(incorporated in the Cayman Islands with limited liability) : Sole Sponsor. Joint Global Coordinators and Joint Bookrunners

Transcription

1 (incorporated in the Cayman Islands with limited liability) : 8105 Sole Sponsor Joint Global Coordinators and Joint Bookrunners

2 IMPORTANT If you are in any doubt about any contents of this prospectus, you should obtain independent professional advice. KINGSLEY EDUGROUP LIMITED (incorporated in the Cayman Islands with limited liability) LISTING ON THE GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED BY WAY OF GLOBAL OFFERING Number of Offer Shares : 200,000,000 Shares (subject to the Offer Size Adjustment Option) Number of Hong Kong Public Offer Shares : 20,000,000 Shares (subject to reallocation) Number of International Placing Shares : 180,000,000 Shares (subject to reallocation and Offer Size Adjustment Option) Offer Price : Not more than HK$0.50 per Offer Share and expected to be not less than HK$0.40 per Offer Share, plus brokerage fee of 1%, SFC transaction levy of % and Stock Exchange trading fee of 0.005% (payable in full upon application in Hong Kong dollars, subject to refund on final pricing) Nominal Value : HK$0.01 per Share Stock Code : 8105 Sole Sponsor China Everbright Capital Limited Joint Global Coordinators and Joint Bookrunners China Everbright Securities (HK) Limited Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus. A copy of this prospectus, having attached thereto the documents specified in Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection in Appendix VI to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above. The Offer Price is expected to be fixed by an agreement between our Company and the Joint Global Coordinators (for itself and on behalf of the Underwriters) on the Price Determination Date which is expected to be on or about 4 May 2018 (Hong Kong time) or such later date as may be agreed between our Company and the Joint Global Coordinators (for itself and on behalf of the Underwriters), but in any event not later than 14 May 2018 (Hong Kong time). Our Offer Price will not be more than HK$0.50 per Offer Share and is expected to be not less than HK$0.40 per Offer Share unless otherwise announced. Applicants for the Hong Kong Public Offer Shares are required to pay, on application, the maximum Offer Price of HK$0.50 for each Offer Share together with brokerage fee of 1.0%, SFC transaction levy of % and Stock Exchange trading fee of 0.005%, subject to refund if the Offer Price finally determined is lower than HK$0.50 per Offer Share (the maximum Offer Price). If, for any reason, our Company and the Joint Global Coordinators (for itself and on behalf of the Underwriters) are unable to reach an agreement on the Offer Price by 14 May 2018 (Hong Kong time) or such later date as agreed by our Company and the Joint Global Coordinators (for itself and on behalf of the Underwriters), the Global Offering will not proceed and will lapse. The Joint Global Coordinators (for itself and on behalf of the Underwriters) may, with our consent, reduce the number of Offer Shares and/or the indicative Offer Price range as stated in this prospectus (which is HK$0.40 to HK$0.50 per Offer Share) at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offer. In such a case, notices of reduction in the number of Offer Shares and/or the indicative Offer Price range will be published on the website of the Stock Exchange at and our Company s website at Further details are set out in Structure and Conditions of the Global Offering and How to Apply for the Hong Kong Public Offer Shares. Prior to making an investment decision, prospective investors should carefully consider all the information set out in this prospectus, including the risk factors set out in Risk Factors in this prospectus. Prospective investors of the Global Offering should note that the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Sole Sponsor and/or the Joint Global Coordinators (for itself and on behalf of the Underwriters) upon the occurrence of any of the events set out in the section headed Underwriting Underwriting arrangements and expenses Grounds for termination in this prospectus occurs at any time prior to 8:00 a.m. (Hong Kong time) on the Listing Date (which is currently expected to be 16 May 2018). Further details of these termination provisions are set out in the section headed Underwriting in this prospectus. It is important that prospective investors refer to that section for further details. The Offer Shares have not and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offered, sold, pledged or transferred, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in accordance with Regulations S of the U.S. Securities Act. No information on any website forms part of this prospectus. 30 April 2018

3 CHARACTERISTICS OF GEM GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM. The principal means of information dissemination on GEM is by publication on the internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspaper. Accordingly, prospective investors should note that they need to have access to the website of the Stock Exchange at in order to obtain up-to-date information on listed issuers. i

4 EXPECTED TIMETABLE If there is any change in the following expected timetable, our Company will issue a separate announcement to be published on the Stock Exchange s website at and our Company s website at Latest time for completing electronic applications under the HK eipo White Form service through the designated website (Note 2)... Application lists of the Hong Kong Public Offer open (Note 3)... Latest time for lodging WHITE and YELLOW Application Forms and to give electronic application instructions to HKSCC (Note 4)... Latest time for completing payments for HK eipo White Form applications by effecting internet banking transfer or PPS payment transfer(s)... 9:00 a.m. on Friday, 4 May :45 a.m. on Friday, 4 May :00 noon on Friday, 4 May :00 noon on Friday, 4 May 2018 Application lists of the Hong Kong Public Offer close (Note 3)... 12:00 noon on Friday, 4 May 2018 Expected Price Determination Date (Note 5)... Friday, 4 May 2018 Announcement of (i) the Offer Price; (ii) the indication of the levels of interest in the Global Offering; (iii) the level of applications in the Hong Kong Public Offer; (iv) the basis of allotment of the Hong Kong Public Offer Shares under the Hong Kong Public Offer; and (v) the number of Offer Shares reallocated, if any, between the Hong Kong Public Offer and the International Placing to be published on the website of our Company at and the website of the Stock Exchange at on or before... Tuesday, 15 May 2018 Results of allocation in the Hong Kong Public Offer will be available at with a search by ID function on... Tuesday, 15 May 2018 Announcement of results of allotment of the Hong Kong Public Offer (with successful applicants identification document numbers, where applicable) to be available through a variety of channels as described in the section headed How to Apply for the Hong Kong Public Offer Shares 11. Publication of results in this prospectus from... Tuesday, 15 May 2018 Despatch/collection of share certificates and/or HK eipo White Form e-auto Refund payment instructions/refunds cheques in respect of wholly successful (if applicable) or wholly or partially unsuccessful applications pursuant to the Hong Kong Public Offer on or before (Notes 7, 8)... Tuesday, 15 May 2018 Dealings in the Shares on GEM expected to commence on... Wednesday, 16 May 2018 Notes: 1. All times and dates refer to Hong Kong local times and dates, except as otherwise stated. Details of the structure of the Global Offering, including its conditions, are set out in the section headed Structure and Conditions of the Global Offering in this prospectus. ii

