of which came into force on 1 January 2020. TheSino-foreign Equity Joint Ventures Law of the PRC* (中華人民共和國中外合資經營企業法), theWholly Foreign-owned Enterprise Law and the Sino-foreign Cooperative Joint Ventures Law ofthe PRC* (中華人民共和國中外合作經營企業法) and their corresponding implementationregulations were repealed simultaneously upon the Foreign Investment Law and itsimplementation regulations taking effect. Subject to the Foreign Investment Law and itsimplementation regulations, foreign invested enterprises, established in accordance with thethree laws mentioned above before the effective date of the Foreign Investment Law, may retaintheir original organisational forms for five years after the Foreign Investment Law takes effectand the specific implementing measures shall be developed by the State Council.

Regulations relating to our business

i. International freight forwarding business

On 29 June 1995, the Ministry of Foreign Trade and Economic Cooperation of the PRC*(中華人民共和國對外貿易經濟合作部) (now known as the MOFCOM) issued the Regulations ofthe PRC on Management of International Freight Forwarding Business* (中華人民共和國國際貨物運輸代理業管理規定). On 7 December 2003, the MOFCOM promulgated the SupplementaryProvisions to the Regulations on the Administration of International Freight Forwarding AgencyEnterprises with Foreign Investment* (《外商投資國際貨物運輸代理企業管理辦法》補充規定)which was abolished on 11 December 2005. On 1 January 2004, the MOFCOM promulgated theImplementing Rules for the Regulations of the PRC on Management of International FreightForwarding Business (Trial)* (中華人民共和國國際貨物運輸代理業管理規定實施細則(試行)),which together with the Regulations of the PRC on Management of International FreightForwarding Business, formulated regulations to govern the behaviour of international freightforwarders. Pursuant to these regulations, international freight forwarding business means anentity accepting the entrustment of consignors and consignees of exports and imports,conducting international freight forwarding and related businesses for its clients in its own nameor in the name of its clients and receiving remuneration for its services and an internationalfreight forwarder must obtain the status of a legal body as a PRC enterprise according to therelevant laws. The minimum amount of registered capital for qualified Hong Kong serviceproviders to establish international freight forwarding agency enterprises in the PRC is asfollows: (1) for an international freight forwarding enterprise by sea, RMB5 million; (2) for aninternational freight forwarding enterprise by air, RMB3 million; and (3) for an internationalfreight forwarding enterprise by land or an international express deliverer, RMB2 million. For anenterprise engaging in two or more types of businesses mentioned above, its registered capitalshould be at least that of the type of business with the highest required minimum amount ofregistered capital. In setting up a branch, the international freight forwarding enterprise shouldcontribute an additional registered capital of RMB500,000.


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International freight forwarding enterprise may act as agents or independent operators toengage in business activities. Where an international freight forwarding enterprise acts as anindependent operator, it should issue transport document to the owner of the cargo. Anyinternational freight forwarding bill of lading issued in the PRC must be reported by theinternational freight forwarding companies to the MOFCOM for registration, and the approvalnumber should be indicated on the bill. Furthermore, the international freight forwardingenterprise shall report its business situation of the previous year to the local foreign tradeauthority before the end of March each year.

Pursuant to the Interim Measures for the Filing of the International Freight ForwardingEnterprises* (國際貨運代理企業備案(暫行)辦法), which was issued by the MOFCOM on 2March 2005, became effective on 1 April 2005, and was amended on 18 August 2016, theenterprise and its branches conducting international freight forwarding business shall file forrecord with the MOFCOM or an agency commissioned by the MOFCOM upon commencementof the business after the business licences have been obtained. The filing authority shall, withinfive days from the date of receipt of the materials submitted by the international freightforwarding enterprise, go through the filing procedures and affix the filing stamp on the “filingform”. When any information on the “filing form” is changed, the international freightforwarding enterprise should apply for the change of the “filing form” within 30 days. If theprocedures of changing information are not handled within such time limit, the “filing form”will be invalidated automatically.

Laws and regulations relating to overseas securities offering and listing by domesticcompanies

On 24 December 2021, the CSRC issued the Notice of Soliciting Public Opinions on theProvisions of the State Council on the Administration of Overseas Securities Offering andListing by Domestic Companies (Draft for Comments) (關於就《國務院關於境內企業境外發行證券和上市的管理規定(草案徵求意見稿)》公開徵求意見的通知) and Notice of Soliciting PublicOpinions on the Administrative Measures for the Filing of Overseas Securities Offering andListing by Domestic Companies (Draft for Comments) (關於就《境內企業境外發行證券和上市備案管理辦法》(徵求意見稿)公開徵求意見的通知), which aims to solicits public opinions on rulesregarding overseas listings. The deadline for public feedback is 23 January 2022. According toAdministrative Measures for the Filing of Overseas Securities Offering and Listing by DomesticCompanies (Draft for Comments), domestic companies that directly or indirectly seek to offerand list securities in overseas markets shall submit to the CSRC filing documents within threeworking days after the issuer submits the application documents for the initial public offering inan overseas market. As at Latest Practicable Date, there is no formal announcement of when itwill be implemented.


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ii. Non-vessel operating common carry (“NVOCC”) business

The Regulations of the PRC on International Maritime Transportation* (中華人民共和國國際海運條例) (the “Maritime Transportation Regulations”) was promulgated by the StateCouncil on 11 December 2001 and was subsequently amended on 18 July 2013, 6 February 2016and 2 March 2019, and the Implementation Rules of the Regulations of the PRC on InternationalMaritime Transportation* (中華人民共和國國際海運條例實施細則) was promulgated by theMinistry of Transport of the PRC* (中華人民共和國交通部) (now known as the MOT) on 20January 2003 and amended by the MOT on 29 August 2013, 7 March 2017, 21 June 2019 and 28November 2019. Pursuant to the Maritime Transportation Regulations and its implementationrules, the NVOCC business refers to the NVOCC operator accepting the cargo of the shipper asthe carrier, taking the freight charges from the shipper by issuing its own bills of lading or othertransport documents, shipping the international ocean goods through international shippingoperators and bearing the responsibilities of the carrier, which includes the following activitiesconducted with respect to the goods carried by the NVOCC operator for the completion of thebusiness: (1) signing the international cargo transportation contract with the consignor as thecarrier; (2) accepting and delivering the goods as the carrier; (3) issuing the bills of lading orother transportation documents; (4) taking freight and other remunerations for the service; (5)booking shipping space and handling consignment for the goods carried with internationalshipping operators or operators of other transportation means; (6) paying charges or othertransportation fees; (7) devanning and consolidating containers; and (8) other relevantbusinesses.

All NVOCC operators shall register their bills of lading and file the freight rates includingpublished freight rates (公佈運價) and negotiated freight rates (協議運價) with the department incharge of transportation under the State Council, and shall pay the security deposit inaccordance with the Maritime Transportation Regulations and its implementation rules. Where aNVOCC operator applies for the registration of its bill of landing, it shall file the applicationwith the MOT and submit to the MOT the relevant materials. After receiving the applicant’smaterials, the MOT shall examine the application in accordance with the relevant regulations. Ifthe application is approved, the bill of lading shall be registered and the NVOCC BusinessQualification Registration Certificate* (無船承運業務經營資格登記證) shall be issued. If two ormore types of bill of lading are used by the NVOCC operator, all types of bill of lading shall beregistered. If the registered bill of lading changes, the new sample bill of lading shall be filedwith the MOT 15 days before the date of use of the new bill of lading.

On 14 May 2019, the General Office of MOT issued the Notice on Relevant Approval andRecordation Matters Concerning the International Shipping Business and MaritimeTransportation between the Mainland and Hong Kong or Macau* (關於國際船舶運輸及內地與港澳間海上運輸業務相關審批備案事項的通知), which stipulated that an enterprise engages inNVOCC business shall file its basic information (including company name, place of registration,legal representative, contact information, etc.) with the provincial transport authority within 15days after the commencement of business, while the filing requirements of NVOCC freight ratesremain unchanged. If a NVOCC operator terminates its NVOCC business, it shall file a notice oftermination with the provincial transport authority.


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Regulations relating to foreign exchange controls

The PRC government imposes controls on the convertibility of Renminbi into foreigncurrencies and, in certain cases, the remittance of foreign currency out of the PRC. The SAFE isresponsible for administering all matters relating to foreign exchange, including the enforcementof the PRC foreign exchange control regulations.

The principal regulations governing foreign currency exchanges in the PRC are the ForeignExchange Administration Regulations of the PRC* (中華人民共和國外匯管理條例) which waspromulgated by the State Council on 29 January 1996 and was subsequently amended on 14January 1997 and 5 August 2008, and the Regulation on the Administration of Foreign ExchangeSettlement, Sale and Payment* (結匯、售匯及付匯管理規定) which was promulgated on 20 June1996 and became effective on 1 July 1996.

Under these existing PRC foreign exchange control regulations, all international paymentsand transfers are classified into current account items and capital account items. Foreigncurrency payments under current account items by domestic institutions, including payments forimports and exports of goods and services and payments of income and current transfers intoand outside the PRC must be either paid with their own foreign currency with validdocumentation or with the foreign currency purchased from financial institutions. Foreigncurrency income under current account items may be retained or sold to financial institutions.Foreign currency payments under capital account items include cross-border transfers of capital,direct investments, securities investments, derivative products and loans, and must be made outof a domestic institution’s own foreign currency with valid documentation or be made withforeign currency purchased from any financial institution. The payments of current account itemscan be made in foreign currencies without the prior approval from the SAFE by complying withcertain procedural requirements. However, payments under the capital account items are subjectto significant foreign exchange controls and require the prior approval from the SAFE or theregistration with the SAFE or its designated banks.

Pursuant to the Circular of the SAFE on Further Simplifying and Improving the DirectInvestment-related Foreign Exchange Administration Policies* (國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知) (the “SAFE Circular 13”), which was promulgated on 13February 2015 and came into effect on 1 June 2015 and was partially repealed in December2019, the foreign exchange registration under domestic direct investment and foreign exchangeregistration under overseas direct investment are directly reviewed and handled by banks inaccordance with the SAFE Circular 13, and the SAFE and its branches shall perform indirectregulation over the foreign exchange registration via banks.

On 23 October 2019, the SAFE promulgated the Notice of the State Administration ofForeign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment*(國家外匯管理局關於進一步促進跨境貿易投資便利化的通知) (the “SAFE Circular 28”), whichcame into force on the same day save as otherwise provided therein. The SAFE Circular No.28,among other things, cancels the restriction on domestic equity investment made with capitalfunds by non-investment foreign-invested enterprises, expands the pilot programme for


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facilitation of domestic payment under capital account, and relaxes the restriction on settlementand use of foreign exchange funds under capital account.

Laws and regulations relating to tax

i. Enterprise income tax

According to the Enterprise Income Tax Law of the PRC* (中華人民共和國企業所得稅法),which was promulgated by the NPC on 16 March 2007 and came into effect on 1 January 2008,and was subsequently amended by the SCNPC respectively on 24 February 2017 and 29December 2018, and its Implementation Regulations* (中華人民共和國企業所得稅法實施條例)which was promulgated by the State Council on 6 December 2007, amended on 23 April 2019and which became effective on the same day (collectively, the “EIT Law”), enterprises areclassified into resident enterprises and non-resident enterprises. Enterprises which areincorporated in the PRC or which are incorporated pursuant to foreign laws with their “de factomanagement bodies” located in the PRC are deemed “resident enterprise” and subject to an EITrate of 25% on their global income. Non-resident enterprises are subject to (i) an EIT rate of25% on their income generated by their establishments or places of business in the PRC and itsincome derived outside the PRC which are effectively connected with their establishments orplaces of business in the PRC; (ii) an EIT rate of 10% on their income derived from the PRC butnot connected with its establishments or places of business located in the PRC; and (iii)non-resident enterprises without an establishment or place of business in the PRC are subject toan EIT of 10% on their income derived from the PRC.

ii. Transfer pricing

According to the EIT Law, related party transactions should comply with the arm’s lengthprinciple (獨立交易原則) (i.e. to consummate transactions at a fair price and as per businessnorms). The tax authority may adjust the taxable revenue or income in compliance withreasonable methods (including comparable uncontrolled price method, resale price method,cost-plus method, transactional net profit method, profit split method and other methods thatmeet the arm’s length principle). If the related party transactions fail to comply with the arm’slength principle and result in the reduction of the enterprise’s taxable income, the tax authorityhas the power to make a special adjustment within 10 years from the tax paying year that thenon-compliant related party transaction occurred. Pursuant to such laws and regulations, anycompany entering into related party transactions with another company shall submit an annualrelated party transactions reporting form* (年度關聯業務往來報告表) to the tax authority.

According to the Announcement of the SAT on Relevant Matters relating to Improvementof the Filing of Related Party Transactions and the Management of ContemporaneousDocumentation* (國家稅務總局關於完善關聯申報和同期資料管理有關事項的公告) (the“Circular 42”) promulgated by the SAT on 29 June 2016 and taking effect on the same day,enterprises which have related party transactions shall prepare their contemporaneousdocumentation of related party transactions (同期資料) per tax year and submit it to the taxauthority if required by the same. Contemporaneous documentation includes the master file (主


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體文檔), local file (本地文檔) and special issue file (特殊事項文檔) as may be applicabledepending on the circumstances of the PRC company involved in the related party transaction.Furthermore, the Circular 42 stipulates the conditions which constitute related parties andenumerates the categories of related party transactions.

Pursuant to the Announcement of the SAT on Issuing the Measures for the Investigation,Adjustment and Consultation Procedures of Special Tax Investigation* (國家稅務總局關於發布《特別納稅調查調整及相互協商程序管理辦法》) (the “Circular 6”) promulgated by the SATon 17 March 2017 and becoming effective on 1 May 2017, where a tax authority finds, whenconducting special tax adjustment monitoring and administration by affiliated tax declarationexamination, contemporaneous documentation administration, profit level monitoring or othermeans, that any enterprise has a risk of special tax adjustments, it may serve a Notice onTax-related Matters* (稅務事項通知書) upon the enterprise, and remind the enterprise of the taxrisk it faces. If an enterprise receives a risk alert for special tax adjustments or finds that it facesthe risk of special tax adjustments, it may make adjustments and make up the taxes due by itself.Where an enterprise makes adjustments and makes up the taxes due by itself, it shall fill out aForm for Self-payment of Taxes under Special Tax Adjustments* (特別納稅調整自行繳納稅款表). Where an enterprise makes adjustments and makes up the taxes due by itself, the taxauthority may still make adjustments under special tax investigation in accordance with therelevant provisions. For labour service transaction, if the price paid or received between anenterprise and its related party does not conform to the independent transaction principle andthus reduces the taxable income of the enterprise or its related party, the tax authority mayimplement the special tax adjustment. Furthermore, the related labour service transactions thatcomply with the independent transaction principle should be beneficial labour servicetransactions and it shall be priced in accordance with the business practice and fair transactionprice of non-related parties under the same or similar circumstances. Pursuant to the Circular 6,beneficial labour service refers to the labour activity which can bring direct or indirect economicbenefits to the recipient of the labour service while a non-related party is willing to purchase orperform it under the same or similar circumstances.

iii. Withholding income tax

Pursuant to the EIT Law, dividends generated after 1 January 2008 and payable by aforeign invested enterprise in the PRC to its foreign investors are subject to a 10% withholdingincome tax, unless otherwise provided in the tax treaty concluded between the PRC and suchforeign investor’s jurisdiction of incorporation.

Pursuant to the Arrangement between the Mainland of China and the Hong Kong SpecialAdministrative Region for the Avoidance of Double Taxation and the Prevention of FiscalEvasion with respect to Taxes on Income (內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排) concluded on 21 August 2006, the applicable withholding income tax payableby a PRC resident company which pays the dividends to a Hong Kong resident enterprise shallbe not more than 5% of the total amount of dividends where the beneficial owner is anenterprise directly holding at least 25% capital of such PRC company, and in other cases, suchapplicable withholding income tax shall be not more than 10% of the total amount of dividends.


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Pursuant to the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment ofthe Treatment under Tax Treaties* (非居民納稅人享受稅收協定待遇管理辦法), which came intoforce on 1 November 2015 and was last amended on 15 June 2018, any non-resident taxpayermeeting conditions for enjoying the convention treatment may be entitled to the conventiontreatment itself/himself/herself when filing a tax return or making a withholding declarationthrough a withholding agent, subject to the subsequent administration by the tax authorities. On14 October 2019, the SAT promulgated the Announcement of the SAT on Promulgation of theAdministrative Measures on Entitlement of Non-resident Taxpayers to Treaty Benefits* (國家稅務總局關於發布〈非居民納稅人享受協定待遇管理辦法〉的公告) (the “SAT AnnouncementNo.35”), which came into force and repealed the Administration of Non-Resident Taxpayers’Enjoyment of the Treatment under Tax Treaties on 1 January 2020. According to the SATAnnouncement No.35, non-resident taxpayers enjoying its tax treaty benefits shall adopt themethod of “self-assessment, claim by declaration and retention of the relevant materials forreview”. Where a non-resident taxpayer deems that it is eligible for tax treaty benefits throughself-assessment, it may, at the time of filing tax return or making withholding declaration by awithholding agent, enjoy tax treaty benefits, and at the same time compile and retain therelevant materials for review, and be subject to follow-up administration by the tax authorities.

iv. Value-added tax

As our PRC entities are taxpayers of value-added tax, we are hence subject to thevalue-added tax laws and regulations. Pursuant to the Interim Regulations of the PRC onValue-Added Tax* (中華人民共和國增值稅暫行條例) (the “VAT Regulations”) which was lastamended on 19 November 2017 and its implementation regulations, all entities or individuals inthe PRC engaged in the sale of goods, the supply of processing services, repairs and replacementservices, and the importation of goods are required to pay value-added tax (“VAT”). VATpayable is calculated as “output VAT” minus “input VAT”. The rate of VAT is 17% or in certainlimited circumstances, 11%, 6% or nil, depending on the product and service type. Pursuant tothe Notice of the MOF and the SAT on Adjusting VAT Rates* (財政部、稅務總局關於調整增值稅稅率的通知), which was jointly issued by the MOF and the SAT on 4 April 2018 and becameeffective from 1 May 2018, VAT taxpayer who engages in taxable sales or import of goods andoriginally applied the tax rate of 17% and 11%, is subject to an adjusted VAT tax rate of 16%and 10% respectively. According to the Notice of the MOF, the SAT and the GeneralAdministration of Customs on Deepening the Policies Related to VAT Reform* (財政部、稅務總局、海關總署關於深化增值稅改革有關政策的公告) issued on 20 March 2019 and implementedon 1 April 2019, for general taxpayers of VAT engaging in value-added taxable sales, the tax rateshall be adjusted to 13% if the original 16% tax rate is applied and the tax rate shall be adjustedto 9% if the original 10% tax rate is applied.

Pursuant to the Appendix III of Notice of the MOF and the SAT on the ComprehensiveImplementation of the Pilot Programme of Replacing Business Tax with VAT* (財政部、國家稅務總局關於全面推開營業稅改徵增值稅試點的通知), i.e. Transition Provisions on the PilotProgramme of Replacing Business Tax with VAT* (營業稅改征增值稅試點過渡政策的規定),which was issued on 23 March 2016, implemented on 1 May 2016 and amended on 11 July 2017(with such amendment taking retrospective effect from 1 July 2017), international freight


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forwarding services provided directly or indirectly by taxpayers are exempt from VAT. Taxpayerswho provide freight forwarding services for freight transport between the PRC and Hong Kong,Macau and Taiwan are levied with reference to the relevant provisions of international freightforwarding services.

Laws and regulations relating to employment and social security

i. Labour law

The Labour Law of the PRC* (中華人民共和國勞動法), which was passed by the SCNPCon 5 July 1994, came into effect on 1 January 1995, and was amended on 27 August 2009 and29 December 2018 respectively, provides that employees are entitled to gain equal opportunitiesin employment, choose occupations, receive labour remuneration, have rest days and holidays,acquire protection of occupational safety and healthcare, enjoy social insurance and welfare, etc.Employers must establish and improve the system for occupational safety and healthcare,provide training on occupational safety and healthcare to employees, comply with nationaland/or local regulations on occupational safety and healthcare, and provide necessary labourprotective supplies to employees.

ii. Labour contract law

The Labour Contract Law of the PRC (中華人民共和國勞動合同法) (the “LabourContract Law”) which was passed by the SCNPC on 29 June 2007, came into effect on 1January 2008, and was amended on 28 December 2012, and the Implementation Regulations onthe Labour Contract Law of the PRC* (中華人民共和國勞動合同法實施條例), which waspromulgated by the State Council on 18 September 2008, and came into effect on the same day,provide that the labour contracts must be executed in order to establish the labour relationshipbetween employers and employees. The Labour Contract Law stipulates that an employer shallinform the employees truthfully of the scope of work, working conditions, workplace,occupational hazards, production safety conditions, labour remuneration and other informationrequested by the employees. The Labour Contract Law also stipulates that employer andemployee shall fully perform their respective obligations in accordance with the terms set forthin the labour contract. In addition, employer shall pay employees the labour remuneration timelyand in full amount in accordance with terms in the labour contract. The Labour Contract Lawalso provides for the scenario of rescission and termination of a labour contract. Except thesituations explicitly stipulated in the Labour Contract Law and its implementation regulationswhich will not subject to economic compensation, economic compensation shall be paid to theemployee whose labour contract has been revoked or terminated by the employer.


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iii. Social insurance

Pursuant to the Social Insurance Law of the PRC (中華人民共和國社會保險法) which waspromulgated by the SCNPC on 28 October 2010 and became effective on 1 July 2011 and wasamended on 29 December 2018, and other relevant regulations, employers are required tocontribute, on behalf of their employees, to a number of social insurance funds, including fundsfor basic pension insurance, unemployment insurance, basic medical insurance, work-relatedinjury insurance and maternity insurance. If an employer fails to do so, the relevant socialinsurance authorities shall order the company to make the outstanding social insurancecontributions within a prescribed time limit, and may impose additional late payment fees and afine on the company.

iv. Housing provident funds

Pursuant to the Regulations on the Administration of Housing Provident Funds* (住房公積金管理條例) which was promulgated by the State Council on 3 April 1999 and became effectiveon 3 April 1999, and was subsequently amended on 24 March 2002 and 24 March 2019,employers shall go through housing provident funds registration with the local housing fundadministration centre and open housing fund accounts for its employees in the bank. Anemployer may be ordered to handle the same within a time limit for failure to comply with theabove-mentioned registration and accounts opening. If an employer fails to handle the samewithin the prescribed time limit, a penalty ranging from RMB10,000 to RMB50,000 may beimposed. Where an employer fails to pay up housing provident funds within the time limit, thehousing fund administration centre shall order it to make payment in a certain period of time,and if the employer still fails to do so, the housing fund administration centre may apply to thecourt for enforcement of the unpaid amount.

Laws and regulations relating to intellectual property

i. Trademark

The Trademark Law of the PRC* (中華人民共和國商標法) (the “Trademark Law”) waspromulgated by the SCNPC on 23 August 1982 and last amended on 23 April 2019. TheTrademark Law and the Implementation Rules on the Trademark Law* (中華人民共和國商標法實施條例) seek to improve the administration of trademarks, protect the right to exclusive use oftrademarks and encourage producers and operators to guarantee the quality of their goods andservices and maintain the reputation of their trademarks, so as to protect the interests ofconsumers, producers and operators. The validity period of a registered trademark in the PRC is10 years from the date of registration. Where the registrant intends to continue to use theregistered trademark beyond the expiration of the validity period, an application for renewal ofregistration shall be made within 12 months before the said expiration. Where no application hasbeen filed within the said period, a grace period of six months will be allowed. The validityperiod of each renewed registration shall be 10 years from the next day of the expiration of thelast validity period. If no application has been filed by the expiration of the grace period, theregistered trademark shall be deregistered.


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ii. Domain name

Pursuant to the Administrative Measures on Internet Domain Names* (互聯網域名管理辦法), which was promulgated by the Ministry of Industry and Information Technology of thePRC* (中華人民共和國工業和信息化部) (the “MIIT”) on 24 August 2017 and became effectiveon 1 November 2017, domain name owners are required to register their domain names and theMIIT is in charge of the administration of PRC internet domain names. The domain nameservices follow a “first apply, first register” principle. Applicants for registration of domainnames shall provide their true, accurate and complete domain name registration information ofthe domain name holder such as the identity information etc. Where there is a change in thecontact information, etc. of the domain name holder, change formalities for domain nameregistration information shall be completed with the domain name registration serviceorganisation within 30 days from the change.

SANCTIONS LAWS AND REGULATIONS

Hogan Lovells, our International Sanctions Legal Advisers, have provided the followingsummary of the sanctions regimes imposed by the U.S. Government, the UN and its memberstates, the EU, the United Kingdom and the United Kingdom overseas territories, andGovernment of Australia, respectively. This summary does not intend to set out the laws andregulations relating to the U.S., the UN, the EU, the United Kingdom and the United Kingdomoverseas territories, and Australian sanctions in their entirety.

U.S.

Treasury regulations

OFAC is the primary agency responsible for administering U.S. sanctions programmesagainst targeted countries, entities, and individuals. “Primary” U.S. sanctions apply to “U.S.persons” or activities involving a U.S. nexus (e.g. funds transfers in U.S. dollars or activitiesinvolving U.S.-origin goods, software, technology or services even if performed by non-U.S.persons), and “secondary” U.S. sanctions apply extraterritorially to the activities of non-U.S.persons even when the transaction has no U.S. nexus. Generally, U.S. persons are defined asentities organised under U.S. law (such as U.S. companies and their U.S. subsidiaries as well asU.S. subsidiaries of foreign companies); any U.S. entity’s domestic and foreign branches(sanctions against Iran and Cuba also apply to U.S. companies’ foreign subsidiaries or othernon-U.S. entities owned or controlled by U.S. persons); U.S. citizens or permanent residentaliens (“green card” holders), regardless of their location in the world; individuals physicallypresent in the U.S.; and U.S. branches or U.S. subsidiaries of non-U.S. companies.

Depending on the sanctions programmes and/or parties involved, U.S. law also may requirea U.S. company or a U.S. person to “block” (freeze) any assets/property interests owned,controlled or held for the benefit of a Sanctioned Country, entity, or individual when suchassets/property interests are in the United States or within the possession or control of a U.S.person. Upon such blocking, no transaction may be undertaken or effected with respect to the


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asset/property interest – no payments, benefits, provision of services or other dealings or othertype of performance (in case of contracts/agreements) – except pursuant to an authorisation orlicence from OFAC.

OFAC’s comprehensive sanctions programmes currently apply to Cuba, Iran, North Korea,Syria, and the Crimea region of Russia/Ukraine and the self-proclaimed Donetsk People’sRepublic and Luhansk People’s Republic regions (the comprehensive OFAC sanctionsprogramme against Sudan was terminated on 12 October 2017). OFAC also prohibits virtually allbusiness dealings with persons and entities identified in the SDN List. Entities that a party onthe SDN List owns (defined as a direct or indirect ownership interest of 50% or more,individually or in the aggregate) are also blocked, regardless of whether that entity is expresslynamed on the SDN List. Additionally, U.S. persons, wherever located, are prohibited fromapproving, financing, facilitating, or guaranteeing any transaction by a non-U.S. person wherethe transaction by that non-U.S. person would be prohibited if performed by a U.S. person orwithin the United States.

UN

The United Nations Security Council (the “UNSC”) can take action to maintain or restoreinternational peace and security under Chapter VII of the United Nations Charter. Sanctionsmeasures encompass a broad range of enforcement options that do not involve the use of armedforce. Since 1966, the UNSC has established 30 sanctions regimes.

The UNSC sanctions have taken a number of different forms, in pursuit of a variety ofgoals. The measures have ranged from comprehensive economic and trade sanctions to moretargeted measures such as arms embargoes, travel bans, and financial or commodity restrictions.The UNSC has applied sanctions to support peaceful transitions, deter non-constitutionalchanges, constrain terrorism, protect human rights and promote non-proliferation.

There are 14 ongoing sanctions regimes which focus on supporting political settlement ofconflicts, nuclear non-proliferation, and counter-terrorism. Each regime is administered by asanctions committee chaired by a non-permanent member of the UNSC. There are 10 monitoringgroups, teams and panels that support the work of the sanctions committees.

UN sanctions are imposed by the UNSC, usually acting under Chapter VII of the UnitedNations Charter. Decisions of the UNSC bind members of the UN and override other obligationsof UN member states.

EU

Under EU sanction measures, there is no “blanket” ban on doing business in or with ajurisdiction targeted by sanctions measures. It is not generally prohibited or otherwise restrictedfor a person or entity to do business (involving non-controlled or unrestricted items) with acounterparty in a country subject to EU sanctions where that counterparty is not a SanctionedPerson or not engaged in prohibited activities, such as exporting, selling, transferring or making


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certain controlled or restricted products available (either directly or indirectly) to, or for use in ajurisdiction subject to EU sanctions measures.

United Kingdom and United Kingdom overseas territories

Although the United Kingdom departed from the EU on 31 January 2020 and is no longer amember state of the EU, EU law including EU sanctions measures continued to apply to and inthe United Kingdom until 31 December 2020. EU sanctions measures have also been extendedby the United Kingdom on a regime by regime basis to apply in the United Kingdom overseasterritories, including the Cayman Islands.

Australia

The Australian restrictions and prohibitions arising from the sanctions laws apply broadlyto any person in Australia, any Australian anywhere in the world, companies incorporatedoverseas that are owned or controlled by Australians or persons in Australia, and/or any personusing an Australian flag vessel or aircraft to transport goods or transact services subject to UNsanctions.


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OUR GROUP STRUCTURE AND HISTORY

Overview

The history of our Group can be traced back to 1997 when (i) Mr. Wong; (ii) Mr. Chim;(iii) Mr. Cheung Chung Ka (“Mr. Cheung”), one of our senior management; and (iv) Mr. WongKa Fai (“Mr. Wong KF”), an Independent Third Party, established EN HK, one of our principaloperating subsidiaries, for carrying out freight forwarding and logistics and related value-addedservices. In 2002 and 2013, Mr. Wong KF and Mr. Cheung disposed of all their interests in ourGroup, respectively. Following such disposals, Mr. Wong KF exited our Group while Mr. Cheungremained as our senior management.

Both Mr. Wong and Mr. Chim had worked in the freight forwarding and logistics industryin Hong Kong for over 30 years. With extensive experience under their belts, they wished tocommence a global freight forwarding and logistics business, with a focus on air and oceanfreight forwarding. In 2001, 2004 and 2012, ENLSH HK, ENSZ HK and ENLGZ HK wereincorporated respectively, to carry out our freight forwarding business.

In view of the potential business opportunities in the freight forwarding industry in thePRC, EN SH was established in Shanghai, the PRC in October 2005 as a subsidiary of EN HK,with an aim to expand our business operations in the PRC and offer efficient freight forwardingand logistics solutions to our customers. Given our expertise and established presence in thePRC, three branches of EN SH, located in Shenzhen, Guangzhou and Chongqing, the PRC, wereset up in April 2007, February 2013 and April 2018, respectively, to accommodate the growingneeds of our customers.

Throughout our years of business operations, we have developed long-term businessrelationships with airline carriers, in particular our largest supplier during the Track RecordPeriod (i.e. Supplier A as further discussed in “Business – Suppliers – Our largest supplierduring the Track Record Period” in this document, being a South Korean-based airline carrierand one of our major suppliers). Since 2007, Supplier A has been one of our Group’s valuedsuppliers in the provision of air cargo spaces for our Group’s air freight forwarding services. Tofurther enhance our business relationship with Supplier A, Mr. Shon, who has extensiveexperience in the freight forwarding industry, joined our Group in May 2014 as sales andmarketing director. He is mainly responsible for marketing strategies and marketing plansdevelopment and relationship maintenance with our customers and suppliers. In December 2018,Mr. Shon acquired interests in our Group through acquiring 4.5% and 1.5% shareholding inE&E, (owned as to 75.0% and 25.0% by Mr. Wong and Mr. Chim, respectively immediatelyprior to the acquisition), an investment holding vehicle holding the entire issued share capital ofEN HK, from Mr. Wong and Mr. Chim, respectively. Since then, E&E became owned as to70.5%, 23.5% and 6.0% by Mr. Wong, Mr. Chim and Mr. Shon, respectively.


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Over the years under the leadership of Mr. Wong, Mr. Chim and Mr. Shon, our Group hascontinually elevated our business profile by focusing on cargo routes to the U.S. and expandingour business to warehousing services, including logistics, repackaging, labelling and palletising.Accumulating over two decades of experience since the incorporation of EN HK, our Group hasgrown to become an established freight forwarding and logistics service provider.

Major milestones

The following are the major milestones of our Group:

1997 EN HK, our first principal operating subsidiary was incorporated in HongKong.

2002 EN HK was registered as an RA under the RAR of the CAD.

2004 ENSZ HK, our second principal operating subsidiary was incorporated inHong Kong.

2005 EN SH, our third principal operating subsidiary was established inShanghai, the PRC, for the purpose of expanding our freight forwarding andlogistics business in the PRC.

2006 EN HK became a member of The Hongkong Association of FreightForwarding and Logistics Ltd.

2007 ENSH SZB, our Shenzhen branch of EN SH was established.

We established our business relationship with Supplier A, a SouthKorean-based airline carrier, by entering into the first cargo agencyagreement with Supplier A for the provision of air cargo spaces to ourcustomers.

2013 EN HK became a member of the Combined Logistics Networks (CLN).

ENSH GZB, our Guangzhou branch of EN SH was established.

2015 We established our business relationship with Customer A, a U.S.-basedcompany principally engaged in the provision of freight forwardingservices.

EN HK became a member of the Cooperative Logistics Network (COOP).

EN HK became a member of the 5-Star Logistics Network (5-SLN).

2016 EN HK became a member of the Carvre Seven.



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2017 EN HK was awarded the Asia Business Achiever Awards by Asia BusinessConsultancy Association.

2018 ENSH CQB, our Chongqing branch of EN SH was established.

2019 EN SH was awarded the 2018 Enterprise with the Greatest Potential inChina Award* (2018中國最具發展潛力企業) by China New Economy BrandConference* (中國新經濟品牌峰會).

EN SH became a member of IATA.

EN HK became a member of IATA.

EN HK became a member of the Cargo Power Network (CPN).

2020 EN HK was registered as a supplier under the Purchasing Group Code in theSupplier List of the Government Logistics Department for the provision of(i) transportation and (ii) vehicles hiring services.

EN HK was accredited as a Corporate Full member and attained Level C ofFSR of TAPA Asia Pacific.

2021 EN HK became a member of the Majestic Global Logistics Network.

Our Company

Our Company was incorporated in the Cayman Islands on 19 January 2021. Uponcompletion of the Reorganisation, our Company became the holding company of our Group on 2June 2021.

Our subsidiaries

EN HK

EN HK was incorporated in Hong Kong with limited liability on 10 September 1997. ENHK is one of our principal operating subsidiaries and engages in the provision of air and oceanfreight forwarding and logistics and related value-added services.

Upon its incorporation, two shares in EN HK were allotted and issued to two initialsubscribers, both of which were Independent Third Parties. On 6 November 1997, 91 shares andseven shares were allotted and issued at par to Pearlin Company Limited (“Pearlin”) and JadinLimited (“Jadin”), each being a company secretary services company and an Independent ThirdParty, respectively (the “EN HK First Allotment”), such shares being held on trust as detailedbelow. On 27 November 1997, each of the two initial subscribers transferred one share toPearlin, at a consideration of HK$1 for each share transfer (the “EN HK Transfer”), such shares



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being held on trust as detailed below. After the EN HK First Allotment and the EN HK Transfer,EN HK became owned by Pearlin and Jadin as to 93 shares and seven shares, respectively. On27 November 1997, three declarations of trusts were entered into between Pearlin and each ofMr. Wong, Mr. Cheung and Mr. Wong KF, respectively. Pursuant to the three declarations oftrusts, Pearlin declared that it was holding 31 shares, 31 shares and 31 shares in EN HK on trustfor each of Mr. Wong, Mr. Cheung, and Mr. Wong KF, representing 31%, 31%, and 31% of thethen entire issued share capital of EN HK, respectively. Pursuant to another declaration of trustentered into between Jadin and Mr. Chim dated the same date, Jadin declared that it was holdingthe seven shares in EN HK on trust for Mr. Chim, representing 7% of the then entire issuedshare capital of EN HK.

On 11 January 1999, 87 shares and 13 shares in EN HK were allotted and issued at par toPearlin and Jadin respectively (the “EN HK Second Allotment”), such shares being held ontrust as detailed below. After the EN HK Second Allotment, EN HK became owned by Pearlinand Jadin as to 180 shares and 20 shares, respectively. On 2 March 1999, three declarations oftrusts were entered into between Pearlin and each of Mr. Wong, Mr. Cheung and Mr. Wong KF,respectively. Pursuant to the three declarations of trusts, Pearlin declared that it was holding 29shares, 29 shares and 29 shares in EN HK on trust for each of Mr. Wong, Mr. Cheung, and Mr.Wong KF, respectively. Pursuant to another declaration of trust entered into between Jadin andMr. Chim dated the same date, Jadin declared that it was holding 13 shares in EN HK on trustfor Mr. Chim. Since then, Pearlin held in aggregate, 60 shares, 60 shares and 60 shares in ENHK on trust for each of Mr. Wong, Mr. Cheung and Mr. Wong KF, representing 30%, 30% and30% of the then entire issued share capital of EN HK, respectively and Jadin held in aggregate20 shares on trust for Mr. Chim, representing 10% of the then entire issued share capital of ENHK.

On 15 December 2000, 24 shares and 16 shares in EN HK were allotted and issued at parto Pearlin and Jadin (the “EN HK Third Allotment”), such shares being held on trust asdetailed below. Pursuant to the declarations of the trusts dated 4 January 2001 entered intobetween Pearlin and each of Mr. Wong, Mr. Cheung and Mr. Wong KF, Pearlin declared that itwas holding 12 shares, six shares and six shares in EN HK on trust for each of Mr. Wong, Mr.Cheung and Mr. Wong KF, respectively. Pursuant to another declaration of trust entered intobetween Jadin and Mr. Chim dated the same date, Jadin declared that it was holding the 16shares in EN HK on trust for Mr. Chim. Subsequent to the EN HK Third Allotment, EN HKbecame owned as to 85% by Pearlin, which held such interests on trust for Mr. Wong as to 30%,Mr. Cheung as to 27.5% and Mr. Wong KF as to 27.5%, respectively, and 15% by Jadin, whichheld such interests on trust for Mr. Chim.

On 24 January 2002, at the directions of the beneficial owners, namely Mr. Wong, Mr.Cheung and Mr. Wong KF, Pearlin transferred 204 shares in EN HK to Mr. Wong and ENL Line(an investment holding vehicle owned as to 75% and 25% by Mr. Wong and Mr. Chim,respectively), of which (a) one share was transferred to Mr. Wong at a consideration of HK$1,such share being held on trust by Mr. Wong for ENL Line pursuant to a declaration of trustdated 24 January 2002; and (b) 203 shares were transferred to ENL Line at a consideration ofHK$203. On the same date, at the direction of the beneficial owner, namely Mr. Chim, Jadin



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also transferred 36 shares to ENL Line at a consideration of HK$36. After such share transfer,EN HK became wholly-owned by ENL Line and Mr. Wong as to 239 shares and one share,respectively, and Mr. Wong KF and Mr. Cheung no longer held any direct or indirect interests inEN HK. Thereafter, Mr. Wong KF exited our Group and Mr. Cheung further disposed of hisinterest in ENSZ HK in 2013 as detailed below.

On 3 June 2005, the authorised share capital of EN HK was increased to HK$2,000,000,divided by 2,000,000 shares, and 1,999,760 shares were allotted and issued to ENL Line at par.Following such allotment and issuance of shares, EN HK became wholly-owned by ENL Lineand Mr. Wong as to 1,999,999 shares and one share, respectively.

To simplify the shareholding structure of our Group, E&E acquired the entire shareholdingof EN HK by acquiring a total of 1,999,999 shares from ENL Line on 30 December 2012 andone share from Mr. Wong on 5 April 2013 at a consideration of HK$1,999,999 and HK$1,respectively. After the above share transfers, EN HK became wholly-owned by E&E.

ENSZ HK

ENSZ HK was incorporated in Hong Kong with limited liability on 19 March 2004. ENSZHK is one of our principal operating subsidiaries and engages in the provision of air and oceanfreight forwarding and logistics and related value-added services.

At incorporation, ENSZ HK was owned as to 60% by ENL Line and 40% by Mr. Cheung,respectively. On 30 December 2012, E&E acquired 60 shares in ENSZ HK from ENL Line at aconsideration of HK$60. On 5 April 2013, E&E acquired 40 shares from Mr. Cheung at aconsideration of HK$40. After the aforesaid share transfers, ENSZ HK became wholly-owned byE&E and Mr. Cheung no longer held any interests in our Group but remained as a director ofENSZ HK and our logistics director.

EN SH

EN SH was established in the PRC with limited liability on 24 October 2005. EN SH is oneof our principal operating subsidiaries located in the PRC and engages in providing air andocean freight forwarding and logistics and related value-added services.

Since the date of establishment, EN SH has been a wholly-owned subsidiary of EN HK.

To facilitate the business expansion of EN SH, three branches located in Shenzhen,Guangzhou, and Chongqing, the PRC, namely ENSH SZB, ENSH GZB and ENSH CQB were setup in April 2007, February 2013 and April 2018, respectively.



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Companies deregistered and in the process of deregistration

ENLGZ HK

ENLGZ HK is a company incorporated in Hong Kong with limited liability on 4 September2012. At the time of incorporation, it was wholly-owned by ENL Line. On 30 December 2012,E&E acquired the entire issued share capital of ENLGZ HK from ENL Line at a consideration ofHK$1. After the aforesaid transfer, ENLGZ HK became wholly-owned by E&E. Since thebeginning of the Track Record Period and up to 31 December 2019, ENLGZ HK engaged in theprovision of air and ocean freight forwarding services in Hong Kong and had rented offices andhired staff in the PRC to assist our business operations. As advised by our Hong Kong LegalCounsel and our PRC Legal Advisers, the above operations of ENLGZ HK were in compliancewith the relevant rules and regulations in Hong Kong and the PRC, respectively.

For the purpose of simplifying our Group structure, ENLGZ HK has ceased businessoperations since 31 December 2019 and is in the process of applying for deregistration undersection 750 of the Companies Ordinance. As such, ENLGZ HK was not included in our Groupstructure under the Reorganisation.

ENLSH HK

ENLSH HK was a company incorporated in Hong Kong with limited liability on 5 March2001. At the time of incorporation, it was owned by an initial subscriber, being an IndependentThird Party and Mr. Wong as to 60% and 40%, respectively. Through a series of share transfersthroughout the years, ENLSH HK became wholly-owned by E&E on 30 December 2012. Sincethe beginning of the Track Record Period and up to 31 December 2019, ENLSH HK engaged inthe provision of air and ocean freight forwarding services in Hong Kong and had rented officesand hired staff in the PRC to assist our business operations. As advised by our Hong Kong LegalCounsel and our PRC Legal Advisers, the above operations of ENLSH HK were in compliancewith the relevant rules and regulations in Hong Kong and the PRC, respectively.

For the purpose of simplifying our Group structure, ENLSH HK had ceased businessoperations since 31 December 2019 and was dissolved by deregistration on 12 November 2021.As such, ENLSH HK was not included in our Group structure under the Reorganisation.

The historical financial information on the air and ocean freight forwarding businesssegments of ENLGZ HK and ENLSH HK during the Track Record Period (the “IncludedBusiness”) was included in our financial information. For details on how such financialinformation on the Included Business was included, please refer to “Financial information –Basis of preparation” in this document and note 1.3 to the Accountant’s Report in Appendix I tothis document.



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REORGANISATION

In August 2020, we commenced the Reorganisation in preparation for the [REDACTED].The following chart sets forth the corporate and shareholding structure of our Groupimmediately prior to the Reorganisation:

Mr. Wong

70.5%

100% 100% 100%

100%

100%

23.5% 6.0%

Mr. Chim

E&E

(Hong Kong)

Mr. Shon

ENLSH HK

(Hong Kong)ENLGZ HK*

(Hong Kong)EN HK

(Hong Kong)

EN SH

(PRC)

ENSZ HK

(Hong Kong)

* represents in the course of applying for deregistration

The main steps of the Reorganisation in preparation for the [REDACTED] are set outbelow.

Incorporation of Lucky Oasis

Lucky Oasis was incorporated in the BVI with liability limited by shares on 25 August2020. Since the date of incorporation, Lucky Oasis is authorised to issue a maximum of 50,000shares of par value US$1.00 each. On 16 December 2020, one fully paid ordinary share ofLucky Oasis was allotted and issued to E&E. After the aforesaid allotment and issue, LuckyOasis became wholly-owned by E&E.

Incorporation of our Company

Our Company was incorporated in the Cayman Islands with limited liability on 19 January2021 to act as the holding company of our Group. On its date of incorporation, one fully paidShare was allotted and issued to the initial subscriber, being an Independent Third Party. On thesame date, such subscriber Share was transferred to Lucky Oasis, and 8,666 new fully paidShares were allotted and issued to Lucky Oasis.



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Incorporation of ENL Development

ENL Development was incorporated in the BVI with liability limited by shares on 25February 2021 to act as the intermediate holding company of our Group. On the same date, onefully paid share of ENL Development was allotted and issued to our Company. After theaforesaid allotment and issue, ENL Development became wholly-owned by our Company.

Acquisition of the entire issued share capital of EN HK

On 24 May 2021, ENL Development acquired 2,000,000 shares of EN HK (representing theentire issued share capital of EN HK) from E&E. In consideration of the aforesaid acquisition,one share of ENL Development was allotted and issued, and credited as fully paid to ourCompany at the direction of E&E. After the aforesaid acquisition, EN HK became wholly-ownedby ENL Development.

Acquisition of the entire issued share capital of ENSZ HK

On 2 June 2021, ENL Development acquired 100 shares of ENSZ HK (representing theentire issued share capital of ENSZ HK) from E&E. In consideration of the aforesaidacquisition, one share of ENL Development was allotted and issued, credited as fully paid to ourCompany at the direction of E&E. After the aforesaid acquisition, ENSZ HK becamewholly-owned by ENL Development.

PRC legal compliance

As the ultimate individual shareholders of our Group, namely Mr. Wong, Mr. Chim and Mr.Shon are not PRC domestic residents and are not deemed overseas individuals who habituallyreside in the PRC for economic interests, our PRC Legal Advisers confirmed that they are notrequired to carry out the foreign exchange registration pursuant to the Circular of SAFE onForeign Exchange Administration of Overseas Investments and Financing and Round-TripInvestments by Domestic Residents via Special Purpose Vehicles (國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知) (“Circular 37”).

As EN SH has been a foreign invested enterprise since its establishment, our PRC LegalAdvisers confirmed that approvals from the CSRC or the MOFCOM pursuant to the “Provisionson the Takeover of Domestic Enterprises by Foreign Investments” (關於外國投資者併購境內企業的規定) (“Circular 10”) in connection with the Reorganisation are not applicable.

Our PRC Legal Advisers confirmed that all approvals, permits and licences required underthe PRC laws and regulations in connection with the Reorganisation have been obtained, and theReorganisation has complied with all applicable PRC laws and regulations.



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[REDACTED]

On 10 November 2020, E&E and the [REDACTED] entered into a memorandum ofunderstanding (the “MOU”) according to which it was the parties’ understanding that the[REDACTED] would enter into a definitive and binding agreement to subscribe for Shares uponconducting financial and legal due diligence on our Group and our business. Upon signing theMOU, the [REDACTED] paid a sum of HK$10.0 million which, pursuant to the MOU, shall beapplied as partial payment for the [REDACTED] should a definitive and binding agreement forthe [REDACTED] be entered into. Such partial payment shall be refunded to the [REDACTED]pursuant to the MOU should the parties fail to enter into a definitive and binding agreement forthe [REDACTED] by 31 December 2021.

On 8 March 2021, our Company and the [REDACTED] entered into a subscriptionagreement pursuant to which our Company agreed to allot and issue and the [REDACTED]agreed to subscribe for 1,333 Shares, representing 13.33% of the enlarged entire issued sharecapital of our Company at a consideration of HK$18.0 million. Such consideration wasdetermined after arm’s length negotiations between our Company and the [REDACTED] andtaking into account (i) the historical financial performance of our Group; (ii) the operatingperformance of our Group; (iii) the business prospects of our Group; and (iv) the then marketconditions of the air and ocean freight forwarding services industry in Hong Kong and the PRC.

HK$10.0 million of the consideration was settled by way of fund transfer on 10 November2020 pursuant to the MOU and HK$2.0 million was settled by way of fund transfer on 29 April2021. The remaining consideration of HK$6.0 million was settled by way of fund transfer on 14May 2021. As such, the consideration for the [REDACTED] was fully and irrevocably settledon 14 May 2021. On 27 July 2021, our Company allotted and issued 1,333 Shares (representing13.33% of the enlarged issued share capital of our Company after completion of thesubscription) to the [REDACTED]. After the aforesaid allotment and issue, our Companybecame owned by Lucky Oasis and the [REDACTED] as to 86.67% and 13.33%, respectively.

As advised by our legal advisers as to Cayman Islands law, no approval is required fromgovernmental body or authority in the Cayman Islands by our Company in connection with ourCompany’s allotment of Shares to the [REDACTED]. As the consideration for the[REDACTED] was fully and irrevocably settled by the [REDACTED] to our Company, therequisite resolutions of our Company have been passed and the register of members of ourCompany has been updated to reflect the [REDACTED] being the registered shareholder of theShares allotted and issued to the [REDACTED], such Shares would be validly issued and fullypaid under Cayman Islands laws. Therefore, the [REDACTED] was conducted in compliancewith all applicable laws and regulations.



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The following table summarises further details of the [REDACTED]:

Name of the [REDACTED] Oriental Prominence SPC, acting for and onbehalf of Prominence Value Fund SP

Background of the [REDACTED] Oriental Prominence SPC is an exemptedcompany incorporated in the Cayman Islandswith limited liability and registered as asegregated portfolio company on 28 August2020 and Prominence Value Fund SP is asegregated portfolio under the [REDACTED]for the primary purpose of investing moniescontributed by investors in accordance withits investment strategy

Date of the [REDACTED] agreement 8 March 2021

Amount of consideration paid HK$18.0 million

Date on which the consideration was fullyand irrevocably settled

14 May 2021

Number of Shares held by the[REDACTED] upon the [REDACTED]

[REDACTED] Shares

Cost per Share paid by the [REDACTED](taking into account the [REDACTED])

HK$[REDACTED]

Discount to the [REDACTED] Range(taking into account the [REDACTED])

Between approximately [REDACTED]% and[REDACTED]% (based on the[REDACTED] at HK$[REDACTED] andHK$[REDACTED] per [REDACTED],respectively)

Shareholding in our Company uponcompletion of the [REDACTED] andthe Reorganisation

13.33%

Shareholding in our Company uponthe [REDACTED]

[REDACTED]%

[REDACTED] by our Group General working capital



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Strategic benefits the [REDACTED] willbring to our Group

The [REDACTED] demonstrates investors’confidence in our operation and serves as anendorsement of our performance, strength andprospects for future investors in the equitycapital market.

Lock-up and public float The Shares held by the [REDACTED] arenot subject to any lock-up arrangement andwill not be counted towards the public floatof our Company and will rank pari passu withthe Shares then in issue and to be[REDACTED] on the Stock Exchange.

No special right was granted to the [REDACTED] in relation to the [REDACTED].

Discount to the cost per Share paid by the [REDACTED] and the [REDACTED] range

The consideration of HK$18.0 million for the [REDACTED] represents a cost per Share of[REDACTED] paid by the [REDACTED] (taking into account the [REDACTED]) and adiscount of approximately [REDACTED]% and [REDACTED]% (based on the [REDACTED]at HK$[REDACTED] and HK[REDACTED] per [REDACTED], respectively).

The difference in cost per Share paid by the [REDACTED] and the [REDACTED] wasmainly attributable to the following:

Risks assumed by the [REDACTED] prior to the [REDACTED]

At the time when the MOU and the [REDACTED] agreement was entered into, E&E(or our Company after the Reorganisation) was a private company with no [REDACTED]status. The [REDACTED] was not entitled to any board representation in our Group underthe terms of the [REDACTED] agreement and therefore had no control on whether a[REDACTED] application would actually be made or whether the [REDACTED] wouldoccur.

On 10 November 2020, the MOU was entered into such that a sum of HK$10.0million was paid by the [REDACTED] to our Group and the [REDACTED] would conductfinancial and legal due diligence on our Group and our business. At the time when theMOU was entered into, a definitive and binding agreement had yet to be executed and theconsideration for the [REDACTED] had yet to be determined.

On 27 November 2020, the Stock Exchange published a consultation paper (the“Consultation Paper”) on Main Board profit requirement. The Consultation Paperproposed an increase in the minimum profit requirement by either 150% or 200%. Had suchincrease in profit requirement been effective, our Group would not have been able to meetthe new profit requirement based on our financial performance for the years ended 31March 2019 and 2020. It was not until May 2021 when the conclusions to the Consultation



– 159 –

Paper were published, in which the increase to the profit requirement was fixed at 60%,resulting in an aggregate profit threshold of HK$80 million (effective on 1 January 2022).As such, when the [REDACTED] agreement was entered into on 8 March 2021, the[REDACTED] and our Group would have to take into account the risks that the[REDACTED] would have to assume at the material time when agreeing on theconsideration for the [REDACTED].

Given the circumstances set out above and the form of [REDACTED] adopted asexplained below, our Directors believe that the difference in cost per Share paid by the[REDACTED] and the [REDACTED] reflects fairly and reasonably the risks assumed bythe [REDACTED] which do not apply to investors in our Company under the[REDACTED].

Form of the [REDACTED]

The [REDACTED] was made through subscribing new shares issued by our Company,as opposed to convertible bonds. As such, the [REDACTED] is less flexible whencompared to investments made in the form of convertible bonds as divestment of the formercould only be made through share repurchase by our Controlling Shareholders or sale toinvestors in a private manner while convertible bonds are generally subject to a maturitydate or may even be interest bearing. Under the terms of the [REDACTED] agreement, the[REDACTED] is not entitled to any divestment rights or interests.

Background of the [REDACTED] and reasons for making the [REDACTED]

Based on the information provided by the [REDACTED], set out below is a briefdescription of the [REDACTED]:

Oriental Prominence SPC (“Oriental Prominence”) is an exempted company incorporatedin the Cayman Islands with limited liability and registered as a segregated portfolio company on28 August 2020 and Prominence Value Fund SP is a segregated portfolio under the[REDACTED] for the primary purpose of investing monies contributed by investors inaccordance with its investment strategy.

Oriental Prominence is managed by Chuntai Management Limited (“Chuntai”). Chuntai iswholly-owned by Mr. Xie Yuanzhe (“Mr. Xie”), an Independent Third Party. Mr. Xie is also adirector of Chuntai. According to the marketing material of Chuntai for distribution toprofessional investors, Chuntai mainly focuses on secondary market investment and invests in avariety of asset classes, including fixed income, equity fund of funds and other relatedderivatives. Currently, the asset under management of Chuntai is approximately US$50 million.The sectors which Chuntai mainly focuses on include Asia real estate bonds, Asia governmentbonds, property management, logistics, technology, media, and telecom (TMT), healthcare, retailand infrastructure.



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In the second half of 2020, Mr. Wong became acquainted with a responsible officer of anasset management firm licensed under the SFO through a common acquaintance. The assetmanagement firm is responsible for providing advice to Chuntai in its investment decisions.Subsequently, Chuntai was given an overview of the background and business of our Group.Chuntai then expressed interests in investing in our Group and negotiations on the proposedinvestment began in September 2020. Following negotiations and discussions, E&E and the[REDACTED] entered into the MOU on 10 November 2020. For details of the MOU, pleaserefer to “[REDACTED]” in this section.

In deciding to invest in our Group, Chuntai has taken into consideration the need to furtherlook into investments in logistics and infrastructure sectors as its investment portfolio graduallydevelops in order to maintain a balanced portfolio of quality assets. According to Chuntai,investments in logistics and infrastructure sectors currently only takes up less than 10% of itstotal management assets. The [REDACTED] therefore presents an opportunity for Chuntai tooptimise its growing investment portfolio.

In deciding to accept the investment from the [REDACTED], our Directors have taken intoconsideration the fact that Chuntai, an asset management company that currently managesapproximately US$50 million worth of assets, deciding to invest in our Group demonstrates thatinvestors who are active in the equity market in Hong Kong have confidence in our operations.The [REDACTED] also serves as an endorsement of our performance, strength and prospectsfor future investors in the equity capital market as future investors will look upon our existinginvestors and Shareholder base before making investment decisions in our Company. With a fundacting as our investor, we believe we can benefit from the knowledge and experience of the[REDACTED] by interacting with more active stakeholders in the equity capital market in HongKong through the network of the [REDACTED]. Although the introduction of the[REDACTED] has not yet led to other investments in our Group as at the Latest PracticableDate, we are confident that the [REDACTED], together with the [REDACTED], will continueto strengthen our capital base and provide a sustainable fund raising platform for us to raisefurther capital by issuing equity or debt securities in the future.

Save for the [REDACTED], to the best of our Directors’ knowledge, information andbelief having made all reasonable enquiries, the [REDACTED] did not have any past or presentrelationship or any agreements, arrangements or understanding with our Company, oursubsidiaries, Shareholders, Directors or senior management and any of their respective closeassociates and was an Independent Third Party as at the Latest Practicable Date.

Sole Sponsor’s confirmation

The Sole Sponsor has confirmed that the [REDACTED] made by the [REDACTED] is incompliance with the Guidance Letters on [REDACTED] HKEx-GL29-12 and HKEx-GL43-12issued by the Stock Exchange.



– 161 –

The following chart sets forth the corporate and shareholding structure of our Groupimmediately following completion of the Reorganisation and the [REDACTED] but prior to thecompletion of the [REDACTED] and the [REDACTED]:

Mr. Wong Mr. Chim Mr. Shon

E&E

(Hong Kong)

Lucky Oasis

(BVI)[REDACTED]

(Cayman Islands)

Company

(Cayman Islands)

ENL Development

(BVI)

EN HK

(Hong Kong)

EN SH

(PRC)

ENSZ HK

(Hong Kong)

70.5% 23.5%

100%

100%

100%

100%

100%

86.67%13.33%

6.0%

[REDACTED] AND THE [REDACTED]

Conditional on the share premium account of our Company having sufficient balance, orotherwise being credited as a result of the allotment and issue of the Shares by our Companypursuant to the [REDACTED], our Company will capitalise an amount of HK$[REDACTED]standing to the credit of the share premium account of our Company by applying such sumstowards paying up in full at par a total of [REDACTED] new Shares for allotment and issue tothe existing Shareholders whose names appear on the register of members or principal shareregister of our Company at the close of business on [•] (or as each of them may direct) inproportion (as nearly as possible without involving fractions so that no fraction of a Share shallbe allotted and issued) to their respective shareholdings in our Company, by way of the[REDACTED].



– 162 –

Immediately after the completion of the [REDACTED] and the [REDACTED] (withouttaking into account any Shares which may be allotted and issued pursuant to the exercise of the[REDACTED] and any options which may be granted under the Share Option Scheme), (a)approximately [REDACTED]% of the enlarged issued share capital of our Company will beowned by Lucky Oasis; (b) approximately [REDACTED]% of the enlarged issued share capitalof our Company will be owned by the [REDACTED]; and (c) approximately [REDACTED]%of the enlarged issued share capital of our Company will be owned by the public under the[REDACTED].

The following chart sets forth the corporate and shareholding structure of our Groupimmediately following completion of the [REDACTED] and the [REDACTED] (taking noaccount of any Shares which may be issued pursuant to the exercise of the [REDACTED] andany options which may be granted under the Share Option Scheme.)

Mr. Wong Mr. Chim Mr. Shon

Public

E&E

(Hong Kong)

Lucky Oasis

(BVI)[REDACTED]

(Cayman Islands)

Company

(Cayman Islands)

ENL Development

(BVI)

EN HK

(Hong Kong)

EN SH

(PRC)

ENSZ HK

(Hong Kong)

70.5% 23.5%

100%

100%

100%

100%

100%

[REDACTED]%[REDACTED]%

6.0%

[REDACTED]%



– 163 –

OVERVIEW


We were established in 1997 in Hong Kong with a focus on providing freight forwardingservices. In 2005, we expanded our freight forwarding business to the PRC. We further expandedour business to providing warehousing, logistics, repackaging and labelling and palletisingservices. We now operate in the PRC through our subsidiary and branches in Chongqing,Shanghai, Guangzhou and Shenzhen. According to the Industry Report, Chongqing and Shanghaiare major trade hubs in the PRC in terms of air cargo throughput.

We provide international freight forwarding services through our operating subsidiaries inHong Kong and the PRC, our branches in the PRC as well as our global network of freightforwarder business partners in other geographical locations where we have not established apresence. We maintain connections with over 1,000 freight forwarder business partners in morethan 160 countries and regions, among which over 200 have been engaged by us on atransaction-by-transaction basis. Our established global network of freight forwarder businesspartners enables us to offer freight forwarding services to our customers on a wide portfolio ofcargo routes. We are an IATA cargo agent and a member of each of the Combined LogisticsNetworks (CLN), the Cooperative Logistics Network (COOP), the 5-Star Logistics Network(5-SLN), the Majestic Global Logistics Network (MGLN), the Carvre Seven and the CargoPower Network (CPN). Our Directors are of the view that these networks offer us reliableplatforms to reach out to, and thereby enabling us to build alliances with, freight forwardersglobally.

Our customers comprise freight forwarder customers who act on behalf of their ownshipper customers and direct customers, and are primarily located in Hong Kong, the PRC andthe U.S. As a recognition of the quality and reliability of our services, we have establishedstrong and stable business relationships with our major customers during the Track RecordPeriod for a period of approximately two to 14 years.

Our suppliers primarily include (i) suppliers of cargo spaces, which include airline carriers,shipping liners and fellow freight forwarders; (ii) overseas freight forwarder business partnersproviding freight forwarding services in geographical locations where we have not established apresence; and (iii) suppliers providing warehousing, trucking and other related logistics services.We have established long-term and stable business relationships with a number of airline carriersfor at least six years, including Supplier A, being our largest supplier during the Track RecordPeriod, for approximately 15 years. We enter into different arrangements with our carrierpartners and fellow freight forwarders in securing cargo spaces, including cargo agencyagreements, ad hoc cargo space arrangements, air charter agreements and/or block spaceagreements, which allow us to offer reliable and competitive solutions to our customers to suittheir individual operational and supply chain needs.


BUSINESS

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The table below sets forth the breakdown of our revenue by type of services for the periodsindicated:


HK$’000 % HK$’000 % HK$’000 %

Freight forwardingservices 483,874 99.7 574,228 99.2 1,031,845 99.8



Logistics and relatedvalue-addedservices 1,649 0.3 4,749 0.8 1,700 0.2

Total 485,523 100.0 578,977 100.0 1,033,545 100.0

OUR COMPETITIVE STRENGTHS

We believe that our success and future prospects are primarily driven by a combination ofthe following competitive strengths which distinguish ourselves from our competitors:

We have established a strong reputation in the freight forwarding and logisticsindustry in Hong Kong and the PRC through our proven track record of over 24 years

We are a well-established freight forwarding and logistics service provider in HongKong and the PRC with a proven track record of over 24 years and have established solidbusiness reputation and network in the industry. Since our inception, we have developed abrand image and reputation that are associated with high quality and reliable services. Overthe years, we have established a reputation in the industry recognised by our customers andthe industry players, which is demonstrated by the loyalty of our major customers, as wellas our accreditation by and admission to memberships of significant associations which arehighly regarded in the industry.

According to the Industry Report, the freight forwarding and logistics industry ishighly fragmented and competitive. There were approximately 7,000 freight forwardingservices providers in Hong Kong and 40,000 freight forwarding services providers in thePRC as at March 2022. Freight forwarders in Hong Kong can be divided into two tiers,namely tier-1 players who are generally international logistics services providers withworldwide logistics network and business coverage, and tier-2 players who are generallylocal and regional players with networks covering specific logistics locations and categoriesof goods. In FY2022, the aggregate market share of the top five players of the tier-1 freight


BUSINESS

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forwarding market in Hong Kong was approximately 13.0% in terms of revenue whereasthe market share of the top five players of the tier-2 freight forwarding market in HongKong was approximately 5.5% in terms of revenue. In FY2022, our Group generated arevenue of approximately HK$486.0 million for freight forwarding services with HongKong as departure port, which accounted for approximately 0.3% of the market share in theoverall freight forwarding services market in Hong Kong and approximately 0.5% of themarket share in the tier-2 freight forwarding services market in Hong Kong.

We believe that, as a recognition of the quality and reliability of our services, we haveestablished strong and stable business relationships with our major customers during theTrack Record Period for a period of approximately two to 14 years. We believe that ourstrong and established relationships with our major customers not only enable us to securea steady flow of recurrent business and revenue from our customers, but also provide uswith a competitive advantage to secure future business in our marketing and businessdevelopment with new customers.

Apart from customers’ recognition, we believe that we are well-recognised in theindustry. We are an IATA cargo agent. IATA is a trade association of the world’s airlinesfounded in 1945 which helps to formulate industry policy and standards with the principalpurpose of promoting safe, secure, efficient and economic air transport operation. IATA’scargo agency programme helps to regulate the working relationships between the memberairlines and the cargo agents and is recognised by the freight forwarding industry globally.Our Directors believe that being an accredited IATA cargo agent is a recognition of ourfinancial and professional competency and credibility in the industry and contributes toboosting our brand image and reputation in the industry as well as our customers’confidence in the services provided by our Group.

We are also a member of each of the Combined Logistics Networks (CLN), theCooperative Logistics Network (COOP), the 5-Star Logistics Network (5-SLN), theMajestic Global Logistics Network (MGLN), the Carvre Seven and the Cargo PowerNetwork (CPN). Our Directors are of the view that these networks offer us reliableplatforms to reach out to, and thereby enabling us to build alliances with, freightforwarders globally. As confirmed by Frost & Sullivan, membership of these networks issubject to stringent approval requirements, including fulfilment of specific financial ratiosand ongoing peer endorsement. In addition, we have received numerous awards over theyears such as Asia Business Achiever Award by Asia Business Consultancy Association,China Airlines – One Million US Dollar Sales Award* (中華航空一佰萬美元代理商大獎)by China Airlines and 2018 Enterprise with the Greatest Potential in China Award* (2018中國最具發展潛力企業) by China New Economy Brand Conference* (中國新經濟品牌峰會).We believe that being a member of each of the aforesaid networks and winner of theseawards serves as a testament of our capability and proven track record endorsed by ourpeers within the industry and our customers. For details of our awards and recognitions,please refer to “Awards, certifications and memberships – Awards and certifications” in thissection.


BUSINESS

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As stated in the Industry Report, the freight forwarding and logistics industry in HongKong and the PRC is highly fragmented and competitive. We believe that ourwell-established market position, recognised competency and credibility and proven trackrecord distinguish us from our competitors and will continue to put us in a significant andbetter position to stay competitive maintain existing business relationships and capture newbusiness opportunities.

We maintain strong and established business relationships with airline carriers whichenhance our competitiveness

We have been engaging in the freight forwarding and logistics business in Hong Kongand the PRC since our inception in 1997. According to Frost & Sullivan, there is asignificant number of freight forwarders in the market and international airline carriersgenerally have in place stringent assessment criteria in selecting freight forwarders as theircargo agents taking into account, among other things, their industry reputation and financialsoundness and are only willing to enter into business relationship with freight forwarderswith whom they have established trusted relationships in their previous course of dealings.We have established long-term and stable business relationships with a number of airlinecarriers for at least six years, including Supplier A, being our largest supplier during theTrack Record Period for approximately 15 years. We enter into cargo agency agreementswith our airline partners which formalise our business relationships with them. We alsoenter into different arrangements with our airline partners in securing cargo spaces,including ad hoc cargo space arrangements, air charter agreements and block spaceagreements. For years, we have been working seamlessly with our airline partners in theoperations of our freight forwarding business, which enables us to offer reliable andcompetitive solutions to our customers, even in times of urgency or scarcity. Furthermore,given our Directors’ and senior management’s substantial expertise and experience in thefreight forwarding industry, we are able to expand our cooperation with our airline partners.For details of the arrangements we enter into with our airline partners, please refer to “Ourservices – Our freight forwarding services – Air freight forwarding services” in thissection.

We believe that by leveraging our established business relationships with our airlinepartners and the mix of different arrangements with them, we will be able to gaincompetitive advantages in terms of pricing and availability of cargo spaces, therebyallowing us to optimise our profit margin, maximise our operational flexibility and capturethe opportunities arising from the fast-changing market demands.


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We have a global network of freight forwarder business partners serving worldwidecargo routes which meets the varying needs of our customers

We provide worldwide freight forwarding services. Over the years, we have developedstrong business relationships with a global network of freight forwarder business partnersin our freight forwarding and logistics operations and maintain connections with over 1,000overseas freight forwarder business partners in more than 160 countries and regions, amongwhich over 200 have been engaged by us on a transaction-by-transaction basis. We havemaintained stable business relationships with our major freight forwarder business partnersfor a period of approximately two to 14 years. Our established global network of freightforwarder business partners enables us to offer freight forwarding services to our customerson a wide portfolio of cargo routes.

We believe that, through our strong and stable network of freight forwarder businesspartners, we are able to secure cargo spaces and reliable freight forwarding services onspecific routes at competitive prices and in times of urgency or scarcity which distinguishesus from our competitors. Having a sizeable network of trusted freight forwarder businesspartners also greatly reduces our risk of business interruption due to heavy reliance on alimited number of business partners. We believe that the ability to offer worldwide freightforwarding and logistics services is essential in expanding our customer base, enhancingour customers’ experience and strengthening our business relationships with our customers.We further believe that a diversified global network of trusted freight forwarder businesspartners, which has been developed over years of cooperation, our proven track record andestablished reputation in the industry, are crucial to our success in expanding ourgeographical reach without incurring extensive capital commitment for establishing ourpresence. According to the Industry Report, it is an entry barrier for new comers withlimited operational experience and standing in this industry to grow and develop a networkof freight forwarder business partners and customers globally. We believe that, given ourwell-developed global network of freight forwarder business partners, our Group’s revenueand market share will continue to grow.

Our freight forwarder business partners, being our suppliers, may also be ourcustomers in different transactions. During the Track Record Period, our revenue generatedfrom our freight forwarder customers amounted to approximately HK$436.9 million,HK$476.8 million and HK$909.6 million, respectively, representing approximately 90.0%,82.4% and 88.0% of our total revenue, respectively. According to the Industry Report,small- and middle-sized players in the freight forwarding market tend to develop theirbusiness with a regional focus and therefore, in line with general industry practice, theyengage other freight forwarders to provide overseas freight forwarding services ingeographical locations where they have no presence. This enables small- and middle-sizedfreight forwarders to enrich their scope of freight forwarding services in terms ofgeographical reach without incurring extensive capital commitment for establishing theirpresence in the overseas regions. Furthermore, according to the Industry Report, it is notuncommon for freight forwarders to consolidate their shipments by way of co-loading inorder to maximise the utilisation of cargo space and to achieve optimal cost efficiency. As


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such, freight forwarders work in alliance that benefits all in the alliance. For details of sucharrangement, please refer to “Overlapping of customers and suppliers” in this section.

We provide comprehensive freight forwarding and logistics and related value-addedservices and take pride in our ability to offer cost and time efficient customisedsolutions to our customers

According to Frost & Sullivan, the core business of a freight forwarder is to move ashipper’s consignment to the consignee within the stipulated, in an orderly manner and atthe most competitive price and the tier-2 freight forwarders in Hong Kong generallyprovide less diversified services portfolio with freight forwarding as a key revenue source.We are capable of offering and providing more comprehensive freight forwarding andlogistics and related value-added services to our customers which differentiates us fromother tier-2 freight forwarders in Hong Kong. We place great emphasis on providingcustomised services to meet the varying needs of our customers and promoting customers’satisfaction. We maintain close and regular contacts with our customers in order tounderstand and cater for their different needs and to ensure that we are kept up-to-date withthe latest market information from time to time. Leveraging our extensive experience inand knowledge of the freight forwarding and logistics services industry, our strongestablished business relationships with our carrier partners and our diversified globalnetwork of trusted freight forwarder business partners, we are able to capitalise on ourresourcefulness and management flexibility to offer customised forwarding and logisticssolutions to our customers in meeting their needs in cost-efficient and/or time-efficientmanners. We also provide 24/7 services to our customers throughout the year in order toprovide assistance and solutions to our customers on a prompt basis. We take pride in ourability to provide solution-oriented services to our customers and respond promptly inaddressing the immediate needs of our customers.

While we continued to expand our customer base, many of our long-term majorcustomers engaged our services on a recurring basis throughout the Track Record Period.We believe that this serves as a testament of our customers’ satisfaction of our services.

We have an experienced and stable management team with extensive industryexpertise

We have an experienced, stable and motivated management team. Our seniormanagement team is led by our executive Directors, Mr. Wong, Mr. Chim and Mr. Shon.Each of Mr. Wong, Mr. Chim and Mr. Shon as well as our senior management teammembers has vast experience in the freight forwarding and logistics industry, ranging fromapproximately 28 to 39 years. Mr. Chim and Mr. Wong were two of the founders whoestablished our Group in 1997 whilst Mr. Shon joined our Group in 2014. Mr. Wong andMr. Chim are responsible for the overall management and business operations of ourGroup, including formulating strategies and operational plans, and making daily businessdecisions for our Group. Mr. Shon, is responsible for the marketing development of ourGroup. For details of the background and experience of our Directors and senior


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management, please refer to “Directors and senior management” in this document. Webelieve that the industry experience, knowledge and stability of our management team havesignificantly contributed to the success of our operations and our business growth, and areinstrumental to our future development in the freight forwarding and logistics industry. Webelieve that under the strong and visionary leadership of our Directors, our Group’s revenueand market share will continue to grow and that our business shall continue to flourish.

OUR BUSINESS STRATEGIES

We intend to implement the following business strategies to strengthen our market positionand maintain our market competitiveness:

Expanding and improving our air freight forwarding services

The U.S. and the PRC are the first and the second largest economies in the world interms of GDP in 2021, respectively, and notwithstanding the Sino-U.S. trade war, the U.S.continued to be the largest export destination of the PRC in terms of export value in 2021and the PRC continued to be the U.S.’ largest supplier of goods imports in terms of goodsimport value in 2021.

Benefitted from the solid global demand as countries reopened amid the COVID-19pandemic in 2021, there was a strong surge of the PRC’s total exports by approximately29.9% from approximately US$2,590.6 billion in 2020 to approximately US$3,364.0 billionin 2021 according to the GACC. According to the PRC export value published by theGACC, the PRC’s export to the U.S. also increased at a similar pace by approximately27.5% from approximately US$451.8 billion in 2020 to approximately US$576.1 billion in2021 and exceeded the level of the PRC’s export to the U.S. of approximately US$478.4billion in 2018. In addition, the PRC’s trade surplus with the U.S. widened byapproximately 25.1% as compared to 2020 to approximately US$396.6 billion in 2021.According to the Industry Report, the PRC’s total export value to the U.S. in 2022 isexpected to be approximately US$691.0 billion and the PRC overall export and the PRC’sexport to the U.S. will further grow to approximately US$4,912.0 billion and US$1,080.0billion, respectively, and at a CAGR of approximately 7.3% and 11.8%, respectively, fromFY2022 to FY2026.

According to the Hong Kong Census and Statistics Department, Hong Kong’s totalexport surged by approximately 26.3% from approximately HK$3,927.5 billion in 2020 toapproximately HK$4,960.7 billion in 2021, while Hong Kong’s export to the U.S. surged byapproximately 19.6% from approximately HK$258.8 billion in 2020 to approximatelyHK$309.6 billion in 2021. In 2021, the U.S. continued to be the second largest exportdestination of Hong Kong in terms of export value, following the Mainland China.According to the Industry Report, the Hong Kong’s total export value to the U.S. in 2022 isexpected to be approximately HK$345.0 billion and the Hong Kong overall export andHong Kong’s export to the U.S. will further grow to approximately HK$6,477.1 billion andHK$414.9 billion in 2026, respectively, and at a CAGR of approximately 5.5% and 5.0%,


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respectively, from FY2022 to FY2026. Further, it is expected that the outward air freightmovement in Hong Kong will increase from approximately 3,351.0 thousand tonnes inFY2021 to approximately 3,451.5 thousand tonnes in FY2022 and further to approximately3,870.5 tonnes in 2026 at a CAGR of approximately 2.9% from FY2022 to FY2026.

Attributable to the rapid development and evolvement of internet andtelecommunication technologies over the last two decades, electronic commercialtransactions over the internet, commonly known as ‘e-commerce’, have grown dramaticallyover the years and have become a significant part of the mainstream commercialtransactions nowadays. According to the Industry Report, the gross merchandise value ofe-commerce in the PRC increased from approximately RMB26.1 trillion in 2016 toapproximately RMB43.7 trillion in 2021, representing a CAGR of approximately 9.9%,whilst the gross merchandise value of e-commerce in Hong Kong increased fromapproximately HK$25.4 billion in 2016 to approximately HK$56.3 billion in 2021,representing a CAGR of approximately 17.3%. As advised by Frost & Sullivan,e-commerce is expected to continue to expand in the years to come, particularly since thedevelopment of a ‘new normal’ shopping behaviour as a result of the global travelrestrictions and quarantine requirements due to the outbreak of COVID-19 since late 2019.

Furthermore, according to the Industry Report, the gross merchandise value ofe-commerce in the PRC increased from approximately RMB26.1 trillion in 2016 toapproximately RMB41.9 trillion in 2021, whilst the gross merchandise value of e-commercein Hong Kong increased from approximately HK$25.4 billion in 2016 to approximatelyHK$46.2 billion in 2021. As advised by Frost & Sullivan, e-commerce is expected tocontinue to expand in the years to come. The export value of cross-border e-commerce inthe PRC to North America is substantial in the amount and as advised by Frost & Sullivan,North America accounted for approximately 20.7% of total cross-border e-commerce exportvalue in the PRC in 2020. The export value of cross border e-commerce in the PRC toNorth America further increased to approximately RMB318.2 billion in 2021, representingan increase of approximately 33.0% from approximately RMB239.4 billion in 2020. NorthAmerica has contributed approximately 22.1% of the total export value of cross-bordere-commerce originated from the PRC in 2021, increased from approximately 20.7% in2020.

Air freight forwarding is an essential component of cross-border e-commerce and it isanticipated that the growth of e-commerce will continue to contribute to the growingdemands for international air freight forwarding services. According to IATA, it isestimated that e-commerce represented approximately 18% of air cargo volume in 2020,and will increase to approximately 22% by 2022.

Over the years, we provide international air freight forwarding services to ourcustomers. During the Track Record Period, our revenue generated from the provision ofair freight forwarding services amounted to approximately HK$378.9 million, HK$450.7million and HK$593.1 million, respectively, representing approximately 78.0%, 77.8% and57.4% of our total revenue, respectively, which was primarily contributed by our provision


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of air freight forwarding services in the PRC and Hong Kong for the export of shipments tothe U.S. Our revenue generated from the provision of air freight forwarding services forexport of shipments during the Track Record Period amounted to approximately HK$368.6million, HK$444.3 million and HK$583.0 million, respectively, representing approximately97.3%, 98.6% and 98.3% of our total revenue from the provision of air freight forwardingservices, respectively. Please refer to “Our services – Our freight forwarding services – Airfreight forwarding services” in this section for details of our air freight forwardingservices. During the Track Record Period and up to the Latest Practicable Date, we haveestablished business relationships with new freight forwarder customers whose ultimatedirect customers, to the best of our Directors’ knowledge, information and belief, areengaging in the e-commerce business of a variety of products. As advised by Frost &Sullivan, with the development of a ‘new normal’ shopping behaviour since early 2020, theglobal e-commerce market is seeing a significant growth and is expected to continue togrow in the years to come. Our Directors believe that, leveraging our track record in ourprovision of air freight forwarding services, we are in an advantageous position to capturethe business opportunities arising from the rapid development of e-commerce and furtherexpand our air freight forwarding services, which would in turn enable us to capture alarger market share in the freight forwarding services industry.

We provide to our customers in Hong Kong (i) general warehousing services at ourexisting leased warehouse in Kwun Tong for the storage of general goods; and (ii) cargowarehousing services ancillary to our freight forwarding services through third partyservice providers for the short-time storage of cargos before they are transported to theterminals or ports for loading onto aircrafts and vessels. In relation to the provision ofcargo warehousing services ancillary to our freight forwarding services, we enter intoservice agreements with third party warehouse and related logistics service providers fromtime to time on an as-needed basis for warehouse spaces in Hong Kong and the PRC for theshort-term storage of goods and consignments before they are exported out of Hong Kongand/or the PRC. During the Track Record Period, our costs incurred for warehousing andlogistics services in relation to our freight forwarding services in Hong Kong amounted toapproximately HK$6.4 million, HK$6.9 million and HK$8.3 million, respectively. OurDirectors are of the view that there are certain risks associated with sourcing third partyservices. Our ability to source warehousing and/or logistics services from our third partyservice providers is subject to, among other things, market demand and supply as well asthe handling capacity of our service providers. There is no guarantee that our costs incurredfor warehousing and logistics services will not increase in times of urgency or scarcity andwe may have to transfer such costs to our customers, which would in turn affect ourcompetitiveness amongst our industry peers. On the other hand, if we decide not to or areunable to transfer such costs to our customers, any significant increase in such costs wouldmaterially and adversely affect our project margin and results of operations. Further, inanticipation of the growing strong demands for our Group’s freight forwarding services andtargeting to be an integrated freight forwarding and logistics service provider to provideone-stop freight forwarding services in Hong Kong to further differentiate us from othercompetitors, our Directors believe that it is beneficial for us to equip ourselves with ourown freight warehousing capacity instead of engaging third party warehousing and logistics


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service providers on an as-needed basis and equip ourselves with the necessary equipmentand manpower for such purpose.

Further, to enhance the level of aviation security in view of the rising threats ofterrorism around the globe, the ICAO has issued a new policy direction to strengthen aircargo security by requiring all known cargos to be subject to security screening by 30 June2021, as increased from a 70% screening requirement by 28 February 2021. In meeting theaforesaid ICAO aviation security requirements, the CAD has introduced the RACSFscheme, a new initiative to enable and regulate air cargo screening at off-airport locationsbefore such cargos are transported to the airport for loading onto aircrafts. The off-airportRACSF operation is subject to, among others, specific security requirements in terms ofscreening equipment, training and supervision of screening personnel, and site security, aswell as security requirements as to post-screening handling and transportation. Please referto “Regulatory overview – Regulatory requirements in Hong Kong” in this document fordetails.

We currently do not own or lease any cargo x-ray screening equipment. We engagedthird party service providers to provide off-airport x-ray cargo-screening services to ourcustomers during the Track Record Period. According to the Industry Report, the pricerange for off-airport x-ray cargo-screening services in Hong Kong will be approximatelyHK$1.0 per kg to approximately HK$1.8 per kg in 2022. As advised by Frost & Sullivan, itis expected that there will be an upsurge in the demand of cargo screening services forcompliance with the ICAO aviation security requirements, which would in turn lead to anincrement in the prices and increased competition for such services.

According to the Industry Report, RAs and warehouse operators who conductoff-airport cargo x-ray screening operations can register their premises with the CAD tobecome RACSFs, subject to specific security requirements in terms of screening equipment,training and supervision of screening personnel, site security as well as securityrequirements as to post-screening handling and transportation. However, as advised byFrost & Sullivan, setting up warehouse premises which are suitable and competitive interms of size and proximity to the Hong Kong International Airport and equipped withon-site security systems and specific cargo x-ray screening equipment may pose a challengeto freight forwarders who lack the financial resources. In particular, the “Pilot SubsidyScheme for Third-party Logistics Service Providers” established by the CAD, which coversthe subsidisation on the purchase of screening equipment, has come to an end on 30 June2021. As further advised by Frost & Sullivan, as at the Latest Practicable Date, (i) therewere approximately 7,000 freight forwarders in Hong Kong, among which only 152 (orapproximately 2.2%) of them had RACSFs registered with the CAD; and (ii) only three ofthe top five tier-2 players in the freight forwarding and logistics services market in HongKong in terms of revenue in FY2022 had RACSFs registered with the CAD. In 2022, asadvised by Frost & Sullivan, the total volume of export air cargos in Hong Kong isexpected to be approximately 3,451.5 thousand tonnes and the market of air cargo x-rayscreening in Hong Kong is expected to amount to approximately HK$294.9 million.


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Given (i) only a relatively small number (i.e. only approximately 2.2%) of freightforwarders in Hong Kong have RACSFs registered with the CAD; and (ii) air cargos mustbe 100% x-ray screened prior to being loaded onboard aircraft (with an estimated marketsize of approximately HK$294.9 million in 2022 as advised by Frost & Sullivan), ourDirectors are of the view and Frost & Sullivan concurs that air cargo x-ray screening wouldbecome an essential aspect of the air freight forwarding business and there would be astrong demand for air cargo x-ray screening services from both our existing and newcustomer network. In addition, given the cost considerations for setting up cargo x-rayscreening system, our existing and new customers may not set up their own cargo x-rayscreening system and have to rely on third parties to provide such services. As such, ourDirectors anticipate that there will be demand from both our existing and new freightforwarder customers who do not have their own cargo x-ray screening facility and that wewill be able to capture such market demand to provide cargo x-ray screening services tosuch customers.

Further, a joint venture led by the logistics arm of Alibaba Group is currentlydeveloping a premium logistics centre at Kwo Lo Wan in the South Cargo Precinct of HongKong International Airport. Occupying a site of about 5.3 hectares and with an estimatedgross floor area of 380,000 sq.m., the premium logistics centre is scheduled to commenceoperations in 2023, and will be the third largest warehouse in Hong Kong serving thefast-growing global ecommerce business. As advised by Frost & Sullivan, such premiumlogistics centre is expected to capture the opportunities arising from the growinge-commerce industry and that the demand for integrated air cargo warehousing services(including off-airport cargo screening services) in Hong Kong is expected to benefit fromthe addition of such premium logistics centre in Hong Kong.

With a view to growing our business and further consolidating our market share andtaking into consideration, among other things, (i) the up-and-coming business opportunitiesas a result of the growth of e-commerce, in particular, the growing demands for air freightforwarding services; (ii) the anticipated growth of the outward air freight movement inHong Kong from 2022 to 2026 at a CAGR of approximately 2.9% as advised by Frost &Sullivan; (iii) our Group’s rich experience and established track record in providing airfreight forwarding services; (iv) the limitations on our ability to source warehousing and/orlogistics services from our third party service providers in a stable and timely manner andour reliance of such service providers; (v) the new air cargo screening requirements and theanticipated increasing demands for off-airport x-ray cargo-screening services; (vi) thescarcity of RACSFs and limited supply of off-airport cargo screening services in the marketin Hong Kong; (vii) the prevailing market conditions affecting the freight forwardingindustry in general, and in particular and as advised by Frost & Sullivan, the higherdemands of customers for integrated and one-stop air freight forwarding solutions; and(viii) the premium logistics centre which is expected to commence operations in 2023,


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our Directors consider it an opportune time to expand and improve the comprehensivenessof our air freight forwarding services by means of the following:

(i) equipping ourselves with our own air freight warehousing capacity by leasingpremises in Kwai Chung, Hong Kong with a gross floor area of approximately[3,400] sq.m. for use as our air freight warehouse facility, at a rental ofapproximately HK$[172] per sq.m. per month, which is determined withreference to the prevailing market rate of premises of comparable size, type andgrading in the same area. As at the Latest Practicable Date, we were in theprocess of identifying suitable premises for use as our air freight warehouse andhad not entered into any lease agreements in respect of the same;

(ii) enhancing our operational efficiency by acquiring eight forklifts of differentloading capacities in our new air freight warehouse facility so as to facilitate thetransport of air cargos and consignments;

(iii) recruiting 10 skilled and experienced personnel to support and facilitate theoperations of our new air freight warehouse facility;

(iv) purchasing and installing at our new air freight warehouse facility three stationsof cargo x-ray screening equipment, as well as hiring four skilled personnel tooversee and handle the cargo x-ray screening related operations. We will alsoseek to register ourselves with the CAD as RACSF for engaging in the operationsof cargo security screening facilities at off-airport locations; and

(v) equipping our new air freight warehouse facility with an advanced warehouse ITmanagement and x-ray system which electronically stores and records data of thegoods and consignments in and out of our air freight warehouse facility as wellas their cargo x-ray screening information, which would enable us to manage theoperations of our air freight warehouse facility in a time-efficient andcost-efficient manner.