5 EXPECTED TIMETABLE 2. You will not be permitted to submit your application to the HK eipo White Form Service Provider through the designated website at after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained a payment reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of the application monies) until 12:00 noon on the last day for submitting applications, when the application lists close. 3. If there is a black rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, 4 May 2018, the application lists will not open or close on that day. Further information is set out in the paragraph headed How to Apply for the Hong Kong Public Offer Shares 10. Effect of Bad Weather on the Opening of the Application Lists in this prospectus. 4. Applicants who apply for the Hong Kong Public Offer Shares by giving electronic application instructions to HKSCC should refer to the paragraph headed How to Apply for the Hong Kong Public Offer Shares 6. Applying by Giving Electronic Application Instructions to HKSCC via CCASS in this prospectus. 5. Please note that the Price Determination Date, being the date on which the Offer Price is to be determined, is expected to be on or about Friday, 4 May If, for any reason, the Offer Price is not agreed between our Company and the Joint Global Coordinators (for itself and on behalf of the other Underwriters), the Global Offering will not proceed and will lapse. Notwithstanding that the Offer Price may be less than the maximum Offer Price of HK$0.50 per Offer Share, applicants must pay the maximum Offer Price of HK$0.50 per Offer Share at the time of application, plus brokerage of 1%, SFC transaction levy of % and Stock Exchange trading fee of 0.005%, but will be refunded the surplus application monies, without interest, as provided in the section headed How to Apply for the Hong Kong Public Offer Shares in this prospectus. 6. None of the website or any information contained on that website forms part of this prospectus. 7. Applicants who apply for 1,000,000 or more Hong Kong Public Offer Shares and have provided all information required in their Application Forms that they may collect Share certificates (if applicable) and refund cheques (if applicable) in person may do so from our Hong Kong Branch Share Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong from 9:00 a.m. to 1:00 p.m. on Tuesday, 15 May 2018 or any other date notified by us as the date of despatch of Share certificates/e-auto Refund payment instructions/refund cheques. Applicants being individuals who opt for personal collection must not authorise any other person to make their collection on their behalf. Applicants being corporations who opt for personal collection must attend by sending their authorised representatives each bearing a letter of authorisation from his corporation stamped with the corporation s chop. Both individuals and authorised representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to our Hong Kong Branch Share Registrar. Applicants who have applied on YELLOW Application Forms may collect their refund cheque (if applicable) in person but may not collect their Share certificates, which will be deposited into CCASS for the credit of their designated CCASS Participants stock accounts or CCASS Investor Participant stock accounts, as appropriate. Uncollected Share certificates and refund cheques (if any) will be despatched by ordinary post at the applicant s own risk to the address specified in the relevant Application Form. For further information, applicants should refer to the section headed How to Apply for the Hong Kong Public Offer Shares 14. Despatch/Collection of Share Certificates and Refund Monies in this prospectus. 8. e-auto Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful applications and also in respect of successful applications in the event that the Offer Price is less than the initial price per Offer Share payable on application. Part of your Hong Kong identity card number/passport number, or, if you are joint applicants, part of the Hong Kong identity card number/passport number of the first-named applicant, provided by you may be printed on your refund cheque, if any. Such data would also be transferred to a third party to facilitate your refund. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque. Inaccurate completion of your Hong Kong identity card number/passport number may lead to delay in encashment of your refund cheque or may invalidate your refund cheque. Further information is set out in the section headed How to Apply for Hong Kong Public Offer Shares in this prospectus. Applicants who apply through the HK eipo White Form service and paid their applications monies through single bank account may have refund monies (if any) despatched to their application payment bank account, in the form of e-auto Refund payment instructions. Applicants who apply through the HK eipo White Form service and paid their application monies through multiple bank accounts may have refund monies (if any) despatched to the address as specified in their application instructions to the HK eipo White Form Services Provider, in the form of refund cheques, by ordinary post at their own risk. iii

6 CONTENTS IMPORTANT NOTICE TO INVESTORS This prospectus is issued by our Company solely in connection with the Hong Kong Public Offer and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Offer Shares offered by this prospectus pursuant to the Global Offering. This prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any other jurisdiction other than Hong Kong or in any other circumstances. No action has been taken to permit the distribution of this prospectus in any jurisdiction other than Hong Kong. The distribution of this prospectus and the offering and sale of the Offer Shares in other jurisdiction are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdiction pursuant to registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom. You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. Our Company, the Sole Sponsor, the Joint Global Coordinators and the Underwriters have not authorised anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not made in this prospectus must not be relied on by you as having been authorised by our Company, the Sole Sponsor, the Joint Global Coordinators, the Underwriters, any of their respective affiliates, directors, officers, employees, agents or representatives or any other person or party involved in the Global Offering. The information contained on our website at does not form part of this prospectus. Page(s) Characteristics of GEM... Expected Timetable... Contents... i ii iv Summary... 1 Definitions Glossary of Technical Terms Forward-looking Statements Risk Factors Information about this Prospectus and the Global Offering Directors and Parties Involved in the Global Offering Corporate Information Industry Overview iv

7 CONTENTS Page(s) Regulatory Overview History, Development and Reorganisation Business Directors and Senior Management Substantial Shareholders Transactions with Controlling Shareholders Relationship with Controlling Shareholders Share Capital Financial Information Statement of Business Objectives and Use of Proceeds Cornerstone Investor Underwriting Structure and Conditions of the Global Offering How to Apply for the Hong Kong Public Offer Shares Appendix I Accountant s Report... I-1 Appendix II Unaudited Pro Forma Financial Information... II-1 Appendix III Summary of the Constitution of the Company and Cayman Islands Company Law... III-1 Appendix IV Property Valuation Report... IV-1 Appendix V Statutory and General Information... V-1 Appendix VI Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection... VI-1 v

8 SUMMARY This summary aims to give you an overview of the information contained in this prospectus. As this is a summary, it does not contain all the information that may be important to you. You should read this prospectus in its entirety before you decide to invest in the Offer Shares. There are risks associated with any investment. Some of the particular risks in investing in the prospectus are set out in the section headed Risk Factors in this prospectus. You should read that section carefully before you decide to invest in the Offer Shares. OVERVIEW We, Kingsley EduGroup, are a private education service provider based in Subang Jaya, Selangor, Malaysia. We principally offer (1) courses ranging from Nursery to A-levels Courses primarily based on curriculum developed by University of Cambridge International Examinations and England National Curriculum through our Kingsley International School, and (2) tertiary education programmes through our Kingsley Tertiary Institutions (comprising Kingsley Skills College, Kingsley Professional Centre and Kingsley College). Our history can be traced back to September 2011 when Kingsley International School recorded the first intake of students. According to the Frost & Sullivan Report, Kingsley International School had an approximate market share of 1.2% and ranked 29 th out of 116 international schools in Malaysia in terms of total number of student enrollment as at 30 June The simplified structure of Kingsley EduGroup as at the Latest Practicable Date is set out as follows: Kingsley EduGroup Kingsley International School Kingsley Skills College Kingsley College Kingsley Professional Centre Kingsley Language House Kingsley Tertiary Institutions 1

9 SUMMARY For the year ended 30 June 2017, we have experienced year-on-year growth of 35.7% and 82.7% in terms of student enrollment and gross profit respectively. For the four months ended 31 October 2017, we have experienced growth of 21.5% in terms of student enrollment and decrease of 7.3% in terms of gross profit. The table below sets out our revenue by business segments for the periods indicated: For the year ended 30 June For the four months ended 31 October Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 30 June 2016 Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 30 June 2017 Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 31 October 2016 Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 31 October 2017 Kingsley International School RM18,046,703 (95.88%) RM8,963,460 (93.80%) 650 RM26,802,388 (89.96%) RM15,028,616 (86.08%) (Unaudited) (Unaudited) 872 RM5,548,884 (96.7%) RM1,882,217 (96.6%) 743 RM6,319,348 (99.0%) RM1,913,274 (105.9%) 885 Kingsley Tertiary Institutions RM776,075 (4.12%) RM592,970 (6.20%) 16 (Note) RM2,992,604 (10.04%) RM2,430,036 (13.92%) 32 (Note) RM190,600 (3.3%) RM66,919 (3.4%) 25 (Note) RM60,899 (1.0%) RM(106,098) (-5.9%) 48 (Note) Total: RM18,822,778 (100%) RM9,556,430 (100%) 666 RM29,794,992 (100%) RM17,458,652 (100%) 904 RM5,739,484 (100%) RM1,949,136 (100%) 768 RM6,380,247 (100%) RM1,807,176 (100%) 933 Note: Student enrollment of Kingsley Tertiary Institutions refers to the full-time students of Kingsley Skills College and part-time students of Kingsley College and excludes the corporate customers of Kingsley Professional Centre. Kingsley Language House did not record any student intake during the Track Record Period and as at the Latest Practicable Date. Kingsley College has recorded first student intake in October