We intend to utilise approximately HK$[REDACTED] million, representingapproximately [REDACTED]% of our [REDACTED] from the [REDACTED], to financethe above expansion plan. Please refer to “Future plans and [REDACTED] –[REDACTED]” in this document for further details. We believe that, in anticipation of thegrowing demands of air freight forwarding services and off-airport x-ray cargo-screeningservices in relation thereto, having our own air freight warehouse facility together with theacquisition of forklifts and cargo x-ray screening equipment, the recruitment of skilledpersonnel as well as the equipment of an advanced warehouse IT management and x-raysystem in our new air freight warehouse facility will strengthen our operational capabilityand place us in an advantageous position in capturing business opportunities and fulfillingthe varying needs of different customers.


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Developing our own truck fleet

In relation to our freight forwarding services, we engage third party service providersin Hong Kong and the PRC for the provision of trucking services based on the demandsand in accordance with the needs of our customers. According to the Industry Report, thenumber of freight forwarders who are able to provide one-stop freight forwarding services,including trucking services, in Hong Kong is relatively low, only 140 (or approximately2.0%) out of a total number of 7,000 freight forwarders in Hong Kong in 2021 wereequipped to provide trucking services. Taking into account the rapid development of thee-commerce business against the backdrop of the COVID-19 pandemic which leads to thedemands for freight forwarding services and ancillary logistics services, the fact that onlyapproximately 2.0% of freight forwarders in Hong Kong in 2021 were equipped to providetrucking services and with a view to providing more comprehensive services to ourcustomers which are complementary our freight forwarding services by deploying our ownresources and reducing our reliance on our third party service providers going forward, weintend to seize the opportunity and expand the scope of our freight forwarding and ancillarylogistics services by developing our own truck fleet. We intend to acquire four unit loaddevices trucks (with a maximum annual handling capacity of 10,472.5 tonnes per truck(Note)) and four pick-up trucks (with a maximum annual handling capacity of 9,292.5 tonnesper truck (Note)) and recruit 16 additional personnel including eight truck drivers and eightdelivery clerks to handle the day-to-day operations in relation to the development of ourown truck fleet. We intend to utilise approximately HK$[REDACTED] million,representing approximately [REDACTED]% of our [REDACTED] from the[REDACTED], to finance such expansion. Please refer to “Future plans and[REDACTED] – [REDACTED]” in this document for further details. We believe that,leveraging our established brand image and reputation in the industry as well as our proventrack record, our Group is in a position to develop our own truck fleet, which would in turnenhance our service ability and develop our capacity as an integrated freight forwardingand logistics service provider to offer services on a more comprehensive portfolio to ourcustomers to satisfy their needs in a prompt and timely manner.

Strengthening our ability to purchase cargo spaces for our business expansion

It is anticipated that the growth of e-commerce will contribute to the growingdemands for international freight forwarding services. Leveraging our Group’s track recordin the provision of freight forwarding services, we are in an advantageous position tocapture the business opportunities arising from such growing demands and further expandour freight forwarding services, which would in turn enable us to capture a larger marketshare in the freight forwarding services industry.

Note: The maximum handling capacity per truck is estimated on the basis and assumptions that (i) each truck cancomplete a maximum of five rounds of shipments per day; and (ii) there are 295 working days annually.


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We obtain and procure air cargo spaces through entering into different arrangementswith our airline partners and freight forwarder business partners, including entering intocargo agency agreements with airline partners. Pursuant to the cargo agency agreementsand in line with industry practice, we are required to provide bank guarantees in favour ofour airline partners to guarantee the discharge of our contractual obligations. The amountsof bank guarantees required are generally determined by our airline partners with referenceto, among other things, our historical shipment volume and transaction amount with theairline carrier. As at 31 March 2020, 2021 and 2022, the bank guarantees provided by us infavour of our airline partners amounted to approximately HK$27.0 million, HK$27.7million and HK$54.8 million, respectively. Please refer to “Suppliers – Bank guarantees” inthis section for further details of our bank guarantees. In anticipation of the growing strongdemands for our air freight forwarding services in view of the anticipated dynamic growthof e-commerce which would inevitably lead to a continuing increase in the demand forinternational freight forwarding service in the years to come and based on the discussionswith our airline partners as at the Latest Practicable Date, we estimate that our airlinepartners will further increase the amounts of bank guarantees to be provided by us by anaggregate of not less than HK$20 million to HK$30 million for the year ending 31 March2023.

As our bank guarantees are generally provided by our principal banks which would inturn require us to provide collaterals, including pledged bank deposits, a robust cashflowposition is crucial to enable us to meet the bank guarantee requirements of our airlinepartners in order to be in a better position to negotiate for and secure cargo spaces from ourairline partners as and when needed. Taking into account the foregoing, we intend to utiliseapproximately HK$[REDACTED] million, representing approximately [REDACTED]% ofour [REDACTED] from the [REDACTED], to finance the provision of bank guarantees toour airline partners. Please refer to “Future plans and [REDACTED] – [REDACTED]” inthis document for further details. We believe that, by enhancing our financial capability inproviding bank guarantees to our airline partners, we will be able to strengthen our abilityto purchase cargo spaces for our business expansion, thereby further consolidating ourmarket position in Hong Kong and the PRC.

Enhancing our sales and marketing efforts and expanding our customer base

We place great emphasis on maintaining our brand image and building up ourreputation as a quality service provider in the freight forwarding and logistics industry inHong Kong and the PRC. We also place great emphasis on promoting customers’satisfaction, thereby encouraging recurring businesses. During the Track Record Period, weprimarily procured our business (i) from our existing freight forwarder customers and directcustomers; (ii) through making sales calls to solicit business from existing and potentialcustomers; and (iii) from referrals by overseas freight forwarder business partners. Weconsidered that even though we are not a B2C freight forwarder, sales and marketingactivities are necessary due to the fact that (i) as advised by Frost & Sullivan, the freightforwarding industry is highly fragmented and competitive due to the presence of asignificant number of freight forwarders both in Hong Kong and the PRC. It is therefore


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important for us to stand out in the crowded freight forwarding market, so as to generatenew customers and revenue opportunities, and at the same time engage our existingcustomers. Further, given our strategy to expand and improve the comprehensiveness of ourair freight forwarding services, marketing is an essential channel for us to implement suchstrategy; (ii) although the majority of our customers were freight forwarder customers andthat we were also able to obtain referrals from our freight forwarder partners during theTrack Record Period, the referral system in the freight forwarding industry is passive andconfined. Our Directors believe that our B2B sales and marketing activities can facilitatethe reach of potential customers locally and globally, which could in turn increase our salesactivities of freight forwarding services to new direct customers and freight forwardercustomers and improve our profitability by transferring such sales opportunities into salesand expanding our customer base; and (iii) our freight forwarder competitors in Hong Kongand the PRC also conduct different sales and marketing activities, such as marketingthrough search engines. Our Directors believe that it is important for us to also conductsales and marketing activities to maintain the market reach which could help expand ourcustomer base in order to avoid running the risk of losing market share and profitability.

Thus, we intend to enhance our sales and marketing efforts in addition to maintainingclose and regular communications with our customers to understand their varying needs,broadening our exposure to more new customers by, among other things, engaging a publicrelations firm to participate in more social media advertising activities, participating inmore international freight forwarder networks, placing advertisements on shipping gazettesin Hong Kong and the PRC, advertising through other marketing channels such as internetsearch engines and placing advertising on trucks, so as to (i) further expand and diversifyour customer base; and (ii) promote our services and enhance our brand image andreputation as a quality service provider in the industry.

The table below sets forth our sales and marketing activities to be conducted and theirrelevant areas and target customers:

Sales and marketingcampaigns Target geographic area Target customers

Engaging a publicrelations firm toparticipate in moresocial media advertisingactivities

Predominantly Hong Kongand the PRC, alsooverseas

Predominantly directcustomers, also freightforwarder customers

Participating in industrynetworks (includingexhibition and annualmeeting sponsorships)


Freight forwardercustomers


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Sales and marketingcampaigns Target geographic area Target customers

Advertising throughshipping gazettes inHong Kong

Hong Kong Freight forwardercustomers

Advertising throughshipping gazettes in thePRC

The PRC Freight forwardercustomers

Marketing through searchengines by way ofsearch engineoptimisation


Predominantly directcustomers, also freightforwarder customers

Placing advertisements ontrucks

Hong Kong Predominantly directcustomers, also freightforwarder customers

We also plan to recruit nine additional staff with relevant expertise to expand our salesand marketing team. Our sales and marketing team will continue with our efforts inmaintaining close and regular contacts with our customers to understand their varyingneeds and to keep abreast of the latest market information which enable us to devisecorresponding sales and marketing plans and business strategies in response to market trendand development and our customised long-term business development. We intend to utiliseapproximately HK$[REDACTED] million, representing approximately [REDACTED]% ofour [REDACTED] from the [REDACTED], in connection with the foregoing sales andmarketing strategy. Please refer to “Future plans and [REDACTED] – [REDACTED]” inthis document for further details.

As advised by Frost & Sullivan, in view of the intense market competition, thesignificant number of freight forwarders in the industry as well as the increasingimportance of digitalisation in the industry, it is imperative for small- to medium-sizedfreight forwarders to elevate their sales and marketing efforts by using a mix of digitalengagement platforms to promote their services and to diversify their customer portfolio soas to boost their brand name and reputation in the market. Given the anticipated businessgrowth of our Group, our Directors believe that enhanced sales and marketing efforts at alevel exceeding the current level will be conducive to and necessary for reinforcing ourposition in the industry.


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Upgrading and strengthening our IT system

As our business operations require a high data processing capability and theavailability of real-time statistics, we have in place an IT system, comprising the freightforwarding system and the warehouse management system, which enables us to improve theefficiency of our operational management and to better serve our customers to meet theirspecific operational and supply chain needs. Please refer to “Information technology” inthis section for further details of our IT system.

According to the Industry Report, as a result of the COVID-19 pandemic, the freightforwarding and logistics services industry has placed a stronger emphasis on digitisationand automation to ensure that customers’ demands can be delivered in an efficient andtimely manner. As customers are increasingly demanding instantaneous information on theirconsignments and greater speed in delivery, as advised by Frost & Sullivan, freightforwarders around the globe are increasingly embracing the adoption of digitisation andautomation in their operations to enhance the efficiency of their services, thereby addingvalue to their customers and strengthening their competitiveness.

In view of the expanding scale of our Group’s business and our increasing operationalneeds, our Directors believe that it is essential to upgrade and further strengthen our ITsystem to improve our operational efficiency, streamline our management process, enhanceour quality of services and thereby maintaining our competitive edge in the industry. Tothis end, we intend to (i) implement an integrated IT system across our offices in HongKong and the PRC, through which our staff will be able to gain access to a centraliseddigital database, thereby facilitating efficient, transparent and timely information flow anddata transmission between our offices and minimising the impact of internet failure on ouroperations; (ii) upgrade and improve our freight forwarding system by introducingworkflow automation thereto to enable e-booking and real-time shipment tracking functionsas well as digitalising our accounting and operational system; (iii) provide a seamless userexperience to our customers by improving the user interface of our online portal andexpanding the scope of services available thereon to include, among other things, e-bookingand real-time shipment tracking services; and (iv) introduce artificial intelligence to our ITsystem to harness data more effectively through big-data analysis and automatic matchingfunctions, thereby enhancing our resources planning and minimising human errors.

We intend to utilise approximately HK$[REDACTED] million, representingapproximately [REDACTED]% of our [REDACTED] from the [REDACTED], to financethe upgrade of our IT system. Please refer to “Future plans and [REDACTED] –[REDACTED]” in this document for further details.


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We believe that the implementation of our strategies above, namely the expansion andimprovement of our air freight forwarding services, the development of our own truck fleet,the strengthening of our ability to purchase cargo spaces to meet customers’ demands, theenhancement of our sales and marketing efforts and expansion of our customer base and theupgrade and strengthening of our IT system, will help to boost our brand image as a qualityand competent service provider capable of offering a comprehensive range of services,foster a stronger confidence in us among our customers, and expand and diversify ourcustomer base.

OUR BUSINESS MODEL AND OPERATIONS

We are a well-established freight forwarding and logistics service provider founded andbased in Hong Kong with a presence in the PRC. We provide international freight forwardingservices. Our business model principally involves the provision of freight forwarding servicesthrough obtaining cargo space from airline carriers and shipping liners for delivery of shipmentsconsigned with us to the required destinations, and consolidating the consigned shipments tomake a profit on the secured cargo spaces. We, as a co-loader, also on-sell our cargo spaceswhich we have secured from our airline carriers and shipping liners to our fellow freightforwarders at competitive prices.

We also offer logistics and related value-added services, including warehousing, logisticsand other ancillary logistics services to our customers.

We take pride in our ability to offer customised forwarding and logistics solutions to ourcustomers in a cost-efficient and/or time-efficient manner.

OUR SERVICES

We provide international air and ocean freight forwarding services to our customers whichare generally freight forwarder customers or direct customers located in Hong Kong, the PRC orthe U.S. We operate through our own operating subsidiaries in Hong Kong and the PRC, ourbranches in the PRC as well as our global network of freight forwarder business partners inother geographical locations where we have not established a presence. We also offer logisticsand related value-added services, including warehousing, logistics, repackaging and labellingand palletising services, to our customers.


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The table below sets forth the breakdown of our revenue by type of services for the periodsindicated:


HK$’000 % HK$’000 % HK$’000 %

Freight forwardingservices 483,874 99.7 574,228 99.2 1,031,845 99.8



Logistics and relatedvalue-addedservices 1,649 0.3 4,749 0.8 1,700 0.2

Total 485,523 100.0 578,977 100.0 1,033,545 100.0

For a detailed analysis of our revenue by type of services during the Track Record Period,please refer to “Financial information – Discussion of selected profit or loss items – Revenue”in this document.

Our freight forwarding services

Through our established business relationships with our carrier partners and our globalnetwork of overseas freight forwarder business partners, we provide international freightforwarding services to our customers which generally involve obtaining cargo spaces fromairline carriers and shipping liners as well as carrying out consolidation of the consignedshipments to transport cargos to the required destinations internationally. Our freight forwardingservices primarily comprise air and ocean freight forwarding services. We take pride in ourability to offer economical freight options to our customers which are tailored to their individualneeds in terms of transit time, costs and routing. During the Track Record Period, our revenueattributable to our freight forwarding services amounted to approximately HK$483.9 million,HK$574.2 million and HK$1,031.8 million, respectively, representing approximately 99.7%,99.2% and 99.8% of our total revenue, respectively. Our customers are generally freightforwarder customers or direct customers located in Hong Kong, the PRC or the U.S.

We have established our presence in Chongqing, Shanghai, Guangzhou and Shenzhen, thePRC. According to the Industry Report, Chongqing and Shanghai are major trade hubs in thePRC in terms of air cargo throughput. We also maintain connections with over 1,000 freightforwarder business partners in more than 160 countries and regions, among which over 200 havebeen engaged by us on a transaction-by-transaction basis to, among other things, handle andexecute our customers’ freight forwarding instructions in geographical locations where we have


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no presence. For details, please refer to “Suppliers – Our freight forwarder business partners” inthis section.

The following diagram sets forth the general provision of our freight forwarding servicesfor export of shipments out of a port of origin where we have operations (i.e. the PRC or HongKong):

At port of origin:

• cargo delivery to

terminal or port (if

required)

• submitting cargo to

carriers

Freight forwarding

• making freight

arrangements

At port of destination:

• collecting cargo from

carriers


consignee

Services generally provided by

our third party service providers


our overseas freight forwarder

business partners (if required)

Services provided by either our

Group or our overseas freight

forwarder business partners, but

generally provided by our Group

in the case of exports

The following diagram sets forth the general provision of our freight forwarding servicesfor import of shipments into a port of destination where we have operations (i.e. the PRC orHong Kong):

At port of destination:


consignee (if

required)

• collecting cargo from

carriers

Freight forwarding

• making freight

arrangements

At port of origin:


terminal or port

• submitting cargo to

carriers


our third party service providers


our overseas freight forwarder

business partners (if required)

Services provided by either our

Group or our overseas freight

forwarder business partners, but

generally provided by our

overseas freight forwarder

business partners in the case of

imports

For details of the key operating procedures of our freight forwarding services, please referto “Our operating procedures – Our freight forwarding services” in this section.


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We principally provide freight forwarding services for the exports of shipments from thePRC and Hong Kong to various destinations including the U.S., Europe and Asia. During theTrack Record Period, our revenue attributable to our freight forwarding services for exports ofshipments amounted to approximately HK$468.2 million, HK$563.1 million and HK$1,018.2million, respectively, representing approximately 96.8%, 98.1% and 98.7% of our total revenuefrom the provision of freight forwarding services, respectively, whilst our revenue attributable toour freight forwarding services for imports of shipments amounted to approximately HK$15.7million, HK$11.1 million and HK$13.7 million, respectively, representing approximately 3.2%,1.9% and 1.3% of our total revenue from the provision of freight forwarding services,respectively.

The table below sets forth the breakdown of our revenue generated from the provision ofour freight forwarding services based on location of shipment destination for the periodsindicated:


HK$’000 % HK$’000 % HK$’000 %


destinations 100,699 20.9 80,038 14.0 129,070 12.5– Europe 58,531 12.1 43,815 7.6 55,094 5.3– Asia 29,859 6.2 23,358 4.1 46,991 4.6– Others (Note) 12,309 2.6 12,865 2.3 26,985 2.6


Total 483,874 100.0 574,228 100.0 1,031,845 100.0

Note: Our others primarily included countries and regions in North America (excluding the U.S.), SouthAmerica, Oceania and Africa.


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The table below sets forth the breakdown of our shipment volumes by type of freightforwarding services for the periods indicated:


Air freight forwarding (’000 kg) 12,736 8,660 8,925

Ocean freight forwarding (TEUs) 11,993 12,232 26,296

For a detailed analysis of our shipment volume and revenue during the Track RecordPeriod, please refer to “Financial information – Discussion of selected profit or loss items –Revenue – Revenue by type of services” in this document.

As advised by Frost & Sullivan, demands for particular types of goods in the freightforwarding industry may vary from time to time depending on a number of factors including,among others, the latest market trends, the launch dates for worldwide popular items, the everchanging consumer shopping patterns and habits, the rising needs for particular essential andnecessary items, seasonality and festive seasons, as well as promotional discount offers forparticular items. As such, the demands for our freight forwarding services may vary dependingon the demands for particular types of goods at a particular time. We provide freight forwardingservices for orders placed by our customers for delivery of a wide variety of goods. While theremay be fluctuations for the demands of our freight forwarding services throughout a year for anyparticular type of product, as illustrated in the table below, given the variety of goods ourcustomers were and are involved in, we did not and do not place any material reliance on thedemand for any particular type of goods.


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The table below sets forth a breakdown of our revenue from the provision of freightforwarding services by type of goods for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

Daily necessities andhousehold products 39,267 8.1 158,409 27.6 134,358 13.0

Electronic devices,machineries andequipment 154,938 32.0 128,183 22.3 239,076 23.2

Garments and fashionrelated products 98,227 20.3 71,361 12.4 358,267 34.7

Computer and parts 8,395 1.7 67,387 11.7 73,992 7.2Medical products 1,923 0.4 36,846 6.4 18,070 1.8Network speakers and

phones 144,650 29.9 34,846 6.1 11,147 1.1Toys and games 7,861 1.6 7,538 1.3 18,900 1.8Others 28,613 6.0 69,658 12.2 178,035 17.2

Total 483,874 100.0 574,228 100.0 1,031,845 100.0


We provide international air freight forwarding services to our customers. During the TrackRecord Period, we collaborated with our airline partners and freight forwarder business partnersin providing air freight forwarding services to over 40 countries and regions. During the TrackRecord Period, our revenue attributable to our air freight forwarding services amounted toapproximately HK$378.9 million, HK$450.7 million and HK$593.1 million, respectively,representing approximately 78.0%, 77.8% and 57.4% of our total revenue, respectively, whichwas primarily contributed by our provision of air freight forwarding services in the PRC andHong Kong for the export of shipments to the U.S. Our revenue generated from the provision ofair freight forwarding services for export of shipments during the Track Record Period amountedto approximately HK$368.6 million, HK$444.3 million and HK$583.0 million, respectively,representing approximately 97.3%, 98.6% and 98.3% of our total revenue from the provision ofair freight forwarding services, respectively. During the Track Record Period, our air shipmentvolumes were approximately 12,736 tonnes, 8,660 tonnes and 8,925 tonnes, respectively.


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We currently do not own or operate any aircraft. During the Track Record Period, our airfreight forwarding services were provided through obtaining air cargo spaces of cargo aircraftsand passenger flights operated by airlines for delivery of shipments consigned with us to therequired destinations. The table below sets forth a breakdown of revenue generated from theprovision of air freight forwarding services by type of carriers for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

Cargo aircrafts 324,459 85.6 411,767 91.4 568,636 95.9Passenger flights 54,423 14.4 38,935 8.6 24,500 4.1

Total 378,882 100.0 450,702 100.0 593,136 100.0

We obtain and procure air cargo spaces through entering into different arrangements. Sucharrangements, each of which has different features, enable us to offer different but reliablelogistics solutions to our customers on competitive terms and to maximise our returns. Details ofsuch arrangements are set out below:

(a) Cargo agency agreements with airline partners

We enter into cargo agency agreements with our airline partners in writing in order toformalise the business relationships between us prior to the commencement of our dealings. Asat the Latest Practicable Date, we had entered into cargo agency agreements with three airlines.Pursuant to our cargo agency agreements, we are appointed by our airline partners as their cargoagents and are eligible to procure air cargo spaces from them directly from time to time. Ourcargo agency agreements may be terminated in the event of a breach of the agreement by orupon insolvency or liquidation of a party. Either party may also terminate the agreement withprior written notice of a specified period.

Pursuant to our cargo agency agreements and in line with industry practice, we are requiredto provide bank guarantees in favour of our airline partners to guarantee the discharge of ourcontractual obligations. The amounts of bank guarantee required are generally determined by ourairline partners with reference to, among other things, our historical shipment volume andtransaction amount with the airline carrier. Please refer to “Suppliers – Bank guarantees” in thissection for further details.

(b) Ad hoc cargo space arrangements with airline partners

We enter into cargo space arrangements with our airline partners on an ad hoc basis topurchase cargo spaces based on the specific needs of our customers. Pursuant to our ad hoccargo space arrangements, we purchase the cargo spaces at the prevailing market rate and are not


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subject to any minimum purchase requirements. Such arrangement is common and in line withthe industry practice according to the Industry Report.

(c) Air charter agreements with airline partners

We enter into air charter agreements with our airline partners in writing from time to time.Our management team reviews and assesses the shipment volume projections received from ourcustomers and determines whether to enter into air charter agreements with our airline partnerswith reference to, among other things, the expected market conditions and the estimated pricesof cargo space in the coming year. We also provide air chartering services to our customers uponrequests, primarily for our largest customer, being Customer A.

Our air charter agreements generally specify the type and number of aircraft, relevant cargoroutes, flight schedules and charter price per flight. Pursuant to our air charter agreements, weare generally required to make full payments to our airline partners before the scheduled flightdeparture. We may be required to make an upfront payment at the time when the air charteragreement is entered into. In the event that we cancel any chartered flights, we will generally beliable to pay to our airline partners a cancellation fee representing a certain percentage of theagreed charter price under our air charter agreements depending on the time of cancellation. Asconfirmed by our Directors, we provide air chartering services to our customers only upon theirrequest. During the Track Record Period, we entered into eight, one and nil air charteragreement(s) with our airline partners, respectively. As there was a decline in requests from ourcustomers for air chartering services during the Track Record Period, there was also a decreasein the number of air charter agreements we entered into during the Track Record Period.

(d) Block space agreements with airline partners

We enter into block space agreements with our airline partners to procure air cargo spacesbased on our preliminary assessment of the expected market demands for such cargo spaces andthe prevailing market circumstances. Pursuant to our block space agreements, our airlinepartners generally guarantee that we will be allocated an agreed volume of air cargo spaces atpre-determined rates normally for a period of one year. Under our block space agreements, weare committed to the purchase of a minimum volume of cargo spaces for regular routing flightson a monthly basis at an agreed freight rate whereby we will be required to pay for anyunutilised committed cargo spaces. Our block space agreements may be terminated in the eventof a breach of the agreement by us or upon insolvency or liquidation of a party to the agreement.Either party may also terminate the agreement with prior written notice of a specified period.

Given the committed minimum procurement requirement and the nature of a pre-determinedrate, we have been prudent in entering into block space agreements to avoid any financial lossesdue to under-utilising the commitment and over-payment. To the best of our Directors’knowledge and belief, most airline operators ceased to enter into block space agreements in 2020since the outbreak of COVID-19 due to the major disruptions to and the uncertainties in theaviation industry, particularly in terms of demands and pricing. During the Track Record Period,as we generally obtained cargo spaces from our airline partners on a need basis by way of ad


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hoc cargo space arrangements, we had entered into block space agreement with one airlinepartner. We had fulfilled the terms of the block space agreement, including the committedvolume of cargo spaces, in all material respect.

While the purchases of cargo space under both the block space agreements and the aircharter agreements are at pre-determined rates, these two arrangements are inherently differentin nature. An air charter agreement allows us to charter the entirety of a particular aircraft of aparticular flight schedule and a particular cargo route at an agreed fixed rate. A block spaceagreement allows us to procure an agreed volume of air-cargo spaces at an agreed fixed rateduring an agreed period of time, usually a period of one year. As confirmed by our Directors, weonly enter into an air charter agreement upon the specific request of our customer, which islargely dependent on the size and volume of the goods involved, specific timing and/ or routerequirements of our customer.

(e) Co-loading with freight forwarder business partners

In line with general industry norm, we also obtain cargo spaces from our freight forwarderbusiness partners by way of co-loading. Co-loading refers to the practice of combiningconsignments having the same destination from more than one freight forwarders into one unitload device on an aircraft or a container on a vessel. According to the Industry Report, in orderto maximise the utilisation of cargo spaces, freight forwarders generally on-sell excess cargospaces which they have purchased from carriers but cannot be filled up by their own shippercustomers to other freight forwarders at a relatively more competitive price before a scheduledflight or vessel departs. We also on-sell our air cargo spaces to our fellow freight forwarders inthe event that we have unutilised cargo spaces. Our Directors are of the view that, by co-loadingwith our freight forwarder business partners, on one hand, we are able to purchase additionalcargo spaces at relatively favourable prices, and on the other hand, we are able to utilise ourcargo spaces in a cost-effective and flexible manner.


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The table below sets forth a breakdown of air shipment volume purchased by type ofagreements/arrangements with our suppliers for the periods indicated:


’000 kg % ’000 kg % ’000 kg %

Cargo spaces obtainedunder:

Cargo agencyagreements and adhoc cargo spacearrangement 7,241 56.9 6,517 75.3 6,460 72.4

Air charteragreements 1,181 9.3 79 0.9 – –

Block spaceagreements 2,140 16.8 – – – –

Co-loadingarrangement 2,174 17.0 2,064 23.8 2,465 27.6

Total 12,736 100.0 8,660 100.0 8,925 100.0


We offer ocean freight forwarding services to our customers for shipments of goods whichare generally subject to relatively less time constraints by sea. During the Track Record Period,we worked with our shipping liners and freight forwarder business partners in providing oceanfreight forwarding services to over 30 countries and regions. During the Track Record Period,our revenue attributable to ocean freight forwarding services amounted to approximatelyHK$105.0 million, HK$123.5 million and HK$438.7 million, respectively, representingapproximately 21.7%, 21.4% and 42.4% of our total revenue, respectively, which was primarilycontributed by our provision of ocean freight forwarding services for the export of goods fromthe PRC and Hong Kong to the U.S. Our revenue generated from the provision of ocean freightforwarding services for export of shipments during the Track Record Period amounted toapproximately HK$99.6 million, HK$118.8 million and HK$435.2 million, respectively,representing approximately 94.9%, 96.2% and 99.2% of our total revenue from the provision ofocean freight forwarding services, respectively. During the Track Record Period, our oceanshipment volumes were approximately 11,993 TEUs, 12,232 TEUs and 26,296 TEUs,respectively.

We currently do not own or operate any vessel. For our non-U.S. and non-Canadashipments, we primarily obtain our cargo spaces from our shipping liner partners based on theactual shipment needs of our customers by way of ad hoc oral arrangements and we generally donot enter into any long-term agreements with our shipping liner partners. For our U.S. and


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Canada shipments, in line with industry practice, we generally enter into framework serviceagreements with our shipping liner partners which provide us with cargo spaces on vessels to theU.S. and Canada for a term of one year, under which we are required to commit to a minimumpurchase amount of cargo spaces on an annual basis at an agreed rate and may be subject topenalty charges if we fail to fulfil our committed purchases. We had in place 10, nine and eightframework service agreements with our shipping liner partners for shipments to the U.S. andCanada during the Track Record Period, respectively. We may also source our ocean cargospaces from our freight forwarder business partners by way of co-loading as and when required.

Our freight and handling costs

Our freight and handling costs generally comprise freight charges for cargo spaces,handling and documentation charges, customs clearance charges, trucking costs for groundtransportation and other surcharges, such as fuel surcharges, security surcharges and othersurcharges. Our carrier partners generally charge us for our cargo spaces based on (i) in the caseof air freight, the chargeable gross weight of the unit load devices we require from our airlinecarriers; or (ii) in the case of ocean freight, the number and size of containers we require tocarry the consignments. During the Track Record Period, our freight and handling costsamounted to approximately HK$390.0 million, HK$483.1 million and HK$868.9 million,respectively, representing approximately 93.1%, 95.4% and 96.5% of our total cost of services,respectively. Any changes in the prevailing market conditions may have a significant impact onthe freight charges and fuel surcharges, which are the primary components of our freight andhandling costs, and therefore result in material fluctuations in our freight and handling costs.Please refer to “Financial information – Discussion of selected profit or loss items – Cost ofservices” in this document for further details.

On the other hand, we generally determine our freight forwarding service fees payable byour customers on a cost-plus basis by taking into account, among other things, freight charges,terminal handling charges, fuel surcharges, security charges and other miscellaneous chargespayable by us to our carriers, plus a target margin. Our freight charges for cargo spaces payableby our customers are generally determined based on the higher of the actual gross weight or thedimensional weight of the consignments. Please refer to “Customers – Pricing policy – Ourfreight forwarding services” in this section for further details of our pricing policy.

Our Directors are of the view that our freight charges payable to our carrier partners andour freight forwarder business partners as well as our charges for cargo spaces payable by ourcustomers are and will continue to be affected by global economic conditions and the prevailingmarket circumstances, in particular, fluctuations in fuel prices. Please refer to “Risk factors –Risks relating to our industry – Increases in fuel prices may reduce our profitability andadversely affect our business operations” in this document for further details.


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Our logistics and related value-added services

We provide logistics and related value-added services independent of and/or ancillary toour freight forwarding services to our customers in Hong Kong and the PRC. During the TrackRecord Period, our revenue attributable to logistics and related value-added services amountedto approximately HK$1.6 million, HK$4.7 million and HK$1.7 million, respectively,representing approximately 0.3%, 0.8% and 0.2% of our total revenue, respectively. We believethat our logistics and related value-added services enable our customers to ensure efficientmanagement of goods and consignments to meet the varying needs and schedules of their supplychains in a cost-effective manner.

The scope of our logistics and related value-added services provided to our customersvaries and is subject to the individual requests of our customers and generally includes:

Warehousing services

We provide warehousing services independently and through third party service providersin Hong Kong to our customers independent of, as well as ancillary to, our freight forwardingservices, in particular, (i) our general warehousing services at our existing leased premises inKwun Tong for the storage of general goods mainly in respect of our logistics and relatedvalue-added services; and (ii) our cargo warehousing services ancillary to our freight forwardingservices provided through third party service providers for the short-time storage of cargosbefore they are transported to the terminals or ports for loading onto aircrafts or vessels. We alsoprovide warehousing services through third party service providers in the PRC to our customers.During the Track Record Period and up to the Latest Practicable Date, we did not own or leaseany premises for the provision of cargo warehousing services ancillary to our freight forwardingservices.

As at the Latest Practicable Date, we operated a warehouse at our leased premises in KwunTong, Hong Kong with a gross floor area of approximately 1,090.68 sq.m., of whichapproximately 30% is used for our self-operated warehouse for the storage of general goods and70% is used as our office premises. Our Directors confirmed that there will be no change ofusage after the [REDACTED]. Please refer to “Property” in this section and “Connectedtransactions” in this document for further details. Our leased warehouse in Kwun Tong isequipped with, among other things, a 24-hour CCTV surveillance system as well as an infraredelectronic security system which is directly linked to the nearby police station.

In addition, in relation to our freight forwarding services we enter into service agreementswith our warehousing and related logistics service suppliers from time to time on an as-neededbasis for warehouse spaces in Tsing Yi and Kwai Chung, Hong Kong and in the PRC for theshort-term storage of goods. As the amount of warehouse spaces we require may vary from timeto time, we generally enter into service agreements with our warehousing and related logisticsservice providers for warehouse spaces for a period of one year or for an unspecified term. Ourservice agreements generally set out the agreed rates for warehousing and related logisticsservices, which are subject to adjustments by our service providers from time to time.


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The table below sets forth a breakdown of our revenue generated from general warehousingand related logistics services for the storage of general goods through our own warehouse andthird party warehouses for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

General warehousingand related logisticsservices through:– Own warehouse 121 8.9 2,720 77.5 301 22.8– Third party

warehouses 1,237 91.1 791 22.5 1,020 77.2

Total 1,358 100.0 3,511 100.0 1,321 100.0

Our revenue generated from general warehousing and related logistics services ofapproximately HK$1.4 million, HK$3.5 million and HK$1.3 million during the Track RecordPeriod, respectively, represented the revenue generated from the provision of generalwarehousing services for the storage of general goods at its existing leased warehouse in KwunTong/third party warehouses in respect of our logistics and related value-added services. Theseservices are totally different from the cargo warehousing services ancillary to our freightforwarding services for the short-time storage of cargos before they are transported to theterminals or ports for loading onto aircrafts or vessels (which are currently fully outsourced tothird party service providers) which we intend to provide in the Kwai Chung warehouse.

It is intended that after the [REDACTED], we will cease outsourcing our air cargowarehousing services and provide such expanded services at the Kwai Chung warehouse. TheKwai Chung warehouse will be equipped with three stations of cargo x-ray screening equipmentfor our operation of x-ray cargo screening services, and cargo warehousing capability with,warehouse office, handling unit load devices, namely the build-up (i.e. placing and securingcargos into unit load devices) and break-down (i.e. removing cargos from unit load devices)processes and cargo consolidation, whereas the Kwun Tong warehouse will continue to be usedfor our self-operated warehouse for the storage of general goods. As such, there is no correlationbetween the declining trend in decrease in our revenue derived from the provision ofwarehousing and related logistics services in the leased warehouse in Kwun Tong and theexpanded freight forwarding services to be provided in the Kwai Chung warehouse.

For further details of our business strategies of expanding and improving thecomprehensiveness of our air freight forwarding services, please refer to “Our businessstrategies – Expanding and improving our air freight forwarding services” in this section.


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Logistics services

We provide domestic logistics services to distribute our customers’ goods to their localdistribution centres, retail stores or other designated locations in Hong Kong by engaging thirdparty trucking service providers in accordance with the needs of our customers.

Repackaging and labelling services

We offer repackaging and labelling services which include wrapping, sealing and labellingin accordance with the specific instructions of our customers. Subject to the needs of ourcustomers, we may carry out repackaging and labelling services by deploying our own staff atour self-operated warehouse in Kwun Tong or outsourcing such services to our third partyservice providers.

Palletising services

In line with industry practice, we bundle together the consignments by way of palletisationbefore they are loaded onto an aircraft or a vessel in order to enhance storage and handlingefficiency. Palletisation refers to the process by which consignments are stacked and packedtogether on a pallet, which is typically in the form of a flat wooden structure that serves as thestructural foundation of a unit load device or a container. Palletised goods can be moved aroundin a warehouse or loaded onto a unit load device on an aircraft or a container in a vessel prior toshipment by the use of common mechanical equipment such as fork-lift trucks.


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OUR OPERATING PROCEDURES


The following diagram illustrates the key operating procedures and approximate time frameof our freight forwarding services for exporting consignments:

Receipt of booking instruction from customer

Preparation of quotation

Reservation of cargo spaces

Cargo pick up or delivery

Cargo consolidation

Customs clearance and departure

Issue of bills and invoices

Issue of pre-alert notification

Arrival, cargo release and delivery

Generally within three days(in the case of air freightforwarding services) and within45 days (in the case of oceanfreight forwarding services),subject to the geographicaldistance between the port of originand the port of destination

Receipt of booking instruction from customer

Our customer, being either a direct customer or a freight forwarder customer, will generallysend us a booking instruction by email setting out certain shipment details which include, amongother things, type(s) of freight forwarding service required, cargo route, description, type,dimension, gross weight and measurement of consignment, ports of origin and destination and/orexpected date of arrival.


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Preparation of quotation

Having assessed and evaluated the requirements as set forth in our customer’s bookinginstruction, we will navigate through the possible freight options and provide our proposedfreight solution(s) to our customer. We generally prepare our quotation by adopting a cost-pluspricing model with reference to, among other things, the freight rate lists obtained from ourcarrier partners from time to time, our target profit margin, the estimated volume of cargo spacerequired, the consignment schedule, the type and value of consignment and/or the prevailingmarket conditions. The freight rate lists provided by our airline carriers and our shipping linersare generally valid for a period of one week and two weeks respectively and typically containthe freight charges and available cargo routes.

Reservation of cargo spaces

Our customer will generally confirm its acceptance of our quotation electronically or byphone. We will then reserve cargo spaces with our airline carrier, shipping liner or our freightforwarder business partner, as the case may be, verbally or by making online bookings withdetails of our customer’s consignment instruction. Our carrier partner or our freight forwarderbusiness partner, as the case may be, will then acknowledge our cargo space reservation.

Cargo pick up

We maintain close communications with our customer from time to time to confirm theconsignment schedule and to coordinate with our customer for consignment arrangements. Uponrequest, we will engage our third party trucking service providers to pick up cargo from ourcustomer to the terminal or port.

Cargo consolidation

Our operations team will weigh and measure our customer’s consignment to check againstthe cargo specifications as provided by our customer. If there exists a difference in terms ofweight or dimensions which exceeds the prescribed limit of five per cent., our operations teamwill notify our customer and the consignment may be subject to remeasurement at the port ofdestination if so requested by our customer.

In order to maximise our utilisation of cargo spaces in terms of both volume and weight, inproviding our air freight forwarding services, we generally consolidate a number of cargos ofdifferent dimensions and weight from different customers into a unit load device. We may alsoon-sell our excess cargo spaces to other freight forwarders who act on behalf of their own directshippers by way of co-loading. As set forth in “Our services – Our freight forwarding services –Our freight and handling costs” in this section, our carrier partners generally charge us for ourcargo spaces based on, (i) in the case of air freight, the chargeable gross weight of the unit loaddevices we require from our airline carriers; or (ii) in the case of ocean freight, the number andsize of containers we require to carry the consignments. On the other hand, we generallydetermine our freight charges payable by our customers for cargo spaces based on the higher of


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the actual gross weight or the dimensional weight of the consignments. Please refer to“Customers – Pricing policy – Our freight forwarding services” in this section for further detailsof our pricing policy. Accordingly, cargo consolidation and co-loading are essential proceduresin our freight forwarding business which enable us to optimise our use of cargo spaces in termsof both volume and weight, thereby maximising the difference between our freight chargespayable and the corresponding receivable revenue and enhancing our profitability.

Customs clearance and departure

Our customer will generally arrange for customs clearance to be obtained for export ofconsignments out of the PRC. We do not conduct inspection of the consignments to verify itsphysical content against that as declared in order to avoid the potential risks of damaging theconsignments in the course of verification.

Issue of bills and invoices

After our customer’s consignment is loaded onto the carrier, our carrier partner will issue amaster air waybill (in the case of air freight) or a master bill of lading (in the case of oceanfreight) to us and we will issue a house air waybill (in the case of air freight) or a house bill oflading (in the case of ocean freight) to our customer. We will also issue an invoice to ourcustomer (in the case of freight prepaid) or to the consignee or our overseas freight forwarderpartner (in the case of freight collect). We generally require our new customers to pay ondemand and offer a credit period of up to 60 days to our existing customers subject to, amongother things, their background, reputation in the industry, payment history and creditability andour length of business relationship with them.

Issue of pre-alert notification

After the carrier has departed from the port of origin, our operations team will issue apre-alert notification, together with the relevant documents (which generally includes, subject tothe type of freight forwarding services involved, a copy of our customer’s commercial invoice,master air waybill or master bill of lading, house air waybill or house bill of lading, cargopacking list and/or cargo manifest) to our overseas freight forwarder partner for cargo release atthe port of destination.

Arrival, cargo release and delivery

After the cargo has arrived at the port of destination and upon presentation of the airwaybill or the bill of lading, as the case may be, the cargo will be released. The consignee orour overseas freight forwarder partner will arrange for import customs declaration (whereapplicable) and delivery of the cargo accordingly.


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Our freight forwarding services for importing consignments

For our freight forwarding services for importing consignments into the PRC and HongKong, we generally provide quotations to our customers upon receipt of their bookinginstructions and, where required, engage our overseas freight forwarder business partners tocarry out the relevant services. Subsequent to the receipt of pre-alert notification from ourfreight forwarder business partners, we will handle the cargo release at the port of destination.From our provision of quotations to our customers to the release of cargo at the port ofdestination, it generally takes within three days (in the case of air freight forwarding services)and within 45 days (in the case of ocean freight forwarding services) subject to the geographicaldistance between the port of origin and the port of destination.


The following diagram illustrates the key operating procedures and approximate time frameby which goods or consignments of our customers are handled in our warehouse:

Arrival of goods at warehouse

Provision of customised services

Issue of invoice

Generally withinthree days toone month

Arrival of goods at warehouse

Our customer will indicate to us the quantity of goods or consignments to be stored at ourwarehouse, the estimated date of arrival and the expected storage period. We will confirm thedetails with our customer subject to the availability of our warehouse spaces.

Goods or consignments of our customer are delivered to our warehouse either by ourcustomer or through local trucking services provided by our third party trucking serviceproviders. We will update our electronic record in our IT system upon the arrival of the goods orconsignments.


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Provision of customised services

We maintain close communications with our customer from time to time after the goods orconsignments have arrived at our warehouse. We may receive further instruction from ourcustomer where our customer requires additional customised value-added services such aslogistics, repackaging and labelling or palletising services. We will acknowledge and confirmour customer’s instruction. We will then provide customised services to our customer inaccordance with its requirements.

Issue of invoice

We generally grant a credit period of up to 60 days to our existing customers and requireour new customers to pay on demand. We generally issue an invoice to our customers upon thereceipt of goods in our warehouse and their release therefrom. Our invoice will generally set outthe types and scope of warehousing and other logistics services provided and the payable servicefees based on an agreed chargeable rate. We will issue a receipt to our customer upon receipt ofpayment.

SALES AND MARKETING

Our sales team, comprising six members as at the Latest Practicable Date, is primarilyresponsible for the overall sales and marketing of our freight forwarding and logistics services toour customers, which include freight forwarder customers and direct customers. With a view tomaintaining stable and amicable business relationships with our existing customers, we seek tomaintain close and regular communications with our customers to understand their varyingneeds. Our sales team will make sales calls to solicit business from existing customers as well aspotential customers who have no prior business relationship with us. We also obtain customerreferrals from our overseas freight forwarder business partners from time to time. From time totime, we also place advertisements on shipping gazettes in Hong Kong and the PRC which offercomprehensive and up-to-date market information to freight forwarders and shipping companies.During the Track Record Period, we primarily procured our business (i) from our existing freightforwarder customers and direct customers; (ii) through making sales calls to solicit businessfrom existing customers and potential customers; and (iii) from referrals by overseas freightforwarder business partners.

Our Directors believe that, being an IATA accredited cargo agent, coupled with ourmemberships in the Combined Logistics Networks (CLN), the Cooperative Logistics Network(COOP), the 5-Star Logistics Network (5-SLN), the Majestic Global Logistics Network(MGLN), the Carvre Seven and the Cargo Power Network (CPN), provides us with a reliablenetworking platform to reach out to potential customers and suppliers. Our management teamwill, from time to time, attend conferences or events organised by these associations to exchangethe latest market information with fellow participants in the freight forwarding and logisticsindustry, which enables us to devise corresponding business strategies in response to markettrends and development.


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Leveraging our established position and proven track record in the freight forwarding andlogistics industry and capitalising on our ties with our global network of freight forwarderbusiness partners, we believe that we have established and will be able to maintain our strongpresence and competitive edge in the market. We seek to promote our services and reputation inthe industry and further expand and diversify our customer base through our continued sales andmarketing efforts and we intend to utilise part of our [REDACTED] from the [REDACTED] tothis end. Please refer to “Our business strategies – Enhancing our sales and marketing effortsand expanding our customer base” in this section and “Future plans and [REDACTED]” in thisdocument for further details.

SEASONALITY

Our business and results of operations are generally subject to seasonality. According to theIndustry Report, there is generally a higher demand for freight forwarding and logistics servicesin the second half of a calendar year, in particular before the Christmas and the Lunar New Yearholidays, due to a higher level of trading activities prior to and during festive seasons. OurDirectors recognise that factors such as market trends, festive items and promotional discountsmay affect the demand of certain goods at certain time during the year. As such, comparisons ofrevenue and results of operations between different periods in any given financial year ordifferent periods in different financial years may not be relied upon as indicators of ourperformance.

CUSTOMERS

Our customers comprise freight forwarder customers who act on behalf of their ownshipper customers and direct customers, primarily located in Hong Kong, the PRC and the U.S.A majority portion of our revenue generated during the Track Record Period was derived fromour freight forwarder customers.


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The table below sets forth a breakdown of our number of customers and revenue by type ofcustomers for the periods indicated:


Number

of


Number

of


Number

of


Freight forwardercustomers 937 436,941 90.0 1,059 476,819 82.4 852 909,606 88.0

Direct customers 972 48,582 10.0 798 102,158 17.6 968 123,939 12.0– Manufacturers 719 26,474 5.5 572 38,132 6.6 687 64,154 6.2– Trading

companies 253 22,108 4.5 226 64,026 11.0 281 59,785 5.8

Total 1,909 485,523 100.0 1,857 578,977 100.0 1,820 1,033,545 100.0

Our business nature is principally B2B and thus our customers are principally freightforwarders. Our revenue attributable to direct customers accounted for only approximately10.0%, 17.6% and 12.0% of our total revenue during the Track Record Period, respectively.Based on our Directors’ best information and belief, during the Track Record Period, none ofour direct customers engaged in e-commerce businesses. In addition, owing to the fact that amajority of our revenue was generated from freight forwarder customers, we are not in aposition to have an accurate breakdown of e-commerce and non e-commerce orders placed bythe ultimate customers of our freight forwarder customers during Track Record Period.

We generally do not enter into agreements with our customers for our freight forwardingservices and logistics and related value-added services. Our customers generally send us bookinginstruction by emails setting out certain shipment details which include, among other things,type(s) of freight forwarding service required, cargo route, description, type, dimension, grossweight and measurement of consignment, ports of origin and destination and/or expected date ofarrival. We will then provide our customers with a quotation. Our customers will generallyconfirm their acceptance of our quotation electronically or by phone. As advised by Frost &Sullivan, the aforesaid manner of placing and accepting orders is in line with the industrypractice.

We are generally not liable for any damage or loss to our customers’ goods during transit orstorage unless such damage or loss is caused by negligence on our part, which is in line with theindustry practice as advised by Frost & Sullivan. We maintain certain insurance policies to coverclaims against us from our customers in respect of damage or loss caused by our negligence.Please refer to “Insurance” in this section for details. During the Track Record Period and up tothe Latest Practicable Date, there were no material claims brought against our Group by our


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customers for damage or loss caused to our customers’ goods during our provision of our freightforwarding and logistics and related value-added services.

We generally do not conduct inspection of the cargo consignments to verify their physicalcontent against that as declared in the relevant declaration forms of the customers and have nocontrol over the consignments. We do, however, generally perform random verification and x-rayinspections on the consignments. As advised by our PRC Legal Advisers and our Hong KongLegal Counsel, the potential liability of our Group in light of consignments carrying goods ofdangerous or illicit nature covers two situations, namely the situation where (i) our customer hasaccurately disclosed the nature of the goods to us; and (ii) our customer has failed to accuratelydisclose the nature of the goods to us. Dangerous goods generally comprise, among other things,electronics, flammable goods and any goods that contain alcoholic contents while goods of anillicit nature are goods that could not be shipped.

In both the PRC and Hong Kong, we have duly licensed personnel to handle dangerouscargos. As at the Latest Practicable Date, we had two and four staff members who have beenduly licensed to handle dangerous cargos in our operating entities in the PRC and in Hong Kong,respectively. For details, please refer to “Quality management” in this section.

In the case where our customer has accurately disclosed the nature of the goods to us, wehave sufficient duly licensed personnel to handle the same in both the PRC and Hong Kongwhere the goods are of a dangerous nature. Where the goods are of an illicit nature, we will beable to identify the same based on the information disclosed by the customer and reject thegoods. As such, our PRC Legal Advisers and our Hong Kong Legal Counsel are of the view, andour Directors concur that it is unlikely that our Group will be subject to any liability in light ofthe said consignments.

In the case where our customer has failed to accurately disclose the nature of the goods tous, there is a risk that we may be subject to investigations for violation of applicable laws andregulations concerning importing and/or exporting unmanifested cargos as the descriptions of thegoods on the relevant declaration forms do not correspond to the physical contents. However,any liability concerning importing and/or exporting unmanifested cargos on the basis that ourGroup is a mere freight forwarder having no actual knowledge of the physical contents of thegoods would not be material. In any event, should there be any prosecution against us leading toany financial penalty, there are provisions in our shipping orders that require our customers toindemnify us for such loss. With such arrangement in place and under general business practice,our PRC Legal Advisers and our Hong Kong Legal Counsel are of the view that it is unlikely forus to suffer any substantial loss as a result of the said consignments.

During the Track Record Period and up to the Latest Practicable Date, there were nomaterial penalties imposed on our Group in relation to carrying goods of dangerous or illicitnature.

Our Directors are therefore of the view that our liability in light of consignments carryinggoods of dangerous or illicit nature are minimal.


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During the Track Record Period, we maintained business relationships with over 3,000customers in aggregate. The table below sets forth a breakdown of the number of our new andreturning customers for the periods indicated:


Number

of

customers %

Number

of

customers %

Number

of

customers %

New customers 802 42.0 700 37.7 633 34.8Returning customers 1,107 58.0 1,157 62.3 1,187 65.2

Total 1,909 100.0 1,857 100.0 1,820 100.0

We have been continuously expanding our customer base over the years through referralsfrom both our existing freight forwarder partners and customers, as well as through our owninitiatives and marketing efforts in contacting new business partners and new customers toexplore business opportunities. During the Track Record Period, we had 1,107, 1,157 and 1,187returning customers, respectively, and commenced business relationships with 700, 802, 700 and633 new customers, respectively. Our revenue attributable to new customers amounted toapproximately HK$9.3 million, HK$68.4 million and HK$47.5 million, respectively, representingapproximately 1.9%, 11.8% and 4.6% of our total revenue, respectively, during the Track RecordPeriod.

Our major customers

We have established strong and stable business relationships with our major customers. Ourbusiness relationships with our top five customers during the Track Record Period ranged fromapproximately two to 14 years.


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Details of our top five customers for FY2020 are set forth below:

Rank CustomerBackground information andprincipal business

Type ofcustomer

Service(s)provided

Year offirstbecomingourcustomer

Creditterm

Paymentmethod Revenue

Percentageto totalrevenue

(days) (HK$’000) (%)

1 Customer A U.S.-based companyprincipally engaging in theprovision of freightforwarding services

Freightforwardercustomer

Air freightforwardingservices andoceanfreightforwardingservices

2015 30 Telegraphictransfer

244,554 50.4

2 Customer B Hong Kong incorporatedcompany principallyengaging in the provision ofair freight forwarding andrelated logistics services,and a subsidiary of acompany whose shares arelisted on the GEM of theStock Exchange with amarket capitalisation ofapproximately HK$218.4million as at the LatestPracticable Date


Air freightforwardingservices

2014 30 Bankcheque

30,753 6.3

3 CustomerC (Note 1)

Hong Kong-based companiesprincipally engaging in themanufacture of videographics cards for personalcomputers, and subsidiariesof a company whose sharesare listed on the MainBoard with a marketcapitalisation ofapproximately HK$3.7billion as at the LatestPracticable Date

Directcustomer


2013 30 Telegraphictransferor bankcheque

18,059 3.7

4 CustomerD (Note 2)

U.S.-based companiesprincipally engaging in thebusiness of transportationarrangement




14,410 3.0


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Rank CustomerBackground information andprincipal business

Type ofcustomer

Service(s)provided


Creditterm



(days) (HK$’000) (%)

5 CustomerE (Note 3)

U.S.-based companiesprincipally engaging in theprovision of air freightforwarding services, oceanfreight forwarding servicesand related logisticsservices, and subsidiaries ofa company whose sharesare listed on the New YorkStock Exchange with amarket capitalisation ofapproximately US$310.6million as at the LatestPracticable Date




8,770 1.8

Total 316,546 65.2

Notes:

(1) Customer C represents two entities belonging to the same group.

(2) Customer D represents two entities belonging to the same group.

(3) Customer E represents three entities belonging to the same group.


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Rank CustomerBackground information and principalbusiness Type of customer Service(s) provided


Creditterm Payment method Revenue


(days) (HK$’000) (%)

1 Customer A U.S.-based company principallyengaging in the provision of freightforwarding services

Freight forwardercustomer

Air freightforwardingservices andocean freightforwardingservices

2015 30 Telegraphic transfer 76,004 13.1

2 Customer B Hong Kong incorporated companyprincipally engaging in the provisionof air freight forwarding and relatedlogistics services to other air freightforwarders, and a subsidiary of acompany whose shares are listed onthe GEM of the Stock Exchange witha market capitalisation ofapproximately HK$218.4 million as atthe Latest Practicable Date



2014 30 Bank cheque 41,268 7.1

3 Customer F Hong Kong incorporated companyprincipally engaging in trading ofgoods

Direct customer Air freightforwardingservices

2020 Ondemand

Telegraphic transfer 26,706 4.6

4 Customer G Hong Kong incorporated companyprincipally engaging in the provisionof air and ocean freight forwardingservices, ground transportation andwarehousing services



2016 30 Bank cheque 22,523 3.9

5 Customer H Hong Kong incorporated companyprincipally engaging in the provisionof air freight forwarding services andwarehousing services



2008 Ondemand

Telegraphic transferor bank cheque

19,309 3.4

Total 185,810 32.1


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Rank Customer

Backgroundinformation andprincipal business

Type ofcustomer

Service(s)provided

Year of firstbecoming ourcustomer

Creditterm



(days) (HK$’000) (%)

1 Customer A U.S.-based companyprincipally engaging inthe provision of freightforwarding services




149,427 14.5

2 Customer D U.S.-based companyprincipally engaging inthe business oftransportationarrangement




69,571 6.7

3 Customer B Hong Kong incorporatedcompany principallyengaging in theprovision of air freightforwarding and relatedlogistics services toother air freightforwarders, and asubsidiary of acompany whose sharesare listed on the GEMof the Stock Exchangewith a marketcapitalisation ofapproximatelyHK$218.4 million asat the LatestPracticable Date



2014 30 Bank cheque 65,608 6.3


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Rank Customer

Backgroundinformation andprincipal business

Type ofcustomer

Service(s)provided

Year of firstbecoming ourcustomer

Creditterm



(days) (HK$’000) (%)

4 Customer I U.S.-based companyprincipally engaging inthe provision ofwarehousing servicesand trucking services




48,117 4.7

5 Customer E(Note)

U.S.-based companiesprincipally engaging inthe provision of airfreight forwardingservices, ocean freightforwarding servicesand related logisticsservices, andsubsidiaries of acompany whose sharesare listed on the NewYork Stock Exchangewith a marketcapitalisation ofapproximatelyUS$310.6 million as atthe Latest PracticableDate




47,926 4.6

Total 380,649 36.8

Note: Customer E represents two entities belonging to the same group.


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During the Track Record Period,

(a) the revenue generated from our top five customers collectively accounted forapproximately 65.2%, 32.1% and 36.8% of our total revenue, respectively; and

(b) the revenue generated from our largest customer, Customer A, accounted forapproximately 50.4%, 13.1% and 14.5% of our total revenue, respectively. Please referto “Customers – Our largest customer during the Track Record Period” in this sectionfor further details.

To the best of our Directors’ knowledge, during the Track Record Period and up to theLatest Practicable Date:

(a) all of our top five customers were Independent Third Parties;

(b) save for Customer H, none of our top five customers were also our top five suppliersduring the Track Record Period. In addition, save for Customer C and Customer F, allof our top five customers were also our suppliers during the Track Record Period.Please refer to “Overlapping of customers and suppliers” in this section for furtherdetails; and

(c) none of our Directors, their respective close associates, nor any of our Shareholdersholding more than 5% of our issued share capital had any interest (direct and indirect)in any of our top five customers.

Our largest customer during the Track Record Period

We commenced our business relationship with Customer A since 2015. Customer A is aU.S.-based company principally engaging in the provision of freight forwarding services, whoseultimate direct customers primarily include, among others, a U.S.-based multinationaltechnology company and a U.S.-based distributor of plumbing supplies, pipes, valves and fittings(PVF), waterworks and fire and fabrication products. Customer A is an Independent Third Party.

During the Track Record Period, Customer A was our largest customer and our revenuederived from Customer A amounted to approximately HK$244.6 million, HK$76.0 million andHK$149.4 million, respectively, accounting for approximately 50.4%, 13.1% and 14.5% of ourtotal revenue, respectively. We primarily provided air freight forwarding services and oceanfreight forwarding services to Customer A for the export of shipments from the PRC or HongKong to the U.S. during the Track Record Period.


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Our Directors are of the view that customer concentration is not uncommon in the freightforwarding and logistics industry for the following reasons: (i) as confirmed by Frost &Sullivan, since the quality, reliability and efficiency of freight forwarding services areimperative to customers for the timely delivery of goods and consignments, they tend to engagefreight forwarders which have an established reputation and proven track record in the industryand with which they have established trusted relationships in the previous course of dealings;and (ii) according to the Industry Report, owing to the stringent cashflow requirements in thefreight forwarding and logistics business, freight forwarders tend to prioritise customers withsound financial ability and which have demonstrated better credibility in their previoustransactions. Accordingly, according to the Industry Report, repeated engagement by customersof the same freight forwarders is not uncommon in the industry, which results in revenue derivedfrom such customers accounting for a relatively larger share of the freight forwarder’s revenue.As we have demonstrated the quality, reliability and value of our freight forwarding services andhave developed an amicable business relationship with Customer A since 2015, our businessrelationship with Customer A has gradually matured and the mutual benefits in our businessrelationship have become further pronounced. Taking into consideration the foregoing, togetherwith the payment history of and our previous dealings with Customer A, our Directors are of theview that the customer concentration attributable to Customer A is not unjustified commercially.

Our business sustainability and customer demand for freight forwarding services

We experienced a decrease in our air shipment volume from Customer A fromapproximately 5.6 million kg in FY2020 to approximately 0.8 million kg in FY2021 and as aresult of which our revenue derived from Customer A decreased from approximately HK$244.6million in FY2020 to approximately HK$76.0 million in FY2021. To the best of our Directors’knowledge, information and belief, such decrease in our air shipment volume and revenue fromCustomer A from FY2020 to FY2021 was primarily due to the relocation of some of thewarehouses of one of Customer A’s key customers (which is a U.S.-based multinationaltechnology company) from the PRC to Southern Asia (the “Customer Relocation”), resulting ina significant decline of orders from Customer A for FY2021.

Our Directors however consider that our business is sustainable based on (i) the generalfactors of the PRC and Hong Kong economies in relation to export business; (ii) the specificfactors attributable to Customer A; (iii) the specific factors attributable to customers (excludingCustomer A) (“Other Customers”); and (iv) our capability to offer freight forwarding servicesof different goods from our customers set out below:

General factors of the PRC and Hong Kong economies in relation to export business

Export business in the PRC and Hong Kong

The Sino-U.S. trade war, which started in July 2018, had brought about certain impacton the global economy and had, to a certain extent, contributed to the uncertaintiessurrounding the freight forwarding and logistics industry.


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However, as confirmed by Frost & Sullivan, the U.S. and the PRC are the first and thesecond largest economies in the world in terms of GDP in 2021, respectively, andnotwithstanding the Sino-U.S. trade war, the U.S. continued to be the largest exportdestination of the PRC in terms of export value in 2021 and the PRC continued to be theU.S.’ largest supplier of goods imports in terms of goods import value in 2021.

Benefitted from the solid global demand as countries reopened amid the COVID-19pandemic in 2021, there was a strong surge of the PRC’s total exports by approximately29.9% from approximately US$2,590.6 billion in 2020 to approximately US$3,364.0 billionin 2021 according to the GACC. According to the PRC export value published by theGACC, the PRC’s export to the U.S. also increased at a similar pace by approximately27.5% from approximately US$451.8 billion in 2020 to approximately US$576.1 billion in2021 and exceeded the level of the PRC’s export to the U.S. of approximately US$478.4billion in 2018. In addition, the PRC’s trade surplus with the U.S. widened byapproximately 25.1% as compared to 2020 to approximately US$396.6 billion in 2021.According to the Industry Report, the PRC’s total export value to the U.S. in 2022 isexpected to be approximately US$691.0 billion and the PRC overall export and the PRC’sexport to the U.S. will further grow to approximately US$4,912.0 billion and US$1,080.0billion, respectively, and at a CAGR of approximately 7.3% and 11.8%, respectively, from2022 to 2026.

According to the Hong Kong Census and Statistics Department, Hong Kong’s totalexport surged by approximately 26.3% from approximately HK$3,927.5 billion in 2020 toapproximately HK$4,960.7 billion in 2021, while Hong Kong’s export to the U.S. surged byapproximately 19.6% from approximately HK$258.8 billion in 2020 to approximatelyHK$309.6 billion in 2021. In 2021, the U.S. continued to be the second largest exportdestination of Hong Kong in terms of export value, following the Mainland China.According to the Industry Report, the Hong Kong’s total export value to the U.S. in 2022 isexpected to be approximately HK$345.0 billion and the Hong Kong overall export andHong Kong’s export to the U.S. will further grow to approximately HK$6,477.1 billion andHK$414.9 billion in 2026, respectively, and at a CAGR of approximately 5.5% and 5.0%,respectively, from 2022 to 2026. Further, it is expected that the outward air freightmovement in Hong Kong will increase from approximately 3,351.0 thousand tonnes in 2021to approximately 3,451.5 thousand tonnes in 2022 and further to approximately 3,870.5tonnes in 2026 at a CAGR of approximately 2.9% from 2022 to 2026.

Both the aforesaid PRC’s export value to the U.S. and the Hong Kong’s export valueto U.S. indicate that there are substantial demand of U.S. export market in the PRC andHong Kong. Our Directors believe that, in view of our established track record in thefreight forwarding industry, we are well-positioned to capture the business opportunitiesbrought about by the increasing demand of export to the U.S. in the PRC and Hong Kong.By the same token, in view of our established amicable working relationship with CustomerA, our Directors verily believe that we will continue to maintain such working relationshipand secure business from Customer A in the growing market.


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World class air and ocean trade hubs in Hong Kong and the PRC

In relation to air freight forwarding services, according to Airports CouncilInternational, Hong Kong International Airport reclaimed the busiest air cargo hub in theworld in 2021 with an increase in annual air cargo volume of approximately 12.5% ascompared to that in 2020 and Shanghai Pudong International Airport maintained its thirdplace in 2021 with an increase in annual air cargo volume of approximately 8.0% ascompared to that in 2020. According to Frost & Sullivan, Hong Kong will continue to beone of the largest logistics hub for domestic exports and re-exports in Asia in theforeseeable future given (i) Hong Kong’s strategic location in the centre of Asia; (ii) HongKong’s position as a dominant gateway of the PRC; (iii) Hong Kong’s comprehensivetransport facilities and infrastructure; and (iv) the expansion of Hong Kong InternationalAirport and the construction of the three-runway system.

In relation to ocean freight forwarding services, according to the World ShippingCouncil, in 2020, Hong Kong remained the ninth busiest port in the world and six of thetop 10 busiest ports in the world were located in the PRC, namely Shanghai (1st),Ningbo-Zhoushan (3rd), Shenzhen (4th), Guangzhou (5th), Qingdao (6th) and Tianjin (8th).

As our Group is a Hong Kong-based freight forwarding and logistics service providerwith a presence in Chongqing, Shanghai, Guangzhou and Shenzhen, the PRC (which aremajor trade hubs in the PRC in terms of cargo throughput), our freight forwarding servicesshould be benefitted from the world class trade hubs in the PRC and Hong Kong, and theincreasing logistics efficiency and air traffic volume attributable to the expansion of HongKong International Airport in Hong Kong.

Likelihood of relocation of production base out of the PRC

Notwithstanding that, as disclosed in “Industry overview – Impact on the COVID-19outbreak and Sino-U.S. trade war on freight forwarding and logistics industry in HongKong and the PRC – Overall impacts” in this document, there were manufacturers based inthe PRC relocating to or shifting part of their production to other regions so as to avoidhigher tariffs and the risks of further trade disruptions as a result of the Sino-U.S. tradewar, according to Frost & Sullivan, there are a number of reasons for manufacturers basedin the PRC not to relocate their production base from the PRC, primarily including thefollowing:

(1) A large internal consumer market in the PRC

The PRC is the second largest economy and the most populous country in theworld. China’s GDP accounted for over 18% of the global GDP in 2021 and hascontributed about 25% of the global GDP growth over the past two decades. TheChinese economy has become more domestically driven by the expansion of itsconsumer market. As China’s internal consumer market has matured, large quantitiesof products manufactured domestically are being consumed in the PRC market, with


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certain proportion of products manufactured in the PRC being exported out of thePRC. With the comprehensive supply chains in the PRC and in order to effectivelyreduce the logistics and other relevant costs of transportation of raw materials andproducts from overseas to the PRC, manufacturers have every reason to maintain itsproduction base in the PRC.

(2) Availability of experienced and skilled labour with lower cost of labour

Benefitted from the economic reform since the late 1970s and the rapiddevelopment of manufacturing sector in the PRC over 40 years, there is a largenumber of experienced and skilled workers in the PRC which can support high qualityand sophistication of manufacturing. Compared to other major economies in the worldwhich are predominately developed countries, the PRC is still regarded as adeveloping country and as such, manufacturers in the PRC can still enjoy a relativelylower labour cost. Although labour force in many other developing countries (such asSouthern Asia) is cheaper than that in the PRC, the production technology andtechnological level is inferior to the PRC’s. Thus, the combination of high labourcapabilities and relatively low labour cost in the PRC is hard to match anywhere inthe world.

(3) Comprehensive supply chains

The PRC plays an important role in the global supply chains. Except for certaintechnologically advanced raw materials, such as high-end chips, many manufacturersfrom different industries in the PRC source most of their parts and raw materialsdomestically within the PRC given the comprehensive supply chains in the PRC. Itwould not be economical for manufacturers to source their parts and raw materialselsewhere out of the PRC. Further, relocation out of the country would require movingthe entire manufacturing and service ecosystems which can take a significant amountof time and sum of money.

(4) Extensive network of transport infrastructure

In the past four decades, the PRC government had spent an enormous sum ofcapital expenditure to develop one of the most extensive networks of transportinfrastructure in the world. By the end of 2020, the PRC had a total of (i)approximately 146,300 km of rail track; (ii) more than 5 million km of highways; (iii)around 23,000 operative berths, including 2,520 berths of 10,000-tonne-class or above;(iv) approximately 127,000 km of navigable inland waterways; and (v) 241 certifiedcivil airports. The substantial growth of transport infrastructure networks in the PRChas accelerated progress in reducing logistics costs, achieving greater transportcapacity, accessibility, convenience, efficiency of freight transport which create astrong competitive edge and provide strong support for economic development ascompared to most of other countries in the world.


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Furthermore, based on various surveys released by certain prestigious U.S. andEuropean chambers of commerce in the PRC during 2021, foreign enterprises (i) areoptimistic about the business outlook and their operations in the PRC; and (ii) have noplans of relocation out of the PRC in general.

According to the MOFCOM, the amount of the PRC’s FDI inflows achieved a recordhigh of approximately US$173.5 billion in 2021, representing a year-on-year increase ofapproximately 20.2% and about 43,370 new foreign-invested enterprises were registeredduring January to November in 2021, representing a year-on-year increase of approximately29.3%. In addition, the PRC will step up efforts to open up its market and optimise supportmeasures to attract foreign investments, including, among others, (i) the reduction of thenumber of sectors in which foreign investors are restricted or prohibited in the national andfree trade zone (FTZ) negative lists; (ii) expanding the catalogue of industries encouragingforeign investment; and (iii) leveraging preferential policies on land and taxation to luremore foreign capital into advanced manufacturing, high-tech sectors and low-carbon andgreen industries, etc.

In light of the above, our Directors believe that foreign enterprises in the PRC haverestored their confidence in conducting businesses in the PRC and the likelihood ofsubstantial relocation of production and warehouses out of the PRC is improbable in thefuture.

Positive outlook of e-commerce

According to the Industry Report, the e-commerce industry has been evolving rapidlyover the last decade, and it is expected that rising internet penetration and the growing useof smartphones will continue to play a leading role in the growth of the e-commerce marketin the future. With the development of a ‘new normal’ shopping behaviour since theoutbreak of COVID-19 since early 2020, the global e-commerce market is seeing asignificant growth in 2020. It is expected that the outlook of e-commerce will continue tobe positive even when the COVID-19 pandemic gradually subsides. According to theIndustry Report, the gross merchandise value of e-commerce in the PRC increased fromapproximately RMB26.1 trillion in 2016 to approximately RMB43.7 trillion in 2021, whilstthe gross merchandise value of e-commerce in Hong Kong increased from approximatelyHK$25.4 billion in 2016 to approximately HK$56.3 billion in 2021. As advised by Frost &Sullivan, e-commerce is expected to continue to expand in the years to come.

Furthermore, the export value of cross-border e-commerce in the PRC to NorthAmerica is substantial in the amount and as advised by Frost & Sullivan, North Americaaccounted for approximately 20.7% of total cross-border e-commerce export value in thePRC in 2020. The export value of cross border e-commerce in the PRC to North Americafurther increased to approximately RMB318.2 billion in 2021, it representing an increase ofapproximately 33.0% from approximately RMB239.4 billion in 2020. North America hascontributed approximately 22.1% of the total export value of cross-border e-commerceoriginated from the PRC in 2021, increased from approximately 20.7% in 2020.


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In view of the anticipated dynamic growth of the e-commerce, we expect that therewill be a continuing increase in the demand for international freight forwarding services.We believe that there are plenty of business opportunities arising from the e-commercemarket for us to expand our services to our existing customers and potential customers.

Specific factors attributable to Customer A

The decrease in our revenue and shipment volume from Customer A during FY2020 toFY2021 was primarily attributable to the Customer Relocation. To the best knowledge andinformation of our Directors, (i) the reduction of shipment orders from Customer A inFY2021 was primarily attributable to the Customer Relocation of a single customer ofCustomer A; (ii) the reduction of shipment orders from Customer A in FY2021 had nocorrelation with our quality of services and there was no dissatisfaction with our freightforwarding services; and (iii) the Customer Relocation did not cause material business andfinancial difficulties on Customer A’s operations.

Significant increase in our revenue from Customer A during FY2022

In addition, Customer A is a U.S.-based company principally engaging in the provisionof freight forwarding services which generates a substantial amount of its revenue throughU.S. import freight forwarding services from the PRC and Southeast Asia. In order tomitigate the impact of the Customer Relocation, Customer A has strived to secure newbusiness of U.S. import freight forwarding from the PRC from new customers and morebusiness from its existing customers. As such, in turn we recorded a strong rebound of totalrevenue attributable to freight forwarding services generated from Customer A byapproximately 97.7% from approximately HK$75.6 million for FY2021 to approximatelyHK$149.4 million for FY2022.

The following table sets forth a breakdown of our revenue from freight forwardingservices and shipment volume from Customer A for FY2021 and FY2022:

Year ended 31 March2021 2022 Percentage of change

RevenueShipment

volume RevenueShipment


volume

HK$’000

‘000kg/

TEUs HK$’000

‘000kg/

TEUs % %

Air freight forwarding services 60,732 805 14,488 120 (76.1) (85.1)Ocean freight forwarding services 14,841 777 134,910 6,975 809.0 797.7

Total 75,573 149,398 97.7


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The significant rebound of total revenue from Customer A by approximately 97.7%from FY2021 to FY2022 was primarily attributable to the increase in shipment orders fromCustomer A for the shipment of garments and fashion-related products for FY2022 whichalso serves as an evidence that the demand for our freight forwarding services for theexports to the U.S. has gradually recovered from the adverse impact of the Sino-U.S. tradewar and the COVID-19 pandemic. To the best knowledge and information of our Directors,the decrease in our revenue from air freight forwarding services from Customer A duringFY2022 was primarily attributable to the shift from air freight forwarding to ocean freightforwarding mainly because of the high air cargo prices in the market as considered byCustomer A’s customers.

Established relationship between Customer A and our Group

We have maintained our business relationship with Customer A for approximatelyseven years since 2015. Such pronounced matured and strong business relationship withCustomer A is evident by the fact that Customer A was consistently our largest customerduring the Track Record Period (representing approximately 50.4%, 13.1% and 14.5% ofour total revenue for the Track Record Period, respectively) despite the significant drop inour revenue generated from Customer A during FY2021 primarily as a result of theCustomer Relocation, and partly as a result of the Sino-U.S. trade war and the COVID-19pandemic encountered by our Group and Customer A.

In addition, Customer A has always regarded our Group as one of its key entrustedfreight forwarder partners specialising in the provision of logistics solutions in respect ofexport from the PRC and Hong Kong as we have consistently demonstrated high qualityand reliability throughout its cooperation with us, and that Customer A will continue itsrelationship with us. As such, our Directors verily believe that given our long establishedamicable business relationship with Customer A, it is highly likely that such businessrelationship will continue to strengthen and will not diminish or discontinue in the future.

Specific factors attributable to Other Customers

No actual or planned relocation out of the PRC by Other Customers

To the best knowledge and information of our Directors, our top five customers (otherthan Customer A) during FY2022, including both freight forwarder customers and directcustomers, (i) do not have plans to relocate out of the PRC (if they are based in the PRCand Hong Kong); and (ii) are not aware of (a) any of their major customers havingrelocated their production base and warehouses out of the PRC during the Track RecordPeriod and up to the Latest Practicable Date; or (b) any of their major customers havingplans to relocate their production base and warehouses out of the PRC during the TrackRecord Period.


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As such, together with the general factors of the PRC and Hong Kong economies inrelation to export business and the increase in our revenue from Other Customers duringthe Track Record Period, our Directors believe that the likelihood that Other Customerswould relocate their production base and warehouses out of the PRC is improbable.

Ability to seize new business opportunities from Other Customers amidst the Sino-U.S.

trade war and the COVID-19 pandemic

Leveraging our ability to obtain cargo spaces at relatively competitive prices from ourairline partners with whom we have established and maintained long-term and stablebusiness relationships, our Group has been in a position and was able to seize the businessopportunities amidst the COVID-19 outbreak and the rapid growth of e-commerce.Notwithstanding the decrease in our revenue derived from Customer A from FY2020 toFY2021, we were able to diversify our customer base and seize new business opportunitiesand our revenue attributable to freight forwarding services increased from approximatelyHK$483.9 million in FY2020 to approximately HK$574.2 million in FY2021 and further toapproximately HK$1,031.8 million for FY2022.

In particular, despite the difficult times caused by the Sino-U.S. trade war and theCOVID-19 pandemic and by diversifying our customer coverage in response to thechanging market needs, we managed to increase our revenue from Other Customers byapproximately HK$262.0 million (or approximately 108.7%) during FY2021 whencompared to that for FY2020, which was primarily attributable to (i) our ability to obtaincargo spaces from airline carriers and shipping liners despite the limited supply of cargospaces; and (ii) the increase in our freight rate charged to Other Customers. Such increasein our revenue from Other Customers has exceeded the decrease in our revenue fromCustomer A by approximately HK$168.6 million (or approximately 68.9%) for FY2021 ascompared to that for FY2020, causing an overall increase in our revenue by approximatelyHK$93.5 million (or approximately 19.2%) for FY2021 when compared to that for FY2020.

The surge in our revenue from Other Customers from FY2020 to FY2021 wasattributable to both our air freight forwarding services and ocean freight forwardingservices with an increase of approximately HK$225.7 million (or approximately 137.5%)and HK$32.6 million (or approximately 42.9%) for FY2021, respectively. During FY2021,we also recorded an increase in our shipment volume from Other Customers by (i)approximately 0.7 million kg (or approximately 10.4%) for air freight forwarding services;and (ii) approximately 586 TEUs (or approximately 5.4%) for ocean freight forwardingservices when compared to that for FY2020.


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Significant increase in our revenue from Other Customers during FY2022

Besides the strong rebound of our revenue from Customer A during FY2022, ourcontinued efforts in expanding our businesses from Other Customers during FY2022resulted in a continuous increase in both our revenue from freight forwarding services andshipment volume from Other Customers. There was a significant increase in our totalrevenue attributable to freight forwarding services generated from Other Customers byapproximately 77.0% from approximately HK$498.7 million for FY2021 to approximatelyHK$882.4 million for FY2022, which was primarily attributable to the strong recovery ofthe demand for freight forwarding services as countries reopened amid the COVID-19pandemic and our effort in customer diversification of other new and existing customersduring FY2022.

The following table sets forth a breakdown of our revenue from freight forwardingservices and shipment volume from Other Customers for FY2021 and FY2022:

Year ended 31 March2021 2022 Percentage of change

RevenueShipment



volume

HK$’000

‘000kg/

TEUs HK$’000

‘000kg/

TEUs % %

Air freight forwarding services 389,970 7,855 578,648 8,805 48.4 12.1Ocean freight forwarding services 108,685 11,455 303,799 19,321 179.5 68.7

Total 498,655 882,447 77.0

In conclusion, despite of the combination of the Sino-U.S. trade war and theCOVID-19 pandemic which our Group and the whole logistics industry did not experiencebefore, we responded to such challenges by devoting our sales and marketing efforts inbolstering our business from Other Customers (including new and existing customers)during FY2021 and FY2022. As such, during the Track Record Period, we still achieved anoverall rise of revenue from Other Customers at a CAGR of approximately 91.6% andrecorded an increase of air and ocean shipment volume from Other Customers at a CAGRof approximately 11.2% and 33.3%, respectively.

Therefore, in the unlikely event that our business relationship with Customer Adiminishes or discontinues in the future, our Directors believe that given our establishedreputation in the industry, our Group is equipped with the ability to capture new businessopportunities and diversify our business model in response to the changing market needs ina prompt manner.


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Diversified customer base and continuous effort in maintaining existing business

relationships and broadening our exposure to new customers

We have a good and solid relationships with our existing customers and will continueto devote sales and marketing efforts in maintaining stable business relationship with ourexisting customers. During the Track Record Period, we had 1,107, 1,157 and 1,187returning customers, representing 58.0%, 62.3% and 65.2% of our total number ofcustomers, respectively. Our Directors believe that our relationships with such customersare built on the foundations of trust in the quality of our services, and will continue to pavethe way for our future transactions with them. We will also devote sales and marketingefforts in broadening our exposure to more new customers. We have been continuouslyexpanding our customer base. During the Track Record Period, we maintained businessrelationship with over 3,000 customers and commenced business relationships with 802,700 and 633 new customers, respectively, amidst the COVID-19 pandemic and the rapidgrowth of e-commerce and our revenue attributable to new customers amounted toapproximately HK$9.3 million, HK$68.4 million and HK$47.5 million, respectively,representing approximately 1.9%, 11.8% and 4.6% of our total revenue, respectively. OurDirectors believe that with our proven track record and reputation in the industry, we are ina position to expand our customer base.

Leveraging our established reputation and the substantial expertise and experience ofour Directors and senior management in the freight forwarding industry and by devotingour sales and marketing efforts to Other Customers (including new and existing customers)in response to the decrease in orders from Customer A from FY2020 to FY2021 and theadverse impact of the Sino-U.S. trade war and the COVID-19 pandemic, we were able toincrease our revenue attributable to new customers to approximately HK$68.4 million andHK$47.5 million for FY2021 and FY2022, respectively, accounting for approximately11.8% and 4.6% of our total revenue, respectively, which is well above the level in FY2020both in absolute amount of approximately HK$9.3 million, and revenue percentagecontribution of approximately 1.9%.

Our Directors believe that customer nurturing is a process which requires time fordeveloping and reinforcing relationships with new customers. As such, new customersgenerally may not bring an immediate positive effect to our financial performance. Ourbusiness relationships with top five customers during the Track Record Period were builtgradually over the years. Nurturing new customers is essential and beneficial to us with theprospect of developing and expanding our customer base and maintaining a relatively morestable base of revenue through diversification of customers with varying business,operational and geographic backgrounds, so as to achieve greater revenue growth. Further,it also helps us (i) reduce over-reliance on any single customer (such as Customer A); and(ii) replace customers that are inactive or cease business with us.


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Moreover, although our revenue contribution attributable to new customers ofapproximately HK$9.3 million for FY2020 was relatively low for the respective year, thesenew customers had gradually increased their businesses with us and contributed revenue ofapproximately HK$22.4 million for FY2022.

Leveraging our established reputation in the freight forwarding and logistics industryin Hong Kong and the PRC and given our high quality and reliable customisedsolution-oriented services which meet the varying customer needs, our Directors believethat some of our new customers will gradually develop loyalty and trust to our freightforwarding services and will engage our services on a recurring basis in the future, whichwill ultimately lead to the enhancement of our profitability in the future.

Continuous effort in expanding business scope and customer base

It is our business strategies to expand and improve our air freight forwarding services,develop and expand our freight forwarding and ancillary logistics services, upgrade andstrengthen our IT system, strengthen our ability to purchase cargo spaces to meetcustomers’ demands and expand our customer base. For details of our business strategies,please refer to “Our business strategies” in this section. Our Directors believe that suchexpansion will place us in an advantageous position in capturing business opportunities andmeeting the varying needs of a diversified group of customers.

Our capability to offer freight forwarding services of different goods from our customers

As advised by Frost & Sullivan, demands for particular types of goods in the freightforwarding industry may vary from time to time depending on a number of factorsincluding, among others, the latest market trends, the launch dates for worldwide popularitems, the ever changing consumer shopping patterns and habits, the rising needs forparticular essential and necessary items, seasonality and festive seasons, as well aspromotional discount offers for particular items. As such, the demands for our freightforwarding services may vary depending on the demands for particular types of goods at aparticular time.

Notwithstanding that we recorded an increase in our revenue by HK$34.9 milliongenerated through the provision of freight forwarding services for medical products fromFY2020 to FY2021, medical products had not constituted a significant component of ourtransported goods during the Track Record Period. During the Track Record Period, ourrevenue from freight forwarding services for the transportation of medical products hadonly contributed approximately 0.4%, 6.4% and 1.8% of our total revenue from freightforwarding services respectively. Owing to the urgent overseas demand for hygieneproducts in respect of the vast spread of COVID-19 globally during the first four months ofFY2021, given our strong ability to obtain cargo spaces from airline carriers despite thelimited supply of cargo spaces for the said period, we recorded most (i.e. approximately84.3%) of our revenue from freight forwarding services for the transportation of medicalproducts in the first four months of FY2021. After excluding such revenue generated in the


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first four months of FY2021, our freight forwarding services for the transportation ofmedical products only contributed revenue of approximately HK$5.8 million (orapproximately 1.0% of our total revenue from freight forwarding services) for FY2021which was comparable with the percentage of our revenue contribution from transportationof medical products for other years during the Track Record Period.

Despite the increase in our revenue from freight forwarding services for thetransportation of medical products for the first four months of FY2021 which had shownour pace and ability to adapt to market change to secure different shipment orders, thegrowth of our revenue has not relied on the transportation of any single or particularcategory of goods during the Track Record Period as we have a proven track record andsubstantial expertise and capability for the provision of freight forwarding services of avariety of goods for our customers. The largest category of products in which we providedour freight forwarding services for had been changing throughout the Track Record Periodfrom “electronic devices, machineries and equipment” for FY2020 (contributingapproximately 32.0% of our total revenue from freight forwarding services) to “dailynecessities and household products” for FY2021 (contributing approximately 27.6% of ourtotal revenue from freight forwarding services), and finally “garments and fashion relatedproducts” for FY2022 (contributing approximately 34.7% of our total revenue from freightforwarding services). For the breakdown of our revenue from freight forwarding servicesby types of goods, please refer to “Our services – Our freight forwarding services” in thissection.

Going forward, our Directors expect that, same as previous periods, although theremay be fluctuations for the demands of our freight forwarding services throughout a yearfor any particular type of product, given the variety of goods our customers are involved in,our Directors verily believe that leveraging our proven track record, established reputationand substantial expertise and capability of transporting a variety of goods for ourcustomers, we are able to capture the market trend as well as the change in market demandto further grow our freight forwarding services.

As aforesaid, taking into account our Group’s recent business and financial performanceamidst the COVID-19 pandemic and the Sino-U.S. trade war as well as the expected growth ofthe freight forwarding services markets in Hong Kong and the PRC in the long run, ourDirectors consider that there is and will be sufficient demand from a diverse and broad customerbase for our freight forwarding services.


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Pricing policy


We determine our freight forwarding service fees payable by our customers on a cost-plusbasis by taking into account, among other things, the freight charges, terminal handling charges,fuel surcharges, security charges and other miscellaneous charges payable by us to our carriersplus a target profit margin. We generally take into account the following factors in determiningour target profit margin and our services fees which we charge our customers: (i) thedimensions, weight, type and value of consignments; (ii) the consignment schedule; (iii) thevolume of cargo space required; (iv) whether consolidation of cargo space or co-loading withother freight forwarders is possible; (v) our other cost of services; (vi) the freight rates offeredby our competitors; (vii) prevailing market demand and supply of cargo spaces; and (viii)general market conditions.

We generally do not offer any discounts to our direct customers for our freight forwardingservices. We may offer a lower rate to our freight forwarder customers upon requests on acase-by-case basis taking into consideration, among other things, the prevailing marketconditions and the potential and background of and our business relationship with the relevantfreight forwarder customer. Where our overseas freight forwarder customers are able to sell ourcargo spaces to their own shipper customers at a rate higher than our agreed rate, we willgenerally be remunerated on a profit-sharing basis which is in line with industry practice. Theprofit-sharing ratio is generally 50%, which is mutually agreed with the relevant freightforwarder customer.


We determine our charges for our logistics and related value-added services based on ourcost of services plus a target profit margin. We generally take into account, among other things,the following factors in determining our target profit margin: (i) the volume, types and value ofgoods to be handled by us; (ii) the type(s) of logistics and related value-added services to beprovided by us; and (iii) our business relationship with the relevant customer.

Credit terms

We generally grant a credit period of up to 60 days to our existing customers subject to,among other things, their background, reputation in the industry, payment history andcreditability and our length of business relationship with them. In accordance with our prudentcredit policy, we generally do not grant any credit period to our new customers and require themto pay on demand. Our new customers may request for a credit review after a certain period ofconducting transactions with us. Our sales team will review the payment history of and assessand adjust the credit term to be granted to such customers subject to the approval of ourmanagement team.