10 SUMMARY CONSTRUCTION OF KIS ANNEX BUILDING We engaged Kingsley Hills and BGMC for the construction of KIS Campus and KIS Annex Building in The KIS Campus came into operation in September The KIS Annex Building is still under construction as at the Latest Practicable Date, and is expected to come into use in the first quarter of The KIS Annex Building, upon completion, will mainly consist of dormitories with accommodation capacity for approximately 883 students, an olympic-sized swimming pool and other facilities, which we believe will hold attraction for international as well as local students. For details, please refer to the section headed Business Construction of KIS Campus and KIS Annex Building and Boarding Facilities. The Directors are of the view that the construction of KIS Annex Building are commercially justified and to the benefits of the Group s development on the grounds that, among others, the primary purpose of KIS Annex Building is to provide dormitory rooms and facilities which will hold attraction for students from both Malaysia and overseas. For details, please refer to Business Benefits of KIS Annex Building and expected increase in student enrolment and utilisation rate of Kingsley International School in this prospectus. As at the Latest Practicable Date, we expect to complete the construction of all the floors and building structures in the third quarter of 2018, to complete the interior structure works such as water piping, electronical piping and obtaining the Certificate of Completion and Compliance in the fourth quarter of 2018, complete the interior renovation by end of 2018 and that the KIS Annex Building would come into use in the first quarter of The total construction costs for the KIS Campus and KIS Annex Building is approximately RM138 million. We plan to settle bank loans which have been utilised for settlement of the construction fees with our internal funds, HK$23.8 million (38.1% of net proceeds) for settlement of fees for construction of the KIS Annex Building, HK$29.9 million (47.8% of net proceeds) for renovation of KIS Annex Building, and HK$8.8 million (14.1% of net proceeds) for purchase of facilities for KIS Annex Building. For further details, please refer to the section headed Statement of Business Objectives and Use of Proceeds in this prospectus. Our Group has drawn down a revolving facility of RM27.0 million from an independent commercial bank in February 2018 for general working purpose. The revolving facility carries an effective interest rate of 4.75% per annum which is subject to fluctuation of the bank s cost of fund rate. Each drawdown of the revolving loan may be for a tenure of up to 12 months subject to the agreement between the Group and the bank, while the whole facility shall be fully settled within 24 months after the first drawdown. Our Group has utilised the aforesaid facility to settle the remaining balance for the BGMC Contract Works in the amount of RM26.8 million in February 2018, and has subsequently partially repaid the said revolving facility with its own funds in the amount of RM7.37 million. Our Group intends to settle the remaining balance of the aforesaid facility with its internal funds. Estimated Breakeven Period and Estimated Investment Payback Period We expect our KIS Campus and KIS Annex Building would achieve a breakeven point when the yearly revenue is at least equal to yearly expense of our KIS Campus and KIS Annex Building. We expect our KIS Campus and KIS Annex Building will achieve breakeven in the first full financial year after the KIS Annex Building comes into use. We define the estimated investment payback period of our KIS Campus and KIS Annex Building to be the amount of time it takes for the accumulated operating cashflow generated from such KIS Campus and KIS Annex Building to equal the initial cost of constructing and renovating our KIS Campus and KIS Annex Building. The estimated investment 3

11 SUMMARY payback period will be approximately 18 years. For further details, please refer to the section headed Business Estimated Breakeven Period and Estimated Investment Payback Period in this prospectus. Our Group s acquisition of KIS Campus Land and KIS Annex Land For the purpose of Listing and the benefits of the long term development of Kingsley International School, Kingsley Hills has transferred the KIS Campus Land to our Group at a nominal consideration of RM10 in June 2017 and has agreed to transfer the KIS Annex Land to our Group at a nominal consideration of RM10 upon completion of the KIS Annex Building which is expected to be in the fourth quarter of For further details, please refer to Transactions with Controlling Shareholders 2. The Sale and Purchase Agreement. STUDENT ENROLLMENT, SCHOOL UTILISATION RATE, TEACHER AND STUDENT-TO-TEACHER RATIO The following table sets out information relating to the student enrollment, capacity and school utilisation rate for each of our schools as at the dates indicated: As at 30 June June October 2017 Latest Practicable Date Kingsley International School Student enrollment Student Capacity (Note 1) 2,600 2,600 2,600 2,600 School utilisation rate (Note 2) 25.00% 33.54% 34.04% 37.96% Teacher Student-to-teacher ratio (Note 4) (Statutory maximum limit: 25) Kingsley Skills College Student enrollment Student Capacity (Note 3) School utilisation rate 21.33% 42.67% 48.00% 9.33% Trainer Student-to-trainer ratio (Note 5) (Government policy maximum limit: 25) Kingsley College Student enrollment Nil Nil Student Capacity (Note 6) School utilisation rate Nil Nil 8% 13.33% Lecturer 2 (Note 7) 3 (Note 7) 3 4 Student-to-lecturer ratio Note 1: Kingsley International School s student capacity = 104 classrooms x 25 students per classroom. Based on the current floor plan, Kingsley International School has designated 104 rooms as classrooms as at the Latest Practicable Date. The student enrollment capacity may change according to the rooms designated by Kingsley International School from time to time. Note 2: School utilisation = student number student capacity Note 3: Kingsley Skills College s student capacity = 3 teaching trainers x 25 students per trainer. As confirmed by the Malaysian Legal Advisers, the maximum ratio of students per registered teaching trainer is 25. In addition, Kingsley Skills College also engaged one program head and one English teacher. As confirmed by our Malaysian Legal Advisers, the trainers of Kingsley Skills College are qualified to teach as they have been 4

12 SUMMARY certified as accreditation personnel by the Department of Skills Development Malaysia, an agency under the Ministry of Human Resources of Malaysia for the implementation and supervision of competency-based learning and training. They are distinct from teachers who are required to registered under the Ministry of Education or the Ministry of Higher Education. Note 4: Student-to-teacher ratio = student number teacher number Note 5: Student-to-trainer ratio = student number trainer number Note 6: Kingsley College s student capacity = 6 classroom x 25 students per classroom. Pursuant to Kingsley College s internal policy, the maximum capacity per classroom is 25 students. Note 7: Lecturers were not engaged as full-time lecturer and were mainly involved in administrative roles as at 30 June 2016 and 2017 as the first student intake was recorded in October The academic year of Kingsley International School typically starts from September and ends in July next year. The academic term of Kingsley Skills College and Kingsley College typically commences in September while admission acceptance are open all year round. OUR CUSTOMERS Our customers primarily consist of our students and their parents. We did not have any single customer who accounted for more than 5% of our revenue for each of the year ended 30 June 2016 and 2017 and for the four months ended 31 October OUR SUPPLIERS Our suppliers primarily consist of security guard service supplier, canteen service supplier, student recruitment agents. For the year ended 30 June 2016 and 2017 and four months ended 31 October 2017, purchases from our five largest suppliers amounted to approximately RM1.49 million, RM2.14 million and RM0.91 million, respectively, representing approximately 16.1%, 17.4% and 19.9% of our total cost of revenue for the relevant periods. For the same periods, purchases from our largest supplier amounted to approximately RM0.37 million, RM1.13 million and RM0.31 million, respectively, accounting for approximately 4.0%, 9.2% and 6.9% of our total cost of revenue for the relevant periods. PRICING Tuition fee is our principal source of income. We determine the pricing policy of our tuition fee after taking into account various factors such as the competitor s pricing. For details, please refer to the subsection headed Business Tuition Fee. According to Frost & Sullivan Report, based on average annual tuition fee, international school in Malaysia can be divided into three segments, namely high-end (RM40,000 above), mid-range (RM20,000 to RM40,000) and low-end (below RM20,000). As disclosed in the section headed Business Tuition Fee on page 124 of the prospectus, the average tuition fee charged by Kingsley International School fall within the mid-range. MAJOR DEVELOPMENT AND MILESTONES Our Kingsley International School recorded its first student intake in September 2011 and moved into the KIS Campus in September For further details, please refer to the section headed History, Development and Reorganisation Important Business Milestones in this prospectus. 5

13 SUMMARY SALES AND MARKETING We have implemented a variety of marketing methods to enhance the brand recognition of our schools and programmes. We principally leverage on the following marketing methods: (i) promotional events, (ii) word-of-mouth referrals, (iii) media advertising, and (iv) external recruitment agents. For further details, please refer to the sub-section headed Business Student Enrolment, Admission and Recruitment Marketing in this prospectus. OUR INDUSTRY The overall international schools, tertiary and professional education market in Malaysia are fragmented in terms of the number of market players. We expect the competition in the private education market to persist and intensify. We believe we are able to compete effectively due to our strong reputation and established programmes. Please refer to the sub-section headed Business Competition in this prospectus for further details. COMPETITIVE STRENGTHS We believe that the following are our key competitive strengths that have contributed significantly to our success and differentiate us from our competitors: (i) established private education service provider in Malaysia with track record and growth potential; (ii) strong reputation for student performance; (iii) our relatively new campus, facilities, boarding facilities upon completion of KIS Annex Building; and (iv) experienced senior management team and qualified teachers. For details, please refer to the section headed Business Competitive Strength in this prospectus for further details. BUSINESS STRATEGIES Our long-term goal is to become an established private education service provider in Asia. To achieve the goal, we intend to pursue the following business strategies: (i) increasing student enrollment and revenue source of Kingsley International School; (ii) develop Kingsley Tertiary Institutions; and (iii) continue to enhance our reputation as a provider of high-quality education. For details, please refer to the section headed Business Business Strategies in this prospectus for further details. Increasing student enrolment and revenue source of the Kingsley International School We intend to increase the student enrolment of our education institution, especially our Kingsley International School. We will work with overseas partners and recruitment agents to attract international students from East Asia and other countries in South East Asia with emphasis on our relatively new campus and boarding options. In addition, we intend to upgrade and expand our facilities and employ additional high quality teachers in our education institutions, which we believe will help attract more high quality students to enrol in our schools. Further, while we will continue to leverage on word-of-mouth referrals based on the established reputation of our Kingsley International School as a main source of attracting new students, we plan to increase our sales and marketing efforts to promote our brand name. For details, please refer to Business Business Strategies Increasing student enrolment and revenue source of the Kingsley International School in this prospectus. MAJORRISKFACTORS Our Group believes that there are certain risks involved in our operations, the details of which are in the section headed Risk Factors in this document. We have categorized these risks and 6