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We also monitor our trade receivables on a regular basis and provide for the loss allowanceon our trade receivables in accordance with HKFRS 9. Please refer to “Financial information –Discussion of selected items of consolidated statements of financial position – Tradereceivables” in this document for the details of credit control policies in relation to thecollectability of our trade receivables.

Our customers generally settle our invoices by telegraphic transfers or bank chequesdenominated in Hong Kong dollars, Renminbi or U.S. dollars.

Customer enquiries and complaints

Our Directors believe that maintaining close communications with our customers isessential in promoting customers’ satisfaction and fostering customers’ confidence in us and ourservices and would in turn encourage recurring businesses and word-of-mouth referrals topotential customers. We maintain an online platform for receiving general enquiries, feedbackand complaints from our customers. In accordance with our internal policy, our sales team willhandle the enquiries or complaints received and follow up with the relevant customer in aprompt manner. As confirmed by our Directors, during the Track Record Period and up to theLatest Practicable Date, we did not receive any material complaints from our customers and wedid not experience any material disputes with our customers.

SUPPLIERS

Our suppliers primarily include (i) suppliers of cargo spaces, which include airline carriers,shipping liners and fellow freight forwarders; (ii) overseas freight forwarder business partnersproviding freight forwarding services in geographical locations where we have not establishedour presence; and (iii) suppliers providing warehousing, trucking and other related logisticsservices.

During the Track Record Period, we maintained business relationship with over 1,400suppliers in aggregate. We have established stable business relationships with our top fivesuppliers, ranging from a period of approximately one to 16 years. As confirmed by ourDirectors, during the Track Record Period and up to the Latest Practicable Date, we did notexperience any material disputes with or any material delay in the delivery of services by oursuppliers which caused material disruption to our business operations.

We generally do not enter into long-term agreements of more than one year with oursuppliers which is in line with the industry practice according to Frost & Sullivan.

Our airline partners

Our airline partners, primarily engaging in international routes spanning across the world,are among our major suppliers. During the Track Record Period, we collaborated with fiveairline partners in providing air freight forwarding services. We have established long-term andstable business relationships with a number of airline carriers for at least six years, including


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Supplier A, being our largest supplier during the Track Record Period, for approximately 15years. In addition to our cargo agency agreements with our airline partners which formalise ourbusiness relationships therewith, we have entered into different arrangements, including ad hoccargo space arrangements, air charter agreements and block space agreements with our airlinepartners in securing cargo spaces, which allow us to offer reliable and competitive solutions toour customers to suit their individual operational and supply chain needs. We set forth below thesalient terms of our cargo agency agreements, air charter agreements and block space agreementswith our airline partners:

(i) Cargo agency agreements

Term : Our cargo agency agreements are generally effective fora fixed term or for an unspecified period, subject totermination.

Scope : We are entitled to procure air cargo spaces from ourairline partners. The freight rate lists will be providedby our airline partners, as adjusted and revised fromtime to time.

In respect of consignments of goods or cargos, we shallbe responsible for, among other things, acceptingconsignments from shipper or consignors, deliveringthe consignments to our airline partners for theircollection at designated locations and collecting andaccepting payment of pre-paid freight, transportationand other charges on behalf of our airline partners.

Credit term : We are generally given a credit period of five to 30days.

Collateral : We are generally required to provide cash deposits orbank guarantees in favour of our airline partners.

Commission : We may be entitled to a commission representing acertain percentage of the cargo freight rate paid to ourairline partners for the carriage of goods or cargos.

Termination : Our cargo agency agreements may be terminated in theevent of a breach of the agreement by or uponinsolvency or liquidation of a party. Either party mayalso terminate the agreement with prior written noticeof a specified period.


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(ii) Air charter agreements

Scope : Our air charter agreements provide for the charter ofaircrafts operated by our airline partners in accordancewith the terms set out therein.

Charter specifications : The type and number of aircraft, cargo payload, cargoroutes, flight schedules and charter price per flight aregenerally specified in our air charter agreements.

Payment term : We are generally required to make full payments to ourairline partners before the scheduled flight departure.We may be required to make an upfront payment at thetime when the air charter agreement is entered into.

Cancellation : In the event that we cancel any chartered flights, wewill generally be liable to pay to our airline partners acancellation fee representing a certain percentage of theagreed charter price under our air charter agreementsdepending on the time of cancellation.

(iii) Block space agreements

Term : Our block space agreements are generally effective forone year, subject to termination.

Scope : Our airline partners guarantee that we will be allocatedan agreed volume of cargo spaces on a monthly basis.We are committed to the purchase of a minimumvolume of cargo spaces at pre-determined rates on amonthly basis and will be required to pay for anyshortfall in our committed volume of cargo spaces.

Termination : Our block space agreements may be terminated in theevent of a breach of the agreement by us or uponinsolvency or liquidation of a party. Either party mayalso terminate the agreement with prior written noticeof a specified period.

For details of the arrangements we enter into with our airline partners, please refer to “Ourservices – Our freight forwarding services – Air freight forwarding services” in this section.


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Our shipping liner partners

Our shipping liner partners are primarily shipping companies offering internationalshipping routes. During the Track Record Period, we collaborated with over eight shipping linersin providing ocean freight forwarding services. For our U.S. and Canada shipments, in line withindustry practice, we generally enter into framework service agreements with our shipping linerpartners which provide us with cargo spaces on vessels to the U.S. and Canada for a term of oneyear. We set forth below the salient terms of our framework service agreements with ourshipping liner partners which provide us with cargo spaces on vessels to the U.S. and Canada:

Term : Our framework service agreements are generallyeffective for one year, subject to termination.

Scope : Our shipping liner partners shall provide us with cargospaces on vessels to the U.S. and/or Canada. We arerequired to commit to a minimum purchase amount ofcargo spaces on an annual basis at an agreed rate andmay be subject to penalty charges if we fail to fulfilour committed purchases.

Termination : Our framework service agreements may be terminatedby mutual agreement or by a party’s prior writtennotice of a specified period.

For details of the arrangements we enter into with our shipping liner partners, please referto “Our services – Our freight forwarding services – Ocean freight forwarding services” in thissection.

Our freight forwarder business partners

In order to facilitate our provision of international freight forwarding services to ourcustomers, we maintain connections with over 1,000 freight forwarder business partners in morethan 160 countries and regions, among which over 200 have been engaged by us on atransaction-by-transaction basis. Our freight forwarder business partners are among our majorsuppliers. We engage our overseas freight forwarder business partners on atransaction-by-transaction basis, primarily for handling and executing our customers’ freightforwarding orders in geographical locations where we have no presence. We do not enter intowritten agreements with our freight forwarder business partners. We generally place our orders,containing details, including size and volume of cargo spaces, particulars of cargo routes andrates, by emails or phones and confirmed by subsequent emails. There is no minimumguarantee/commitment arrangement between our Group and our freight forwarder businesspartners. We have established stable and amicable business relationships with these overseasfreight forwarder business partners.


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In line with general industry norm, we also obtain cargo spaces from our freight forwarderbusiness partners by way of co-loading. Please refer to “Our services – Our freight forwardingservices” in this section for details.

During the Track Record Period, our revenue generated from major freight forwarderbusiness partners (i.e. our freight forwarder customers/suppliers which are our top fivecustomers/suppliers during the Track Record Period) amounted to approximately HK$313.3million, HK$201.0 million and HK$440.1 million, respectively, accounting for approximately64.5%, 34.7% and 42.6% of our total revenue, respectively, whereas our costs incurred to majorfreight forwarder business partners amounted to approximately HK$50.5 million, HK$60.4million and HK$135.9 million, respectively, accounting for approximately 13.0%, 12.6% and15.6% of our total freight and handling costs incurred, respectively.


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BUSINESS

– 228 –

Our warehousing, trucking and other related logistics service providers

We enter into service agreements with our warehousing and related logistics serviceproviders from time to time on an as-needed basis for, among other things, warehouse spaces inTsing Yi and Kwai Chung, Hong Kong and the PRC for the short-term storage of specific goods.We also engage third party service providers for trucking services and repackaging and labellingservices from time to time in accordance with the needs of our customers. Our serviceagreements with our service providers generally have a period of one year or an unspecifiedterm and set out the agreed rates for warehousing and related logistics services, which aresubject to adjustments by our service providers from time to time. We set forth below the salientterms of our service agreements with our warehousing, trucking and other related logisticsservice providers:

Term : Our service agreements are generally effective for afixed term of one to three years or for an unspecifiedperiod, subject to termination.

Scope : Our service providers will provide us with warehousingand/or related logistics service including trucking anddelivery services and repackaging and labelling servicesat agreed rates, subject to adjustments from time totime. Additional charges such as tunnel fees, toll feesand gate charges may be payable by us.

Credit term : We are generally given a credit period of five to 60days.

Termination : Our service agreements may be terminated uponinsolvency or liquidation of a party or by a party’sprior written notice of a specified period.

Please refer to “Our services – Our logistics and related value-added services” in thissection for further details.

Bank guarantees

In line with industry practice, we are required to provide bank guarantees in favour of ourairline partners under our cargo agency agreements to guarantee the discharge of our contractualobligations. The amounts of bank guarantees required are generally determined by our airlinepartners with reference to, among other things, our historical shipment volume and transactionamount with the airline carrier. Our bank guarantees are generally provided by our principalbanks which would in turn require us to provide collaterals, including pledged bank deposits.


BUSINESS

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As at 31 March 2020, 2021 and 2022, the bank guarantees provided by us in favour of ourairline partners amounted to approximately HK$27.0 million, HK$27.7 million and HK$54.8million, respectively. During the Track Record Period and up to the Latest Practicable Date, asconfirmed by our Directors, we did not breach any of our cargo agency agreements in a materialrespect and accordingly, there was no enforcement of any bank guarantees by our airline partnersthereunder.

Our major suppliers

Details of our top five suppliers for FY2020 are set forth below:

Rank SupplierBackground information andprincipal business

Product/service(s)provided

Year offirstbecomingoursupplier Credit term

Paymentmethod

Freight andhandling

costsincurred

Percentageto total

freight andhandling

costsincurred

(days) (HK$’000) (%)

1 Supplier A (Note 1) South Korea-based companyprincipally engaging in theprovision of worldwide cargoand passenger carriage servicesby air, whose shares are listedon the Korea Exchange with amarket capitalisation ofapproximately KRW1.4 trillionas at the Latest Practicable Date

Air cargospaces


184,390 47.3

2 Supplier B (Note 2) Taiwan-based company principallyengaging in the provision inworldwide cargo and passengercarriage services by air, whoseshares are listed on the TaiwanStock Exchange with a marketcapitalisation of approximatelyTWD153.6 billion as at theLatest Practicable Date

Air cargospaces


20,689 5.3

3 Supplier C Hong Kong incorporated companyprincipally engaging in theprovision of cargo handlingservices, courier services andwarehousing services



16,499 4.2


BUSINESS

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Paymentmethod

Freight andhandling

costsincurred

Percentageto total

freight andhandling

costsincurred

(days) (HK$’000) (%)

4 SupplierD (Note 3)

PRC-based company principallyengaging in the freightforwarding business

Air freightforwardingservicesand oceanfreightforwardingservices


10,034 2.6

5 CustomerH (Note 4)

Hong Kong incorporated companyprincipally engaging in theprovision of air freightforwarding services andwarehousing services


2006 On demand Telegraphictransfer orbankcheque

8,888 2.3

Total 240,500 61.7

Notes:

(1) Supplier A represents four entities belonging to the same group.

(2) Supplier B represents three entities/branches belonging to the same group.

(3) Supplier D represents four entities/branches belonging to the same group.

(4) Customer H was also a major customer of our Group for FY2021. Please refer to “Customer – Our majorcustomers” in this section for further details.


BUSINESS

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Paymentmethod

Freight andhandling

costsincurred

Percentageto total

freight andhandling

costsincurred

(days) (HK$’000) (%)

(unaudited)

1 Supplier A (Note 1) South Korea-based companyprincipally engaging in theprovision of worldwide cargoand passenger carriage servicesby air, whose shares are listedon the Korea Exchange with amarket capitalisation of overKRW1.4 trillion as at the LatestPracticable Date

Air cargospaces


255,160 52.8




17,568 3.6

3 Supplier D (Note 2) PRC-based company principallyengaging in the freightforwarding business



12,344 2.6


BUSINESS

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Paymentmethod

Freight andhandling

costsincurred

Percentageto total

freight andhandling

costsincurred

(days) (HK$’000) (%)

(unaudited)

4 CustomerH (Note 3)

Hong Kong incorporated companyprincipally engaging in theprovision of air freightforwarding services andwarehousing services


2006 On demand Telegraphictransfer orbankcheque

10,310 2.1

5 Supplier E PRC-based company principallyengaging in the freightforwarding business

Oceanfreightforwardingservices


6,226 1.3

Total 301,608 62.4

Notes:

(1) Supplier A represents three entities belonging to the same group.

(2) Supplier D represents two entities belonging to the same group.

(3) Customer H was also a major customer of our Group for FY2021. Please refer to “Customer – Our majorcustomers” in this section for further details.


BUSINESS

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Paymentmethod

Freight andhandling

costsincurred

Percentageto total

freight andhandling

costsincurred

(days) (HK$’000) (%)

1 Supplier A (Note 1) South Korea-based companyprincipally engaging in theprovision of worldwide cargoand passenger carriage servicesby air, whose shares are listedon the Korea Exchange with amarket capitalisation ofapproximately KRW1.4 trillionas at the Latest Practicable Date

Air cargospaces


321,642 37.0

2 Supplier F PRC-based company principallyengaging in freight forwardingbusiness, consolidated cargoservices, warehousing andlogistics services



37,964 4.4




23,233 2.7

4 Supplier D (Note 2) PRC-based company principallyengaging in the freightforwarding business



23,227 2.7


BUSINESS

– 234 –




Paymentmethod

Freight andhandling

costsincurred

Percentageto total

freight andhandling

costsincurred

(days) (HK$’000) (%)

5 Supplier G PRC-based company principallyengaging in the provision ofocean freight forwardingservices

Oceanfreightforwardingservices


23,188 2.6

Total 429,254 49.4

Notes:

(1) Supplier A represents two entities belonging to the same group.

(2) Supplier D represents two entities belonging to the same group.

During the Track Record Period,

(a) the purchases from our top five suppliers collectively accounted for approximately61.7%, 62.4% and 49.4% of our total freight and handling costs incurred, respectively;and

(b) the purchases from our largest supplier, Supplier A, accounted for approximately47.3%, 52.8% and 37.0% of our total freight and handling costs incurred, respectively.Please refer to “Suppliers – Our largest supplier during the Track Record Period” inthis section for further details.

To the best of our Directors’ knowledge, during the Track Record Period and up to theLatest Practicable Date:

(a) all of our top five suppliers were Independent Third Parties;

(b) save for Customer H, none of our top five suppliers were also our top five customersduring the Track Record Period. In addition, Customer H, Supplier C, Supplier D,Supplier E and Supplier F were also our customers during the Track Record Period.Please refer to “Overlapping of customers and suppliers” in this section for furtherdetails; and

(c) none of our Directors, their respective close associates, nor any of our Shareholdersholding more than 5% of our issued share capital had any interest (direct and indirect)in any of our top five suppliers.


BUSINESS

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Reliance on Supplier A during the Track Record Period

During the Track Record Period, Supplier A was our largest supplier and our costs incurredto Supplier A amounted to approximately HK$184.4 million, HK$255.2 million and HK$321.6million, respectively, accounting for approximately 47.3%, 52.8% and 37.0% of our total freightand handling costs incurred, respectively. Supplier A primarily provided air cargo spaces to usfor shipments from the PRC or Hong Kong to the U.S. during the Track Record Period.

We commenced our business relationship with Supplier A in 2007. Supplier A is aninternational airline based and headquartered in South Korea. Supplier A is an Independent ThirdParty. In 2007, we entered into a cargo agency agreement with Supplier A to formalise thebusiness relationships between us. Apart from the aforesaid cargo agency agreement, we havenot entered into any long-term agreement with Supplier A which is in line with the industrypractice according to Frost & Sullivan. Over the years, we have entered into differentarrangements with Supplier A in securing air cargo spaces, including ad hoc cargo spacearrangements, air charter agreements and block space agreements. To the best of our Directors’knowledge and belief, the rates offered by Supplier A to us were on terms more favourable thanthose offered to other customers in general given the size of our transactions and our establishedrelationship with Supplier A. We set forth below the salient terms of our cargo agencyagreements, air charter agreements and block space agreements entered into with Supplier A:

(i) Cargo agency agreements

Term : Our cargo agency agreements are generallyeffective for a fixed term or for an unspecifiedperiod, subject to termination.

Scope : We are entitled to procure air cargo spaces fromSupplier A. The freight rate lists will be providedby Supplier A, as adjusted and revised from timeto time.

Payment term : Payments shall be made through the cargo billingsystem of Supplier A. We are generally given acredit period of 30 days.

Collateral : We are generally required to provide cash depositsor bank guarantees in favour of Supplier A.

Termination : Our cargo agency agreements may be terminatedin the event of a breach of the agreement by us orupon insolvency or liquidation of a party. Eitherparty may also terminate the agreement with priorwritten notice of a specified period.


BUSINESS

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(ii) Air charter agreements

Scope : Our air charter agreements with Supplier Aprovide for the charter of aircrafts operated bySupplier A in accordance with the terms set outtherein.

Charter specifications : The type and number of aircraft, cargo payload,cargo routes, flight schedules and charter price perflight are generally specified in our air charteragreements.

Payment term : We are generally required to make full paymentsto Supplier A before the scheduled flight departureby way of telegraphic transfer.

Cancellation : In the event that we cancel any chartered flights,we will generally be liable to pay to Supplier A acancellation fee representing a certain percentageof the agreed charter price depending on the timeof cancellation.

(iii) Block space agreements

Term : Our block space agreements are generally effectivefor one year, subject to termination.

Scope : Supplier A guarantees that we will be allocated anagreed volume of cargo spaces on a monthly basis.We are committed to the purchase of a minimumvolume of cargo spaces at pre-determined rates ona monthly basis and will be required to pay forany shortfall in our committed volume of cargospaces.

Termination : Our block space agreements may be terminated inthe event of a breach of the agreement by us orupon bankruptcy, insolvency or liquidation of aparty. Either party may also terminate theagreement without cause with prior written noticeof a specified period.


BUSINESS

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Stable business relationship with Supplier A

We believe that our stable business relationship with Supplier A over the last 15 years ismainly due to our mutual satisfaction of the terms and manner of cooperation and our respectiveproven track record over the years.

Despite (i) the absence of a long-term agreement with Supplier A which is generally in linewith the industry practice according to Frost & Sullivan; and (ii) the keen competition for aircargo spaces in the freight forwarding industry, our Directors are of the view that the businessrelationship with Supplier A is stable for the following reasons:

(i) We have maintained good and extensive business relationship with Supplier A forapproximately 15 years to date and we transact with Supplier A nearly on a dailybasis, with a shipment volume of approximately 6.3 million kg, 4.8 million kg and 4.5million kg during the Track Record Period, respectively. Our Directors confirm thatwe did not have any material disputes or disagreements with Supplier A and there hadbeen no material defaults and delay in payment of our trade payables to Supplier Asince the commencement of the business relationship with Supplier A and up to theLatest Practicable Date which demonstrated our financial ability and credibility.

(ii) Despite the keen competition for air cargo spaces in the freight forwarding industry,especially during the COVID-19 pandemic and the recent outbreak of Omicron andother COVID-19 variants in Hong Kong and the PRC, we have not experienced anymaterial non-performance by Supplier A which caused disruption to our operations,nor have we experienced any material difficulty in securing air cargo spaces fromSupplier A.

(iii) Although we have not entered into any long-term agreement with Supplier A, In 2007,we entered into a cargo agency agreement with Supplier A to formalise the businessrelationships between us and Supplier A. In accordance with the cargo agencyagreement, we provide a substantial amount of bank guarantees in favour of SupplierA with reference to, among other things, our historical shipment volume andtransaction amount with Supplier A. As at 31 March 2020, 2021 and 2022, the bankguarantees provided by us in favour of Supplier A amounted to approximatelyHK$20.6 million, HK$21.5 million and HK$48.4 million, respectively. As advised byFrost & Sullivan, bank guarantees to airline carriers (a) enable the freight forwardersthat have established business and operations with those airline carriers to enjoyeconomies of scale to have better control over cost and capital usage; and (b) create ahuge barrier to other tier-2 freight forwarders to be able to compete with the existingplayers.


BUSINESS

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(iv) Our Directors believe that Supplier A and our Group have formed a complementarybusiness relationship with mutual benefits to each other and have developed awell-established mutual understanding of the business needs of each other. Ourbusiness communications and transactions are being conducted efficiently andeffectively. As such, it is commercially advantageous and in the interests of us andSupplier A to maintain an ongoing relationship.

(v) Since we secure air cargo spaces from Supplier A nearly on a daily basis, Supplier Aand our Group have developed certain expectations from each other throughout ourapproximately 15 years of business relationship and have been familiar with eachother’s standards and requirements. Therefore, our Directors believe that it could betroublesome and risky for Supplier A to terminate the business relationship with ourGroup and consider other new freight forwarding companies.

In light of the above, our Directors are of the view that our current business relationshipwith Supplier A is unlikely to materially adversely change or terminate and will continue to becomplementary.

Favourite rate offered by Supplier A to our Group

In selecting the suppliers that we will secure air cargo spaces from, we will obtain freightrates and supply terms from our airline partners from time to time. Based on the supply termsand the freight rates compiled by us, we will consider our selection of suppliers.

To the best of our Directors’ knowledge and belief, the rates offered by Supplier A to ourGroup are more favourable than those offered by other suppliers in general, due to:

(i) The size of transactions

During the Track Record Period, the volume of air cargo spaces we procured fromSupplier A amounted to approximately 6.3 million kg, 4.8 million kg and 4.5 million kg,respectively, representing approximately 49.1%, 55.2% and 50.4% of our total air shipmentvolume, respectively. As we procure a high volume of air cargo spaces and as Supplier Ahas a larger supply of air cargo spaces compared to our other suppliers, we are able toobtain favourable terms/rates than those offered by our other suppliers.

(ii) Our long and established relationship with Supplier A

As discussed above, (a) we have maintained good and extensive business relationshipwith Supplier A for approximately 15 years to date; (b) we did not have any materialdisputes or disagreements with Supplier A since the commencement of the businessrelationship with Supplier A and up to the Latest Practicable Date; (c) we did notexperience any material non-performance by Supplier A which caused disruption to ouroperations; and (d) we did not experience any material difficulty in securing air cargospaces from Supplier A. Our Directors believe that as a result of such a long-term business


BUSINESS

– 239 –

relationship with Supplier A, Supplier A has been familiar with our standards andrequirements and has been able to respond quickly and in a cost-efficient manner to therequirement that we may request. Given the long and extensive business relationship withus, Supplier A is willing to provide us with favourable terms/rates compared to theterms/rates obtained from our other suppliers.

Supplier concentration risk of Supplier A

Our Directors are of the view that supplier concentration and reliance are not uncommon inthe freight forwarding industry. As confirmed by Frost & Sullivan, as the freight forwardingindustry is highly fragmented and there is a significant number of freight forwarders in themarket, international airline carriers generally have in place stringent assessment criteria inselecting freight forwarders as their cargo agents taking into account, among other things, theirindustry reputation and financial soundness and are only willing to enter into businessrelationship with freight forwarders with whom they have established trusted relationships intheir previous course of dealings. On the other hand, according to the Industry Report, it is anentry barrier for small- and middle-sized players in the freight forwarding industry withrelatively smaller shipment volumes to develop and build stable business relationships with alarge number of airline carriers and thus resulting in a narrower base of airline partners. Takinginto account the foregoing, our Directors believe, and Frost & Sullivan concurs, that it is notuncommon for costs incurred to an international airline carrier to account for a significantportion of a small- or middle-sized freight forwarder’s cost of services. As such, our supplierconcentration attributable to Supplier A is not unjustified commercially.

Our Directors further consider that our business is sustainable despite our reliance onSupplier A and that such exposure to supplier reliance can be mitigated based on the factors setout below:

(a) The availability of alternative airline carriers

Owing to the fact that we have developed an amicable and trusted businessrelationship with Supplier A, we have secured cargo spaces from Supplier A over the yearsprimarily for the shipments from the PRC or Hong Kong to the U.S. We believe that thereare ample alternative airline carriers available for the same or similar routes offered bySupplier A. Taking into account our established reputation in the industry and our proventrack record, we believe that we are in a position to reach out to and build new businessrelationships with alternative carrier partners. Our Directors consider that, given ourDirectors and senior management’s expertise and experience in the freight forwardingindustry, in the unlikely event that our relationship with Supplier A diminishes ordiscontinues in the future, we will not experience any difficulties in seeking cooperationwith other airline carrier business partners or explore cooperation opportunities with newairline carriers. Indeed, other than Supplier A, we have also been cooperating with at leastfour other airline carriers, including Supplier B, during the Track Record Period.


BUSINESS

– 240 –

(b) Our extensive global network of freight forwarder business partners

We have been operating in the freight forwarding industry with a proven track recordfor over 24 years and have established solid business reputation and network with theindustry. We maintain connections with over 1,000 freight forwarder business partners inmore than 160 countries and regions, among which over 200 have been engaged by us on atransaction-by-transaction basis. We believe that, in the unlikely event that we are not ableto secure cargo spaces directly from our largest supplier, namely Supplier A, leveraging ourglobal network of freight forwarder business partners, we will be able to secure air cargospaces from them and provide international air freight forwarding services to our customerswith minimal interruption.

(c) Continuous effort in expanding suppliers network

Our costs incurred to Supplier A accounted for a major part of our total freight andhandling costs incurred during the Track Record Period. To the best of our Directors’knowledge and belief, we believe that the rates offered by Supplier A to us were on termsmore favourable than those offered to other customers in general given the size of ourtransactions and our established relationship with Supplier A. We believe that ourestablished relationship with Supplier A is commercially advantageous to us and it is in ourinterest to maintain ongoing relationship with Supplier A. Other than Supplier A, we havealso been cooperating with at least four other airline carriers, including Supplier B, duringthe Track Record Period. We endeavour to maintain ongoing relationships with our existingairline carrier suppliers. Nevertheless, our Directors recognise the importance of expandingour supplier base, in particular suppliers of cargo spaces, with a view to sustaining longterm growth. To this end, we have been (i) approaching other airline carriers in exploringarrangements for supply of cargo spaces purchases; (ii) negotiating the terms andconditions with potential airline carrier suppliers.

Leveraging our well-established market position and proven record, we will continueto devote efforts to expand and diversify our supplier network and enhance our networkagility from time to time to minimise our operational risks in relation to over-reliance on asingle supplier.

(d) Our anticipated business growth

We anticipate that there will be a growing demand for off-airport x-raycargo-screening services in view of the ICAO aviation security requirements and hence theRACSF scheme launched by the CAD. In addition, we believe that there will be anincreasing demand for freight forwarding services and ancillary logistics in view of therapid development of e-commerce business. We believe that, leveraging our establishedbrand image and reputation in the industry, we are in the position to capture such growingdemand and offer a more comprehensive portfolio to our customers. We intend to expandand improve our air freight forwarding services by providing off-airport x-raycargo-screening services and trucking services in Hong Kong. Our Directors believe that


BUSINESS

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our added offering of services not only lays a fundamental groundwork for the growth ofour business operations, it enables us to capture a larger market share in the freightforwarding industry alongside with our provision of international freight forwardingservices.

(e) Switch to other suppliers with similar air cargo volume and rate provided by

Supplier A

During the Track Record Period, we also purchased air cargo spaces from other airlinesuppliers for our business operations. Apart from Supplier A, Supplier B, a major airlinescompany, was also one of our top five suppliers for FY2020. In addition, among our topfive suppliers during the Track Record Period, there were four other freight forwardersuppliers that provided air freight forwarding services which we were able to secure aircargo spaces from to carry out our air freight forwarding services. During the Track RecordPeriod, the volume of air cargo spaces our Group purchased from other suppliers was notlimited, which amounted to approximately 6.5 million kg, 3.9 million kg and 4.4 millionkg, respectively, representing approximately 50.9%, 44.8% and 49.6% of our total airshipment volume, respectively.

In the unlikely event that Supplier A terminates the supply of air cargo spaces to usfor unforeseeable reasons, our Directors believe that since we cooperated with other airlinecarriers and other suppliers who provided air freight forwarding services to us during theTrack Record Period, we would be able to obtain adequate supply of air cargo spacesnecessary for our business operations from other airline carriers or other suppliers whoprovide air freight forwarding services.

Potential risk of financial deterioration of Supplier A

Despite the global traffic restrictions and uncertain economic environment since theoutbreak of COVID-19, our Directors are of the view that the risk of termination of cooperationbetween our Group and Supplier A is remote as a result of the financial deterioration of SupplierA due to the following reasons:

(i) Supplier A was established in 1988 and is currently the second largest South Koreanairline which serves cargo and passenger carriage destinations across the globe,including Asia, North America, Australia and Europe. According to Frost & Sullivan,Supplier A accounted for approximately 19.7% and 18.9% of South Korea’sinternational aviation market in 2020 and the first half of 2021, respectively. Inaddition, Supplier A is a member of Star Alliance, one of the most prestige globalaviation alliances and its member airlines include many of the world’s top aviationcompanies, such as Air China, ANA, Singapore Airlines, United Airlines, Lufthansa,etc.;


BUSINESS

– 242 –

(ii) Supplier A’s financial performance in 2021 had improved significantly amidst theCOVID-19 pandemic. Despite the impact of the COVID-19 pandemic on its airpassenger business, Supplier A reported its largest-ever operating profits since 2010.Its operating profit had surged to approximately KRW456.5 billion in 2021 as opposedto an operating loss of approximately KRW63.1 billion in 2020. Its revenue hadincreased by approximately 16% to approximately KRW4.1 trillion in 2021 which wasprimarily attributable to the strong increase in its air cargo business by approximately47% to KRW3.1 trillion mainly due to its strong air cargo demand due to thecongestion in the global logistics supply chain;

(iii) The government of South Korea announced that Supplier A will be acquired byKorean Air on 16 November 2020. In June 2021, Korea Development Bank, astate-run bank in South Korea, approved Korean Air’s post-merger integration plan toacquire a controlling stake in Supplier A for KRW1.8 trillion and subsequently mergethe two airlines. As at the Latest Practicable Date, the merger is still under theapproval of competition authorities around the world, including South Korea, the U.S.,the E.U., the PRC and Japan, etc., before the merger can proceed. It is expected thatthe merged airlines will become one of the world’s top 10 largest airlines. Supplier Ahas confirmed that it is not aware of any reason for it to terminate its businessrelationship with us following the completion of the merger between Supplier A andKorean Air; and

(iv) Supplier A will benefit from the gradual relaxation of quarantine measures in SouthKorea and other overseas countries. From 21 March 2022, South Korean nationalswho are vaccinated are exempted from self-quarantine when they return to the countryfrom overseas travel. From 1 April 2022, foreign visitors are also exempted fromquarantine regardless of their vaccination history. Therefore, it is expected that theinternational passenger flights in South Korea will gradually recover in 2022 from theprolonged COVID-19 pandemic for more than two years. The government of SouthKorea aims to increase the number of international flights in 2022 to the 50% level of2019. As at March 2022, the number of international flights departing the country wasaround 8.8% of the corresponding figure in 2019.

OVERLAPPING OF CUSTOMERS AND SUPPLIERS

In order to expand our geographical reach, we maintain connections with over 1,000 freightforwarder business partners in over 160 countries and regions, among which over 200 have beenengaged by us on a transaction-by-transaction basis, to, among other things, handle and executeour customers’ freight forwarding instructions in geographical locations where we have nopresence. Please refer to “Suppliers – Our freight forwarder business partners” in this section forfurther details. As our freight forwarder business partners may also engage us to provide freightforwarding services in Hong Kong and the PRC and we may on-sell our cargo space to ourfreight forwarder business partners in the process of consolidation and co-loading, some of ourcustomers may also be our suppliers and vice versa.


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During the Track Record Period, to the best of our Directors’ information, knowledge andbelief, a total of 238, 247 and 240 of our customers were also our suppliers, respectively. Inparticular, save for Customer C and Customer F, all of our top five customers during the TrackRecord Period, being Customer A, Customer B, Customer D, Customer E, Customer G andCustomer H and Customer I, were also our suppliers during the Track Record Period. Weprimarily sourced cargo spaces, freight forwarding services and logistics and related servicesfrom our top five customers during the Track Record Period. During the Track Record Period,our freight and handling costs incurred to our customers who were also our suppliers amountedto approximately HK$113.2 million, HK$136.5 million and HK$302.6 million, respectively,accounting for approximately 29.0%, 28.2% and 34.8% of our total freight and handling costsincurred, respectively.

In addition, five of our top five suppliers during the Track Record Period, being CustomerH, Supplier C, Supplier D, Supplier E and Supplier F were also our customers during the TrackRecord Period. We primarily provided freight forwarding services and logistics and relatedvalue-added services to our top five suppliers who were also our customers during the TrackRecord Period. During the Track Record Period, our revenue derived from our suppliers whowere also our customers amounted to approximately HK$376.2 million, HK$383.1 million andHK$756.5 million, respectively, accounting for approximately 77.5%, 66.2% and 73.2% of ourtotal revenue, respectively.

According to the Industry Report, small- and middle-sized players in the freight forwardingmarket tend to develop their business with a regional focus and therefore, in line with generalindustry practice, they engage other freight forwarders to provide overseas freight forwardingservices in geographical locations where they have no presence. This enables the small- andmiddle-sized freight forwarders to enrich their scope of freight forwarding services in terms ofgeographical reach without incurring extensive capital commitment for establishing theirpresence in the overseas regions. Furthermore, according to the Industry Report, it is notuncommon for freight forwarders to consolidate their shipments by way of co-loading in order tomaximise the utilisation of cargo space and to achieve optimal cost efficiency. As such, freightforwarder work in alliance that benefits all in the alliance.

Taking into account the above, our Directors are of the view that the overlapping of ourcustomers and suppliers is in line with industry practice. Our Directors further believe to thebest of their information knowledge and belief that, since most of our freight forwarder businesspartners are generally established freight forwarder companies in the regions in which theyoperate with their own clientele, our business relationship with each of our freight forwarderbusiness partners is one of alliance rather than competition.


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The following table sets forth a breakdown of our gross profit and gross margin from (i)overlapping customers and suppliers; and (ii) non-overlapping customers for the periodsindicated:


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %

Overlappingcustomers andsuppliers 50,866 13.5 42,706 11.1 97,254 12.9

Non-overlappingcustomers 15,903 14.5 29,928 15.3 36,211 13.1

Total/Overall 66,769 13.8 72,634 12.5 133,465 12.9

During the Track Record Period, our gross margin from overlapping customers andsuppliers was generally in line with our overall gross margin and was lower than that fromnon-overlapping customers primarily attributable to the fact that (i) our overlapping customersand suppliers were all freight forwarders while over 50% of our gross profit fromnon-overlapping customers was generated from our direct customers; and (ii) our gross margingenerated from freight forwarder customers was generally lower than that generated from directcustomers mainly because (a) freight forwarder customers are inclined to be more price sensitiveas they are more knowledgeable to the market prices of cargos in general; and (b) directcustomers generally request more specific logistics solutions in respect of cargo pick-up, releaseand delivery in the export destinations which allows us to generate a higher mark-ups.

Our Directors confirm that the respective prices of transactions with the overlappingcustomers and suppliers are comparable to those of similar transactions our Group conductedwith other customers and suppliers, and that all of the services to and from our overlappingcustomers and suppliers during the Track Record Period were conducted on an arm’s lengthbasis, on normal commercial terms and in the ordinary course of business. Our Directors furtherconfirm that none of the transactions between us and our overlapping customers and supplierswere inter-connected or inter-conditional with one another.

RISK OF DISINTERMEDIATION BY OUR CUSTOMERS AND SUPPLIERS

As advised by Frost & Sullivan, the evolution of internet and the rise of digital platformsover the years have enormously increased market transparency whereby customers are givenaccess to a wider scope of choices, leading to the displacement of many traditionalintermediaries. Please refer to “Risk factors – Risks relating to our industry – We are exposed tothe risks of disintermediation” in this document for further details. It is possible that our


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customers may transact directly with our suppliers without the intermediaries such as us. Whilethere exists a risk of disintermediation, our Directors believe, and the Sole Sponsor concurs thatwe are able to mitigate such risk on the following basis:

(i) our role as an intermediary is necessary and valuable, particularly for suppliers whichare airline carriers and shipping liners, from the perspectives of both the suppliers andcustomers, namely (a) we procure cargo spaces in bulk and are thereby able to achieveeconomies of scale; and (b) in addition to freight forwarding services which airlinecarriers and shipping liners are providing, we also provide logistics and relatedvalue-added services, which are much needed by most customers; and

(ii) notwithstanding that some of our suppliers are fellow freight forwarders, as noted inthe Industry Report and highlighted above, small- and middle-sized freight forwarderstend to have a regional focus and there is a need to collaborate with others in order toexpand their own scope of services in terms of geographical reach. Most of our freightforwarders are well established in their particular regions with their own clienteles.While we and our freight forwarder suppliers are engaging in the same business, weoperate distinctively. We consider that the collaboration among us serves to fill thevoid of one and other. Depending on the ports of origin, the risk of our customerstransacting with our freight forwarder suppliers who do not have an establishedoperation in the regions where we have an established presence, such as the PRC andHong Kong, is low given the concerns of costs, time and logistics involved.

To the best of our Directors’ knowledge and belief, our Directors are not aware of any ofour major suppliers and major customers having any plan to transact directly withoutintermediates.

EFFECTS OF THE COVID-19 OUTBREAK AND SINO-U.S. TRADE WAR

(a) COVID-19 outbreak

Impact of the COVID-19 outbreak on the overall freight forwarding and logisticsindustry

An outbreak of respiratory illness caused by COVID-19, a novel coronavirus, was firstreported in late 2019 and continues to expand globally. COVID-19 had spread globallyaccording to the WHO with the death toll and number of infected cases continuing to rise.Since the outbreak, draconian measures have been imposed within the PRC and globally inan effort to contain COVID-19, including the closing of national borders in variouscountries, the lockdowns of a vast number of cities across the world, travel restrictions andextensive suspension of business operations and mandatory quarantine requirements oninfected individuals and anyone deemed potentially infected.


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The COVID-19 outbreak is likely to have an adverse impact on the livelihood of thepeople all over the world and the global economy. Any economic downturn or slowdownand/or negative business sentiment could have an indirect potential impact on the freightforwarding and logistics industry, and as a result, our business operations and financialperformance may be adversely affected. Furthermore, according to the Industry Report, thefreight forwarding and logistics industry is subject to uncertainties under the COVID-19pandemic due to, among other things, (i) limited supply of cargo spaces due to theprolonged suspension and/or cancellation of passenger flights and other carriers; (ii)slowdown in the global economy, in particular, the U.S. and decline in consumerconsumption of non-essential goods; (iii) shutdown of manufacturing factories located inthe PRC and Southeast Asia region; (iv) delay in launches of new products, such aselectronics and luxury goods, attributable to, among other things, disruption of globalsupply chains and uncertain consumer sentiments; and (v) mandatory quarantine controls onvessels upon arrival at ports, which in turn are expected to adversely affect the demands forand the costs of freight forwarding and logistics services. Please refer to “Risk factors –Risks relating to our business – Our business operations may be adversely affected by theCOVID-19 pandemic” in this document for further details.

Effects of the COVID-19 outbreak on our business operations

Our Group’s operations in the PRC were, to a limited extent, affected by the outbreakof COVID-19 particularly due to the mandatory suspension of business operations in thePRC (including the suspension of our offices and the operations of our customers andsuppliers in the PRC) in March 2020 pursuant to the nationwide lockdown measuresimposed by the PRC government. As confirmed by our Directors, despite the mandatorysuspension of business operations in the PRC during March 2020 where all industries andbusinesses, including ours, were affected to a certain extent, given the nature of ourbusiness, we were able to continue providing 24/7 services to our customers despite thesuspension of our offices in the PRC as aforementioned. Our employees in Hong Kong andthe PRC were able to continue our communications and cooperations with our cargo spacesuppliers, logistics services providers and customers through electronic means and remoteaccess to our IT system. Amidst the recent severe outbreak of Omicron variant in the PRCsince March 2022, owing to the lockdown and quarantine measures promogulated by thePRC local governments, (i) our Shenzhen office was closed during the period from 28February 2022 to 3 March 2022, and from 14 March 2022 to 20 March 2022; and (ii) ourShanghai office has been closed since 1 April 2022. Our Directors confirm that ourShenzhen and Shanghai employees were able to continue working from home and providingservices to our customers despite the aforesaid suspension of offices.

As confirmed by our Directors and to the best of their knowledge and information, (i)none of customers cancelled their orders placed with us and there was no loss of majorcustomers due to the outbreak of COVID-19 and the recent outbreak of Omicron variant inHong Kong and the PRC; and (ii) there were no penalties imposed on us whether by ourcustomers or suppliers during the said periods of mandatory suspension of our offices inthe PRC.


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In addition, to the best of our Directors’ knowledge and information, during the TrackRecord Period and up to the Latest Practicable Date, there had been (i) nine confirmedcases of COVID-19 infection of our Hong Kong employees; and (ii) no suspected orconfirmed cases of COVID-19 infection of our PRC employees. Our Directors confirm thatthere was no material interruption caused to both our Group’s Hong Kong and the PRCoperations during the period of the absence of work for our staff attributable to theCOVID-19 infection.

Effects of the outbreak of Omicron and other COVID-19 variants on the operations ofour customers and the demand for our freight forwarding services

To the best knowledge and information of our Directors, during FY2022 and up to theLatest Practicable Date, despite certain lockdown and quarantine measures enforced in thePRC (i) neither our Group nor our top five customers for FY2022 had experiencedoperation suspension; and (ii) our Directors were not aware of any major customers of ourGroup experiencing operation suspensions, due to the recent outbreak of Omicron and otherCOVID-19 variants in Hong Kong and the PRC.

Although the outbreak of Omicron and other COVID-19 variants in Hong Kong andthe PRC may lead to the operation suspension of our certain customers, we have mitigatedthe impacts brought about by the risk of suspension of our customers’ operations bycontinuously expanding our customer base during the Track Record Period. Our Directorsbelieve that, owing to our reputation and expertise in the freight forwarding industry, ourability to seize business opportunities, and attributable to the rapid growth of cross-bordere-commerce, we were able to secure a significant number of new customers, throughreferrals from both our existing freight forwarder partners and returning customers, as wellas through our own initiatives and marketing efforts in contacting new business partnersand new customers to explore business opportunities and partnerships. During the TrackRecord Period, we had 1,107, 1,157 and 1,187 returning customers, respectively, andcommenced business relationships with 802, 700 and 633 new customers, respectively.

According to our unaudited consolidated management accounts, during the severespread of Omicron in Hong Kong, we were still able to record a strong increase in ourrevenue for the three months ended 31 March 2022 as compared to that for the threemonths ended 31 March 2021.

As advised by Frost & Sullivan, given the fact that the number of reported COVID-19cases in Shanghai had reached the peak at mid-April 2022 and Shanghai is currently in theprogress to effectively contain the spread of Omicron variant, Shanghai is on track toresume production at key manufacturing sites from mid-April 2022 and businesses areexpected to gradually return to normal in the third quarter of 2022. Up to the LatestPracticable Date, as advised by Frost & Sullivan, most of the manufacturing operations andbusinesses in the PRC outside Shanghai were not materially affected by the outbreak ofOmicron variant in the PRC.


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Further, according to the PRC export value published by GACC, the PRC’s totalexports had further increased by approximately 12.5% to approximately US$1,094.4 billionfor the first four months of 2022 as compared to that for the first four months of 2021 andthe PRC’s export to the U.S. had even increased at a higher pace by approximately 14.9%to approximately US$184.9 billion for the first four months of 2022 as compared to that forthe first four months of 2021, which had shown that the adverse impact on the demand forexport freight forwarding services in respect of the lockdown and quarantine measures inthe PRC was not significant.

According to our unaudited consolidated management accounts, we were able tomaintain a relatively stable revenue in April 2021 and 2022, which was primarilyattributable to the offsetting effect of (i) the slight drop of our air and ocean shipmentvolume from approximately 0.8 million kg and 1,420 TEUs, respectively, in April 2021 toapproximately 0.7 million kg and 1,270 TEUs, respectively, in April 2022 mainly due to theunstable supply of air and ocean cargos attributable to the outbreak of Omicron variant; and(ii) the higher ocean freight rates charged by shipping liners in April 2022 due to theskyrocketing increment in North America market ocean shipping rates.

As such, our Directors submit that, after the Track Record Period and up to the LatestPracticable Date, (i) there was no material adverse impact on the overall demand for ourfreight forwarding services; and (ii) the impact on the demand for our freight forwardingservices in the PRC, especially Shanghai, was considered to be temporary due to thelockdown and quarantine measures in the PRC and such demand is expected to recoverquickly after the easing of COVID-19 control measures in the PRC.

Supply of air and ocean cargo spaces and the cooperation with overseas freightforwarder business partners

During FY2021 and FY2022, there were unprecedented disruptions such as prolongedsuspensions and/or cancellation of passenger flights and other flights by most, if not all,airline carriers due to the COVID-19 pandemic. In response to the rising trend of importedCOVID-19 cases with Omicron variant and the fifth wave of the outbreak of COVID-19 inHong Kong, the Hong Kong government has tightened the quarantine measures for HongKong-based air cargo crews. Consequently, Cathay Pacific makes reductions to itslong-haul cargo capacity through March 2022. As such, Cathay Pacific’s cargo carriage bytonnes declined approximately 13.8% to approximately 236,533 tonnes for the first threemonths of 2022 as compared to that for the same period in 2021. However, Cathay Pacific’scargo carriage by tonnes in March 2022 had been gradually recovered from the fifth waveof the outbreak of COVID-19 in Hong Kong with a strong rebound of approximately 30.9%and 49.2% from January and February 2022, respectively, and also a growth ofapproximately 16.6% when compared to that in March 2021.


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Our Directors confirm that our operations have not been affected by the aforesaidquarantine measures in Hong Kong as follows:

(i) We provide both air and ocean freight forwarding services. The aforesaidquarantine measures are mainly imposed on airline carriers and there was nosubstantial effect on ocean cargo transport in respect of shipping liners. Inaddition, there has been an increase in our customer demand for ocean freightforwarding services mainly due to the substantial increase in costs for using aircargos primarily attributable to the limited supply of air cargo spaces since theoutbreak of COVID-19.

(ii) We collaborate with five airline partners, including Supplier A. The tightenedquarantine measures are mainly imposed on airlines with locally based air crewwho has to layover. We primarily obtain air cargo spaces from Supplier A whichis not Hong Kong-based and its cargo aircrafts generally do not layover, asconfirmed by Frost & Sullivan.

Since March 2022, the PRC has been heavily struck by the outbreak of Omicronvariant with daily cases rising to the peak of nearly 30,000 cases in mid-April 2022. ThePRC government has imposed lockdown and quarantine measures for certain cities,including some major cities with considerable logistics throughput, such as Shanghai,Guangzhou and Shenzhen, which have caused temporary adverse impacts on themanufacturing industry, flow of goods, the overall supply chain and related demand forlogistics and freight forwarding services in the PRC.

Further, the CAAC imposed certain circuit breaker on inbound flights, in order tocontain the number of passengers with COVID-19 that arrive in the PRC.

As advised by Frost & Sullivan, up to the Latest Practicable Date,

(i) for air cargo freight in Shanghai, although the air cargo terminal in Shanghai wasstill operational, all freight forwarders must apply for authorisation to performdaily pick-up services. As a result of the labour shortages under the imposition ofcity-wide quarantine and lockdown measures, some international airlines hadcancelled cargo flights to/from Shanghai Pudong International Airport. Besides,all custom brokers at Shanghai Pudong International Airport were required towork from home, while clearance of cargo freights which require special andmanual inspection was not available during the lockdown period;

(ii) for ocean cargo freight in Shanghai, all container yards had been temporarilyshut down due to the lockdown in Shanghai, resulting in a considerable amountof ocean freight in Shanghai being temporarily put on hold; and


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(iii) for air and ocean cargo freight in Guangzhou and Shenzhen, there were nomaterial restrictions on cargo freight transportation given the relatively lownumber of reported COVID-19 cases.

During FY2021 and FY2022 and up to the Latest Practicable Date, notwithstandingthat there were shortages and disruptions in the supply of cargo spaces in the market,leveraging our established reputation and the substantial expertise and experience of ourDirectors and our Group’s senior management in the freight forwarding industry and givenour established and good business relationships with our major suppliers of cargo spaces,we were generally able to obtain cargo spaces from airline carriers, shipping liners, fellowfreight forwarders and overseas freight forwarder business partners and did not experienceany material difficulty in securing cargo spaces from them.

As such, despite the severe spread of Omicron in Hong Kong for the first threemonths of 2022, we were able to record an overall increase in our air and ocean shipmentvolume from approximately 1.7 million kg and 3,210 TEUs, respectively, for the threemonths ended 31 March 2021 to approximately 1.8 million kg and 5,631 TEUs,respectively, for the three months ended 31 March 2022.

Furthermore, since we continued to (i) be able to transfer the increased costs of airand ocean cargo spaces to our customers; and (ii) undertake essential procedures in ourfreight forwarding business, such as cargo consolidation and co-loading, which enable us tooptimise our use of cargo spaces in terms of both volume and weight, we were able tomaintain our overall gross margin to approximately 12.5% and 12.9% for FY2021 andFY2022, respectively.

Since the commencement of the Track Record Period and until 31 December 2021, wedid not experience any cancellation of cargo spaces by our airline partners and shippingliner partners. Owing to the lockdown and quarantine measures in the PRC, during theperiod from 1 January 2022 to 30 April 2022, we had been (i) declined air and oceanshipment orders of approximately 0.2 million kg and 6 TEUs, respectively; (ii) delayed airand ocean shipment orders of approximately 70,000 kg and 812 TEUs, respectively; and(iii) cancelled air and ocean shipment orders of approximately 25,000 kg and 8 TEUs,respectively, by our shipping liner and airline carrier suppliers. As such, our revenue for airfreight forwarding services and ocean freight forwarding services affected by such decline,delay and cancellation of shipment orders was in aggregate approximately HK$5.8 millionand HK$15.0 million, respectively, in aggregate representing only approximately 7.6% ofour total revenue for the said period.

Our Directors confirm that none of our customers had cancelled their shipment ordersplaced to us since we had exhausted all available means to resolve the aforesaid decline,delay and cancellation of shipment orders by shipping liners and airline carriers with ourcustomers, including but not limited to, (i) placing new shipment orders to our suppliers;(ii) planning for rerouting of the shipments; and (iii) ongoing discussion with the shippingliners and airline carriers of the revised shipment time.


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In light of the above, our Directors confirm that our operations have not beenmaterially adversely affected due to the decreasing supply of cargo spaces and/or thesuspensions of our customers’ operations as a result of the recent outbreak of Omicron andother COVID-19 variants and the related government measures on freight control in HongKong and the PRC.

Impact of the COVID-19 outbreak on our overall financial performance

Notwithstanding the outbreak of COVID-19, our revenue attributable to our freightforwarding services increased from approximately HK$483.9 million in FY2020 toapproximately HK$574.2 million in FY2021 and further to approximately HK$1,031.8million for FY2022. Our Directors are of the view that such increases were primarilyattributable to, among other things, our ability to obtain cargo spaces at relativelycompetitive prices from our suppliers with whom we have established and maintainedlong-term and stable business relationships and our ability to seize business opportunitiesarising from the needs of air and ocean freight for goods against the backdrop of theCOVID-19 outbreak and the corresponding rapid growth of e-commerce. In view of theabove, our Directors believe that the temporary effects of the COVID-19 outbreak on ourfinancial performance in terms of our revenue have been partially mitigated by ourcapability to capture business opportunities and diversify our business model in response tothe changing market needs in a prompt manner and that no permanent material adverseeffect on our Group’s business operations and financial performance is expected to resultfrom the COVID-19 pandemic.

Our contingency plan and response towards the COVID-19 outbreak

In response to the COVID-19 pandemic, we have implemented a contingency plan tominimise potential disruptions that may be caused to our business operations, including (i)maintaining regular and on-going contact with our suppliers to check on the flight/vesselschedules and the availability of cargo spaces; (ii) reviewing our lists of approvedsuppliers, including airline partners, shipping liners and freight forwarder business partners,from time to time and identifying suitable alternative suppliers which meet our demandsand requirements to ensure an adequate supply of cargo spaces; (iii) maintaining closecommunications and negotiations with our customers should there be a potential delay inthe provision of our freight forwarding and logistics services by our overseas freightforwarder business partners in locations where we do not have presence; and (iv)implementing flexible working shift arrangements for our staff in Hong Kong and the PRC.Further, during FY2021, we have applied for both tranches of the Employment SupportScheme rolled out by the Hong Kong government and have successfully obtained bothtranches of subsidies thereunder in the total amount of approximately HK$2.1 million forour 40 employees in Hong Kong, with a cap of HK$9,000 per employee. In May 2022, weapplied for the 2022 Employment Support Scheme rolled out by the Hong Konggovernment and expect to receive subsidies of approximately HK$1.0 million for our 43employees in Hong Kong.


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In addition, we have adopted enhanced hygiene and precautionary measures to ensurea hygienic work environment for our employees. These measures include, among otherthings, (i) supplying sanitary masks and disinfecting products, including hand cleansing geland alcohol disinfectants to our employees in our office and warehouse premises; (ii)monitoring the medical symptoms of our staff by daily measurement of their bodytemperatures upon their entry to our office and warehouse premises; (iii) subsidising ouremployees in our Hong Kong office to undertake COVID-19 tests; (iv) promoting personalhygiene and health protection among our employees; and (v) regularly cleaning anddisinfecting our office and warehouse premises.

We estimate that the costs for implementing the abovementioned enhanced hygienemeasures to be approximately HK$55,000 for the year ending 31 March 2023. This mainlyrepresents the material costs for sanitary masks, hand cleansing gel, alcohol disinfectants,cleaning charges and the fees paid for COVID-19 tests. Our Directors confirm that theadditional costs associated with the enhanced hygiene measures and the provision oftemporary accommodation would have no significant impact on our Group’s financialposition and financial performance for the year ending 31 March 2023. Our Directorsbelieve that these additional costs will gradually decrease as the COVID-19 pandemicsubsides over time.

Effects of the COVID-19 outbreak on our business strategies

Currently, it is one of our business strategies to expand and improve our air freightforwarding services. Please refer to “Our business strategies – Expanding and improvingour air freight forwarding services” in this section for further details. According to theIndustry Report, whilst the global economy may experience a certain extent of impact as aresult of the COVID-19 outbreak, e-commerce is expected to continue to expand in theyears to come, particularly since the development of a ‘new normal’ shopping behaviour asa result of the global travel restrictions and quarantine requirements due to the outbreak ofCOVID-19 since early 2020. Air freight forwarding is an essential component ofcross-border e-commerce and it is anticipated that the growth of e-commerce will continueto contribute to the growing demands for international air freight forwarding services.According to IATA, it is estimated that e-commerce represented approximately 18% of aircargo volumes in 2020, and will increase to approximately 22% by 2022. Furthermore,according to the Industry Report, the outbreak of COVID-19 is unlikely to affect thegrowth of the macroeconomic development in the PRC and Hong Kong in the long run. Itis anticipated that, according to the Industry Report, once the outbreak of COVID-19 iseffectively controlled, the outlook of the demand for freight forwarding services, andlogistics and related value-added services in both the PRC and Hong Kong will remainpositive.

Based on the above, our Directors believe that our expansion plan remains feasible,and it is unlikely that we will change the use of our [REDACTED] from the[REDACTED] as disclosed in “Future plans and [REDACTED]” in this document as aresult of the COVID-19 outbreak. However, there is no assurance that direct and indirect


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effects of COVID-19 will not have a greater impact on the livelihood of the people in andthe economy of the PRC and Hong Kong. In the event that the COVID-19 pandemic furtherevolves, any global economic downturn or slowdown and/or negative business sentimentcould have an indirect potential impact on the freight forwarding and logistics industry andour business operations and financial performance may be adversely affected. Please referto “Risk factors – Risks relating to our business – Our business operations may beadversely affected by the COVID-19 pandemic” in this document for further details.

(b) Sino-U.S. trade war

Impact of the Sino-U.S. trade war on the overall freight forwarding and logistics industry

The Sino-U.S. trade war has, to a certain extent, contributed to the uncertaintiessurrounding the freight forwarding and logistics industry. According to the Industry Report,the U.S. has implemented several rounds of import tariffs on a variety of products ofChinese origin since July 2018. The PRC, in response to the U.S. tariffs, also levied roundsof tariffs on imports from the U.S. into the PRC. As confirmed by Frost & Sullivan, theSino-U.S. trade war has brought about continuous impact on the global economy and inparticular, some manufacturers based in the PRC have relocated to or shifted part of theirproduction to other regions, such as other Asian countries, amidst the trade war.

According to the Industry Report, the U.S. and the PRC entered into a phase oneeconomic and trade agreement on 15 January 2020 with a view to deescalating theSino-U.S. trade war. Pursuant to the phase one trade agreement which came into effect on14 February 2020, the two countries agreed on, among other things, expanding bilateraltrade in the future through reducing U.S. tariffs and increasing purchases of certain U.S.products and services by the PRC by approximately US$200 billion for the two-year periodfrom 1 January 2020 to 31 December 2021. According to the U.S. Department ofCommerce, the PRC’s import and export value with the U.S. reached approximatelyUS$560.1 billion in 2020, with an increase of approximately 0.4% compared to the importand export value in the previous year and it reached approximately US$657.4 billion in2021. As advised by Frost & Sullivan, the phase one trade agreement is expected to benefit,among other things, the freight forwarding logistics industry by the two countries graduallyresuming and promoting trade activities between them in the coming years.

The U.S. removal of Hong Kong’s preferential trade status and the termination of US-HKShipping Agreement

On 14 July 2020, the U.S. Government issued the Executive Order which, amongother things, formally determines that Hong Kong is no longer sufficiently autonomous tojustify differential treatment in relation to the Mainland China and revokes Hong Kong’spreferential trade status.


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The Executive Order declares that Hong Kong no longer warrants treatment underU.S. law in the same manner as U.S. laws were applied to Hong Kong before 1 July 1997whereby the heads of executive departments and agencies are directed to begin the processof eliminating policy exemptions under U.S. law that give Hong Kong differential treatmentin relation to the Mainland China, including among others, the U.S.-Hong Kong Policy Actof 1992, which allowed Hong Kong to enjoy lower trade tariffs and a separate customsframework in its dealings with the U.S.

In terms of trade, the Executive Order revokes the licence exceptions for exports toHong Kong, re-exports to Hong Kong, and transfers (in-country) within Hong Kong ofitems that provide differential treatment compared to those licence exceptions applicable toexports to the Mainland China, re-exports to the Mainland China, and transfers (in-country)within the Mainland China. In other words, Hong Kong will now be treated the same as theMainland China for the purposes of, among other things, export controls and possiblytariffs.

Despite the U.S. removal of Hong Kong’s preferential trade status and the terminationof the US-HK Shipping Agreement may increase the cost of trade, they have limited impacton the freight forwarding industry in Hong Kong and hence immaterial impact on ourbusiness operations and financial performances, based on the following:

(i) The restrictive trade measures imposed by the U.S. are mainly targeted on certainproducts notably steel, aluminium, ores, chemicals, fertiliser, plastic, rubber,electronic products and wood. Given the variety of goods our customers were andare involved in, and the majority type of goods in our customers’ orders aremainly daily necessities and household products, garments and fashion relatedproducts, and electronic devices, machineries and equipment, the restrictive trademeasures imposed by the U.S. do not have a material effect on our customers.

(ii) According to the Hong Kong Census and Statistics Department, there was stillstrong demand for Hong Kong’s export to the U.S. following the U.S. removal ofHong Kong’s preferential trade status and the termination of US-HK ShippingAgreement. In 2021, the U.S. continued to be the second largest exportdestination of Hong Kong in terms of export value, following the MainlandChina. Also, Hong Kong’s export to the U.S. surged by approximately 19.6%from approximately HK$258.8 billion in 2020 to approximately HK$309.6 billionin 2021. According to Frost & Sullivan, it is expected that the Hong Kong’sexport to the U.S. will further grow to approximately HK$414.9 billion in 2026with a CAGR of approximately 5.0% from 2022 to 2026.

(iii) Hong Kong’s ports have a competitive advantage due to their geographiclocation, the extensive selection of international flights and the predictability andcertainty of the Hong Kong air space. There is a strong synergy between Hong


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Kong as the financial hub and cross border transactions, which will continue tobenefit the air freight forwarders in Hong Kong, such as us, regardless ofwhether Hong Kong’s special trading status is removed or not.

(vi) With the growth of the e-commerce industry as a result of the consumersswitching from traditional physical shopping to online shopping with the aid ofadvances in information technology mainly due to the COVID-19 pandemic, thefreight forwarding market will continuously grow despite the Sino-U.S. trade warand COVID-19 pandemic. In view of the anticipated dynamic growth ofe-commerce, our Directors expect that there will be a continuing increase in thedemand for international freight forwarding services. Our Directors believe thatthere are plenty of business opportunities arising from the e-commerce marketfor us to expand our services to our existing customers and potential customers.

(v) The termination of the US-HK Shipping Agreement does not have any overallsignificant negative impact on our financial performance of U.S. export oceanfreight forwarding services during the Track Record Period. Our revenueattributable to the provision of U.S. export ocean freight forwarding servicesamounted to approximately HK$58.8 million, HK$83.3 million and HK$367.0million, respectively, representing a strong increase by approximately 340.4%from FY2021 to FY2022 and a CAGR of approximately 149.8% during the TrackRecord Period. This is a clear indication that U.S. export ocean freightforwarding services are in high demand.

Please refer to “Risk factors – Risks relating to our business – Our results ofoperations may be adversely affected by the U.S. removal of Hong Kong’s preferentialtrade status” in this document.

The suspension of flights between the PRC and the U.S.

As advised by Frost & Sullivan, the CAAC implements strict rules on COVID-19prevention measures for all airlines and routinely suspends and cancels inbound flights tothe PRC if they have carried passengers that later test positive for COVID-19. As such, inJanuary 2022, the U.S. Government suspended 44 U.S.-China flights by PRC airlinecarriers in retaliation to the suspension of inbound flights to the PRC by the U.S. airlinecarriers over COVID-19 concerns.

According to the Industry Report, the cancellation of aircrafts was mainly seen in thepassenger segment during the COVID-19 pandemic and that save for, as discussed above,the cancellation of certain cargo flights to/from Shanghai Pudong International Airport as aresult of the lockdown and quarantine measures in Shanghai due to the recent outbreak ofOmicron variant, the COVID-19 pandemic did not result in a large-scale cancellation ofcargo aircrafts in the PRC. In addition, the aforesaid suspension of flights between the PRCand the U.S. is for passenger flights provided by certain PRC airline carriers which are notour major suppliers.


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Our Directors are of the view that there was no material impact brought by the currentsuspension of flights between the PRC and the U.S. that may have a material adverseimpact on the availability of cargo spaces of our Group, and our operations and financialperformance given the fact that (i) the suspension of flights between the PRC and the U.S.are mainly flights of PRC-based airline carriers that are not our major suppliers; and (ii) amajority of the cargo spaces we procured during the Track Record Period was from cargoaircrafts, and the revenue generated therefrom accounted for approximately 85.6%, 91.4%and 95.9% of our total revenue from air freight forwarding services during the TrackRecord Period, respectively.

Impact of the Sino-U.S. trade war on our overall financial performance

We principally provide air and ocean freight forwarding services for the exports ofshipments from the PRC and Hong Kong to the U.S. Our export shipment volume by airand ocean freight to the U.S. recorded a year on year decrease in FY2020, which wasprimarily attributable to the decrease in our shipment volume from (i) our largest customer,namely Customer A, mainly due to the reduced volume of goods exported from the PRC tothe U.S. by Customer A’s ultimate direct customers mainly as a result of the uncertaintiescaused by the Sino-U.S. trade war; and (ii) our Other Customers mainly due to the decreasein the demands for the export of goods to the U.S. mainly as a result of the intensifiedSino-U.S. trade war during FY2020.

Our Directors are of the view that we are able to mitigate and manage the adverseimpact of the Sino-U.S. trade war as our Group was able to diversify our customer base andseize new business opportunities. Our Group was able to respond to such drop in shipmentorders and bolster our business through securing an increased air and ocean shipmentvolume from our Other Customers from approximately 7.1 million kg and 10,869 TEUs inFY2020, respectively, to approximately 7.9 million kg and 11,455 TEUs in FY2021 andfurther to approximately 8.8 million kg and 19,321 TEUs for FY2022, respectively. Assuch, our revenue attributable from Other Customers increased from approximatelyHK$241.0 million in FY2020 to approximately HK$503.0 million in FY2021 and further toapproximately HK$884.1 million for FY2022. As confirmed by our Directors and to thebest of their knowledge and information, none of customers cancelled their orders placedwith us and there was no loss of major customers due to the Sino-U.S. trade war. Despitethe foregoing, our gross margin for our freight forwarding services for the export ofshipments to the U.S. maintained relatively stable at approximately 14.6%, 12.5% and12.9% during the Track Record Period, respectively, since we were able to pass on theincreased costs in relation to the imposition of tariffs to our customers based on ourcost-plus pricing model.

Based on the above, our Directors believe that our expansion plan remains feasibleand it is unlikely that we will change the use of our [REDACTED] from the[REDACTED] as disclosed in “Future plans and [REDACTED]” in this document as aresult of the Sino-U.S. trade war.


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In the event that the trade relationship between the PRC and the U.S. deteriorates andin turn adversely affects the demands for freight forwarding services for the export ofshipments to the U.S., taking into account our proven track record and establishedreputation in the industry, our Directors are of the view that we will be in a position todiversify our business model leveraging our established business relationships with ourcarrier partners and our global network of freight forwarder business partners in over 160countries and regions which enable us to provide freight forwarding services worldwide. Assuch, our Directors are of the view that no material adverse effect on our Group’s businessoperations and financial performance is expected to result from the Sino-U.S. trade war.However, should there be any escalation of the Sino-U.S. trade war which dampens theoutlook of the global freight forwarding industry, our business and results of operationscould be detrimentally affected. For details, please refer to “Risk factors – Risks relating toour business – Our business growth is susceptible to changes in macroeconomic and/orpolitical conditions, including the Sino-U.S. trade war” in this document.

(c) Impact of the COVID-19 outbreak and Sino-U.S. trade war on the macro-environment

In addition to the effects of the COVID-19 outbreak and Sino-U.S. trade war on ouroperations disclosed above, the COVID-19 outbreak and Sino-U.S. trade war have also broughtabout a negative impact on most industries in the PRC and Hong Kong, including the freightforwarding industry in which we operate, mainly due to (i) the introduction of more stringentimport and export procedures in the PRC and Hong Kong; (ii) the mandatory quarantinerequirements and travel restrictions imposed by different countries around the world; (iii) themandatory suspension of operations of the manufacturers in the PRC; (iv) the reducedinternational and inter-provincial flow of goods; and (v) the relocation of production base fromPRC to other Asian countries.

Despite the unprecedented disruptions caused to almost all industries, our Directors are ofthe view that the impact on the macro-environment will not have a lasting negative impact onour Group and that we are able to mitigate and manage the negative impact brought about by theCOVID-19 outbreak and Sino-U.S. trade war for the following reasons:

(i) notwithstanding the introduction of more stringent import and export procedures in thePRC and Hong Kong as a result of the COVID-19 outbreak and as a result of thepromulgation of the new Export Control Law in the PRC in December 2020 (details asdisclosed in “Industry overview” in this document), as confirmed by Frost & Sullivan,such procedures entail a more stringent custom cargo process leading to a lengthierlead time for cargo inspection prior to transportation, and may have caused additionaladministrative work and costs on the part of the freight forwarders. They are,however, hardly regarded as a barrier or hurdle for the ultimate customers in the longrun particularly amid the rapid growth of e-commerce, which has become a ‘newnormal’ shopping behaviour around the world. According to the Industry Report, therising cross-border e-commerce would increase the demand for freight forwarding andlogistics services in Hong Kong and the PRC. It is expected that the e-commercemarket will continue to grow in the future. According to the Industry Report, along


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with the trade conflicts between the U.S. and PRC as well as the outbreak ofCOVID-19 in December 2019, the import value and export value in Hong Kongdecreased in 2020 and is expected to resume their growth afterwards at CAGRs ofapproximately 5.1% and 5.5%, respectively, from 2022 to 2026. Whereas for the PRC,the import value and export value in the PRC experienced a slower growth in 2020,but it is expected that the export and import value in the PRC will recover after thepandemic is controlled and will grow at CAGRs of approximately 8.0% and 7.3%,respectively, from 2022 to 2026. Furthermore, according to IATA, it is estimated thate-commerce represented approximately 18% of air cargo volumes in 2020, and willincrease to approximately 22% by 2022;

(ii) mandatory quarantine requirements and travel restrictions have been imposed bydifferent countries around the world as a result of the COVID-19 pandemic. Accordingto the Industry Report, such requirements and restrictions restraint passenger travelsinternationally and within a country, and hence have a negative impact on thepassenger flights industry and manufacturing and logistics businesses which are labourintensive. They, however, did not and will not have much negative impact on cargotransportation. According to the Industry Report, save for, as discussed above, thecancellation of certain cargo flights to/from Shanghai Pudong International Airport asa result of the lockdown and quarantine measures in Shanghai due to the recentoutbreak of Omicron variant, the cancellation of aircrafts was mainly seen in thepassenger segment while the COVID-19 pandemic did not result in large-scalecancellation of cargo aircrafts. During the Track Record Period, a majority of cargospace procured by our Group was from cargo aircrafts. During the Track RecordPeriod, approximately 85.6%, 91.4% and 95.9% of our revenue from air freightforwarding service income was derived from air shipments generated through cargoaircrafts, respectively, where the remaining were generated through passenger flights.As confirmed by Frost & Sullivan, even if such requirements and restrictions continueto last for a while, they are not regarded as major drawbacks in the freight forwardingindustry on the basis that the operation of cargo aircrafts remains up and running asusual and alternative workforce in providing logistical services are available. Duringthe Track Record Period, we did not encounter major problems in securing cargospaces or providing logistical services to meet our customers’ demands despite thedisruptions caused by the COVID-19 pandemic. Furthermore, we are of the view, andas concurred by Frost & Sullivan, that such requirements and restrictions will likelyease off as and when the COVID-19 pandemic subsides;

(iii) despite the mandatory suspension of business operations in the PRC as discussedabove, given the nature of our business, we were able to continue to provide 24/7services to our customers despite the suspension of our offices in the PRC. We wereable to continue our communications and cooperations with our cargo space suppliers,logistics services providers and customers through electronic means and remote accessto our IT system. As such, our operations had not been materially and adverselyaffected. Furthermore, as advised by Frost & Sullivan, given the fact that the numberof reported COVID-19 cases in Shanghai had reached the peak at mid-April 2022 and


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Shanghai is currently in the progress of effectively containing the spread of Omicronvariant, Shanghai is on track to resume production at key manufacturing sites frommid-April 2022 and businesses are expected to gradually return to normal in the thirdquarter of 2022. The impact on the demand for our freight forwarding services in thePRC, especially Shanghai, is considered to be temporary due to the lockdown andquarantine measures in the PRC and such demand is expected to recover quickly afterthe easing of COVID-19 control measures in the PRC;

(iv) as confirmed by Frost & Sullivan, the reduction in international and inter-provincialflow of goods was primarily due to the disruption of the global supply chain as aresult of the COVID-19 pandemic as well as trade protectionism as a result of theSino-U.S. trade war. We believe that as and when COVID-19 pandemic graduallysubsides, international and inter-provincial flow of goods will be on the rising trend.Indeed, as confirmed by Frost & Sullivan, with the lifting of the mandatorysuspension requirements, the manufacturing and export activities in the PRC haveresumed since April 2020 whereby international and inter-provincial flow of goodshave gradually been on the rise since then. Furthermore, according to the IndustryReport, the outbreak of COVID-19 is unlikely to affect the growth of themacroeconomic development in the PRC and Hong Kong in the long run. As to theSino-U.S. trade war, according to the Industry Report, Hong Kong as a transshipmentport has been negatively impacted by the Sino-U.S. trade war, as exports from thePRC passing through Hong Kong to the U.S. are still subject to the tariff rate thatapplies to the PRC. Nevertheless, Frost & Sullivan is of the view that Hong Kong isbenefitted by the “first-sales rule” whereby exports to the U.S. that go through morethan one location will be charged duties based on the price of the initial sales. Forexample, when a Chinese exporter sells goods to a Hong Kong re-exporter at a lowerprice, then the Hong Kong re-exporter sells at a higher price to a U.S. importer, thetariff paid could be lowered when there is a throughput via Hong Kong. It isanticipated that, according to the Industry Report, once the outbreak of COVID-19 iseffectively controlled and notwithstanding the impact from the Sino-U.S. trade war,the outlook of the demand for freight forwarding services, and logistics and relatedvalue-added services in both the PRC and Hong Kong will remain positive; and

(v) according to Frost & Sullivan, the relocation of the production base of somemanufacturers from the PRC to other Asian countries as a result of the Sino-U.S. tradewar has led to a decrease in the volume of export consignments from the PRC to theU.S. and the demand for the relevant freight forwarding services during FY2020.According to the Industry Report, in view of the advanced infrastructure andfavourable government policies in the PRC, it is expected that brand owners wouldstill prefer the PRC as the manufacturing base particularly for high-end products, suchas sophisticated integrated circuit, semiconductor and electronic vehicles, given theavailability of integrated manufacturing solutions offered in the PRC.


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Furthermore, according to Frost & Sullivan, there are a number of reasons formanufacturers based in the PRC not to relocate their production base from the PRC,primarily including (a) a large internal consumer market in the PRC; (b) availabilityof experienced and skilled labour with lower cost of labour; (c) comprehensive supplychains; (d) extensive network of transport infrastructure. Based on various surveysreleased by certain prestigious U.S. and European chambers of commerce in the PRCduring 2021, foreign enterprises (a) are optimistic about the business outlook and theiroperations in the PRC; and (b) have no plans of relocation out of the PRC in general.According to the MOFCOM, the amount of the PRC’s FDI inflows achieved a recordhigh of approximately US$173.5 billion in 2021, representing a year-on-year increaseof approximately 20.2% and about 43,370 new foreign-invested enterprises wereregistered during January to November in 2021, representing a year-on-year increaseof approximately 29.3%. In light of the above, our Directors believe that foreignenterprises in the PRC have restored their confidence in conducting businesses in thePRC and the likelihood of substantial relocation of production and warehouses out ofthe PRC is improbable in the future.

(d) Impact of the COVID-19 outbreak and Sino-U.S. trade war on our financialperformance

Although there was certain uncertainty over the global economy amid the recentdevelopment of the COVID-19 pandemic and the Sino-U.S. trade war as discussed above, ourrevenue and gross profit had increased from approximately HK$579.0 million and HK$72.6million, respectively, for FY2021 to approximately HK$1,033.5 million and HK$133.5 million,respectively, for FY2022.

Although there was a year on year decrease of our revenue for FY2020 attributable to theSino-U.S. trade war, from FY2021 onwards, there has been a gradual increase in our revenuemainly due to our ability to obtain cargo spaces from airline carriers despite the limited supplyof cargo spaces amid the COVID-19 pandemic. Furthermore, during FY2022, the revenuegenerated from our ocean freight forwarding services has sharply increased to approximatelyHK$438.7 million from approximately HK$123.5 million for FY2021 mainly as result of thehigher demand for our ocean freight forwarding services for the shipment of garments andfashion-related products, and household products and furniture primarily due to the lessening ofthe adverse impact brought by the Sino-U.S. trade war and the COVID-19 pandemic, and therapid growth of cross-border e-commerce.

Furthermore, since we (i) were able to transfer the increased costs of air and ocean cargospaces to our customers; and (ii) undertake essential procedures in our freight forwardingbusiness, such as cargo consolidation and co-loading, which enable us to optimise our use ofcargo spaces in terms of both volume and weight, we were able to maintain our overall grossmargin stable at approximately 12.5% and 12.9% for FY2021 and FY2022, respectively.


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Combining the effects of (i) our stable overall gross margin; (ii) the recovery of customerdemands for our air freight forwarding services and the strong demand of customer demands forour ocean freight forwarding services, together with (iii) the continuous record level of air andocean freight rates owing to the supply shortage of air and ocean cargo spaces in the marketattributable to the outbreak of Omicron and other COVID-19 variants, our profitability hadfurther enhanced in FY2022.

Subsequent to the Track Record Period, according to our unaudited consolidatedmanagement accounts, we were able to maintain a relatively stable revenue in April 2021 and2022, which was primarily attributable to the offsetting effect of (i) the slight drop of our airand ocean shipment volume from approximately 0.8 million kg and 1,420 TEUs, respectively, inApril 2021 to approximately 0.7 million kg and 1,270 TEUs, respectively, in April 2022 mainlydue to the unstable supply of air and ocean cargos attributable to the outbreak of Omicronvariant; and (ii) the higher ocean freight rates charged by shipping liners in April 2022 due tothe skyrocketing increment in North America market ocean shipping rates.

WORST CASE SCENARIO UNDER COVID-19 OUTBREAK AND SINO-U.S. TRADEWAR

As disclosed in “Effects of the COVID-19 outbreak and Sino-U.S. trade war” in this sectionabove, our Directors are of the view that no material adverse effect on our Group’s businessoperations and financial performance is expected to result from the COVID-19 outbreak andSino-U.S. trade war. In the unlikely event that we are to reduce or suspend all of our businessoperations for a prolonged period of time, whether due to government policy or any otherreasons beyond our control as a result of the COVID-19 outbreak, and/or deterioration of thetrade relationship between the PRC and the U.S. or any other reasons beyond our control whichleads to the lower demands for our freight forwarding services as a result of the Sino-U.S. tradewar, we estimate that our existing financial resources (including our bank balances and cash) asat 31 March 2022 together with approximately HK$[REDACTED] million from the[REDACTED] from the [REDACTED] designated as our general working capital could satisfyour necessary costs for not less than [11] months under such worst case scenario.

The key assumptions of such worst case scenario where our business is forced to besuspended due to the impact of the COVID-19 outbreak and the Sino-U.S. trade war include: (i)we will not generate any revenue due to the suspension of business; (ii) our trade receivables asat 31 March 2022 will be settled within the range of our trade receivables turnover days duringthe Track Record Period; (iii) we will be required to settle our trade payables as at 31 March2022 within the range of our trade payables turnover days during the Track Record Period; (iv)all of our staff will remain with our Group without salary deduction; (v) the rental payments andother miscellaneous charges would be paid in connection with our leased warehouse and offices;(vi) minimal operating and administrative expenses will be incurred to maintain our operationsat a minimum level (including basic maintenance cost and utilities expenses); (vii) there will beno further internal or external financing from our Shareholders or financial institutions; (viii)our outstanding dividends will be fully settled and no further dividend will be declared and paidunder such situation; and (ix) the availability of approximately HK$[REDACTED] million


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(representing approximately [REDACTED]% of our [REDACTED] from the [REDACTED]based on the mid-point of the indicative [REDACTED] range of HK$[REDACTED] per[REDACTED] and assuming the [REDACTED] is not exercised) will be available for ourgeneral working capital.

The abovementioned extreme situation may or may not occur and is for illustrativepurposes only. Our Directors currently assess that the likelihood of such situation is remote. OurDirectors will continue to assess the impact of the COVID-19 outbreak and Sino-U.S. trade waron our Group’s business operations and financial performance and to closely monitor ourGroup’s exposure to the risks and uncertainties in this connection.

EMPLOYEES

As at the Latest Practicable Date, we had a total of 103 full-time employees directlyemployed by our Group in Hong Kong and the PRC. The following table sets forth a breakdownof our full-time employees by function as at the Latest Practicable Date:

Number ofemployees

Management 6Sales and marketing 6Finance and accounting 17Operations 65Human resources 8IT 1

Total 103

The following table sets forth a breakdown of our full-time employees by geographicallocation as at the Latest Practicable Date:

Number ofemployees

PRC 61Hong Kong 42

Total 103


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Recruitment policy

We reckon that our Group’s success in the freight forwarding and logistics industry isdependent on our employees. We generally recruit our employees through internal referrals byour existing employees or recruitment advertisements as well as through recruitment agencies. Inthe recruitment process, we generally evaluate the potential candidates based on their industryexperience, previous work experience, education level and qualification and interviewperformance. We enter into employment contracts with our full-time employees, which generallycover terms including employment period, monthly salary and benefits as well as termination.

Remuneration and benefits

We believe that we offer competitive remuneration packages to our employees. In additionto basic salaries, our employees are entitled to an annual discretionary bonus based on theperformance of our Group as well as our employees’ job performance. Our Directors are of theview that our competitive performance-based discretionary bonus can motivate our employeesand promote job satisfaction. We also review the performance of our employees on a regularbasis for salary appraisals.

We have made defined contributions to the mandatory provident fund as required under theMandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for allof our eligible employees in Hong Kong. We have also taken out employees’ compensationinsurance for our employees in Hong Kong in compliance with the Employees’ CompensationOrdinance (Chapter 282 of the Laws of Hong Kong) to cover compensation and costs which wemay be liable for personal injuries of our employees in Hong Kong in the course of employmentwith us.

In accordance with the relevant laws and regulations and local policies in the PRC, weparticipate in housing fund and employee social security plans organised by applicable localPRC and provincial governments, including housing provident fund, pension, medical,work-related injury, maternity and unemployment benefit plans, under which we have madecontributions at specified percentages of the salaries of our employees in the PRC whereapplicable.

Training

We provide formal and on-the-job trainings to our employees to improve their industryknowledge. Our training covers various aspects of our business operations, which include,among other things, quality control and work safety. We also arrange for and subsidise ouremployees to attend external training programmes or conferences from time to time to encouragethem to keep abreast of the market trends and development in the freight forwarding industry.


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Relationship with our employees

Our Directors believe that we have an amicable working relationship with our employees.During the Track Record Period and up to the Latest Practicable Date, we did not experience anysignificant incident of work stoppage or suspension which adversely affected our businessoperations. During the Track Record Period and up to the Latest Practicable Date, we did notexperience any difficulties in the recruitment or retention of any skilled personnel, and therewere no incidents of any material labour disputes with or union actions from our employees.

OCCUPATIONAL HEALTH, WORK SAFETY

In the course of our business operations, our employees working at our warehouse premisesare required to lift heavy objects. In accordance with the TAPA requirements, we haveimplemented a work safety policy to provide regular trainings to our employees to enhance theirknowledge in relation to the proper operating procedures in our warehouse premises. Asconfirmed by our Directors, we had not experienced any material accidents or incidents relatingto occupational health and work safety during the Track Record Period and up to the LatestPracticable Date.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

We generally do not generate, whether directly or indirectly, industrial pollutants in ourcourse of business. Our Directors confirm, and our PRC Legal Advisers and our Hong KongLegal Counsel concur, that we have complied with the applicable laws and regulations onenvironmental protection in Hong Kong and the PRC in all material respects during the TrackRecord Period and up to the Latest Practicable Date.

We acknowledge our responsibilities on environmental protection, social responsibilitiesand corporate governance (“ESG”). We are committed to promoting environmental protection,corporate social responsibilities and sustainable developments and integrating them into ourbusiness operations. We are committed to comply with the ESG reporting requirements upon[REDACTED]. We have established an ESG policy (the “ESG Policy”) which sets forth certainpolicies including our environmental protection and social responsibilities objectives andprovides guidance on practising them in our daily operations.

We put emphasis on environmental protection and strive to develop and operate anenvironmental management system that achieves high standards on pollution prevention andresources preservation. We expect every employee to adhere to the ESG Policy and help us toachieve our goals by adopting, including the following measures:

• use LED lights in the office and gradually replace ordinary fluorescent tubes withLED ones in the warehouse;

• maintain workplace room temperature at approximately 24 to 26 degrees Celsius;


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• provide recycling bins in the office and instruct staff to separate wastepaper,aluminum cans and plastic waste;

• use rechargeable batteries instead of disposable ones;

• recycle all used toner/ink cartridges;

• encourage double side printing and reuse papers printed on single side;

• conserve resources and maximise energy efficiency;

• minimise waste generation by reusing cartons, packaging materials and cardboards;and

• promote good environmental practices on both departmental and individual levels.

We are also committed to our corporate social responsibilities. Each of our staff andcontractors are required to follow our policy in relation to corporate social responsibilities,including fulfilling the following commitments:

• prohibit employment of underage children or involuntary, forced or compulsorylabour;

• prohibit physical punishment, threat of violence, coercion or other forms of physical,sexual, psychological or verbal harassment, abuse or intimidation;

• prohibit discrimination of any kind in employment and appointment practices,including wages, benefits, promotion, discipline, dismissal or retirement, race,religion, age, nationality, one’s community or ethnicity, sexual orientation, gender,marital status, political opinions and disability;

• strictly abide by all laws in relation to bribery, extortion and blackmailing and otherforms of related corruption;

• treat staff members with dignity and respect;

• allow staff members’ rights in association, organisation and collective bargaining inlawful and peaceful manner without penalty or interference;

• provide staff members with a safe and healthy working environment and ensure theirreasonable access to necessary drinking and sanitation facilities, fire safety andadequate lighting and ventilation pursuant to all applicable laws and regulations; and

• provide resources to encourage and promote staff participation in volunteer andcommunity services and charitable activities.


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We are committed to attain high standards of corporate governance. We have an internalcontrol system which is designed to ensure our on-going compliance with the applicable lawsand regulations relevant to our business operations and/or corporate governance.

Our Board has the collective and overall responsibility for establishing, adopting andreviewing the ESG Policy, and evaluate, determine and address our ESG-related risks regularly(if any). Our Board may assess or engage Independent Third Parties to evaluate the ESG-relatedrisks and review our existing strategy. Necessary improvement will then be implemented tomitigate the risks.

LICENCES, PERMITS AND APPROVALS

Our Directors confirm, and our PRC Legal Advisers and our Hong Kong Legal Counselconcur, that as at the Latest Practicable Date, we had obtained all material licences, permits andapprovals from the relevant PRC and Hong Kong authorities for our business operations. We didnot experience any material difficulty in obtaining or renewing our required permits and licencesfor our business operations during the Track Record Period and up to the Latest PracticableDate. Our Directors confirm, and our PRC Legal Advisers and our Hong Kong Legal Counselconcur, that we do not expect any material impediment in renewing our material permits andlicences as and when they expire in the future.

We set forth below the relevant information on our material licences, permits and approvalsas at the Latest Practicable Date:

Licence/permit/approval Issuing authority Holder Issuing date Expiry date

Certificate ofRegistration as aTextiles Trader

Trade and IndustryDepartment of HongKong

EN HK 22 June 2021 21 June 2022

Certificate ofExemption underthe TranshipmentCargo ExemptionScheme

Trade and IndustryDepartment of HongKong

EN HK 1 January 2022 31 December 2023

Radio Dealers Licence(Unrestricted)

CommunicationsAuthority of HongKong

EN HK 4 October 2017 31 October 2022


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AWARDS, CERTIFICATIONS AND MEMBERSHIPS

Awards and certifications

Since our inception, our Group has been granted a number of major awards and obtainedindustry-based certifications in recognition of our business development and our provision ofquality services respectively, the principal particulars of which are set out as follows:

Award/Certification Awarded by Holder

Year of award/firstcertification

Certificate of FSRLevel C (Note 1)

TAPA Asia Pacific EN HK 2020 (Note 2)

China IntegrityOperation and ServiceDemonstration Unit*(中國誠信經營與服務示範單位)

China IntegrityEntrepreneursConference* (中國誠信企業家大會)

EN SH 2020

China Airlines – OneMillion US DollarSales Award* (中華航空一佰萬美元代理商大獎)

China Airlines EN SH 2019

2018 Enterprise with theGreatest Potential inChina Award* (2018中國最具發展潛力企業)

China New EconomyBrand Conference*(中國新經濟品牌峰會)

EN SH 2018

Asia Business AchieverAward

Asia BusinessConsultancyAssociation

EN HK 2017

Notes:

(1) FSR is a standard administered by TAPA that describes the security requirements for warehouse operations.

(2) The certificate of FSR Level C awarded by TAPA to EN HK is valid for three years. In order to renewsuch certification, a re-certification audit must be performed on the relevant warehouse three monthsbefore the expiry date of the certification.


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Memberships

We believe that it is important to participate as members in trade associations and freightforwarder networks well-respected by the industry in order to further expand our existingnetwork of customers and freight forwarder business partners as well as to explore potentialbusiness referral opportunities. As at the Latest Practicable Date, we maintained validmemberships in the major local and worldwide trade associations and freight forwarder networksas set forth below:

Organisation/network MemberFirst year ofjoining

The Hong Kong Association of FreightForwarding and Logistics Ltd

EN HK 2006

Combined Logistics Networks (CLN) EN HK 2013

5-Star Logistics Network (5-SLN) EN HK 2015

Cooperative Logistics Network (COOP) EN HK 2015

Carvre Seven EN HK 2016

IATA EN HK and ENSH 2019

Majestic Global Logistics Network (MGLN) EN HK 2020

Cargo Power Network (CPN) EN HK 2019

TAPA Asia Pacific EN HK 2020

QUALITY MANAGEMENT

Our Directors are of the view that our ability to uphold the quality and reliability of ourfreight forwarding and logistics and related value-added services is imperative to maintainingour position and reputation as an established player in the freight forwarding and logisticsindustry. In order to ensure that our services are of high quality standard and to identify andclosely monitor the risks that may have significant impact on our service quality in a timely andsystematic manner, we have in place stringent quality management measures throughout ourbusiness operations.


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Our management team is responsible for devising and overseeing the implementation ofstrategies and policies in relation to quality management. In particular, our management teamholds monthly meetings with our operations team to review and discuss, among other things, (i)feedbacks and complaints (if any) received from our customers in respects of our services; (ii)the performance and quality of services of our suppliers; and (iii) industry updates on cargohandling procedures.

In both the PRC and Hong Kong, we have duly licensed personnel to handle dangerouscargos, which comprise, among other things, electronics, flammable goods and any goods thatcontain alcoholic contents. Pursuant to the relevant laws and regulations in Hong Kong, eachfreight forwarding and logistics service company is required to have at least two duly licensedemployees for handling and processing dangerous cargos. In order to be licensed for suchpurpose in Hong Kong, a person has to obtain a certificate from the CAD by completingtrainings provided by a duly registered trainer. In addition, in the PRC, a person is required toattend and pass the relevant trainings in relation to dangerous cargos with duly recognisedtraining institutions. As at the Latest Practicable Date, we had two and four staff members whohave been duly licensed to handle dangerous cargos in our operating entities in the PRC and inHong Kong, respectively. It is one of the prerequisite for an accredited IATA cargo agent to havestaff members who have attended recognised training courses on handling dangerous goods.

Our Directors believe that, as we provide customer-based services, our employees’awareness as to quality control plays an indispensable role in maintaining and upholding thequality of our services. We encourage our staff to attend external trainings in relation to qualitycontrol from time to time, including but not limited to, the Dangerous Goods AwarenessTraining, the RAR Security Training and the IATA Lithium Batteries Requirements and RiskPrevention Workshop, in order to ensure that they are equipped with the requisite qualityawareness and is keeping abreast with the industry practice.

Further, as a recognition of our stringent quality management systems in our warehouse inHong Kong, we have obtained the accreditation of FSR Level C from TAPA Asia Pacific inDecember 2020, which demonstrates that we have the necessary facilities and measures in placein compliance with industry security standards. TAPA is a non-profit organisation founded in1997 which serves as an international forum for various stakeholders in the global supply chain,including but not limited to global manufacturers, logistics providers and freight carriers. TAPAhas established various security requirements, including the FSR, that are highly recognised inthe industry.

With a view to facilitating the off-airport screening of cargos for identifying dangerousgoods and further enhancing cargo security, we plan to acquire and install cargo x-ray screeningequipment at our new air freight warehouse facility by applying part of our [REDACTED] fromthe [REDACTED]. For details, please refer to “Our business strategies – Expanding andimproving our air freight forwarding services” in this section and “Future plans and[REDACTED] – [REDACTED]” in this document.


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Our Directors confirm that, during the Track Record Period and up to the Latest PracticableDate, we did not receive any material claims or complaints by our customers in respect of thequality of our services and there had been no incident of any failure of our quality managementsystem which had a material adverse impact on our business operations.

INFORMATION TECHNOLOGY

As our business operations require a high data processing capability and the availability ofreal-time statistics, we have in place an IT system which enables us to improve the efficiency ofour operational management and to better serve our customers to meet their specific operationaland supply chain needs.

Freight forwarding system

Our freight forwarding system enables us to maintain prompt access to real-time andup-to-date information relating to our customers’ consignments, including but not limited tonature, weight and volume of the goods, ports of origin and destination, carrier number andestimated time of arrival. Our Directors believe that, with the benefit of our freight forwardingsystem, we are able to track and trace our customers’ consignment and closely monitor the statusof our customers’ orders and to respond to customers’ queries on a 24/7 basis and provide timelysolutions to our customers, ranging from cargo routing options to delivery options. The data willbe stored on our internal database which is accessible by our management team and operationsteam, which allows us to compile market data and carry out analysis of our utilisation of cargospaces.

Our freight forwarding system also allows us to provide an online portal for our customersin managing their orders placed with us. Upon acceptance of a consignment or confirmation of abooking with us, we will give each of our customers a unique passcode to access our onlineportal to, among other things, track the movement and delivery status of their goods.

Warehouse management system

We maintain effective warehouse management by recording the relevant data on ourwarehouse management system electronically. Similar to our freight forwarding system, ourwarehouse management system allows us to provide an online portal for our customers intracking the status of their goods and accessing daily record, including without limitation, (i) thedate of arrival of the goods at our warehouse; and (ii) the gross weight, dimensions and quantityof the goods.


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As confirmed by our Directors, during the Track Record Period and up to the LatestPracticable Date, we did not experience any malfunctioning of or failure in our IT system whichhad a material adverse impact on our business operations. However, we are susceptible to risksrelating to technical failure or improper performance of our IT system or database. Please referto “Risk factors – Risks relating to our business – Failure in our IT system in the course of ourbusiness operations could adversely affect our reputation, business operations and prospects” inthis document for details. In view of such risks, we have adopted an internal manual detailingthe procedures in relation to backups, firewall installation, virus protection and contingencymeasures.

According to the Industry Report, as a result of the COVID-19 outbreak, the freightforwarding and logistics services industry has placed a stronger emphasis on digitisation andautomation to ensure that customers’ demands can be delivered in an efficient and timelymanner. As customers are increasingly demanding instantaneous information on theirconsignments and greater speed in delivery, as advised by Frost & Sullivan, freight forwardersaround the globe are increasingly embracing the adoption of digitisation and automation in theiroperations to enhance the efficiency of their services, thereby adding value to their customersand strengthening their competitiveness. In view of the expanding scale of our Group’s businessand our increasing operational needs, we intend to utilise part of our [REDACTED] from the[REDACTED] to upgrade and strengthen our IT system. Please refer to “Our business strategies– Upgrading and strengthening our IT system” in this section and “Future plans and[REDACTED]” in this document for further details.

INTELLECTUAL PROPERTY

We rely on a combination of trademark and domain name registrations to protect ourintellectual property rights. As at the Latest Practicable Date, our Group had (i) registered onetrademark in Hong Kong and registered one trademark in the PRC; and (ii) registered sevendomain names. Details of our intellectual property rights are set forth in “B. Further informationabout our business – 2. Intellectual property rights” in Appendix IV to this document.

Our Directors confirm that, as at the Latest Practicable Date, we were not aware of anyinfringement (i) by us of any intellectual property rights owned by third parties; or (ii) by anythird parties of any intellectual property rights owned by us. Further, as at the Latest PracticableDate, we were not involved in any litigation or legal proceedings in relation to any materialclaims of infringement, either threatened or pending, of any intellectual property rights imitatedby or against us that had a material and adverse effect on our business.

INSURANCE

To guard against inherent risks arising out of our ordinary course of operations, such ascargo loss or damage, employees’ compensation for personal injuries and third party liability, wemaintain insurance coverage in relation to our business that is adequate and customary for ourindustry, including but not limited to air freight liability insurance, key management lifeinsurance and property all risks insurance and public liability insurance for our warehouse.


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As an IATA accredited cargo agent, we have taken out an air freight liability insurancepolicy which is administered by IATA with a limit of approximately US$500,000 per annum. Thepremium per annum payable by us under our air freight liability insurance policy is determinedby IATA based on, among other things, our financial statements and is reviewed on a yearlybasis. In line with industry practice, our airline partners generally bear the responsibility to takeout insurance policies covering damage to or loss in our customers’ goods during transit.Accordingly, in respect of air cargo, we are generally not liable for any damage or loss inconnection with our customers’ goods unless such damage or loss is caused by our negligence.In the event that we are found liable for such damage or loss, our Directors consider that ourIATA air freight liability insurance will be sufficient to cover claims against us from ourcustomers in respect of such damage or loss.

In respect of ocean cargo, we did not take out any ocean freight insurance policy during theTrack Record Period, which, as confirmed by Frost & Sullivan, is in line with the industrypractice. As confirmed by Frost & Sullivan, freight forwarders are not liable for any damage orloss to their customers’ goods during the transit of the ocean cargo. Given the fact the premiumpayable under ocean freight insurance policies is expensive as the goods are exposed to variousrisks for an extended amount of time, it is generally considered that it is disproportionate to theloss that the freight forwarders may be exposed to in connection with ocean freight forwardingservices.

Any uninsured occurrence of business disruptions, litigation or natural disasters, significantdamage to our uninsured equipment or facilities or any loss arising therefrom in excess of ourinsured limits could have a material adverse effect on our results of operations. Please refer to“Risk factors – Risks relating to our business – We cannot assure you that the insurance policieswe have taken out are always able to cover all losses we sustain from potential claims in thecourse of our business operations” in this document for details.

During the Track Record Period, our total insurance expenses amounted to approximatelyHK$0.4 million, HK$0.3 million and HK$0.4 million, respectively. We believe that the insurancecoverage we currently maintain is in line with the relevant industry standards and practice and isadequate for us to conduct normal business operations. As confirmed by our PRC Legal Advisersand our Hong Kong Legal Counsel, we maintained all material insurance policies in compliancewith the relevant PRC and Hong Kong laws and regulations during the Track Record Period. OurDirectors review and assess our risk portfolio regularly and adjust our insurance coverage as andwhen necessary having regard to our operational needs and the industry practices in the PRC andHong Kong.

Our Directors confirm that, during the Track Record Period and up to the Latest PracticableDate, we did not experience any material claim from any third party nor did we make anymaterial insurance claim in the course of our operations.


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PROPERTY

Our Group does not own any property. As at the Latest Practicable Date, we leased thefollowing properties in Hong Kong and the PRC:

Location

Approximategross floor

area Lessee Expiry of lease Use of property

Unit A&C, 4/F, King Win FactoryBuilding, No. 65-57 King YipStreet, Kwun Tong,Hong Kong (Note)

1,090.68sq.m.

EN HK 31 March 2023 Office andwarehouse

P33, 1/F, King Palace Plaza, No.55 King Yip Street, Kwun Tong

N/A EN HK 11 October 2023 Car park

P21, 1/F, King Palace Plaza, No.55 King Yip Street, Kwun Tong

N/A EN HK 5 February 2023 Car park

Room 3208, No. 5 Fuchang Road,Haizhu District, Guangzhou city,the PRC*(中國廣州市海珠區福場路5號3208房號)

121.86 sq.m. ENSH GZB 31 October 2022 Office

Room 303, Level 3, No. 291Guiping Road, Xuhui District,Shanghai city, the PRC*(中國上海市徐匯區桂平路291號3樓303室)

70.00 sq.m. EN SH 18 July 2022 Office

Room 302, Level 3, No. 291Guiping Road, Xuhui District,Shanghai city, the PRC*(中國上海市徐匯區桂平路291號3樓302室)

300.00 sq.m. EN SH 18 July 2022 Office

Level B1, Building 1,Qilai Technology Service Park,No. 889 Yishan Road,Xuhui District, Shanghai city,the PRC*(中國上海市徐匯區宜山路889號齊來科技服務園區1號樓B1層)

6.60 cbm EN SH 11 January 2023 Storage


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Location

Approximategross floor

area Lessee Expiry of lease Use of property

Room 1202, No. 9, Lane 788,Hongxu Road, Minhang District,Shanghai city, the PRC*(中國上海市閔行區虹許路788弄9號1202室)

138.47 sq.m. EN SH 31 March 2023 Staffaccommodation

Room A8312, Building 8,No. 130 Tianlin Road,Xuhui District, Shanghai city,the PRC*(中國上海市徐匯區田林路130號8幢A8312房)

26.00 sq.m. EN SH 27 August 2022 Staffaccommodation

No. 17-1, Building 2, No. 22Nanbin Road, Nan’an District,Chonqing city, the PRC*(中國重慶市南岸區南濱路22號2棟17-1號)

135.39 sq.m. ENSH CQB 2 March 2023 Office

12F, Sea View Plaza,No. 18 Taizi Road, Shekou,Nanshan District, Shenzhen city,the PRC*(中國深圳市南山區蛇口太子路18號海景廣場12F)

146.96 sq.m. ENSH SZB 17 December2022

Office

Note: Top Aim Limited, being the landlord of our leased office and warehouse in Kwun Tong, Hong Kong, is aconnected person of our Company and accordingly, the lease agreement constitutes a connected transactionof our Company under Chapter 14A of the Listing Rules. Please refer to “Connected transaction” in thisdocument for further details.

LEGAL PROCEEDINGS AND COMPLIANCE

We may from time to time become a party to legal, arbitral or administrative proceedingsarising in the ordinary course of our business. To the best knowledge of our Directors, as at theLatest Practicable Date, there were no litigation, claim or arbitration proceedings pending orthreatened against us or any of our Directors which could have a material adverse effect on ourbusiness, financial condition or results of operations.


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Our Directors confirm that, and as advised by our PRC Legal Advisers and our Hong KongLegal Counsel, our Group has complied with all material applicable laws and regulations in thePRC and Hong Kong (being the principal jurisdictions within which our Group operated ourbusinesses) and there was no non-compliance incident the nature of which was material orsystemic during the Track Record Period and up to the Latest Practicable Date.

Business activities in relation to Countries Subject to International Sanctions

During the Track Record Period, we provided freight forwarding services to our freightforwarder customers who acted on behalf of their shipper customers for the shipment of goods toand from the Relevant Regions. During the Track Record Period, our revenue derived from theprovision of services in relation to consignments to and/or from these Relevant Regionsamounted to approximately HK$0.9 million, HK$1.7 million and HK$0.7 million, respectively,representing approximately 0.2%, 0.3% and 0.1% of our total revenue, respectively. Burundi,Egypt, Lebanon, Myanmar, Russia (excluding Crimea region), Turkey, Ukraine (excludingCrimea, and the self-proclaimed Donetsk People’s Republic and Luhansk People’s Republicregions) and Venezuela were subject to various sanctions during the Track Record Period butnone of them was subject to a general and comprehensive export, import, financial or investmentembargo under sanctions related law or regulation of a Relevant Jurisdiction (i.e., none of themwas a Comprehensively Sanctioned Country). For more details, please refer to “Risk Factors –We could be adversely affected as a result of our provision of services in relation toconsignments to and/or from certain countries/regions that are, or become subject to, sanctionsadministered by the U.S., the EU, the UN, the UK, Australia and other relevant sanctionsauthorities” in this document.

As advised by our International Sanctions Legal Advisers after performing the proceduresthey consider necessary, our activities during the Track Record Period did not implicaterestrictions under the International Sanctions and we did not violate relevant sanctions as aresult of Primary Sanctioned Activity or Secondary Sanctionable Activity during the TrackRecord Period because we did not provide services to sanctioned parties nor did we provideservices for shipments to/from Comprehensively Sanctioned Countries. None of our freightforwarder customers nor their shipper customers involved in the transactions we handled to andfrom the Relevant Regions were identified on the SDN List maintained by OFAC or otherrestricted parties lists maintained by the EU, the UK, the UN and Australia. We intend tocontinue to provide freight forwarding services to our freight forwarder customers who act onbehalf of their shipper customers for the shipment of goods to and from Countries Subject toInternational Sanctions except for the Comprehensively Sanctioned Countries after[REDACTED] if and when suitable business opportunity arises, subject to our strict adherenceto our internal control and risk management measures. To identify and monitor our exposure torisks associated with International Sanctions laws relating to these transactions, we willimplement enhanced internal control and risk management measures upon [REDACTED] toprotect the interests of our Group and our Shareholders from sanction risks. Please refer to“Internal control – Internal controls in relation to business activities relating to CountriesSubject to International Sanctions” in this section for further details.


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RISK MANAGEMENT

We are inevitably exposed to various risks in the ordinary course of our business operationsand we believe that effective and flexible risk management is vital to our success. Keyoperational risks we are faced with include, among other things, the absence of long-termagreements with our customers for the provision of our services and inability to pass on the risein our services costs to our customers. For details of such operational risks, please refer to “Riskfactors – Risks relating to our business” in this document.

In addition, we are also faced with certain market risks (including foreign currency risk andinterest rate risk, liquidity risk and credit risk. For details, please refer to note 3.1 to theAccountant’s Report in Appendix I to this document.

For the purpose of effective risk management, we will adopt or have put in place thefollowing measures:

(i) our Directors are responsible for the overall evaluation of the nature and extent of therisks faced by our Group in the course of our business operations, and all significantbusiness decisions involving material risk exposure, including but not limited toconducting business with suppliers which are not on our approved list, are subject toreview, discussion and approval by our Directors;

(ii) leveraging our robust and amicable relationships with existing suppliers andcustomers, we seek to diversify our customer base and supplier network from time totime to minimise our operational risks in relation to over-reliance on a single customeror supplier;

(iii) where commercially viable and beneficial to our Group, we actively exploreopportunities to enter into various types of agreements to diversify our suppliernetwork and our portfolio of cargo routes;

(iv) we only grant credit periods to customers with whom we have been transacting for acertain number of years, and the extent of any such credit limit to be granted isdetermined by our Directors based on, among other things, payment history andcredibility of our customers, and subject to our assessment of the background searchon our customers;

(v) we regularly assess the credit rating of our customers, and where necessary, we mayadjust the credit period and/or credit limit accordingly to minimise the risk ofcustomer default;

(vi) our management will closely monitor the market trends, including any change ofprices of cargo spaces, and regularly compare our purchase costs of cargo spacesagainst the market rates in order to make sure that we are able to source air cargospaces at competitive prices;


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(vii) we will explore opportunities to join trade associations on both international and locallevels to gain access to a diversified network of freight forwarders and further expandour supplier network;

(viii) we maintain insurance coverage in line with industry practice for businesses of oursize and nature to ensure that we are adequately protected against third party claims;

(ix) we maintain comprehensive IT control to minimise the risk of IT system failure;

(x) we will constantly review the remuneration packages offered to our management teamand other employees to ensure that our packages are competitive enough to retainexperienced personal and in line with our Group’s business development;

(xi) our Directors will closely monitor the liquidity and financial position of our Group toensure that our Group maintains a sound financial position, and will considerobtaining financing to fund our Group’s business operations and expansion plans asand necessary and desirable; and

(xii) we [have established] an audit committee which is comprised of all our independentnon-executive Directors to review and supervise our financial reporting process andinternal control system.

Our Directors believe that the effective implementation of the above measures will helpsafeguard our Group against the inherent risks facing our Group in the course of our businessoperations.

INTERNAL CONTROL

Our Directors and senior management are responsible for the formulation of and overseeingthe implementation and effectiveness of our internal control system, which is designed to ensureour on-going compliance with the applicable laws and regulations relevant to our businessoperations and/or corporate governance, and to prevent any recurrence of any incidents ofnon-compliance.

We believe that our internal control systems and current procedures are sufficient in termsof comprehensiveness, practicability and effectiveness. We have engaged an independent internalcontrol consultant (the “Internal Control Consultant”) to perform a review of the adequacy andeffectiveness of our Group’s internal control procedures, systems and measures in relation to ourmanagement, financial reporting and disclosure, IT, business operations, corporate governance,compliance and risk management. Based on the results of the interim review by our InternalControl Consultant, our Directors confirm that all major recommendations provided by ourInternal Control Consultant have been duly considered and we would take all remedial actionsaccordingly to address the internal deficiencies of our Group before [REDACTED].


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Internal controls in relation to business activities relating to Countries Subject toInternational Sanctions

As we may continue to provide freight forwarding services to our freight forwardercustomers who acted on behalf of their direct shipper customers for the shipment of goods toand from Countries Subject to International Sanctions (including the Relevant Countries) afterthe [REDACTED], we [will adopt] the following know-your-client and other enhanced internalcontrol and risk management measures upon [REDACTED] in order to continuously monitor ourbusiness and take measures to protect the interests of our Group and our Shareholders fromsanctions risks:

(a) to further enhance our existing internal risk management functions, we will establish arisk management committee to monitor our exposure to sanctions risks and theimplementation of our internal control procedures. Our risk management committeemeets on a quarterly and as required basis to discuss compliance activities andmonitor our exposure to sanctions risks;

(b) we will evaluate the sanctions risks prior to determining whether we should embark onany business opportunities in Countries Subject to International Sanctions and withSanctioned Persons. According to our internal control procedures, in particular, ourrisk management committee will:

(i) review all relevant business transaction documentation from customers orpotential customers from Countries Subject to International Sanctions and withSanctioned Persons, in particular, the information (such as identity and nature ofbusiness as well as its ownership) relating to the counterparties to the transactionalong with the draft business transaction documentation;

(ii) check the counterparty and other participants in the transaction (such as theairline carrier or shipping company) against the various lists of restricted partiesand countries maintained by the U.S., the EU, the UN or Australia, includingwithout limitation, any government, individual or entity that is the subject of anyOFAC-administered sanctions, which are publicly available, and determinewhether the counterparty is, or is owned or controlled by, a person located inCountries Subject to International Sanctions or a Sanctioned Person; and

(iii) if any potential sanctions risk is identified, seek advice from reputable externalinternational legal counsel with necessary expertise and experience in matters inrelation to International Sanctions;

(c) our Directors will continuously monitor our [REDACTED] from the [REDACTED]as well as any other funds raised through the Stock Exchange to ensure that suchfunds will not be used to finance or facilitate, directly or indirectly, activities orbusiness with, or for the benefit of, Countries Subject to International Sanctions orSanctioned Persons which would be in breach of International Sanctions; and


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(d) our risk management committee will review our internal control policies andprocedures with respect to International Sanctions matters on a quarterly basis. As andwhen our risk management committee considers necessary, we will retain externalinternational legal counsel with necessary expertise and experience in InternationalSanctions matters for recommendations and advice.

Having taken the advice of our Internal Control Consultant into account, our Directors andthe Sole Sponsor are of the view that the above measures provide a reasonably adequate andeffective internal control framework to assist us in identifying and monitoring any material riskrelating to sanctions laws so as to protect the interests of our Shareholders and our Group.

Internal controls against corrupt activities

We will adopt upon the [REDACTED], the following measures against corrupt activities,which include measures to prevent bribery and kickback arrangements among our employees:

(a) we will include relevant policies against corrupt activities including expressprohibitions against bribery and kickback arrangements with our business partners inour staff handbooks;

(b) our audit committee will establish a whistleblowing policy and delegate the day-to-dayresponsibility for overseeing and implementing the policy to the manager of financedepartment by which employees can raise concerns with confidence with our auditcommittee about possible improprieties related to our Group and how internalinvestigations will be carried out;

(c) where necessary, we will provide anti-corruption compliance training to our employeesto enhance their knowledge and compliance with applicable laws and regulations; and

(d) where corrupt activities have been identified, we will undertake rectification measuresand evaluate the identified corrupt activities and propose and establish preventivemeasures to avoid recurrence.

During the Track Record Period and up to the Latest Practicable Date, we were not subjectto any government investigation or litigation with respect to claims or allegations of monetaryand non-monetary bribery activities, and to the best knowledge of our Directors, none of ouremployees were involved in any bribery or kickback arrangements.

Having taken into account the advice of our Internal Control Consultant, our Directors andthe Sole Sponsor are of the view that we have established adequate internal procedures, systemsand controls in relation to preventing bribery or kickback arrangements among our employees.


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MARKET AND COMPETITION

According to the Industry Report, the freight forwarding and logistics industry is highlyfragmented and competitive due to the presence of numerous small- to medium-sized players.There were approximately 40,000 and 7,000 freight forwarding services providers in the PRCand Hong Kong as at March 2022, respectively. Freight forwarders in Hong Kong can be dividedinto two tiers, namely tier-1 players who are generally international logistics services providerswith worldwide logistics network and business coverage, and tier-2 players who are generallylocal and regional players with networks covering specific logistics locations and categories ofgoods.

In FY2022, the aggregate market share of the top five players of the tier-1 freightforwarding market in Hong Kong was approximately 13.0% in terms of revenue whereas theaggregate market share of the top five players of the tier-2 freight forwarding market in HongKong was approximately 5.5% in terms of revenue. In FY2022, our Group recorded a revenue ofapproximately HK$486.0 million for freight forwarding services with Hong Kong as departureport, which accounted for approximately 0.3% of the market share in the overall freightforwarding services market in Hong Kong and approximately 0.5% of the market share in thetier-2 freight forwarding services market in Hong Kong. In FY2022, our Group accounted for amarket share of approximately 0.03% with a revenue of approximately HK$506.0 million(equivalent to approximately RMB416.6 million) generated by our Group with the PRC asdeparture port.

According to the Industry Report, the main entry barriers to the freight forwarding andlogistics industry include (i) satisfying the need for substantial capital investment for, amongother things, procurement of specific machineries and vehicles, warehouse and facility spacesrentals, recruitment of workers for daily operations as well as cash deposits with banks forissuance of bank guarantee for reserving airline cargo spaces; (ii) establishing businessrelationships with upstream suppliers and downstream customers and participating ininternational freight forwarder networks which are subject to stringent approval requirement; and(iii) developing the capability to provide a wide range of value-added services to the customers,such as pick-up collection, transportation, customs clearance and delivery services. For furtherdetails of the competitive landscape of the freight forwarding and logistics industry, please referto “Industry overview” in this document.

We face keen competition from numerous competitors operating on different scales in thefreight forwarding and logistics markets in Hong Kong and the PRC. However, havingmaintained a track record of over 24 years in the freight forwarding and logistics industry with astrategic presence in the PRC, our Directors believe that our Group will be able to continue tocompete favourably with our industry peers by leveraging our competitive strengths as set out in“Our competitive strengths” in this section.


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OVERVIEW

Immediately following completion of the [REDACTED] and the [REDACTED] (withouttaking into account any Shares which may be issued pursuant to the exercise of the[REDACTED] and any options which may be granted under the Share Option Scheme), LuckyOasis will hold [REDACTED]% of the issued share capital of our Company.

Lucky Oasis is an investment holding company without any business operation and iswholly-owned by E&E, which is in turn owned by Mr. Wong, Mr. Chim and Mr. Shon as to70.5%, 23.5% and 6.0%, respectively.

Each of Mr. Wong, Mr. Chim, Mr. Shon, E&E and Lucky Oasis is our ControllingShareholder and will together form a group of Controlling Shareholders who are entitled tocontrol [REDACTED]% of the issued share capital of our Company immediately followingcompletion of the [REDACTED] and the [REDACTED] (without taking into account anyShares which may be issued pursuant to exercise of the [REDACTED] and any options whichmay be granted under the Share Option Scheme).

RULE 8.10 OF THE LISTING RULES

Our Controlling Shareholders, Directors and their respective close associates do not haveany interest in a business apart from our Group’s business which competes and is likely tocompete, directly or indirectly, with our Group’s business that would require disclosure underRule 8.10 of the Listing Rules.

As at the Latest Practicable Date, E&E, being an investment holding company and one ofour Controlling Shareholders, is the sole shareholder of ENLGZ HK. E&E was the soleshareholder of ENLSH HK prior to the deregistration of ENLSH HK on 12 November 2021.Since the beginning of the Track Record Period and up to 31 December 2019, each of ENLGZHK and ENLSH HK engaged in air and ocean freight forwarding services in Hong Kong.

For the purpose of simplifying our Group structure, each of ENLGZ HK and ENLSH HKhas ceased business operations since 31 December 2019. ENLSH HK was dissolved byderegistration on 12 November 2021, and ENLGZ HK is in the process of applying forderegistration. For details, please refer to “History, Reorganisation and corporate structure – OurGroup structure and history – Companies deregistered and in the process of deregistration” inthis document.

The historical financial information on the air and ocean freight forwarding businesssegments of ENLGZ HK and ENLSH HK during the Track Record Period (the “IncludedBusiness”) was included in our financial information. For details of how such financialinformation on the Included Business was included, please refer to “Financial information –Basis of preparation” in this document and note 1.3 to the Accountant’s Report in Appendix I tothis document.


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INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Having considered the below factors, our Directors are satisfied that we are capable ofcarrying out our business independent from each of our Controlling Shareholders and their closeassociates after the [REDACTED].

Operational independence

Our Group is not operationally dependent on each of our Controlling Shareholders and theirclose associates. We have full rights to make all decisions on, and to carry out, our own businessoperations independent from our Controlling Shareholders and their close associates and do notrely on our Controlling Shareholders or their close associates for our business development andactivities. We have independent access to our customers, suppliers and our Directors and seniormanagement are responsible for handling our day-to-day operations and conducting our business.We are also in possession of all relevant licences that are material to carrying on and operatingour business and we have sufficient operational capacity in terms of capital and employees tooperate independently.

Financial independence

We have established our own finance department with a team of financial staff, who areresponsible for financial control, accounting, reporting, group credit and internal controlfunction of our Company, independent from our Controlling Shareholders and their closeassociates. We are able to make financial decisions independently and our ControllingShareholders and their close associates do not intervene with our use of funds. We have alsoestablished an independent audit system, a standardised financial and accounting system and acomplete financial management system.

During the Track Record Period, certain credit facilities granted to our Group wereguaranteed by our Controlling Shareholders and/or their close associate. Such guarantees will bereleased or replaced by corporate guarantees executed by our Company upon [REDACTED].For details, please refer to “Financial information – Indebtedness – Credit facilities” in thisdocument. We believe we will have sufficient capital to operate our business independently andwill be capable of obtaining financing from Independent Third Parties without reliance on ourControlling Shareholders or their close associates after the [REDACTED].

Management independence

Our Board comprises three executive Directors and three independent non-executiveDirectors. For details of our Directors, please refer to “Directors and senior management –Directors” in this document. The daily operations of our Group are carried out by anindependent experienced management team, and we have the capability and personnel to performall essential administrative functions, including finance, accounting, human resources andbusiness management on a standalone basis.



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DEED OF NON-COMPETITION

In order to avoid any potential competition between our Controlling Shareholders and ourGroup, each of Mr. Wong, Mr. Chim, Mr. Shon, E&E and Lucky Oasis (each the “Covenantor”and collectively the “Covenantors”) [had entered] into the Deed of Non-competition in favourof our Company and our subsidiaries.

Pursuant to the Deed of Non-competition, each of the Covenantors has irrevocably andunconditionally undertaken to our Company (for itself and for the benefit of our subsidiaries)that, he/it shall not, and shall procure that none of their respective close associates (other thanmembers of our Group) will, during the period which (a) the Shares remain [REDACTED] onthe Stock Exchange; and (b) the Covenantors and their close associates (other than members ofour Group), individually or jointly, are entitled to exercise, or control the exercise of, not lessthan 30% of the voting power at general meetings of our Company; or (c) the Covenantors orthe relevant close associates remain as a director of any member of our Group (the “RestrictedPeriod”), directly or indirectly, either on their own account, in conjunction with, on behalf of,or through any person, firm or company, partnership, joint venture or other contractualarrangement among other things, carry on, participate or be interested, engaged, concerned orotherwise involved (directly or indirectly) in or acquire or hold (in each case whether as ashareholder, partner, agent or otherwise and whether for profit, reward or otherwise) anybusiness in competition with or likely to be in competition with the existing business activity ofany member of our Group or any business activity to be conducted by any member of our Groupfrom time to time (the “Restricted Business”) and where they become aware of suchengagement of the Restricted Business, they shall notify our Company immediately.

Each of the Covenantors has further undertaken to procure that, during the RestrictedPeriod, any business investment or other commercial opportunity relating to the RestrictedBusiness (the “New Opportunity”) identified by or offered to such Covenantor and/or any ofhis/its close associates (other than members of our Group) (the “Offeror”) is first referred to ourCompany promptly within seven days upon identifying or being offered any New Opportunity inthe manner stated in the Deed of Non-competition. Upon receipt of such notice, our Companyshall seek opinions and decisions from all independent non-executive Directors who do not havea material interest in the matter as to whether (a) such New Opportunity would constitutecompetition with our Company’s core business; and (b) it is in the interest of our Company andour Shareholders as a whole to pursue the New Opportunity.

The Offeror will be entitled to pursue the New Opportunity only if (a) the Offeror hasreceived a written notice from our Company declining the New Opportunity and confirming thatthe New Opportunity would not constitute competition with its core business, or (b) the Offerorhas not received the notice from our Company within 30 business days (or such longer period ifour Group is required to complete any approval procedures as set out in the Listing Rules fromtime to time) from the receipt of the notice by our Company.

The undertakings contained in the Deed of Non-competition are conditional upon the[REDACTED] becoming unconditional. If such condition is not fulfilled within 30 days fromthe date of this document, the Deed of Non-competition shall become null and void withoutprejudice to any right of the party in respect of antecedent breaches.



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CORPORATE GOVERNANCE

Our Directors recognise the importance of good corporate governance to protect theinterests of our Shareholders. We would adopt the following corporate governance measures tomanage potential conflict of interests between our Group and our Controlling Shareholders:

(a) each of the Covenantors will make an annual confirmation as to compliance with itsundertaking under the Deed of Non-competition for inclusion in the annual report ofour Company;

(b) our Board is committed to the view that our Board should include a balancedcomposition of executive and non-executive Directors (including independentnon-executive Directors) so that there is a strong independent element in our Boardwhich can effectively exercise independent judgement. Our Company has appointedthree independent non-executive Directors. Our Directors believe that our independentnon-executive Directors are of sufficient calibre, are free of any business or otherrelationship which could interfere in any material manner with the exercise of theirindependent judgement and will be able to provide impartial and professional adviceto protect the interests of the minority Shareholders. Details of our independentnon-executive Directors are set out in “Directors and senior management – Directors”in this document;

(c) in the event that our independent non-executive Directors shall review any conflict ofinterests between our Group and our Controlling Shareholders, our ControllingShareholders shall provide all information requested by our Group which is necessaryfor the annual review by our independent non-executive Directors and the enforcementof the Deed of Non-competition;

(d) our independent non-executive Directors will, based on the information available tothem, review on an annual basis (i) the compliance with the Deed of Non-competition;and (ii) all the decisions taken in relation to whether to pursue the new opportunityunder the Deed of Non-competition; and

(e) any transaction between or proposed to be made between our Group and the connectedpersons will be subject to the requirements under Chapter 14A of the Listing Rules,including, where applicable, the announcement, reporting, annual review, circular(including independent financial advice) and independent Shareholders’ approvalrequirements and with those conditions imposed by the Stock Exchange for thegranting of waiver from strict compliance with relevant requirements under the ListingRules; and

(f) our Company [has appointed] Advent as our compliance adviser, which will provideadvice and guidance to our Company in respect of compliance with applicable lawsand the Listing Rules including various requirements relating to directors’ duties andinternal control.



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CONNECTED TRANSACTION

Leasing of office and warehouse to our Group

During the Track Record Period, Top Aim Limited (“Top Aim”), which is owned as to 75%by Mr. Wong (being one of our Controlling Shareholders, an executive Director and the chiefexecutive officer of our Group) and as to 25% by Mr. Chim (being one of our ControllingShareholders, an executive Director and the chairman of our Board), had leased premises (the“Premises”) to one of our operating subsidiaries, EN HK. It is expected that the tenancybetween Top Aim and EN HK will continue after the [REDACTED].

The Tenancy Agreement between Top Aim and EN HK

Description of the tenancy agreement

On 31 March 2021, EN HK entered into a tenancy agreement (the “Tenancy Agreement”)with Top Aim to lease the Premises stated below. The following table summarises the majorterms of the Tenancy Agreement.

Address

(i) Approximategross floorarea

(ii) Use ofproperty Term

Annual rentpayable under the

Tenancy Agreement Payment method

Unit A&C, 4/F,King Win FactoryBuilding, No. 65–67King Yip Street,Kwun Tong,Hong Kong

(i) 1,090.68 sq.m.(ii) Office and

warehouse

From 1 April 2021to 31 March 2023

HK$1,380,000 Monthly rent ofHK$115,000 ispayable by ENHK to Top Aim inadvance on thefirst day of eachand every calendarmonth

Connected person

Since Top Aim is owned as to 75% by Mr. Wong, who is one of our ControllingShareholders, an executive Director and the chief executive officer of our Group, Top Aim is anassociate of Mr. Wong, and is therefore a connected person of our Company under Rule14A.07(4) of the Listing Rules. As such, the transaction contemplated under the TenancyAgreement constitutes a connected transaction of our Company under Chapter 14A of the ListingRules.



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Basis in determining the rental payable

The rent payable by us under the Tenancy Agreement was determined after arm’s lengthnegotiations based on the prevailing market rents no less favourable to those offered byIndependent Third Parties for comparable properties in similar locations.

Reasons for and benefits of the transaction

We have historically leased the Premises for use as our office and warehouse. Havingconsidered that the rent of the Premises under the Tenancy Agreement is comparable to theprevailing market rents of comparable properties in similar locations, and the TenancyAgreement has been entered into in the ordinary and usual course of business, on terms no lessfavourable to us than from those offered by Independent Third Parties, our Directors considerthat the terms of the Tenancy Agreement are fair and reasonable and it is in the interests of ourCompany and our Shareholders as a whole to continue using the Premises under the TenancyAgreement as our office premises and warehouse.

Accounting treatment of the Tenancy Agreement

In accordance with HKFRS 16, our Group recognised the rental payments to be paid by ourGroup under the Tenancy Agreement as acquisition of right-of-use asset which constitutes aone-off connected transaction for our Group under Chapter 14A of the Listing Rules.

Listing Rules Implications

As each of the relevant percentage ratios (other than the profits ratio) calculated for thepurpose of Chapter 14A in respect of the value of the right-of-use of the Premises under theTenancy Agreement is expected to be less than 5% and the value of the right-of-use is less thanHK$3 million, the Tenancy Agreement would fall within the de minimis threshold under Rule14A.76(1)(a) of the Listing Rules and would be fully exempt from the reporting, annual review,announcement, circular and independent Shareholders’ approval requirements under Chapter 14Aof the Listing Rules.



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OVERVIEW

Our Board currently consists of six Directors, comprising three executive Directors andthree independent non-executive Directors. Our Directors are supported by our seniormanagement in the day-to-day management of our business.

The following table sets out information regarding our Directors:

Name Age Position

Date ofjoining ourGroup

Date ofappointmentas Director

Role andresponsibility

Relationshipwith otherDirectors andseniormanagement

Executive Directors

Mr. Wong Tat Shing(黃達成)

58 Executive Director andchief executiveofficer

1 May 2001 19 January2021

Responsible foroverall businessdevelopment of ourGroup

Nil

Mr. Chim Kwok YungRamthur (詹國勇)

57 Executive Director andchairman of ourBoard

10 November1997

19 January2021

Responsible foroverall managementof our businessoperations

Nil

Mr. Shon Il Seon(孫一善)

54 Executive Director 1 May 2014 19 January2021

Responsible formarketingdevelopment of ourGroup

Nil


Ms. Yao Qing (姚青) 36 Independentnon-executiveDirector

[•] [•] Providing independentjudgement on ourstrategy,performance,resources andstandard of conduct

Nil


DIRECTORS AND SENIOR MANAGEMENT

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Name Age Position

Date ofjoining ourGroup

Date ofappointmentas Director

Role andresponsibility


Mr. Ng Ming Kwan(吳銘軍)

44 Independentnon-executiveDirector


Nil

Mr. Kuan Hong KinDaniel (關匡建)

32 Independentnon-executiveDirector


Nil

DIRECTORS

Executive Directors

Mr. Wong Tat Shing (黃達成), aged 58, is the chief executive officer of our Group and anexecutive Director. He was appointed as a Director on 19 January 2021 and re-designated as anexecutive Director on 27 July 2021. He is the chief executive officer of our Group and also adirector of ENL Development, EN HK and EN SH. He is mainly responsible for the overallbusiness development of our Group.

Mr. Wong has more than 39 years of experience in the freight forwarding industry. Aftercompleting form five secondary education in 1982, he joined the freight forwarding industry. InMay 2001, Mr. Wong joined our Group as a director and was subsequently appointed as chiefexecutive officer with effect from January 2014.

Mr. Wong was awarded China’s outstanding innovative entrepreneur of 2018 (2018中國優秀創新企業家) and China’s reform and innovative business creditable leader (中國改革創新商界誠信領袖) in January 2019 and May 2020, respectively.



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Mr. Wong was a director of the following companies which were dissolved:

Name of companyPlace ofincorporation

Date ofdissolution Nature of dissolution

Nature of businessbefore dissolution

ACX Logistics (HK) Limited Hong Kong 30 January2015

Deregistration(Note 2) Provision of freightforwarding services

ACX Logistics (Shanghai)Limited

Hong Kong 30 January2015


Ampress Logistics Limited Hong Kong 9 March 2007 Deregistration(Note 1) Provision of freightforwarding services

Asia Worldwide Limited Hong Kong 8 April 2005 Deregistration(Note 1) Local express

Caseth Logistics (H.K.)Limited

Hong Kong 16 December2016


Caseth Logistics (Shanghai)Limited



Excel Network (Hangzhou)Limited


Deregistration(Note 1) Shipping and freightforwarding agent

Power Legend (China)Limited

Hong Kong 24 October2014

Deregistration(Note 1) Warehouse rental

上海正哲貿易有限公司 The PRC 16 June 2020 Cancelled(Note 3) Trading of auto-parts

易高 (上海) 貿易有限公司 The PRC 4 November2014

Cancelled(Note 3) Wholesale of wine

Notes:

1 Under section 291AA of the Predecessor Companies Ordinance, an application for deregistration can onlybe made if (a) all members of such company agree to such deregistration; (b) such company has nevercommenced business, or has ceased to carry on business or ceased operation for more than three monthsimmediately before the application; and (c) such company has no outstanding liabilities.

2. Under section 750 of the Companies Ordinance, an application for deregistration must not be made unlessat the time of the application (a) all members of such company agree to such deregistration; (b) suchcompany has not commenced operation or business, or has not been in operation or carried on businessduring the three months immediately before the application; (c) such company has no outstandingliabilities; (d) such company is not a party to any legal proceedings; (e) such company’s assets do notconsist of any immovable property situate in Hong Kong; and (f) if such company is a holding company,none of its subsidiary’s assets consist of any immovable property situate in Hong Kong.

3. These companies had ceased to operate any business prior to their dissolution. As such, they werevoluntarily dissolved by shareholders’ resolution and their registration status was cancelled.



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Mr. Wong confirmed that the above-mentioned companies were solvent at the time ofdissolution and there was no wrongful act on his part leading to the dissolution of thecompanies, and the dissolutions have not resulted in any liability or obligation being imposed onhim.

Mr. Chim Kwok Yung Ramthur (詹國勇), aged 57, is the chairman of our Board and anexecutive Director. He was appointed as a Director on 19 January 2021 and re-designated as anexecutive Director on 27 July 2021. He is the chairman of our Board and also a director of ENLDevelopment, EN HK, ENSZ HK and EN SH. He is mainly responsible for the overallmanagement of our business operations.

Mr. Chim has more than 36 years of experience in the freight forwarding and logisticsindustry. After completing the Hong Kong Advanced Level Examination in 1985, he joined thefreight forwarding industry. In November 1997, Mr. Chim joined our Group as a generalmanager and was subsequently promoted to chief operation officer in September 2000.

Mr. Chim was a director of the following companies which were dissolved:




ACX Logistics (HK) Limited Hong Kong 30 January2015


ACX Logistics (Shanghai)Limited



Ampress Logistics Limited Hong Kong 9 March 2007 Deregistration(Note 1) Provision of freightforwarding services

Asia Worldwide Limited Hong Kong 8 April 2005 Deregistration(Note 1) Local express

Caseth Logistics (H.K.)Limited


Deregistration(Note 2) Freight forwarder

Caseth Logistics (Shanghai)Limited


Deregistration(Note 2) Freight forwarder

Excel Network (Hangzhou)Limited


Deregistration(Note 1) Shipping and freightforwarding agent

Global Asian Limited Hong Kong 13 January2006

Striking Off(Note 3) Provision of freightforwarding services



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IGHL Limited Hong Kong 16 May 2013 Deregistration(Note 1) Shipping and freightforwarding agent

Koland Trading Limited Hong Kong 17 July 2015 Deregistration(Note 2) Trading of wine

Power Legend (China)Limited

Hong Kong 24 October2014

Deregistration(Note 2) Warehouse rental

U.S. Parcel Express (H.K.)Limited


Deregistration(Note 1) Local express

上海正哲貿易有限公司 The PRC 16 June 2020 Cancelled(Note 5) Trading of auto-parts

易高 (上海) 貿易有限公司(Note 4)

The PRC 4 November2014

Cancelled(Note 5) Wholesale of wine

ENLSH HK Hong Kong 12 November2021

Deregistration(Note 2) Provision of air andocean freightforwarding services

Notes:

1. Under section 291AA of the Predecessor Companies Ordinance, an application for deregistration can onlybe made if (a) all members of such company agree to such deregistration; (b) such company has nevercommenced business, or has ceased to carry on business or ceased operation for more than three monthsimmediately before the application; and (c) such company has no outstanding liabilities.

2. Under section 750 of the Companies Ordinance, an application for deregistration must not be made unlessat the time of the application (a) all members of such company agree to such deregistration; (b) suchcompany has not commenced operation or business, or has not been in operation or carried on businessduring the three months immediately before the application; (c) such company has no outstandingliabilities; (d) such company is not a party to any legal proceedings; (e) such company’s assets do notconsist of any immovable property situate in Hong Kong; and (f) if such company is a holding company,none of its subsidiary’s assets consist of any immovable property situate in Hong Kong.

3. Mr. Chim confirmed that this company no longer served any purpose nor had any operation before itsdissolution. Therefore, Mr. Chim did not actively take part in maintaining it. As it was not in operation, itwas struck off by the Registrar of Companies in Hong Kong.

4. Mr. Chim was a supervisor of 易高(上海)貿易有限公司 prior to its deregistration.

5. These companies had ceased to operate any business prior to their dissolution. As such, they werevoluntarily dissolved by shareholders’ resolution and their registration status was cancelled.

Mr. Chim confirmed that the above-mentioned companies were solvent at the time ofdissolution and there was no wrongful act on his part leading to the dissolution of thecompanies, and the dissolutions have not resulted in any liability or obligation being imposed onhim.



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Mr. Shon Il Seon (孫一善), aged 54, is an executive Director. He was appointed as aDirector on 19 January 2021 and re-designated as an executive Director on 27 July 2021. He ismainly responsible for the marketing development for our Group.

Mr. Shon has approximately 28 years of experience in the freight forwarding and logisticsindustry. From October 1994 to February 2002, he served as the general manager of Molax LineLimited, a company engaged in import and export logistics services. From October 2006 toAugust 2008, he worked as a corporate representative in Globelink-Trans (Tianjin) InternationalForwarding Company Limited, a forwarding company. Mr. Shon joined our Group in May 2014as sales and marketing director.

Mr. Shon obtained a master of science in management from Sungkyunkwan University,Korea in August 1991.


Ms. Yao Qing (姚青), aged 36, was appointed as our independent non-executive Directoron [•]. She is responsible for providing independent judgement on our strategy, performance,resources and standard of conduct.

Ms. Yao has approximately seven years of experience in the legal field. She worked as atrainee solicitor in Phillips Solicitors from April 2015 to January 2017. From May 2017 toMarch 2019, she worked for Tsun & Partners as a trainee solicitor and with her last position asan associate solicitor. She is currently a legal counsel of Zongyou Capital Co. Limited sinceApril 2019.

Ms. Yao obtained a juris doctor degree and a postgraduate certificate in laws from TheUniversity of Hong Kong in November 2012 and June 2014, respectively. She was admitted as asolicitor in Hong Kong in November 2017.

Mr. Ng Ming Kwan (吳銘軍), aged 44, was appointed as our independent non-executiveDirector on [•]. He is responsible for providing independent judgement on our strategy,performance, resources and standard of conduct.

Mr. Ng has more than 21 years of experience in the field of accounting and financialmanagement. From July 2000 to September 2006, he worked for Otiumation Inc., with his lastposition as accounting manager. From October 2006 to May 2007, he worked as an executive ofthe corporate finance department in Platinum Management Services Limited. From May 2007 toMay 2008, he worked for BNP Paribas Capital (Asia Pacific) Limited with his last position as ananalyst in corporate finance-merger & acquisition department. From October 2009 to December2011, he worked for Greka China Limited with his last position as a senior financial analyst.From December 2011 to July 2013, he worked as a vice president (finance) of Winston GlobalEnergy Holdings. From July 2013 to November 2015, he worked as an assistant to chairpersonand the chief executive of the investment and corporate finance department of Hua LongInvestment Holdings Limited. From November 2015 to August 2018, he worked as the chief



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financial officer of SMI Culture & Travel Group Holdings Limited (stock code: 2366), theissued shares of which are listed on the Stock Exchange, and the corporate finance and investorrelationship director of SMI Holdings Limited (former stock code: 0198), the issued shares ofwhich were formerly listed on the Stock Exchange until 14 December 2020. From July 2018 toApril 2019, he worked as the corporate finance director for Hao Tian Management (Hong Kong)Limited, a subsidiary of Aceso Life Science Group Limited (formerly known as Hao TianDevelopment Group Limited) (stock code: 0474), the issued shares of which are listed on theStock Exchange, and the group finance director of Hao Tian International ConstructionInvestment Group Limited (stock code: 1341), the issued shares of which are listed on the StockExchange. From May 2019 to November 2020, he worked for Prosperity International Holdings(H.K.) Limited (stock code: 0803), the issued shares of which are listed on the Stock Exchange,with his last position as the chief operating officer. He has been working as the chief financialofficer and the company secretary of Milestone Builder Holdings Limited (stock code: 1667), theissued shares of which are listed on the Stock Exchange, since March 2021 and April 2021,respectively.

Mr. Ng obtained a bachelor of arts (honours business administration) from the University ofWestern Ontario in June 2000. He was admitted as a certified management accountant inOntario, Canada in August 2005, a chartered financial analyst in September 2006, a charteredprofessional accountants of Ontario, Canada in 2014 and a certified public accountant ofHKICPA in Hong Kong in January 2019.

Mr. Kuan Hong Kin Daniel (關匡建), aged 32, was appointed as our independentnon-executive Director on [•]. He is responsible for providing independent judgement on ourstrategy, performance, resources and standard of conduct.

Mr. Kuan has more than seven years of experience in the legal field. He was admitted as abarrister in Hong Kong in April 2014. From August 2016 to May 2020, Mr. Kuan was anon-executive director of Kingland Group Holdings Limited (previously known as Sing OnHoldings Limited) (stock code: 1751; previous stock code: 8352). In February 2021, Mr. Kuanwas appointed as an independent non-executive director of Singapore Food Holdings Limited(currently known as Global Dining Holdings Limited) (stock code: 8496), the issued shares ofwhich are listed on GEM of the Stock Exchange.

Mr. Kuan obtained a bachelor’s degree in law and a postgraduate certificate in laws fromThe Chinese University of Hong Kong in November 2012 and July 2013, respectively.

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

Save as disclosed above, each of our Directors (i) did not hold any current or pastdirectorships as at the Latest Practicable Date and in the last three years preceding the LatestPracticable Date in any public companies listed on any securities market in Hong Kong oroverseas; (ii) did not hold other positions in our Company or any other member of our Group asat the Latest Practicable Date; and (iii) had no other relationship with any Directors, SubstantialShareholders, Controlling Shareholders, or senior management of our Company as at the Latest



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Practicable Date. As at the Latest Practicable Date, each of our Directors did not have anyinterest in the Shares within the meaning of Part XV of the SFO. 　　

Save as disclosed above, to the best of the knowledge, information and belief of ourDirectors having made all reasonable enquiries, there was no other matter with respect to theappointment of our Directors that needs to be brought to the attention of our Shareholders andthere was no information relating to our Directors that is required to be disclosed pursuant toRule 13.51(2) of the Listing Rules as at the Latest Practicable Date.

The following table sets out information regarding our senior management:

Name Age Position

Date ofjoining ourGroup Role and responsibility


Ms. Hung Yat Ka Peggy(熊一珈)

48 Chief financial officer andcompany secretary

23 August2004

Overseeing our Group’sfinancial planning,treasury and financialcontrol matters andcompany secretarialmatters

Nil

Mr. Cheung Chung Ka(張忠家)

65 Logistics director 19 March2004

Overseeing our Group’slogistics operations

Nil

Ms. Chiu Wan Ngan Sarah(趙雲雁)

46 Human resource andadministration director

26 May 1999 Overseeing our Group’shuman resource andadministrativeoperations

Nil

SENIOR MANAGEMENT

Ms. Hung Yat Ka Peggy (熊一珈), aged 48, is our chief financial officer and our companysecretary. Ms. Hung joined our Group in August 2004. She is mainly responsible for overseeingour Group’s financial planning, treasury and financial control matters and company secretarialmatters.

Ms. Hung has more than 28 years of experience in the accounting field. From September1993 to October 1994, she worked as an audit assistant for Edward Wan & Co. Certified PublicAccountants. From October 1994 to March 1997, she worked for Charles Chan, Ip & FungCertified Public Accountants, as an auditor. From March 1997 to February 1999, she worked asan accountant for Organic Gardens Ltd. From February 1999 to November 1999, she worked asan accounting manager for Lung Electronics (H.K.) Ltd. From February 2000 to June 2001, she



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worked as an audit supervisor for Leung Kam Wan Certified Public Accountant. From June 2002to August 2004, she worked as an officer of the finance & accounts department of SinotransShipping Limited. In August 2004, she joined our Group as a financial controller and wassubsequently promoted to chief financial officer in January 2014.

Ms. Hung obtained a bachelor of accounting from The University of Hong Kong inDecember 2002. She has been a certified public accountant of HKICPA since September 2003.

Ms. Hung did not hold any current or past directorships as at the Latest Practicable Dateand in the last three years preceding the Latest Practicable Date in any public companies listedon any securities market in Hong Kong or overseas.

Mr. Cheung Chung Ka (張忠家), aged 65, is our logistics director. Mr. Cheung was one ofthe founders and a passive investor of EN HK from 1997 to 2002. In March 2004, Mr. Cheungjoined our Group as our logistics director and a director and shareholder of ENSZ HK. Hedisposed of his interests in EN HK in 2002 and his interests in ENSZ HK in 2013 and remainedas a director of ENSZ HK and our logistics director. He is mainly responsible for overseeing ourGroup’s logistics operations.

Mr. Cheung has more than 38 years of experience in the shipping and logistics industry.Prior to joining our Group, he joined Hong Kong Export Lines, Limited (currently known asOOCL (Hong Kong) Limited) as a sales representative of the America service department inSeptember 1983 and was re-assigned as a sales executive and a marketing executive in April1984 and November 1984, respectively. He was then transferred to Orient Overseas ContainerLine Limited in April 1985 as a marketing analyst and remained in the same position until July1985. From July 1985 to May 1987, he worked for Fritz Transportation International (HK)Limited as an assistant sales manager. From May 1987 to August 1993, he worked for JardineShipping Agencies (Hong Kong) Ltd. with his last position as a line manager. From September1993 to June 2003, he worked for Hyundai Merchant Marine (Hong Kong) Limited with his lastposition as a general manager. From July 2003 to January 2004, he was employed by ChinaShipping Container Lines (Hong Kong) Company Limited as a sales and marketing generalmanager.

Mr. Cheung obtained a master of business administration in May 1983 from the CaliforniaState University.

Mr. Cheung was a member of the Chartered Institute of Logistics and Transport in HongKong (previously known as the Chartered Institute of Transport) from January 1992 toSeptember 1993 and a fellow member of the Hong Kong Sea Transport and Logistics AssociationLimited from March 2017 to February 2018.

Mr. Cheung did not hold any current or past directorships as at the Latest Practicable Dateand in the last three years preceding the Latest Practicable Date in any public companies listedon any securities market in Hong Kong or overseas.



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Ms. Chiu Wan Ngan Sarah (趙雲雁), aged 46, is our human resource and administrationdirector. She is mainly responsible for our Group’s human resource and administrativeoperations.

Ms. Chiu has more than 26 years of experience in accounting and administration. FromAugust 1995 to June 1997, she worked as an accounts clerk for Hellmann InternationalForwarders Limited. From July 1997 to October 1997 she worked as a customer servicerepresentative for Morning Star Travel Service Limited. From November 1997 to March 1998,she worked as an accounts clerk for Mansion House Group Limited, currently known as YunfengFinancial Group Limited (stock code: 0376), the issued shares of which are listed on the StockExchange. From April 1998 to October 1998, she worked for Dynaking Company Limited as anaccounts clerk. She worked as an assistant merchandiser for Youngmart (H.K.) Co., Ltd., fromOctober 1998 to April 1999. She joined our Group in May 1999 as an account clerk and wassubsequently promoted to accounts and administration manager and human resource andadministration director in May 2000 and January 2014, respectively.

Ms. Chiu obtained a certificate in personnel administration and operations and an advanceddiploma in secretarial and administrative studies from the Hong Kong Management Associationin August 2005 and November 2006, respectively.

Ms. Chiu did not hold any current or past directorships as at the Latest Practicable Dateand in the last three years preceding the Latest Practicable Date in any public companies listedon any securities market in Hong Kong or overseas.

COMPANY SECRETARY

Ms. Hung Yat Ka Peggy (熊一珈) was appointed as our company secretary on 9 March2021. Details of her qualifications and experience are set out in “Senior management” above inthis section.

BOARD COMMITTEES

Our Board delegates certain responsibilities to various committees. In accordance with theArticles and the Listing Rules, we have formed three board committees, namely the auditcommittee, the nomination committee, and the remuneration committee.

Audit committee

Our Company established an audit committee in compliance with Rule 3.21 of the ListingRules and with the written terms of reference in compliance with the Corporate GovernanceCode. The primary duties of our audit committee are (i) to make recommendations to our Boardon the appointment and removal of external auditors; (ii) to review the financial statements; (iii)to review the effectiveness of our Company’s internal audit activities, internal controls and riskmanagement systems; and (iv) to develop and implement policy on engaging external auditor tosupply non-audit services. Our audit committee currently consists of all three of our independent



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non-executive Directors, namely Ms. Yao Qing, Mr. Ng Ming Kwan and Mr. Kuan Hong KinDaniel. Mr. Ng Ming Kwan is the chairman of the audit committee.

Nomination committee

Our Company established a nomination committee with written terms of reference incompliance with paragraph B.3.1 of the Corporate Governance Code. The primary duties of ournomination committee are (i) to review the structure, size, composition and diversity of ourBoard on a regular basis; (ii) to identify individuals suitably qualified to become Boardmembers; (iii) to assess the independence of independent non-executive Directors; (iv) to makerecommendations to our Board on relevant matters relating to the appointment or re-appointmentof Directors and succession planning for directors; and (v) to make recommendations to ourBoard regarding candidates to fill vacancies on our Board and/or in senior management. Ournomination committee currently consists of one executive Director, namely Mr. Chim KwokYung Ramthur, and three of our independent non-executive Directors, namely Ms. Yao Qing, Mr.Ng Ming Kwan and Mr. Kuan Hong Kin Daniel. Mr. Chim Kwok Yung Ramthur is the chairmanof the nomination committee.

Remuneration committee

Our Company established a remuneration committee in compliance with Rule 3.25 of theListing Rules and with the written terms of reference in compliance with the CorporateGovernance Code. The primary duties of our remuneration committee are (i) to review and makerecommendations to our Board on the overall remuneration policy and structure relating to allDirectors and senior management of our Group; (ii) to review and make recommendations to ourBoard on other remuneration-related matters, including benefits-in-kind and other compensationpayable to our Directors and senior management; and (iii) to review performance basedremunerations and to establish a formal and transparent procedure for developing policy inrelation to remuneration. Our remuneration committee currently consists of three of ourindependent non-executive Directors, namely Ms. Yao Qing, Mr. Ng Ming Kwan and Mr. KuanHong Kin Daniel. Ms. Yao Qing is the chairlady of our remuneration committee.

REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT

Our Directors receive compensation in the form of Directors fees, salaries, allowances,discretionary bonuses and other benefits as well as contributions to retirement benefit schemes.The total compensation accrued to our Directors for the Track Record Period were approximatelyHK$8.4 million, HK$4.4 million and HK$4.9 million, respectively.

For the Track Record Period, our Group’s five highest paid individuals included two, twoand two executive Directors, respectively. The emoluments paid or payable to the remainingthree, three and three highest paid individuals for the Track Record Period were approximatelyHK$5.6 million, HK$6.0 million and HK$8.5 million, respectively.



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Under the arrangements currently in force, the aggregate amount of emoluments (includingfees, salaries, discretionary bonuses, allowances, other benefits in kind and retirement schemecontributions) payable by our Group to our Directors for the year ending 31 March 2023 isexpected to be approximately HK$5.4 million.

We did not pay to our Directors or the five highest paid individuals any inducement fees tojoin us or as compensation for loss of office for the Track Record Period. Furthermore, none ofour Directors waived any compensation for the same period.

Save as disclosed above, no other payments have been paid or are payable, in respect of theTrack Record Period, by us or any of our subsidiaries to our Directors.

REMUNERATION POLICY

Our Directors and senior management receive compensation in the form of director fees,salaries, benefits in kind and/or discretionary bonuses with reference to those paid bycomparable companies, their time commitment and the performance of our Group. Our Groupalso reimburses our Directors and senior management for expenses which are necessarily andreasonably incurred for the provision of services to our Group or executing their functions inrelation to the operations of our Group. We regularly review and determine the remuneration andcompensation packages of our Directors and senior management, by reference to, among otherthings, market level of remuneration and compensation paid by comparable companies, therespective responsibilities of our Directors and the performance of our Group.

After [REDACTED], the remuneration committee of our Company will review anddetermine the remuneration and compensation packages of our Directors with reference to theirresponsibilities, workload, the time devoted to our Group and the performance of our Group.Our Directors may also receive options to be granted under the Share Option Scheme. Theprincipal terms of the Share Option Scheme are summarised in “D. Share Option Scheme” inAppendix IV to this document.

BOARD DIVERSITY POLICY

We have adopted a board diversity policy (the “Board Diversity Policy”) which sets outour approach to achieve a sustainable and balanced development of our Group and to enhanceour quality of performance.

We recognise and embrace the benefit of having a diverse Board to enhance the quality ofour Board’s performance. All Board appointments will be based on meritocracy, and candidateswill be considered against selection criteria.

Selection and recommendation of candidates will be based on the nomination proceduresand the process and criteria adopted by our nomination committee and a number of perspectives,including but not limited to gender, age, cultural and educational background, industryexperience, technical and professional skills and/or qualifications, knowledge, length of services,



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personal integrity and time commitments of the proposed candidates. We will take into accountfactors relating to our own business model and specific needs from time to time. The ultimatedecision is based on merit and contribution that the selected candidates will bring to our Board.

Our nomination committee has been delegated with the overall responsibility forimplementation, monitoring and periodic review of our Board Diversity Policy and to complywith relevant code governing board diversity. Any revisions to the policy as recommended byour nomination committee will be submitted to our Board for consideration and approval and wewill disclose in our corporate governance report about the implementation of the Board DiversityPolicy on an annual basis.

Our Board members have a balanced mix of experiences and background, including but notlimited to experiences in freight forwarding, sales and marketing, accounting, finance and legalindustries. We have three independent non-executive Directors with different industrybackgrounds, and they together represent half of the members of our Board. Moreover, ourBoard includes one female independent non-executive Director. While we recognise thatdiversity at the board level has been achieved given its current composition, we will continue toselect and recommend candidates to our Board based on merits and contribution with referenceto our Board Diversity Policy as a whole and will continue to take steps to promote genderdiversity at all levels of our Company.

COMPLIANCE ADVISER

We [have appointed] Advent as our compliance adviser pursuant to Rules 3A.19 of theListing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the compliance adviser will adviseus, among others, at the following circumstances:

(a) before the publication of any regulator announcement, circular or financial report;

(b) where a transaction which might be a notifiable or connected transaction, iscontemplated including share issues and share repurchases;

(c) where our Company proposes to use the [REDACTED] of the [REDACTED] in amanner different from that detailed in this document or where our business activities,developments or results deviates from any forecast, estimate or other information inthis document; and

(d) where the Stock Exchange makes an inquiry of us under Rule 13.10 of the ListingRules concerning unusual movements in the price or trade volume of our Shares, thepossible development of a false market in our Shares, or any other matters.

The term of appointment of our compliance adviser shall commence on the [REDACTED]and end on the date of dispatch of our annual report in respect of our financial results for thefirst full financial year commencing after the [REDACTED] and such appointment shall besubject to extension by mutual agreement.



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So far as our Directors are aware, immediately following completion of the [REDACTED]and the [REDACTED] (without taking into account any Shares which may be issued pursuant tothe exercise of the [REDACTED] and any options which may be granted under the ShareOption Scheme), the following persons will have interests or short positions in our Shares orunderlying Shares which would fall to be disclosed to our Company and the Stock Exchangeunder the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will be directly orindirectly, interested in 10% or more of the nominal value of any class of share capital carryingrights to vote in all circumstances at general meetings of our Company or any other member ofour Group:

Shares held/interestedimmediately following completion

of the Reorganisation and the[REDACTED] (Note 1)

Shares held / interestedimmediately following completion

of the [REDACTED] and the[REDACTED] (Note 1)

ShareholderMember of ourGroup Nature of interest Number Percentage Number Percentage

Mr. Wong (Note 2) Our Company Interest in controlledcorporation

8,667(L) 86.7% [REDACTED] [REDACTED]

Ms. Leung YukLing

Our Company Interest of spouse (Note

3)


E&E(Note 2) Our Company Interest in controlledcorporation


Lucky Oasis(Note 2) Our Company Beneficial owner 8,667(L) 86.7% [REDACTED] [REDACTED]

The [REDACTED] Our Company Beneficial owner 1,333(L) 13.3% [REDACTED] [REDACTED]

Notes:

(1) The letter (L) denotes the person’s long interest in our Shares.

(2) Lucky Oasis directly held 8,667 Shares immediately following completion of the Reorganisation and willdirectly hold [REDACTED] Shares immediately following completion of the [REDACTED] and the[REDACTED]. Lucky Oasis is wholly-owned by E&E and E&E is controlled by Mr. Wong. By virtue ofthe SFO, each of E&E and Mr. Wong is deemed to have an interest in the Shares held by Lucky Oasis.

(3) Ms. Leung Yuk Ling is the spouse of Mr. Wong. Accordingly, Ms. Leung Yuk Ling is deemed or taken tobe interested in all the Shares which Mr. Wong is interested in under the SFO.


SUBSTANTIAL SHAREHOLDERS

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Save as disclosed above, our Directors are not aware of any other persons who will,immediately following completion of the [REDACTED] and the [REDACTED] (without takinginto account any Shares which may be issued pursuant to the exercise of the [REDACTED], andany options which may be granted under the Share Option Scheme), have interests or shortpositions in the Shares or underlying Shares which would be required to be disclosed to ourCompany and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of theSFO, or who will be directly or indirectly, interested in 10% or more of the nominal value ofany class of share capital carrying rights to vote in all circumstances at general meetings of ourCompany or any other member of our Group.


SUBSTANTIAL SHAREHOLDERS

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SHARE CAPITAL

Without taking into account any Shares to be issued upon exercise of the [REDACTED]and any options which may be granted under the Share Option Scheme, our issued share capitalimmediately following the [REDACTED] will be as follows:

Authorised share capital HK$

10,000,000,000 Shares 100,000,000.00

Issued and to be issued, fully paid or credited as fully paid upon

completion of the [REDACTED] and the [REDACTED]:HK$

10,000 Shares in issue at the date of this document 100.00

[REDACTED] Shares to be issued pursuant to the[REDACTED]

[REDACTED]

[REDACTED] Shares to be issued pursuant to the[REDACTED]

[REDACTED]

[REDACTED] Total [REDACTED]

RANKING

The [REDACTED] will rank pari passu in all respects with all the Shares now in issue orto be issued as mentioned in this document, and, in particular, will qualify in full for alldividends or other distributions declared, made or paid on the Shares in respect of a record datewhich falls after the date of [REDACTED].

[REDACTED]

Pursuant to the resolutions of our Shareholders passed on [•], subject to the share premiumaccount of our Company having sufficient balance, or otherwise being credited as a result of theallotment and issue of the [REDACTED] pursuant to the [REDACTED], our Directors areauthorised to allot and issue a total of [REDACTED] Shares, credited as fully paid at par, to theShareholders on the register of members or the principal share register of our Company at theclose of business on [•] (or as they may direct) in proportion to their shareholdings (save that noShareholder shall be entitled to be allotted or issued any fraction of a Share) by way ofcapitalisation of the sum of HK$[REDACTED] standing to the credit of the share premiumaccount of our Company, and our Shares to be allotted and issued pursuant to this resolutionshall rank pari passu in all respects with the existing issued Shares.


SHARE CAPITAL

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MINIMUM PUBLIC FLOAT

Pursuant to Rule 8.08 of the Listing Rules, at least 25% of the total issued share capital ofour Company must be at all times be held by the public (as defined in the Listing Rules). The[REDACTED] represent not less than [REDACTED]% of the issued share capital of ourCompany upon [REDACTED].

GENERAL MANDATE TO ISSUE SHARES

Conditional on the conditions as stated in “Structure of the [REDACTED] – Conditions ofthe [REDACTED]” in this document, our Directors [have been granted] a general unconditionalmandate to allot, issue and deal with Shares and to make or grant offers, agreements or optionswhich might require such Shares to be allotted and issued or dealt with subject to therequirement that the aggregate nominal value of our Shares so allotted and issued or agreedconditionally or unconditionally to be allotted and issued (otherwise than pursuant to a rightsissue, or scrip dividend scheme or similar arrangements, or a specific authority granted by ourShareholders) shall not exceed:

(a) 20% of the aggregate nominal value of the share capital of our Company in issueimmediately following the completion of the [REDACTED] and the [REDACTED](but excluding any Shares which may be issued pursuant to the exercise of the[REDACTED] and any options which may be granted under the Share OptionScheme); and

(b) the aggregate nominal value of the share capital of our Company repurchased pursuantto the authority granted to our Directors referred to in “General mandate to repurchaseshares” in this section below.

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

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

(b) the expiration of the period within which the next annual general meeting of ourCompany is required by the Memorandum and the Articles or the Companies Act orany other applicable laws of the Cayman Islands to be held; or

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

For further details of this general mandate, please refer to “A. Further information aboutour Company – 3. Written resolutions of our Shareholders passed on [•]” in Appendix IV to thisdocument.


SHARE CAPITAL

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GENERAL MANDATE TO REPURCHASE SHARES

Conditional on the conditions as stated in “Structure of the [REDACTED] – Conditions ofthe [REDACTED]” in this document, our Directors [have been granted] a general unconditionalmandate to exercise all powers to repurchase Shares (Shares which may be [REDACTED] onthe Stock Exchange or on any other stock exchange which is recognised by the SFC and theStock Exchange for this purpose) with an aggregate nominal value of not more than 10% of theaggregate nominal value of our Company’s share capital in issue immediately followingcompletion of the [REDACTED] and the [REDACTED] (excluding Shares which may be issuedpursuant to the exercise of the [REDACTED] and any options which may be granted under theShare Option Scheme).

This mandate only relates to repurchases made on the Stock Exchange, or on any otherstock exchange on which our Shares may be [REDACTED] (and which is recognised by theSFC and the Stock Exchange for this purpose), and made in connection with all applicable lawsand regulations and the requirements of the Listing Rules. A summary of the relevant ListingRules is set out in “A. Further information about our Company – 6. Repurchase of our Shares byour Company” in Appendix IV to this document.

The general mandate to repurchase Shares will remain in effect until the earliest of:

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

(b) the expiration of the period within which the next annual general meeting is requiredby the Memorandum and the Articles or the Companies Act or any other applicablelaws of the Cayman Islands to be held; or

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

For further details of this general mandate, please refer to “A. Further information aboutour Company – 3. Written resolutions of our Shareholders passed on [•]” and “A. Furtherinformation about our Company – 6. Repurchase of our Shares by our Company” in AppendixIV to this document.

SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme. Details of the principalterms of the Share Option Scheme are summarised in “D. Share Option Scheme” in Appendix IVto this document.

Our Group did not have any outstanding share options, warrants, convertible instruments,or similar rights convertible into our Shares as at the Latest Practicable Date.


SHARE CAPITAL

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CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING AREREQUIRED

As a matter of the Cayman Islands law, a Cayman Islands exempted company is notrequired by law to hold an annual general meeting unless the articles of association otherwiseprovides. The holding of general meeting or class meeting is prescribed for under the articles ofassociation of a Cayman Islands company. Accordingly, our Company will hold general meetingsas prescribed for under the Articles of Association, a summary of which is set out in AppendixIII to this document.


SHARE CAPITAL

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The following discussion and analysis should be read in conjunction with the our

audited consolidated financial information for the Track Record Period and the accompanying

notes, included in the Accountant’s Report in Appendix I to this document. Our financial

information and consolidated financial statements have been prepared in accordance with

HKFRSs, which may differ in certain respects from generally accepted accounting principles

in other countries. Potential investors should also read the entire Accountant’s Report in

Appendix I to this document and should not rely merely on the information contained in this

section.

The discussion and analysis in this section contains forward-looking statements that

involve risks and uncertainties. Our actual results may differ significantly from those

projected. Factors that might cause our future results to differ significantly from those

projected in the forward-looking statements include, but are not limited to, those discussed

below and elsewhere in this document, particularly in “Risk factors” in this document.

Discrepancies between totals and sums of amounts listed herein in any table or

elsewhere in this document may be due to rounding.

OVERVIEW


During the Track Record Period, our revenue amounted to approximately HK$485.5million, HK$579.0 million and HK$1,033.5 million, respectively, whereas our net profitamounted to approximately HK$35.0 million, HK$25.4 million and HK$75.9 million,respectively.

Please refer to “Business – Our services” and “Business – Our business strategies” in thisdocument for further details of our services and business strategies, respectively.

BASIS OF PREPARATION

Our financial information is presented in HK$, which is also the functional currency ofcompanies comprising our Group, and was prepared and presented in accordance with HKFRSs.

Immediately prior to our Reorganisation, our business composed of the business of EN HK,ENSZ HK and EN SH (the “Operating Subsidiaries”) and the air and ocean freight forwardingbusiness segments of ENLGZ HK and ENLSH HK (i.e. the Included Business) (together referredas the “[REDACTED] Business”). Pursuant to our Reorganisation, the [REDACTED] Businesswas transferred to and held by our Company. Our Company has not been involved in any otherbusiness prior to our Reorganisation and does not meet the definition of a business. Our


FINANCIAL INFORMATION

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Reorganisation is merely a reorganisation of the [REDACTED] Business with no change inmanagement and the ultimate owners of the [REDACTED] Business remains substantially thesame.

Accordingly, our Group resulting from our Reorganisation is regarded as a continuation ofthe [REDACTED] Business under our Operating Subsidiaries and the Included Business. Ourhistorical financial information has been prepared and presented as a continuation of theconsolidated financial statements of our Operating Subsidiaries and the Included Business, withthe assets and liabilities of our Group recognised and measured at the carrying amounts of the[REDACTED] Business for all periods presented.

Our historical financial information of our Included Business during the Track RecordPeriod was included in the following manner: (i) transactions and balances of ENLGZ HK andENLSH HK specifically identified as relating to the Included Business were consolidated in ourhistorical financial information; (ii) expenses incurred by ENLGZ HK and ENLSH HK whichwere not specifically identified as relating to our Included Business were allocated asappropriate for combining into our historical financial information as if such expenses were paidby ENLGZ HK and ENLSH HK on behalf of our Group; (iii) current and deferred income taxeson profits attributable to our Included Business calculated on the above basis are provided inaccordance with our Group’s accounting policies; and (iv) inter-company transactions andbalances between group companies including our Included Business were eliminated oncombination.

Please refer to “History, Reorganisation and corporate structure – Reorganisation” in thisdocument for further details of our Reorganisation.

KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIALCONDITION

Our financial condition, results of operations and the period to period comparability of ourfinancial results are principally affected by the following factors:

Market demand and competition of our freight forwarding and logistics and relatedvalue-added services

Our Group primarily engages in the provision of (i) air freight forwarding services; (ii)ocean freight forwarding services; and (iii) logistics and related value-added services. During theTrack Record Period, we derived a majority of our revenue from the provision of air freightforwarding services, representing approximately 78.0%, 77.8% and 57.4% of our total revenue,respectively. During the Track Record Period, sales to our top five customers accounted forapproximately 65.2%, 32.1% and 36.8% of our total revenue, respectively.



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The demand for our services is primarily driven by (i) the levels of international trade,especially in our major markets, including the U.S., the PRC and Hong Kong; and (ii) our majorcustomers’ business performance and developments in their markets and industries, which are inturn affected by the global economy in general. For detailed discussion of the impacts of theCOVID-19 pandemic and the Sino-U.S. trade war on the global economy, please refer to“Business – Effects of the COVID-19 outbreak and Sino-U.S. trade war” in this document,respectively. Furthermore, the freight forwarding and logistics industry in Hong Kong and thePRC is highly fragmented and competitive due to the presence of (i) numerous small- tomedium-sized local companies; and (ii) certain international giant competitors, which compete,among other factors, on pricing, quality, reliability of services, range of services, network ofpartners. Intense competition within the market means that the price becomes increasinglytransparent and it is more difficult for us to increase our mark-up to capture a higher profit. Assuch, our sales performance and profitability depend on our ability to compete for more ordersfrom our customers at the price they accept and the route they select and to offer morecustomised and effective services of high quality and flexibility in order to maintain our goodbusiness relationships with major customers and even enlarge our market share and customerbase in the future.

However, if the levels of international trade and our customers experience any adverseeconomic, political or regulatory conditions due to events beyond our control, including, amongothers, global economic downturn, natural disasters, contagious disease outbreaks, terroristattacks, or if the government adopts regulations which place restrictions or burdens on ourGroup or on our industry in general, we may not be able to secure sufficient orders from ourcustomers or charge our customers at reasonable prices to maintain our margin. In addition,there is no assurance that our major customers will continue to place orders with our Group, orthat their future orders will be at a comparable level as in previous years. As such, our business,financial condition, results of operations and prospects may be materially and adversely affected.

Please refer to “Sensitivity and breakeven analysis – Sensitivity analysis” in this section forfurther details of the sensitivity analysis of our average freight rates of air and ocean freightforwarding services.

Ability to obtain and optimise cargo spaces

In order to offer reliable and competitive solutions to our customers to suit their individualoperational and supply chain needs, our Group purchases cargo spaces at either pre-determinedrates or at market rates by entering into air charter agreements and block space agreements andby way of ad hoc cargo space arrangements and co-loading.

We also consider that the optimisation of cargo space utilisation is a key factor for ourGroup to increase our revenue that can be derived from the cargo spaces since the selling ratesof cargo spaces are relatively transparent in the market and similar selling rates of cargo spacesare offered by our competitors in the industry. In order to increase the amount of goods that itcan load for carriage on the cargo spaces in order to increase the profit that it can derive fromthat cargo spaces, we need to plan and execute the consolidation of cargo spaces (i.e. the



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grouping of a number of consignments into a single consignment) in accordance with theoperational experience of our staff by determining various factors, including but not limited tothe weight, volume, shapes and textures of the consignments.

If there is any detrimental change to our business relationships with our major suppliers,we may not be able to obtain sufficient cargo spaces from our suppliers at reasonable priceswhich in turn could materially and adversely affect our business, financial condition and resultsof operations. In addition, if we cannot fully utilise the cargo spaces purchased under theblock-space agreements or at the market rates, we may not be able to recover the costs of therelevant cargo spaces, and our business, financial condition and results of operations may bematerially and adversely affected.

Fluctuations in our freight and handling costs

Our freight and handling costs primarily represented fees we paid for (i) freight chargespayable to our carrier partners and fees payable to our freight forwarder business partners forcargo spaces; (ii) terminal handling charges; (iii) fuel surcharges; (iv) security charges; and (v)other miscellaneous charges payable by us to our carriers, which were our largest segment ofcost of services during the Track Record Period. During the Track Record Period, our freight andhandling costs amounted to approximately representing HK$390.0 million, HK$483.1 millionand HK$868.9 million, respectively, approximately 93.1%, 95.4% and 96.5% of our total cost ofservices, respectively.

Our carrier partners generally charge us for our cargo spaces based on (i) in the case of airfreight, the higher of the actual gross weight or the minimum weight requirement of our unitload devices, which is in turn subject to specific requirements in terms of weight and volume inaccordance with the configurations of the aircraft; or (ii) in the case of ocean freight, thenumber of containers we require to carry the consignments. Our freight and handling costslargely depend on market forces (i.e. the fluctuation of market rates charged by our majorsuppliers, especially airline carriers and shipping liners) which are beyond our control. If thereis a substantial increase in our freight and handling costs and we are not able to pass on anyincreases in our freight and handling costs to our customers, our operating expenses and pressureon our operating cash flows will substantially increase and our business, gross margin, financialresults and results may be materially and adversely affected.

In addition, there is no assurance that we will be able to maintain good businessrelationships with our major suppliers in the future or the services from our major suppliers willnot be interrupted due to any circumstances. Further, we may not be able to source anyalternative supplier with similar or favourable terms on a timely manner to replace any loss ofour current major suppliers. As such, our business, financial condition and results of operationsmay be materially and adversely affected.

Please refer to “Sensitivity and breakeven analysis – Sensitivity analysis” in this section forfurther details of the sensitivity analysis of our freight and handling costs.



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Fluctuations in our staff costs

The freight forwarding and logistics services industry is a service-oriented industry and wedepend on our staff to provide services to our customers. During the Track Record Period, ourstaff costs amounted to approximately HK$37.8 million, HK$30.8 million and HK$41.2 million,respectively, representing approximately 7.8%, 5.3% and 4.0% of our total revenue, respectively.Our staff costs are primarily affected by, among others, (i) the demand and supply of labour; (ii)economic factors, including the inflation rate and standard of living; and (iii) the implementationof relevant labour rules and regulations in Hong Kong and the PRC.

If we fail to recruit replacement staff in a timely manner after the resignation of our trainedand skilled workers, we may not be able to maintain the level of our services. This will probablyreduce our competitiveness, which in turn will have a material and adverse effect on ourbusiness and operations. In the event that there is any significant increase in our employeebenefits expenses, our operating expenses and pressure on our operating cash flows willincrease, thereby materially and adversely affecting our business, results of operations, financialposition and prospects.

Please refer to “Sensitivity and breakeven analysis – Sensitivity analysis” in this section forfurther details of the sensitivity analysis of our staff costs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have identified various accounting policies that are significant to the preparation of ourfinancial information. These significant accounting policies are important for an understandingof our financial condition and results of operations, which are disclosed in note 2 to theAccountant’s Report in Appendix I to this document.

In the application of our accounting policies, our Directors are required to makejudgements, estimates and assumptions that affect our revenues, expenses, assets and liabilities,and their accompanying disclosures. Uncertainty about these assumptions and estimates canresult in outcomes that require a material adjustment to our revenues, expenses, assets orliabilities in the future. The estimates and underlying assumptions are reviewed by ourmanagement on an on-going basis. Revisions to accounting estimates are recognised in theperiod in which the estimate is revised if the revision affects only that period, or in the period ofthe revision and future periods if the revision affects both current and future periods.

The key assumptions concerning the future and other key sources of estimation uncertaintyas at the end of each reporting period, that have a significant risk of causing a materialadjustment to the carrying amounts of our assets and liabilities within the next financial year,are set out in note 4 to the Accountant’s Report in Appendix I to this document.



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ADOPTION OF NEW AND REVISED HKFRSs

For the purpose of preparing and presenting the financial information relating to our Groupfor the Track Record Period, our Group has consistently applied all applicable HKFRSs whichwere effective during the Track Record Period, including HKFRS 16 Leases which was effectivefor periods beginning on or after 1 January 2019, and earlier adoption is permitted. Our Grouphas adopted and consistently applied HKFRS 16 throughout the Track Record Period.

Effect on the adoption of HKFRS 16

HKFRS 16 introduces a comprehensive model for the identification of lease arrangementsand accounting treatments for both lessors and lessees. HKFRS 16 will supersede HKAS 17 andthe related interpretations when it becomes effective. HKFRS 16 distinguishes lease and servicecontracts on the basis of whether an identified asset is controlled by a customer. Distinctions ofoperating leases and finance leases are removed for lessee accounting, and are replaced by amodel where a right-of-use asset and a corresponding liability have to be recognised for allleases by lessees, except for short-term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost(subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted forany remeasurement of the lease liability. The lease liability is initially measured at the presentvalue of the lease payments that are not paid at that date. Subsequently, the lease liability isadjusted for interest and lease payments, as well as the impact of lease modifications, amongstothers. For the classification of cash flows, our Group presented operating lease payments asoperating cash flows previously. Upon the application of HKFRS 16, lease payments in relationto lease liability will be allocated into a principal and an interest portion which will be presentedas financing and operating cash flows, respectively.

In contrast to lessee accounting, HKFRS 16 substantially carries forward the lessoraccounting requirements in HKAS 17, and continues to require a lessor to classify a lease eitheras an operating lease or a finance lease.

By applying HKFRS 16, our assets and liabilities would have increased as compared tothose under HKAS 17 as right-of-use assets and lease liabilities in respect of our leases ofpremises had been recognised in our consolidated statements of financial position. However, weconcluded that there has been no significant impact on our overall net asset position. In addition,corresponding depreciation charges and finance costs (representing our effective rental expenses)would have been in our consolidated statements of profit or loss.

We concluded that the adoption of HKFRS 16 has no significant impact on our overallfinancial position and financial performance as compared to HKAS 17.



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OUR RESULTS OF OPERATIONS

The following table includes certain items selected from our consolidated statements ofprofit or loss and other comprehensive income for the Track Record Period, which has beenextracted from, and should be read in conjunction with the Accountant’s Report in Appendix I tothis document.


HK$’000 HK$’000 HK$’000

Revenue 485,523 578,977 1,033,545Cost of services (418,754) (506,343) (900,080)

Gross profit 66,769 72,634 133,465Other income 640 2,461 –Other (losses)/gains, net (2,428) (3,264) 134Administrative expenses (24,058) (38,639) (36,527)Net reversal of/(provision for)

impairment losses of financial assets 2 3 (1,206)

Operating profit 40,925 33,195 95,866Finance income 2,213 413 70Finance costs (144) (90) (242)

Profit before income tax 42,994 33,518 95,694Income tax expense (7,988) (8,080) (19,843)

Profit for the year 35,006 25,438 75,851



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DISCUSSION OF SELECTED PROFIT OR LOSS ITEMS

Revenue

Revenue by type of services

During the Track Record Period, our revenue was primarily derived from the provision of(i) our freight forwarding services, comprising our air and ocean freight forwarding services;and (ii) our logistics and related value-added services. Please refer to “Business – Our services”in this document for further details of our services. Our total revenue amounted to approximatelyHK$485.5 million, HK$579.0 million and HK$1,033.5 million during the Track Record Period,respectively.