14 SUMMARY uncertainties into: (i) risks relating to our business and our industry; (ii) risks relating to Malaysia; and (iii) risks relating to the global offering and our shares. Many of these risks are beyond our control and the major risk factors include: If we fail to enroll and retain a sufficient number of students, our business could be materially and adversely affected If we fail to help our students achieve their academic goals, students and parents satisfaction with our private education services may decline We may be unable to charge tuition fees at sufficient levels to be profitable or raise tuition fees as planned Our contractor may not be able to compete the construction of KIS Annex Building in the fourth quarter of 2018 CONTROLLING SHAREHOLDERS AND CONFIRMATION DEED Tan Sri Barry Goh holds 82.8% of the issued share capital of our Company immediately before the Global Offering. Immediately following completion of the Global Offering (without taking into account any Shares which may be allotted and issued upon exercise of the Offer Size Adjustment Option), Tan Sri Barry Goh, through his wholly owned company, Star Shine, will be beneficially interested in 62% of the issued share capital of our Company and Dato Danny Goh, through his wholly owned company, DGMK Investment, will be beneficially interested in 7% of the issued share capital of our Company. Tan Sri Barry Goh and Dato Danny Goh entered into the Confirmation Deed to acknowledge and confirm, among other things, that they have been acting in concert to maintain the consolidated control of our Group. Accordingly, Tan Sri Barry Goh, Star Shine, Dato Danny Goh and DGMK Investment are and will continue to be our Controlling Shareholders after the Listing. All the Controlling Shareholders are not interested in any business which is, whether directly or indirectly, in competition with our business. During the Track Record Period, our Group had entered into certain significant related parties transactions with companies controlled by our Controlling Shareholders. For further details, please refer to the sub-section headed Financial Information Related Party Transactions and Note 33 to the accountants report included in Appendix I to this prospectus. In particular, our Group had recognised significant amounts of other gains arising from Liquidated and Ascertained Damages from Kingsley Hills, a company controlled by Dato Danny Goh, one of the Controlling Shareholders. For details, please refer to the section headed Business Liquidated and Ascertained Damages ( LAD ) in this prospectus. 7

15 SUMMARY SUMMARY FINANCIAL INFORMATION Results of Operations The table below sets out, for the periods indicated, our consolidated results of operations. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period. Year ended 30 June Four months ended 31 October RM HK$ RM HK$ RM HK$ RM HK$ (Unaudited) Revenue 18,822,778 38,210,239 29,794,992 60,483,834 5,739,484 11,651,153 6,380,247 12,951,901 Profit/(loss) before income tax 3,180,605 6,456,628 11,361,953 23,064,765 (300,213) (609,432) (2,429,422) (4,931,727) Profit/(loss) and total comprehensive income for the year 3,196,756 6,489,415 11,291,569 22,921,885 (307,984) (625,208) (2,431,030) (4,934,991) Revenue Our revenue represents the value of services rendered, after deducting discounts and refunds during the Track Record Period. During the Track Record Period, we generated revenue from tuition fees collected from our students and from ancillary services provided to our students of our (i) international school, and (ii) tertiary education. Our revenue for the two years ended 30 June 2016 and 2017 and for the four months ended 31 October 2017 was RM18.8 million, RM29.8 million and RM6.4 million, respectively. The revenue generated from ancillary services consists of, among others, fees collected with respect to extra-curriculum activities, facilities, in-campus canteen, study trip, and other miscellaneous services provided to students. During the year ended 30 June 2016, Kingsley International School provided discounts in a total amount of RM0.8 million to, among others, students who are siblings of current students, or based on academic merits. Discounts was offered as an incentive for student to enrol at Kingsley International School since our first student intake in September 2011 up to the academic year 2015/2016, since Kingsley International School was back then a relatively new market player and was just moving into the new KIS Campus for the academic year 2015/2016. KIS did not offer any such discounts starting from academic year 2016/2017. As confirmed by Frost & Sullivan, it is common for relatively new international schools in Malaysia to offer discounted tuition fee rate so as to gain a higher student enrolment. The following table sets out the revenue generated from tuition fees and ancillary services for the periods indicated: Year ended 30 June Four months ended 31 October RM HK$ % RM HK$ % RM HK$ % RM HK$ % (Unaudited) Tuition fees 13,497,678 27,400, % 21,850,083 44,355, % 3,890,003 7,896, % 4,106,516 8,336, % Ancillary services 5,325,100 10,809, % 7,944,909 16,128, % 1,849,481 3,754, % 2,273,731 4,615, % 18,822,778 38,210, % 29,794,992 60,483, % 5,739,484 11,651, % 6,380,247 12,951, % 8

16 SUMMARY The revenue generated from tuition fee increased from RM13.5 million for the year ended 30 June 2016 to RM21.9 million for the year ended 30 June 2017, which is due to the student enrolment increasing from 650 as at 30 June 2016 to 872 as at 30 June The revenue generated from tuition fee increased from RM3.9 million for the four months ended 31 October 2016 to RM4.1 million for the four months ended 31 October 2017, which is due to student enrolment increasing from 743 as at 31 October 2016 to 885 as at 31 October The unaudited revenue generated from tuition fee for the four months ended 31 October 2016 (i.e. RM3.9 million) only represented approximately 17.8% of the revenue generated from tuition fee for the year ended 30 June 2017 (i.e. RM21.9 million), which is mainly because the cash inflow from tuition fee is initially accounted as receipt in advance and deferred revenue and only recognised as revenue progressively when the education service is provided during the academic term, and that the period from July to August is the summer holiday period, during which no education service is provided and accordingly no revenue from tuition fee is recognised during that period. The following table sets out the breakdown of our revenue by segment for the periods indicated: Year ended 30 June Four months ended 31 October RM HK$ RM HK$ RM HK$ RM HK$ (Unaudited) International school 18,046,703 36,634,807 26,802,388 54,408,848 5,548,884 11,264,235 6,319,348 12,828,276 Tertiary education 776,075 1,575,432 2,992,604 6,074, , ,918 60, ,625 18,822,778 38,210,239 29,794,992 60,483,834 5,739,484 11,651,153 6,380,247 12,951,901 Our revenue increased by RM11.0 million from RM18.8 million for the year ended 30 June 2016 to RM29.8 million for the year ended 30 June 2017, representing an increase of 58.3%. The increase in our revenue was primarily due to the increase in revenue from our international school as a result of the increase in number of students enrolled from 650 as at 30 June 2016 to 872 as at 30 June 2017 because of the relocation of Kingsley International School to the current campus in September Our revenue increased by RM0.7 million from RM5.7 million for the four months ended 31 October 2016 to RM6.4 million for the four months ended 31 October 2017, representing an increase of 11.2%. The increase was mainly due to the increase in revenue for our international school as a result of the increase in student number enrolled in our international school from 743 as at 31 October 2016 to 885 as at 31 October For the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, revenue generated from ancillary services contributed to 28.3%, 26.7% and 35.6% of our total revenue, respectively. Cost of revenue For the two years ended 30 June 2016 and 2017 and four months ended 31 October 2017, our cost of revenue amounted to RM9.3 million and RM12.3 million and RM4.6 million, respectively, representing 49.2%, 41.4% and 71.7% of our revenue for the same period, respectively. 9