The following table sets forth a breakdown of our revenue by type of services for theperiods indicated:


HK$’000 % HK$’000 % HK$’000 %

Freight forwarding services 483,874 99.7 574,228 99.2 1,031,845 99.8– Air freight forwarding 378,882 78.0 450,702 77.8 593,136 57.4– Ocean freight forwarding 104,992 21.7 123,526 21.4 438,709 42.4

Logistics and related value-addedservices 1,649 0.3 4,749 0.8 1,700 0.2

Total 485,523 100.0 578,977 100.0 1,033,545 100.0



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The following table sets forth a breakdown of our revenue from the provision of air freightforwarding services based on the location of shipment destination for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

Export shipmentsThe U.S. 308,695 81.5 399,769 88.7 522,198 88.0Other export destinations 59,897 15.8 44,520 9.9 60,815 10.3

– Europe 34,379 9.1 26,211 5.8 22,879 3.9– Asia 18,311 4.8 11,969 2.7 29,422 5.0– Others (Note) 7,207 1.9 6,340 1.4 8,514 1.4


Total 378,882 100.0 450,702 100.0 593,136 100.0




– 315 –

The following table sets forth a breakdown of the shipment volume and average freightprice of our air freight forwarding services for the periods indicated:


Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

’000kg HK$/kg ’000kg HK$/kg ’000kg HK$/kg


– Europe 1,485 23.2 964 27.2 463 49.4– Asia 889 20.6 578 20.7 1,177 25.0– Others (Note) 220 32.8 73 86.8 93 91.5


Total/Overall 12,736 29.7 8,660 52.0 8,925 66.5


During the Track Record Period, our revenue from the provision of air freight forwardingservices amounted to approximately HK$378.9 million, HK$450.7 million and HK$593.1million, respectively, representing approximately 78.0%, 77.8% and 57.4% of our total revenue,respectively.

Our revenue from the provision of air freight forwarding services increased by HK$71.8million from approximately HK$378.9 million for FY2020 to approximately HK$450.7 millionfor FY2021, which was primarily attributable to the increase in revenue generated from ourOther Customers from approximately HK$164.2 million for FY2020 to approximately HK$390.0million for FY2021 mainly due to (i) the increase in our air shipment volume of OtherCustomers from approximately 7.1 million kg for FY2020 to approximately 7.9 million kg forFY2021 mainly as a result of a higher demand for the transportation of medical andmedical-related products in view of (a) the surge in urgent demand for hygiene products inrespect of the COVID-19 pandemic; and (b) our ability to obtain cargo spaces from airlinecarriers despite the limited supply of cargo spaces; and (ii) the increase in our average airfreight rate of Other Customers from approximately HK$23.1/kg for FY2020 to approximatelyHK$49.6/kg for FY2021 mainly as a result of the increase in the unit price of cargo spacecharged by airline carriers due to the shortage in supply of cargo spaces caused by theCOVID-19 pandemic, partially offset by the decrease in our revenue from the provision of airfreight forwarding services generated from Customer A from approximately HK$214.7 million



– 316 –

for FY2020 to approximately HK$60.7 million for FY2021 mainly due to the decrease in our airshipment volume from Customer A from approximately 5.6 million kg for FY2020 toapproximately 0.8 million kg for FY2021 mainly as a result of the fact that, to the best of ourDirectors’ belief and knowledge, one of Customer A’s key customers (which is a U.S.-basedmultinational technology company) has relocated some of its warehouses from the PRC toSouthern Asia, resulting in a significant decline of orders from Customer A for FY2021.

Our revenue from the provision of air freight forwarding services increased byapproximately HK$142.4 million to approximately HK$593.1 million for FY2022, which wasprimarily attributable to the increase in revenue generated from our Other Customers byapproximately HK$188.7 million to approximately HK$578.6 million for FY2022 mainly due to(i) the increase in our air shipment volume of Other Customers to approximately 8.8 million kgfor FY2022 mainly as a result of a higher demand for our air freight forwarding services for thedelivery of garment and fashion-related products, and electrical and electronic goods mainlyattributable to (a) the temporary suspension of manufacturing operations of certain factories inthe PRC as a result of the lockdown measures due to the outbreak of COVID-19 during FY2021;and (b) the gradual recovery of the global and the U.S. economy from the COVID-19 pandemicduring FY2022; and (ii) the increase in our average air freight rate of Other Customers toapproximately HK$65.7/kg for FY2022 mainly as a result of the continuing surge of the aircargo price in the market attributable to the ongoing disruptions and shortage in supply of cargospaces caused by the COVID-19 pandemic in Hong Kong and the PRC together with the gradualrecovery of the global and the U.S. demand, partially offset by the decrease in our revenue fromthe provision of air freight forwarding services generated from Customer A by approximatelyHK$46.2 million to approximately HK$14.5 million for FY2022 mainly due to the decrease inour air shipment volume from Customer A to approximately 0.1 million kg for FY2022 mainlyas a result of the reduction of demand for our air freight forwarding services from Customer Afor the delivery of mobile phones, and computers and parts mainly as a result of the fact that, tothe best of our Directors’ belief and knowledge, one of Customer A’s key customers (which is aU.S.-based multinational technology company) has relocated some of its warehouses from thePRC to Southern Asia.

(A) Export shipments – the U.S.

During the Track Record Period, we derived a majority of our revenue from the provisionof air freight forwarding services for the export to the U.S., and the revenue of which accountedfor approximately 81.5%, 88.7% and 88.0% of our total revenue from the provision of air freightforwarding services, respectively.

Our revenue from the provision of air freight forwarding services for the export to the U.S.increased by approximately HK$91.1 million from approximately HK$308.7 million for FY2020to approximately HK$399.8 million for FY2021, which was primarily attributable to thesignificant increase in our average U.S. air freight rate from approximately HK$32.4/kg forFY2020 to approximately HK$59.0/kg for FY2021 mainly in line with the increase in ouraverage unit cost from approximately HK$27.3/kg for FY2020 to approximately HK$50.9/kg forFY2021 principally resulting from the surge of the unit price of cargo space charged by airline



– 317 –

carriers due to the shortage in supply of cargo spaces caused by the COVID-19 pandemic,partially offset by the further decrease in our revenue from the provision of air freightforwarding services for the export to the U.S. from Customer A from approximately HK$187.1million for FY2020 to approximately HK$60.0 million for FY2021 principally due to thesignificant drop of U.S. air export shipment volume from Customer A from approximately 4.7million kg for FY2020 to approximately 0.8 million kg for FY2021 mainly due to the fact that,to the best of our Directors’ belief and knowledge, one of Customer A’s key customers (which isa U.S.-based multinational technology company) has relocated some of its warehouses from thePRC to Southern Asia, resulting in a significant decline of orders from Customer A for FY2021.

Our revenue from the provision of air freight forwarding services for the export to the U.S.increased by approximately HK$122.4 million to approximately HK$522.2 million for FY2022,which was primarily attributable to the increase in our average U.S. air freight rate toapproximately HK$76.4/kg for FY2022 mainly due to the continuing surge of the U.S. export aircargo price in the market attributable to the ongoing disruptions and shortage in supply of cargospaces caused by the COVID-19 pandemic in Hong Kong and the PRC together with the gradualrecovery of the U.S. demand. Our U.S. air export shipment volume remained relatively stable atapproximately 6.8 million kg and 6.8 million kg for FY2021 and FY2022, respectively.

(B) Export shipments – other destinations

During the Track Record Period, we also derived our revenue from the provision of airfreight forwarding services for other export shipment destinations (mainly including countriesand regions in Europe and Asia) and the aggregate revenue of which accounted forapproximately 15.8%, 9.9% and 10.3% of our total revenue from the provision of air freightforwarding services, respectively.

Our revenue from the provision of air freight forwarding services for the other exportshipment destinations further decreased by approximately HK$15.4 million from approximatelyHK$59.9 million for FY2020 to approximately HK$44.5 million for FY2021, which wasprimarily attributable to:

(i) the decrease in our revenue from the provision of air freight forwarding services forthe export to Europe by approximately HK$8.2 million mainly due to the decrease inour Europe air export shipment volume from approximately 1.5 million kg for FY2020to approximately 1.0 million kg for FY2021 mainly due to (a) the significant drop ofEurope air export shipment volume from Customer A’s by approximately 0.3 millionkg mainly as a result of the fact that one of Customer A’s key customers (which is aU.S.-based multinational technology company) has relocated some of its warehousesfrom the PRC to Southern Asia, resulting in a significant decline of orders fromCustomer A for FY2021; and (b) the decrease in Europe air export shipment volumefrom Other Customers by approximately 0.3 million kg mainly due to the reduction oforders from our Other Customers for the export of consumer goods to Europe due tothe lockdowns and extensive suspension of business in Europe as a result of theCOVID-19 pandemic; and



– 318 –

(ii) the decrease in our revenue from the provision of air freight forwarding services forthe export to Asia by approximately HK$6.3 million mainly due to the decrease in ourAsia air export shipment volume from approximately 0.9 million kg for FY 2020 toapproximately 0.6 million kg for FY2021 mainly due to the significant drop of Asiaair export shipment volume from Customer A’s by approximately 0.3 million kgmainly as a result of the fact that one of Customer A’s key customers (which is aU.S.-based multinational technology company) has relocated some of its warehousesfrom the PRC to Southern Asia, resulting in a significant decline of orders fromCustomer A for FY2021.

Our revenue from the provision of air freight forwarding services for the other exportshipment destinations increased by approximately HK$16.3 million to approximately HK$60.8million for FY2022, which was primarily attributable to:

(i) the increase in our revenue from the provision of air freight forwarding services forthe export to Asia by approximately HK$17.5 million mainly due to (a) the increase inour Asia air export shipment volume to approximately 1.2 million kg for FY2022mainly because of the increase in our customer orders for the delivery of electroniccigarette products to Japan; and (b) the increase in our average Asia air freight ratefrom approximately HK$20.7/kg for FY2021 to approximately HK$25.0/kg forFY2022 mainly as a result of the increase in our mark-ups for the urgent orders forthe delivery of electronic cigarette products to Japan for FY2022 which were targetedto sell during Tokyo Olympics 2020 according to the best of our Directors’ knowledgeand information;

(ii) the increase in our revenue from the provision of air freight forwarding services forthe export to others by approximately HK$2.2 million mainly due to (a) the increasein our air export shipment volume to others from approximately 73,000 kg for FY2021to approximately 93,000 kg for FY2022 mainly due to the increase in our customerorders for the shipment of electronic goods to Mexico; and (b) the slight increase inour average air freight rate for the export to others from approximately HK$86.8/kgfor FY2021 to approximately HK$91.5/kg for FY2022 mainly due to the continuingsurge of the air cargo price in the market attributable to the ongoing disruptions andshortage in supply of cargo spaces caused by the COVID-19 pandemic in Hong Kongand the PRC; and



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(iii) the decrease in our revenue from the provision of air freight forwarding services forthe export to Europe by approximately HK$3.3 million mainly due to the decrease inour Europe air export shipment volume to approximately 0.5 million kg for FY2022mainly due to the shift of our customer orders from air freight forwarding to oceanfreight forwarding mainly because of the strong increment in the air cargo price toEurope as considered by our customers, partially offset by the strong increase in ouraverage Europe air freight rate from approximately HK$27.2/kg for FY2021 toapproximately HK$49.4/kg for FY2022 mainly due to the continuing surge of the aircargo price in the market attributable to the ongoing disruptions and shortage insupply of cargo spaces caused by the COVID-19 pandemic in Hong Kong and the PRCand the economic rebound of Europe mainly as a result of the removal of most of theCOVID-19 control measures in Europe during FY2022.


The following table sets forth a breakdown of our revenue from the provision of oceanfreight forwarding services based on the location of shipment destination for the periodsindicated:


HK$’000 % HK$’000 % HK$’000 %




Total 104,992 100.0 123,526 100.0 438,709 100.0




– 320 –

The following table sets forth a breakdown of the shipment volume and average freightprice of our ocean freight forwarding services for the periods indicated:


Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

Shipmentvolume

Averageprice

TEUs

HK$’000/

TEU TEUs

HK$’000/

TEU TEUs

HK$’000/

TEU


– Europe 3,045 7.9 2,222 7.9 5,246 6.1– Asia 1,624 7.1 1,820 6.3 2,531 6.9– Others (Note) 490 10.4 589 11.1 950 19.4


Total/Overall 11,993 8.8 12,232 10.1 26,296 16.7

Note: Our others primarily included countries and regions in North America (excluding the U.S.), South

America, Oceania and Africa.

During the Track Record Period, our revenue from the provision of ocean freightforwarding services amounted to approximately HK$105.0 million, HK$123.5 million andHK$438.7 million, respectively, representing approximately 21.7%, 21.4% and 42.4% of ourtotal revenue, respectively.

The increase in our revenue from the provision of ocean freight forwarding services byapproximately HK$18.5 million from approximately HK$105.0 million for FY2020 toapproximately HK$123.5 million for FY2021 was primarily attributable to the rebound of ouraverage freight rate of ocean freight forwarding services form approximately HK$8,800/TEU forFY2020 to approximately HK$10,100/TEU for FY2021 mainly due to (i) the uncertainty overthe global economy as a result of the intensified Sino-U.S. trade war during FY2020; and (ii) thesupply insufficiency of shipment capacity caused by the COVID-19 pandemic during FY2021while we maintained relatively stable ocean shipment volume of approximately 11,993 TEUs and12,232 TEUs for FY2020 and FY2021, respectively.

Our revenue from the provision of ocean freight forwarding services increased byapproximately HK$315.2 million to approximately HK$438.7 million for FY2022, which wasprimarily attributable to (i) the strong increase in our ocean shipment volume to approximately26,296 TEUs for FY2022 mainly due to (a) the increased ocean shipment volume from Customer



– 321 –

A by approximately 6,198 TEUs mainly as a result of the significant increase in our oceanshipment orders of garments and fashion-related products from Customer A; and (b) theincreased ocean shipment volume from our Other Customers by approximately 7,866 TEUsmainly as a result of a higher demand for our ocean freight forwarding services for the shipmentof garments and fashion-related products, household products and furniture from our OtherCustomers; and (ii) the increase in our average freight rate of ocean freight forwarding servicesto approximately HK$16,700/TEU for FY2022 mainly due to (a) the increase in our average unitcost from approximately HK$9,300/TEU for FY2021 to approximately HK$13,800/TEU forFY2022 mainly driven by the strong and continuous increase in North America ocean shippingrates charged by shipping liners during FY2022; and (b) the increase in our mark-ups inresponse to the surge of demand for our ocean freight forwarding services for the export ofgoods mainly to North America accompanying with such skyrocketing North America oceanshipping rates charged by shipping liners.

The aforesaid substantial increase in our ocean shipment volume from FY2021 to FY2022was primarily driven by the following factors, including, among other things, (i) the temporarysuspension of manufacturing operations of certain factories in the PRC as a result of thelockdown measures due to the outbreak of COVID-19 during FY2021; (ii) the gradual recoveryof the global and the U.S. economy from the COVID-19 pandemic during FY2022; (iii) the shiftfrom air freight forwarding to ocean freight forwarding because of high freight price andcapacity shortages in air cargos; and (iv) our increased effort to provide our customers withcompetitive solutions to secure more freight forwarding orders.


During the Track Record Period, we derived a majority of our revenue from the provisionof ocean freight forwarding services for the export to the U.S., and the revenue of whichaccounted for approximately 56.0%, 67.5% and 83.6% of our total revenue from the provision ofocean freight forwarding services, respectively.

Our revenue from the provision of ocean freight forwarding services for the export to theU.S. increased by approximately HK$24.5 million from approximately HK$58.8 million forFY2020 to approximately HK$83.3 million for FY2021, which was primarily attributable to (i)the increase in our average U.S. ocean freight rate from approximately HK$9,500/TEU forFY2020 to approximately HK$11,700/TEU for FY2021 mainly in line with the increase in ouraverage unit cost from approximately HK$8,700/TEU for FY2020 to approximatelyHK$10,900/TEU for FY2021 mainly due to the supply insufficiency of shipment capacity causedby the COVID-19 pandemic during FY2021; and (ii) the increase in our U.S. ocean exportshipment volume from approximately 6,160 TEUs for FY2020 to approximately 7,146 TEUs forFY2021 mainly due to the increase in U.S. ocean export demand from our customers forcomputer and parts, and household necessity products primarily in relation to work from homeand lockdown measures in the U.S. as a result of the COVID-19 pandemic during FY2021.



– 322 –

Our revenue from the provision of ocean freight forwarding services for the export to theU.S. increased by approximately HK$283.6 million to approximately HK$366.9 million forFY2022, which was primarily attributable to (i) the strong increase in our U.S. ocean exportshipment volume to approximately 17,191 TEUs for FY2022 mainly due to (a) the increasedU.S. ocean export shipment volume from Customer A by approximately 5,970 TEUs mainly as aresult of the significant increase in our ocean shipment orders of garments and fashion-relatedproducts from Customer A; and (b) the increased U.S. ocean export shipment volume from ourOther Customers by approximately 4,075 TEUs mainly as a result of a higher demand for ourU.S. ocean export freight forwarding services for the shipment of garments and fashion-relatedproducts, household products and furniture from our Other Customers, both mainly attributableto the factors as discussed above; and (ii) the increase in our average U.S. ocean freight rate toapproximately HK$21,300/TEU for FY2022 mainly due to (a) the increase in our average unitcost to approximately HK$17,400/TEU for FY2022 mainly driven by the strong and continuousincrease in U.S. ocean shipping rates charged by shipping liners during FY2022; and (b) theincrease in our mark-ups in response to the surge of demand for our ocean freight forwardingservices for the export of goods to the U.S. accompanying with such skyrocketing U.S. oceanshipping rates charged by shipping liners.


During the Track Record Period, we also derived our revenue from the provision of oceanfreight forwarding services for other export shipment destinations (mainly including countriesand regions in Europe and Asia) and the aggregate revenue of which accounted forapproximately 38.9%, 28.7% and 15.6% of our total revenue from the provision of ocean freightforwarding services, respectively.

Our revenue from the provision of ocean freight forwarding services for the other exportshipment destinations further decreased by approximately HK$5.3 million from approximatelyHK$40.8 million for FY2020 to approximately HK$35.5 million for FY2021, which wasprimarily attributable to the decrease in our revenue from the provision of ocean freightforwarding services for the export to Europe by approximately HK$6.5 million mainly due to thesignificant decline in our Europe ocean export shipment volume from approximately 3,045 TEUsfor FY2020 to approximately 2,222 TEUs for FY2021 mainly due to the fact that (i) one ofCustomer A’s key customers (which is a U.S.-based multinational technology company) hasrelocated some of its warehouses from the PRC to Southern Asia, resulting in a significantdecline of orders from Customer A for FY2021; and (ii) we received less orders from our OtherCustomers for the export of consumer goods to Europe due to the lockdowns and extensivesuspension of business in Europe as a result of the COVID-19 pandemic.



– 323 –

Our revenue from the provision of ocean freight forwarding services for the other exportshipment destinations increased by approximately HK$32.7 million to approximately HK$68.3million for FY2022, which was primarily attributable to:

(i) the increase in our revenue from the provision of ocean freight forwarding services forthe export to Europe by approximately HK$14.6 million mainly due to the increase inour Europe ocean export shipment volume to approximately 5,246 TEUs for FY2022mainly as a result of the substantial increase in our customer orders for the oceanshipment of toys and games mainly attributable to the factors as discussed above;

(ii) the increase in our revenue from the provision of ocean freight forwarding services forthe export to others by approximately HK$11.9 million mainly due to (a) the increasein our ocean export shipment volume for the export to others from approximately 589TEUs for FY2021 to approximately 950 TEUs for FY2022 mainly as a result of theincrease in our customer orders for the ocean shipment of garments and dailynecessities primarily to Canada mainly attributable to the factors as discussed above;and (b) the increase in our average ocean freight rate for the export to others fromapproximately HK$11,100/TEU for FY2021 to approximately HK$19,400/TEU forFY2022 mainly attributable to (1) the increase in our average unit cost fromapproximately HK$10,400/TEU for FY2021 to approximately HK$16,600/TEU forFY2022 mainly driven by the strong and continuous increase in North America oceanshipping rates charged by shipping liners during FY2022; and (2) the increase in ourmark-ups in response to the surge of demand for our ocean freight forwarding servicesfor the export of goods to other North American countries accompanying with suchskyrocketing North America ocean shipping rates charged by shipping liners; and

(iii) the increase in our revenue from the provision of ocean freight forwarding services forthe export to Asia by approximately HK$6.2 million mainly due to the increase in ourocean export shipment volume for the export to others from approximately 1,820TEUs for FY2021 to approximately 2,531 TEUs for FY2022 mainly as a result of theincrease in our customer orders for the ocean shipment of construction materials andequipment mainly attributable to the factors as discussed above.

Logistics and related value-added services

Our logistics and related value-added services include, among others, warehousing,logistics, distribution, repackaging and labelling and palletising services. During the TrackRecord Period, our revenue from the provision of logistics and related value-added servicesamounted to approximately HK$1.6 million, HK$4.7 million and HK$1.7 million, respectively,representing approximately 0.3%, 0.8% and 0.2% of our total revenue, respectively.

The increase in our revenue from the provision of logistics and related value-added servicesfrom approximately HK$1.6 million for FY2020 to approximately HK$4.7 million for FY2021was primarily attributable to the increase in our warehouse services provided to our customers



– 324 –

mainly for the storage of face masks and other hygiene products in our warehouse as a result ofthe COVID-19 pandemic.

The decrease in our revenue from the provision of logistics and related value-addedservices to approximately HK$1.7 million for FY2022 was primarily attributable to a higherdemand for our warehouse services for the storage of face masks and other hygiene products inour warehouse during FY2021 as a result of the outbreak of COVID-19.

Freight forwarding service revenue by location of shipment destination

The following table sets forth a breakdown of our revenue from the provision of freightforwarding services based on the location of shipment destination for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %




Total 483,874 100.0 574,228 100.0 1,031,845 100.0


During the Track Record Period, our revenue generated from the export shipmentscontributed a major proportion of our total revenue from freight forwarding services, whichamounted to approximately HK$468.2 million, HK$563.1 million and HK$1,018.2 million,respectively, representing approximately 96.8%, 98.1% and 98.7% of our total revenue fromfreight forwarding services, respectively.

During the Track Record Period, our revenue generated from the export shipmentdestination located in the U.S. contributed a major proportion of our revenue from freightforwarding services for export shipments, which amounted to approximately HK$367.5 million,HK$483.1 million and HK$889.1 million, respectively, representing approximately 78.5%,85.8% and 87.3% of our revenue from freight forwarding services for export shipments,respectively.



– 325 –

We also generated revenue from freight forwarding services for other export shipmentdestinations, mainly including countries and regions in Europe and Asia, which collectivelyrepresented approximately 21.5%, 14.2% and 12.7% of our revenue from freight forwardingservices for export shipments during the Track Record Period, respectively.

For details of the discussion of the fluctuation in our revenue from the provision of freightforwarding services based on the location of shipment destination during the Track RecordPeriod, please refer to “Discussion of selected profit or loss items – Revenue – Revenue by typeof services” in this section above.

Revenue by customer category

The following table sets forth a breakdown of our revenue by customer category for theperiods indicated:


HK$’000 % HK$’000 % HK$’000 %

Freight forwarder customers 436,941 90.0 476,819 82.4 909,606 88.0Direct customers 48,582 10.0 102,158 17.6 123,939 12.0

Total 485,523 100.0 578,977 100.0 1,033,545 100.0

During the Track Record Period, we derived a majority of our revenue from freightforwarder customers, including our freight forwarder business partners which we handle thefreight, local transportation and customs clearance in locations where we have business presenceand which we co-load the goods with them. During the Track Record Period, our revenuegenerated from freight forwarder customers amounted to approximately HK$436.9 million,HK$476.8 million and HK$909.6 million, respectively, representing approximately 90.0%,82.4% and 88.0% of our total revenue, respectively.

In addition, we also generated revenue from our direct customers. During the Track RecordPeriod, our revenue generated from direct customers amounted to approximately HK$56.8million, HK$102.2 million and HK$123.9 million, respectively, representing approximately10.0%, 17.6% and 12.0% of our total revenue, respectively.



– 326 –

Revenue by operating location

We provide international freight forwarding services through our operating subsidiaries inHong Kong and the PRC. We now operate in the PRC through our subsidiary and branches inShanghai, Guangzhou, Shenzhen and Chongqing. The following table sets forth a breakdown ofour revenue by operating location for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

Hong Kong 241,194 49.7 393,247 67.9 580,410 56.2Shanghai 212,912 43.9 140,440 24.3 365,650 35.4Guangzhou 18,070 3.7 25,607 4.4 27,070 2.6Shenzhen 13,296 2.7 19,650 3.4 59,959 5.8Chongqing 51 – 33 – 456 –

Total 485,523 100.0 578,977 100.0 1,033,545 100.0

During the Track Record Period, Hong Kong and Shanghai were our major locations ofoperation.

During the Track Record Period, our revenue generated in Hong Kong amounted toapproximately HK$241.2 million, HK$393.2 million and HK$580.4 million, respectively,representing approximately 49.7%, 67.9% and 56.2% of our total revenue, respectively.

During the Track Record Period, our revenue generated in Shanghai amounted toapproximately HK$212.9 million, HK$140.4 million and HK$365.7 million, respectively,representing approximately 43.9%, 24.3% and 35.4% of our total revenue, respectively. Thedecrease in our revenue generated in Shanghai during FY2020 to FY2021 was primarilyattributable to the decrease in our revenue generated in Shanghai from Customer A fromapproximately HK$166.0 million for FY2020 to approximately HK$37.4 million for FY2021mainly as a result of the fact that, to the best of our Directors’ belief and knowledge, one ofCustomer A’s key customers (which is a U.S.-based multinational technology company) hasrelocated some of its warehouses from the PRC to Southern Asia, resulting in a significantdecline of orders from Customer A for FY2021. The rebound of our revenue generated inShanghai to approximately HK$365.7 million for FY2022 was primarily attributable to theincrease in the demand for our ocean freight forwarding services in Shanghai mainly in relationto the delivery of garment and fashion-related products during FY2022.

We also generated revenue in other operating locations, including Guangzhou, Shenzhenand Chongqing, which collectively represented approximately 6.4%, 7.8% and 8.4% of our totalrevenue during the Track Record Period, respectively.



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Cost of services

During the Track Record Period, our cost of services represented approximately 86.2%,87.5% and 87.1% of our total revenue, respectively. The following table sets forth a breakdownof our cost of services by cost nature for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

Freight and handling costs 390,022 93.1 483,093 95.4 868,919 96.5Labour costs 27,215 6.5 21,774 4.3 30,019 3.3Other costs (Note) 1,517 0.4 1,476 0.3 1,142 0.2

Total 418,754 100.0 506,343 100.0 900,080 100.0

Note: Our other costs primarily represented our warehouse storage, insurance, utility and other service costs

incurred for the provision of our freight forwarding, and logistics and related value-added services.

During the Track Record Period, our cost of services primarily comprised:

(i) our freight and handling costs, mainly including (a) freight charges for cargo spaces;(b) terminal handling charges; (c) fuel surcharges; (d) security charges; and (e) othermiscellaneous charges payable by us to our carriers; and

(ii) our labour costs primarily representing the salaries and other staff benefits paid to ourdirect labour for the provision of our freight forwarding, and logistics and relatedvalue-added services.

Our freight and handling costs were the largest component of our cost of services, whichaccounted for approximately 93.1%, 95.4% and 96.5% of our total cost of services during theTrack Record Period, respectively. The fluctuation in our freight and handling costs wasgenerally attributable to (i) the changes in the shipment volume handled; and (ii) the fluctuationof market rates charged by our major suppliers, especially airline carriers and shipping linersduring the Track Record Period.

Please refer to “Sensitivity and breakeven analysis – Sensitivity analysis” in this section forthe sensitivity analysis of our freight and handling costs and “Sensitivity and breakeven analysis– Breakeven analysis” in this section for the breakeven analysis of our cost of services.



– 328 –


Gross profit and gross margin by type of services

Our gross profit represented our revenue less our cost of services, and our gross marginrepresented our gross profit divided by our revenue, multiplied by 100%. The following tablesets forth a breakdown of our gross profit and gross margin by business segments for the periodsindicated:


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %

Freight forwarding services 66,156 13.7 70,128 12.2 133,209 12.9– Air freight forwarding 55,851 14.7 59,908 13.3 56,438 9.5– Ocean freight forwarding 10,305 9.8 10,220 8.3 76,771 17.5

Logistics and related value-addedservices 613 37.2 2,506 52.8 256 15.1

Total/Overall 66,769 13.8 72,634 12.5 133,465 12.9

During the Track Record Period, our total gross profit amounted to approximately HK$66.8million, HK$72.6 million and HK$133.5 million, respectively, whereas our overall gross marginwas approximately 13.8%, 12.5% and 12.9% , respectively.

Since our air freight forwarding services are our major line of services during FY2020 toFY2021, our gross profit from air freight forwarding services accounted for approximately83.6% and 82.5% of our total gross profit during FY2020 and FY2021, respectively. Our grossprofit from ocean freight forwarding services, and logistics and related value-added servicescollectively accounted for the remaining portion of approximately 16.4% and 17.5% of our totalgross profit during FY2020 and FY2021, respectively. Benefited from the strong demand fromour customers for ocean freight forwarding services and the skyrocketing North America oceanshipping rates charged by shipping liners during FY2022, we were able to increase the mark-upsof our ocean freight forwarding services in general and thus increased our gross profit sharefrom ocean freight forwarding services. On the other hand, owing to the fact that the unit priceof air cargo space charged by airline carriers was maintained at a high level continuously duringthe COVID-19 pandemic, we were required to reduce our gross margin charged to our customersso as to maintain our competitiveness of air freight forwarding services, ultimately leading to adecline in our gross profit share from air freight forwarding services. As such, our gross profitfrom air freight forwarding services, ocean freight forwarding services, and logistics and relatedvalue-added services accounted for approximately 42.3%, 57.5% and 0.2% of our total grossprofit during FY2022, respectively.



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The fluctuation in our gross margin from logistics and related value-added services washighly dependent on the level of revenue which we were able to generate during the TrackRecord Period since the costs for the provision of our logistics and related value-added servicesprimarily consisted of certain fixed costs, including our labour costs and rental expenses of thewarehouse premises.

We experienced a decrease in our overall gross margin from approximately 13.8% forFY2020 to approximately 12.5% for FY2021, which was primarily attributable to (i) thedecrease in our gross margin from air freight forwarding services from approximately 14.7% forFY2020 to approximately 13.3% for FY2021 mainly due to (a) the significant reduction of theproportion of gross profit generated from Customer A due to the huge decrease in our revenuegenerated from Customer A; and (b) a relatively higher gross margin of approximately 19.2%and 21.2% was generated from Customer A for FY2020 and FY2021, respectively, as comparedto that of our Other Customers despite the fact that we were generally able to transfer thesubstantial increment of our average air freight cost to our customers for FY2021; and (ii) thedecrease in our gross margin from ocean freight forwarding services from approximately 9.8%for FY2020 to approximately 8.3% for FY2021 mainly because we did not transfer all of theincrement of our average ocean freight cost from our suppliers to our customers in order tomaintain our market competitiveness.

Our overall gross margin slightly increased to approximately 12.9% for FY2022, which wasprimarily attributable to the increase in our gross margin from ocean freight forwarding servicesto approximately 17.5% for FY2022 mainly because of the overall increase in our mark-ups ofocean freight forwarding services in response to (i) the strong demand from our customers forour ocean freight forwarding services; and (ii) the skyrocketing North America ocean shippingrates charged by shipping liners during FY2022, partially offset by the decrease in our grossmargin from air freight forwarding services to approximately 9.5% for FY2022 mainly due to (i)higher mark-ups charged to our customers for U.S. air export freight forwarding services ingeneral during FY2021 mainly as a result of our ability to obtain cargo spaces from airlinecarriers despite the limited supply of cargo spaces in respect of the COVID-19 pandemic; and(ii) the overall reduction of mark-ups charged to our customers during FY2022 to maintain ourcompetitiveness of air freight forwarding services mainly attributable to the fact that the unitprice of air cargo space charged by airline carriers was maintained at a high level continuouslyduring the COVID-19 pandemic.



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Gross profit and gross margin of our freight forwarding services by location of shipment

destination

The following table sets forth a breakdown of the gross profit and gross margin of ourfreight forwarding services by location of shipment destination for the periods indicated:


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %


– Europe 4,045 6.9 3,091 7.1 3,999 7.3– Asia 6,524 21.8 3,767 16.1 8,966 19.1– Others (Note) 513 4.2 699 5.4 2,768 10.3


Total/Overall 66,156 13.7 70,128 12.2 133,209 12.9

Note: Our other destinations primarily included countries and regions in North America (excluding the U.S.),South America, Oceania and Africa.


The decrease in our gross margin from export shipments to the U.S. from approximately14.6% for FY2020 to approximately 12.5% for FY2021, which was primarily attributable to (i)the significant reduction of the proportion of gross profit generated from Customer A due to thehuge decrease in our revenue from U.S. export freight forwarding services generated fromCustomer A; and (ii) a relatively higher gross margin was generated from Customer A forFY2020 and FY2021 as compared to that of our Other Customers despite the fact that we weregenerally able to transfer the substantial increment of our average U.S. export air freight cost toour customers for FY2021.

Our gross margin from export shipments to the U.S. then remained stable at approximately12.9% for FY2022.



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The decrease in our gross margin from export shipments to other destinations fromapproximately 11.0% for FY2020 to approximately 9.4% for FY2021, which was primarilyattributable to the decrease in our gross margin from export shipments to Asia fromapproximately 21.8% for FY2020 to approximately 16.1% for FY2021 mainly due to the factthat a relatively higher mark-up was charged for certain orders from Customer A in respect of airfreight shipments of smart phones and network speakers to Japan during FY2020 given the localfreight logistics difficulties encountered in Japan resulting from the final stage of theconstruction of arenas for Tokyo Olympics 2020 during the second half of FY2020.

The increase in our gross margin from export shipments to other destinations toapproximately 12.2% for FY2022, which was primarily attributable to (i) the increase in ourgross margin from export shipments to Asia to approximately 19.1% for FY2022 mainly due tothe increase in our mark-ups for the urgent orders for the delivery of electronic cigaretteproducts to Japan for FY2022 which were targeted to sell during Tokyo Olympics 2020according to the best of our Directors’ knowledge and information; and (ii) the increase in ourgross margin from export shipments to others from approximately 5.4% for FY2021 toapproximately 10.3% for FY2022 mainly due to the increase in our mark-ups of North Americaocean export freight forwarding services in response to (a) the rising demand from ourcustomers for our ocean export freight forwarding services primarily to Canada; and (b) theskyrocketing North America ocean shipping rates charged by shipping liners during FY2022.

Gross profit and gross margin by customer category

The following table sets forth a breakdown of our gross profit and gross margin bycustomer category for the periods indicated:


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %

Freight forwardercustomers 58,128 13.3 53,643 11.3 113,599 12.5

Direct customers 8,641 17.8 18,991 18.6 19,866 16.0

Total/Overall 66,769 13.8 72,634 12.5 133,465 12.9

During the Track Record Period, our gross margin generated from freight forwardercustomers was generally lower than that generated from direct customers, which was primarilyattributable to the fact that (i) freight forwarder customers are inclined to be more pricesensitive as they are more knowledgeable to the market prices of cargos in general; and (ii)



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direct customers generally request more specific logistics solutions in respect of cargo pick-up,release and delivery in the export destinations which allows us to generate a higher mark-ups.

Gross profit and gross margin by operating location

The following table sets forth a breakdown of our gross profit and gross margin byoperating location for the periods indicated:


Grossprofit

Grossmargin

Grossprofit

Grossmargin

Grossprofit

Grossmargin

HK$’000 % HK$’000 % HK$’000 %

Hong Kong 32,744 13.6 50,721 12.9 76,130 13.1Shanghai 28,965 13.6 14,581 10.4 44,491 12.2Guangzhou 3,072 17.0 3,901 15.2 4,589 17.0Shenzhen 1,978 14.9 3,426 17.4 8,177 13.6Chongqing 10 19.6 5 15.2 78 17.1

Total/Overall 66,769 13.8 72,634 12.5 133,465 12.9

During the Track Record Period, our gross margins generated in Hong Kong and Shanghaiwere generally lower than our gross margins generated in Guangzhou, Shenzhen and Chongqing,which was primarily attributable to the fact that (i) relatively higher mark-ups were charged inGuangzhou, Shenzhen and Chongqing due to less bulk orders were received from our customersin these three operating locations; and (ii) a higher proportion of our revenue in Hong Kong andShanghai was generated from our freight forwarder customers during the Track Record Periodwhich had a relatively lower gross margin in general as discussed above.

Other income

The following table sets forth a breakdown of our other income for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

Government grants 460 71.9 2,356 95.7 – N/AManagement fee income 180 28.1 105 4.3 – N/A

Total 640 100.0 2,461 100.0 – N/A



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During the Track Record Period, our other income amounted to approximately HK$0.6million, HK$2.5 million and nil, respectively.

Our other income primarily consisted of (i) our government grants mainly in relation to theanti-epidemic fund from Hong Kong government, and grants for brand development and businessupgrade and restructuring, and tax and export subsidies provided by the Hong Kong and the PRCgovernments; and (ii) our management fee income in respect of our provision of certainadministrative services to our related companies, namely Strategic Global Partnership (HK)Limited and Strategic Global Partnership (SHA) Limited. Please refer to “Related partytransactions” in this section and note 30 to the Accountant’s Report in Appendix I in thisdocument for further details of our related parties and related party transactions.

Other (losses)/gains, net

The following table sets forth a breakdown of our other (losses)/gains, net for the periodsindicated:


HK$’000 HK$’000 HK$’000

Exchange (losses)/gains, net (1,372) (825) 1,700Gain on disposal of property, plant

and equipment, net 129 – (5)Gain on early termination of leases 27 – –Change in cash surrender value of

key management life insurancecontracts (1,212) (2,439) (1,561)

Total (2,428) (3,264) 134

During the Track Record Period, our other (losses)/gains, net amounted to approximatelyHK$(2.4) million, HK$(3.3) million and HK$0.1 million, respectively.

Our other gains/(losses), net primarily consisted of (i) our exchange (losses)/gains, netmainly arising from the translation and settlement of our foreign currency denominated financialassets and liabilities; and (ii) our gain on disposal of property, plant and equipment, net mainlyin relation to the disposal of our certain motor vehicles; (iii) our gain on early termination ofleases; and (iv) our change in cash surrender value of key management life insurance contractsfor our executive Directors.



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Administrative expenses

During the Track Record Period, our administrative expenses amounted to approximately5.0%, 6.7% and 3.5% of our total revenue, respectively. The following table sets forth abreakdown of our administrative expenses for the periods indicated:


HK$’000 % HK$’000 % HK$’000 %

Amortisation anddepreciation 2,445 10.2 2,650 6.9 3,766 10.3

[REDACTED] – – 8,756 22.7 12,566 34.4Office expenses 1,536 6.4 1,167 3.0 1,156 3.2Repair and maintenance

expenses 1,471 6.1 1,405 3.6 1,438 3.9Rental expenses 990 4.1 765 2.0 165 0.5Share-based compensation – – 10,381 26.9 – –Staff costs 10,627 44.2 9,035 23.4 11,210 30.7Travelling and

entertainment expenses 3,987 16.6 1,400 3.6 2,335 6.4Other expenses (Note) 3,002 12.4 3,080 7.9 3,891 10.6

Total 24,058 100.0 38,639 100.0 36,527 100.0

Note: Our other expenses primarily comprised our legal and professional fees, bank charges, insurance expenses,other taxes and surcharges and other miscellaneous expenses.

During the Track Record Period, our administrative expenses primarily consisted of:

(i) our amortisation and depreciation mainly representing our amortisation of intangibleassets and our depreciation charges in respect of property, plant and equipment andright-of-use assets for administrative and general purposes;

(ii) our [REDACTED] mainly representing the professional services fees incurred toprofessional parties by our Company in relation to the [REDACTED] as detailed in“[REDACTED]” in this section;

(iii) our office expenses mainly representing our expenses incurred in relation to officecleaning, computer and internet, office supplies and stationery, and utilities;

(iv) our repair and maintenance expenses mainly representing the maintenance costs of ourproperty, plant and equipment, mainly including leasehold improvements, motorvehicles and furniture and fixtures;



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(v) our rental expenses mainly representing our rental expenses incurred for short-termleases of our warehousing facilities and staff quarters;

(vi) our share-based compensation in respect of the [REDACTED] which was thedifference between the consideration of the [REDACTED] payable by the[REDACTED] and the fair value of 1,333 Shares of our Company granted (valued byan independent external valuer). For further details of valuation approach of ourshare-based compensation and the [REDACTED], please refer to note 22 to theAccountant’s Report in Appendix I to this document and “History, Reorganisation andcorporate structure – [REDACTED]” in this document, respectively;

(vii) our staff costs mainly including our Directors’ emoluments, and the salaries and wagesof our certain administrative and management staff; and

(viii) our travelling and entertainment expenses mainly representing our travel,accommodation and meal expenses incurred for our business development andadministrative purposes.

Net reversal of/(provision for) impairment loss of financial assets

During FY2020 and FY2021, our net reversal of impairment loss of financial assetsamounted to approximately HK$2,000 and HK$3,000, respectively, whereas our net provision forimpairment loss of financial assets amounted to approximately HK$1.2 million for FY2022.

Our net reversal of/(provision for) impairment loss of financial assets represented thereversal of and provision for expected credit loss estimated by our Group on our tradereceivables in accordance with HKFRS 9. Please refer to “Discussion of selected items ofconsolidated statements of financial position – Trade receivables” in this section for furtherdetails.



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Finance income/(costs), net

The following table sets forth a breakdown of our finance income/(costs), net for theperiods indicated:


HK$’000 HK$’000 HK$’000

Finance incomeInterest income on bank deposits 2,213 413 70

Finance costsInterest expense on:

– Bank borrowings (32) – (77)– Lease liabilities (112) (90) (165)

(144) (90) (242)

Finance income/(costs), net 2,069 323 (172)

Our finance income primarily represented our bank interest income arising from our bankdeposits and pledged deposits.

Our finance costs primarily consisted of (i) our interest expense on bank borrowings; and(ii) our interest expense on lease liabilities mainly in respect of the leases of our office andwarehouse premises.

Income tax expense

During the Track Record Period, our income tax expense comprised our Hong Kong profitstax, EIT and deferred income tax recognised for the year. We are subject to income taxcalculated at the applicable income tax rates in accordance with the relevant laws andregulations in each tax jurisdiction we operate or domicile.



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The following table sets forth a breakdown of our income tax expense and effective incometax rate for the periods indicated:


HK$’000 HK$’000 HK$’000

Current income tax:– Hong Kong profits tax 5,913 8,794 14,716– EIT 1,288 – 4,504– EIT arising from potential permanent

establishment risk in the PRC 823 – –

8,024 8,794 19,220

Deferred income tax charge/(credit) (36) (714) 623

Total 7,988 8,080 19,843

Effective income tax rate (%) 18.6% 24.1% 20.7%

We were not subject to any income tax in the Cayman Islands and the BVI during the TrackRecord Period.

Our Hong Kong profits tax is calculated at the two-tiered profits tax regime (i.e. the firstHK$2.0 million of assessable profits of qualifying corporations will be taxed at 8.25%, andassessable profits above HK$2.0 million will be taxed at 16.5%).

Our EIT was made on the estimated assessable profits in the PRC and was calculated inaccordance with the relevant regulations of the PRC after considering the available tax benefitsfrom refunds and allowances. The general EIT rate was 25% during the Track Record Period.

According to Article 3 of the EIT Law, non-tax residence enterprises that have set up anestablishment or a place in the PRC shall pay EIT in relation to the income that is derived bysuch establishment or place in the PRC from sources inside the PRC as well as income that,although derived from sources outside the PRC, is effectively connected with such establishmentor place.



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During the course of the preparation of our consolidated financial statements, we becameaware that ENLSZ HK, ENLGZ HK and ENLSH HK (the “Three HK Entities”) were exposedto the potential risk of being deemed a permanent establishment in the PRC under the EIT Lawgiving rise to corresponding potential EIT and surcharges on the basis that the Three HK Entitieshad rented offices and hired staff in the PRC to assist our business operations. As such, wevoluntarily notified Guangzhou tax authority for assessment of the EIT position of the Three HKEntities in the PRC. The PRC local tax authorities were in the process of reviewing the EITposition of the Three HK Entities as at the Latest Practicable Date. For the sake of prudence, wehave recognised (i) EIT expenses of approximately HK$0.8 million, nil and nil; and (ii)surcharges (included in our administrative expenses) of approximately HK$0.2 million, nil andHK$1.3 million for the Track Record Period, respectively.

Further, an interview was conducted with Guangzhou tax authority, which is the competentauthority regarding tax filing, on 12 July 2021, during which, Guangzhou tax authorityconfirmed that it will not impose any penalty and that it will coordinate with the local taxauthorities in Shanghai and Shenzhen to obtain the same position.

Each of Mr. Wong, Mr. Chim, Mr. Shon, E&E and Lucky Oasis has, under the Deed ofIndemnity, given joint and several indemnities to our Company for ourselves and as trustee forour subsidiaries in connection with, among other things, taxation falling on any member of ourGroup. Please refer to “E. Other information – 1. Tax and other indemnities” in Appendix IV tothis document for details of the Deed of Indemnity.

Our deferred income tax primarily represented the movement of our deferred income taxassets and liabilities during the year, which were primarily attributable to the deferred incometax effect of lease liabilities, accelerated/decelerated depreciation on property, plant andequipment and tax losses.

Our Directors confirm that, save as disclosed above, as at the Latest Practicable Date, (i)we made all required tax filings under the relevant tax laws and regulations in Hong Kong andthe PRC and have paid all outstanding tax liabilities due; and (ii) we were not subject to anydispute with the tax authorities in Hong Kong and the PRC.



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SENSITIVITY AND BREAKEVEN ANALYSIS

Sensitivity analysis

The following sensitivity analysis illustrates the impact of hypothetical fluctuations of (i)38.0% and 50.0% in our average freight rates of air and ocean freight forwarding services; (ii)25.0% and 50.0% in our freight and handling costs; and (iii) 2.2% and 4.4% in our staff costs,with other variables remaining constant, on our profit before income tax for the periodsindicated:


HK$’000 HK$’000 HK$’000

Average freight rates of air and oceanfreight forwarding services:50.0% 241,937 287,114 515,923-50.0% (241,937) (287,114) (515,923)38.0% 183,872 218,207 392,101-38.0% (183,872) (218,207) (392,101)

Freight and handling costs:50.0% (195,011) (241,547) (434,460)-50.0% 195,011 241,547 434,46025.0% (97,506) (120,773) (217,230)-25.0% 97,506 120,773 217,230

Staff costs:4.4% (1,665) (1,356) (1,814)-4.4% 1,665 1,356 1,8142.2% (833) (678) (907)-2.2% 833 678 907

The hypothetical fluctuation rates for our average freight rates of air and ocean freightforwarding services are set at 38.0% and 50.0%, which correspond to the CAGR of our overallaverage freight rates of (i) air freight forwarding services of approximately 49.5%; and (ii)ocean freight forwarding services of approximately 38.0% during the Track Record Period.

The hypothetical fluctuation rates for our freight and handling costs are set at 25.0% and50.0%, which correspond to the CAGR of our freight and handling costs of approximately 49.3%during the Track Record Period.

The hypothetical fluctuation rates for our staff costs are set at 2.2% and 4.4%, whichcorrespond to the CAGR of our staff costs of approximately 4.4% during the Track RecordPeriod.



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Breakeven analysis

If our cost of services increased by approximately 10.3%, 6.6% and 10.6% during the TrackRecord Period, respectively, with other variables remaining constant, we would record breakevenof profit before taxation for the respective year.

PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

FY2022 compared to FY2021

Revenue

Our total revenue increased by approximately 78.5% from approximately HK$579.0 millionfor FY2021 to approximately HK$1,033.5 million for FY2022, which was primarily attributableto:

(i) the increase in our revenue from the provision of air freight forwarding services fromapproximately HK$450.7 million for FY2021 to approximately HK$593.1 million forFY2022 mainly due to the increase in revenue generated from our Other Customersfrom approximately HK$390.0 million for FY2021 to approximately HK$578.6 millionfor FY2022 mainly due to (a) the increase in our air shipment volume of OtherCustomers from approximately 7.9 million kg for FY2021 to approximately 8.8million kg for FY2022 mainly as a result of a higher demand for our air freightforwarding services for the delivery of garment and fashion-related products, andelectrical and electronic goods mainly attributable to (1) the temporary suspension ofmanufacturing operations of certain factories in the PRC as a result of the lockdownmeasures due to the first outbreak of COVID-19 during FY2021; and (2) the gradualrecovery of the global and the U.S. economy from the COVID-19 pandemic duringFY2022; and (b) the increase in our average air freight rate of Other Customers fromapproximately HK$49.6/kg for FY2021 to approximately HK$65.7/kg for FY2022mainly as a result of the continuing surge of the air cargo price in the marketattributable to the ongoing disruptions and shortage in supply of cargo spaces causedby the COVID-19 pandemic in Hong Kong and the PRC together with the gradualrecovery of the global and the U.S. demand, partially offset by the decrease in ourrevenue from the provision of air freight forwarding services generated from CustomerA from approximately HK$60.7 million for FY2021 to approximately HK$14.5 millionfor FY2022 mainly due to the decrease in our air shipment volume from Customer Afrom approximately 0.8 million kg for FY2021 to approximately 0.1 million kg forFY2022 mainly because of the reduction of demand for our air freight forwardingservices from Customer A for the delivery of mobile phones, and computers and partsmainly as a result of the fact that, to the best of our Directors’ belief and knowledge,one of Customer A’s key customers (which is a U.S.-based multinational technologycompany) has relocated some of its warehouses from the PRC to Southern Asia; and



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(ii) the increase in our revenue from the provision of ocean freight forwarding servicesfrom approximately HK$123.5 million for FY2021 to approximately HK$438.7 millionfor FY2022 mainly due to (i) the strong increase in our ocean shipment volume fromapproximately 12,232 TEUs for FY2021 to approximately 26,296 TEUs for FY2022mainly due to the significant increase in our ocean shipment orders of garments andfashion-related products, household products and furniture from our customers mainlyattributable to (a) the temporary suspension of manufacturing operations of certainfactories in the PRC as a result of the lockdown measures due to the outbreak ofCOVID-19 during FY2021; (b) the gradual recovery of the global and the U.S.economy from the COVID-19 pandemic during FY2022; (c) the shift from air freightforwarding to ocean freight forwarding because of high freight price and capacityshortages in air cargos; and (d) our increased effort to provide our customers withcompetitive solutions to secure more freight forwarding orders; and (ii) the increase inour average freight rate of ocean freight forwarding services from approximatelyHK$10,100/TEU for FY2021 to approximately HK$16,700/TEU for FY2022 mainlydue to (a) the increase in our average unit cost from approximately HK$9,300/TEU forFY2021 to approximately HK$13,800/TEU for FY2022 mainly driven by the strongand continuous increase in North America ocean shipping rates charged by shippingliners during FY2022; and (b) the increase in our mark-ups to our customers inresponse to the surge of demand for our ocean freight forwarding services for theexport of goods mainly to North America accompanying with such skyrocketing NorthAmerica shipping rates charged by shipping liners.

Cost of services

Our cost of services increased by approximately 77.8% from approximately HK$506.3million for FY2021 to approximately HK$900.1 million for FY2022, which was primarilyattributable to the increase in our freight and handling costs from approximately HK$483.1million for FY2021 to approximately HK$868.9 million for FY2022 mainly in line with theincrease in our revenue from freight forwarding services as discussed above.


Our gross profit increased by approximately 83.8% from approximately HK$72.6 millionfor FY2021 to approximately HK$133.5 million for FY2022, which was primarily attributable tothe increase in our revenue as discussed above.

The slight increase in our overall gross margin from approximately 12.5% for FY2021 toapproximately 12.9% for FY2022 was primarily attributable to the increase in our gross marginfrom ocean freight forwarding services from approximately 8.3% for FY2021 to approximately17.5% for FY2022 mainly because of the overall increase in our mark-ups of ocean freightforwarding services in response to (i) the strong demand from our customers for our oceanfreight forwarding services; and (ii) the skyrocketing North America ocean shipping ratescharged by shipping liners during FY2022, partially offset by the decrease in our gross marginfrom air freight forwarding services from approximately 13.3% for FY2021 to approximately



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9.5% for FY2022 mainly due to (i) higher mark-ups charged to our customers for U.S. air exportfreight forwarding services in general during FY2021 mainly as a result of our ability to obtaincargo spaces from airline carriers despite the limited supply of cargo spaces in respect of theCOVID-19 pandemic; and (ii) the overall reduction of mark-ups charged to our customers duringFY2022 to maintain our competitiveness of air freight forwarding services mainly attributable tothe fact that the unit price of air cargo space charged by airline carriers was maintained at a highlevel continuously during the COVID-19 pandemic.

Other income

Our other income decreased from approximately HK$2.5 million for FY2021 to nil forFY2022, which was primarily attributable to the recognition of government grants ofapproximately HK$2.4 million for FY2021 mainly in respect of subsidies approximately HK$2.2million received under the anti-epidemic fund from the Hong Kong government during FY2021.

Other losses, net

The change from our other losses, net of approximately HK$3.3 million for FY2021 to ourother gains, net of approximately HK$0.1 million for FY2022, which was primarily attributableto (i) the change from our exchange losses, net of approximately HK$0.8 million for FY2021 toour exchange gains, net of approximately HK$1.7 million for FY2022 mainly due to thefavourable effect of exchange translations and settlement of U.S.-denominated trade receivablesmainly as a result of the general appreciation of US$ against HK$ during FY2022; and (ii) thedecrease in our loss from the change in cash surrender value of key management life insurancecontracts from approximately HK$2.4 million for FY2021 to approximately HK$1.6 million forFY2022.


Our administrative expenses decreased from approximately HK$38.6 million for FY2021 toapproximately HK$36.5 million for FY2022, which was primarily attributable to the recognitionof our share-based compensation of approximately HK$10.4 million for FY2021 in respect of the[REDACTED], partially offset by (i) the increase in our [REDACTED] from approximatelyHK$[REDACTED] million for FY2021 to approximately HK$[REDACTED] million forFY2022; and (ii) the increase in our staff costs from approximately HK$9.0 million for FY2021to approximately HK$11.2 million for FY2022 mainly due to the increase in our staff bonus andthe salary increment during FY2022.

Finance income/(costs), net

The change from our finance income, net of approximately HK$0.3 million for FY2021 toour finance costs, net of approximately HK$0.2 million for FY2022 was primarily attributable to(i) the decrease in our interest income on bank deposits from approximately HK$0.4 million forFY2021 to approximately HK$70,000 for FY2022 mainly due to the decrease in the averagebalances of our cash and cash equivalents; (ii) the recognition of our interest expense on bank



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borrowings of approximately HK$77,000 for FY2022 due to the drawdown of bank borrowingsduring FY2022; and (iii) the increase in our interest expense on lease liabilities fromapproximately HK$90,000 for FY2021 to approximately HK$0.2 million for FY2022 mainly dueto the renewal of the lease of our office and premises located in Kwun Tong during FY2022.

Income tax expense

Our income tax expense increased from approximately HK$8.1 million for FY2021 toapproximately HK$19.8 million for FY2022, which was primarily attributable to the increase inour profit before income tax mainly as a result of the significant increase in our revenue.

Our effective income tax rate decreased from approximately 24.1% for FY2021 toapproximately 20.7% for FY2022, which was primarily attributable to the decrease in ouraggregate tax non-deductible [REDACTED] and share-based compensation from approximatelyHK$19.1 million for FY2021 to approximately HK$12.6 million for FY2022.

Profit for the year

Our profit for the year increased from approximately HK$25.4 million for FY2021 toapproximately HK$75.9 million for FY2022, which was primarily attributable to the foregoingreasons as discussed above.

FY2021 compared to FY2020

Revenue

Our total revenue increased by approximately 19.2% from approximately HK$485.5 millionfor FY2020 to approximately HK$579.0 million for FY2021, which was primarily attributableto:

(i) the increase in our revenue from the provision of air freight forwarding services fromapproximately HK$378.9 million for FY2020 to approximately HK$450.7 million forFY2021 primarily attributable to the increase in revenue generated from our OtherCustomers by approximately HK$225.7 million from approximately HK$164.2 millionfor FY2020 to approximately HK$390.0 million for FY2021 mainly due to (a) theincrease in our air shipment volume of Other Customers from approximately 7.1million kg for FY2020 to approximately 7.9 million kg for FY2021 mainly as a resultof a higher demand for the transportation of medical and medical-related products inview of (1) the surge in urgent demand for hygiene products in respect of theCOVID-19 pandemic; and (2) our ability to obtain cargo spaces from airline carriersdespite the limited supply of cargo spaces; and (b) the increase in our average airfreight rate of Other Customers from approximately HK$23.1/kg for FY2020 toapproximately HK$49.6/kg for FY2021 mainly as a result of the increase in the unitprice of cargo space charged by airline carriers due to the shortage in supply of cargospaces caused by the COVID-19 pandemic, partially offset by the decrease in our



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revenue from the provision of air freight forwarding services generated from CustomerA by approximately HK$153.9 million from approximately HK$214.7 million forFY2020 to approximately HK$60.7 million for FY2021 mainly due to the decrease inour air shipment volume from Customer A from approximately 5.6 million kg forFY2020 to approximately 0.8 million kg for FY2021 mainly as a result of the factthat, to the best of our Directors’ belief and knowledge, one of Customer A’s keycustomers (which is a U.S.-based multinational technology company) has relocatedsome of its warehouses from the PRC to Southern Asia, resulting in a significantdecline of orders from Customer A for FY2021; and

(ii) the increase in our revenue from the provision of ocean freight forwarding servicesfrom approximately HK$105.0 million for FY2020 to approximately HK$123.5 millionfor FY2021 primarily attributable to the rebound of our average freight rate of oceanfreight forwarding services from approximately HK$8,800/TEU for FY2020 toapproximately HK$10,100/TEU for FY2021 mainly due to (a) the uncertainty over theglobal economy as a result of the intensified Sino-U.S. trade war during FY2020; and(b) the supply insufficiency of shipment capacity caused by the COVID-19 pandemicduring FY2021 while we maintained relatively stable ocean shipment volume ofapproximately 11,993 TEUs and 12,232 TEUs for FY2020 and FY2021, respectively.

Cost of services

Our cost of services increased by approximately 20.9% from approximately HK$418.8million for FY2020 to approximately HK$506.3 million for FY2021, which was primarily in linewith the increase in our revenue as discussed above.

The increase was primarily attributable to the increase in our freight and handling costsfrom approximately HK$390.0 million for FY2020 to approximately HK$483.1 million forFY2021 mainly in line with the increase in our revenue from freight forwarding services,partially offset by the decrease in our labour costs from approximately HK$27.2 million forFY2020 to approximately HK$21.8 million for FY2021 mainly due to (i) the decrease in ourcommission to Mr. Shon from approximately HK$3.1 million for FY2020 to approximatelyHK$0.3 million for FY2021 mainly as a result of the substantial decrease in our revenuegenerated from air freight forwarding services which was attributable to Mr. Shon’s businessnetwork, experience and efforts; and (ii) the reduction of the average number of direct labourfrom approximately 81 for FY2020 to approximately 74 for FY2021 mainly because of staffattrition during FY2021.


Our gross profit increased by approximately 8.8% from approximately HK$66.8 million forFY2020 to approximately HK$72.6 million for FY2021, which was primarily in line with theincrease in our revenue as discussed above.



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Our overall gross margin decreased from approximately 13.8% for FY2020 toapproximately 12.5% for FY2021, which was primarily attributable to (i) the decrease in ourgross margin from air freight forwarding services from approximately 14.7% for FY2020 toapproximately 13.3% for FY2021 mainly due to (a) the significant reduction of the proportion ofgross profit generated from Customer A due to the huge decrease in our revenue generated fromCustomer A; and (b) a relatively higher gross margin of approximately 19.2% and 21.2% wasgenerated from Customer A for FY2020 and FY2021, respectively, as compared to that of ourOther Customers despite the fact that we were generally able to transfer the substantialincrement of our average air freight cost to our customers for FY2021; and (ii) the decrease inour gross margin from ocean freight forwarding services from approximately 9.8% for FY2020to approximately 8.3% for FY2021 mainly due to the fact that we did not transfer all of theincrement of our average ocean freight cost from our suppliers to our customers in order tomaintain our market competitiveness.

Other income

Our other income increased from approximately HK$0.6 million for FY2020 toapproximately HK$2.5 million for FY2021, which was primarily attributable to the increase inour government grants from approximately HK$0.5 million for FY2020 to approximatelyHK$2.4 million for FY2021 mainly due to the receipts of subsidies of approximately HK$2.2million under the anti-epidemic fund from the Hong Kong government during FY2021.

Other losses, net

Our other losses, net increased from approximately HK$2.4 million for FY2020 toapproximately HK$3.3 million for FY2021, which was primarily attributable to the increase inour loss from the change in cash surrender value of key management life insurance contractsfrom approximately HK$1.2 million for FY2020 to approximately HK$2.4 million for FY2021.


Our administrative expenses increased from approximately HK$24.1 million for FY2020 toapproximately HK$38.6 million for FY2021, which was primarily attributable to (i) therecognition of our share-based compensation of approximately HK$10.4 million for FY2021 inrespect of the [REDACTED]; and (ii) the recognition of our [REDACTED] of approximatelyHK$[REDACTED] million for FY2021, partially offset by (i) the decrease in our travelling andentertainment expenses from approximately HK$4.0 million for FY2020 to approximatelyHK$1.4 million for FY2021 mainly due to the minimisation of business meals and entertainmentwith respect to the social distancing policy due to the COVID-19 pandemic; and (ii) the decreasein our staff costs from approximately HK$10.6 million for FY2020 to approximately HK$9.0million for FY2021 mainly due to the decrease in our average staff headcount and staff bonusduring FY2021.



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Finance income, net

Our finance income, net decreased from approximately HK$2.1 million for FY2020 toapproximately HK$0.3 million for FY2021, which was primarily attributable to the decrease inour interest income on bank deposits from approximately HK$2.2 million for FY2020 toapproximately HK$0.4 million for FY2021 mainly due to the decrease in our cash and cashequivalents.

Income tax expense

Our income tax expense remained relatively stable at approximately HK$8.0 million andHK$8.1 million for FY2020 and FY2021, respectively.

Our effective income tax rate increased from approximately 18.6% for FY2020 toapproximately 24.1% for FY2021, which was primarily attributable to the recognition of taxnon-deductible [REDACTED] and share-based compensation of approximatelyHK$[REDACTED] million and HK$10.4 million for FY2021, respectively.

Profit for the year

Our profit for the year decreased from approximately HK$35.0 million for FY2020 toapproximately HK$25.4 million for FY2021, which was primarily attributable to the foregoingreasons as discussed above.



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DISCUSSION OF SELECTED ITEMS OF CONSOLIDATED STATEMENTS OFFINANCIAL POSITION

The following table includes items from our consolidated statements of financial positionas at 31 March 2020, 2021 and 2022, which has been extracted from, and should be read inconjunction with the Accountant’s Report in Appendix I to this document.

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 4,421 3,543 2,298Intangible asset 1 66 39Right-of-use assets 2,185 1,534 2,075Non-current prepayments and

deposits 143 155 4Key management life insurance

contracts 1,503 – 949Deferred income tax assets 73 775 170

8,326 6,073 5,535

Current assetsTrade receivables 36,177 60,999 91,956Deposits, prepayments and other

receivables 2,067 12,475 8,096Income tax recoverable 113 – –Restricted bank deposits 31,607 34,429 60,756Cash and cash equivalents 102,546 61,259 31,068

172,510 169,162 191,876

Total assets 180,836 175,235 197,411



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As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

EquityShare capital – – –*Combined capital 2,000 2,000 –Other reserves 4,894 35,128 39,339Retained earnings 51,033 26,471 35,891

Total equity 57,927 63,599 75,230

Non-current liabilitiesLease liabilities 994 579 242Deferred tax liabilities 43 – –

1,037 579 242

Current liabilitiesTrade payables 31,664 38,356 45,078Accruals, other payables and

provisions 12,001 16,018 19,816Current income tax liabilities 7,448 7,692 10,864Amounts due to related parties 69,769 47,989 29,268Bank borrowings – – 15,000Lease liabilities 990 1,002 1,913

121,872 111,057 121,939

Total liabilities 122,909 111,636 122,181

Total equity and liabilities 180,836 175,235 197,411

* Less than HK$1,000



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Net current assets

The following table sets forth a breakdown of our current assets and current liabilities as atthe dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Current assets

Trade receivables 36,177 60,999 91,956Deposits, prepayments and other

receivables 2,067 12,475 8,096Income tax recoverable 113 – –Restricted bank deposits 31,607 34,429 60,756Cash and cash equivalents 102,546 61,259 31,068

172,510 169,162 191,876

Current liabilitiesTrade payables 31,664 38,356 45,078Accruals, other payables and provisions 12,001 16,018 19,816Current income tax liabilities 7,448 7,692 10,864Amounts due to related parties 69,769 47,989 29,268Bank borrowings – – 15,000Lease liabilities 990 1,002 1,913

121,872 111,057 121,939

Net current assets 50,638 58,105 69,937



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Our net current assets then increased from approximately HK$50.6 million as at 31 March2020 to approximately HK$58.1 million as at 31 March 2021, which was primarily attributableto (i) our net profit of approximately HK$25.4 million for FY2021; (ii) the increase in ourshare-based compensation reserve by approximately HK$10.4 million for FY2021 in respect ofthe [REDACTED]; and (iii) the increase in our capital reserve of HK$18.0 million in respect ofthe consideration paid/to be paid by the [REDACTED] for the subscription of 13.33% of theenlarged entire issued share capital of our Company, partially offset by our declaration ofdividend of HK$50.0 million for FY2021.

Our net current assets further increased to approximately HK$69.9 million as at 31 March2022, which was primarily attributable to our net profit of approximately HK$75.9 million forFY2022, partially offset by (i) our declaration of dividend of HK$40.0 million for FY2022; and(ii) our deemed distribution of approximately HK$25.3 million in respect of the distributionmade by ENLGZ HK and ENLSZ HK to the then owners in relation to our Included Business forFY2022.

Please refer to the below for further details of and analysis of our current assets and currentliabilities during the Track Record Period.

Property, plant and equipment

Our property, plant and equipment decreased from approximately HK$4.4 million as at 31March 2020 to approximately HK$3.5 million and HK$2.3 million as at 31 March 2021 and2022, respectively, which was primarily attributable to our depreciation of approximatelyHK$1.4 million and HK$1.5 million in FY2021 and FY2022, respectively.

Right-of-use assets

Our right-of-use assets represented our right to use our leased assets mainly in relation toour office and warehouse premises, motor vehicles and office equipment with lease terms ofover one year, which was initially measured at cost and subsequently measured at cost lessaccumulated depreciation and impairment losses under HKFRS 16. Please refer to “Business –Property” in this document for further details of our leased properties.

Our right-of-use assets decreased from approximately HK$2.2 million as at 31 March 2020to approximately HK$1.5 million as at 31 March 2021, which was primarily attributable to ourdepreciation of approximately HK$1.3 million for FY2021.



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Our right-of-use assets then increased to approximately HK$2.1 million as at 31 March2022, which was primarily attributable to the additions to right-of-use assets of approximatelyHK$2.9 million mainly in respect the renewal of the lease of our office and premises located inKwun Tong during FY2022, partially offset by our depreciation of approximately HK$2.3million for FY2022.

Key management life insurance contracts

Our key management life insurance contracts amounted to approximately HK$1.5 million,nil and HK$0.9 million as at 31 March 2020, 2021 and 2022, respectively, which represented thecash surrender value of our key management life insurance policies for our executive Directors.

In May 2006, we entered into two key management life insurance policies with a HongKong insurance company to insure our Directors, Mr. Wong and Mr. Chim, respectively. Underthe original key management life insurance policies, our Group, being the beneficiary and policyholder, was required to pay upfront payments of approximately HK$0.1 million in aggregate atthe time of taking out the life insurance policy and annual premium of approximately HK$0.1million in aggregate. The total insured sum of the life insurance policy amounted to HK$4.5million. We are entitled terminate the policies at any time and receive cash back based on thenet nominal account value of life insurance policies at the date of withdrawal.

We entered into new key management life insurance policies with another Hong Konginsurance company to insure all our executive Directors, including Mr. Wong and Mr. Chim inOctober 2019 and Mr. Shon in February 2020. Under the new life insurance policies, we wererequired to pay upfront payments of approximately HK$0.4 million in aggregate at the time oftaking out the life insurance policies and an annual premium of approximately HK$2.6 millionin aggregate. The total insured sum of the life insurance policy amounted to approximatelyHK$28.9 million.

Owing to the fact that (i) we would like to extend our life insurance policies to cover all ofour executive Directors; and (ii) we considered that the new life insurance policies have betterinsurance coverage, after taking into account the fact that a large sum of premium paid for theoriginal life insurance policies of approximately HK$1.5 million would be received upontermination of the policies, we decided to terminate the original life insurance contracts andenter into the new life insurance contracts during the Track Record Period.



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Trade receivables

The following table sets forth a breakdown of our trade receivables as at the datesindicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Trade receivables– Third parties 35,180 61,012 93,175– Related parties 1,013 – –

Less: Loss allowance (16) (13) (1,219)

Trade receivables – net 36,177 60,999 91,956

Our trade receivables principally represented the outstanding amounts to be received fromour customers in relation to the provision of our freight forwarding services, and logistics andrelated value-added services.

The following table sets forth our trade receivables turnover days for the periods indicated:

Year ended 31 March2020 2021 2022Days Days Days

Trade receivables turnover days (Note) 30.4 30.6 27.0

Note: Our trade receivables turnover days equals to the average of the opening and closing balances of our tradereceivables divided by our revenue and multiplied by 366, 365 and 365 days for the Track Record Period,respectively.

Our trade receivables increased from approximately HK$36.2 million as at 31 March 2020to approximately HK$61.0 million as at 31 March 2021, which was primarily attributable to theincrease in our trade receivables aged within 60 days from approximately HK$33.4 million as at31 March 2020 to approximately HK$57.0 million as at 31 March 2021 mainly due to thesignificant increase in our revenue generated in February and March 2021 as compared to thatfor the same period in 2020 mainly as a result of the outbreak of COVID-19 since early 2020and the substantial increase in the freight rate for FY2021 due to the shortage in supply of cargospaces caused by the COVID-19 pandemic.

Our trade receivables further increased to approximately HK$92.0 million as at 31 March2022, which was primarily in line with the increase in our revenue.



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During the Track Record Period, we generally granted our customers credit periods up to60 days.

Our trade receivables turnover days remained relatively stable at approximately 30.4 days,30.6 days and 27.0 days during the Track Record Period, respectively.

The following table sets forth an ageing analysis of our trade receivables before lossallowance, based on invoice date as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Less than 30 days 29,057 34,683 48,02831 to 60 days 4,392 22,351 25,34761 to 90 days 2,009 3,424 16,05591 to 180 days 606 527 3,110Over 180 days 129 27 635

Total 36,193 61,012 93,175

The following table sets forth an ageing analysis of our trade receivables before lossallowance, based on due date as at the dates indicated:

As at 31 MarchSubsequent settlement

up to theLatest Practicable Date2020 2021 2022

HK$’000 HK$’000 HK$’000 HK$’000 %

Current 27,117 31,143 41,118 30,917 75.2Within 30 days past due 5,410 23,049 30,198 26,323 87.231 to 60 days past due 2,422 5,919 17,060 14,325 84.061 to 90 days past due 904 547 3,780 2,826 74.891 to 180 days past due 244 327 411 373 90.8181 to 365 days past due 75 3 249 180 72.3Over 365 days past due 21 24 359 2 0.6

Total 36,193 61,012 93,175 74,946 80.4



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As at 31 March 2020, 2021 and 2022, our trade receivables of approximately HK$9.1million, HK$29.9 million and HK$52.1 million, respectively, (representing approximately 25.1%,49.0% and 55.9% of our total gross trade receivables, respectively) were past due. We appliedthe simplified approach to provide for expected credit losses prescribed by HKFRS 9 which usesa lifetime expected loss allowance for all of our trade receivables. To measure the expectedcredit losses, our trade receivables were grouped based on shared credit risk characteristics andthe days past due. The expected loss rates are based on the ageing profile as at the end ofreporting period and the corresponding historical credit losses experienced within this period.The historical loss rates are adjusted to reflect current and forward-looking information onmacroeconomic factors affecting the ability of our customers to settle our trade receivables.

As a result of our impairment assessment as discussed above, we recorded loss allowanceon our trade receivables of approximately HK$16,000, HK$13,000 and HK$1.2 million as at 31March 2020, 2021 and 2022, respectively, on our consolidated statements of financial positionand thus recorded net reversal of impairment loss of financial assets of approximately HK$2,000and HK$3,000 during FY2020 and FY2021, respectively, and net provision for impairment lossof financial assets of approximately HK$1.2 million for FY2022 on our profit or loss. We didnot hold any collateral as security over our trade receivables as at 31 March 2020, 2021 and2022.

We have implemented certain credit control policies to reduce our credit risk in relation tothe collectability of our trade receivables, especially past due trade receivables, including (i)setting trade credit period and credit limits based on our assessment of the customers’ financialbackground, creditworthiness and past payment history; (ii) continuous and regular monitoringof the progress of customers’ payments by the use of ageing and credit reports of our tradereceivables; (iii) follow-up actions of our trade receivables, such as issuing monthly statements,payment reminders, actively liaising with customers, and, if necessary, taking legal actions; and(iv) performing expected credit loss assessment of trade receivables in accordance with HKFRS9 to recognise credit loss of our trade receivables.

Please refer to note 3.1(c) to the Accountant’s Report in Appendix I to this document forfurther details of the credit risk of our trade receivables.

As at the Latest Practicable Date, approximately HK$74.9 million (or approximately80.4%) of our gross trade receivables as at 31 March 2022 were subsequently settled.



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Prepayments, deposits and other receivables

The following table sets forth a breakdown of our prepayments, deposits and otherreceivables as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Prepayments for office renovations – – –Deposits to vendors 1,250 1,451 1,802Prepayments for [REDACTED] – 2,216 5,282Receivable from the [REDACTED] – 8,000 –Other prepayments 462 484 771Deposits and other receivables(Note) 498 479 245

Total 2,210 12,630 8,100

Less: Non-current portionDeposits (143) (155) (4)

Current portion 2,067 12,475 8,096

Note: Our deposits and other receivables primarily represented (i) our rental deposits for our leased properties;and (ii) our other miscellaneous deposits and receivables.

Our prepayments, deposits and other receivables increased from approximately HK$2.2million as at 31 March 2020 to approximately HK$12.6 million as at 31 March 2021, which wasprimarily attributable to (i) the recognition of our receivable from the [REDACTED] of HK$8.0million as at 31 March 2021 in relation to the outstanding amount of consideration to be settledby the [REDACTED] for the [REDACTED]; and (ii) the recognition of our prepayments for[REDACTED] of approximately HK$2.2 million as at 31 March 2021.

Our prepayments, deposits and other receivables decreased to approximately HK$8.1million as at 31 March 2022, which was primarily attributable to the decrease in our receivablefrom the [REDACTED] to nil as at 31 March 2022, partially offset by the increase in ourprepayments for [REDACTED] to approximately HK$5.3 million as at 31 March 2022.



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Trade payables

The following table sets forth a breakdown of our trade payables as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Trade payables– Third parties 31,497 38,356 45,078– Related parties 167 – –

Total 31,664 38,356 45,078

Our trade payables principally represented the payables to our suppliers, including airlinecarriers, shipping liners, other freight forwarders and trucking service providers, mainly inrelation to our freight and handling costs.

The following table sets forth our trade payables turnover days for the periods indicated:

Year ended 31 March2020 2021 2022Days Days Days

Trade payables turnover days (Note) 29.9 25.2 16.9

Note: Our trade payables turnover days equals to the average of the opening and closing balances of our tradepayables divided by our cost of services and multiplied by 366, 365 and 365 days for the Track RecordPeriod, respectively.

Our trade payables increased from approximately HK$31.7 million as at 31 March 2020 toapproximately HK$38.4 million as at 31 March 2021, which was primarily in line with theincrease in our freight and handling costs.

Our trade payables further increased to approximately HK$45.1 million as at 31 March2022, which was primarily in line with the increase in our freight and handling costs.



– 357 –

During the Track Record Period, our suppliers generally granted us credit periods up to 60days. Our trade payables turnover days of approximately 29.9 days, 25.2 days and 16.9 days forthe Track Record Period, respectively, were generally within the credit terms allowed by oursuppliers.

The decrease in our trade payables turnover days to approximately 16.9 days for FY2022was primarily attributable to the fact that we accelerated our payment process to settle ourfreight costs incurred to our major suppliers so as to maintain good relationships with our majorsuppliers in order to secure sufficient air and ocean cargo spaces from them to cope with theshortages and disruptions in the supply of air and ocean cargo spaces in the market duringFY2022.

The following table sets forth an ageing analysis of our trade payables, based on invoicedate as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Less than 30 days 26,943 29,846 37,33831 to 60 days 2,162 7,741 5,90661 to 90 days 1,085 394 1,25291 to 180 days 658 143 448Over 180 days 816 232 134

Total 31,664 38,356 45,078

Our Directors confirm that there had been no material defaults in payment of our tradepayables during the Track Record Period.

As at the Latest Practicable Date, approximately HK$30.3 million (or approximately67.3%) of our trade payables as at 31 March 2022 were subsequently settled.



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Accruals, other payables and provisions

The following table sets forth a breakdown of our accruals, other payables and provisionsas at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Salaries, and staff welfare payables 5,055 4,986 7,883Provision for long-service payments 874 812 848Deposits received 350 – –Other tax payables (Note 1) 5,407 5,535 7,355Accrued [REDACTED] – 3,146 3,334Others (Note 2) 315 1,539 396

Total 12,001 16,018 19,816

Notes:

(1) Our other tax payables primarily represented (i) our payable of estimated surcharges in relation to our EITarising from the potential risk of each of the Three HK Entities being deemed a PRC permanentestablishment under the EIT Law; (ii) our individual income tax payables; and (iii) our payables of VAT,stamp duty and other surtaxes.

(2) Our others primarily represented (i) our accrued professional fees and expenses; and (ii) our othermiscellaneous payables and accruals.

Our accruals, other payables and provisions increased from approximately HK$12.0 millionas at 31 March 2020 to approximately HK$16.0 million as at 31 March 2021, which wasprimarily attributable to the recognition of our accrued [REDACTED] of approximately HK$3.1million as at 31 March 2021.

Our accruals, other payables and provisions increased to approximately HK$19.8 million asat 31 March 2022, which was primarily attributable to (i) the increase in our salaries, and staffwelfare payables from approximately HK$5.0 million as at 31 March 2021 to approximatelyHK$7.9 million as at 31 March 2022 mainly due to the increase in our commission payable toour certain Hong Kong management staff mainly as a result of the increase in our shippingvolume; and (ii) the increase in our other tax payables from approximately HK$5.5 million as at31 March 2021 to approximately HK$7.4 million as at 31 March 2022 mainly due to the increasein our payables of stamp duty and estimated EIT surcharges arising from the potential risk ofeach of the Three HK Entities being deemed a PRC permanent establishment under the EIT Law.



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Amounts due to related parties

The following table sets forth a breakdown of our amounts due to related parties as at thedates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Mr. Wong 28,439 – –E&E 41,325 47,989 –The [REDACTED] – – 5,332Lucky Oasis – – 23,936Top Aim 5 – –

Total 69,769 47,989 29,268

All of our amounts due to related parties were non-trade in nature, unsecured, interest-freeand repayable on demand as at 31 March 2020, 2021 and 2022.

Our amounts due to related parties of approximately HK$69.8 million, HK$48.0 millionand HK$29.3 million as at 31 March 2020, 2021 and 2022, respectively, primarily represented(i) our amount due to Mr. Wong mainly in relation to the profits generated from pallet tradingbusiness of ENLSH which was excluded from our [REDACTED] Business; and (ii) our amountsdue to E&E, the [REDACTED] and Lucky Oasis mainly in relation to the outstanding dividendpayables.

Our Directors confirm that our outstanding amounts due to related parties as at 31 March2022 will be settled before the [REDACTED].

LIQUIDITY AND CAPITAL RESOURCES

Our Group had historically financed our operations primarily through a combination ofcapital contribution, cash generated from our operating activities and credit facilities. Ourworking capital requirements primarily comprised payments for our freight and handling costs,staff costs, administrative expenses and capital investments mainly in relation to the purchasesof our property, plant and equipment. During the Track Record Period, we were able to repayour bank borrowings when they became due and to manage our liquidity risks by maintainingadequate reserves, credit facilities, continuously monitoring our forecasted and actual cash flowsand matching the maturity profiles of our assets and liabilities. We did not experience anyliquidity shortage during the Track Record Period.



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In the future, we expect that our working capital and other liquidity requirements will besatisfied through a combination of cash generated from our operating activities, credit facilitiesmade available to us and our proceeds from the [REDACTED]. Our ability to fund our workingcapital needs, repay our indebtedness and finance other obligations depends on our futureoperating performance and cash flow, which are in turn subject to the prevailing economicconditions, the level of spending by our customers and other factors, many of which are beyondour control.

We may need additional cash resources in the future if we experience changing businessconditions or other developments. We may also need additional cash resources in the future ifwe find and wish to pursue opportunities for investment, acquisition, and collaborations of othersimilar actions. If our existing cash resources are insufficient to meet our requirements, we mayseek to obtain extra credit facilities, or sell or issue equity securities, which might result indilution to our Shareholders.

Cash flows

The following table sets forth a summary of our cash flows for the periods indicated:


HK$’000 HK$’000 HK$’000

Operating cash flow before workingcapital changes 44,443 48,740 102,481

Changes in working capital (1,754) (17,284) (48,137)Income tax paid (8,070) (8,256) (15,882)


Net cash generated from/(used in)investing activities (3,451) (953) (2,605)

Net cash generated from/(used in)financing activities (5,533) (64,921) (67,472)

Net increase/(decrease) in cash and cashequivalents 25,635 (42,674) (31,615)

Effect of changes in foreign exchangerates (2,319) 1,387 1,424

Cash and cash equivalents at beginningof year 79,230 102,546 61,259

Cash and cash equivalents at end of year 102,546 61,259 31,068



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We recorded net cash outflows of approximately HK$42.7 million for FY2021, which wasprimarily attributable to (i) the dividend payments of approximately HK$41.3 million to E&E;and (ii) the net payments to related parties of approximately HK$30.5 million. We recorded netcash outflows of approximately HK$31.6 million for FY2022, which was primarily attributableto (i) the dividend payments of approximately HK$50.0 million; and (ii) the payment of deemeddistribution of approximately HK$25.3 million in respect of the distribution made by ENLGZHK and ENLSZ HK to the then owners in relation to our Included Business.

Net cash generated from operating activities

During the Track Record Period, we derived our cash from operating activities principallyfrom the receipt of payments from our customers for the provision of our freight forwardingservices, and logistics and related value-added services, while our cash used in operatingactivities was primarily related to the payments for our freight and handling costs, staff costs,other expenses relating to operating activities and income taxes.

Net cash generated from operating activities reflects our profit before taxation afteradjusting for (i) non-cash items, which primarily comprised depreciation of property, plant andequipment and right-of-use assets, and change in cash surrender value of key management lifeinsurance contracts; (ii) the effects of changes in working capital, which comprised tradereceivables, deposits, prepayments and other receivables, restricted bank deposits, tradepayables, and accruals, other payables and provisions; and (iii) items not related to operatingactivities, principally including finance income, finance costs and gain on disposals of property,plant and equipment.

For FY2020, our net cash generated from operating activities was approximately HK$34.6million, comprising cash generated from operations of approximately HK$42.7 million andpayment of income tax of approximately HK$8.1 million. Our net cash generated fromoperations comprised operating cash flow before working capital changes of approximatelyHK$44.4 million and adjustments for changes in working capital, primarily including (i) adecrease in trade receivables of approximately HK$8.0 million; (ii) a decrease in deposits,prepayments and other receivables of approximately HK$2.1 million; (iii) an increase inrestricted bank deposits of approximately HK$6.5 million; (iv) a decrease in trade payables ofapproximately HK$3.5 million; and (v) a decrease in accruals, other payables and provisions ofapproximately HK$1.7 million.

For FY2021, our net cash generated from operating activities was approximately HK$23.2million, comprising cash generated from operations of approximately HK$31.5 million andpayment of income tax of approximately HK$8.3 million. Our net cash generated fromoperations comprised operating cash flow before working capital changes of approximatelyHK$48.7 million and adjustments for changes in working capital, primarily including (i) anincrease in trade receivables of approximately HK$24.7 million; (ii) an increase in restrictedbank deposits of approximately HK$2.8 million; (iii) an increase in trade payables ofapproximately HK$6.5 million; and (iv) an increase in accruals, other payables and provisions ofapproximately HK$4.1 million.



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The decrease in our net cash generated from operating activities from approximatelyHK$34.6 million for FY2020 to approximately HK$23.2 million for FY2021 was primarilyattributable to an increase in trade receivables of approximately HK$24.7 million.

For FY2022, our net cash generated from operating activities was approximately HK$38.5million, comprising cash generated from operations of approximately HK$54.3 million andpayment of income tax of approximately HK$15.9 million. Our net cash generated fromoperations comprised operating cash flow before working capital changes of approximatelyHK$102.5 million and adjustments for changes in working capital, primarily including (i) anincrease in trade receivables of approximately HK$31.7 million; (ii) a decrease in deposits,prepayments and other receivables of approximately HK$0.6 million; (iii) an increase inrestricted bank deposits of approximately HK$26.3 million; (iv) an increase in trade payables ofapproximately HK$5.7 million; and (v) an increase in accruals, other payables and provisions ofapproximately HK$3.6 million.

Please refer to “Description of selected items of consolidated statements of financialposition” in this section for further details and analysis of our working capital.

Net cash used in investing activities

During the Track Record Period, our cash used in investing activities primarily consisted ofpurchases of property, plant and equipment, and premium paid for key management lifeinsurance contracts, while our cash from investing activities primarily represented the receipt ofinterests, the decrease in short-term bank deposits and receipts upon termination of keymanagement life insurance contracts.

For FY2020, our net cash used in investing activities was approximately HK$3.5 million,which was primarily contributed by (i) purchases of property, plant and equipment ofapproximately HK$4.5 million; and (ii) premium paid for key management life insurancecontracts of approximately HK$1.4 million, partially offset by receipt of interests ofapproximately HK$2.2 million.

For FY2021, our net cash used in investing activities was approximately HK$1.0 million,which was primarily contributed by premium paid for key management life insurance contractsof approximately HK$2.5 million, partially offset by receipts upon termination of keymanagement life insurance contracts of approximately HK$1.5 million.

For FY2022, our net cash used in investing activities was approximately HK$2.6 million,which was primarily contributed by premium paid for key management life insurance contractsof approximately HK$2.5 million.



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Net cash generated from/(used in) financing activities

During the Track Record Period, our cash from financing activities primarily consisted ofproceeds from the [REDACTED], proceeds from bank borrowings and proceeds from relatedparties, while our cash used in financing activities primarily consisted of payments of dividendsand deemed distributions, repayments of borrowings, principal repayments of lease liabilities,payment of [REDACTED] and payments to related parties.

For FY2020, our net cash used in financing activities was approximately HK$5.5 million,which was primarily contributed by (i) payment of dividend of approximately HK$2.3 million;(ii) repayments of bank borrowings of HK$5.0 million; (iii) principal repayment of leaseliabilities of approximately HK$1.1 million; and (iv) payments to related parties ofapproximately HK$2.1 million, partially offset by proceeds from bank borrowings of HK$5.0million.

For FY2021, our net cash used in financing activities was approximately HK$64.9 million,which was primarily contributed by (i) payment of dividend of approximately HK$41.3 million;(ii) principal repayment of lease liabilities of approximately HK$1.1 million; (iii) payment of[REDACTED] of approximately HK$2.0 million; and (iv) payments to related parties ofapproximately HK$48.7 million, partially offset by (i) proceeds from the [REDACTED] ofHK$10.0 million; and (ii) proceeds from related parties of approximately HK$18.2 million.

For FY2022, our net cash generated from financing activities was approximately HK$67.5million, which was primarily contributed by (i) payment of dividend and deemed distribution ofapproximately HK$84.0 million; (ii) repayments of bank borrowings of HK$15.0 million; (iii)principal repayment of lease liabilities of approximately HK$2.3 million; and (iv) payment of[REDACTED] of approximately HK$3.9 million, partially offset by proceeds from bankborrowings of HK$30.0 million.

Sufficiency of working capital

Taking into account the financial resources available to us, including our available creditfacilities, cash and cash equivalents on hand, cash flows generated from our operations and ourestimated proceeds from the [REDACTED], and in the absence of unforeseen circumstances,our Directors are of the opinion that we have available sufficient working capital for our presentrequirements and for at least 12 months from the date of this document.

INDEBTEDNESS

Bank borrowings

As at 31 March 2020, 2021 and 2022, our bank borrowings amounted to nil, nil andHK$15.0 million, respectively.



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As at 31 March 2022, our bank borrowings (i) were repayable within one year; (ii) carriedinterest at 2.23% per annum; (iii) were guaranteed by Mr. Wong and Mr. Chim; and (iv) weresecured by properties owned by Top Aim (a company owned by Mr. Wong and Mr. Chim).

Our Directors confirm that the guarantees provided by Mr. Wong and Mr. Chim, and thesecurities over Top Aim’s properties will be released upon the [REDACTED].

Lease liabilities

As at 31 March 2020, 2021 and 2022, our lease liabilities amounted to approximatelyHK$2.0 million, HK$1.6 million and HK$2.2 million, respectively. Our lease liabilities primarilyrepresented the outstanding lease payments primarily in respect of our office and warehousepremises, motor vehicles and office equipment, which would be primarily adjusted for interestand lease payments, and the impact of lease modifications.

The following table sets forth the maturity profile of our lease liabilities as at the datesindicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Within one year 990 1,002 1,913Between one and two years 725 465 67Between two and five years 269 114 175

Total 1,984 1,581 2,155

Non-trade nature amounts due to related parties

As at 31 March 2020, 2021 and 2022, our non-trade nature amounts due to related partiesof approximately HK$69.8 million, HK$48.0 million and HK$29.3 million, respectively, wereunsecured, interest-free and repayable on demand.

Our Directors confirm that our outstanding non-trade nature amounts due to related partieswill be settled before the [REDACTED].

Credit facilities

As at 31 March 2020, 2021 and 2022, the total credit facilities in respect of bankguarantees granted to our Group amounted to approximately HK$44.1 million, HK$44.4 millionand HK$99.3 million, respectively, of which approximately HK$17.1 million, HK$16.7 millionand HK$44.5 million were not utilised, respectively, which were committed, unrestricted andcould be drawn down at any time.



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As at 31 March 2020, 2021 and 2022, the total credit facilities in respect of revolving loansand overdrafts granted to our Group amounted to approximately HK$54.0 million, HK$54.0million and HK$19.3 million, respectively, of which approximately HK$54.0 million, HK$54.0million and HK$4.3 million were not utilised, respectively, which were committed, unrestrictedand could be drawn down at any time.

As at 31 March 2020, 2021 and 2022, our credit facilities were (i) guaranteed by Mr. Wongand Mr. Chim; (ii) secured by properties owned by Top Aim (a company owned by Mr. Wongand Mr. Chim); and (iii) secured by our restricted bank deposits of approximately HK$31.6million, HK$34.4 million and HK$60.8 million, respectively.

Our Directors confirm that the guarantees provided by Mr. Wong and Mr. Chim, and thesecurities over Top Aim’s properties will be released upon the [REDACTED].

Debt securities

As at 31 March 2022, being the most recent practicable date for the purpose of thisindebtedness statement, we had no debt securities issued outstanding or authorised, or otherwisecreated but unissued.

Contingent liabilities

As at 31 March 2020, 2021 and 2022, we did not have any significant contingent liabilities.We are currently not a party to any litigation that is likely to have a material adverse effect onour business, results of operations or financial condition.

Save as disclosed in “Indebtedness” in this section, as at 31 March 2022, being the mostrecent practicable date for the purpose of this indebtedness statement, we did not haveoutstanding mortgages, charges, debentures, loan capital, bank overdrafts, loans, loans fromgovernment, debt securities or other similar indebtedness, finance lease on hire purchasecommitments, liabilities under acceptances or acceptance credits or any guarantees on othermaterial contingent liabilities outstanding.

Our Directors confirm that during the Track Record Period and up to the Latest PracticableDate, (i) our credit facilities were subject to the standard banking conditions and covenants, andthere were no material covenants that impose a substantial limitation on our ability to obtainfurther banking facilities; (ii) we had no material default in repayments of our borrowings andwith regard to covenants and/or breaches of the covenants under our credit facilities; (iii) we didnot receive any notice from any bank indicating that it might withdraw or downsize ourfacilities; (iv) we did not experience any difficulty in obtaining credit facilities and request forearly repayments of our borrowings; and (v) we did not have any material external debtfinancing plans.



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Our Directors further confirm that there had not been any material change in ourindebtedness since 31 March 2022, being the most recent practicable date for the purpose of thisindebtedness statement, and up to the Latest Practicable Date.

OFF-BALANCE SHEET TRANSACTIONS

We have not entered into any material off-balance sheet transactions or arrangementsduring the Track Record Period and up to the Latest Practicable Date.

CAPITAL EXPENDITURES

During the Track Record Period, we paid an aggregate amount of approximately HK$4.5million, HK$0.4 million and HK$0.2 million primarily for capital expenditures on our property,plant and equipment and intangible assets, respectively.

We intend to fund our capital expenditures through a combination of the [REDACTED]receivable by us from the [REDACTED] and the cash flows generated from our operatingactivities. Save as disclosed in “Future plans and [REDACTED]” in this document, we have noother material planned capital expenditures for the year ending 31 March 2023.

COMMITMENTS

As at 31 March 2020, 2021 and 2022, we did not have any material capital commitments.

PROPERTY INTERESTS

Please refer to “Business – Property” in this document for the further details of our leasedproperties.

RELATED PARTY TRANSACTIONS

With respect to the related party transactions set out in this document, our Directors are ofthe opinion that these related party transactions were conducted on normal commercial terms.



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The following sets forth particulars of our related parties and discontinued transactions:

Strategic Global Partnership Group Limited (“SGPG”)

SGPG is an investment holding company incorporated in Hong Kong on 24 July 2014.Strategic Global Partnership (HK) Limited (“SGP(HK)”) and Strategic Global Partnership(SHA) Limited (“SGP(SHA)” ) are direct wholly-owned operating subsidiaries of SGPG(collectively referred as “Strategic Global Group”) incorporated in Hong Kong on 7 August2014 and 5 August 2014, respectively. At the time of its establishment and up to its disposal asset out below, Strategic Global Group principally engaged in the provision of freight forwardingservices for aircraft parts.

SGPG is owned by Smart Advance Limited (“Smart Advance”), Alliance 21 Group Pte.Ltd. (“Alliance 21”) and International Freight Consultancy Limited (“International Freight”) asto approximately 33.3%, 33.3% and 33.3%, respectively. Alliance 21 is an investment holdingcompany incorporated in Singapore while International Freight is an investment holdingcompany incorporated in the United Kingdom. Alliance 21 and International Freight areultimately owned by individuals who are Independent Third Parties. Smart Advance is aninvestment holding company incorporated in the BVI and was owned by Mr. Wong and Mr.Chim as to 75% and 25%, respectively, prior to its disposal on 16 January 2019 as detailedbelow. Mr. Wong and Mr. Chim, through Smart Advance, jointly incorporated SGPG withAlliance 21 and International Freight in 2014 in order to invest in a business that specificallyprovides freight forwarding services for aircraft parts as passive investors. The dailymanagement of Strategic Global Group was handled by Mr. Wong Wing Hung (“Mr. WHWong”), being a senior management member of Strategic Global Group and an IndependentThird Party.

Each of SGP(HK) and SGP(SHA) was regarded as our related parties given that (i) ourDirectors, Mr. Wong and Mr. Chim indirectly held, in aggregate, 33.3% of the issued sharecapital of SGPG prior to the disposal of Smart Advance on 16 January 2019; and (ii) Mr. Chimwas a director of each of the companies in Strategic Global Group prior to his resignation on 8September 2020.

As (i) Mr. Wong and Mr. Chim only indirectly held approximately 33.3% interests inStrategic Global Group as passive investors; (ii) the business of Strategic Global Group was notin line with our Group’s core business; and (iii) Mr. WH Wong was interested in acquiringinterests in and further developing the business of Strategic Global Group, Mr. Wong and Mr.Chim disposed of their entire interests in Smart Advance to Mr. WH Wong on 16 January 2019.As transition time was required to handover the directorship matters of the business during theperiod after the disposal, Mr. Chim resigned from his directorship in each of the companies inStrategic Global Group on 8 September 2020. Thereafter, each of SGP(HK) and SGP(SHA)ceased to be our related parties.



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Since the establishment of Strategic Global Group, our Group had been generating freightforwarding service income through providing freight forwarding services for aircraft parts toeach of SGP(HK) and SGP(SHA) while freight forwarding service fees were charged by each ofSGP(HK) and SGP(SHA) through providing freight forwarding services for aircraft parts to us.After the disposal of Smart Advance, Mr. WH Wong began to gradually develop general freightforwarding services in addition to Strategic Global Group’s existing freight forwarding servicesbusiness for aircraft parts. As such, during the Track Record Period, our freight forwardingservices transactions with each of SGP(HK) and SGP(SHA) included both general freightforwarding services and freight forwarding services for aircraft parts. Such transactions wererecognised as discontinued transactions upon each of SGP(HK) and SGP(SHA) ceasing to be ourrelated parties on 8 September 2020, being the date of Mr. Chim’s resignation from hisdirectorship in each of the companies in Strategic Global Group.

Since the establishment of Strategic Global Group and up to each of SGP(HK) andSGP(SHA) ceasing to be our related parties, our Group had been providing certainadministrative services to each of SGP(HK) and SGP(SHA). As such, during the Track RecordPeriod, we continued to receive management fees through providing such administrativeservices. Such transactions were recognised as discontinued transactions upon each of SGP(HK)and SGP(SHA) ceasing to be our related parties as set out above.

KEC Logistics Limited (“KEC Logistics”)

KEC Logistics is a company incorporated in Hong Kong on 11 March 2019 and waswholly-owned by Mr. Chim as at the date of incorporation until the disposal. Mr. Chimincorporated KEC Logistics in order to explore further logistics services business opportunities.Yet KEC Logistics remained inactive and had no business operation since the date ofincorporation up to its disposals on 12 July 2019 and 1 August 2019 as detailed below.

KEC Logistics was regarded as our related party given that (i) our Director, Mr. Chim, heldthe entire issued share capital of KEC Logistics prior to its disposals on 12 July 2019 and 1August 2019; and (ii) each of Mr. Wong and Mr. Chim was a director of KEC Logistics prior totheir resignation on 8 September 2020.

As (i) KEC Logistics had no business operation since its incorporation; (ii) Mr. WH Wongwas interested in taking up and developing the business of KEC Logistics together with StrategicGlobal Group as set out above; and (iii) three other business acquaintances of Mr. WH Wong,who are Independent Third Parties, were also interested in developing the business of KECLogistics together with Mr. WH Wong, Mr. Chim disposed of his entire interests in KECLogistics to Mr. WH Wong and his three business partners through a series of disposals on 12July 2019 and 1 August 2019. After the disposals, KEC Logistics became owned by Mr. WHWong (through an investment holding company incorporated in the BVI) and three otherIndependent Third Parties as to 60%, 15%, 15% and 10%, respectively. Mr. Chim and Mr.Wong’s resignation from their directorship of KEC Logistics were effected together with that ofStrategic Global Group on 8 September 2020 after all transition matters were handled.Thereafter, KEC Logistics ceased to be our related party.



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After the disposal of KEC Logistics, Mr. WH Wong and his three business partners beganto gradually develop general freight forwarding services through KEC Logistics. As such, duringFY2020 and FY2021, we generated certain freight forwarding service income through providingfreight forwarding services to KEC Logistics while certain freight forwarding service fees werecharged by KEC Logistics through providing freight forwarding services to us. Such transactionswere recognised as discontinued transactions upon KEC Logistics ceasing to be our related partyon 8 September 2020, being the date of Mr. Wong’s and Mr. Chim’s resignation from theirdirectorships in KEC Logistics as set out above.

Please refer to the note 30 to the Accountant’s Report in Appendix I to this document forfurther details of our related party transactions.

[REDACTED]

Our total [REDACTED], primarily consisting of fees paid or payable to professionalparties and [REDACTED] and commission, are estimated to be approximatelyHK$[REDACTED] million (based on the mid-point of the indicative [REDACTED] range ofHK$[REDACTED] per [REDACTED], representing approximately [REDACTED]% of thegross proceeds from the [REDACTED]. Our total [REDACTED] primarily comprise (i) ourestimated [REDACTED] of approximately HK$[REDACTED] million; (ii) our estimated feesand expenses of legal advisers and reporting accountant of approximately HK$[REDACTED]million; and (iii) our other estimated fees and expenses of approximately HK$[REDACTED]million. During FY2021 and FY2022, we incurred [REDACTED] of HK$[REDACTED] millionand HK$[REDACTED] million, respectively, of which approximately HK$[REDACTED]million and HK$[REDACTED] million will be accounted for as a deduction in equity,respectively, and approximately HK$[REDACTED] million and HK$[REDACTED] million wascharged to our profit or loss, respectively. We expect to further incur [REDACTED] amountingto approximately HK$[REDACTED] million, of which approximately HK$[REDACTED]million is expected to be accounted for as a deduction in equity and the remaining amount ofapproximately HK$[REDACTED] million is expected to be recorded as expenses for the yearending 31 March 2023.

Our Directors are of the view that our financial results for the year ending 31 March 2023are expected to be adversely affected by our [REDACTED], the nature of which isnon-recurring. Our Directors would also like to emphasise that the amount of our [REDACTED]is a current estimate for reference only and the final amount to be recognised in our consolidatedfinancial statements is subject to adjustment based on audit and the then changes in variablesand assumptions.

Potential investors should note that our financial performance for the year ending 31 March2023 is expected to be adversely affected by our estimated non-recurring [REDACTED]mentioned above, and may or may not be comparable to our financial performance in the past.



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KEY FINANCIAL RATIOS

The table below sets forth our certain key financial ratios as at the dates/for the periodsindicated:

Year ended/As at 31 March2020 2021 2022

Net profit margin (%) (Note 1) 7.2% 4.4% 7.3%Current ratio (Note 2) 1.4 1.5 1.6Gearing ratio (%) (Note 3) 3.4% 2.5% 22.8%Return on assets (%) (Note 4) 19.4% 14.5% 38.4%Return on equity (%) (Note 5) 60.4% 40.0% 100.8%Interest coverage ratio (Note 6) 299.6 373.4 396.4

Notes:

(1) Our net profit margin equals to our net profit divided by our revenue, multiplied by 100%.

(2) Our current ratio equals to our total current assets divided by our total current liabilities.

(3) Our gearing ratio equals to our total debts (being our bank borrowings and lease liabilities) divided by ourtotal equity, multiplied by 100%.

(4) Our return on assets equals to our net profit divided by our total assets, multiplied by 100%.

(5) Our return on equity equals to our net profit divided by our total equity, multiplied by 100%.

(6) Our interest coverage ratio equals to our net profit netting off our finance costs and income tax expensedivided by our finance costs.

Net profit margin

Our net profit margin decreased from approximately 7.2% for FY2020 to approximately4.4% for FY2021, which was primarily attributable to (i) the decrease in our gross margin fromapproximately 13.8% for FY2020 to approximately 12.5% for FY2021; and (ii) the recognitionof our [REDACTED] and share-based compensation of approximately HK$[REDACTED]million and HK$10.4 million for FY2021, respectively.

Our net profit margin increased to approximately 7.3% for FY2022, which was primarilyattributable to the decrease in our administrative expenses from approximately HK$38.6 millionfor FY2021 to approximately HK$36.5 million for FY2022 mainly due to the recognition ofshare-based compensation of HK$10.4 million for FY2021, partially offset by (i) the increase inour [REDACTED] from approximately HK$[REDACTED] million for FY2021 toapproximately HK$[REDACTED] million for FY2022; and (ii) the increase in our staff costsfrom approximately HK$9.0 million for FY2021 to approximately HK$11.2 million for FY2022mainly due to the increase in our staff bonus and the salary increment during FY2022.



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Current ratio

Our current ratio increased from approximately 1.4 as at 31 March 2020 to approximately1.5 as at 31 March 2021, which was primarily attributable to the increase in our net currentassets from approximately HK$50.6 million as at 31 March 2020 to approximately HK$58.1million as at 31 March 2021 mainly due to (i) our net profit of approximately HK$25.4 millionfor FY2021; (ii) the increase in our share-based compensation reserve by approximatelyHK$10.4 million for FY2021 in respect of the [REDACTED]; and (iii) the increase in ourcapital reserve of HK$18.0 million in respect of the consideration paid/to be paid by the[REDACTED] for the subscription of 13.33% of the enlarged entire issued share capital of ourCompany, partially offset by our declaration of dividend of HK$50.0 million for FY2021.

Our current ratio increased to approximately 1.6 as at 31 March 2022 mainly due to theincrease in our net current assets to approximately HK$69.9 million as at 31 March 2022 mainlydue to our net profit of approximately HK$75.9 million for FY2022, partially offset by (i) ourdeclaration of dividend of HK$40.0 million for FY2022; and (ii) our deemed distribution ofapproximately HK$25.3 million in respect of the distribution made by ENLGZ HK and ENLSZHK to the then owners in relation to our Included Business for FY2022.

Gearing ratio

Our gearing ratio decreased from approximately 3.4% as at 31 March 2020 toapproximately 2.5% as at 31 March 2021, which was primarily attributable to the decrease inour lease liabilities from approximately HK$2.0 million as at 31 March 2020 to approximatelyHK$1.6 million as at 31 March 2021.

Our gearing ratio increased to approximately 22.8% as at 31 March 2022, which wasprimarily attributable to (i) the recognition of bank borrowings of HK$15.0 million as at 31March 2022; and (ii) the increase in our lease liabilities to approximately HK$2.2 million as at31 March 2022 mainly due to the renewal of the lease of our office and premises located inKwun Tong for FY2022.

Return on assets

Our return on assets decreased from approximately 19.4% for FY2020 to approximately14.5% for FY2021, which was primarily attributable to the decrease in our net profit fromapproximately HK$35.0 million for FY2020 to approximately HK$25.4 million for FY2021.

Our return on assets increased to approximately 38.4% for FY2022, which was primarilyattributable to the increase in our net profit to approximately HK$75.9 million for FY2022.



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Return on equity

Our return on equity decreased from approximately 60.4% for FY2020 to approximately40.0% for FY2021, which was primarily attributable to (i) the decrease in our net profit fromapproximately HK$35.0 million for FY2020 to approximately HK$25.4 million for FY2021; and(ii) the increase in our total equity from approximately HK$57.9 million as at 31 March 2020 toapproximately HK$63.6 million as at 31 March 2021 mainly due to (a) our net profit ofapproximately HK$25.4 million for FY2021; (b) the increase in our share-based compensationreserve by approximately HK$10.4 million for FY2021 in respect of the [REDACTED] ; and (c)the increase in our capital reserve of HK$18.0 million in respect of the consideration paid/to bepaid by the [REDACTED] for the subscription of 13.33% of the enlarged entire issued sharecapital of our Company, partially offset by our declaration of dividend of HK$50.0 million forFY2021.

Our return on equity increased to approximately 100.8% for FY2022, which was primarilyattributable to the significant increase in our net profit to approximately HK$75.9 million forFY2022 as opposed to a lower rate of increase in our total equity to approximately HK$75.2million as at 31 March 2022 mainly due to (i) our declaration of dividend of HK$40.0 millionduring FY2022; and (ii) our deemed distribution of approximately HK$25.3 million in respect ofthe distribution made by ENLGZ HK and ENLSZ HK to the then owners in relation to ourIncluded Business for FY2022.

Interest coverage ratio

Our interest coverage ratio increased from approximately 299.6 for FY2020 toapproximately 373.4 for FY2021, which was primarily attributable to the decrease in our financecosts from approximately HK$0.1 million for FY2020 to approximately HK$90,000 for FY2021mainly due to the reduction of the drawdown of short-term bank borrowings.

Our interest coverage ratio increased to approximately 396.4 for FY2022, which wasprimarily attributable to the significant increase in our net profit from approximately HK$25.4million for FY2021 to approximately HK$75.9 million for FY2022, partially offset by theincrease in our finance costs to approximately HK$0.2 million for FY2022 mainly due to (i) theincrease in the drawdown of bank borrowings; and (ii) the renewal of the lease of our office andpremises located in Kwun Tong during FY2022.

UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

Please refer to the unaudited pro forma financial information in Appendix II to thisdocument for the details of our unaudited pro forma adjusted consolidated net tangible assets.



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MARKET RISKS

During the Track Record Period, we are principally subject to the foreign currency risk,interest rate risk, credit risk and liquidity risk. Please refer to note 3.1 to the Accountant’sReport in Appendix I to this document for further details of our market risks.

We mainly operate in Hong Kong and the PRC and our business transactions, assets andliabilities are principally denominated in HK$, US$ and RMB. Foreign currency risk arises whenfuture commercial transactions or recognised assets and liabilities are denominated in a currencythat is not an entity’s functional currency. As HK$ is pegged against US$, we consider that weare mainly exposed to foreign currency risk with respect to RMB as a result of the movementsof HK$ and RMB.

During the Track Record Period, we did not enter into any derivative instruments to hedgeagainst foreign currency risk. We manage our foreign currency risk by closely monitoring themovement of foreign currency exchange rates and performing regular reviews of our net foreignexchange exposure. In the event of any change of circumstances and we consider that ourexposure to foreign currency risk has heightened, we will implement necessary measures andpolicy to manage such risk, such as entering into foreign currency hedging transactions in thefuture.

DIVIDENDS AND DISTRIBUTABLE RESERVE

During the Track Record Period, we declared dividends of approximately HK$43.7 million,HK$50.0 million and HK$40.0 million, respectively. After the Track Record Period and up to theLatest Practicable Date, we did not propose and declare any dividend to our Shareholders. OurCompany currently does not have any predetermined dividend payout ratio. To the extent profitsare distributed as dividends, such profits will not be available to be reinvested in our operations.Our historical dividend distribution record may not be used as a reference or basis to determinethe level of dividends that may be declared or paid in the future. We cannot assure thatdividends will be paid in the future or as to the timing of any dividends that may be paid in thefuture.

Pursuant to the EIT Law, withholding income tax of 10% will be levied on dividendsdistribution from our PRC subsidiary to our Hong Kong incorporated intermediate holdingcompany. If our Hong Kong incorporated intermediate holding company falls within qualifiedinvestors as defined by the EIT Law, a treaty rate of 5% will apply. Please refer to “Regulatoryoverview – Regulatory requirements in the PRC – Laws and regulations related to tax – iii.Withholding income tax” in this document for further details.

The payment and the amount of any dividends of our Company, if paid, would depend onour results of operations, cash flows, financial position, statutory and regulatory restrictions onthe payment of dividends by us, future prospects and other factors that our Directors mayconsider relevant. Our Shareholders will be entitled to receive such dividends pro rata accordingto the amount paid up or credited as paid up on our Shares. The declaration, payment and



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amount of dividends will be subject to our Directors’ discretion. Dividends may be paid only outof our distributable profits as permitted under the relevant laws.

As at 31 March 2022, our Company had retained earnings of approximately HK$16.4million, being the distributable reserve available for distribution to our Shareholders.

DISCLOSURE REQUIRED UNDER THE LISTING RULES

Our Directors confirm that as at the Latest Practicable Date, they were not aware of anycircumstances that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of theListing Rules.

NO MATERIAL ADVERSE CHANGE

Our Directors confirm that since 31 March 2022 and up to the date of this document, therehas been no material adverse change in our financial or trading position or prospects. OurDirectors also confirm that there have been no events since 31 March 2022 which wouldmaterially affect the information shown in the Accountant’s Report in Appendix I to thisdocument.



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BUSINESS OBJECTIVES AND BUSINESS STRATEGIES

Please refer to “Business – Our business strategies” in this document for further details ofour business objectives and strategies.

[REDACTED]

Assuming an [REDACTED] of HK$[REDACTED] per [REDACTED] (being themid-point of the indicative [REDACTED] Price range) and that the [REDACTED] is notexercised, we estimate that the [REDACTED] receivable by us from the [REDACTED] (afterdeducting [REDACTED] and commission and estimated expenses in connection with the[REDACTED]) will be approximately HK$[REDACTED] million. We intend to apply such[REDACTED] in the following manner:

(a) Expanding and improving our air freight forwarding services

Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forexpanding and improving our air freight forwarding services, of which:

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forequipping ourselves with air freight warehousing capacity by leasing premises inKwai Chung, Hong Kong with a gross floor area of approximately [3,400] sq.m.for use as our air freight warehouse facility, at a rental of approximatelyHK$[172] per sq.m. per month and for financing the related management feesand utility costs.

It is anticipated that the Kwai Chung warehouse will have an estimated grossfloor area of approximately 3,400 sq.m. of which: (i) approximately 1,150 sq.m.(representing approximately 33.8% of the gross floor area) will be allocated forthe operation of cargo screening services, including the placing of three stationsof cargo x-ray screening equipment proposed to be acquired by our Group; (ii)approximately 1,250 sq.m. (representing approximately 36.8% of the gross floorarea) will be allocated for the warehousing of cargos; and (iii) approximately1,000 sq.m. (representing approximately 29.4% of the gross floor area) will beallocated for warehouse office, handling unit load devices, namely the build-up(i.e. placing and securing cargos into unit load devices) and break-down (i.e.removing cargos from unit load devices) processes and cargo consolidation.

Our Directors consider that the location of the Kwai Chung warehouse is suitablefor our freight forwarding business, as (i) Kwai Chung is the principalcommercial ocean cargo handling area of Hong Kong and Kwai Tsing ContainerTerminals, which is located in Kwai Tsing District, is one of the busiest port


FUTURE PLANS AND [REDACTED]

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facilities in the world; and (ii) Kwai Chung is in close proximity to the Tsing MaBridge, which leads to Hong Kong International Airport through the NorthLantau Highway for air cargo freight forwarding.

Further, there are two major factors for our consideration of the size of the KwaiChung warehouse. Firstly, the warehouse leasing should result in cost savingduring the first year of usage. For details of the calculation of estimated annualcost saving for the year ending 31 March 2023, please refer to “[REDACTED] –Analysis of costs and benefits of our expansion plans” in this section. Secondly,given our anticipated business growth and to meet the increasing future demandfor further storage space, there should be sufficient space in the new warehouseto provide for our future business growth given the high set-up costs, includingthe costs of renovation, installation of equipment and warehouse systems, etc. Ifwe are to obtain a warehouse of a lesser scale of which the utilisation rate isclose to the maximum, such warehouse will not be able to sustain for any growthand future demand. Further, a subsequent relocation to a larger warehouse in theforeseeable future will be costly and time consuming and will cause interruptionto our future business operations. We could utilise the excess capacity of thewarehouse for cargo warehousing of our ocean freight forwarding services andthe excess capacity of the cargo x-ray screening equipment for air cargo x-rayscreening services, which would in turn provide us with an additional source ofrevenue.

Taking into account, among other things, the expected utilisation rates of thewarehousing area for cargos and unit load devices with reference to our expectedair shipment volume for the year ending 31 March 2023, the anticipated businessgrowth and the gradual recovery of the air freight forwarding market, ourDirectors consider that the size of the proposed Kwai Chung warehouse isnecessary and justifiable.

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forenhancing our operational efficiency by acquiring eight forklifts of differentloading capacities to facilitate the transport of air cargos and consignments in ournew air freight warehouse facility.



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• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forrecruiting 10 additional skilled and experienced personnel to support andfacilitate the operations of our new air freight warehouse facility, details ofwhich are as follows:

Position

Number ofstaff to berecruited Role

Expected minimumacademic qualificationsand years of experience

Estimatedmonthly

salaryper staff

(Note)

Estimatedaggregate

remunerationfor the first

18 monthsfrom

[REDACTED](Note)

HK$ HK$’000

Warehouse supervisor 1 To be responsible for theoverall supervision ofthe operations of ournew air freightwarehouse facility

A minimum academicqualification of a highdiploma degree; and

At least eight years ofrelevant workexperience


Warehouse officer 3 To be responsible for theoverall arrangement ofthe provision ofwarehousing services


At least four years ofrelevant workexperience


Warehouse clerk 6 To provide day-to-daywarehousing services


At least one year ofrelevant workexperience


[REDACTED]

Note: The estimated aggregate remuneration for the first 18 months from [REDACTED] iscalculated on the basis of an expected inflation rate of 3% per year.



– 378 –

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forpurchasing and installing three stations of cargo x-ray screening equipment at ournew air freight warehouse facility and for financing the related maintenancecosts.

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forhiring four additional skilled personnel from the cargo x-ray screening supplierto oversee and handle our cargo x-ray screening related operations.

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forequipping our new air freight warehouse facility with an advanced warehouse ITmanagement and x-ray system which electronically stores and records data of thegoods and consignments in and out of our air freight warehouse facility as wellas their cargo x-ray screening information.

Please refer to “Business – Our business strategies – Expanding and improving our airfreight forwarding services” in this document for further details.

For details of cost and benefit analysis for our expansion plans in relation to (a)expanding and improving our air freight forwarding services; and (b) developing our owntruck fleet, please refer to “[REDACTED] – Analysis of costs and benefits of ourexpansion plans” in this section below.

(b) Developing our own truck fleet

Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used fordeveloping our own truck fleet, of which:

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used foracquiring four unit load devices trucks (with a maximum annual handlingcapacity of 10,472.5 tonnes per truck (Note)) and four pick-up trucks (with amaximum annual handling capacity of 9,292.5 tonnes per truck(Note)) to enable usto provide logistics services by deploying our own resources and therebyminimising our reliance on our third party service providers and for financing thecar park rental and related insurance and maintenance costs.

Note: The maximum handling capacity per truck is estimated on the basis and assumptions that (i) eachtruck can complete a maximum of five rounds of shipments per day; and (ii) there are 295 workingdays annually.



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• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forrecruiting 16 additional personnel to handle the day-to-day operations in relationto our logistics services, details of which are as follows:

Position

Number ofstaff to berecruited Role

Expected minimumacademic qualificationsand years of experience

Estimatedmonthly

salaryper staff

(Note)

Estimatedaggregate

remunerationfor the first

18 monthsfrom

[REDACTED](Note)

HK$ HK$’000

Truck driver 8 To be responsible fordriving trucks


At least five years ofrelevant workexperience


Delivery clerk 8 To be responsible for theoverall arrangement ofthe provision oflogistics services


At least three years ofrelevant workexperience


[REDACTED]

Note: The estimated aggregate remuneration for the first 18 months from [REDACTED] iscalculated on the basis of an expected inflation rate of 3% per year.

Please refer to “Business – Our business strategies – Developing our own truck fleet”for further details.

For details of cost and benefit analysis for our expansion plans in relation to (a)expanding and improving our air freight forwarding services; and (b) developing our owntruck fleet, please refer to “[REDACTED] – Analysis of costs and benefits of ourexpansion plans” in this section below.



– 380 –

(c) Strengthening our ability to purchase cargo spaces to meet customers’ demands

Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used for financingthe provision of bank guarantees to our airline partners so as to strengthen our ability topurchase cargo spaces to meet customers’ demands. Please refer to “Business – Ourbusiness strategies – Strengthening our ability to purchase cargo spaces to meet customers’demands” for further details.

(d) Enhancing our sales and marketing efforts and expanding our customer base

Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forenhancing our sales and marketing efforts and expanding our customer base, of which:

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forengaging a public relations firm to participate in more social media advertisingactivities, participating in international freight forwarder networks, placingadvertisements on shipping gazettes in Hong Kong and the PRC, advertisingthrough other marketing channels such as internet search engines and placingadvertisements on trucks, in order to enhance our corporate profile; and

• Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forrecruiting nine additional personnel, including one sales director, one marketingmanager, two senior sales executives, two sales executives, one marketingexecutive and two marketing assistants, with relevant expertise to expand oursales and marketing team;

Please refer to “Business – Our business strategies – Enhancing our sales andmarketing efforts and expanding our customer base” in this document for further details.

(e) Upgrading and strengthening our IT system

Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used forupgrading and strengthening our IT system. Please refer to “Business – Our businessstrategies – Upgrading and strengthening our IT system” for further details.

(f) As general corporate purposes and working capital

Approximately HK$[REDACTED] million, representing approximately[REDACTED]% of our [REDACTED] from the [REDACTED], will be used for ourgeneral corporate purposes and working capital.



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Our Directors consider that there is and will be sufficient demand for our Group’sservices, especially U.S. export freight forwarding services, to support and commerciallyjustify our expansion plans and the [REDACTED] as follows:

Growth of export market in Hong Kong and the PRC

Based on the Industry Report, there was a hiccup in the growth of the export marketin Hong Kong in 2020 owing to the COVID-19 outbreak and the Sino-U.S. trade war.However, according to the Industry Report, the outlook of the air freight forwardingservices market in Hong Kong remains positive in the long run. Our Group has benefittedand can benefit from the positive outlook of the export market of the PRC and Hong Kongfollowing the rapid recovery of U.S. export market demand in the PRC and Hong Kongfrom the challenges posed by the Sino-U.S. trade war and the COVID-19 pandemic,including the following:

(i) the U.S. and the PRC are still the first and the second largest economies in theworld in terms of GDP in 2021, respectively. The PRC and the U.S. continued tobe the largest trading partners in 2021 amid the Sino-U.S. trade war and thetrading volume between the U.S. and the PRC was well ahead of other countries;

(ii) according to the GACC, there was a strong surge of the PRC’s export to the U.S.by approximately 27.5% from approximately US$451.8 billion in 2020 toapproximately US$576.1 billion in 2021, exceeding the level of the PRC’s exportto the U.S. of approximately US$478.4 billion in 2018;

(iii) the U.S. continued to be the second largest export destination of Hong Kong interms of export value in 2021, following the Mainland China; and

(iv) according to the Hong Kong Census and Statistics Department, Hong Kong’sexport to the U.S. surged by approximately 19.6% from approximately HK$258.8billion in 2020 to approximately HK$309.6 billion in 2021.

Going forward, according to Frost and Sullivan, it is expected that:

(i) the PRC’s export to the U.S. will further grow to approximately US$1,080.0billion, respectively at a CAGR of approximately 11.8% from 2022 to 2026; and

(ii) the Hong Kong’s export to the U.S. will further grow to approximately HK$414.9billion in 2026 at a CAGR of approximately 5.0% from 2022 to 2026. Further, itis expected that the outward air freight movement in Hong Kong will increasefrom approximately 3,351.0 thousand tonnes in 2021 to approximately 3,451.5thousand tonnes in 2022 and further to approximately 3,870.5 tonnes in 2026 at aCAGR of approximately 2.9% from 2022 to 2026.



– 382 –

In addition, in relation to air freight forwarding services, according to AirportsCouncil International, Hong Kong International Airport reclaimed the busiest air cargo hubin the world in 2021 and Shanghai Pudong International Airport maintained its third placein 2021. Given Hong Kong’s strategic location in the centre of Asia and comprehensivetransport facilities and infrastructure, the city enjoys a competitive advantage as theregional logistics hub. It is anticipated that the expansion of Hong Kong InternationalAirport and the construction of the three-runway system will enhance the overall logisticsefficiency and thereby further increasing air traffic volume. In relation to ocean freightforwarding services, according to the World Shipping Council, in 2020, Hong Kongremained the ninth busiest port in the world and six of the top 10 busiest ports in the worldwere located in the PRC, namely Shanghai (1st), Ningbo-Zhoushan (3rd), Shenzhen (4th),Guangzhou (5th), Qingdao (6th) and Tianjin (8th).

As our Group is a Hong Kong-based freight forwarding and logistics service providerwith a presence in Chongqing, Shanghai, Guangzhou and Shenzhen, the PRC (which aremajor trade hubs in the PRC in terms of cargo throughput), our freight forwarding servicesshould benefit from the world class trade hubs in the PRC and Hong Kong, and theincreasing logistics efficiency and air traffic volume attributable to the expansion of HongKong International Airport in Hong Kong.

Ability to seize new business opportunities from our customers

Leveraging our Group’s proven track record and ability to obtain cargo spaces atrelatively competitive prices from our airline partners with whom we have established andmaintained long-term and stable business relationships, we were able to seize businessopportunities amidst the COVID-19 outbreak and the rapid growth of e-commerce.Notwithstanding that our revenue from Customer A did decrease during FY2020 to FY2021,we recorded a strong rebound of total revenue attributable to freight forwarding servicesgenerated from Customer A by approximately 97.7% from approximately HK$75.6 millionfor FY2021 to approximately HK$149.4 million for FY2022, which was primarilyattributable to the increase in our shipment orders from Customer A for the shipment ofgarments and fashion-related products for FY2022 which also serves as an evidence that thedemand for our freight forwarding services for the exports to the U.S. has graduallyrecovered from the adverse impact of the Sino-U.S. trade war and the COVID-19 pandemic.

In addition, we were able to diversify our customer base and seize new businessopportunities, such that our revenue attributable from Other Customers increased fromapproximately HK$241.0 million in FY2020 to approximately HK$503.0 million in FY2021and further to approximately HK$884.1 million in FY2022.

In particular, owing to the strong increase in our shipment orders from Customer Aand Other Customers, we recorded an increase in our revenue from freight forwardingservices for U.S. export by approximately HK$406.0 million (or approximately 84.0%)from FY2021 to FY2022, which was attributable to the increase in our revenue from bothair freight forwarding services and ocean freight forwarding services with an increase of



– 383 –

approximately HK$122.4 million (or approximately 30.6%) and HK$283.6 million (orapproximately 340.3%) from FY2021 to FY2022, respectively. During FY2022, we alsorecorded an increase in our shipment volume by (i) approximately 65,000 kg (orapproximately 1.0%) for our air freight forwarding services; and (ii) approximately 10,045TEUs (or approximately 140.6%) for our ocean freight forwarding services as compared tothat for FY2021. Further, given our Group’s established reputation and the substantialexpertise and experience of our Directors and senior management in the freight forwardingindustry, we have every ability to diversify our business model in response to the changingmarket needs, if needed.

Diversified and broadening of customer base

During the Track Record Period, we maintained business relationships with over 3,000customers and commenced businesses with 802, 700 and 633 new customers, respectively,amidst the COVID-19 pandemic and the rapid growth of e-commerce and our revenueattributable to new customers amounted to approximately HK$9.3 million, HK$68.4 millionand HK$47.5 million, respectively.

Leveraging our established reputation and the substantial expertise and experience ofour Directors and senior management in the freight forwarding industry and by devotingour sales and marketing efforts to Other Customers (including new and existing customers)in response to the decrease in orders from Customer A from FY2020 to FY2021 and theadverse impact of the Sino-U.S. trade war and the COVID-19 pandemic, we were able toincrease in our revenue attributable to new customers to approximately HK$68.4 millionand HK$47.5 million for FY2021 and FY2022, respectively, accounting for approximately11.8% and 4.6% of our total revenue, respectively, which is well above the level in FY2020both in the amount of approximately HK$9.3 million and revenue percentage contributionof approximately 1.9%.

Moreover, although our revenue contribution attributable to new customers ofapproximately HK$9.3 million for FY2020 was relatively low, these new customers hadgradually increased their businesses with us and contributed revenue of approximatelyHK$22.4 million for FY2022.

Leveraging our established reputation in the freight forwarding and logistics industryin Hong Kong and the PRC and given our high quality and reliable customisedsolution-oriented services which meet the varying customer needs, our Directors believethat some of our new customers will gradually develop loyalty and trust to our freightforwarding services and will engage our services on a recurring basis in the future, whichwill ultimately lead to the enhancement of our profitability in the future.



– 384 –

Our capability to offer freight forwarding services of different goods from our customers

As advised by Frost & Sullivan, demands for particular types of goods in the freightforwarding industry may vary from time to time depending on a number of factorsincluding, among others, the latest market trends, the launch dates for worldwide popularitems, the ever changing consumer shopping patterns and habits, the rising needs forparticular essential and necessary items, seasonality and festive seasons, as well aspromotional discount offers for particular items. As such, the demands for our freightforwarding services may vary depending on the demands for particular types of goods at aparticular time.

The growth of our revenue has not relied on the transportation of any single orparticular category of goods during the Track Record Period as we have a proven trackrecord and substantial expertise and capability for the provision of freight forwardingservices of a variety of goods for our customers. The largest category of products in whichwe provided our freight forwarding services for had been changing throughout the TrackRecord Period from “electronic devices, machineries and equipment” for FY2020(contributing approximately 32.0% of our total revenue from freight forwarding services) to“daily necessities and household products” for FY2021 (contributing approximately 27.6%of our total revenue from freight forwarding services), and finally “garments and fashionrelated products” for FY2022 (contributing approximately 34.7% of our total revenue fromfreight forwarding services).

Going forward, our Directors expect that, same as previous periods, although theremay be fluctuations for the demands of our freight forwarding services throughout a yearfor any particular type of product, given the variety of goods our customers are involved in,our Directors verily believe that leveraging our proven track record, established reputationand substantial expertise and capability of transporting a variety of goods for ourcustomers, we are able to capture the market trend as well as the change in market demandto further grow our freight forwarding services.

Positive outlook of e-commerce

With the development of a ‘new normal’ shopping behaviour since early 2020, theglobal e-commerce market is seeing a significant growth and is expected to continue togrow in the years to come. It is also expected that the outlook of e-commerce will continueto be positive even when the COVID-19 pandemic gradually subsides. According to theIndustry Report, the gross merchandise value of e-commerce in the PRC and Hong Kong isexpected to continue to expand in the years to come. In view of the anticipated dynamicgrowth of e-commerce, our Directors believe that there will be a continuing increase in thedemand for international freight forwarding services and that there will be plenty ofbusiness opportunities arising from the e-commerce market for our Group to expand ourservices to both our existing customers and potential customers.



– 385 –

Taking into account the expected growth of the export market in Hong Kong and thePRC, our Group’s ability to seize new business opportunities and diversify and broadencustomer base, our capability to offer freight forwarding services of different goods fromour customers and the positive outlook of e-commerce, our Directors consider that there isand will be sufficient demand from a diverse and broad customer base for our air freightforwarding services.

For further details of the discussion of the increasing demand of freight forwardingservices from our customers, please refer to “Business – Customers – Our businesssustainability and customer demand for freight forwarding services” in this document.

Analysis of costs and benefits of our expansion plans

Our Directors consider that there is sufficient demand for our air freight forwardingservices and freight forwarding and ancillary logistics services to support theimplementation of our expansion plans described in “Business – Our business strategies –Expanding and improving our air freight forwarding services” and “Business – Ourbusiness strategies – Developing our own truck fleet” in this document given (i) the rapiddevelopment of the e-commerce business in recent years and its anticipated growth in theyears to come and the fact that freight forwarding services are an essential component ofcross-border e-commerce and domestic e-commerce transactions; and (ii) the introductionof the RACSF scheme which regulates air cargo screening at off-airport locations.

Owing to the nature of our freight forwarding business, (i) our air and ocean freightcosts mainly charged by the airline carriers and shipping liners; (ii) our overseas logisticscosts mainly charged by overseas freight forwarders; (iii) our other freight-related charges,mainly including Automated Manifest System (AMS) fees, custom charges, fuel surcharges,taxes and handling costs; and (iv) our labour costs together accounted for more than 95%of our cost of services for the Track Record Period which can hardly be reduced or avoidedby us. As such, we focus on saving the cost of having to outsource services, includingcargo warehousing services and x-ray cargo-screening and hence increasing our profitmargin, which is beneficial to us. In addition, in anticipation of the growing strongdemands for our freight forwarding services, we target to be an integrated freightforwarding and logistics service provider to provide one-stop freight forwarding services inHong Kong to further differentiate us from our competitors.



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The following tables illustrate a comparison of (i) the annual costs for warehousingand logistics services in relation to our freight forwarding services and annual costs foroff-airport cargo x-ray screening services through engaging third party service providers;and (ii) the annual costs expected to be incurred for (a) expanding and improving our airfreight forwarding services; and (b) developing our own truck fleet:

HK$ million

(approximately)

Annual costs for warehousing and logistics services in relation toour freight forwarding services (Note 1) 9.9

Annual costs for off-airport cargo x-ray screening services (Note 2) 11.7

Total (A) 21.6

Notes:

(1) Our annual costs for warehousing and logistics services in Hong Kong are calculated on the basisand assumptions of (i) our forecast annual air shipment volume with Hong Kong as departure portfor the year ending 31 March 2023 of approximately 8.3 million kg; and (ii) our average cost forwarehousing and logistics services of approximately HK$1.2/kg (i.e. dividing our costs forwarehousing and logistics services in Hong Kong of approximately HK$8.3 million for FY2022 byour air shipment volume with Hong Kong as departure port of approximately 6.9 million kg forFY2022).

(2) Our annual costs for off-airport cargo x-ray screening services are calculated on the basis andassumptions that (i) our forecast annual air shipment volume with Hong Kong as departure port forthe year ending 31 March 2023 is approximately 8.3 million kg; and (ii) the average price foroff-airport cargo x-ray screening services in Hong Kong in 2022 is approximately HK$1.4 per kg(being the average of the high-end and low-end of the price range between approximately HK$1.0per kg and HK$1.8 per kg, as confirmed by Frost & Sullivan).



– 387 –

HK$ million

(approximately)

Expanding and improving our air freight forwarding services(1) Annual rental costs for our new air freight warehouse facility

(inclusive of management fees and related utility costs) [REDACTED](2) Aggregate annual depreciation of (a) forklifts; and (b) cargo

x-ray screening equipment to be acquired (Notes 1 and 2) [REDACTED](3) Aggregate annual remuneration for (a) warehouse personnel;

and (b) x-ray handling officer [REDACTED](4) Aggregate annual amortisation for our advanced warehouse IT

management and x-ray system (Notes 1 and 2) [REDACTED]

Developing our own truck fleet(1) Aggregate annual depreciation of trucks to be acquired

(Notes 1 and 2) [REDACTED](2) Aggregate annual remuneration for truck drivers and delivery

clerks [REDACTED](3) Aggregate annual car park rental and related insurance and

maintenance costs [REDACTED]

Total (B) [REDACTED]

Annual costs saved (HK$ million) (A) – (B) [REDACTED]

Notes:

(1) Depreciation and amortisation charges are non-cash item without any actual cash outflows and hencewould not impact our Group’s liquidity.

(2) The estimated useful life of 10 years is determined according to accounting policies adopted by ourGroup. Based on our Directors’ best knowledge and estimation, the actual useful life of forklifts,cargo x-ray screening equipment, trucks and advanced warehouse IT management and x-ray systemwill be more than 10 years. Therefore, the actual amount of cost savings are expected to be largerthan the above computed figures.



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As illustrated in the above tables, our annual costs for warehousing and logisticsservices in relation to our freight forwarding services and off-airport cargo x-ray screeningservices through engaging third party service providers will be higher than the annual costsexpected to be incurred for (i) expanding and improving our air freight forwarding services;and (ii) developing our own truck fleet. Our Directors are of the view that in view of thepositive industry outlook and sufficient demand for our freight forwarding services, notonly that we would be in a position to better monitor and ensure the quality of its services,it would be beneficial and more economical for us to undertake such services ourselveswhilst expanding and improving our air freight forwarding services and develop our owntruck fleet by utilising part of our [REDACTED] from the [REDACTED] as opposed tooutsourcing such services to third party service providers in the long run.

Our Directors consider that the actual benefit to our Group would generally be morethan the saving of approximately HK$3.8 million per annum as calculated above. Theexcess capacity of the cargo x-ray screening equipment is estimated to be approximately4.7 million kg which is calculated by the difference between (i) the capacity of the cargox-ray screening equipment of approximately 13.0 million kg; and (ii) the forecasted airshipment volume of approximately 8.3 million kg with Hong Kong as departure port for theyear ending 31 March 2023. We will be able to generate additional source of revenue bymarketing such excess capacity for the provision of cargo x-ray screening services, whichcould generate an extra revenue of up to approximately HK$6.6 million per year (based on(i) the excess capacity of approximately 4.7 million kg as discussed above; and (ii) theaverage price for off-airport cargo x-ray screening services in Hong Kong in 2022 ofapproximately HK$1.4 per kg (being the average of the high-end and low-end of the pricerange between approximately HK$1.0 per kg and HK$1.8 per kg, as confirmed by Frost &Sullivan)).

In addition, we could enjoy economies of scale with our anticipated business growth.Based on our Directors’ best knowledge and estimation, the saving per annum will furtherincrease to approximately HK$15.9 million if the annual air shipment volume with HongKong as departure port increased to approximately 13.0 million kg where the cargo x-rayscreening equipment is fully utilised.



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In addition, the following table sets forth a comparison of the purchase costs (takinginto account the annual depreciation charges over the estimated useful life of 10 years) andthe leasing costs of the (i) forklifts; (ii) cargo x-ray screening equipment; and (iii) trucks tobe acquired by our Group in furtherance of our business strategies and expansion plans:

Type Quantity

Approximatepurchase cost

per unit

Approximateannual

depreciationper unit (Notes

1 and 2)

Approximateannual

leasing costper unit

Approximateannual costs

saved perunit

Approximatetotal annualcosts saved

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

(A) (B) (C) (D)=(C)-(B) (D)x(A)

(i) ForkliftsForklift with maximum

loading capacity of5,000 kg and maximum liftheight of 3,000 mm 2 [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Forklift with maximumloading capacity of2,500 kg and maximum liftheight of 3,000 mm 6 [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

(ii) Cargo x-ray screeningequipment

Large cargo x-ray screeningequipment 2 [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Small cargo x-ray screeningequipment 1 [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

(iii) TrucksUnit load devices trucks 4 [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]Pick-up trucks 4 [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]




– 390 –

Notes:

(1) Depreciation charges are non-cash item without any actual cash outflows and hence would notimpact our Group’s liquidity.

(2) The estimated useful life of 10 years is determined according to accounting policies adopted by ourGroup. Based on our Directors’ best knowledge and estimation, the actual useful life of the aboveitems will be more than 10 years. Therefore, the actual amount of cost savings are expected to belarger than the above computed figures.

(3) As confirmed by our Directors after having made due and careful enquiries, the unit load trucks andpick-up trucks which our Group intends to acquire are not readily available for lease in the market.

The estimated useful life of 10 years is determined according to the best estimates byour management. Based on our Directors’ best knowledge and estimation, the actual usefullife of forklifts, cargo x-ray screening equipment, trucks and advanced warehouse ITmanagement and x-ray system will generally be more than 10 years.

Given that our forklifts will be operated according to their specifications byexperienced logistics staff in a clean and indoor environment with sufficient proper andregular maintenance, to our Directors’ best knowledge and information and Frost &Sullivan concurs that, the lifespan of forklifts can be over 10 years.

According to the discussion between our Directors and the supplier of cargo x-rayscreening equipment, and as concurred by Frost & Sullivan, the average lifespan of a cargox-ray screening equipment can be more than 10 years with proper usage and maintenance.

Based on the service life limit of 15 years for Pre-Euro IV diesel commercial vehiclesas set by the Hong Kong government, it is expected that the actual useful life of trucks willbe more than 10 years.

As illustrated in the table above, the estimated annual leasing costs for the (i)forklifts; and (ii) cargo x-ray screening equipment are higher than their estimated annualdepreciation charges. Our Directors consider that acquiring rather than leasing these itemswould result in better cost-saving effects and is therefore more economical.

Assuming that the [REDACTED] is not exercised at all, if the final [REDACTED] is setat the highest or lowest point of the indicative [REDACTED] range, the [REDACTED] fromthe [REDACTED] will increase or decrease by approximately HK$[REDACTED] million,respectively.



– 391 –

Assuming that the [REDACTED] is exercised in full, we estimate that the additional[REDACTED] from the offering of these additional Shares to be received by us, after deducting[REDACTED] and estimated expenses payable by us, will be approximately (i)HK$[REDACTED] million, assuming the [REDACTED] is fixed at the high-end of theindicative [REDACTED] range, being HK$[REDACTED] per [REDACTED]; (ii)HK$[REDACTED] million, assuming the [REDACTED] is fixed at the mid-point of theindicative [REDACTED] range, being HK$[REDACTED] per [REDACTED]; and (iii)HK$[REDACTED] million, assuming the [REDACTED] is fixed at the low-end of theindicative [REDACTED] range, being HK$[REDACTED] per [REDACTED].

Our [REDACTED] from the [REDACTED] will be used in the same proportions asdisclosed above irrespective of: (i) whether the [REDACTED] is determined at the highest orlowest point of the indicative [REDACTED] range; and (ii) whether the [REDACTED] isexercised.

If there is any material change to the [REDACTED] as disclosed above after the[REDACTED], we will make the appropriate announcement(s) in due course.

To the extent that our [REDACTED] from the [REDACTED] are not immediately requiredfor the above purposes or if we are unable to implement any part of our future plans as intended,our Directors intend to place such [REDACTED] as short-term interest-bearing deposits withauthorised financial institutions in Hong Kong.



– 392 –

IMPLEMENTATION PLAN

In relation to the intended application of our [REDACTED] from the [REDACTED] as setforth above, the following table sets forth the intended nature, timing and amount of ourimplementation plan:

For the 1st to12th month

from[REDACTED]

For the 13th to18th month

from[REDACTED]

Amount to befunded by

[REDACTED]from the

[REDACTED]

Percentage of[REDACTED]

from the[REDACTED]

HK$ million HK$ million HK$ million %

(a) Expanding and improving our airfreight forwarding services

[REDACTED] [REDACTED] [REDACTED] [REDACTED]

(i) Leasing premises in KwaiChung, Hong Kong for use asour new air freight warehousefacility


(ii) Acquiring eight forklifts [REDACTED] [REDACTED] [REDACTED] [REDACTED](iii) Recruiting 10 additional

skilled and experiencedpersonnel to facilitateoperations of our new airfreight warehouse facility


(iv) Acquiring three stations ofcargo x-ray screeningequipment


(v) Hiring four additional skilledpersonnel to oversee andhandle the cargo x-rayscreening related operations


(vi) Equipping our new air freightwarehouse facility with anadvanced warehouse ITmanagement and x-ray system


(b) Developing our own truck fleet [REDACTED] [REDACTED] [REDACTED] [REDACTED](i) Acquiring eight new trucks

and financing car park rentaland related insurance andmaintenance costs


(ii) Recruiting 16 additionalpersonnel to handle theday-to-day operations of ourlogistics services




– 393 –

For the 1st to12th month

from[REDACTED]

For the 13th to18th month

from[REDACTED]

Amount to befunded by

[REDACTED]from the

[REDACTED]

Percentage of[REDACTED]

from the[REDACTED]

HK$ million HK$ million HK$ million %

(c) Providing bank guarantees to ourairline partners


(d) Further enhancing our sales andmarketing efforts


(i) Participating in industrynetworks and placingadvertisements


(ii) Recruiting nine additionalsales and marketing personnel


(e) Upgrading and strengthening ourIT system


(f) General working capital [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Total [REDACTED] [REDACTED] [REDACTED] [REDACTED]

REASONS AND BENEFITS FOR THE [REDACTED]

Our Directors consider that the [REDACTED] will provide the following benefits to ourGroup:

(a) our cash position together with our net operating cash inflows and available creditfacilities are only sufficient to meet our average one-month working capital needsbased on our current operational scale. Our Directors are of the view that our averageworking capital needs will increase beyond our current level in light of our growingoperational scale. Taking into account our imperative need to adopt a prudent financialmanagement strategy and to maintain a reasonable level of working capital as cashbuffer to support our operations, particularly in view of the fluctuations in freightrates and freight and handling costs amidst the COVID-19 pandemic, our Directorsbelieve that our expansion plans could not be fully and timely implemented if we relysolely on our revenue generated from freight forwarding services without additionalfunds to finance the same. As such, we have genuine funding needs and commercialinterest to pursue our expansion plans via the [REDACTED] and it is justifiable tofund our expansions of air freight forwarding services, including the leasing of theKwai Chung warehouse, and the remuneration of the additional warehouse personnelwith the [REDACTED] from the [REDACTED]. Our [REDACTED] proceeds from



– 394 –

the [REDACTED] will facilitate the implementation of our business strategies andstrengthen our cash flow position which in turn will enable us to enhance ouroperational capacity and support our future business expansion. According to theIndustry Report, there will be a continuing increase in the demand for internationalfreight forwarding services and cargo warehousing services including off-airport cargoscreening services and that the air freight forwarding services markets in Hong Kongand the PRC are expected to grow at a CAGR of approximately 5.0% and 4.0%,respectively, from 2022 to 2026. Further, as detailed in “Business – Customers – Ourbusiness sustainability and customer demand for freight forwarding services” in thisdocument, our Directors anticipate that there will be sufficient demand for our freightforwarding services as we implement our expansion plans. Taking into account, amongother things, (i) our growing operational scale and our average working capital needs;and (ii) our need to maintain a robust cashflow as we expand our business scale and toenhance our financial and operational ability, our Directors estimate that, in theabsence of additional funding from the [REDACTED], our internal financial resourceswould not be sufficient to support our expansion plans. Accordingly, our Directors areof the view that it is not commercially justifiable for us to implement our expansionplans in sole reliance of our internal financial resources and that our [REDACTED]from the [REDACTED] would provide us with a strong capital base to expand ourbusiness while maintaining our liquidity position;

(b) the freight forwarding and logistics industry is highly fragmented and competitive andthe entry barriers to the market are relatively high. According to the Industry Report,as at the Latest Practicable Date, all of the top five players of the tier-1 freightforwarding market in Hong Kong in terms of revenue in FY2022 were listed onvarious stock exchanges (including the Stock Exchange), whereas only one amongstthe top five players of the tier-2 freight forwarding market in Hong Kong in terms ofrevenue in FY2022 was listed on the Stock Exchange. According to Frost & Sullivan,market players in the freight forwarding and logistics services market are required tostrengthen their capital base and maintain a robust liquidity position, expand andconsolidate their network with upstream suppliers and downstream customers andenrich their scope of service offerings from time to time in order to reinforce theircompetitiveness in the market. Taking into account the competitive landscape of thefreight forwarding industry and that Hong Kong is an international financial centreand the stock market in Hong Kong is well-established and highly recognisedinternationally, our Directors believe that the [REDACTED] will help to strengthenour capital base, further expand our service scope to develop our capacity as anintegrated freight forwarding and logistics service provider, elevate the profile of ourGroup, increase our recognition and raise our visibility within the freight forwardingand logistics services market in general, which would enhance our corporate profileand reinforce our brand awareness and in turn help to generate more businessopportunities and attract potential customers and suppliers, thereby enabling us tocompete with and differentiate ourselves from the other market players in the industryand facilitating our business expansion;



– 395 –

(c) the [REDACTED] will enhance our credibility with our customers and suppliers, whogenerally would be inclined to give preference to freight forwarders who have a[REDACTED] status with good reputation and transparent financial disclosure andare subject to stringent regulatory supervision. The [REDACTED] will also enhanceour standards of corporate governance and internal control as well as promotetransparency of our Group. Our Directors believe that the [REDACTED] will provideour customers and suppliers with greater security and confidence when engaging inbusiness with us and allow us to gain a competitive edge over other industry players,and at the same time strengthen and reinforce our bargaining power in negotiatingbusiness terms with our customers and suppliers;

(d) our Directors believe that the use of equity financing would avoid the risk of highinterest payment generally associated with debt financing which may expose ourGroup to increasing financial costs in the future. Equity financing will also enable ourGroup to maintain a lower gearing level, which will reduce our leverage and enhanceour capital structure. On the other hand, as we may continue to obtain certain amountof banking facilities after [REDACTED] alongside with equity financing, ourDirectors believe the [REDACTED] status will place us in a better position tonegotiate with banks and financial institutions in obtaining credit lines on morefavourable terms in the future as compared to being a private company given thefinancial transparency and increased equity base of a [REDACTED] company;

(e) the [REDACTED] will broaden our Group’s shareholder base and potentially lead to amore liquid market in the trading of our Shares, strengthen our capital base andprovide a sustainable fund raising platform for us to raise further capital by issuingequity or debt securities in the future;

(f) the [REDACTED] will help our Group raise staff morale and confidence in ourGroup, which would improve our ability to attract, recruit, retain and motivateexperienced and qualified staff (in particular, key management and experienced staff);and

(g) the [REDACTED] will enable our Group to offer equity-based incentive programmesinvolving publicly tradable shares (such as a share option schemes) to our staff thatprovides a more direct correlation between their performance and our business results,and motivate our staff to increase the intrinsic value of our Shares, which is closelyaligned with the objective of creating value for our Shareholders.



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[REDACTED]

Independence of the Sole Sponsor

The Sole Sponsor satisfies the independence criteria applicable to sponsors as set out inRule 3A.07 of the Listing Rules.

[REDACTED]


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STRUCTURE OF THE [REDACTED]

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The following is the text of a report set out on pages [I-1] to [I-3], received from the

Company’s reporting accountant, [PricewaterhouseCoopers], Certified Public Accountants,

Hong Kong, for the purpose of incorporation in this document. It is prepared and addressed to

the directors the Company and the Sole Sponsor pursuant to the requirements of HKSIR 200

Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the

Hong Kong Institute of Certified Public Accountants.

[Letterhead of PricewaterhouseCoopers]

[DRAFT]

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THEDIRECTORS OF ENL GROUP HOLDINGS LIMITED AND ADVENT CORPORATEFINANCE LIMITED

Introduction

We report on the historical financial information of ENL Group Holdings Limited (the“Company”) and its subsidiaries (together, the “Group”) set out on pages [I-4] to [I-73], whichcomprises the Group’s consolidated statements of financial position as at 31 March 2020, 2021and 2022, the Company’s statements of financial position as at 31 March 2021 and 2022, theGroup’s consolidated statements of comprehensive income, the consolidated statements ofchanges in equity and consolidated statements of cash flows for each of the years ended 31March 2020, 2021 and 2022 (the “Track Record Period”) and a summary of significantaccounting policies and other explanatory information (together, the “Historical FinancialInformation”). The Historical Financial Information set out on pages [I-4] to [I-73] forms anintegral part of this report, which has been prepared for inclusion in the document of theCompany dated [•] (the “Document”) in connection with the initial [REDACTED] of shares ofthe Company on the Main Board of The Stock Exchange of Hong Kong Limited.

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical FinancialInformation that gives a true and fair view in accordance with the basis of presentation andpreparation set out in Notes 1.3 and 2.1 to the Historical Financial Information, and for suchinternal control as the directors determine is necessary to enable the preparation of HistoricalFinancial Information that is free from material misstatement, whether due to fraud or error.


APPENDIX I ACCOUNTANT’S REPORT

– I-1 –

Reporting accountant’s responsibility

Our responsibility is to express an opinion on the Historical Financial Information and toreport our opinion to you. We conducted our work in accordance with Hong Kong Standard onInvestment Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial

Information in Investment Circulars issued by the Hong Kong Institute of Certified PublicAccountants (“HKICPA”). This standard requires that we comply with ethical standards and planand perform our work to obtain reasonable assurance about whether the Historical FinancialInformation is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts anddisclosures in the Historical Financial Information. The procedures selected depend on thereporting accountant’s judgement, including the assessment of risks of material misstatement ofthe Historical Financial Information, whether due to fraud or error. In making those riskassessments, the reporting accountant considers internal control relevant to the entity’spreparation of Historical Financial Information that gives a true and fair view in accordance withthe basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical FinancialInformation in order to design procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. Ourwork also included evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the directors, as well as evaluating the overallpresentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of theaccountant’s report, a true and fair view of the financial position of the Company as at 31 March2021 and 2022 and the consolidated financial position of the Group as at 31 March 2020, 2021and 2022 and of the Group’s consolidated financial performance and consolidated cash flows forthe Track Record Period in accordance with the basis of presentation and preparation set out inNotes 1.3 and 2.1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Upand Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the UnderlyingFinancial Statements as defined on page [I-4] have been made.



– I-2 –

Dividends

We refer to Note 12 to the Historical Financial Information which contains informationabout the dividends declared and/or paid by the Company and the companies comprising theGroup in respect of the Track Record Period.

No statutory financial statements for the Company

No statutory financial statements have been prepared for the Company since its date ofincorporation.

[PricewaterhouseCoopers]Certified Public Accountants

Hong Kong, [Date]



– I-3 –

I HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part ofthis accountant’s report.

The financial statements of the Group for the Track Record Period, on which theHistorical Financial Information is based, were audited by PricewaterhouseCoopers inaccordance with Hong Kong Standards on Auditing issued by the HKICPA (the “UnderlyingFinancial Statements”).

The Historical Financial Information is presented in Hong Kong dollars (“HK$”) andall values are rounded to the nearest thousand (“HK$’000”) except when otherwiseindicated.



– I-4 –

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


Notes HK$’000 HK$’000 HK$’000

Revenue 5 485,523 578,977 1,033,545Cost of services 7 (418,754) (506,343) (900,080)

Gross profit 66,769 72,634 133,465Other income 6 640 2,461 –Other (losses)/gains, net 6 (2,428) (3,264) 134Administrative expenses 7 (24,058) (38,639) (36,527)Net reversal of/(provision for)

impairment loss of financial assets 18 2 3 (1,206)

Operating profit 40,925 33,195 95,866Finance income 10 2,213 413 70Finance costs 10 (144) (90) (242)

Profit before income tax 42,994 33,518 95,694Income tax expense 11 (7,988) (8,080) (19,843)

Profit for the year 35,006 25,438 75,851

Other comprehensive (loss)/incomeItems that may be reclassified

subsequently to profit or loss:

Currency translation differences (1,426) 1,853 1,097

Total comprehensive income forthe year 33,580 27,291 76,948

Earnings per share attributable toowners of the Company for the year

Basic and diluted (HK$) 13 4,039 2,906 7,585



– I-5 –

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 March2020 2021 2022

Notes HK$’000 HK$’000 HK$’000

AssetsNon-current assetsProperty, plant and equipment 14 4,421 3,543 2,298Intangible assets 15 1 66 39Right-of-use assets 16 2,185 1,534 2,075Non-current prepayments and deposits 19 143 155 4Key management life insurance contracts 28 1,503 – 949Deferred income tax assets 24 73 775 170

8,326 6,073 5,535

Current assetsTrade receivables 18 36,177 60,999 91,956Deposits, prepayments and other

receivables 19 2,067 12,475 8,096Income tax recoverable 113 – –Restricted bank deposits 20 31,607 34,429 60,756Cash and cash equivalents 20 102,546 61,259 31,068

172,510 169,162 191,876

Total assets 180,836 175,235 197,411

EquityShare capital 21 – – –*Combined capital 21 2,000 2,000 –Other reserves 23 4,894 35,128 39,339Retained earnings 23 51,033 26,471 35,891

Total equity 57,927 63,599 75,230

* The amount in the consolidated statements of financial position is less than HK$1,000.



– I-6 –

As at 31 March2020 2021 2022

Notes HK$’000 HK$’000 HK$’000

LiabilitiesNon-current liabilitiesLease liabilities 16 994 579 242Deferred tax liabilities 24 43 – –

1,037 579 242

Current liabilitiesTrade payables 25 31,664 38,356 45,078Accruals, other payables and provisions 26 12,001 16,018 19,816Current income tax liabilities 7,448 7,692 10,864Amounts due to related parties 30 69,769 47,989 29,268Bank borrowings 27 – – 15,000Lease liabilities 16 990 1,002 1,913

121,872 111,057 121,939


Total equity and liabilities 180,836 175,235 197,411



– I-7 –

STATEMENTS OF FINANCIAL POSITION OF THE COMPANY

As at31 March

2021

As at31 March

2022Notes HK$’000 HK$’000

AssetsNon-current assetInvestment in a subsidiary 23(c) –* 66,637

Total non-current asset –* 66,637

Current assetsAmount due from a subsidiary 2,019 79,000Other receivables and prepayments 19 10,216 5,282

Total current assets 12,235 84,282

Total assets 12,235 150,919

EquityEquity attributable to owners of the CompanyShare capital 21 –* –*Other reserves 23(b) 28,381 95,018(Accumulated losses)/retained earnings 23(b) (20,788) 16,361

Total equity 7,593 111,379

LiabilitiesCurrent liabilitiesOther payables 26 4,287 3,334Amounts due to subsidiaries 355 6,938Amounts due to related parties 30 – 29,268

Total liabilities 4,642 39,540

Total equity and liabilities 12,235 150,919

* The amount in the statements of financial position of the Company is less than HK$1,000.



– I-8 –

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of the Company

Sharecapital

Combinedcapital

Statutoryreserve

Exchangereserve

Share-basedcompensation

reserveRetainedearnings Total

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

(Note 21) (Note 21) (Note 22)

For the year ended31 March 2020

At 1 April 2019 – 2,000 1,162 788 3,933 60,132 68,015

Profit for the year – – – – – 35,006 35,006Currency translation

differences – – – (1,426) – – (1,426)

Total comprehensive incomefor the year – – – (1,426) – 35,006 33,580

Transactions with owners intheir capacity as owners:

Dividends declared (Note 12) – – – – – (43,668) (43,668)Profits appropriations to

statutory reserve – – 437 – – (437) –

– – 437 – – (44,105) (43,668)

At 31 March 2020 – 2,000 1,599 (638) 3,933 51,033 57,927



– I-9 –


Sharecapital

Combinedcapital

Capitalreserve

Statutoryreserve

Exchangereserve



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



At 1 April 2020 – 2,000 – 1,599 (638) 3,933 51,033 57,927

Profit for the year – – – – – – 25,438 25,438Currency translation differences – – – – 1,853 – – 1,853

Total comprehensive income forthe year – – – – 1,853 – 25,438 27,291

Transactions with owners in theircapacity as owners:

Dividends declared (Note 12) – – – – – – (50,000) (50,000)Share-based compensation

(Note 22) – – – – – 10,381 – 10,381Shares to be issued (Note 23) – – 18,000 – – – – 18,000

– – 18,000 – – 10,381 (50,000) (21,619)

At 31 March 2021 – 2,000 18,000 1,599 1,215 14,314 26,471 63,599



– I-10 –


Sharecapital

Combinedcapital

Capitalreserve

Statutoryreserve

Exchangereserve


reserveOther


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



At 1 April 2021 – 2,000 18,000 1,599 1,215 14,314 – 26,471 63,599

Profit for the year – – – – – – – 75,851 75,851Currency translation

differences – – – – 1,097 – – – 1,097

Total comprehensive incomefor the year – – – – 1,097 – – 75,851 76,948

Transactions with ownersin their capacity asowners:

Deemed distribution anddividends declared(Note 12) – – – – – – – (65,317) (65,317)

Profits appropriations tostatutory reserves – – – 1,114 – – – (1,114) –

Reclassification of combinedcapital to other reservepursuant to Reorganisation(Note 1.2) – (2,000) – – – – 2,000 – –

Reclassification of capitalreserve to other reservepursuant to shares issuance(Note 1.2) – – (18,000) – – – 18,000 – –

– (2,000) (18,000) 1,114 – – 20,000 (66,431) (65,317)

At 31 March 2022 – – – 2,713 2,312 14,314 20,000 35,891 75,230



– I-11 –

CONSOLIDATED STATEMENTS OF CASH FLOWS


Notes HK$’000 HK$’000 HK$’000

Cash flows from operating activitiesCash generated from operations 29(a) 42,689 31,456 54,344Income tax paid (8,070) (8,256) (15,882)


Cash flows from investing activitiesPurchases of intangible assets – (85) –Purchases of property, plant and

equipment (4,493) (345) (165)Proceeds from disposals of property,

plant and equipment 29(b) 183 – –Interest received 2,213 413 70Premium paid for key management life

insurance contracts 28 (1,354) (2,456) (2,510)Receipts upon termination of key

management life insurance contracts 28 – 1,520 –

Net cash used in investing activities (3,451) (953) (2,605)

Cash flows from financing activitiesInterest paid on bank borrowings (32) – (77)Dividends and deemed distribution paid (2,343) (41,325) (84,038)Proceeds from a [REDACTED] 1.2(v) – 10,000 8,000Proceeds from bank borrowings 5,000 – 30,000Repayments of bank borrowings (5,000) – (15,000)Principal repayment of lease liabilities (1,093) (1,092) (2,327)Interest paid on lease liabilities (112) (90) (165)[REDACTED] paid [REDACTED] [REDACTED] [REDACTED]Proceeds from related parties 127 18,205 –Payments to related parties (2,080) (48,655) –

Net cash used in financing activities (5,533) (64,921) (67,472)



– I-12 –


Notes HK$’000 HK$’000 HK$’000

Net increase/(decrease) in cash andcash equivalents 25,635 (42,674) (31,615)

Effect of changes in foreign exchangerates (2,319) 1,387 1,424

Cash and cash equivalents at beginningof year 79,230 102,546 61,259

Cash and cash equivalents at end ofyear 20 102,546 61,259 31,068



– I-13 –

II NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION

1.1 General information

The Company was incorporated in the Cayman Islands on 19 January 2021 as an exempted company withlimited liability under the Companies Law (Cap. 22, Law 3 of 1961 as consolidated and revised) of the CaymanIslands. The address of the Company’s registered office is 71 Fort Street, PO Box 500, George Town, GrandCayman, KY1-1106, Cayman Islands.

The Company is an investment holding company and its subsidiaries (together the “Group”) are principallyengaged in provision of air and ocean freight forwarding, logistics and related value-added services (together, the“[REDACTED] Business”). The ultimate holding company is E&E Corporation Limited, a company incorporatedin Hong Kong, which is owned as to 70.5% by Mr. Wong Tat Shing (“Mr. Wong”), 23.5% by Mr. Chim KwokYung Ramthur (“Mr. Chim”) and 6% by Mr. Shon Il Seon (collectively, the “Shareholders”).

1.2 Reorganisation

Prior to the incorporation of the Company and a reorganisation (the “Reorganisation”) in preparation forthe [REDACTED] of the Company’s shares on The Stock Exchange of Hong Kong Limited (the“[REDACTED]”) as described below, the [REDACTED] Business was operated by Excel Network Limited,Excel Network (Shenzhen) Limited and Excel Network (Shanghai) Limited (the “Operating Subsidiaries”) andthe air and ocean freight forwarding business segments of ENL (Guangzhou) Logistics Limited (“ENLGZ”) andENL (SHA) Logistics Limited (“ENLSH”) (the “Included Business”). ENLGZ and ENLSH are companiesincorporated in Hong Kong and beneficially owned by the Shareholders.

Details of the Reorganisation are as follows:

(i) Incorporation of Lucky Oasis Global Limited

On 25 August 2020, Lucky Oasis Global Limited (“Lucky Oasis”) was incorporated in the BritishVirgin Islands (the “BVI”). On 16 December 2020, one share of Lucky Oasis was allotted and issued toE&E Corporation Limited at US$1 per share. Upon completion of the transaction, Lucky Oasis has becomewholly-owned by E&E Corporation Limited.

(ii) Incorporation of the Company

The Company was incorporated in the Cayman Islands on 19 January 2021 with one share beingallotted and issued to the initial subscriber. On the same date, one share of the Company was transferred atpar value of HK$0.01 from the initial subscriber to Lucky Oasis. In addition, 8,666 shares were furtherallotted and issued to Lucky Oasis. Since then, the Company has become wholly-owned by Lucky Oasis.

(iii) Incorporation of ENL Development Limited

On 25 February 2021, ENL Development Limited (“ENL Development”) was incorporated in theBVI and one share of US$1 was allotted and issued at par value to the Company.

(iv) Acquisition of Excel Network Limited and Excel Network (Shenzhen) Limited by ENLDevelopment

ENL Development acquired the entire equity interest of Excel Network Limited (which owned theentire interest in Excel Network (Shanghai) Limited) and Excel Network (Shenzhen) Limited from E&ECorporation Limited on 24 May 2021 and 2 June 2021, respectively, in consideration for ENLDevelopment allotting and issuing two shares in aggregate, credited as fully paid to the Company at thedirection of E&E Corporation Limited.



– I-14 –

Upon completion of the aforementioned transactions, the Company became the holding company ofall companies comprising the Group.

(v) [REDACTED]

On 8 March 2021, the Company entered into a share subscription agreement (the “SubscriptionAgreement”) with Oriental Prominence SPC (“Oriental Prominence”), a company incorporated in theCayman Islands, pursuant to which the Company agreed and obliged to issue 1,333 shares of its shares toOriental Prominence at a consideration of HK$18,000,000 with all conditions fulfilled. Upon entering intothe aforesaid Subscription Agreement on 8 March 2021, the share capital of the Company was owned as to86.67% by Lucky Oasis and 13.33% by Oriental Prominence, respectively. On 27 July 2021, the Companycompleted the share issuance procedures and allotted and issued 1,333 shares of the Company to OrientalProminence in accordance with the Subscription Agreement.

HK$10,000,000 of the consideration was paid by Oriental Prominence to the Group on 10 November2020 and the remaining balances of HK$2,000,000 and HK$6,000,000 were received by the Group on 29April 2021 and 14 May 2021, respectively.

As of the date of this report, the Company has direct or indirect interests in the followingsubsidiaries:

Name

Place and date ofincorporation/establishmentand kind of legal entity Principal activities

Issued and paidup/ registeredcapital

Effective interests held as at:

31 MarchDate of

thisreport Note2020 2021 2022

Directly held:ENL Development BVI, 25 February 2021,

limited liability companyInvestment holding US$3 – 100% 100% 100% (a)

Indirectly held:Excel Network Limited Hong Kong, 10 September

1997, limited liabilitycompany

Provision of air and oceanfreight forwarding services,and logistics and relatedvalue-added services

HK$2,000,000 100% 100% 100% 100% (b)

Excel Network(Shenzhen) Limited

Hong Kong, 19 March 2004,limited liability company


HK$100 100% 100% 100% 100% (c)

Excel Network(Shanghai) Limited

The PRC, 24 October 2005,limited liability company*


RMB6,500,000 100% 100% 100% 100% (d)

* Registered as a wholly foreign owned subsidiary of Excel Network Limited

Notes:

(a) No statutory audited financial statements were issued for ENL Development as there is nostatutory requirement in its place of incorporation.

(b) The statutory financial statements of Excel Network Limited for the year ended 31 March2021 were audited by Kenneth Wong & Co., certified public accountants in Hong Kong. Thestatutory financial statements of Excel Network Limited for the year ended 31 March 2020were audited by Alan Chan & Company, certified public accountants in Hong Kong.



– I-15 –

(c) The statutory financial statements of Excel Network (Shenzhen) Limited for the years ended31 March 2020 and 2021 were audited by Kenneth Wong & Co., certified public accountantsin Hong Kong.

(d) The financial statements of Excel Network (Shanghai) Limited for the year ended 31December 2020 were audited by Shanghai Hddy, Certified Public Accountants Co., Ltd.,certified public accountants in the PRC.

1.3 Basis of presentation

Immediately prior to the Reorganisation, the [REDACTED] Business was primarily conducted through theOperating Subsidiaries and the Included Business of ENLGZ and ENLSH. Pursuant to the Reorganisation, the[REDACTED] Business was transferred to and held by the Company. The Company has not been involved inany other business prior to the Reorganisation and does not meet the definition of a business. The Reorganisationis merely a reorganisation of the [REDACTED] Business with no change in management and the ultimateowners of the [REDACTED] Business remain substantially the same.

Accordingly, the Group resulting from the Reorganisation is regarded as a continuation of the[REDACTED] Business under the Operating Subsidiaries and the Included Business. For the purpose of thisreport, the Historical Financial Information has been prepared and presented as a continuation of the consolidatedfinancial statements of the Operating Subsidiaries and the Included Business, with the assets and liabilities of theGroup recognised and measured at the carrying amounts of the [REDACTED] Business under the consolidatedfinancial statements for all periods presented.

The Historical Financial Information of the Included Business during the Track Record Period wasincluded in the following manner:

• Transactions and balances of ENLGZ and ENLSH specifically identified as relating to the IncludedBusiness were consolidated in the Historical Financial Information;

• Expenses incurred by ENLGZ and ENLSH which were not specifically identified as relating to theIncluded Business were allocated as appropriate for combining into the Historical FinancialInformation, as if such expenses were paid by ENLGZ and ENLSH on behalf of the Group;

• Current and deferred income taxes on profits attributable to the Included Business calculated on theabove basis are provided in accordance with the Group’s accounting policies; and

• Inter-company transactions and balances between group companies including the Included Businesswere eliminated on consolidation.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The principal accounting policies applied in the preparation of the Historical Financial Information are setout below. These policies have been consistently applied throughout the Track Record Period presented, unlessotherwise stated.

The Historical Financial Information has been prepared in accordance with Hong Kong FinancialReporting Standards (“HKFRSs”) issued by the HKICPA. The Historical Financial Information has been preparedunder the historical cost convention.

The preparation of the Historical Financial Information in conformity with HKFRSs requires the use ofcertain critical accounting estimates. It also requires management to exercise its judgment in the process ofapplying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, orareas where assumptions and estimates are significant to the Historical Financial Information, are disclosed inNote 4.



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Certain new standards, amendments to existing standards, interpretations and annual improvements havebeen published but are not effective for the Track Record Period and have not been early adopted by the Group.These new standards, amendments to existing standards, interpretations and annual improvements are set outbelow:

Standards Subject of amendment

Effective forannual periodsbeginning on orafter

Annual Improvements to HKFRSStandards 2018–2020

Annual Improvements to HKFRS Standards2018–2020

1 January 2022

Amendments to HKAS 16 Property, Plant and Equipment: Proceedsbefore Intended Use

1 January 2022

Amendments to HKAS 37 Onerous Contract: Cost of Fulfillinga Contract

1 January 2022

Amendments to HKFRS 3 Reference to the Conceptual Framework 1 January 2022

Revised Accounting Guideline 5 Merger Accounting for Common ControlCombination

1 January 2022

Amendments to HKAS 1 Classification of Liabilities as Current orNon-current

1 January 2023

Hong Kong Interpretation 5 (2020) Presentation of Financial Statements –Classification by the Borrower of aTerm Loan that Contains a Repayment onDemand Clause

1 January 2023

HKFRS 17 Insurance Contracts 1 January 2023

Amendments to HKFRS 17 Insurance Contracts 1 January 2023

Amendments to HKAS 12 Deferred Tax related to Assets andLiabilities arising from a SingleTransaction

1 January 2023

Amendments to HKAS 1, HKFRSPractice Statement 2

Disclosure of Accounting Policies 1 January 2023

Amendments to HKAS 8 Definition of Accounting Estimates 1 January 2023

Amendments to HKFRS 10 andHKAS 28

Sale or Contribution of Assets between anInvestor and its Associate or JointVenture

To be determined



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The Group will adopt the above relevant new standards, amendments to existing standards, interpretationsand annual improvements when they become effective.

The Group has commenced an assessment of the related impact to the Group of the above new standards,amendments to existing standards, interpretations and annual improvements that are relevant to the Group uponinitial adoption. According to the preliminary assessment made by the directors of the Company, managementdoes not anticipate any significant impact on the Group’s financial position and results of operations.

2.2 Subsidiaries

2.2.1 Business combination under common control

The Historical Financial Information incorporates the financial statement items of the combiningentities or businesses in which the common control combination occurs as if they had been combined fromthe date when the combining entities or businesses first came under the control of the controlling parties.

The net assets of the combining entities or businesses are combined using the existing book valuesfrom the controlling party’s perspective. No amount is recognised in respect of goodwill or excess ofacquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingentliabilities over cost at the time of common control combination, to the extent of the continuation of thecontrolling party’s interest.

The consolidated statements of comprehensive income include the results of each of the combiningentities or businesses from the earliest date presented or since the date when the combining entities orbusinesses first came under the common control, where there is a shorter period, regardless of the date ofthe common control combination.

2.2.2 Consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. TheGroup controls an entity where the Group is exposed to, or has rights to, variable returns from itsinvolvement with the entity and has the ability to affect those returns through its power to direct theactivities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred tothe Group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between group companiesare eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of animpairment of the transferred asset. Accounting policies of subsidiaries have been changed wherenecessary to ensure consistency with the policies adopted by the Group.

2.2.3 Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost includes directattributable costs of investment. The results of subsidiaries are accounted for by the Company on the basisof dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving dividend from theseinvestments if the dividend exceeds the total comprehensive income of the subsidiary in the period thedividend is declared or if the carrying amount of the investment in the separate financial statementsexceeds the carrying amount in the consolidated financial statements of the investee’s net assets includinggoodwill.



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2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chiefoperating decision-maker (the “CODM”). The CODM, who is responsible for allocating resources and assessingperformance of the operating segments, has been identified as the executive directors of the Company who makestrategic decisions.

2.4 Business combinations

(a) Functional and presentation currency

Items included in the Historical Financial Information of each of the Group’s entities are measuredusing the currency of the primary economic environment in which these companies operate (the“functional currency”). The Historical Financial Information is presented in Hong Kong dollars (“HK$”),which is the Company’s functional and the Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates atthe dates of the transactions. Foreign exchange gains and losses resulting from the settlement of suchtransactions and from the translation at year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the consolidated statements of comprehensive income.

All other foreign exchange gains and losses are presented in the consolidated statements ofcomprehensive income within “other (losses)/gains, net”.

(c) Group companies

The results and financial position of foreign operations (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:

• assets and liabilities are translated at the closing rate at the date of that statement of financialposition,

• income and expenses are translated at average exchange rates (unless this is not a reasonableapproximation of the cumulative effect of the rates prevailing on the transaction dates, inwhich case income and expenses are translated at the dates of the transactions), and

• all resulting exchange differences are recognised in other comprehensive income andaccumulated in the currency translation reserve. These currency translation differences arereclassified to the consolidated statements of comprehensive income on disposal or partialdisposal of the entity giving rise to such reserve.

2.5 Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and impairmentlosses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to theGroup and the cost of the item can be measured reliably. The carrying amount of the replaced part isderecognised. All other repairs and maintenance are charged to the consolidated statement of comprehensiveincome during the financial period in which they are incurred.



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Depreciation is calculated using the straight-line method to allocate their costs to their residual values overtheir estimated useful lives, as follows:

Useful lives

Leasehold improvements Shorter of the lease terms or 5 yearsMotor vehicles 2 to 5 yearsFurniture and fixture 4 to 5 yearsComputer equipment 3 to 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of eachreporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carryingamount is greater than its estimated recoverable amount (Note 2.7).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and arerecognised within “other (losses)/gains, net” in the consolidated statements of comprehensive income.

2.6 Intangible assets

Intangible assets represent computer software purchased from third parties. They are initially recognisedand measured at cost. The intangible assets are amortised over their estimated useful lives using the straight-linemethod which reflects the pattern in which the intangible asset’s future economic benefits are expected to beconsumed.

The Group amortises computer software using the straight-line method over 2 to 5 years.

2.7 Impairment of non-financial assets

Non-financial assets are tested for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. An impairment loss is recognised for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fairvalue less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assetsother than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at eachreporting date.

2.8 Financial assets

2.8.1 Classification

The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value through profit or loss; and

• those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and thecontractual terms of the cash flows.

For assets measured at fair value, gains and losses will be recorded in profit or loss. For investmentsin equity instruments that are not held for trading, this will depend on whether the Group has made anirrevocable election at the time of initial recognition to account for the equity investment at fair valuethrough profit or loss.



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2.8.2 Recognition and de-recognition

Regular way purchases and sales of financial assets are recognised on trade date – the date on whichthe Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the financial assetshave expired or have been transferred and the Group has transferred substantially all risks and rewards ofownership.

2.8.3 Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of afinancial asset not at fair value through profit or loss, transaction costs that are directly attributable to theacquisition of the financial asset. Transaction costs of financial assets carried at fair value through profitof loss are expensed in profit or loss.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model formanaging the asset and the cash flow characteristics of the asset. The Group classifies its debtinstruments as financial assets at amortised cost.