17 SUMMARY The following table sets out the breakdown of our cost of revenue for the periods indicated: Year ended 30 June Four months ended 31 October RM HK$ RM HK$ RM HK$ RM HK$ (Unaudited) Staff cost 3,631,715 7,372,381 5,604,756 11,377,655 1,732,688 3,517,357 2,334,770 4,739,583 Depreciation of property, plant and equipment 1,667,492 3,385,009 1,942,054 3,942, ,029 1,325, ,254 1,334,226 Commission 294, , , , , , , ,773 Exam fee 149, , , ,627 46,110 93,603 40,651 82,522 Food and beverage 772,024 1,567,209 1,478,275 3,000, , , , ,022 Rental of premises 185, , , ,765 31,320 63,580 35,320 71,700 Security Services 456, , , , , , , ,575 Student book 311, , , ,543 Student activities 674,982 1,370, ,313 2,026, , , , ,833 Teaching materials 116, , , ,310 92, ,304 57, ,973 Uniforms 537,480 1,091, , , , ,798 Upkeep of property, plant and equipment 271, , , , , , , ,687 Others 98, , , ,561 86, , , ,601 Hostel expenses 88, , , ,229 30,355 61,621 29,600 60,088 Training cost 9,681 19,652 41,572 84,391 11,700 23,751 9,266,348 18,810,686 12,336,340 25,042,770 3,790,348 7,694,406 4,573,071 9,283,334 Our cost of revenue increased by RM3.1 million from RM9.3 million for the year ended 30 June 2016 to RM12.3 million for the year ended 30 June 2017, representing an increase of 33.1%. The increase in our cost of revenue was primarily due to the increase in number of teachers from 79 to 99, which is in line with the increase in number of students enrolled. Our cost of revenue increased by RM0.8 million from RM3.8 million for the four months ended 31 October 2016 to RM4.6 million for the four months ended 31 October 2017, representing an increase of 20.7%. The increase in our cost of revenue was primarily due to the increase in number of teachers from 92 as at 31 October 2016 to 122 as at 31 October 2017, which is in line with the increase in number of students enrolled. Gross profit Our gross profit increased by RM7.9 million from RM9.6 million for the year ended 30 June 2016 to RM17.5 million for the year ended 30 June 2017, representing an increase of 82.7%. Our gross profit margin increased from 50.8% for the year ended 30 June 2016 to 58.6% for the year ended 30 June Our gross profit decreased by RM0.1 million from RM1.9 million for the four months ended 31 October 2016 to RM1.8 million for the four months ended 31 October 2017, representing a decrease of 7.3%. Our gross profit margin decreased from 34.0% for the four months ended 31 October 2016 to 28.3% for the four months ended 31 October International school Our gross profit generated from international school increased by RM6.1 million from RM9.0 million for the year ended 30 June 2016 to RM15.0 million for the year ended 30 June 2017, representing an increase of 67.7%. Our gross profit margin increased from 49.7% for the year ended 30 June 2016 to 56.1% for the year ended 30 June 2017, representing an increase of 6.4%. The increase in gross profit margin was primarily due to the larger increase in revenue as compare with the increase in cost of revenue as a result of (i) the increase in student-to-teacher ratio from 8.23 as at 30 June 2016 to 8.81 as at 30 June 2017; and (ii) the stable depreciation on property, plant and equipment. 10

18 SUMMARY Our gross profit generated from international school increased by approximately RM31,000 from approximately RM1,882,000 for the four months ended 31 October 2016 to approximately RM1,913,000 for the four months ended 31 October 2017, representing an increase of 1.7%. Our gross profit margin decreased from 33.9% for the four months ended 31 October 2016 to 30.3% for the four months ended 31 October 2017, representing a decrease of 3.6%. The decrease in gross profit margin was primarily due to the percentage increase in the number of teachers outweighs the percentage increase in the number of students. Tertiary education Our gross profit generated from tertiary education increased by RM1.8 million from RM0.6 million for the year ended 30 June 2016 to RM2.4 million for the year ended 30 June 2017, representing an increase of 309.8%. Our gross profit margin increased from 76.4% for the year ended 30 June 2016 to 81.2% for the year ended 30 June 2017, representing an increase of 4.8%. The increase in gross profit margin was primarily due to the larger increase in revenue as compared with the increase in cost of revenue as a result of the increase in student to trainer ratio from 5.3 as at 30 June 2016 to 10.7 as at 30 June Our gross profit/ loss generated from tertiary education decreased by approximately RM0.2 million from a gross profit of RM66,919 for the four months ended 31 October 2016 to a gross loss of RM106,098 for the four months ended 31 October 2017, representing a decrease of 258.5%. Our gross profit margin decreased from 35.1% for the four months ended 31 October 2016 to a negative gross profit margin of 174.2% for the four months ended 31 October 2017, representing a decrease of 209.3%. The decrease in gross profit was primarily due to lesser revenue in terms of tuition fee of RM0.065 million from Kingsley Skills College, as well as lesser revenue in terms of training fees of RM0.069 million from Kingsley Professional Centre during the corresponding period. As at the Latest Practicable Date, Kingsley Tertiary Institutions was at the early stage of development. Our Group is of the view that the development focus of our Group has been and will continue to be the Kingsley International School, while the Kingsley Tertiary Institutions enable our Group to offer comprehensive education service but it would not become a major revenue contribution in the medium term. For the specific strategies for development and increasing student intake of each of the Tertiary Institutions, please refer to the section headed Business Business Strategies Development of Kingsley Tertiary Institutions in this prospectus for further information. Kingsley College As at the Latest Practicable Date, Kingsley College employed 4 lecturers and had 20 students while its total student capacity is 150 students. Kingsley College recorded the first student intake of 12 students in October 2017, all of whom were enrolled in diploma in business programme. Our Group acquired the approval for registration of Kingsley College in 2012 as part of a potential but not immediate development plan. Our Group s focus has always been on the development of Kingsley International School and the construction of KIS Campus and KIS Annex Building. While our Group hired certain personnel (including Dr. Chua, the executive Director of our Company) to lead the development of Kingsley College in May Kingsley College was at the preparation stage and has only obtained all the necessary accreditations for the programs recognised by Malaysian Qualifications Agency (MQA) in November 2016 and the programmes of Pearson Level 5 Higher National Diploma in June Hence, Kingsley College did not record any student intake during the preparation stage up to June 2017 and only recorded the first student intake in October Our Group does not expect Kingsley College to become a major revenue contributor in the medium term. For further details, please refer to the section headed Business Kingsley College Development milestones in this prospectus. 11

19 SUMMARY Profit/(loss) and total comprehensive income for the year/period Our profit and total comprehensive income for the year, including the liquidated and ascertained damages of RM4.6 million and RM5.5 million for the year ended 30 June 2016 and 2017, respectively, increased by RM8.1 million from RM3.2 million for the year ended 30 June 2016 to RM11.3 million for the year ended 30 June 2017, representing an increase of 253.2%. Our net profit margin increased from 17.0% for the year ended 30 June 2016 to 37.9% for the year ended 30 June Our Group would have recorded a loss of RM1.4 million for year ended 30 June 2016 and a profit and total comprehensive income of RM5.8 million for the year ended 30 June 2017 if the liquidated and ascertained damages were excluded. The net loss of RM1.4 million for the year ended 30 June 2016 after excluding the liquidated and ascertained damages was primarily due to (i) the lower number of students enrolled during the year ended 30 June 2016 as compared with the year ended 30 June 2017; and (ii) the administrative expenses of approximately RM7.1 million and finance costs of approximately RM4.6 million during the year ended 30 June Our loss and total comprehensive income for the period increased by RM2.1 million from loss of RM0.3 million for the four months ended 31 October 2016 to loss of RM2.4 million for the four months end 31 October Our net profit margin decreased from (5.4%) for the four months ended 31 October 2016 to (38.1%) for the four months ended 31 October Such increase in the loss and total comprehensive income for the period was mainly due to (i) increase in staff cost and (ii) incurrence of Listing expense. If the Listing expense being excluded, our (loss)/profit and total comprehensive income for the period will be increased from loss of RM2.4 million to profit of RM0.3 million. The accumulated losses of the Group as at 1 July 2015 was mainly due to the losses from Kingsley Skills College of approximately RM140,000 and Kingsley College of approximately RM739,000 in previous years. The losses were incurred during their early stage of operation, primarily consist of staff costs, depreciation and other administrative expenses. Selected Consolidated Statements of Financial Position As at 30 June As at 31 October RM HK$ RM HK$ RM HK$ Non-current assets 121,315, ,271, ,807, ,208, ,341, ,383,344 Current assets 3,482,359 7,069,189 13,941,080 28,300,392 19,861,289 40,318,417 Current liabilities 20,141,067 40,886,366 8,295,241 16,839,339 17,758,694 36,050,149 Net current (liabilities)/ assets (16,658,708) (33,817,177) 5,645,839 11,461,053 2,102,595 4,268,268 Total assets less current liabilities 104,657, ,454, ,453, ,669, ,444, ,651,612 Total non-current liabilities 84,074, ,670,315 93,563, ,933,503 95,985, ,850,500 Net assets 20,583,199 41,783,894 31,889,813 64,736,320 29,458,676 59,801,112 Total equity 20,583,199 41,783,894 31,889,813 64,736,320 29,458,676 59,801,112 12