Assets that are held for collection of contractual cash flows where those cash flows representsolely payments of principal and interest are measured at amortised cost. Interest income from thesefinancial assets is included in finance income using the effective interest rate method. Any gain orloss arising on derecognition is recognised directly in consolidated statements of comprehensiveincome and presented in “other (losses)/gains, net” together with foreign exchange gains and losses.Impairment losses are presented as separate line item in the consolidated statements ofcomprehensive income.

2.8.4 Impairment

The Group assesses on a forward-looking basis the expected credit losses associated with its debtinstruments carried at amortised cost. The impairment methodology applied depends on whether there hasbeen a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by HKFRS 9, whichrequires expected lifetime losses to be recognised from initial recognition of the receivables, see Notes3.1(c) and 18 for further details.

Impairment of other receivables are measured as either 12-month expected credit losses or lifetimeexpected credit losses, depending on whether there has been a significant increase in credit risk sinceinitial recognition. If a significant increase in credit risk of a receivable has occurred since initialrecognition, impairment is measured as lifetime expected credit losses.

2.9 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated statements offinancial position where the Group currently has a legally enforceable right to offset the recognised amounts andthere is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Grouphas also entered into arrangements that do not meet the criteria for offsetting but still allow for the relatedamounts to be set off in certain circumstances, such as bankruptcy or the termination of a contract.



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2.10 Trade and other receivables

Trade receivables are amounts due from customers for services performed in the ordinary course ofbusiness. They are generally due for settlement within one year or less (or in the normal operating cycle of thebusiness if longer) and therefore all classified as current.

Trade receivables are recognised initially at the amount of consideration that is unconditional unless theycontain significant financing components, when they are recognised at fair value. The Group holds the trade andother receivables with the objective of collecting the contractual cash flows and therefore measures themsubsequently at amortised cost using the effective interest method. See Note 2.8.4 for a description of theGroup’s impairment policies.

2.11 Cash and cash equivalents and restricted bank deposits

For the purpose of presentation in the consolidated statements of cash flows, cash and cash equivalentsincludes cash on hand and deposits held at call with financial institutions.

Deposits that is restricted from withdrawal, from use or from being pledged as security is reportedseparately on the face of the consolidated statements of financial position and is not included in the total cashand cash equivalents in the consolidated statements of cash flows.

2.12 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new sharesare shown in equity as a deduction, net of tax, from the proceeds.

2.13 Trade and other payables

Trade and other payables represent liabilities for services provided to the Group in the ordinary course ofbusiness from service providers prior to the end of financial year which are unpaid. Trade and other payables arepresented as current liabilities unless payment is not due within 12 months after the reporting period. They arerecognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.14 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and theredemption value is recognised in the consolidated statements of comprehensive income over the period of theborrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to theextent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred untilthe draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility willbe drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of thefacility to which it relates.

Borrowings are removed from the consolidated statements of financial position when the obligationspecified in the contract is discharged, cancelled or expired. The difference between the carrying amount of afinancial liability that has been extinguished or transferred to another party and the consideration paid, includingany non-cash assets transferred or liabilities assumed, is recognised in consolidated statements of comprehensiveincome as finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for at least 12 months after the end of the reporting period.



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2.15 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production ofqualifying assets, which are assets that necessarily take a substantial period of time to get ready for theirintended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready fortheir intended use or sale.

There were no qualifying assets during the Track Record Period. All borrowing costs are expensed in theperiod in which they are incurred.

2.16 Current and deferred income tax

The income tax expense or credit for the period is the tax payable on the current period’s taxable incomebased on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets andliabilities attributable to temporary differences and to unused tax losses.

(a) Current income tax

Current income tax charge is calculated on the basis of the tax laws enacted or substantively enactedat the balance sheet date in the jurisdictions where the companies comprising the Group operate andgenerate taxable income. Management periodically evaluates positions taken in tax returns with respect tosituations in which applicable tax regulation is subject to interpretation and considers whether it isprobable that a taxation authority will accept an uncertain tax treatment. The Group measures its taxbalances either based on the most likely amount or the expected value, depending on which methodprovides a better prediction of the resolution of the uncertainty.

(b) Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. However, deferred tax liabilities are not recognised if they arise from the initial recognition ofgoodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset orliability in a transaction other than a business combination that at the time of the transaction affectsneither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws)that have been enacted or substantively enacted by the end of the reporting period and are expected toapply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be availableto utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carryingamount and tax bases of investments in foreign operations where the Company is able to control the timingof the reversal of the temporary differences and it is probable that the differences will not reverse in theforeseeable future.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offsetcurrent tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset andintends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in consolidated statement of comprehensive income, except tothe extent that it relates to items recognised in other comprehensive income or directly in equity. In thiscase, the tax is also recognised in other comprehensive income or directly in equity, respectively.



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2.17 Employee benefits

Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.

(a) Pension obligations

The Group participates in various defined contribution pension schemes. In Hong Kong, the Grouppays fixed contributions to publicly administered pension insurance plans on a mandatory basis.

In accordance with the rules and regulations in the PRC, the PRC based employees of the Groupparticipate in various defined contribution retirement benefit plans organised by the relevant municipal andprovincial governments in the PRC under which the Group and the PRC based employees are required tomake monthly contributions to these plans calculated as a percentage of the employees’ salaries, subject tocertain ceiling.

The municipal and provincial governments undertake to assume the retirement benefit obligations ofall existing and future retired PRC based employees payable under the plans described above.

Other than the monthly contributions, the Group has no further obligation for the payment ofretirement and other post-retirement benefits of its employees. The assets of these plans are held separatelyfrom those of the Group in independently administered funds managed by the PRC government.

The contributions are recognised as employee benefit expenses when they are due.

(b) Short-term obligations

Liabilities for wages and salaries that are expected to be settled wholly within 12 months after theend of the period in which the employees render the related service are recognised in respect ofemployees’ services up to the end of the reporting period and are measured at the amounts expected to bepaid when the liabilities are settled. The liabilities are presented as current employee benefit obligations inthe consolidated statements of financial position.

(c) Bonus plans

The expected costs of bonus payment are recognised as a liability when the Group has a presentlegal or constructive obligation as a result of services rendered by employees and a reliable estimate of theobligation can be made. Liabilities for bonus plans are measured at the amounts expected to be paid whenthey are settled.

(d) Other benefits

Other directors’ and employees’ obligations are recorded as a liability and charged to theconsolidated statements of comprehensive income when the Group is contractually obliged or when thereis a past practice that has created a constructive obligation.

(e) Long service payments

The Group’s net obligation in respect of long service payments to its employees upon thetermination of their employment or retirement when the employee fulfils certain circumstances under theHong Kong Employment Ordinance is the amount of future benefit that employees have earned in returnfor their services in the current and prior periods.

2.18 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of pastevents, it is probable that an outflow of resources will be required to settle the obligation and the amount hasbeen reliably estimated. Provisions are not recognised for future operating losses.



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Where there are a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. A provision is recognised even if thelikelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required tosettle the present obligation at the end of the reporting period. The discount rate used to determine the presentvalue is a pre-tax rate that reflects current market assessments of the time value of money and the risks specificto the liability. The increase in the provision due to passage of time is recognised as interest expense.

2.19 Revenue recognition

The Group’s revenue comprises income from provision of freight forwarding services and logistics andrelated value-added services.

Revenue is measured at the fair value of the consideration received or receivable for rendering of servicesin the ordinary course of the Group’s activities.

If contracts involve the sale of multiple elements, the transaction price will be allocated to eachperformance obligation based on their relative stand-alone selling prices. If the stand-alone selling prices are notdirectly observable, they are estimated based on expected cost plus a margin or adjusted market assessmentapproach, depending on the availability of observable information.

Revenue is recognised when or as the control of the service is transferred to the customer. Depending onthe terms of the contract and the laws that apply to the contract, control of the service may be transferred overtime or at a point in time.

Control of service is transferred over time if the Group’s performance:

• Provides all of the benefits received and consumed simultaneously by the customer;

• Creates or enhances an asset that the customer controls as the Group performs; or

• Does not create an asset with an alternative use to the Group and the Group has an enforceable rightto payment for performance completed to date.

If control of the services transfers over time, revenue is recognised over the period of the contract byreference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue isrecognised at a point in time when the customer obtains control of the service.

All of the Group’s revenue is recognised over the service period.

2.20 Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing:

• the profit attributable to owners of the Company, excluding any costs of servicing equity otherthan ordinary shares by the weighted average number of ordinary shares outstanding duringthe financial year, adjusted for bonus elements in ordinary shares issued during the year andexcluding treasury shares.



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(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per shareto take into account:

• the after-income tax effect of interest and other financing costs associated with dilutivepotential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been outstandingassuming the conversion of all dilutive potential ordinary shares.

2.21 Interest income

Interest income is presented as finance income where it is earned from financial assets that are held forcash management purposes. Any other interest income is included in other income.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of afinancial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financialassets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of theloss allowance).

2.22 Leases

The Group leases various office premises and motor vehicles. The leases are typically made for fixedperiods of one to six years. Lease terms are negotiated on an individual basis and contain various different termsand conditions. The lease agreements do not impose any covenants, but leased assets may not be used as securityfor borrowing purposes.

The leases are recognised as right-of-use assets and the corresponding liabilities at the date of which therespective leased asset is available for use by the Group. Each lease payment is allocated between the liabilityand finance cost. The finance cost is charged to the consolidated statements of comprehensive income over thelease period so as to produce a constant periodic rate of interest on the remaining balance of the liability foreach period.

Assets and liabilities arising from a lease are initially measured on a present value basis.

Lease liabilities include the net present value of fixed payments (including in-substance fixed payments),less any lease incentives receivable.

Right-of-use assets included the rights to use certain properties under leases which are measured at cost.

The initial costs of right-of-use assets include the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date

• any initial direct costs, and

• restoration costs.

The right-of-use assets are depreciated over the term of lease on a straight-line basis.



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The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot bereadily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate isused, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an assetof similar value to the right-of-use asset in a similar economic environment with similar terms, security andconditions.

Payments associated with short-term leases are recognised on a straight-line basis as an expense in profitor loss. Short-term leases are leases with no renewal option and lease term of less than 12 months.

Leases are recognised as a right-of-use asset and corresponding liability at the date of which the leasedasset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on apresent value basis.

2.23 Government grants

Government grants are recognised at their fair value when there is reasonable assurance that the grant willbe received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the consolidated statements ofcomprehensive income over the period necessary to match them with the costs that they are intended tocompensate.

Government grants relating to the purchase of property, plant and equipment are included in non-currentliabilities as deferred income and are credited to consolidated statements of comprehensive income on astraight-line basis over the expected lives of the related assets.

2.24 Dividend distribution

Dividend distribution to the equity holders of the companies comprising the Group is recognised as aliability in the Group’s financial statements in the period in which the dividends are approved by the equityholders or directors, where appropriate.

2.25 Equity-settled share-based payments

As disclosed in Note 22, the Group recognises the unidentifiable goods or services received (or to bereceived) by the Group when the identifiable consideration received (if any) appears to be less than the fair valueof the equity instruments granted. In this situation, it indicates that other consideration (i.e. unidentifiable goodsor services) has been (or will be) received by the Group. The entity measures the unidentifiable goods or servicesreceived at the grant date for such equity-settled transactions.

2.26 Key management life insurance contracts

The Group invests in certain key management life insurance contracts, which contain both investment andinsurance elements. The life insurance contracts are initially recognised at the amount of premium paid, andsubsequently measured at each balance sheet date at its cash surrender value. Changes to the cash surrendervalue at each balance sheet date will be recognised in consolidated statements of comprehensive income as“other (losses)/gains, net”. In the event of death of the insured person, the surrender of the policies, or thepolicies mature, the investment will be derecognised and any resulting gains/losses will be recognised in profit orloss.



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3 FINANCIAL RISK AND CAPITAL MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including cash flow and fairvalue interest rate risk and foreign currency risk), credit risk and liquidity risk. The Group’s overall riskmanagement program focuses on the unpredictability of financial markets and seeks to minimise potentialadverse effects on the Group’s financial performance.

Management manages and monitors these exposures to ensure appropriate measures are implemented on atimely and effective manner. Because of the simplicity of the financial structure and the current operations of theGroup, no hedging activities are undertaken by management.

(a) Cash flow and fair value interest rate risk

The Group’s interest rate risk arises primarily from bank borrowings with creditworthy licensedbanks and financial institutions. The Group is not exposed to material interest rate risk as all the bankborrowings are of short-term nature.

(b) Foreign currency risk

The Group mainly operates in Hong Kong and the PRC and its business transactions, assets andliabilities are principally denominated in HK$, United States dollar (“US$”) and Renminbi (“RMB”).Foreign currency risk arises when future commercial transactions or recognised assets and liabilities aredenominated in a currency that is not an entity’s functional currency. Management monitors foreigncurrency exchange exposure and will take measures to minimise the currency translation risk.

As HK$ is pegged against US$, management considers that the Group is mainly exposed to foreigncurrency risk with respect to RMB as a result of the movements of HK$ and US$.

During the Track Record Period, the Group did not enter into any derivative instruments to hedgeagainst foreign currency risk.

As at 31 March 2020, 2021 and 2022, if RMB strengthen or weaken by 10% against HK$ with allother variables held constant, profit before income tax for each of the years ended 31 March 2020, 2021and 2022 would increase or decrease by HK$555,000, HK$54,000 and HK$26,000 respectively.

As at 31 March 2020, 2021 and 2022, if US$ strengthen or weaken by 10% against RMB with allother variables held constant, profit before income tax for each of the years ended 31 March 2020, 2021and 2022 would increase or decrease by HK$582,000, HK$563,000 and HK$399,000 respectively.

(c) Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument would fail to dischargeits obligation under the terms of the financial instrument and cause a financial loss to the Group. Thecredit risk of the Group mainly arises from cash and cash equivalents, restricted bank deposits, tradereceivables, deposits and other receivables (except prepayments) and key management life insurancecontracts.



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(i) Risk management

Credit risk is managed on a group basis. For banks and financial institutions, only state-ownedbanks and other medium or large size listed banks are accepted. Management does not expect thatthere will be any significant losses from non-performance by these counterparties.

To manage risk arising from trade receivables, the Group has policies in place to ensure thatcredit terms are made to customers with an appropriate credit history and the management performsongoing credit evaluations of its customers. The credit period granted to the customers is typicallyof 30-45 days and the credit quality of these customers is assessed, which takes into account theirfinancial position, past experience and other factors.

(ii) Impairment of financial assets

The Group has three types of financial assets that are subject to the expected credit lossmodel:

• Trade receivables

• Other financial assets at amortised cost

• Financial assets at cash surrender value

While cash and cash equivalents and restricted bank deposits are also subject to theimpairment requirements of HKFRS 9, the identified impairment loss is not considered assignificant.

Trade receivables

The Group applies the HKFRS 9 simplified approach to measuring expected creditlosses which uses a lifetime expected loss allowance, except for those individually significanttrade receivables or trade receivables at default which are tested individually.

Measurement of expected credit loss on individual basis

Trade receivables relating to customers with known financial difficulties or significantdoubt on collection of receivables are assessed individually for provision for impairmentallowance. As at 31 March 2022, the balances of such individually assessed trade receivablesand the loss allowance in respect of these receivables are HK$335,000 and HK$335,000,respectively, which was in relation to trade receivables due from a customer with financialdifficulties during the year ended 31 March 2022. No trade receivables are assessedindividually for provision for impairment allowance as at 31 March 2020 and 2021.

Measurement of expected credit loss on collective basis

Trade receivables have been grouped based on shared credit risk characteristics and thedays past due. The expected credit losses on trade receivables are estimated using a provisionmatrix based on the Group’s historical credit loss experience and ageing profile as at the endof reporting period. The historical loss rates are adjusted to reflect current andforward-looking information on macroeconomic factors, including but not limited to theimpact of the COVID-19 pandemic, affecting the ability of the customers to settle thereceivables. The Group has identified the factors including Gross Domestic Products, andaccordingly adjusted the historical loss rates based on expected changes in these factors.

The Group’s credit risk is concentrated on a number of major and long establishedcustomers. As at 31 March 2020, 2021 and 2022, trade receivables from the top fivecustomers accounted for approximately 55%, 36% and 43% of the Group’s total gross tradereceivables.



– I-29 –

Measurement of expected credit loss on collective basis (Continued)

The loss allowance as at 31 March 2020, 2021 and 2022 was determined as follows fortrade receivables:

Current

Within30 days

past due

31–60days

past due

61–90days

past due

91–180days

past due

181–365days

past due

Over365

dayspast due Total

As at 31 March 2020Expected loss rate –* 0.02% 0.04% 0.11% 0.41% 1.61% 47.62%Gross carrying amount – trade

receivables (in HK$’000) 27,117 5,410 2,422 904 244 75 21 36,193Loss allowance (in HK$’000) 1 1 1 1 1 1 10 16

As at 31 March 2021Expected loss rate 0.01% 0.01% 0.02% 0.2% 0.34% –* 24.37%Gross carrying amount – trade

receivables (in HK$’000) 31,143 23,049 5,919 547 327 3 24 61,012Loss allowance (in HK$’000) 1 3 1 1 1 – 6 13

As at 31 March 2022Expected loss rate 0.10% 0.18% 0.89% 5.19% 49.64% 87.95% 91.67%Gross carrying amount – trade

receivables (in HK$’000) 41,118 30,198 17,060 3,780 411 249 24 92,840Loss allowance (in HK$’000) 39 53 151 196 204 219 22 884

* Insignificant expected credit loss rate.

Trade receivables are written off when there is no reasonable expectation of recovery.Indicators that there is no reasonable expectation of recovery include, amongst others, the failure ofa debtor to engage in a repayment plan with the Group, and a failure to make contractual paymentsfor a long period.

Impairment losses on trade receivables are presented as net impairment losses withinoperating profit. Subsequent recoveries of amounts previously written off are credited against thesame line item.

The movement of allowance for impairment and ageing analysis of trade receivables aredisclosed in Note 18 of this Historical Financial Information.

Other financial assets at amortised cost and financial assets at cash surrender value

Other financial assets at amortised cost include deposits and other receivables (except forprepayment) and financial assets at cash surrender value represented key management life insurancecontracts.



– I-30 –

Management assessed the credit quality of the counterparties, taking into account thehistorical risk of default and capacity to meet its contractual cash flow obligations in the near term.

Since these assets are considered to be of low credit risk, the loss allowance recognised, ifany, was therefore limited to 12-month expected losses. The expected credit loss is minimal duringthe Track Record Period.

(d) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and theavailability of funding through internally generated cash flows and committed credit facilities to meetobligations when due and to close out market positions. As at 31 March 2020, 2021 and 2022, the Groupheld cash and cash equivalents of HK$102,546,000, HK$61,259,000 and HK$31,068,000, respectively, thatare expected to be readily available for managing liquidity risk. The Group manages its liquidity risk byclosely monitoring the turnover days of receivables and its working capital requirements, and keepingcredit lines available. Management monitors rolling forecasts of the Group’s bank facilities and cash andcash equivalents on the basis of expected cash flows. During the Track Record Period, the Group had notbreached any borrowing limits or covenants (where applicable) of its banking facilities.

The table below analyses the Group’s financial liabilities by relevant maturity groupings based onthe remaining period at each of the reporting date to the contractual maturity date. The amounts disclosedin the table were the contractual undiscounted cash flows. Balances due within 12 months from the end ofreporting date equal to their carrying amounts in the consolidated statements of financial position, as theimpact of discount is not significant.

Repayableon demand

Within1 year

Between1 and 2

years

Between2 and 5

years TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2020Trade payables – 31,664 – – 31,664Other payables – 665 – – 665Amounts due to related

parties 69,769 – – – 69,769Lease liabilities – 1,055 759 273 2,087

69,769 33,384 759 273 104,185

As at 31 March 2021Trade payables – 38,356 – – 38,356Accrued [REDACTED] – 3,146 – – 3,146Other payables – 1,539 – – 1,539Amounts due to related

parties 47,989 – – – 47,989Lease liabilities – 1,065 484 121 1,670

47,989 44,106 484 121 92,700



– I-31 –

Repayableon demand

Within1 year

Between1 and 2

years

Between2 and 5

years TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2022Trade payables – 45,078 – – 45,078Accrued [REDACTED] – 3,334 – – 3,334Other payables – 396 – – 396Amounts due to related

parties 29,268 – – – 29,268Bank borrowings – 15,335 – – 15,335Lease liabilities – 1,976 112 159 2,247

29,268 66,119 112 159 95,658

3.2 Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern in order to provide returns for equity holders and benefits for other stakeholders and to maintain anoptimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid toequity holders, return capital to equity holders, issue new shares or sell assets to reduce debt. The Groupcomplied with the financial covenants attached to the banking facilities during the Track Record Period.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided bytotal capital. Net debt is calculated as bank borrowings, lease liabilities and amounts due to related parties lesscash and cash equivalents and restricted bank deposits. Total capital is calculated as “equity” as shown in theconsolidated statements of financial position plus net debt.

As at 31 March 2020, 2021 and 2022, the Group was in a net cash position hence no gearing ratio waspresented.

3.3 Fair value estimation

The Group has no significant financial instruments other than trade receivables, deposits, otherreceivables, restricted bank deposits, cash and cash equivalents, trade payables, other payables, bank borrowings,lease liabilities and amounts due to related parties. The carrying amounts of these balances approximate their fairvalues due to their short maturities.



– I-32 –

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldomequal the actual results. Management also needs to exercise judgment in applying the Group’s accounting policies.

Estimates and judgments are continually evaluated. They are based on historical experience and other factors,including expectations of future events that may have a financial impact on the entity and that are believed to bereasonable under the circumstances.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are addressed below:

(a) Income taxes and deferred taxation

The Group is subject to income taxes in Hong Kong and the PRC. Significant judgment is required indetermining the provision for income taxes. There are transactions and calculations for which the ultimate taxdetermination is uncertain during the ordinary course of business. In addition, a foreign enterprise, which has apotential permanent establishment in the PRC might be subject to the income taxes in the PRC. Where the finaltax outcome of these matters is different from the amounts that were initially recorded, such difference willimpact the income tax and deferred tax provision in the year in which such determination is made.

Deferred tax assets relating to certain temporary difference tax losses are recognised when managementconsiders that it is probable that future taxable profits will be available against which the temporary differencesor tax losses can be utilised.

(b) Impairment of financial assets

The loss allowances for financial assets are based on assumptions about risk of default and expected lossrates. The Group uses judgment in making these assumptions and selecting the inputs to the impairmentcalculation, based on the evaluation of a range of possible outcomes, and taking into account past events, currentand future conditions, including but not limited to the impact of the COVID-19 pandemic, and the current andforward-looking market condition. Management reassesses the provision at the end of each reporting period.

(c) Estimated useful lives and impairment of property, plant and equipment and right-of-use assets

The Group’s property, plant and equipment are depreciated based on their estimated useful lives andestimated residual values. The Group’s right-of-use assets are depreciated over the shorter of the assets’ usefullives and the lease terms on a straight-line basis. Management has reviewed the estimated useful lives andconsiders they are appropriate. This estimate is based on the historical experience of the actual useful lives ofproperty, plant and equipment and right-of-use assets of similar nature and functions. It could changesignificantly as a result of technical innovations and competitor actions in response to market conditions.

Management will increase the depreciation charges where useful lives are less than previously estimatedand will dispose of technically obsolete or non-strategic assets that have been abandoned. Actual economic livesmay differ from estimated useful lives. Periodic review could result in a change in depreciable lives andtherefore depreciation expense in future periods.

(d) Recognition of share-based compensation expenses

The fair value of service received in exchange for the shares of the Group is recognised as an expense.The total amount to be expensed is determined by reference to the fair value of the shares at the transaction dateand the consideration received if any. Since the shares of the Group are not traded in an active market, the Groupdetermines the fair value of the shares by using valuation technique. The Group has engaged an independentexternal valuer to determine the fair values. The key assumptions are disclosed in Note 22.



– I-33 –

5 SEGMENT INFORMATION

The CODM has been identified as the executive directors of the Group who review the Group’s internal reportingin order to assess performance and allocate resources. The CODM has determined the operating segments based onthese reports.

The Group is principally engaged in provision of the air freight forwarding services, ocean freight forwardingservices and logistics and related value-added services.

The Group is separated into three operating segments:

• Air freight: this segment provides freight forwarding service by air

• Ocean freight: this segment provides freight forwarding service by sea

• Logistics and related value-added services: this segment provides short-term warehousing, local logisticsand other ancillary services

The CODM assesses the performance of the operating segments based on the results of reportable segments.Finance income and costs, corporate income and expenses and net reversal of/(provision for) impairment loss offinancial assets are not included in the results for each operating segment that are reviewed by the CODM. Otherinformation provided to the CODM is measured in a manner consistent with that in the consolidated financialstatements.

Segment assets mainly exclude deferred tax assets, income tax recoverable, deposits, prepayments and otherreceivables, key management life insurance contracts, cash and cash equivalents and restricted bank deposits that aremanaged on a central basis. Segment liabilities mainly exclude income tax payable, deferred tax liabilities, amount dueto related parties and other liabilities that are managed on a central basis.



– I-34 –

(a) The segment information provided to the CODM for the reportable segments during the Track RecordPeriod is as follows:

Year ended 31 March 2020

Air freight Ocean freight

Logistics andrelated

value-addedservices Total

HK$’000 HK$’000 HK$’000 HK$’000

Reportable segment revenue 378,882 104,992 1,649 485,523

Timing of revenue recognition– Over time 378,882 104,992 1,649 485,523

Segment gross profit 55,851 10,305 613 66,769

Segment results 53,941 7,633 386 61,960

Unallocated expenses (19,249)Other income 640Other losses, net (2,428)Reversal of impairment losses on

financial assets 2Finance income 2,213Finance costs (144)

Profit before income tax 42,994Income tax expenses (7,988)

Profit for the year 35,006


Air freightOceanfreight

Logisticsand related

value-addedservices Unallocated Total

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

Other segment informationAmortisation of intangible

assets – – – 5 5Depreciation of property, plant

and equipment 180 111 123 750 1,164Depreciation of right-of-use

assets 196 138 92 869 1,295Additions to non-current assets

(other than financial assetsand deferred income taxassets) 793 504 531 3,426 5,254



– I-35 –





HK$’000 HK$’000 HK$’000 HK$’000

Reportable segment revenue 450,702 123,526 4,749 578,977

Timing of revenue recognition– Over time 450,702 123,526 4,749 578,977

Segment gross profit 59,908 10,220 2,506 72,634

Segment results 58,417 9,654 2,268 70,339

Unallocated expenses (36,344)Other income 2,461Other losses, net (3,264)Reversal of impairment losses on

financial assets 3Finance income 413Finance costs (90)







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




assets 202 142 97 897 1,338Additions to non-current assets

(other than financial assetsand deferred income taxassets) 155 105 60 669 989



– I-36 –





HK$’000 HK$’000 HK$’000 HK$’000

Reportable segment revenue 593,136 438,709 1,700 1,033,545

Timing of revenue recognition– Over time 593,136 438,709 1,700 1,033,545

Segment gross profit 56,438 76,771 256 133,465

Segment results 54,459 75,334 (122) 129,671

Unallocated expenses (32,733)Other gains, net 134Provision of impairment loss on

financial assets (1,206)Finance income 70Finance costs (242)







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




assets 318 230 297 1,512 2,357Additions to non-current assets

(other than financial assetsand deferred income taxassets) 361 272 74 2,315 3,022



– I-37 –

The segment assets are as follows:




HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2020Total segment assets 30,591 7,042 750 38,383



Reconciliation of total segment assets to total assets is provided as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Total segment assets 38,383 62,752 93,285Unallocated:

Property, plant and equipment 2,834 2,273 1,464Intangible asset 1 46 28Right-of-use assets 1,566 1,071 1,591Key management life insurance contracts 1,503 – 949Deferred income tax assets 73 775 170Deposits, prepayments and other receivables 2,210 12,630 8,100Income tax recoverable 113 – –Restricted bank deposits 31,607 34,429 60,756Cash and cash equivalents 102,546 61,259 31,068

Total assets 180,836 175,235 197,411



– I-38 –

The segment liabilities are as follows:




HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2020Total segment liabilities 29,907 6,496 202 36,605



Reconciliation of total segment liabilities to total liabilities is provided as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Total segment liabilities 36,605 42,700 52,708Unallocated:

Accruals, other payables and provisions 7,673 12,152 13,012Current income tax liabilities 7,448 7,692 10,864Amounts due to related parties 69,769 47,989 29,268Deferred tax liabilities 43 – –Bank borrowings – – 15,000Lease liabilities 1,371 1,103 1,329




– I-39 –

(b) Geographical information

An analysis of the Group’s revenue from external customers by region of destination during the TrackRecord Period is as follows:


HK$’000 HK$’000 HK$’000

The United States of America (the “USA”) 367,696 483,138 889,207The United Kingdom 17,151 19,955 27,648Japan 12,939 6,937 26,885Canada 8,912 5,861 16,857The PRC 10,548 8,030 10,435Hong Kong 7,863 8,460 5,315Netherlands 18,024 2,664 1,502Others 42,390 43,932 55,696

485,523 578,977 1,033,545

An analysis of the Group’s non-current assets, excluding financial instruments and deferred income taxassets by geographical locations as at 31 March 2020, 2021 and 2022 is as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Hong Kong 2,870 2,171 3,030The PRC 3,737 2,972 1,382

6,607 5,143 4,412

(c) Information about major customers

During the Track Record Period, a customer individually contributed to over 10% of the Group’s totalrevenue. Revenue generated from this customer during the Track Record Period is as follows:


HK$’000 HK$’000 HK$’000

Customer A 244,554 76,004 149,427

There was no other customer who individually accounted for more than 10% of the Group’s total revenueduring the Track Record Period.



– I-40 –

(d) Unsatisfied performance obligations

The Group’s air and ocean freight forwarding and logistics and related value-added services are eitherrendered in short period of time and within a year or do not have a fixed service term set out in the servicecontract. Accordingly, the Group has elected the practical expedient as allowed under paragraph 121 of HKFRS15 “Revenue from Contracts with Customers” of not to disclose the remaining performance obligations at the endof respective periods.

(e) Assets recognised from incremental costs to obtain a contract

There was no significant incremental costs to obtain a contract during the Track Record Period.

6 OTHER INCOME AND OTHER (LOSSES)/GAINS, NET


HK$’000 HK$’000 HK$’000

Other incomeGovernment grants (Note) 460 2,356 –Management fee income 180 105 –

640 2,461 –

Other (losses)/gains, netExchange (losses)/gains, net (1,372) (825) 1,700Gain/(loss) on disposals of property, plant and

equipment 129 – (5)Gain on early termination of leases (Note 16) 27 – –Change in cash surrender value of key management life

insurance contracts (Note 28) (1,212) (2,439) (1,561)

(2,428) (3,264) 134

Note: During the year ended 31 March 2020, the amount represented grants provided by the Hong Kong SpecialAdministrative Region and the PRC governments for the purpose of brand development and businessupgrade, and certain tax and export subsidies.

During the year ended 31 March 2021, the amount primarily represented subsidies of HK$2,234,000granted by the Hong Kong government under the Anti-Epidemic Fund.

There are no unfulfilled conditions or other contingencies attaching to these grants.



– I-41 –

7 EXPENSES BY NATURE


HK$’000 HK$’000 HK$’000

Amortisation of intangible assets (Note 15) 5 22 29Auditor’s remuneration:– Audit services 105 61 245Depreciation of property, plant and equipment

(Note 14) 1,164 1,368 1,457Depreciation of right-of-use assets (Note 16) 1,295 1,338 2,357Employee benefit expenses, including directors’

emoluments (Note 8) 37,842 30,809 41,229Expenses relating to short term leases 1,857 1,449 514Freight and handling costs 390,022 483,093 868,919[REDACTED] [REDACTED] [REDACTED] [REDACTED]Share-based compensation (Note 22) – 10,381 –Travelling and entertainment expenses 3,987 1,400 2,335Repair and maintenance expenses 1,471 1,405 1,438Others 5,064 4,900 5,518

Total cost of services and administrative expenses 442,812 544,982 936,607

8 EMPLOYEE BENEFIT EXPENSES, INCLUDING DIRECTORS’ EMOLUMENTS


HK$’000 HK$’000 HK$’000

Salaries, wages and bonus 34,629 28,557 37,363Retirement benefits contributions (Note) 2,850 2,117 3,479Staff welfare and benefits 363 135 387

37,842 30,809 41,229

Employee benefit expenses have been included in consolidated statements of comprehensive income as follows:


HK$’000 HK$’000 HK$’000

Cost of services 27,215 21,774 30,019Administrative expenses 10,627 9,035 11,210

37,842 30,809 41,229



– I-42 –

Note: Employees of the entity in the PRC are required to participate in a defined contribution retirement schemeadministered and operated by the local municipal government. The Group contributes funds which arecalculated on fixed percentage of the employees’ salary (subject to a floor and cap) as set by localmunicipal governments to each scheme locally to fund the retirement benefits of the employees.

The Group has arranged for its Hong Kong employees to join the Mandatory Provident Fund Scheme (the“MPF Scheme”), a defined contribution scheme managed by an independent trustee. Under the MPFScheme, the Group and its employees make monthly contributions to the scheme at 5% of the employees’earnings as defined under the Mandatory Provident Fund legislation. Both the Group’s and the employees’contributions were subject to a monthly cap of HK$1,500 and thereafter contributions are voluntary.

Five highest paid individuals

During the Track Record Period, the five individuals whose emoluments were the highest in the Groupincluded two, two and two directors, respectively, whose emoluments are reflected in the analysis in Note 9. Theemoluments paid/payable to the remaining three, three and three individuals during the years ended 31 March2020, 2021 and 2022, respectively, were as follows:


HK$’000 HK$’000 HK$’000

Salaries, wages, bonus and other benefits 5,509 5,912 8,482Retirement benefits contributions scheme 54 54 51

5,563 5,966 8,533

The emoluments of the remaining highest paid individuals fell within the following bands:


Number of individuals

Emolument bandNil to HK$500,000 – – –HK$500,001 to HK$1,000,000 – 1 –HK$1,000,001 to HK$1,500,000 2 1 –HK$1,500,001 to HK$2,000,000 – – 2HK$2,000,001 to HK$2,500,000 – – –HK$2,500,001 to HK$3,000,000 – – –HK$3,000,001 to HK$3,500,000 1 – –HK$3,500,001 to HK$4,000,000 – 1 –HK$4,000,001 to HK$4,500,000 – – –HK$4,500,001 to HK$5,000,000 – – –HK$5,000,001 to HK$5,500,000 – – 1

3 3 3



– I-43 –

9 BENEFIT AND INTERESTS OF DIRECTORS

(a) Directors’ emoluments

The remunerations of each director were set out below:

Fees

Salaries andbenefits in

kindDiscretionary

bonuses

Employer’scontribution

to retirementbenefitscheme


expenses TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Year ended 31 March2020:

Executive directorsMr. Wong (Note (i)) – 2,136 – 125 – 2,261Mr. Chim (Note (i)) – 801 – 17 – 818Mr. Shon Il Seon

(Note (i)) – 5,193 – 109 – 5,302

– 8,130 – 251 – 8,381



(Note (i)) – 1,094 – 108 – 1,202

– 4,138 – 252 – 4,390



(Note (i)) – 1,505 – 114 – 1,619

– 4,664 – 262 – 4,926

Notes:

(i) Mr. Wong, Mr. Chim and Mr. Shon Il Seon were appointed as Directors of the Company on 19January 2021 and re-designated as Executive Directors of the Company on 27 July 2021.

(ii) Kuan Hong Kin, Ng Ming Kwan and Yao Qing were appointed as Independent Non-ExecutiveDirectors of the Company on [•] and therefore no remuneration was paid during the Track RecordPeriod.



– I-44 –

(b) Directors’ retirement benefits

During the Track Record Period, no other retirement benefits were paid to or receivable by any director inrespect of their other services in connection with the management of the affairs of the Company or itssubsidiaries undertaking.

(c) Directors’ termination benefits

No payment was made to directors as compensation for early termination of the appointment during theTrack Record Period.

(d) Consideration provided to third parties for making available directors’ services

No payment was made to third parties for making available directors’ services during the Track RecordPeriod.

(e) Information about loans, quasi-loans and other dealings in favour of directors, bodies corporatecontrolled by, and entities connected with, such directors

Save as disclosed in Note 30, there were no other loans, quasi-loans and other dealings in favour ofdirectors, controlled bodies corporate by and connected entities with such directors during the Track RecordPeriod.

(f) Directors’ material interests in transactions, arrangements or contracts

No significant transactions, arrangements and contracts in relation to the Group’s business to which theCompany was a party and in which a director of the Company had a material interest, whether directly orindirectly, subsisted at the end of the year or at any time during the Track Record Period.

10 FINANCE INCOME AND FINANCE COSTS


HK$’000 HK$’000 HK$’000

Finance incomeInterest income on bank deposits 2,213 413 70

Finance costsInterest expense on:

– Bank borrowings (32) – (77)– Lease liabilities (Note 16) (112) (90) (165)

(144) (90) (242)

Finance income/(costs), net 2,069 323 (172)



– I-45 –

11 INCOME TAX EXPENSES


HK$’000 HK$’000 HK$’000

Current income tax:– Hong Kong profits tax 5,913 8,794 14,716– PRC enterprise income tax 1,288 – 4,504– Enterprise income tax arising from potential

permanent establishment risk in the PRC 823 – –Deferred income tax (credit)/charge (Note 24) (36) (714) 623

Total income tax expense 7,988 8,080 19,843

(i) Hong Kong profits tax

The Group’s entities incorporated in Hong Kong are subject to Hong Kong profits tax of 8.25% for thefirst HK$2 million of the estimated assessable profits and 16.5% on the remaining estimated assessable profitsduring the Track Record Period.

(ii) The PRC enterprise income tax (“EIT”)

EIT provision is made on the estimated assessable profits of entities within the Group incorporated in thePRC and is calculated in accordance with the relevant regulations of the PRC after considering the available taxbenefits from refunds and allowances. A foreign enterprise which has a potential permanent establishment in thePRC also subject to the income taxes at 25% in the PRC during the Track Record Period.

(iii) Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capitalgain. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islandswithholding tax will be imposed.

(iv) British Virgin Islands

The Group’s entities established under the International Business Companies Acts of BVI are exemptedfrom BVI income tax.

(v) PRC withholding tax

Pursuant to the Detailed Implementation Regulations for Implementation of the Enterprise Income TaxLaw issued on December 6, 2007, dividends distributed from the profits generated by the PRC companies afterJanuary 1, 2008 to their foreign investors shall be subject to a withholding income tax of 5% or 10%. For theGroup, the applicable rate is 5%. The Group is therefore liable for withholding taxes on dividends distributed bythose foreign invested subsidiaries established in the PRC in respect of earnings generated from 1 January 2008.

The Group does not have any plan in the foreseeable future to require its subsidiary in the PRC todistribute its retained earnings and intends to retain them to operate and expand its business in Mainland China.Accordingly, no deferred income tax liability related to withholding tax on undistributed earnings was accrued asof the end of each reporting period.



– I-46 –

The tax on the Group’s profit before income tax differs from the theoretical amount that would arise usingthe statutory tax rate as follows:


HK$’000 HK$’000 HK$’000

Profit before income tax 42,994 33,518 95,694

Tax calculated at tax rates applicable to profits inthe respective jurisdictions 7,747 5,291 18,098

Income not subject to tax (196) (829) (610)Expenses not deductible for tax purposes 642 3,803 2,530Statutory income tax exemption (205) (185) (175)

Income tax expense 7,988 8,080 19,843

12 DIVIDENDS AND DEEMED DISTRIBUTION

Dividends during the years ended 31 March 2020 and 2021 represented dividends declared by the companies nowcomprising the Group to the then owners of the companies for the years after elimination of intra-group dividends,which have been fully settled in cash during the Track Record Period. The rates of dividend of the number of sharesranking for the dividends are not presented as such information is not considered meaningful for the purpose of thisreport.


HK$’000 HK$’000 HK$’000

Dividends 43,668 50,000 –

Deemed distribution during the year ended 31 March 2022 represented the distribution made by ENLGZ andENLSZ to the then owners in relation to the Included Business, which have been fully settled in cash during the yearended 31 March 2022.


HK$’000 HK$’000 HK$’000

Deemed distribution – – 25,317

Dividend declared by the Company since the date of its incorporation up to the date of this report is as follows,which is partially settled up to the date of this report:

Year ended 31 March2021 2022

HK$’000 HK$’000

Dividends – 40,000



– I-47 –

13 EARNINGS PER SHARE

(i) Basic earnings per share

The basic earnings per share is calculated by dividing the profit attributable to owners of the Company bythe weighted average number of ordinary shares in issue during the respective years. In determining the weightedaverage number of shares in issue during the respective years, 8,667 shares were deemed to have been in issueon 1 April 2019 as if the Company had been incorporated by then.


Profit attributable to owners of the Company(HK$’000) 35,006 25,438 75,851

Weighted average number of shares in issue 8,667 8,754 10,000

Basic earnings per share (HK$) 4,039 2,906 7,585

(ii) Diluted earnings per share

Diluted earnings per share presented is the same as the basic earnings per share as there was no potentiallydilutive ordinary share outstanding during the Track Record Period.



– I-48 –

14 PROPERTY, PLANT AND EQUIPMENT

Leaseholdimprovements

Motorvehicles

Furnitureand fixtures

Computerequipment Total

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

As at 1 April 2019Cost 179 3,076 570 939 4,764Accumulated depreciation (177) (2,035) (485) (836) (3,533)

Net book amount 2 1,041 85 103 1,231

Year ended 31 March 2020Opening net book amount 2 1,041 85 103 1,231Additions 1,910 1,868 616 99 4,493Disposals – (22) (18) (14) (54)Depreciation (274) (693) (128) (69) (1,164)Exchange differences – (81) (2) (2) (85)

Closing net book amount 1,638 2,113 553 117 4,421

As at 31 March 2020Cost 2,033 4,361 944 555 7,893Accumulated depreciation (395) (2,248) (391) (438) (3,472)

Net book amount 1,638 2,113 553 117 4,421

Year ended 31 March 2021Opening net book amount 1,638 2,113 553 117 4,421Additions – – 1 344 345Depreciation (382) (716) (143) (127) (1,368)Exchange differences – 137 4 4 145

Closing net book amount 1,256 1,534 415 338 3,543

As at 31 March 2021Cost 2,033 4,624 957 917 8,531Accumulated depreciation (777) (3,090) (542) (579) (4,988)

Net book amount 1,256 1,534 415 338 3,543



– I-49 –

Leaseholdimprovements

Motorvehicles

Furnitureand fixtures

Computerequipment Total

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

Year ended 31 March 2022Opening net book amount 1,256 1,534 415 338 3,543Additions – – 36 129 165Disposals – – (5) – (5)Depreciation (382) (757) (135) (183) (1,457)Exchange differences – 50 – 2 52

Closing net book amount 874 827 311 286 2,298

As at 31 March 2022Cost 2,033 4,762 959 1,058 8,812Accumulated depreciation (1,159) (3,935) (648) (772) (6,514)

Net book amount 874 827 311 286 2,298

Depreciation expenses have been charged to the consolidated statements of comprehensive income as follows:


HK$’000 HK$’000 HK$’000

Cost of services 19 78 77Administrative expenses 1,145 1,290 1,380

1,164 1,368 1,457



– I-50 –

15 INTANGIBLE ASSETS

SoftwareHK$’000

At 1 April 2019Cost 23Accumulated amortisation (17)

Net book amount 6

Year ended 31 March 2020Opening net book amount 6Amortisation (Note 7) (5)

Closing net book amount 1

At 31 March 2020Cost 22Accumulated amortisation (21)

Net book amount 1

Year ended 31 March 2021Opening net book amount 1Additions 85Amortisation (Note 7) (22)Exchange differences 2



Net book amount 66

Year ended 31 March 2022Opening net book amount 66Amortisation (Note 7) (29)Exchange differences 2



Net book amount 39

Amortisation expenses have been charged in administrative expenses during the Track Record Period.



– I-51 –

16 LEASES

(i) Amounts recognised in the consolidated statements of financial position:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Right-of-use assetsOffices 1,753 1,348 1,807Motor vehicles 432 – –Furniture and fixtures – 186 268

2,185 1,534 2,075

Lease liabilitiesCurrent 990 1,002 1,913Non-current 994 579 242

1,984 1,581 2,155

Additions to the right-of-use assets for the years ended 31 March 2020, 2021 and 2022 were HK$761,000,HK$559,000 and HK$2,857,000, respectively.

Because of the early termination of a lease agreement, right-of-use assets with net book value amountingto HK$318,000 and related lease liabilities amounting to HK$345,000 were derecognised during the year ended31 March 2020. Gain on early termination of a lease contract amounting to HK$27,000 was included in “other(losses)/gains, net”.

(ii) Amounts recognised in the consolidated statements of comprehensive income


HK$’000 HK$’000 HK$’000

Depreciation of right-to-use assetsOffices 862 881 2,301Motor vehicles 433 432 –Furniture and fixtures – 25 56

1,295 1,338 2,357

Interest expense (included in finance costs) 112 90 165Expenses relating to short-term leases 1,857 1,449 514

1,969 1,539 679

The total cash outflow for leases for the years ended 31 March 2020, 2021 and 2022 were HK$3,062,000,HK$2,631,000 and HK$3,006,000, respectively.



– I-52 –

17 FINANCIAL INSTRUMENTS BY CATEGORY

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Financial assetsFinancial assets at amortised cost:

Trade receivables 36,177 60,999 91,956Deposits and other receivables, excluding

prepayments 1,748 9,930 2,168Restricted bank deposits 31,607 34,429 60,756Cash and cash equivalents 102,546 61,259 31,068

Financial assets at cash surrender value:Key management life insurance contracts 1,503 – 949

173,581 166,617 186,897

Financial liabilitiesFinancial liabilities at amortised cost:

Trade payables 31,664 38,356 45,078Accruals and other payables, excluding non-financial

liabilities 665 4,685 3,730Amounts due to related parties 69,769 47,989 29,268Bank borrowings – – 15,000Lease liabilities 1,984 1,581 2,155

104,082 92,611 95,231

18 TRADE RECEIVABLES

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Trade receivables– Third parties 35,180 61,012 93,175– Related parties (Note 30(a)) 1,013 – –

Less: Loss allowance (16) (13) (1,219)

Trade receivable – net 36,177 60,999 91,956

The Group’s credit terms granted to third-party customers are generally 30 to 60 days.



– I-53 –

As at 31 March 2020, 2021 and 2022, the ageing analysis of the trade receivables, based on invoice date beforeloss allowance, was as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Less than 30 days 29,057 34,683 48,02831–60 days 4,392 22,351 25,34761–90 days 2,009 3,424 16,05591–180 days 606 527 3,110181–365 days 129 27 635

36,193 61,012 93,175

Movement in the loss allowance for trade receivables were as follows:


HK$’000 HK$’000 HK$’000

As beginning of the year 18 16 13Net (reversal of)/provision for impairment loss of

financial assets (2) (3) 1,206

At end of the year 16 13 1,219

The Group applied the simplified approach to provide for expected credit losses prescribed by HKFRS 9 whichuses a lifetime expected loss allowance for all trade receivables (Note 3.1(c)).

The carrying amounts of the Group’s trade receivables were denominated in the following currencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

US$ 16,285 20,796 52,325HK$ 18,386 36,032 36,453RMB 1,518 4,184 4,397Others 4 – –

36,193 61,012 93,175

The maximum exposure to credit risk as at 31 March 2020, 2021 and 2022 was the carrying value of thereceivables mentioned above. The Group does not hold any collateral as security. The carrying amounts of tradereceivables approximate their fair values.



– I-54 –

19 DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

The Group

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Deposits to vendors 1,250 1,451 1,802Prepayments for [REDACTED] – 2,216 5,282Receivable from Oriental Prominence

(Note 1.2(v)) – 8,000 –Other prepayments 462 484 650Deposits and other receivables 498 479 366

Total 2,210 12,630 8,100

Less:Non-current deposits (143) (155) (4)

Current portion 2,067 12,475 8,096

The Company

As at 31 March2021 2022

HK$’000 HK$’000

Prepayments for [REDACTED] 2,216 5,282Receivable from Oriental Prominence (Note 1.2(v)) 8,000 –

Total 10,216 5,282

The carrying amounts of the Group’s deposits and other receivables were denominated in the followingcurrencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ 377 8,358 551RMB 1,171 1,477 1,617US$ 200 95 –

1,748 9,930 2,168

As at 31 March 2021 and 2022, the carrying amounts of the Company’s other receivables weredenominated in HK$ and deposits and other receivables of the Company approximated their fair values.

As at 31 March 2020, 2021 and 2022, the carrying amounts of deposits and other receivables of the Groupapproximated their fair values. Further details on the Group’s credit policy and credit risk arising from depositsand other receivables are set out in Note 3.1(c).



– I-55 –

20 CASH AND BANK BALANCES

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Cash at banks 102,467 61,130 30,949Cash on hand 79 129 119

Cash and cash equivalents 102,546 61,259 31,068Restricted bank deposits (Note) 31,607 34,429 60,756

134,153 95,688 91,824

Note: The deposits are pledged to secure bank facilities for guarantees on payment to certain airline suppliers.

The carrying amounts of cash and bank balances were denominated in the following currencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ 6,176 19,417 6,579RMB 8,919 6,487 6,069US$ 119,031 69,475 79,154Others 27 309 22

134,153 95,688 91,824

As at 31 March 2020, 2021 and 2022, the carrying amounts of cash and bank balances approximate their fairvalues.

For the years ended 31 March 2020, 2021 and 2022, the Group’s bank deposits carried effective interest rates of1.88%, 0.10% and 0.07% per annum, respectively.

The conversion of bank balances and cash of the Group denominated in RMB into foreign currencies andremittance of RMB funds out of the PRC are subject to the rules and regulations of foreign exchange controlpromulgated by the Mainland Chinese Government.



– I-56 –

21 SHARE CAPITAL AND COMBINED CAPITAL

(a) Share capital

Number ofshares Share capital

HK$’000

Authorised:As at 19 January 2021 (date of incorporation of the Company),

31 March 2021 and 2022 38,000,000 380

Issued and fully paid:Issue of shares at date of incorporation of the Company 8,667 –Issue of shares to Oriental Prominence (Note 1.2(v)) 1,333 –

As at 31 March 2021 and 2022 10,000 –

The Company was incorporated on 19 January 2021 with an authorised share capital of HK$380,000divided into 38,000,000 ordinary shares with a par value of HK$0.01 each. On the same date, one share wasissued and allotted to the initial subscriber. Upon incorporation, the issued one share was transferred at par toLucky Oasis, following which 8,666 shares were further allotted and issued to Lucky Oasis on the same date. On8 March 2021, 1,333 shares were granted to Oriental Prominence at a consideration of HK$18,000,000. TheCompany completed the share issuance procedures, and the aforesaid 1,333 shares of the Company were issuedand allotted to Oriental Prominence on 27 July 2021 (Note 1.2 (v)).

(b) Combined capital

The Reorganisation has not been completed as at 31 March 2021. The combined capital as at 31 March2020 and 2021 represented the combined capital of the companies now comprising the Group prior to thecompletion of the Reorganisation after elimination of the inter-company investments. On 27 July 2021, thebalances of combined capital of HK$2,000,000 and capital reserve of HK$18,000,000 were reclassified to otherreserves upon the completion of share issuance and the Reorganisation (Note 1.2).



– I-57 –

22 SHARE-BASED COMPENSATION

On 8 March 2021, 1,333 shares of the Company, representing 13.33% of its equity interest, were granted toOriental Prominence at a consideration of HK$18,000,000 (Note 1.2(v)). The difference between the fair value of such1,333 shares granted and the consideration paid by Oriental Prominence, amounting to approximately HK$10,381,000,was treated as share-based compensation and was recognised in the profit or loss at the date of share grant.

The independent external valuer (the “Valuer”) used the income approach based on discounted cash flowscross-checked by the market approach to assess the fair value of the shares granted. The Valuer considered thefollowing key assumptions in the income approach, which are set out below:

As at8 March 2021

Relationship of unobservableinputs to fair value

Operating profit margin 5.3%–7.2% the higher the operating profitmargin, the higher the fair value;

Weighted average cost of capital 13.6% the higher the weighted average costof capital, the lower the fair value.

There are no interrelationships within those inputs.

The Valuer considered the market prices of comparable companies and other key assumptions in the marketapproach, which are set out below:

As at8 March 2021

Relationship of unobservableinputs to fair value

Profit/equity ratio of comparable companies 8.4 the higher the profit/equity ratio ofcomparable companies, the higherthe fair value;

Discount for lack of control 20% the higher the discount for lack ofcontrol, the lower the fair value;

Discount for lack of marketability 25% the higher the discount for lack ofmarketability, the lower the fairvalue.

There are no interrelationships within those inputs.



– I-58 –

23 RESERVES

(a) Reserves of the Group

Capitalreserve

Statutoryreserve

Exchangereserve


reserveOther


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Note i)


At 1 April 2019 – 1,162 788 3,933 – 60,132 66,015Profit for the year – – – – – 35,006 35,006Currency translation differences – – (1,426) – – – (1,426)Dividends declared (Note 12) – – – – – (43,668) (43,668)Profits appropriations to

statutory reserves – 437 – – – (437) –

At 31 March 2020 – 1,599 (638) 3,933 – 51,033 55,927


At 1 April 2020 – 1,599 (638) 3,933 – 51,033 55,927Profit for the year – – – – – 25,438 25,438Currency translation differences – – 1,853 – – – 1,853Dividends declared (Note 12) – – – – – (50,000) (50,000)Share-based compensation

(Note 22) – – – 10,381 – – 10,381Shares to be issued (Note ii) 18,000 – – – – – 18,000

At 31 March 2021 18,000 1,599 1,215 14,314 – 26,471 61,599


At 1 April 2021 18,000 1,599 1,215 14,314 – 26,471 61,599Profit for the year – – – – – 75,851 75,851Currency translation differences – – 1,097 – – – 1,097Deemed distribution and

dividends declared (Note 12) – – – – – (65,317) (65,317)Profits appropriations to

statutory reserves – 1,114 – – – (1,114) –Reclassification of combined

capital to other reservepursuant to Reorganisation(Note 1.2) – – – – 2,000 – 2,000

Reclassification of capitalreserve to other reservepursuant to shares issuance(Note 1.2) (18,000) – – – 18,000 – –

At 31 March 2022 – 2,713 2,312 14,314 20,000 35,891 75,230



– I-59 –

Notes:

(i) Statutory reserve

Under the relevant PRC laws and regulations, PRC companies are required to allocate 10% of thecompanies’ net profit to the fund until such fund reaches 50% of the companies’ registered capital.The statutory reserve fund can be utilised, upon approval by the relevant authorities, to offsetagainst accumulated losses or to increase registered capital of the companies, provided that suchfund is maintained at a minimum of 25% the companies’ registered capital.

(ii) On 8 March 2021, the Company entered into a subscription agreement with Oriental Prominence,pursuant to which Oriental Prominence has agreed and obliged to subscribe for and the Companyhas agreed and obliged to allot and issue 1,333 shares at a total consideration of HK$18,000,000.The Company completed the share issuance procedures, and the aforesaid 1,333 shares were issuedand allotted to Oriental Prominence on 27 July 2021 (Note 1.2 (v)).

As at 31 March 2021, all the conditions precedent under the subscription agreement were fulfilled.Accordingly, the raised capital before year end date was credited to an equity account as shares tobe issued.

(b) Reserves of the Company

Capitalreserve


reserveOther

reserve

(Accumulatedlosses)/

retainedearnings Total

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


At 1 April 2020 – – – – –Loss for the year – – – (20,788) (20,788)Share-compensation expenses

(Note 22) – 10,381 – – 10,381Shares to be issued

(Note 23(a)(ii)) 18,000 – – – 18,000

At 31 March 2021 18,000 10,381 – (20,788) 7,593


At 1 April 2021 18,000 10,381 – (20,788) 7,593Profit for the year – – – 77,149 77,149Dividends declared (Note 12) – – – (40,000) (40,000)Surplus arising in connection

with the Reorganisation(Note 1.2) – – 66,637 – 66,637

Reclassification of capitalreserve to other reservepursuant to shares issuance(Note 1.2) (18,000) – 18,000 – –

At 31 March 2022 – 10,381 84,637 16,361 111,379



– I-60 –

(c) Investment in a subsidiary

Investment in a subsidiary is carried at cost on the date when one share of ENL Development was allottedand issued at par value to the Company on 25 February 2021 as disclosed in Note 1.2(iii). On 24 May 2021 and2 June 2021, two shares of ENL Development were allotted and issued at par value to the Company uponacquisition of Excel Network Limited and Excel Network (Shenzhen) Limited by ENL Development. Investmentin a subsidiary is measured at the net asset values of ENL Development and its subsidiaries as disclosed in Note1.2(iv).

24 DEFERRED INCOME TAXES

The analysis of deferred income tax assets and liabilities was as follows:


HK$’000 HK$’000 HK$’000

Deferred tax assets– Recoverable after more than 12 months 488 1,015 511– Recoverable within 12 months 20 – 37

508 1,015 548

Deferred tax liabilities– Settle after more than 12 months (458) (240) (344)– Settle within 12 months (20) – (34)

(478) (240) (378)

Deferred income tax assets 30 775 170

Net movement in deferred income tax assets and liabilities was as follows:


HK$’000 HK$’000 HK$’000

Beginning of the year (2) 30 775Tax credited/(charged) to consolidated statements of

comprehensive income 36 714 (623)Exchange differences (4) 31 18

End of the year 30 775 170



– I-61 –

Movement in deferred income tax assets and liabilities (prior to offsetting of balances within the same taxjurisdiction) was as follows:

Deferred income tax assets:

Lease

Decelerateddepreciationon property,

plant andequipment Tax losses Total

HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2019 494 15 – 509(Charged)/credited to consolidated

statement of comprehensive income (47) 49 – 2Exchange differences (3) – – (3)

At 31 March 2020 444 64 – 508

At 1 April 2020 444 64 – 508(Charged)/credited to consolidated

statement of comprehensive income (104) 73 508 477Exchange differences – – 30 30

At 31 March 2021 340 137 538 1,015

At 1 April 2021 340 137 538 1,015Credited/(charged) to consolidated

statement of comprehensive income 55 17 (557) (485)Exchange differences (1) – 19 18

At 31 March 2022 394 154 – 548

Deferred tax assets are recognised for tax loss carry-forward to the extent that the realisation of the related taxbenefit through future taxable profits is probable.



– I-62 –

Deferred income tax liabilities:

Right-of-useassets

Accelerateddepreciationon property,

plant andequipment Total

HK$’000 HK$’000 HK$’000

At 1 April 2019 (483) (28) (511)Credited/(charged) to consolidated statement of

comprehensive income 48 (14) 34Exchange differences – (1) (1)

At 31 March 2020 (435) (43) (478)

At 1 April 2020 (435) (43) (478)Credited to consolidated statement of comprehensive

income 195 42 237Exchange differences – 1 1

At 31 March 2021 (240) – (240)

At 1 April 2021 (240) – (240)Charged to consolidated statement of comprehensive

income (138) – (138)

At 31 March 2022 (378) – (378)

As at 31 March 2020, 2021 and 2022, deferred income tax liabilities of approximately HK$1,482,000,HK$1,450,000 and HK$2,677,000, respectively, have not been recognised for withholding tax that would be payable onthe unremitted earnings of the subsidiary of the Group in the PRC, as such amounts are expected to be permanentlyreinvested and management currently has no intention to remit those earnings.

25 TRADE PAYABLES

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Trade payables– Third parties 31,497 38,356 45,078– Related parties (Note 30(a)) 167 – –

31,664 38,356 45,078



– I-63 –

As at 31 March 2020, 2021 and 2022 the ageing analysis of the trade payables, based on invoice date, was asfollows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Less than 30 days 26,943 29,846 37,33831–60 days 2,162 7,741 5,90661–90 days 1,085 394 1,25291–180 days 658 143 448Over 180 days 816 232 134

31,664 38,356 45,078

During the Track Record Period, the average credit period granted by suppliers was 30 to 60 days.

The carrying amounts of trade payables were denominated in the following currencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ 17,501 23,831 24,749RMB 8,398 8,836 6,224US$ 5,445 5,510 13,961Others 320 179 144

31,664 38,356 45,078

As at 31 March 2020, 2021 and 2022, the carrying amounts of trade payables approximate their fair values. Alltrade payables are unsecured and non-interest-bearing.

26 ACCRUALS, OTHER PAYABLES AND PROVISIONS

The Group

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Salaries, and staff welfare payables 5,055 4,986 7,883Provision for long-service payments 874 812 848Deposits received 350 – –Other tax payables 5,407 5,535 7,355Accrued [REDACTED] [REDACTED] [REDACTED] [REDACTED]Others 315 1,539 396

12,001 16,018 19,816

As at 31 March 2020, 2021 and 2022, the carrying amounts of accruals, other payables and provisionsapproximate their fair values.



– I-64 –

The carrying amounts of accruals, other payables and provisions were denominated in the followingcurrencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ 11,007 14,429 17,984RMB 985 1,430 1,772US$ 9 159 60

12,001 16,018 19,816

The Company

Other payables of the Company mainly represented the accrued [REDACTED] as at 31 March 2021 and2022.

27 BANK BORROWINGS

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Current– Secured bank borrowings – – 15,000

As at 31 March 2022, bank borrowings of HK$15,000,000 were guaranteed by Mr. Wong and Mr. Chim andsecured by properties owned by Top Aim Limited, a related party of the Group. Such bank borrowings weresubsequently repaid in April 2022.

The weighted average effective interest rates (per annum) were as follows:


Bank borrowings Not applicable Not applicable 2.23%

The maturity date of the bank borrowings was analysed as follows:

As at 31 March2020 2021 2022

Less than 1 year – – 15,000

As at 31 March 2022, the carrying amounts of the Group’s bank borrowings approximated their fair valuesbecause of their short-term maturities and were denominated in HK$.

As at 31 March 2020, 2021 and 2022, the total credit facilities in respect of bank guarantees granted to theGroup amounted to approximately HK$44,065,000, HK$44,432,000 and HK$99,323,000, respectively, of whichapproximately HK$17,054,000, HK$16,688,000 and HK$44,476,000 were not utilised.



– I-65 –

As at 31 March 2020, 2021 and 2022, the total credit facilities in respect of revolving loans and overdraftsgranted to the Group amounted to HK$53,991,000, HK$53,989,000 and HK$19,311,000, respectively, of whichHK$15,000,000 were utilised as at 31 March 2022 (2021 and 2020: Nil).

The credit facilities were guaranteed by Mr. Wong and Mr. Chim and secured by properties owned by Top AimLimited, a related party of the Group, and restricted bank deposits of the Group amounted to HK$31,607,000,HK$34,429,000 and HK$60,756,000 as at 31 March 2020, 2021 and 2022, respectively.

28 KEY MANAGEMENT LIFE INSURANCE CONTRACTS

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Key management life insurance contracts 1,503 – 949

Movement is as follows:


HK$’000 HK$’000 HK$’000

At beginning of year 1,361 1,503 –Additions 1,354 2,456 2,510Receipts upon termination of key management life

insurance contracts – (1,520) –Change in cash surrender value (Note 6) (1,212) (2,439) (1,561)

At the end of year 1,503 – 949

As at 31 March 2020, 2021 and 2022, the carrying amount of key management life insurance contractsrepresented the cash surrender value of the insurance policies.

The Group terminated certain key management life insurance contracts during the year ended 31 March 2021 andrealised the amount of HK$1,520,000. During the same year, the Group invested in another key management lifeinsurance contracts with premium of HK$2,456,000 paid during the year ended 31 March 2021. Under the new lifeinsurance policies, all executive directors were covered with a better insurance coverage. The Group further investedHK$2,510,000 in such insurance contracts during the year ended 31 March 2022. The cash surrender value of suchnewly invested key management insurance contracts was nil and HK$949,000 as at 31 March 2021 and 2022,respectively.



– I-66 –

29 NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

(a) Reconciliation of profit before income tax to net cash generated from operations


HK$’000 HK$’000 HK$’000

Cash flows from operating activitiesProfit before income tax 42,994 33,518 95,694Adjustments for:Finance income (2,213) (413) (70)Finance costs 144 90 242Net (reversal of)/provision for impairment loss of

financial assets (2) (3) 1,206(Gain)/loss on disposals of property, plant and

equipment (Note (b)) (129) – 5Depreciation of property, plant and equipment 1,164 1,368 1,457Depreciation of right-of-use assets 1,295 1,338 2,357Amortisation of intangible assets 5 22 29Gains on early termination of leases (27) – –Change in cash surrender value of key

management life insurance contracts 1,212 2,439 1,561Share-based compensation – 10,381 –

Operating cash flows before working capitalchanges 44,443 48,740 102,481

Changes in working capitalTrade receivables 7,973 (24,711) (31,684)Deposits, prepayments and other receivables 2,055 (429) 599Increase in restricted bank deposits (6,506) (2,822) (26,327)Trade payables (3,541) 6,545 5,659Accruals, other payables and provisions (1,731) 4,138 3,616Amounts due from/to related parties (4) (5) –

Net cash generated from operations 42,689 31,456 54,344

(b) Proceeds from disposals of property, plant and equipment comprise:


HK$’000 HK$’000 HK$’000

Net book amount 54 – 5Gain/(loss) on disposals of property, plant and

equipment 129 – (5)

Proceeds from disposals of property, plant andequipment 183 – –



– I-67 –

(c) Reconciliation of liabilities arising from financing activities

Liabilities from financing activities

Leaseliabilities

Bankborrowings

Amounts dueto related

parties TotalHK$’000 HK$’000 HK$’000 HK$’000

As at 1 April 2019 (2,800) – (30,401) (33,201)Cash flows – financing 1,205 32 4,296 5,533Cash flows – operating – – 4 4Dividends declared in current

year – – (43,668) (43,668)Acquisition – leases (761) – – (761)Early termination – leases 345 – – 345Interest expenses (112) (32) – (144)Foreign exchange adjustments 139 – – 139

As at 31 March 2020 (1,984) – (69,769) (71,753)

As at 1 April 2020 (1,984) – (69,769) (71,753)Cash flows – financing 1,182 – 71,775 72,957Cash flows – operating – – 5 5Dividends declared in current

year – – (50,000) (50,000)Acquisition – leases (559) – – (559)Interest expenses (90) – – (90)Foreign exchange adjustments (130) – – (130)

As at 31 March 2021 (1,581) – (47,989) (49,570)

As at 1 April 2021 (1,581) – (47,989) (49,570)Cash flows – financing 2,492 (14,923) 84,038 71,607Deemed distribution and

dividends declared in currentyear – – (65,317) (65,317)

Acquisition – leases (2,857) – – (2,857)Interest expenses (165) (77) – (242)Foreign exchange adjustments (44) – – (44)

As at 31 March 2022 (2,155) (15,000) (29,268) (46,423)



– I-68 –

30 RELATED PARTY TRANSACTIONS

For the purposes of the Historical Financial Information, parties are considered to be related to the Group if theparty has the ability, directly or indirectly, to exercise significant influence over the Group in making financial andoperational decisions. Related parties may be individuals (being members of key management personnel, significantequity holders and/or their close family members) or other entities and include entities which are under the significantinfluence of related parties of the Group where those parties are individuals. Parties are also considered to be related ifthey are subject to common control.

The directors are of the view that the following companies were related parties that had material transactions orbalances with the Group during the Track Record Period:

Name of the related party Relationship with the Group:

Mr. Wong Director and controlling shareholder of the CompanyMr. Chim Director and shareholder of the CompanyE&E Corporation Limited Controlling shareholder of the CompanyLucky Oasis Global Limited Immediate holding company of the CompanyOriental Prominence SPC Immediate holding company of the CompanyTop Aim Limited Controlled by Mr. Wong and Mr. ChimStrategic Global Partnership (HK) Limited

(“SGP(HK)”)Significantly influenced by Mr. Wong and Mr. Chim (Note)

Strategic Global Partnership (SHA) Limited(“SGP(SHA)”)

Significantly influenced by Mr. Wong and Mr. Chim (Note)

KEC Logistics Limited (“KEC”) Controlled by Mr. Wong and Mr. Chim (Note)

Note: Mr. Wong and Mr. Chim disposed of the entire equity interests they held in SGP(HK) and SGP(SHA) on16 January 2019 and KEC on 1 August 2019, respectively, to an independent third party.

Mr. Chim resigned as director of SGP(HK) and SGP(SHA) on 8 September 2020; Mr. Wong and Mr. Chimresigned as directors of KEC on 8 September 2020. Upon completion of Mr. Chim and Mr. Wong’sresignations, SGP(HK), SGP(SHA) and KEC ceased to be the related parties of the Group.

(a) Balances with related parties

The Group

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Trade receivables– SGP(HK) 1,013 – –

Trade payables– SGP(HK) 159 – –– KEC 8 – –

167 – –



– I-69 –

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Amounts due to related parties (Note)– Mr. Wong Tat Shing 28,439 – –– E&E Corporation Limited 41,325 47,989 –– Top Aim Limited 5 – –– Oriental Prominence SPC – – 5,332– Lucky Oasis Global Limited – – 23,936

69,769 47,989 29,268

Note: These balances are non-trade in nature.

Amounts due to E&E Corporation Limited, Oriental Prominence SPC and Lucky Oasis GlobalLimited represented dividends declared and unsettled as at 31 March 2020, 2021 and 2022.

All balances with related parties were unsecured, interest-free, repayable on demand during theTrack Record Period.

The carrying amounts of trade related receivables due from related parties were denominated in thefollowing currencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ 1,013 – –

The carrying amounts of trade related payables due to related parties were denominated in thefollowing currencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

RMB 138 – –US$ 29 – –

167 – –



– I-70 –

The carrying amounts of amounts due to related parties were denominated in the followingcurrencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ 9,808 47,989 29,268RMB 30,541 – –US$ 29,420 – –

69,769 47,989 29,268

The Company

As at 31 March2021 2022

HK$’000 HK$’000

Amounts due to related parties (Note)– Oriental Prominence SPC – 5,332– Lucky Oasis Global Limited – 23,936

– 29,268

Note: These balances are non-trade in nature and denominated in HK$.

All balances with related parties were unsecured, interest-free, repayable on demand as at 31 March2021 and 2022.

(b) Transactions with related parties


HK$’000 HK$’000 HK$’000

Continuing transactionsShort-term lease expenses charged by a

related party– Top Aim Limited 1,080 1,080 1,380

Utility expenses charged by a related party– Top Aim Limited 133 85 150



– I-71 –

During the year ended 31 March 2022, the Group entered into a lease agreement with Top Aim Limited onterms mutually agreed by both parties for which the Group recognised right-of-use assets and lease liabilitieseach being HK$2,628,000 at the commencement date of the lease. During the same period, lease payments to TopAim Limited under the lease amounted to HK$1,380,000. As at 31 March 2022, lease liabilities due to Top AimLimited amounted to HK$1,345,000.


HK$’000 HK$’000 HK$’000

Discontinued transactions (Note)Freight forwarding service income received from

related parties– KEC 25 73 –– SGP (HK) 4,521 4,726 –– SGP (SHA) 968 518 –

5,514 5,317 –

Freight forwarding service fees charged byrelated parties

– KEC 34 81 –– SGP (HK) 1,061 586 –– SGP (SHA) 1,343 386 –

2,438 1,053 –

Management fees received from related parties– SGP (HK) 180 75 –

Note: Discontinued transactions represented the transaction amounts up to the date upon which suchcounter parties ceased to be the Group’s related parties.

The above related party transactions were based on terms mutually agreed with related parties and in theordinary course of business.

(c) Key management compensation

Key management includes executive and non-executive directors of the Group. The compensation paid orpayable to key management was disclosed in Note 9 to the Historical Financial Information.

31 COMMITMENTS

Capital commitments

As at 31 March 2020, 2021 and 2022, the Group and the Company did not have any capital commitments.

32 SUBSEQUENT EVENTS

Saved as disclosed, there were no other material subsequent events took place after 31 March 2022.



– I-72 –

III SUBSEQUENT FINANCIAL INFORMATION

No audited financial statements have been prepared by the Company or any of thecompanies now comprising the Group in respect of any period subsequent to 31 March 2022 andup to the date of this report.

Saved as disclosed elsewhere in this report, no dividend or distribution has been declaredor made by the Company or any of the companies that comprise the Group in respect of anyperiod subsequent to 31 March 2022 and up to the date of this report.



– I-73 –

[REDACTED]


APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

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[REDACTED]



– II-2 –

[REDACTED]



– II-3 –

[REDACTED]



– II-4 –

[REDACTED]



– II-5 –

Set out below is a summary of certain provisions of the Memorandum of Association andthe Articles of Association of our Company and of certain aspects of Cayman Islands companylaw.

Our Company was incorporated in the Cayman Islands as an exempted company withlimited liability on 19 January 2021 under the Cayman Companies Act. Our Company’sconstitutional documents consist of the Memorandum and the Articles.

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum provides, inter alia, that the liability of members of our Companyis limited and that the objects for which our Company is established are unrestricted(and therefore include acting as an investment company), and that our Company shallhave and be capable of exercising any and all of the powers at any time or from timeto time exercisable by a natural person or body corporate whether as principal, agent,contractor or otherwise and, since our Company is an exempted company, that ourCompany will not trade in the Cayman Islands with any person, firm or corporationexcept in furtherance of the business of our Company carried on outside the CaymanIslands.

(b) By special resolution our Company may alter the Memorandum with respect to anyobjects, powers or other matters specified in it.

2. ARTICLES OF ASSOCIATION

The Articles were conditionally adopted on [•] 2021 with effect from the [REDACTED]. Asummary of certain provisions of the Articles is set out below.

(a) Shares

(i) Classes of shares

The share capital of our Company consists of ordinary shares.

(ii) Variation of rights of existing shares or classes of shares

Subject to the Cayman Companies Act, if at any time the share capital of ourCompany is divided into different classes of shares, all or any of the special rightsattached to any class of shares may (unless otherwise provided for by the terms ofissue of the shares of that class) be varied, modified or abrogated either with thevoting rights of consent in writing of the members together holding not less thanthree-fourths of the issued shares of that class or with the sanction of a specialresolution passed at a separate general meeting of the holders of the shares of thatclass. The provisions of the Articles relating to general meetings shall mutatis


APPENDIX III SUMMARY OF THE CONSTITUTION OF OURCOMPANY AND CAYMAN ISLANDS COMPANY LAW

– III-1 –

mutandis apply to every such separate general meeting, but so that the necessaryquorum (other than at an adjourned meeting) shall be not less than two personstogether holding (or, in the case of a member being a corporation, by its dulyauthorised representative) or representing by proxy not less than one third in nominalvalue of the issued shares of that class. Every holder of shares of the class shall beentitled on a poll to one vote for every such share held by him, and any holder ofshares of the class present in person or by proxy may demand a poll.

Any special rights conferred upon the holders of any shares or class of sharesshall not, unless otherwise expressly provided in the rights attaching to the terms ofissue of such shares, be deemed to be varied by the creation or issue of further sharesranking pari passu therewith.

(iii) Alteration of capital

Our Company may, by an ordinary resolution of its members: (a) increase itsshare capital by the creation of new shares of such amount as it thinks expedient; (b)consolidate or divide all or any of its share capital into shares of larger or smalleramount than its existing shares; (c) divide its unissued shares into several classes andattach to such shares any preferential, deferred, qualified or special rights, privilegesor conditions; (d) subdivide its shares or any of them into shares of an amount smallerthan that fixed by the Memorandum; (e) cancel any shares which, at the date of theresolution, have not been taken or agreed to be taken by any person and diminish theamount of its share capital by the amount of the shares so cancelled; (f) makeprovision for the allotment and issue of shares which do not carry any voting rights;and (g) change the currency of denomination of its share capital.

(iv) Transfer of shares

Subject to the Cayman Companies Act and the requirements of The StockExchange of Hong Kong Limited (the “Stock Exchange”), all transfers of shares shallbe effected by an instrument of transfer in the usual or common form or in such otherform as the Board may approve and may be under hand or, if the transferor ortransferee is a Clearing House or its nominee(s), under hand or by machine imprintedsignature, or by such other manner of execution as the Board may approve from timeto time.

Execution of the instrument of transfer shall be by or on behalf of the transferorand the transferee, provided that the Board may dispense with the execution of theinstrument of transfer by the transferor or transferee or accept mechanically executedtransfers. The transferor shall be deemed to remain the holder of a share until thename of the transferee is entered in the register of members of our Company inrespect of that share.



– III-2 –

The Board may, in its absolute discretion, at any time and from time to timeremove any share on the principal register to any branch register or any share on anybranch register to the principal register or any other branch register. Unless the Boardotherwise agrees, no shares on the principal register shall be removed to any branchregister nor shall shares on any branch register be removed to the principal register orany other branch register. All removals and other documents of title shall be lodgedfor registration and registered, in the case of shares on any branch register, at therelevant registration office and, in the case of shares on the principal register, at theplace at which the principal register is located.

The Board may, in its absolute discretion, decline to register a transfer of anyshare (not being a fully paid up share) to a person of whom it does not approve or onwhich our Company has a lien. It may also decline to register a transfer of any shareissued under any share option scheme upon which a restriction on transfer subsists ora transfer of any share to more than four joint holders.

The Board may decline to recognise any instrument of transfer unless a certainfee, up to such maximum sum as the Stock Exchange may determine to be payable, ispaid to our Company, the instrument of transfer is properly stamped (if applicable), isin respect of only one class of share and is lodged at the relevant registration office orthe place at which the principal register is located accompanied by the relevant sharecertificate(s) and such other evidence as the Board may reasonably require is providedto show the right of the transferor to make the transfer (and if the instrument oftransfer is executed by some other person on his behalf, the authority of that person soto do).

The register of members may, subject to the Listing Rules, be closed at such timeor for such period not exceeding in the whole 30 days in each year as the Board maydetermine, and by sending a notice to the members, such period may be extended forno more than another 30 days in respect of any year by an ordinary resolution of themembers passed in that year.

Fully paid shares shall be free from any restriction on transfer (except whenpermitted by the Stock Exchange) and shall also be free from all liens.

(v) Power of our Company to purchase its own shares

Our Company may purchase its own shares subject to certain restrictions and theBoard may only exercise this power on behalf of our Company subject to anyapplicable requirement imposed from time to time by the Articles or any, code, rulesor regulations issued from time to time by the Stock Exchange and/or the Securitiesand Futures Commission of Hong Kong.



– III-3 –

(vi) Power of any subsidiary of our Company to own shares in our Company

There are no provisions in the Articles relating to the ownership of shares in ourCompany by a subsidiary.

(vii) Calls on shares and forfeiture of shares

The Board may, from time to time, make such calls as it thinks fit upon themembers in respect of any monies unpaid on the shares held by them respectively(whether on account of the nominal value of the shares or by way of premium) andnot by the conditions of allotment of such shares made payable at fixed times. A callmay be made payable either in one sum or by instalments. If the sum payable inrespect of any call or instalment is not paid on or before the day appointed forpayment thereof, the person or persons from whom the sum is due shall pay intereston the same at such rate not exceeding 20% per annum as the Board shall fix from theday appointed for payment to the time of actual payment, but the Board may waivepayment of such interest wholly or in part. The Board may, if it thinks fit, receivefrom any member willing to advance the same, either in money or money’s worth, allor any part of the money uncalled and unpaid or instalments payable upon any sharesheld by him, and in respect of all or any of the monies so advanced our Company maypay interest at such rate (if any) not exceeding 20% per annum as the Board maydecide.

If a member fails to pay any call or instalment of a call on the day appointed forpayment, the Board may, for so long as any part of the call or instalment remainsunpaid, serve not less than 14 days’ notice on the member requiring payment of somuch of the call or instalment as is unpaid, together with any interest which may haveaccrued and which may still accrue up to the date of actual payment. The notice shallname a further day (not earlier than the expiration of 14 days from the date of thenotice) on or before which the payment required by the notice is to be made, and shallalso name the place where payment is to be made. The notice shall also state that, inthe event of non-payment at or before the appointed time, the shares in respect ofwhich the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share inrespect of which the notice has been given may at any time thereafter, before thepayment required by the notice has been made, be forfeited by a resolution of theBoard to that effect. Such forfeiture will include all dividends and bonuses declared inrespect of the forfeited share and not actually paid before the forfeiture.



– III-4 –

A person whose shares have been forfeited shall cease to be a member in respectof the forfeited shares but shall, nevertheless, remain liable to pay to our Company allmonies which, at the date of forfeiture, were payable by him to our Company inrespect of the shares together with (if the Board shall in its discretion so require)interest thereon from the date of forfeiture until payment at such rate not exceeding20% per annum as the Board may prescribe.

(b) Directors

(i) Appointment, retirement and removal

At any time or from time to time, the Board shall have the power to appoint anyperson as a Director either to fill a casual vacancy on the Board or as an additionalDirector to the existing Board subject to any maximum number of Directors, if any, asmay be determined by the members in general meeting. Any Director so appointed tofill a casual vacancy shall hold office only until the first annual general meeting ofour Company after his appointment and be subject to re-election at such meeting. AnyDirector so appointed as an addition to the existing Board shall hold office only untilthe first annual general meeting of our Company after his appointment and be eligiblefor re-election at such meeting. Any Director so appointed by the Board shall not betaken into account in determining the Directors or the number of Directors who are toretire by rotation at an annual general meeting.

At each annual general meeting, one third of the Directors for the time beingshall retire from office by rotation. However, if the number of Directors is not amultiple of three, then the number nearest to but not less than one third shall be thenumber of retiring Directors. The Directors to retire in each year shall be those whohave been in office longest since their last re-election or appointment but, as betweenpersons who became or were last re-elected Directors on the same day, those to retireshall (unless they otherwise agree among themselves) be determined by lot.

No person, other than a retiring Director, shall, unless recommended by theBoard for election, be eligible for election to the office of Director at any generalmeeting, unless notice in writing of the intention to propose that person for election asa Director and notice in writing by that person of his willingness to be elected hasbeen lodged at the head office or at the registration office of our Company. The periodfor lodgment of such notices shall commence no earlier than the day after despatch ofthe notice of the relevant meeting and end no later than seven days before the date ofsuch meeting and the minimum length of the period during which such notices may belodged must be at least seven days.

A Director is not required to hold any shares in our Company by way ofqualification nor is there any specified upper or lower age limit for Directors eitherfor accession to or retirement from the Board.



– III-5 –

A Director may be removed by members of our Company by an ordinaryresolution of our Company before the expiration of his term of office (but withoutprejudice to any claim which such Director may have for damages for any breach ofany contract between him and our Company) and the members of our Company mayby an ordinary resolution appoint another in his place. Any Director so appointed shallbe subject to the “retirement by rotation” provisions. The number of Directors shallnot be less than two.

The office of a Director shall be vacated if he:

(aa) resigns;

(bb) dies;

(cc) is declared to be of unsound mind and the Board resolves that his office bevacated;

(dd) becomes bankrupt or has a receiving order made against him or suspendspayment or compounds with his creditors generally;

(ee) is prohibited from being or ceases to be a director by operation of law;

(ff) without special leave, is absent from meetings of the Board for sixconsecutive months, and the Board resolves that his office is vacated;

(gg) has been required by the stock exchange of the Relevant Territory (asdefined in the Articles) to cease to be a Director; or

(hh) is removed from office by the requisite majority of the Directors orotherwise pursuant to the Articles.

From time to time the Board may appoint one or more of its body to bemanaging director, joint managing director or deputy managing director or to hold anyother employment or executive office with our Company for such period and uponsuch terms as the Board may determine, and the Board may revoke or terminate any ofsuch appointments. The Board may also delegate any of its powers to committeesconsisting of such Director(s) or other person(s) as the Board thinks fit, and from timeto time it may also revoke such delegation or revoke the appointment of and dischargeany such committees either wholly or in part, and either as to persons or purposes, butevery committee so formed shall, in the exercise of the powers so delegated, conformto any regulations that may from time to time be imposed upon it by the Board.



– III-6 –

(ii) Power to allot and issue shares and warrants

Subject to the provisions of the Cayman Companies Act, the Memorandum andArticles and without prejudice to any special rights conferred on the holders of anyshares or class of shares, any share may be issued with or have attached to it suchrights, or such restrictions, whether with regard to dividend, voting, return of capitalor otherwise, as our Company may by an ordinary resolution determine (or, in theabsence of any such determination or so far as the same may not make specificprovision, as the Board may determine). Any share may be issued on terms that, uponthe happening of a specified event or upon a given date and either at the option of ourCompany or the holder of the share, it is liable to be redeemed.

The Board may issue warrants to subscribe for any class of shares or othersecurities of our Company on such terms as it may from time to time determine.

Where warrants are issued to bearer, no certificate in respect of such warrantsshall be issued to replace one that has been lost unless the Board is satisfied beyondreasonable doubt that the original certificate has been destroyed and our Company hasreceived an indemnity in such form as the Board thinks fit with regard to the issue ofany such replacement certificate.

Subject to the provisions of the Cayman Companies Act, the Articles and, whereapplicable, the rules of any stock exchange of the Relevant Territory (as defined in theArticles) and without prejudice to any special rights or restrictions for the time beingattached to any shares or any class of shares, all unissued shares in our Company shallbe at the disposal of the Board, which may offer, allot, grant options over or otherwisedispose of them to such persons, at such times, for such consideration and on suchterms and conditions as it in its absolute discretion thinks fit, but so that no sharesshall be issued at a discount.

Neither our Company nor the Board shall be obliged, when making or grantingany allotment of, offer of, option over or disposal of shares, to make, or makeavailable, any such allotment, offer, option or shares to members or others whoseregistered addresses are in any particular territory or territories where, in the absenceof a registration statement or other special formalities, this is or may, in the opinion ofthe Board, be unlawful or impracticable. However, no member affected as a result ofthe foregoing shall be, or be deemed to be, a separate class of members for anypurpose whatsoever.



– III-7 –

(iii) Power to dispose of the assets of our Company or any of its subsidiaries

While there are no specific provisions in the Articles relating to the disposal ofthe assets of our Company or any of its subsidiaries, the Board may exercise allpowers and do all acts and things which may be exercised or done or approved by ourCompany and which are not required by the Articles or the Cayman Companies Act tobe exercised or done by our Company in general meeting, but if such power or act isregulated by our Company in general meeting, such regulation shall not invalidate anyprior act of the Board which would have been valid if such regulation had not beenmade.

(iv) Borrowing powers

The Board may exercise all the powers of our Company to raise or borrowmoney, to mortgage or charge all or any part of the undertaking, property and uncalledcapital of our Company and, subject to the Cayman Companies Act, to issuedebentures, debenture stock, bonds and other securities of our Company, whetheroutright or as collateral security for any debt, liability or obligation of our Companyor of any third party.

(v) Remuneration

The Directors shall be entitled to receive, as ordinary remuneration for theirservices, such sums as shall from time to time be determined by the Board or ourCompany in general meeting, as the case may be, such sum (unless otherwise directedby the resolution by which it is determined) to be divided among the Directors in suchproportions and in such manner as they may agree or, failing agreement, either equallyor, in the case of any Director holding office for only a portion of the period inrespect of which the remuneration is payable, pro rata. The Directors shall also beentitled to be repaid all expenses reasonably incurred by them in attending any Boardmeetings, committee meetings or general meetings or otherwise in connection with thedischarge of their duties as Directors. Such remuneration shall be in addition to anyother remuneration to which a Director who holds any salaried employment or officein our Company may be entitled by reason of such employment or office.

Any Director who, at the request of our Company, performs services which in theopinion of the Board goes beyond the ordinary duties of a Director may be paid suchspecial or extra remuneration as the Board may determine, in addition to or insubstitution for any ordinary remuneration as a Director. An executive Directorappointed to be a managing director, joint managing director, deputy managingdirector or other executive officer shall receive such remuneration and such otherbenefits and allowances as the Board may from time to time decide. Suchremuneration shall be in addition to his ordinary remuneration as a Director.



– III-8 –

The Board may establish, either on its own or jointly in concurrence oragreement with subsidiaries of our Company or companies with which our Company isassociated in business, or may make 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 andthe following paragraph shall include any Director or former Director who may holdor have held any executive office or any office of profit with our Company or any ofits subsidiaries) and former employees of our Company and their dependents or anyclass or classes of such persons.

The Board may also pay, enter into agreements to pay or make grants ofrevocable or irrevocable, whether or not subject to any terms or conditions, pensionsor other benefits to employees and former employees and their dependents, or to anyof such persons, including pensions or benefits additional to those, if any, to whichsuch employees or former employees or their dependents are or may become entitledunder any such scheme or fund as mentioned above. Such pension or benefit may, ifdeemed desirable by the Board, be granted to an employee either before and inanticipation of, or upon or at any time after, his actual retirement.

(vi) Compensation or payments for loss of office

Payments to any present Director or past Director of any sum by way ofcompensation for loss of office or as consideration for or in connection with hisretirement from office (not being a payment to which the Director is contractually orstatutorily entitled) must be approved by our Company in general meeting.

(vii) Loans and provision of security for loans to Directors

Our Company shall not directly or indirectly make a loan to a Director or adirector of any holding company of our Company or any of their respective closeassociates, enter into any guarantee or provide any security in connection with a loanmade by any person to a Director or a director of any holding company of ourCompany or any of their respective close associates, or, if any one or more of theDirectors hold(s) (jointly or severally or directly or indirectly) a controlling interest inanother company, make a loan to that other company or enter into any guarantee orprovide any security in connection with a loan made by any person to that othercompany.



– III-9 –

(viii) Financial assistance to purchase Shares

Subject to the Cayman Companies Act, or any other law or so far as notprohibited by any law and subject to any rights conferred on the holders of any classof Shares, our Company shall have the power to give, directly or indirectly, by meansof a loan, a guarantee, an indemnity, the provision of security or otherwise howsoever,financial assistance for the purpose of or in connection with a purchase or otheracquisition made or to be made by any person of any Shares or warrants or othersecurities in our Company or any company which is a holding company of ourCompany.

(ix) Disclosure of interest in contracts with our Company or any of its subsidiaries

With the exception of the office of auditor of our Company, a Director may holdany other office or place of profit with our Company in conjunction with his office ofDirector for such period and upon such terms as the Board may determine, and may bepaid such extra remuneration for that other office or place of profit, in whatever form,in addition to any remuneration provided for by or pursuant to any other Articles. ADirector may be or become a director, officer or member of any other company inwhich our Company may be interested, and shall not be liable to account to ourCompany or the members for any remuneration or other benefit received by him as adirector, officer or member of such other company. The Board may also cause thevoting power conferred by the shares in any other company held or owned by ourCompany to be exercised in such manner in all respects as it thinks fit, including theexercise in favour of any resolution appointing the Directors or any of them to bedirectors or officers of such other company.

No Director or intended Director shall be disqualified by his office fromcontracting with our Company, nor shall any such contract or any other contract orarrangement 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 ourCompany for any profit realised by any such contract or arrangement by reason onlyof such Director holding that office or the fiduciary relationship established by it. ADirector who is, in any way, materially interested in a contract or arrangement orproposed contract or arrangement with our Company shall declare the nature of hisinterest at the earliest meeting of the Board at which he may practically do so.

There is no power to freeze or otherwise impair any of the rights attaching to anyshare by reason that the person or persons who are interested directly or indirectly inthat share have failed to disclose their interests to our Company.



– III-10 –

A Director shall not vote or be counted in the quorum on any resolution of theBoard in respect of any contract or arrangement or proposal in which he or any of hisclose associate(s) has/have a material interest, and if he shall do so his vote shall notbe counted nor shall he be counted in the quorum for that resolution, but thisprohibition shall not apply to any of the following matters:

(aa) the giving of any security or indemnity to the Director or his closeassociate(s) in respect of money lent or obligations incurred or undertakenby him or any of them at the request of or for the benefit of our Companyor any of its subsidiaries;

(bb) the giving of any security or indemnity to a third party in respect of a debtor obligation of our Company or any of its subsidiaries for which theDirector or his close associate(s) has/have himself/themselves assumedresponsibility in whole or in part whether alone or jointly under a guaranteeor indemnity or by the giving of security;

(cc) any proposal concerning an offer of shares, debentures or other securities ofor by our Company or any other company which our Company may promoteor be interested in for subscription or purchase, where the Director or hisclose associate(s) is/are or is/are to be interested as a participant in theunderwriting or sub-underwriting of the offer;

(dd) any proposal or arrangement concerning the benefit of employees of ourCompany or any of its subsidiaries, including the adoption, modification oroperation of either: (i) any employees’ share scheme or any share incentiveor share option scheme under which the Director or his close associate(s)may benefit; or (ii) any of a pension fund or retirement, death or disabilitybenefit scheme which relates to Directors, their close associates andemployees of our Company or any of its subsidiaries and does not providein respect of any Director or his close associate(s) any privilege oradvantage not generally accorded to the class of persons to which suchscheme or fund relates; and

(ee) 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, debenturesor other securities of our Company by virtue only of his/their interest inthose shares, debentures or other securities.



– III-11 –

(x) Proceedings of the Board

The Board may meet anywhere in the world for the despatch of business and mayadjourn and otherwise regulate its meetings as it thinks fit. Questions arising at anymeeting shall be determined by a majority of votes. In the case of an equality ofvotes, the chairman of the meeting shall have a second or casting vote.

(c) Alterations to the constitutional documents and our Company’s name

To the extent that the same is permissible under Cayman Islands law and subject tothe Articles, the Memorandum and Articles of our Company may only be altered oramended, and the name of our Company may only be changed, with the sanction of aspecial resolution of our Company.

(d) Meetings of member

(i) Special and ordinary resolutions

A special resolution of our Company must be passed by a majority of not lessthan three-fourths of the votes cast by such members as, being entitled so to do, votein person or by proxy or, in the case of members which are corporations, by their dulyauthorised representatives or, where proxies are allowed, by proxy at a generalmeeting of which notice specifying the intention to propose the resolution as a specialresolution has been duly given.

Under Cayman Companies Act, a copy of any special resolution must beforwarded to the Registrar of Companies in the Cayman Islands within 15 days ofbeing passed.

An “ordinary resolution”, by contrast, is a resolution passed by a simple majorityof the votes of such members of our Company as, being entitled to do so, vote inperson or, in the case of members which are corporations, by their duly authorisedrepresentatives or, where proxies are allowed, by proxy at a general meeting of whichnotice has been duly given.

A resolution in writing signed by or on behalf of all members shall be treated asan ordinary resolution duly passed at a general meeting of our Company dulyconvened and held, and where relevant as a special resolution so passed.



– III-12 –

(ii) Voting rights and right to demand a poll

Subject to any special rights, restrictions or privileges as to voting for the timebeing attached to any class or classes of shares at any general meeting: (a) on a pollevery member present in person or by proxy or, in the case of a member being acorporation, by its duly authorised representative shall have one vote for every sharewhich is fully paid or credited as fully paid registered in his name in the register ofmembers of our Company but so that no amount paid up or credited as paid up on ashare in advance of calls or instalments is treated for this purpose as paid up on theshare; and (b) on a show of hands every member who is present in person (or, in thecase of a member being a corporation, by its duly authorised representative) or byproxy shall have one vote. Where more than one proxy is appointed by a memberwhich is a Clearing House (as defined in the Articles) or its nominee(s), each suchproxy shall have one vote on a show of hands. On a poll, a member entitled to morethan one vote need not use all his votes or cast all the votes he does use in the sameway.

At any general meeting a resolution put to the vote of the meeting is to bedecided by poll save that the chairman of the meeting may, in good faith and pursuantto the Listing Rules, allow a resolution which relates purely to a procedural or anadministrative matter to be voted on by a show of hands. Where a show of hands isallowed, before or on the declaration of the result of the show of hands, a poll may bedemanded by (in each case by members present in person or by proxy or by a dulyauthorised corporate representative):

(A) at least two members present in person or by proxy for the time beingentitled to speak and vote at the meeting;

(B) any member or members representing not less than one-tenth of the totalvoting rights of all the members having the right to attend, speak and voteat the meeting; or

(C) a member or members holding shares in our Company conferring a right toattend, speak and vote at the meeting on which an aggregate sum has beenpaid equal to not less than one-tenth of the total sum paid up on all theshares conferring that right.

Should a Clearing House or its nominee(s) be a member of our Company, suchperson or persons may be authorised as it thinks fit to act as its representative(s) atany meeting of our Company or at any meeting of any class of members of ourCompany, or (where appropriate and subject to the Cayman Company Act) at anymeeting of creditors of our Company, provided that, if more than one person is soauthorised, the authorisation shall specify the number and class of shares in respect ofwhich each such person is so authorised. A person authorised in accordance with this



– III-13 –

provision shall be deemed to have been duly authorised without further evidence ofthe facts and be entitled to exercise the same rights and powers on behalf of theClearing House or its nominee(s) as if such person were an individual memberincluding the right to vote individually on a show of hands and the right to speak.

Where our Company has knowledge that any member is, under the Listing Rules,required to abstain from voting on any particular resolution or restricted to votingonly for or only against any particular resolution, any votes cast by or on behalf ofsuch member in contravention of such requirement or restriction shall not be counted.

(iii) Annual general meetings

Our Company must hold an annual general meeting each financial year other thanthe year of our Company’s adoption of the Articles. Such meeting must be held within6 months after the end of the Company’s financial year (unless a longer period wouldnot infringe the Listing Rules), at such time and place as may be determined by theBoard.

(iv) Requisition of general meetings

Extraordinary general meetings may be convened on the requisition of one ormore members holding, at the date of deposit of the requisition, shares in the sharecapital of our Company that represent not less than one tenth of the voting rights atgeneral meetings of our Company on a one vote per share basis. Such requisition shallbe made in writing to the Board or the secretary of our Company for the purpose ofrequiring an extraordinary general meeting to be called by the Board for thetransaction of any business specified in such requisition. Such meeting shall be heldwithin two months after the deposit of such requisition. If within 21 days of suchdeposit, the Board fails to proceed to convene such meeting, the requisitionist(s)himself (themselves) may do so in the same manner, and all reasonable expensesincurred by the requisitionist(s) as a result of the failure of the Board shall bereimbursed to the requisitionist(s) by our Company.

(v) Notices of meetings and business to be conducted

An annual general meeting of our Company shall be called by at least 21 days’notice in writing, and any other general meeting of our Company shall be called by atleast 14 days’ notice in writing. The notice shall be exclusive of the day on which it isserved or deemed to be served and of the day for which it is given, and must specifythe time, place and agenda of the meeting and particulars of the resolution(s) to beconsidered at that meeting and, in the case of special business, the general nature ofthat business.



– III-14 –

Except where otherwise expressly stated, any notice or document (including ashare certificate) to be given or issued under the Articles shall be in writing, and maybe served by our Company on any member personally, by post to such member’sregistered address or (in the case of a notice) by advertisement in the newspapers. Anymember whose registered address is outside Hong Kong may notify our Company inwriting of an address in Hong Kong which shall be deemed to be his registeredaddress for this purpose. Subject to the Cayman Companies Act and the Listing Rules,a notice or document may also be served or delivered by our Company to any memberby electronic means.

Although a meeting of our Company may be called by shorter notice than asspecified above, such meeting may be deemed to have been duly called if it is soagreed:

(i) in the case of an annual general meeting, by all members of our Companyentitled to attend, speak and vote thereat; and

(ii) in the case of any other meeting, by a majority in number of the membershaving a right to attend, speak and vote at the meeting holding not less than95% of the total voting rights in our Company.

All business transacted at an extraordinary general meeting shall be deemedspecial business. All business shall also be deemed special business where it istransacted at an annual general meeting, with the exception of certain routine matterswhich shall be deemed ordinary business.

(vi) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum ispresent when the meeting proceeds to business, and continues to be present until theconclusion of the meeting.

The quorum for a general meeting shall be two members present in person (or inthe case of a member being a corporation, by its duly authorised representative) or byproxy and entitled to speak and vote. In respect of a separate class meeting (other thanan adjourned meeting) convened to sanction the modification of class rights thenecessary quorum shall be two persons holding or representing by proxy not less thanone third in nominal value of the issued shares of that class.

(vii) Proxies

Any member of our Company entitled to attend, speak and vote at a meeting ofour Company is entitled to appoint another person as his proxy to attend, speak andvote instead of him. A member who is the holder of two or more shares may appoint



– III-15 –

more than one proxy to represent him and attend, speak and vote on his behalf at ageneral meeting of our Company or at a class meeting. A proxy need not be a memberof our Company and shall be entitled to exercise the same powers on behalf of amember who is an individual and for whom he acts as proxy as such member couldexercise. In addition, a proxy shall be entitled to exercise the same powers on behalfof a member which is a corporation and for which he acts as proxy as such membercould exercise if it were an individual member. On a poll or on a show of hands, votesmay be given either personally (or, in the case of a member being a corporation, by itsduly authorised representative) or by proxy.

The instrument appointing a proxy shall be in writing under the hand of theappointor or of his attorney duly authorised in writing, or if the appointor is acorporation, either under seal or under the hand of a duly authorised officer orattorney. Every instrument of proxy, whether for a specified meeting or otherwise,shall be in such form as the Board may from time to time approve, provided that itshall not preclude the use of the two-way form. Any form issued to a member forappointing a proxy to attend, speak and vote at an extraordinary general meeting or atan annual general meeting at which any business is to be transacted shall be such as toenable the member, according to his intentions, to instruct the proxy to vote in favourof or against (or, in default of instructions, to exercise his discretion in respect of)each resolution dealing with any such business.

(viii) Right to speak

All members have the right to (a) speak at a general meeting; and (b) vote at ageneral meeting except where a member is required, by the Listing Rules, to abstainfrom voting to approve the matter under consideration.

(e) Accounts and audit

The Board shall cause proper books of account to be kept of the sums of moneyreceived and expended by our Company, and of the assets and liabilities of our Companyand of all other matters required by the Cayman Companies Act (which include all salesand purchases of goods by the company) necessary to give a true and fair view of the stateof our Company’s affairs and to show and explain its transactions. The financial year endof our Company shall be [31 December] in each calendar year or as otherwise determinedby the Board.

The books of accounts of our Company shall be kept at the head office of ourCompany or at such other place or places as the Board decides and shall always be open toinspection by any Director. No member (other than a Director) shall have any right toinspect any account, book or document of our Company except as conferred by the CaymanCompanies Act or ordered by a court of competent jurisdiction or authorised by the Boardor our Company in general meeting.



– III-16 –

The Board shall from time to time cause to be prepared and laid before our Companyat its annual general meeting balance sheets and profit and loss accounts (including everydocument required by law to be annexed thereto), together with a copy of the Directors’report and a copy of the auditors’ report, not less than 21 days before the date of the annualgeneral meeting. Copies of these documents shall be sent to every person entitled to receivenotices of general meetings of our Company under the provisions of the Articles togetherwith the notice of annual general meeting, not less than 21 days before the date of themeeting.

Subject to the rules of the stock exchange of the Relevant Territory (as defined in theArticles), our Company may send summarised financial statements to members who have,in accordance with the rules of the stock exchange of the Relevant Territory, consented andelected to receive summarised financial statements instead of the full financial statements.The summarised financial statements must be accompanied by any other documents as maybe required under the rules of the stock exchange of the Relevant Territory, and must besent to those members that have consented and elected to receive the summarised financialstatements not less than 21 days before the general meeting.

The members of our Company may by an ordinary resolution appoint auditor(s) tohold office until the conclusion of the next annual general meeting on such terms and withsuch duties as may be agreed with the Board. The auditors’ remuneration shall be fixed byour Company in general meeting by an ordinary resolution or in such manner as themembers may determine.

The members may, at a general meeting remove the auditor(s) by an ordinaryresolution at any time before the expiration of the term of office of the auditor(s) and shall,by an ordinary resolution, at that meeting appoint new auditor(s) in place of the removedauditor(s) for the remainder of the term.

The auditors shall audit the financial statements of our Company in accordance withgenerally accepted accounting principles of Hong Kong, the International AccountingStandards or such other standards as may be permitted by the Stock Exchange.

(f) Dividends and other methods of distribution

Our Company in general meeting may declare dividends in any currency to be paid tothe members but no dividend shall be declared in excess of the amount recommended bythe Board.



– III-17 –

Except in so far as the rights attaching to, or the terms of issue of, any share mayotherwise provide:

(i) all dividends shall be declared and paid according to the amounts paid up on theshares in respect of which the dividend is paid, although no amount paid up on ashare in advance of calls shall for this purpose be treated as paid up on the share;

(ii) all dividends shall be apportioned and paid pro rata in accordance with theamount paid up on the shares during any portion(s) of the period in respect ofwhich the dividend is paid; and

(iii) the Board may deduct from any dividend or other monies payable to any memberall sums of money (if any) presently payable by him to our Company on accountof calls, instalments or otherwise.

Where the Board or our Company in general meeting has resolved that a dividendshould be paid or declared, the Board may resolve:

(aa) that such dividend be satisfied wholly or in part in the form of an allotmentof shares credited as fully paid up, provided that the members entitled tosuch dividend will be entitled to elect to receive such dividend (or partthereof) in cash in lieu of such allotment; or

(bb) that the members entitled to such dividend will be entitled to elect toreceive an allotment of shares credited as fully paid up in lieu of the wholeor such part of the dividend as the Board may think fit.

Upon the recommendation of the Board, our Company may by ordinaryresolution in respect of any one particular dividend of our Company determine that itmay be satisfied wholly in the form of an allotment of shares credited as fully paid upwithout offering any right to members to elect to receive such dividend in cash in lieuof such allotment.

Any dividend, bonus or other sum payable in cash to the holder of shares may bepaid by cheque or warrant sent through the post. Every such cheque or warrant shallbe made payable to the order of the person to whom it is sent and shall be sent at theholder’s or joint holders’ risk and payment of the cheque or warrant by the bank onwhich it is drawn shall constitute a good discharge to our Company. Any one of twoor more joint holders may give effectual receipts for any dividends or other moniespayable 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 adividend be paid or declared, the Board may further resolve that such dividend besatisfied wholly or in part by the distribution of specific assets of any kind.



– III-18 –

The Board may, if it thinks fit, receive from any member willing to advance thesame, and either in money or money’s worth, all or any part of the money uncalledand unpaid or instalments payable upon any shares held by him, and in respect of allor any of the monies so advanced may pay interest at such rate (if any) not exceeding20% per annum, as the Board may decide, but a payment in advance of a call shall notentitle the member to receive any dividend or to exercise any other rights or privilegesas a member in respect of the share or the due portion of the shares upon whichpayment has been advanced by such member before it is called up.

All dividends, bonuses or other distributions unclaimed for one year after havingbeen declared may be invested or otherwise used by the Board for the benefit of ourCompany until claimed and our Company shall not be constituted a trustee in respectthereof. All dividends, bonuses or other distributions unclaimed for six years afterhaving been declared may be forfeited by the Board and, upon such forfeiture, shallrevert to our Company.

No dividend or other monies payable by our Company on or in respect of anyshare shall bear interest against our Company.

Our Company may exercise the power to cease sending cheques for dividendentitlements or dividend warrants by post if such cheques or warrants remain uncashedon two consecutive occasions or after the first occasion on which such a cheque orwarrant is returned undelivered.

(g) Inspection of corporate records

For so long as any part of the share capital of our Company is [REDACTED] on theStock Exchange, except when the register of members is closed, the register of members ofour Company in Hong Kong shall during business hours be kept open to inspection by anymember without charge, and any member may require the provision to him of copies orextracts of such register in all respects as if our Company were incorporated under andwere subject to the Hong Kong Companies Ordinance.

(h) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles concerning the rights of minority members inrelation to fraud or oppression. However, certain remedies may be available to members ofour Company under Cayman Islands law, as summarised in paragraph 3(f) of this appendix.

(i) Procedures on liquidation

A resolution that our Company be wound up voluntarily shall be a special resolution.



– III-19 –

Subject to any special rights, privileges or restrictions as to the distribution ofavailable surplus assets on liquidation for the time being attached to any class or classes ofshares:

(i) if our Company is wound up, the surplus assets remaining after payment to allcreditors shall be divided among the members in proportion to the capital paid upon the shares held by them respectively; and

(ii) if our Company is wound up and the surplus assets available for distributionamong the members are insufficient to repay the whole of the paid-up capital,such assets shall be distributed, subject to the rights of any shares which may beissued on special terms and conditions, so that, as nearly as may be, the lossesshall be borne by the members in proportion to the capital paid up on the sharesheld by them, respectively.

If our Company is wound up (whether the liquidation is voluntary or compelled by thecourt), the liquidator may, with the sanction of a special resolution and any other sanctionrequired by the Cayman Companies Act, divide among the members in specie or kind thewhole or any part of the assets of our Company, whether the assets consist of property ofone kind or different kinds, and the liquidator may, for such purpose, set such value as hedeems fair upon any one or more class or classes of property to be so divided and maydetermine how such division shall be carried out as between the members or differentclasses of members and the members within each class. The liquidator may, with the likesanction, vest any part of the assets in trustees upon such trusts for the benefit of membersas the liquidator thinks fit, but so that no member shall be compelled to accept any sharesor other property upon which there is a liability.

(j) Subscription rights reserve

Provided that it is not prohibited by and is otherwise in compliance with the CaymanCompanies Act, if warrants to subscribe for shares have been issued by our Company and ourCompany does any act or engages in any transaction which would result in the subscription priceof such warrants being reduced below the par value of the shares to be issued on the exercise ofsuch warrants, a subscription rights reserve shall be established and applied in paying up thedifference between the subscription price and the par value of such shares.

3. CAYMAN ISLANDS COMPANY LAW

Our Company was incorporated in the Cayman Islands as an exempted company on 19January 2021 subject to the Cayman Companies Act. Certain provisions of Cayman Islandscompany law are set out below but this section does not purport to contain all applicablequalifications and exceptions or to be a complete review of all matters of the CaymanCompanies Act and taxation, which may differ from equivalent provisions in jurisdictions withwhich interested parties may be more familiar.



– III-20 –

(a) Company operations

An exempted company such as our Company must conduct its operations mainlyoutside the Cayman Islands. An exempted company is also required to file an annual returneach year with the Registrar of Companies of the Cayman Islands and pay a fee which isbased on the amount of its authorised share capital.

(b) Share capital

Under the Cayman Companies Act, a Cayman Islands company may issue ordinary,preference or redeemable shares or any combination thereof. Where a company issuesshares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount orvalue of the premiums on those shares shall be transferred to an account, to be called the“share premium account”. At the option of a company, these provisions may not apply topremiums on shares of that company allotted pursuant to any arrangements in considerationof the acquisition or cancellation of shares in any other company and issued at a premium.The share premium account may be applied by the company subject to the provisions, ifany, of its memorandum and articles of association, in such manner as the company mayfrom time to time determine including, but without limitation, the following:

(i) paying distributions or dividends to members;

(ii) paying up unissued shares of the company to be issued to members as fully paidbonus shares;

(iii) any manner provided in section 37 of the Cayman Companies Act;

(iv) writing-off the preliminary expenses of the company; and

(v) writing-off the expenses of, or the commission paid or discount allowed on, anyissue of shares or debentures of the company.

Notwithstanding the foregoing, no distribution or dividend may be paid to membersout of the share premium account unless, immediately following the date on which thedistribution or dividend is proposed to be paid, the company will be able to pay its debts asthey fall due in the ordinary course of business.

Subject to confirmation by the court, a company limited by shares or a companylimited by guarantee and having a share capital may, if authorised to do so by its articles ofassociation, by special resolution reduce its share capital in any way.



– III-21 –

(c) Financial assistance to purchase shares of a company or its holding company

There are no statutory prohibitions in the Cayman Islands on the granting of financialassistance by a company to another person for the purchase of, or subscription for, its own,its holding company’s or a subsidiary’s shares. Therefore, a company may provide financialassistance provided the directors of the company, when proposing to grant such financialassistance, discharge their duties of care and act in good faith, for a proper purpose and inthe interests of the company. Such assistance should be on an arm’s-length basis.

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a sharecapital may, if so authorised by its articles of association, issue shares which are to beredeemed or are liable to be redeemed at the option of the company or a member and, forthe avoidance of doubt, it shall be lawful for the rights attaching to any shares to be varied,subject to the provisions of the company’s articles of association, so as to provide that suchshares are to be or are liable to be so redeemed. In addition, such a company may, ifauthorised to do so by its articles of association, purchase its own shares, including anyredeemable shares; an ordinary resolution of the company approving the manner and termsof the purchase will be required if the articles of association do not authorise the mannerand terms of such purchase. A company may not redeem or purchase its shares unless theyare fully paid. Furthermore, a company may not redeem or purchase any of its shares if, asa result of the redemption or purchase, there would no longer be any issued shares of thecompany other than shares held as treasury shares. In addition, a payment out of capital bya 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 companyshall be able to pay its debts as they fall due in the ordinary course of business.

Shares that have been purchased or redeemed by a company or surrendered to thecompany shall not be treated as cancelled but shall be classified as treasury shares if heldin compliance with the requirements of Section 37A(1) of the Cayman Companies Act. Anysuch shares shall continue to be classified as treasury shares until such shares are eithercancelled or transferred pursuant to the Cayman Companies Act.

A Cayman Islands company may be able to purchase its own warrants subject to andin accordance with the terms and conditions of the relevant warrant instrument orcertificate. Thus there is no requirement under Cayman Islands law that a company’smemorandum or articles of association contain a specific provision enabling suchpurchases. The directors of a company may under the general power contained in itsmemorandum of association be able to buy, sell and deal in personal property of all kinds.

A subsidiary may hold shares in its holding company and, in certain circumstances,may acquire such shares.



– III-22 –

(e) Dividends and distributions

Subject to a solvency test, as prescribed in the Cayman Companies Act, and theprovisions, if any, of the company’s memorandum and articles of association, a companymay pay dividends and distributions out of its share premium account. In addition, basedupon English case law which is likely to be persuasive in the Cayman Islands, dividendsmay be paid out of profits.

For so long as a company holds treasury shares, no dividend may be declared or paid,and no other distribution (whether in cash or otherwise) of the company’s assets (includingany distribution of assets to members on a winding up) may be made, in respect of atreasury share.

(f) Protection of minorities and shareholders’ suits

It can be expected that the Cayman Islands courts will ordinarily follow English caselaw precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions tothat rule) which permit a minority member to commence a representative action against orderivative actions in the name of the company to challenge acts which are ultra vires,illegal, fraudulent (and performed by those in control of our Company) against theminority, or represent an irregularity in the passing of a resolution which requires aqualified (or special) majority which has not been obtained.

Where a company (not being a bank) is one which has a share capital divided intoshares, the court may, on the application of members holding not less than one-fifth of theshares of the company in issue, appoint an inspector to examine the affairs of the companyand, at the direction of the court, to report on such affairs. In addition, any member of acompany may petition the court, which may make a winding up order if the court is of theopinion that it is just and equitable that the company should be wound up.

In general, claims against a company by its members must be based on the generallaws of contract or tort applicable in the Cayman Islands or be based on potential violationof their individual rights as members as established by a company’s memorandum andarticles of association.

(g) Disposal of assets

There are no specific restrictions on the power of directors to dispose of assets of acompany, however, the directors are expected to exercise certain duties of care, diligenceand skill to the standard that a reasonably prudent person would exercise in comparablecircumstances, in addition to fiduciary duties to act in good faith, for proper purpose and inthe best interests of the company under English common law (which the Cayman Islandscourts will ordinarily follow).



– III-23 –

(h) Accounting and auditing requirements

A company must cause proper records of accounts to be kept with respect to (i) allsums of money received and expended by it; (ii) all sales and purchases of goods by it; and(iii) its assets and liabilities.

Proper books of account shall not be deemed to be kept if there are not kept suchbooks as are necessary to give a true and fair view of the state of the company’s affairs andto explain its transactions.

If a company keeps its books of account at any place other than at its registered officeor any other place within the Cayman Islands, it shall, upon service of an order or noticeby the Tax Information Authority pursuant to the Tax Information Authority Act (2017Revision) of the Cayman Islands, make available, in electronic form or any other medium,at its registered office copies of its books of account, or any part or parts thereof, as arespecified in such order or notice.

(i) Exchange control

There are no exchange control regulations or currency restrictions in effect in theCayman Islands.

(j) Taxation

Pursuant to section 6 of the Tax Concessions Act (2018 Revision) of the CaymanIslands, our Company has obtained an undertaking from the Financial Secretary that:

(i) no law which is enacted in the Cayman Islands imposing any tax to be levied onprofits or income or gains or appreciations shall apply to our Company or itsoperations; and

(ii) no tax be levied on profits, income, gains or appreciations or which is in thenature of estate duty or inheritance tax shall be payable by our Company:

(aa) on or in respect of the shares, debentures or other obligations of ourCompany; or

(bb) by way of withholding in whole or in part of any relevant payment asdefined in the Tax Concessions Act (2018 Revision).

The undertaking for our Company is for a period of 20 years from 4 February2021.



– III-24 –

The Cayman Islands currently levy no taxes on individuals or corporations basedupon profits, income, gains or appreciations and there is no taxation in the natureof inheritance tax or estate duty. There are no other taxes likely to be material toour Company levied by the Government of the Cayman Islands save for certainstamp duties which may be applicable, from time to time, on certain instruments.

(k) Stamp duty on transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of CaymanIslands companies save for those which hold interests in land in the Cayman Islands.

(l) Loans to directors

There is no express provision prohibiting the making of loans by a company to any ofits directors. However, the company’s articles of association may provide for theprohibition of such loans under specific circumstances.

(m) Inspection of corporate records

The members of a company have no general right to inspect or obtain copies of theregister of members or corporate records of the company. They will, however, have suchrights as may be set out in the company’s articles of association.

(n) Register of members

A Cayman Islands exempted company may maintain its principal register of membersand any branch registers in any country or territory, whether within or outside the CaymanIslands, as the company may determine from time to time. There is no requirement for anexempted company to make any returns of members to the Registrar of Companies in theCayman Islands. The names and addresses of the members are, accordingly, not a matter ofpublic record and are not available for public inspection. However, an exempted companyshall make available at its registered office, in electronic form or any other medium, suchregister of members, including any branch register of member, as may be required of itupon service of an order or notice by the Tax Information Authority pursuant to the TaxInformation Authority Act (2017 Revision) of the Cayman Islands.

(o) Register of Directors and officers

Pursuant to the Cayman Companies Act, our Company is required to maintain at itsregistered office a register of directors, alternate directors and officers which is notavailable for inspection by the public. A copy of such register must be filed with theRegistrar of Companies in the Cayman Islands and any change must be notified to theRegistrar within 30 days of any change in such directors or officers, including a change ofthe name of such directors or officers.



– III-25 –

(p) Winding up

A Cayman Islands company may be wound up by (i) an order of the court; (ii)voluntarily by its members; or (iii) under the supervision of the court.

The court has authority to order winding up in a number of specified circumstancesincluding where, in the opinion of the court, it is just and equitable that such company beso wound up.

A voluntary winding up of a company (other than a limited duration company, forwhich specific rules apply) occurs where the company resolves by special resolution that itbe wound up voluntarily or where the company in general meeting resolves that it bewound up voluntarily because it is unable to pay its debt as they fall due. In the case of avoluntary winding up, the company is obliged to cease to carry on its business from thecommencement of its winding up except so far as it may be beneficial for its winding up.Upon appointment of a voluntary liquidator, all the powers of the directors cease, except sofar as the company in general meeting or the liquidator sanctions their continuance.

In the case of a members’ voluntary winding up of a company, one or more liquidatorsare appointed for the purpose of winding up the affairs of the company and distributing itsassets.

As soon as the affairs of a company are fully wound up, the liquidator must make areport and an account of the winding up, showing how the winding up has been conductedand the property of the company disposed of, and call a general meeting of the companyfor the purposes of laying before it the account and giving an explanation of that account.

When a resolution has been passed by a company to wind up voluntarily, theliquidator or any contributory or creditor may apply to the court for an order for thecontinuation of the winding up under the supervision of the court, on the grounds that: (i)the company is or is likely to become insolvent; or (ii) the supervision of the court willfacilitate a more effective, economic or expeditious liquidation of the company in theinterests of the contributories and creditors. A supervision order takes effect for allpurposes as if it was an order that the company be wound up by the court except that acommenced voluntary winding up and the prior actions of the voluntary liquidator shall bevalid and binding upon the company and its official liquidator.



– III-26 –

For the purpose of conducting the proceedings in winding up a company and assistingthe court, one or more persons may be appointed to be called an official liquidator(s).Thecourt may appoint to such office such person or persons, either provisionally or otherwise,as it thinks fit, and if more than one person is appointed to such office, the court shalldeclare whether any act required or authorised to be done by the official liquidator is to bedone by all or any one or more of such persons. The court may also determine whether anyand what security is to be given by an official liquidator on his appointment; if no officialliquidator is appointed, or during any vacancy in such office, all the property of thecompany shall be in the custody of the court.

(q) Reconstructions

Reconstructions and amalgamations may be approved by a majority in numberrepresenting 75% in value of the members or creditors, depending on the circumstances, asare present at a meeting called for such purpose and thereafter sanctioned by the courts.Whilst a dissenting member has the right to express to the court his view that thetransaction for which approval is being sought would not provide the members with a fairvalue for their shares, the courts are unlikely to disapprove the transaction on that groundalone in the absence of evidence of fraud or bad faith on behalf of management, and if thetransaction were approved and consummated the dissenting member would have no rightscomparable to the appraisal rights (i.e. the right to receive payment in cash for thejudicially determined value of their shares) ordinarily available, for example, to dissentingmembers of a United States corporation.

(r) Take-overs

Where an offer is made by a company for the shares of another company and, withinfour months of the offer, the holders of not less than 90% of the shares which are thesubject of the offer accept, the offeror may, at any time within two months after theexpiration of that four-month period, by notice require the dissenting members to transfertheir shares on the terms of the offer. A dissenting member may apply to the CaymanIslands courts within one month of the notice objecting to the transfer. The burden is on thedissenting member to show that the court should exercise its discretion, which it will beunlikely to do unless there is evidence of fraud or bad faith or collusion as between theofferor and the holders of the shares who have accepted the offer as a means of unfairlyforcing out minority members.

(s) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles ofassociation may provide for indemnification of officers and directors, save to the extent anysuch provision may be held by the court to be contrary to public policy, for example, wherea provision purports to provide indemnification against the consequences of committing acrime.



– III-27 –

4. GENERAL

Appleby, our Company’s legal adviser on Cayman Islands law, has sent to our Company aletter of advice which summarises certain aspects of the Cayman Islands company law. Thisletter, together with a copy of the Cayman Companies Act, is available on display as referred toin “Documents available on display” in Appendix V to this document. Any person wishing tohave a detailed summary of Cayman Islands company law or advice on the differences betweenit and the laws of any jurisdiction with which he is more familiar is recommended to seekindependent legal advice.



– III-28 –

A. FURTHER INFORMATION ABOUT OUR COMPANY

1. Incorporation of our Company

Our Company was incorporated in the Cayman Islands under the Companies Act as anexempted company with limited liability on 19 January 2021. Our Company was registeredas a non-Hong Kong company in Hong Kong under Part 16 of the Companies Ordinance on25 March 2021 and our principal place of business in Hong Kong is at Unit A&C, 4/F.,King Win Factory Building, 65-67 King Yip Street, Kwun Tong, Kowloon, Hong Kong. Mr.Chim Kwok Yung Ramthur and Ms. Hung Yat Ka Peggy have been appointed as theauthorised representatives of our Company for the acceptance of service of process andnotices on behalf of our Company in Hong Kong.

As our Company is incorporated in the Cayman Islands, our Company is subject to therelevant laws of the Cayman Islands and the constitution which comprises theMemorandum of Association and the Articles of Association. A summary of variousprovisions of its constitution and relevant aspects of the Cayman Islands company law isset out in Appendix III to this document.

2. Changes in share capital of our Company

(a) As at the date of incorporation, our Company had an authorised share capital ofHK$380,000 divided into 38,000,000 Shares of par value HK$0.01 each. On thesame day (i) one fully paid Share was allotted and issued to the initial subscriber,which was subsequently transferred to Lucky Oasis; and (ii) 8,666 fully paidShares were allotted and issued to Lucky Oasis.

(b) On 27 July 2021, our Company allotted and issued and the [REDACTED]subscribed for 1,333 Shares pursuant to a subscription agreement dated 8 March2021. As a result, our Company became owned as to 86.7% and 13.3% by LuckyOasis and the [REDACTED], respectively.

(c) On [•], our Shareholders resolved to increase the authorised share capital of ourCompany from HK$380,000 divided into 38,000,000 Shares of par valueHK$0.01 each to HK$100,000,000 divided into 10,000,000,000 Shares of parvalue HK$0.01 each by the creation of 9,962,000,000 additional Shares, eachranking pari passu with our Shares then in issue in all respects.

(d) Immediately following completion of the [REDACTED] and the [REDACTED],without taking into account any Shares which may be issued pursuant to theexercise of the [REDACTED] and any options which may be granted under theShare Option Scheme, [REDACTED] Shares, fully paid or credited as fully paid,will be in issue, and [REDACTED] Shares will remain unissued.


APPENDIX IV STATUTORY AND GENERAL INFORMATION

– IV-1 –

(e) Other than pursuant to the general mandate to issue Shares referred to in “A.Further information about our Company – 3. Written resolutions of ourShareholders passed on [•]” in this appendix and pursuant to the Share OptionScheme, our Company does not have any present intention to issue any of theauthorised but unissued share capital of our Company and, without prior approvalof our Shareholder(s) in general meeting, no issue of Shares which wouldeffectively alter the control of our Company will be made.

(f) Save as disclosed in “Share capital” in this document and in “A. Furtherinformation about our Company – 2. Changes in share capital of our Company”in this appendix, there has been no other alteration in our Company’s sharecapital since its incorporation.

3. Written resolutions of our Shareholders passed on [•]

By written resolutions of our Shareholders passed on [•]:

(a) our Company approved and conditionally adopted the Memorandum ofAssociation and the Articles of Association, upon fulfilment of the Conditions (asdefined below) and with effect from the [REDACTED];

(b) conditional on the [REDACTED] granting the [REDACTED] of, and permissionto deal in, our Shares in issue and Shares to be issued as mentioned in thisdocument, including any Shares which may be issued and allotted pursuant to theexercise of the [REDACTED] and any options which may be granted under theShare Option Scheme, and on the obligations of the [REDACTED] under the[REDACTED] becoming unconditional and not being terminated in accordancewith the terms of the [REDACTED] or otherwise (the “Conditions”), in eachcase on or before the date falling 30 days after the date of the issue of thisdocument:

(i) the [REDACTED] and the [REDACTED] were approved and our Directorswere authorised to allot and issue the [REDACTED] pursuant to the[REDACTED] and such number of Shares as may be required to be allottedand issued upon the exercise of the [REDACTED] to rank pari passu withthe then existing Shares in all respects;

(ii) the rules of the Share Option Scheme, the principal terms of which are setout in “D. Share Option Scheme” in this appendix, were approved andadopted and our Directors were authorised, at their absolute discretion,subject to the terms and conditions of the Share Option Scheme, to grantoptions to subscribe for Shares thereunder and to allot, issue and deal withour Shares pursuant to the exercise of subscription rights attaching to any



– IV-2 –

options which may be granted under the Share Option Scheme and to takeall such actions as they consider necessary or desirable to implement theShare Option Scheme;

(iii) conditional further on the share premium account of our Company havingsufficient balance, or otherwise being credited as a result of the issue of thenew Shares under the [REDACTED], the [REDACTED] be approved, andour Directors were authorised to capitalise an amount of HK$[REDACTED]standing to the credit of the share premium account of our Company and toappropriate such amount as capital to pay up in full at par [REDACTED]Shares for allotment and issue to the person(s) whose name(s) appear on theregister of members or principal share register of our Company at the closeof business on [•] in proportion (as nearly as possible without involvingfractions) to its/their then existing shareholdings in our Company, eachranking pari passu in all respects with the Shares then in issue, and ourDirectors were authorised to give effect to such capitalisation anddistributions;

(c) a general unconditional mandate was given to our Directors to exercise allpowers of our Company to allot, issue and deal with, otherwise than by way ofrights or an issue of Shares pursuant to the exercise of the [REDACTED] andany options which may be granted under the Share Option Scheme or any othershare option scheme of our Company or any Shares issued and allotted in lieu ofthe whole or part of a dividend on our Shares or similar arrangement inaccordance with the Memorandum of Association and the Articles or pursuant toa specific authority granted by our Shareholders in general meetings or pursuantto the [REDACTED] and the [REDACTED], Shares or securities convertibleinto Shares or options, warrants or similar rights to subscribe for Shares or suchconvertible securities, and to make or grant offers, agreements or options whichmight require the exercise of such power, with an aggregate nominal value notexceeding 20% of the aggregate nominal value of the share capital of ourCompany in issue immediately following completion of the [REDACTED] andthe [REDACTED] but excluding any Shares which may be issued pursuant to theexercise of the [REDACTED] and the options which may be granted under theShare Option Scheme, and such mandate to remain in effect until whichever isthe earliest of:

(i) the conclusion of the next annual general meeting of our Company;

(ii) the expiration of the period within which the next annual general meeting ofour Company is required by the Articles of Association or the CompaniesAct or any other applicable laws of the Cayman Islands to be held; or

(iii) the time when such mandate is revoked or varied by an ordinary resolutionof our Shareholders in general meeting;



– IV-3 –

(d) a general unconditional mandate was given to our Directors authorising them toexercise all powers of our Company to repurchase on the Stock Exchange or onany other stock exchange on which the securities of our Company may be[REDACTED] and which is recognised by the SFC and the Stock Exchange forthis purpose such number of Shares as will represent up to 10% of the aggregatenominal value of the share capital of our Company in issue immediatelyfollowing completion of the [REDACTED] and the [REDACTED] but excludingany Shares which may be issued pursuant to the exercise of the [REDACTED]and the options which may be granted under the Share Option Scheme (the“Repurchase Mandate”), and the Repurchase Mandate to remain in effect untilwhichever is the earliest of:

(i) the conclusion of the next annual general meeting of our Company;

(ii) the expiration of the period within which the next annual general meeting ofour Company is required by the Memorandum of Association and theArticles or the Companies Act or any other applicable laws of the CaymanIslands to be held; or

(iii) the time when the Repurchase Mandate is revoked or varied by an ordinaryresolution of the Shareholders in general meeting; and

(e) a general unconditional mandate mentioned in sub-paragraph (c) above wasextended by the addition to the aggregate nominal value of the share capital ofour Company which may be allotted or agreed to be allotted by our Directorspursuant to such general mandate of an amount representing the aggregatenominal value of the share capital of our Company repurchased by our Companypursuant to the Repurchase Mandate to repurchase Shares referred to insub-paragraph (d) above, provided that such extended amount shall not exceed10% of the aggregate nominal value of the share capital of our Company in issueimmediately following completion of the [REDACTED] and the [REDACTED]but excluding any Shares which may be issued pursuant to the exercise of the[REDACTED] and the options which may be granted under the Share OptionScheme.

4. Corporate Reorganisation

The companies comprising our Group underwent the Reorganisation to rationalise ourGroup’s structure in preparation for the [REDACTED] of our Shares on the StockExchange, pursuant to which our Company became the holding company of our Group. Fordetails of the major steps of the Reorganisation, please refer to “History, Reorganisationand corporate structure” in this document.



– IV-4 –

5. Changes in share capital of subsidiaries

Our subsidiaries are listed in the Accountant’s Report, the text of which is set out inAppendix I to this document. Save for the alterations described in “History, Reorganisationand corporate structure” in this document, no changes in the share capital of oursubsidiaries took place within the two years immediately preceding the date of thisdocument.

6. Repurchase of our Shares by our Company

This section includes information required by the Stock Exchange to be included inthis document concerning the repurchase of our Shares by our Company.

(a) Provisions of the Listing Rules

The Listing Rules permit companies with a primary listing on the StockExchange to purchase their shares on the Stock Exchange subject to certainrestrictions.

(i) Shareholders’ approval

The Listing Rules provide that all proposed repurchases of shares (whichmust be fully paid in the case of shares) by a company with a primary listing onthe Stock Exchange must be approved in advance by an ordinary resolution,either by way of general mandate or by specific approval of a specifictransaction.

Note: Pursuant to the written resolutions of our Shareholders passed on [•], the Repurchase Mandatewas given to our Directors authorising them to exercise all powers of our Company torepurchase Shares on the Stock Exchange or any other stock exchange on which the securitiesof our Company may be [REDACTED] and which is recognised by the SFC and the StockExchange for this purpose, such number of Shares representing up to 10% of the aggregatenominal value of the share capital of our Company in issue immediately following completionof the [REDACTED] and the [REDACTED] but excluding any Shares to be issued andallotted pursuant to the exercise of the [REDACTED] and any options which may be grantedunder the Share Option Scheme, and the Repurchase Mandate shall remain in effect until theearliest of the conclusion of the next annual general meeting of our Company, or theexpiration of the period within which the next annual general meeting of our Company isrequired by the Memorandum of Association and the Articles or the Companies Act or anyother applicable laws of the Cayman Islands to be held, or the time when the RepurchaseMandate is revoked or varied by an ordinary resolution of our Shareholders in generalmeeting.



– IV-5 –

(ii) Source of funds

Repurchases must be funded out of funds legally available for the purposein accordance with the Articles and the laws of the Cayman Islands. A listedcompany may not repurchase its own shares on the Stock Exchange for aconsideration other than cash or for settlement otherwise than in accordance withthe trading rules of the Stock Exchange.

Any repurchases by our Company may be made out of our Company’sprofits, out of our Company’s share premium account, or out of the proceeds of afresh issue of Shares made for the purpose of the repurchase or, if authorised bythe Articles and subject to the Companies Act, out of capital and, in the case ofany premium payable on the repurchase, out of either or both of our Company’sprofit or our Company’s share premium account, before or at the time the Sharesare repurchased or, if authorised by the Articles and subject to the CompaniesAct, out of capital.

(iii) Connected parties

The Listing Rules prohibit our Company from knowingly repurchasing theShares on the Stock Exchange from a core connected person, which includes aDirector, chief executive or Substantial Shareholder of our Company or any of itssubsidiaries or a close associate of any of them and a core connected person shallnot knowingly sell Shares to our Company.

(b) Reasons for repurchases

Our Directors believe that it is in the best interests of our Company and theShareholders for our Directors to have a general authority from our Shareholders toenable our Company to repurchase Shares in the market. Such repurchases may,depending on the market conditions and funding arrangements at the time, lead to anenhancement of our Company’s net asset value and/or earnings per Share and willonly be made when our Directors believe that such repurchases will benefit ourCompany and the Shareholders.

(c) Exercise of the Repurchase Mandate

Exercise in full of the Repurchase Mandate, on the basis of [REDACTED]Shares in issue after completion of the [REDACTED] and the [REDACTED], couldaccordingly result in up to [REDACTED] Shares being repurchased by our Companyduring the period in which the Repurchase Mandate remains in force.



– IV-6 –

(d) Funding of repurchases

In repurchasing Shares, our Company may only apply funds legally available forsuch purpose in accordance with the Articles, the Listing Rules and the applicablelaws of the Cayman Islands.

Our Directors do not propose to exercise the Repurchase Mandate to such extentas would, in the circumstances, have a material adverse effect on the working capitalrequirements of our Company or the gearing levels which in the opinion of ourDirectors are from time to time appropriate for our Company.

(e) General

None of our Directors or, to the best of their knowledge having made allreasonable enquiries, any of their close associates, has any present intention to sellany Shares to our Company if the Repurchase Mandate is exercised.

Our Directors have undertaken to the Stock Exchange that, so far as the samemay be applicable, they will exercise the Repurchase Mandate in accordance with theListing Rules and the applicable laws of the Cayman Islands.

If as a result of a repurchase of Shares pursuant to the Repurchase Mandate, aShareholder’s proportionate interest in the voting rights of our Company increases,such increase will be treated as an acquisition for the purposes of the Takeovers Code.Accordingly, a Shareholder or a group of Shareholders acting in concert, depending onthe level of increase of the Shareholders’ interest, could obtain or consolidate controlof our Company and may become obliged to make a mandatory offer in accordancewith Rule 26 of the Takeovers Code as a result of any such increase. Save as disclosedabove, our Directors are not aware of any consequence that would arise under theTakeovers Code as a result of a repurchase pursuant to the Repurchase Mandate.

Our Directors will not exercise the Repurchase Mandate if the repurchase wouldresult in the number of Shares which are in the hands of the public falling below 25%of the total number of Shares in issue (or such other percentage as may be prescribedas the minimum public shareholding under the Listing Rules).

No core connected person of our Company has notified our Company that he orshe has a present intention to sell Shares to our Company, or has undertaken not to doso, if the Repurchase Mandate is exercised.



– IV-7 –

B. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of material contracts

The following contracts (not being contracts in the ordinary course of business) havebeen entered into by members of our Group within the two years preceding the date of thisdocument and are or may be material:

(a) a sale and purchase agreement dated 24 May 2021 entered into among E&E, ENLDevelopment and our Company for the transfer of 2,000,000 shares of EN HKfrom E&E to ENL Development. In consideration of the aforesaid transfer, oneshare of ENL Development was allotted, issued and credited as fully paid to ourCompany at the direction of E&E;

(b) a sale and purchase agreement dated 2 June 2021 entered into among E&E, ENLDevelopment and our Company for the transfer of 100 shares of ENSZ HK fromE&E to ENL Development. In consideration of the aforesaid transfer, one shareof ENL Development was allotted, issued and credited as fully paid to ourCompany at the direction of E&E;

(c) a share subscription agreement dated 8 March 2021 entered into between the[REDACTED] and our Company, pursuant to which our Company agreed to allotand issue and the [REDACTED] agreed to subscribe for 1,333 Shares of ourCompany at a consideration of HK$18.0 million;

(d) the Deed of Non-competition;

(e) the Deed of Indemnity; and

(f) the [REDACTED].



– IV-8 –

2. Intellectual property rights

(a) Trademark(s)

As at the Latest Practicable Date, our Group had registered the followingtrademark(s) which, in the opinion of our Directors, are material to our business:

TrademarkRegisteredowner Class(es)

Place ofregistration

Trademarknumber

Effectiveperiod

EN HK 39 Hong Kong 305028129 From 16August 2019to 15 August2029

Trademark Applicant Class(es)Place ofapplication

Trademarknumber

Effectiveperiod

EN SH 39 PRC 49665352 From 7 May2021 to6 May 2031

(b) Domain names

As at the Latest Practicable Date, our Group had registered the following domainnames which, in the opinion of our Directors, are material to our business:

Domain nameRegisteredowner

Registrationdate Expiry date

enl.com.hk EN HK 15 January 1999 –

enlsha.com EN SH 23 October 2002 23 October 2023

enlshen.com ENSH SZB 10 March 2004 10 March 2023

enlsz.com ENSH SZB 7 May 2010 7 May 2023

enlsha.cn EN SH 29 June 2017 29 June 2022

enlckg.com ENSH CQB 16 May 2018 16 May 2023

enl-group.com EN HK 30 October 2016 31 October 2022



– IV-9 –

C. FURTHER INFORMATION ABOUT SUBSTANTIAL SHAREHOLDERS,DIRECTORS AND EXPERTS

1. Disclosure of interests

(a) Interests of Directors and chief executive in Shares, underlying Shares anddebentures of our Company and the associated corporations

Immediately following completion of the [REDACTED] and the [REDACTED]but taking no account of any Shares which may be issued pursuant to the exercise ofthe [REDACTED] and any options which may be granted under the Share OptionScheme, the interest or short positions of our Directors or chief executive of ourCompany in the Shares, underlying shares and debentures of our Company or any ofthe associated corporations (within the meaning of Part XV of the SFO) which, oncethe Shares are [REDACTED] on the Stock Exchange, would have to be notified toour Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of theSFO (including any interests or short positions which they are taken or deemed tohave under such provisions of the SFO) or will be required, pursuant to section 352 ofthe SFO, to be entered in the register referred to therein, or will be required, pursuantto the Model Code for Securities Transactions by Directors of Listed Companies in theListing Rules, to be notified to our Company and the Stock Exchange, in each caseonce the Shares are [REDACTED] on the Stock Exchange, will be as follows:

(i) Long position in our Shares

Name of Director Capacity/Nature

Number of Sharesheld/interested in

immediatelyfollowing

completion of the[REDACTED]

and the[REDACTED]

Percentage ofshareholdingimmediately

followingcompletion of the

[REDACTED]and the

[REDACTED]

Mr. Wong (Note) Interest in controlledcorporation

[REDACTED] [REDACTED]%

Note: Lucky Oasis will directly hold [REDACTED] Shares immediately followingcompletion of the [REDACTED] and the [REDACTED]. Lucky Oasis is wholly-ownedby E&E and E&E is controlled by Mr. Wong. By virtue of the SFO, Mr. Wong isdeemed to have an interest in the Shares held by Lucky Oasis.



– IV-10 –

(ii) Long position in the shares of associated corporation

Name of Director

Name ofassociatedcorporation Capacity/Nature

Number ofshares

held/interestedin

Percentage ofinterest in our

associatedcorporation

Mr. Wong(Note) Lucky Oasis Interest incontrolledcorporation

1 100.0%

Note: Lucky Oasis is wholly-owned by E&E. E&E is controlled by Mr. Wong. By virtue ofthe SFO, Mr. Wong is deemed to have an interest in the shares in Lucky Oasis held byE&E.

(b) Interests of substantial and other Shareholders in the Shares and underlyingshares

For information on the persons who will, immediately following completion ofthe [REDACTED], have interests or short positions in our Shares or underlyingShares which would be required to be disclosed to us and the Stock Exchange underprovisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, beinterested in 10% of more of any class of Shares carrying the rights to vote in allcircumstances at general meetings of our Company or any of our subsidiaries, pleaserefer to “Substantial Shareholders” in this document.

2. Particulars of service contracts

Executive Directors

Each of our executive Directors [has entered] into a service contract with ourCompany for an initial term of three years commencing from the [REDACTED]renewable automatically until terminated by not less than three months’ written noticeserved by either party on the other (subject to termination in certain circumstances asstipulated in the relevant service contract). Our executive Directors, Mr. Wong, Mr.Chim and Mr. Shon, are entitled to a fixed basic annual salary of HK$1.7 million,HK$0.8 million and HK$0.8 million, respectively for their services. Our Companymay in its absolute discretion from time to time pay our executive Directorsdiscretionary compensation or bonus of such amount (if any) as it may determine.


Each of our independent non-executive Directors [has entered] into anappointment letter with our Company for an initial term of three years commencingfrom the [REDACTED] renewable automatically until terminated by not less than onemonth’s written notice served by either party on the other (subject to termination in



– IV-11 –

certain circumstances as stipulated in the relevant appointment letter). Each of ourindependent non-executive Directors is entitled to a fixed annual director’s fee ofHK$120,000 for his/her services. Our independent non-executive Directors are notentitled to any bonus, benefit or other entitlement which are available to our executiveDirectors or employees of our Group.

Save as disclosed above, none of our Directors has entered into any servicecontracts with any member of our Group (excluding contracts expiring or determinableby the employer within one year without payment of compensation other thanstatutory compensation).

3. Directors’ remuneration

(a) The aggregate amount of emoluments (including fees, salaries, discretionarybonuses, allowances, other benefits in kind and retirement scheme contributions)accrued to our Directors by our Group for the Track Record Period wereapproximately HK$8.4 million, HK$4.4 million and HK$4.9 million, respectively.

(b) Under the arrangements currently in force, the aggregate amount of emoluments(including fees, salaries, discretionary bonuses, allowances, other benefits in kindand retirement scheme contributions) payable by our Group to our Directors forthe year ending 31 March 2023 is expected to be approximately HK$5.4 million.

(c) No amount was paid to our Directors as an inducement to join or upon joiningour Group during the Track Record Period.

(d) No compensation was paid to our Directors during the Track Record Period forthe loss of office as a director of any member of our Group or of any other officein connection with the management of the affairs of any member of our Group.

(e) There has been no arrangement under which a Director has waived or agreed towaive any emoluments during the Track Record Period.

4. Fees or commission received

Save as disclosed in “[REDACTED] – [REDACTED] arrangements and expenses –[REDACTED] and expenses” in this document, none of our Directors or the experts namedin “E. Other information – 6. Qualifications of experts” in this appendix had received anyagency fees, discounts, commissions, brokerages or other special terms in connection withthe issue or sale of any capital of any member of our Group within the two years precedingthe date of this document.



– IV-12 –

5. Related party transactions

Details of the related party transactions are set out under note 30 to the Accountant’sReport set out in Appendix I to this document.

6. Disclaimers

Save as disclosed in this document:

(a) none of our Directors or the experts named in “E. Other information – 6.Qualifications of experts” in this appendix has any direct or indirect interest inthe promotion of, or in any assets which have been, within the two yearsimmediately preceding the date of this document, acquired or disposed of by orleased to, any member of our Group, or are proposed to be acquired or disposedof by or leased to any member of our Group;

(b) none of our Directors or the experts named in “E. Other information – 6.Qualifications of experts” in this appendix is materially interested in any contractor arrangement subsisting at the date of this document which is significant inrelation to the business of our Group taken as a whole;

(c) none of our Directors or the experts named in “E. Other information − 6.Qualifications of experts” in this appendix has any shareholding in any memberof our Group or the right (whether legally enforceable or not) to subscribe for orto nominate persons to subscribe for securities in any member of our Group;

(d) taking no account any Shares to be issued upon exercise of the [REDACTED]and any options which may be granted under the Share Option Scheme orrepurchased by our Company pursuant to the mandate as referred to in “A.Further information about our Company” in this appendix, and taking no accountof Shares which may be taken up under the [REDACTED], our Directors are notaware of any person (not being a Director or chief executive of our Company)who will, immediately following completion of the [REDACTED] and[REDACTED], have an interest or short position in Shares or underlying Shareswhich would fall to be disclosed to our Company and the Stock Exchange underthe provisions of Divisions 2 and 3 of Part XV of the SFO, or who will bedirectly or indirectly interested in 10% or more of the nominal value or any classof share capital carrying rights to vote in all circumstances at general meetings ofour Company or any of our subsidiaries;



– IV-13 –

(e) taking no account any Shares to be issued upon exercise of the [REDACTED]and any options which may be granted under the Share Option Scheme, none ofour Directors or chief executive of our Company has any interest or shortposition in Shares, underlying Shares or debentures of our Company or any of itsassociated corporations (within the meaning of Part XV of the SFO) which wouldhave to be notified to our Company and the Stock Exchange under Divisions 7and 8 of Part XV of the SFO (including any interests and short positions whichthey are taken or deemed to have under such provisions of the SFO) or would berequired, pursuant to section 352 of the SFO, to be entered in the registerreferred to therein, or would be required, pursuant to the Model Code forSecurities Transactions by Directors of Listing Companies in the Listing Rulesrelating to securities transactions by our Directors, to be notified to our Companyand the Stock Exchange, in each case once the Shares are [REDACTED]; and

(f) so far as is known to our Directors, none of our Directors, their respectiveassociates (as defined under the Listing Rules) or Shareholders who areinterested in more than 5% of the issued share capital of our Company has anyinterests in the five largest customers, five largest subcontractors or the fivelargest suppliers of our Group.

D. SHARE OPTION SCHEME

1. Definitions

For the purpose of this section, the following expressions have the meanings set outbelow unless the context requires otherwise:

“Adoption Date” [•], the date on which the Share Option Scheme isconditionally adopted by the Shareholders by way ofwritten resolutions

“Board” the board of Directors or a duly authorised committee ofthe board of Directors

“Business Day” any day on which the Stock Exchange is open for thebusiness of dealings in securities

“Group” our Company and any entity in which our Company,directly or indirectly, holds any equity interest

“Scheme Period” the period commencing on the Adoption Date and expiringat the close of business on the business day immediatelypreceding the 10th anniversary thereof, unless terminatedearlier in accordance with the terms of the Share OptionScheme



– IV-14 –

2. Summary of terms

The following is a summary of the principal terms of the rules of the Share OptionScheme conditionally adopted by the written resolutions of our Shareholders passed on [•]:

(a) Purpose of the Share Option Scheme

The purpose of the Share Option Scheme is to attract and retain the bestavailable personnel, to provide additional incentive to employees (full-time andpart-time), directors, consultants, advisers, distributors, contractors, suppliers, agents,customers, business partners or service providers of our Group and to promote thesuccess of the business of our Group.

(b) Who may join and basis of eligibility

Our Board may, at its absolute discretion and on such terms as it may think fit,grant any employee (full-time or part-time), director, consultant or adviser of ourGroup, or any substantial shareholder of our Group, or any distributor, contractor,supplier, agent, customer, business partner or service provider of our Group, options tosubscribe at a price calculated in accordance with paragraph (c) below for suchnumber of Shares as it may determine in accordance with the terms of the ShareOption Scheme.

The basis of eligibility of any participant to the grant of any option shall bedetermined by our Board (or as the case may be, our independent non-executiveDirectors) from time to time on the basis of his contribution or potential contributionto the development and growth of our Group.

(c) Price of Shares

The subscription price of a Share in respect of any particular option grantedunder the Share Option Scheme shall be a price solely determined by our Board andnotified to a participant and shall be at least the higher of: (i) the closing price of ourShares as stated in the Stock Exchange’s daily quotations sheet on the date of grant ofthe option, which must be a Business Day; (ii) the average of the closing prices of ourShares as stated in the Stock Exchange’s daily quotations sheets for the five BusinessDays immediately preceding the date of grant of the option; and (iii) the nominalvalue of a Share on the date of grant of the option. For the purpose of calculating thesubscription price where our Company has been [REDACTED] on the StockExchange for less than five Business Days, the issue price of the Shares on the StockExchange shall be used as the closing price for any Business Day fall within theperiod before [REDACTED].



– IV-15 –

(d) Grant of options and acceptance of offers

An offer for the grant of options must be accepted within seven days inclusive ofthe day on which such offer was made. The amount payable by the grantee of anoption to our Company on acceptance of the offer for the grant of an option is HK$1.

(e) Maximum number of Shares

(i) Subject to sub-paragraphs (ii) and (iii) below, the maximum number ofShares issuable upon exercise of all options to be granted under the ShareOption Scheme and any other share option schemes of our Company as fromthe Adoption Date (excluding, for this purpose, Shares issuable uponexercise of options which have been granted but which have lapsed inaccordance with the terms of the Share Option Scheme or any other shareoption schemes of our Company) must not in aggregate exceed 10% of allour Shares in issue as at the [REDACTED]. Therefore, it is expected thatour Company may grant options in respect of up to [REDACTED] Shares(or such numbers of Shares as shall result from a sub-division or aconsolidation of such [REDACTED] Shares from time to time) to theparticipants under the Share Option Scheme.

(ii) The 10% limit as mentioned above may be refreshed at any time byapproval of the Shareholders in general meeting provided that the totalnumber of Shares which may be issued upon exercise of all options to begranted under the Share Option Scheme and any other share option schemesof our Company must not exceed 10% of our Shares in issue as at the dateof approval of the refreshed limit. Options previously granted under theShare Option Scheme and any other share option schemes of our Company(including those outstanding, cancelled or lapsed in accordance with theterms of the Share Option Scheme and any other share option schemes ofour Company) will not be counted for the purpose of calculating therefreshed 10% limit. A circular must be sent to the Shareholders containingthe information as required under the Listing Rules in this regard.

(iii) Our Company may seek separate approval from our Shareholders in generalmeeting for granting options beyond the 10% limit provided the options inexcess of the 10% limit are granted only to grantees specifically identifiedby our Company before such approval is sought. In such event, ourCompany must send a circular to our Shareholders containing a genericdescription of such grantees, the number and terms of such options to begranted and the purpose of granting options to them with an explanation asto how the terms of the options will serve such purpose and all otherinformation required under the Listing Rules.



– IV-16 –

(iv) The aggregate number of Shares which may be issued upon exercise of alloutstanding options granted and yet to be exercised under the Share OptionScheme and any other share option schemes of our Company must notexceed 30% of our Shares in issue from time to time. No options may begranted under the Share Option Scheme or any other share option schemesof our Company if this will result in such 30% limit being exceeded.

(v) The exercise of any option shall be subject to our Shareholders in generalmeeting approving any increase in the authorised share capital of ourCompany. Subject thereto, our Board shall make available sufficientauthorised but unissued share capital of our Company for purpose ofallotment of Shares upon exercise of options.

(f) Maximum entitlement of each participant

The total number of Shares issued and to be issued upon exercise of optionsgranted to any participant (including both exercised and outstanding options) underthe Share Option Scheme or any other share option schemes of our Company in any12-month period up to the date of grant shall not exceed 1% of the Shares in issue.Any further grant of options in excess of such limit must be separately approved byShareholders in general meeting with such grantee and his close associates abstainingfrom voting. In such event, our Company must send a circular to the Shareholderscontaining the identity of the grantee, the number and terms of the options to begranted (and options previously granted to such grantee), and all other informationrequired under the Listing Rules. The number and terms (including the subscriptionprice) of the options to be granted must be fixed before the approval of theShareholders and the date of our Board meeting proposing such further grant shouldbe taken as the date of grant for the purpose of calculating the subscription price.

(g) Grant of options to certain core connected persons

(i) Any grant of an option to a Director, chief executive or SubstantialShareholder (or any of their respective close associates) must be approvedby our independent non-executive Directors (excluding any independentnon-executive Director who is the grantee of the option).

(ii) Where any grant of options to a Substantial Shareholder or an independentnon-executive Director (or any of their respective close associates) willresult in the total number of Shares issued and to be issued upon exercise ofall options already granted and to be granted to such person under the ShareOption Scheme and any other share option schemes of our Company(including options exercised, cancelled and outstanding) in any 12-monthperiod up to and including the date of grant:

(a) representing in aggregate over 0.1% of our Shares in issue; and



– IV-17 –

(b) having an aggregate value, based on the closing price of our Shares atthe date of each grant, in excess of HK$5 million,

such further grant of options is required to be approved by theShareholders at a general meeting of our Company, with voting to betaken by way of poll. Our Company shall send a circular to theShareholders containing all information as required under the ListingRules in this regard. All core connected persons of our Company shallabstain from voting (except where any core connected person intendsto vote against the proposed grant and his intention to do so has beenstated in the aforesaid circular). Any change in the terms of an optiongranted to a Substantial Shareholder or an independent non-executiveDirector or any of their respective close associates is also required tobe approved by the Shareholders in the aforesaid manner.

(h) Restrictions on the times of grant of options

(i) Our Company may not grant any options after any inside information hascome to its knowledge until such inside information has been announcedpursuant to the requirements of the Listing Rules and the SFO. In particular,no options may be granted during the period commencing one monthimmediately preceding the earlier of:

(A) the date of our Board meeting (as such date is first notified to theStock Exchange in accordance with the Listing Rules) for the approvalof our Company’s results for any year, half-year, quarterly or otherinterim period (whether or not required under the Listing Rules); and

(B) the last day on which for our Company is to publish an announcementof our Company’s results for any year or half-year under the ListingRules, or quarterly or other interim period (whether or not requiredunder the Listing Rules),

and ending on the date of the results announcement.

(ii) Further to the restrictions in paragraph (i) above, no option may be grantedto a Director on any day on which financial results of our Company arepublished and:

(A) during the period of 60 days immediately preceding the publicationdate of the annual results or, if shorter, the period from the end of therelevant financial year up to the publication date of the results; and



– IV-18 –

(B) during the period of 30 days immediately preceding the publicationdate of the quarterly results (if any) and half-year results or, if shorter,the period from the end of the relevant quarterly or half-year period upto the publication date of the results.

(i) Time of exercise of option

An option may be exercised in accordance with the terms of the Share OptionScheme at any time during a period as our Board may determine which shall notexceed 10 years from the date of grant subject to the provisions of early terminationthereof.

(j) Performance targets

Save as determined by our Board and provided in the offer of the grant of therelevant options, there is no performance target which must be achieved before any ofthe options can be exercised.

(k) Ranking of Shares

Our Shares to be allotted upon the exercise of an option will be subject to all theprovisions of the Articles for the time being in force and will rank pari passu in allrespects with our fully paid Shares in issue on the date of allotment and accordinglywill entitle the holders to participate in all dividends or other distributions paid ormade after the date of allotment other than any dividend or other distributionpreviously declared or recommended or resolved to be paid or made with respect to arecord date which shall be on or before the date of allotment, save that the Sharesallotted upon the exercise of any option shall not carry any voting rights until thename of the grantee has been duly entered on the register of members of our Companyas the holder thereof.

(l) Rights are personal to grantee

An option shall not be transferable or assignable and shall be personal to thegrantee of the option.

(m) Rights on cessation of employment by death

In the event of the death of the grantee (provided that none of the events whichwould be a ground for termination of employment referred to in (n) below ariseswithin a period of three years prior to the death, in the case the grantee is anemployee at the date of grant), the legal personal representative(s) of the grantee mayexercise the option up to the grantee’s entitlement (to the extent which has becomeexercisable and not already exercised) within a period of 12 months following hisdeath provided that where any of the events referred to in (q), (r) and (s) occurs prior



– IV-19 –

to his death or within such period of 12 months following his death, then his legalpersonal representative(s) may so exercise the option within such of the variousperiods respectively set out therein.

(n) Rights on cessation of employment by dismissal

In the event that the grantee is an employee of our Group at the date of grant andhe subsequently ceases to be an employee of our Group on any one or more of thegrounds that he has been guilty of serious misconduct, or has committed an act ofbankruptcy or has become insolvent or has made any arrangement or composition withhis or her creditors generally, or has been convicted of any criminal offence involvinghis integrity or honesty or (if so determined by our Board) on any other ground onwhich an employer would be entitled to terminate his employment at common law orpursuant to any applicable laws or under the grantee’s service contract with ourGroup, his option shall lapse automatically (to the extent not already exercised) on thedate of cessation of his employment with our Group.

(o) Rights on cessation of employment for other reasons

In the event that the grantee is an employee, a consultant or an adviser (as thecase may be) of a member of our Group at the date of grant and he subsequentlyceases to be an employee, a consultant or an adviser (as the case may be) of ourGroup for any reason other than his death or the termination of his employment of anemployee or engagement of a consultant or an adviser (as the case may be) on one ormore of the grounds specified in (n) above, the option (to the extent not alreadylapsed or exercised) shall lapse on the expiry of three months after the date ofcessation of such employment of an employee or engagement of a consultant or anadviser (as the case may be) (which date will be in the case of an employee the lastactual working day, on which the grantee was physically at work with our Company orthe relevant member of our Group whether salary is paid in lieu of notice or not, andin the case of a consultant or an adviser (as the case may be), the last actual day ofproviding consultancy or advisory services to the relevant member of our Group).

(p) Effects of alterations to share capital

In the event of any alteration in the capital structure of our Company whilst anyoption remains exercisable, whether by way of capitalisation of profits or reserves,rights issue, open offer, consolidation, subdivision or reduction of the share capital ofour Company (other than an issue of Shares as consideration in respect of atransaction to which any member of our Group is a party), such correspondingadjustments (if any) shall be made in the number of Shares subject to the option so faras unexercised; and/or the subscription prices of any unexercised option, as theauditors of or independent financial adviser to our Company shall certify or confirm inwriting (as the case may be) to our Board to be in their opinion fair and reasonable incompliance with the relevant provisions of the Listing Rules, or any guideline or



– IV-20 –

supplemental guideline issued by the Stock Exchange from time to time, provided thatany alteration shall give a grantee, as near as possible, the same proportion of theissued share capital of our Company as that to which he was previously entitled, butno adjustment shall be made to the effect of which would be to enable a Share to beissued at less than its nominal value.

(q) Rights on a general offer

In the event of a general offer (whether by way of takeover offer or scheme ofarrangement or otherwise in like manner) being made to all our Shareholders (or allsuch holders other than the offeror and/or any persons controlled by the offeror and/orany person acting in association or concert with the offeror), our Company shall useits best endeavours to procure that an appropriate offer is extended to all the grantee(on comparable terms, mutatis mutandis, and assuming that they will become, byexercise in full of the options granted to them, as Shareholders) and when such offerbecoming or being declared unconditional, the grantee (or, as the case may be, hislegal personal representative(s)) shall be entitled to exercise the option in full (to theextent not already lapsed or exercised) at any time within one month after the date onwhich the offer becomes or is declared unconditional.

(r) Rights on winding-up

In the event a notice is given by our Company to our members to convene ageneral meeting for the purposes of considering, and if thought fit, approving aresolution to voluntarily wind up our Company, our Company shall on the same dateas or soon after it despatches such notice to each member of our Group give noticethereof to all grantees and thereupon, each grantee (or, as the case may be, his legalpersonal representative(s)) shall be entitled to exercise all or any of his options at anytime not later than two Business Days prior to the proposed general meeting of ourCompany by giving notice in writing to our Company, accompanied by a remittancefor the full amount of the aggregate subscription price for our Shares in respect ofwhich the notice is given whereupon our Company shall as soon as possible and, inany event, no later than the Business Day immediately prior to the date of theproposed general meeting referred to above, allot the relevant Shares to the granteecredited as fully paid.

(s) Rights on compromise or arrangement

In the event of a compromise or arrangement between our Company and theShareholders or the creditors of our Company being proposed in connection with ascheme for the reconstruction of our Company or its amalgamation with any othercompany or companies pursuant to the Companies Act, our Company shall give noticethereof to all the grantees (or, as the case may be, their legal personal representatives)on the same day as it gives notice of the meeting to the Shareholders or the creditorsto consider such a compromise or arrangement and the options (to the extent not



– IV-21 –

already lapsed or exercised) shall become exercisable in whole or in part on such datenot later than two Business Days prior to the date of the general meeting directed tobe convened by the court for the purposes of considering such compromise orarrangement (the “Suspension Date”), by giving notice in writing to our Companyaccompanied by a remittance for the full amount of the aggregate subscription pricefor the Shares in respect of which the notice is given whereupon our Company shall assoon as practicable and, in any event, no later than 3:00 p.m. on the Business Dayimmediately prior to the date of the proposed general meeting, allot and issue therelevant Shares to the grantee credited as fully paid. With effect from the SuspensionDate, the rights of all grantees to exercise their respective options shall forthwith besuspended. Upon such compromise or arrangement becoming effective, all optionsshall, to the extent that they have not been exercised, lapse and determine. Our Boardshall endeavour to procure that our Shares issued as a result of the exercise of optionshereunder shall for the purposes of such compromise or arrangement form part of theissued share capital of our Company on the effective date thereof and that such Sharesshall in all respects be subject to such compromise or arrangement. If for any reasonsuch compromise or arrangement is not approved by the court (whether upon the termspresented to the court or upon any other terms as may be approved by such court), therights of grantees to exercise their respective options shall with effect from the date ofthe making of the order by the court be restored in full but only up to the extent notalready exercised and shall thereupon become exercisable (but subject to the otherterms of the Share Option Scheme) as if such compromise or arrangement had notbeen proposed by our Company and no claim shall lie against our Company or any ofits officers for any loss or damage sustained by any grantee as a result of suchproposal, unless any such loss or damage shall have been caused by the act, neglect,fraud or wilful default on the part of our Company or any of our officers.

(t) Lapse of options

An option shall lapse automatically on the earliest of:

(i) the expiry of the period referred to in paragraph (i) above;

(ii) the date on which our Board exercises our Company’s right to cancel,revoke or terminate the option on the ground that the grantee commits abreach of paragraph (l);

(iii) the expiry of the relevant period or the occurrence of the relevant eventreferred to in paragraphs (m), (n), (o), (q), (r) or (s) above;

(iv) subject to paragraph (r) above, the date of the commencement of thewinding-up of our Company;



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(v) the occurrence of any act of bankruptcy, insolvency or entering into of anyarrangements or compositions with his creditors generally by the grantee, orconviction of the grantee of any criminal offence involving his integrity orhonesty;

(vi) where the grantee is only a substantial shareholder of any member of ourGroup, the date on which the grantee ceases to be a substantial shareholderof such member of our Group; or

(vii) subject to the compromise or arrangement as referred to in paragraph (s)becoming effective, the date on which such compromise or arrangementbecomes effective.

(u) Cancellation of options granted but not yet exercised

Any cancellation of options granted but not exercised may be effected on suchterms as may be agreed with the relevant grantee, as our Board may in its absolutediscretion sees fit and in manner that complies with all applicable legal requirementsfor such cancellation.

(v) Period of the Share Option Scheme

The Share Option Scheme will remain in force for a period of 10 yearscommencing on the date on the Adoption Date and shall expire at the close ofbusiness on the Business Day immediately preceding the 10th anniversary thereof.

(w) Alteration to the Share Option Scheme

(i) The Share Option Scheme may be altered in any respect by resolution of ourBoard except that alterations of the provisions of the Share Option Schemewhich alters to the advantage of the grantees of the options relating tomatters governed by Rule 17.03 of the Listing Rules shall not be madeexcept with the prior approval of the Shareholders in general meeting.

(ii) Any alternations to any terms and conditions of the Share Option Schemewhich are of a material nature or any change to the terms of optionsgranted, or any change to the authority of our Board in respect of alterationof the Share Option Scheme must be approved by Shareholders in generalmeeting except where the alterations take effect automatically under theexisting terms of the Share Option Scheme.

(iii) Any amendment to any terms of the Share Option Scheme or the optionsgranted shall comply with the relevant requirements of Chapter 17 of theListing Rules or any guidelines issued by the Stock Exchange from time totime.



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(x) Termination of the Share Option Scheme

Our Company by resolution in general meeting or our Board may at any timeterminate the operation of the Share Option Scheme and in such event no furtheroptions will be offered but options granted prior to such termination shall continue tobe valid and exercisable in accordance with provisions of the Share Option Scheme.

(y) Conditions of the Share Option Scheme

The Share Option Scheme is conditional upon the [REDACTED] granting the[REDACTED] of, and permission to deal in, any Shares to be issued pursuant to theexercise of any options which may be granted under the Share Option Scheme andcommencement of dealings in the Shares on the Stock Exchange.

3. Present status of the Share Option Scheme

Application has been made to the [REDACTED] for the [REDACTED] of andpermission to deal in [REDACTED] Shares which fall to be issued pursuant to the exerciseof options which may be granted under the Share Option Scheme.

As at the date of this document, no option has been granted or agreed to be grantedunder the Share Option Scheme.

E. OTHER INFORMATION

1. Tax and other indemnities

Mr. Wong, Mr. Chim, Mr. Shon, E&E and Lucky Oasis (collectively, the“Indemnifiers”) [have], under the Deed of Indemnity, [given] joint and several indemnitiesto our Company for ourselves and as trustee for our subsidiaries in connection with, amongother things, (a) any duty which is or thereafter becomes payable by any member of ourGroup under or by virtue of the provisions of section 35 and/or section 43 of the EstateDuty Ordinance (Chapter 111 of the Laws of Hong Kong) or any other similar legislation inHong Kong or any relevant jurisdiction outside Hong Kong arising on the death of anyperson at any time by reason of any transfer of any property to any member of our Groupon or before the date on which the [REDACTED] becomes unconditional; (b) any taxationfalling on any member of our Group (i) in respect of any income, profits or gains earned,accrued or received or deemed to have been earned, accrued or received on or before thedate on which [REDACTED] becomes unconditional; or (ii) in respect of or inconsequence of any act, omission or event occurring or deemed to occur on or before thedate on which the [REDACTED] becomes unconditional; (c) any penalties, claims, actions,demands, proceedings, suits, judgments, losses, payments, liabilities, damages, settlementpayments, costs, administrative or other charges, fees, expenses and fines of whatevernature which may be imposed on or suffered by or incurred by any member of our Group asa result of or in connection with any litigation, arbitrations, claims (includingcounter-claims),



– IV-24 –

complaints, demands and/or legal proceedings whether of criminal, administrative,contractual, tortuous or otherwise, instituted by or against any member of our Group inrelation to any act, non-performance, omission, events or otherwise occurred on or beforethe date on which the [REDACTED] becomes unconditional, and any non-compliance withthe applicable laws, rules or regulations by any member of our Group on or before the dateon which the [REDACTED] becomes unconditional except that provisions, reserve orallowance has been made for such liabilities in the audited consolidated financialstatements of our Company or any other member of our Group for the Track Record Period(if any). The Indemnifiers will, however, not be liable under the Deed of Indemnity fortaxation to the extent that, among others:

(a) specific provision, reserve or allowance has been made for such taxation liabilityor taxation claim in the audited consolidated financial statements of any memberof our Group for the Track Record Period; or

(b) the taxation liability arises or is incurred as a result of a retrospective change inlaw or a retrospective increase in tax rates coming into force after the date onwhich the [REDACTED] becomes unconditional; or

(c) the taxation liability arises in the ordinary course of business of our Group after31 July 2021 up to and including the date of which the [REDACTED] becomesunconditional.

Our Directors have been advised that no material liability for estate duty under the laws ofthe Cayman Islands is likely to fall on our Group.

2. Litigation

Save as disclosed in “Business – Legal proceedings and compliance” in this document,as at the Latest Practicable Date, no member of our Group was engaged in any litigation orarbitration of material importance and no litigation or claim of material importance isknown to our Directors to be pending or threatened against any member of our Group.

3. Sole Sponsor

The Sole Sponsor has made an application on behalf of our Company to the[REDACTED] for the [REDACTED] of, and permission to deal in, the Shares in issue andShares to be issued as mentioned herein including any Shares falling to be issued pursuantto the exercise of the [REDACTED] and any options which may be granted under theShare Option Scheme.

The Sole Sponsor has confirmed to the Stock Exchange that it satisfies theindependence test as stipulated under Rule 3A.07 of the Listing Rules.



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Our Company has entered into an agreement with the Sole Sponsor, pursuant to whichour Company agreed to pay HK$3.2 million million to the Sole Sponsor to act as the SoleSponsor to our Company for purposes of the [REDACTED].

4. Preliminary expenses

The preliminary expenses of our Company are estimated to be approximatelyHK$52,000 and are payable by our Company.

5. Promoter

Our Company has no promoter for the purpose of the Listing Rules.

6. Qualifications of experts

The following are the qualifications of the experts who have given opinion or advicewhich are contained in this document:

Name Qualifications

Advent Corporate FinanceLimited

A licensed corporation under the SFO to carry outtype 6 (advising on corporate finance) regulatedactivity (as defined in the SFO)

PricewaterhouseCoopers Certified Public Accountants under theProfessional Accountants Ordinance (Chapter 50of the Laws of Hong Kong) and RegisteredPublic Interest Entity Auditor under theFinancial Reporting Council Ordinance (Chapter588 of the Laws of Hong Kong)

Appleby Legal advisers to our Company as to CaymanIslands law

GFE Law Office Legal advisers as to PRC law

Ng Wing Shan Queenie Barrister-at-law of Hong Kong

Hogan Lovells Legal Advisers as to International Sanctions law

Frost & Sullivan Limited Independent industry consultant



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7. Consents of experts

Each of the experts named in “E. Other information – 6. Qualifications of experts” inthis appendix has given and has not withdrawn its/her written consent to the issue of thisdocument with the inclusion of its/her reports and/or letter and/or advice and/or opinionand/or summary thereof (as the case may be) and/or reference to its/her name includedherein in the form and context in which it/she is respectively included.

8. Binding effect

This document shall have the effect, if an application is made in pursuance hereof, ofrendering all persons concerned bound by all the provisions (other than penal provisions) ofsections 44A and 44B of the Companies (WUMP) Ordinance so far as applicable.

9. Registration procedures

The principal share register of our Company will be maintained in the Cayman Islandsby [REDACTED] and a Hong Kong branch share register will be maintained in HongKong by the Hong Kong Branch Share Registrar. Unless our Directors otherwise agree, alltransfers and other documents of title to Shares must be lodged for registration with, andregistered by, the branch share register in Hong Kong and may not be lodged in theCayman Islands.

10. No material adverse change

Save for our non-recurring [REDACTED] recognised and to be recognised asexpenses in our consolidated statements of profit or loss and other comprehensive incomewhich are expected to adversely affect our financial performance for the year ending 31March 2023, our Directors do not expect to have any material adverse change in ourfinancial or trading position or prospect since 31 March 2022, being the date of which ourlatest audited financial information was prepared up to the date of this document and therehad been no event since 31 March 2022 which would materially affect the informationshown in Appendix I to this document.

11. Miscellaneous

Save as disclosed in this document;

(a) Within the two years immediately preceding the date of this document:

(i) no share or loan capital of our Company or any of the subsidiaries has beenissued, agreed to be issued or is proposed or intended to be issued fully orpartly paid either for cash or for a consideration other than cash;



– IV-27 –

(ii) no commissions, discounts, brokerages or other special terms have beengranted or agreed to be granted in connection with the issue or sale of anyshare or loan capital of our Company or any of the subsidiaries and nocommission has been paid or is payable in connection with the issue or saleof any capital of our Company or any of our subsidiaries; and

(iii) no commission has been paid or payable (except to the [REDACTED]) forsubscribing or agreeing to subscribe, procuring or agreeing to procuresubscriptions, for any shares or debenture of our Company or any of thesubsidiaries;

(b) no founders, management or deferred shares or any debentures of our Companyhave been issued or agreed to be issued;

(c) no share or loan capital of our Company is under option or is agreedconditionally or unconditionally to be put under option;

(d) there has not been any interruption in the business of our Group which may haveor have had a significant effect on the financial position of our Group in the 12months immediately preceding the date of this document;

(e) none of the experts named in “E. Other information – 6. Qualifications ofexperts” in this appendix:

(i) is interested beneficially or non-beneficially in any securities in anymember of our Group, including the Shares; or

(ii) has any right or option (whether legally enforceable or not) to subscribe foror to nominate persons to subscribe for any securities in any member of ourGroup, including the Shares;

(f) our Company and our subsidiaries do not have any debt securities issued oroutstanding, or authorised or otherwise created but unissued, or any term loanswhether guaranteed or secured as at the Latest Practicable Date;

(g) our Directors have been advised that, under Cayman Islands laws, our Company,as an exempted company, may adopt a dual foreign name, whereby the name ofour Company may be preceded by or followed with such dual foreign name;

(h) no company within our Group is presently listed on any stock exchange or tradedon any trading system;

(i) our Group has no outstanding convertible debt securities;



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(j) there is no restriction affecting the remittance of profits or reputation of capitalby us into Hong Kong and from outside Hong Kong; and

(k) the English text of this document shall prevail over the Chinese text.

12. Bilingual document

The English language and Chinese language versions of this document are beingpublished separately in reliance upon the exemption provided in section 4 of the Companies(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice(Chapter 32L of the Laws of Hong Kong).



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DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

The documents attached to a copy of this document and delivered to the Registrar ofCompanies in Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) copies of the material contracts referred to in “B. Further information about ourbusiness – 1. Summary of material contracts” in Appendix IV to this document; and

(c) the written consents referred to in “E. Other information – 7. Consents of experts” inAppendix IV to this document.

DOCUMENTS AVAILABLE ON DISPLAY

Copies of the following documents will be available on display on the website of the StockExchange and our website at enl-group.com during a period of 14 days from the date of thisdocument:

(a) the Memorandum of Association and the Articles of Association;

(b) the Accountant’s Report of our Group received from PricewaterhouseCoopers, the textof which is set out in Appendix I to this document;

(c) the report on the unaudited pro forma financial information of our Group receivedfrom PricewaterhouseCoopers, the text of which is set out in Appendix II to thisdocument;

(d) the audited consolidated financial statements of our Group for the Track RecordPeriod;

(e) the letter of advice prepared by Appleby summarising certain aspects of the CaymanIslands company law as referred to in Appendix III to this document;

(f) the service contracts referred to in “C. Further information about SubstantialShareholders, Directors and Experts – 2. Particulars of service contracts” in AppendixIV to this document;

(g) the material contracts referred to in “B. Further information about our business – 1.Summary of material contracts” in Appendix IV to this document;

(h) the written consents referred to in “E. Other information – 7. Consents of experts” inAppendix IV to this document;


APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIESIN HONG KONG AND AVAILABLE ON DISPLAY

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(i) the Companies Act;

(j) the rules of the Share Option Scheme;

(k) the legal opinion prepared by our PRC Legal Advisers;

(l) the legal opinion prepared by our Hong Kong Legal Counsel;

(m) the legal memorandum prepared by our International Sanctions Legal Advisers; and

(n) the Industry Report.


APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIESIN HONG KONG AND AVAILABLE ON DISPLAY

– V-2 –

ENL Group Holdings Limited 卓越物流集團控股有限公司

Documents

Transcript of ENL Group Holdings Limited 卓越物流集團控股有限公司