20 SUMMARY Cash flows of our Group The following table sets out the selected cash flow data from the consolidated statements of cash flows for the Track Record Period: Year ended 30 June Four month ended 31 October RM HK$ RM HK$ RM HK$ Net cash from operating activities 6,940,917 14,090,062 14,317,755 29,065,043 9,315,678 18,910,826 Net cash (used in)/ generated from investing activities (12,262,112) (24,892,087) (86,898) (176,403) (377,740) (766,812) Net cash from/ (used in) financing activities 5,468,978 11,102,025 (9,214,835) (18,706,115) (5,871,617) (11,919,383) Net increase/(decrease) in cash and cash equivalents 147, ,999 5,016,022 10,182,525 3,066,321 6,224,632 Cash and cash equivalents at beginning of year/period 1,541,293 3,128,825 1,689,076 3,428,824 6,705,098 13,611,349 Cash and cash equivalents at end of year/ period 1,689,076 3,428,824 6,705,098 13,611,349 9,771,419 19,835,981 Our operating cash flows before working capital changes were RM5.4 million, RM13.3 million and RM0.3 million during the years ended 30 June 2016 and 2017 and four months ended 31 October 2017 respectively. Our net operating cash flows before changes to working capital and listing expenses were RM5.4 million and RM12.9 million during the years ended 30 June 2016 and 2017, respectively. We had net operating cash out flows before changes to working capital and listing expenses of RM2.5 million during the four months ended 31 October KEY FINANCIAL RATIOS Year ended 30 June Four months ended 31 October % Profitability ratios Gross profit margin (1) Netprofitmargin (2) (38.1) Return of equity (3) (8.0) Return of total assets (4) (1.7) As at 30 June Four months ended 31 October Times Liquidity ratios Current ratio (5) Quick ratio (6) Capital adequacy ratios % Gearing ratio (7) Notes: 1. The calculation of gross profit margin is based on gross profit divided by revenue and multiplied by 100%. 13

21 SUMMARY 2. The calculation of net profit margin is based on profit for the year/period divided by revenue and multiplied by 100%. 3. The calculation of return on equity is based on profit for the year/period attributable to the owners of the Company divided by total equity and multiplied by 100%. 4. The calculation of return on total assets is based on profit for the year/period divided by total assets and multiplied by 100%. 5. The calculation of current ratio is based on current assets divided by current liabilities. 6. The calculation of quick ratio is based on current assets less inventories divided by current liabilities. 7. The calculation of gearing ratio is based on interest-bearing liabilities divided by total equity and multiplied by 100%. Please refer to the section headed Financial Information Key Financial Ratios in this prospectus for further details. NET CURRENT ASSETS/LIABILITIES Our Group recorded net current liabilities of RM16.7 million as at 30 June 2016, net current assets of RM5.6 million as at 30 June 2017 and net current assets of RM2.1 million as at 31 October We had net current liabilities as at 30 June 2016 of RM16.7 million primarily due to (i) amount due to related companies of RM7.0 million, which had been settled during the year ended 30 June 2017, (ii) amount due to a Director of RM3.2 million, which had been settled during the year ended 30 June 2017, and (iii) secured bank borrowings of RM5.9 million. The increase in net current liabilities/ assets was primarily due to the increase in amounts due from related companies of RM4.1 million, increase in cash and cash equivalents of RM5.0 million and decrease in amounts due to related companies of RM6.9 million, partially off-set by the increase in other payables and accruals of RM2.3 million. Our net current assets decreased from RM5.6 million as at 30 June 2017 to RM2.1 million as at 31 October 2017 was mainly due to (i) the decrease in the account receivables of RM0.6 million; and (ii) the increase in other payables and accruals of RM8.5 million; partially offset by the increase and cash equivalents of RM3.1 million. Our accounts receivables decreased from RM0.9 million as at 30 June 2017 to RM0.2 million as at 31 October 2017 was primarily due to more stringent credit policy enforced by our Group. Our other payables and accruals also increased from RM5.9 million as at 30 June 2017 to RM14.4 million as at 31 October 2017 primarily due to the tuition fees we have received in advance before the commencement of term 2 and term 3 for the academic year and deferred revenue in relation to remaining tuition fees for term 1 which has not yet been fully recognised as at 31 October NON-COMPLIANCE During the Track Record Period, we had the following non-compliance incidents: (a) Kingsley International displayed banner on the school building without a licence from Subang Jaya Municipal Council; and (b) Kingsley International failed to register one staff with the Ministry of Education Malaysia during the period of 1 August 2013 to 10 July For details of our non-compliance incidents, please refer to the sub-section headed Business Legal Compliance in this prospectus. 14

22 SUMMARY RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE As at 31 October 2017, Kingsley International School recorded student enrolment of 885, which represents an increase of 60.91% and 19.11% as compared to 550 and 743 students as at 31 October 2015 and 2016 respectively. The utilisation rate of Kingsley International School as at 31 October 2017 is 34.04%. As at the Latest Practicable Date, Kingsley International School recorded student enrolment of 987. Kingsley College has recorded its first student intake in October 2017 and had 20 students as at the Latest Practicable Date. Kingsley Digital Solutions was incorporated in November 2017, with focus on exploring business opportunities in development of on-line training platform. Since 31 October 2017 and up to the date of this prospectus, our business generally experienced continued growth, which was in line with the past trends and our expectations. To the best of our knowledge, there is no change to the overall economic and market condition in Malaysia or in the Malaysian international school and tertiary education markets in which we operate that may have a material adverse effect to our business operations and financial position. Our Group recorded net loss of RM2.4 million during the four months ended 31 October Currently, we expects a decrease in our Group s net profit for the year ending 30 June 2018 as compared to the year ended 30 June 2017, which is mainly due to (i) non-recurring listing expenses, and (ii) the expected decrease in the revenue generated from Kingsley Tertiary Institutions as a result of an expected decrease in corporate training programmes provided by Kingsley Professional Centre to our corporate clients. Our Directors confirm that since 31 October 2017 (being the date on which the latest audited consolidated financial information of our Group was prepared) and up to the date of this prospectus, there had been no material adverse change in the industry in which we operate or in the financial or trading position of our Group that would materially affect the information shown in our consolidated financial statements consisted in the Accountants Report set out in the Appendix I to this prospectus. DIVIDENDS During the two years ended 30 June 2016 and 2017 and four months ended 31 October 2017 and up to the Latest Practicable Date, no dividend has been paid or proposed by our Company. In future, declaration and payment of any dividends would require the recommendation of the Board and will be at their discretion. In addition, any final dividend for a financial year will be subject to Shareholders approval, but no dividend shall be declared in excess of the amount recommended by the Board. A decision to declare or to pay any dividend in the future, and the amount of any dividends, depends on a number of factors, including our results of operations, financial condition, the payment by our subsidiaries of cash dividends to us, and other factors the Board may deem relevant. There will be no assurance that our Company will be able to declare or distribute any dividend in the amount set out in any plan of the Board or at all. The dividend distribution record in the past may not be used as a reference or basis to determine the level of dividends that may be declared or paid by our Company in the future. As at the Latest Practicable Date, we did not have any specific dividend policy nor pre-determined dividend payout ratios. 15

23 SUMMARY USE OF PROCEEDS Our Group estimates the net proceeds from the Global Offering based on the Offer Price of HK$0.45 per Share, being the mid-point of the indicative Offer Price range and after deducting the underwriting fees, commissions and estimated expenses payable by us in relation to the Global Offering, will be HK$62.5 million (assuming the Offer Size Adjustment Option is not exercised). Approximately HK$29.9 million (representing approximately 47.8% of the net proceeds) will be used for renovation of the KIS Annex Building; Approximately HK$23.8 million (representing approximately 38.1% of the net proceeds) will be used for settlement of fees for constructing the KIS Annex Building which mainly consists of dormitories, and other facilities such as swimming pool, gymnasium and cafeteria; Approximately HK$8.8 million (representing approximately 14.1% of the net proceeds) will be used for purchase of facilities for KIS Annex Building; If the final Offer Price is set at: (i) the low-end; or (ii) the high-end of the indicative Offer Price range, the net proceeds from the Global Offering, after deducting the underwriting fees, commissions and estimated expenses payable by us in relation to the Global Offering, are estimated to be (i) approximately HK$53.3 million; or (ii) approximately HK$71.7 million respectively (assuming the Offer Size Adjustment Option is not exercised). The net proceeds are intended to be used in the same proportions as disclosed above. To the extent that the net proceeds from the Global Offering are not immediately required for the above purposes, it is our present intention that such net proceeds be placed in short-term interest bearing deposit accounts held with authorized financial institutions in Hong Kong or Malaysia. Please refer to the sub-section headed Statement of Business Objectives and Use of Proceeds Use of proceeds in the prospectus for further details. LISTING EXPENSES Assuming the Offer Price of HK$0.45 per Offer Share, being the mid-point of the indicative range of the Offer Price stated in this prospectus, the total amount of expenses in relation to the Listing are estimated to be approximately HK$27.5 million. During the Track Record Period, our Group incurred Listing expenses of approximately HK$8.4 million, of which HK$6.6 million was charged to our consolidated statement of profit or loss and HK$1.8 million was capitalized as prepayments that would be charged against equity upon Listing. We expect to incur an additional Listing expenses of approximately HK$19.1 million after 31 October 2017, of which HK$9.7 million is expected to be charged to our consolidated statements of profit or loss and HK$9.4 million is expected to be charged against equity upon Listing. Our net profit for the year ending 30 June 2018 will have a considerable reduction due to the incurrence of listing expenses during the year ending 30 June Our financial performance for the year ending 30 June 2018 will be affected by such expenses as compared with our financial performance for the year ended 30 June

24 SUMMARY GLOBAL OFFERING STATISTICS Based on the minimum indicative Offer Price of HK$0.40 per Offer Share Based on the maximum indicative Offer Price of HK$0.50 per Offer Share Market capitalisation of our Shares¹ HK$320,000,000 HK$400,000,000 Unaudited pro forma adjusted consolidated net tangible assets of our Group per Share² HK$0.15 HK$0.17 Notes: 1. The calculation of the market capitalisation of the Shares is based on 800,000,000 Shares in issued immediately after completion of the Global Offering. 2. The unaudited pro forma adjusted consolidated net tangible assets of our Group per Share is calculated based on 800,000,000 Shares in issue immediately following completion of the Global Offering (assuming the Offer Size Adjustment Option is not exercised at all). 17

25 DEFINITIONS % per cent academic year Accountant s Report the academic year for all of our schools, which generally starts on or around 1 September of each calendar year and ends on 31 August of the next calendar year the accountant s report on our Group for the two years ended 30 June 2017 and four months ended 31 October 2017 prepared by the Reporting Accountants as set out in Appendix I to this prospectus Acquisitions the acquisitions of the equity interests of Kingsley International, Kingsley Graduate, Kingsley Professional and Kingsley Skills, details of which are set out in the section headed History, Development and Reorganisation in this prospectus A-levels Courses Application Forms Articles associate(s) Audit Committee B&G Capital courses offered in relation to the public exam taken in England and Wales by children aged 17 or 18 WHITE application form(s), YELLOW application forms and GREEN application form(s) or, where the context so requires, any of them the amended and restated articles of association of our Company conditionally adopted on 19 April 2018 and effective on the Listing Date as amended from time to time, a summary of certain provisions of which is set out in Appendix III to this prospectus has the meaning given to it in the GEM Listing Rules the audit committee of our Board B&G Capital Resources Berhad, a company incorporated under the laws of Malaysia with limited liability on 18 July 1994, which is owned as to 22.6% by Dato Danny Goh and 77.4% by Syapurna Sdn Bhd, a company incorporated under the laws of Malaysia with limited liability, which is owned as to 95% by Dato Danny Goh and as to 5% by Dato Law Boon Hee (who is a shareholder of our Company) BGMC Contract Works the construction and development of part of the Development Project by BGMC comprising the KIS Campus and foundation up to the ground floor of the KIS Annex Building, excluding interior renovation and facilities 18

26 DEFINITIONS BGMC Corporation Board or Board of Directors BTEC or Pearson BTEC business day BVI BGMC Corporation Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 25 March 1996, which is indirectly wholly-owned by BGMC International Limited, a company listed on the Main Board of the Stock Exchange where Tan Sri Barry Goh is the controlling shareholder the board of Directors the Business and Technology Education Council, which is a provider of secondary school leaving qualifications and Further education qualifications in England, Wales and Northern Ireland. any day (other than a Saturday, a Sunday or public holiday in Hong Kong) on which licensed banks in Hong Kong are generally open for business to the public British Virgin Islands Cambridge A Level Courses courses designed to prepare students for the examinations required for obtaining the Cambridge A-levels qualification offered to students completing secondary education Cambridge Assessments Cambridge Checkpoint Examinations The method used to evaluate a candidate s performance in relation to a Cambridge Qualification examinations for students of year six and year nine, which are administered by the University of Cambridge International Examinations Cambridge Handbook The Cambridge publication entitled Cambridge Handbook which sets out the rules for administering Cambridge Qualifications and Assessments and the obligations between Cambridge and schools, as amended by Cambridge from time to time Cambridge IGCSE Cambridge International General Certificate of Secondary Education Cambridge IGCSE courses courses designed to prepare students for the examinations required for obtaining the Cambridge IGCSE, an English language curriculum offered by University of Cambridge International Examinations to secondary students to prepare them for more advanced secondary qualifications Cambridge IGCSE Examinations examinations for students of year eleven, which are administered by the University of Cambridge International Examinations 19

27 DEFINITIONS Cambridge International Examinations or CIE or University of Cambridge International Examinations Cambridge International School University of Cambridge International Examinations, a provider of international qualifications, a division of Cambridge Assessment, which is a department of University of Cambridge accreditation of school by the University of Cambridge International Examinations Cambridge Qualification Qualifications offered by Cambridge to Kingsley International School so that Kingsley International School may offer them to students Cambridge Standard Terms of School Registration The Cambridge standard terms of school registration as enclosed to the Cambridge International School registration application form Capitalisation Issue the issue of 599,998,000 Shares to be made upon capitalisation of the share premium account of our Company as referred to in the paragraph headed A. Further information about our Company 4. Resolutions in writing of our Shareholders passed on 19 April 2018 in Appendix V to this prospectus Cayman Companies Law or Companies Law CCASS CCASS Clearing Participant the Companies Law (as revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time the Central Clearing and Settlement System established and operated by HKSCC a person admitted to participate in CCASS as a direct clearing participant or a general clearing participant CCASS Custodian Participant a person admitted to participate in CCASS as a custodian participant CCASS Investor Participant a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation CCASS Operational Procedures the operational procedures of HKSCC in relation to CCASS, containing the practices, procedures and administrative requirements relating to the operations and functions of CCASS, as from time to time in force CCASS Participant a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant CCC or Certificate of Completion and Compliance Chairman the certificate of completion and compliance the chairman of the Board, namely Tan Sri Barry Goh 20

28 DEFINITIONS Companies (Winding Up and Miscellaneous Provisions) Ordinance Companies Ordinance Companies Registry the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time the Companies Registry of Hong Kong Company Kingsley Edugroup Limited, an exempted company incorporated in the Cayman Islands with limited liability on 12 January The expression we, us and our Company may be used to refer to our Company or our Group as the context may require Concept Cabling Concept Cabling System Sdn. Bhd., a company incorporated in Malaysia on 24 September 2008 and is wholly-owned by Bras Ventures Bhd., an Independent Third Party, other than its 30% equity interest in Kingsley Graduate, Kingsley Language and Kingsley Catering Confirmation Deed connected person(s) Controlling Shareholder(s) core connected persons the confirmation deed dated 14 September 2017 entered into between Tan Sri Barry Goh and Dato Danny Goh to acknowledge and confirm that they are parties acting in concert has the meaning given to it under the GEM Listing Rules has the meaning given to it under the GEM Listing Rules and, in the case of our Company, means Tan Sri Barry Goh, Dato Danny Goh, Star Shine and DGMK Investment has the meaning ascribed to it under the GEM Listing Rules Corporate Governance Code the Corporate Governance Code set out in Appendix 15 to the GEM Listing Rules Dato Danny Goh Deed of Indemnity Dato Goh Meng Keong, brother of Tan Sri Barry Goh, an executive Director and a Controlling Shareholder the deed of indemnity dated 19 April 2018 given by our Controlling Shareholders in favour of our Company, details of which are set out in the paragraph headed E. Other Information 1. Tax and other indemnity in Appendix V to this prospectus 21

29 DEFINITIONS Deed of Non-competition the deed of non-competition dated 19 April 2018 given by each of our Controlling Shareholders in favour of our Company, details of which are set out in the section headed Relationship with Controlling Shareholders in this prospectus Development Project the construction and development of Kingsley International School on the KIS Campus Land and the KIS Annex Building Project on the KIS Annex Land DGMK Investment Director(s) Dr. Chua Early Years Department Eduking Investment England National Curriculum DGMK Investment Limited, a company incorporated in the BVI with limited liability on 26 July 2016 and is directly wholly-owned by Dato Danny Goh the director(s) of our Company Chua Ping Yong, our executive Director comprising Reception and Nursery Eduking Investment Limited, a company incorporated in the BVI with limited liability on 26 July 2016 and is directly wholly-owned by Dato Law Boon Hee the national curriculum for England to be taught in all local-authority-maintained schools, as administered by the UK Department for Education from time to time Frost & Sullivan Frost & Sullivan Limited, an independent market research and consulting company Frost & Sullivan Report GEM Listing Rules General Rules of CCASS an industry report commissioned by us and issued by Frost & Sullivan The Rules Governing the Listing of Securities on GEM, as amended, supplemented or otherwise modified from time to time the terms and conditions regulating the use of CCASS, as may be amended or modified from time to time and where the context so permits, shall include the CCASS Operational Procedures Global Offering the Hong Kong Public Offer and the International Offering GREEN Application Form(s) Group or Kingsley EduGroup the application form(s) to be completed by HK eipo WHITE Form Service Provider, designated by our Company our Company and its subsidiaries 22

30 DEFINITIONS Handover Date HK eipo White Form HK eipo White Form Service Provider HK$ or HK dollars or Hong Kong dollars or HKD the date when the KIS Annex Building is completed and defined with the issue and delivery of the CCC in respect of the KIS Annex Building the application for Hong Kong Offer Shares to be issued in the applicant s own name by submitting applications online through the designated website of HK eipo White Form the HK eipo White Form service provider designated by our Company, as specified on the designated website at Hong Kong dollars, the lawful currency of Hong Kong HKSCC Hong Kong Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited HKSCC Nominees Hong Kong, HKSAR or HK Hong Kong Branch Share Registrar Hong Kong Public Offer Hong Kong Public Offer Shares Hong Kong Underwriters Hong Kong Underwriting Agreement HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC the Hong Kong Special Administrative Region of the PRC Tricor Investor Services Limited the offer of the Hong Kong Public Offer Shares for subscription by the public in Hong Kong for cash at the Offer Price on and subject to the terms and conditions stated in this prospectus and in the Application Forms as further described in the section headed Structure and Conditions of the Global Offering in this prospectus the 20,000,000 Shares (subject to reallocation) initially being offered by our Company for subscription in the Hong Kong Public Offer, as described under the section headed Structure and Conditions of the Global Offering in this prospectus the underwriters of the Hong Kong Public Offer Shares whose names are set out in the section headed Underwriting in this prospectus the conditional underwriting agreement relating to the Hong Kong Public Offer entered into by our Company, our executive Directors, our Controlling Shareholders, the Sole Sponsor, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters on or around 30 April 2018, 23

31 DEFINITIONS details of which are set out in the section headed Underwriting in this prospectus HRDF Human Resources Development Fund which was established under Human Resources Development Act 1992 IGCSE the International General Certificate of Secondary Education, an English language curriculum offered by University of Cambridge International Examinations to secondary students to prepare them for more advanced secondary qualifications Independent Third Party(ies) an individual or a company who is not connected with (within the meaning of the GEM Listing Rules) any Directors, chief executive or substantial Shareholders of our Company, its subsidiaries or any of their respective associates International Placing the conditional placing of the International Placing Shares by the International Underwriters on behalf of our Company for cash at the Offer Price outside the United States (including professional, institutional and other investors, but excluding the public, in Hong Kong) as described in the section headed Structure and Conditions of the Global Offering in this prospectus International Placing Share(s) International Underwriters International Underwriting Agreement Joint Global Coordinators and/or Joint Bookrunners the 180,000,000 new Shares being initially offered for subscription by our Company at the Offer Price under the International Placing (subject to re-allocation as further described in the section headed Structure and Conditions of the Global Offering in this prospectus) the underwriters of the International Placing Shares who are expected to enter into the International Underwriting Agreement to underwrite the International Placing Shares the conditional international underwriting agreement relating to the International Placing and to be entered into between, amongst others, our Company, our Controlling Shareholders, the Sole Sponsor, the Joint Global Coordinators, the Joint Lead Managers and the International Underwriters on or about the Price Determination Date China Everbright Securities (HK) Limited and Sinolink Securities (Hong Kong) Company Limited 24

32 DEFINITIONS Joint Lead Managers China Everbright Securities (HK) Limited, Sinolink Securities (Hong Kong) Company Limited and Sinomax Securities Limited JPK or Department of Skills Development, Malaysia Kingsley Catering Kingsley College Jabatan Pembangunan Kemahiran (Department of Skills Development, Malaysia) Kingsley Catering Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 7 January 2009, which is owned as to 70% by Kingsley International and as to 30% by Concept Cabling Kingsley College, an institution established by Kingsley Graduate Kingsley Digital Solutions Kingsley Digital Solutions Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 21 November 2017, which is an indirect wholly-owned subsidiary of our Company Kingsley Edugroup (Malaysia) Kingsley Edugroup Bhd, a company incorporated under the laws of Malaysia with limited liability on 14 December 2016, which is an indirect wholly-owned subsidiary of our Company Kingsley Graduate Kingsley Graduate School Malaysia Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 9 May 2012, which is an indirect wholly-owned subsidiary of our Company Kingsley Hills Kingsley Hills Contract Works Kingsley Hills Sdn. Bhd. (formerly known as One Beverly Hills Sdn. Bhd.), a company incorporated under the laws of Malaysia with limited liability on 17 January 2008 and is directly wholly-owned by B&G Capital the construction and development of the above-ground floor parts of the KIS Annex Building, excluding interior renovation and facilities Kingsley International Kingsley International Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 2 December 2010, which is an indirect whollyowned subsidiary of our Company Kingsley International School Kingsley International School, an institution established by Kingsley International Kingsley Language House Kingsley Language House Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 8 November 2016, which is owned as to 70% by Kingsley International and as to 30% by Concept Cabling 25

33 DEFINITIONS Kingsley Malaysia Kingsley Malaysia Limited, a company incorporated in the BVI on 25 January 2017, which is a direct whollyowned subsidiary of our Company Kingsley Professional Kingsley Professional Centre Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 31 October 2013, which is an indirect whollyowned subsidiary of our Company Kingsley Skills Kingsley Skills Sdn. Bhd., a company incorporated under the laws of Malaysia with limited liability on 30 October 2013, which is an indirect wholly-owned subsidiary of our Group Kingsley Skills College Kingsley Skills College, an institution established by Kingsley Skills Kingsley Tertiary Institutions KIS Annex Building KIS Annex Building Project KIS Annex Land KIS Campus collectively, Kingsley College, Kingsley Skills College and Kingsley Professional Centre as at the Latest Practicable Date an annex building of Kingsley International School which is under construction on the KIS Annex Land, comprising, among others, 2 hostel towers of 13 and 15- storey high on a 13-storey multi-level carpark and facilities podium with a planned total gross floor area of approximately 49,518 sq.m. (533,007 sq.ft.) the project involving the construction of the KIS Annex Building a parcel of land held under H.S.(D) , PT36308 measuring approximately two acres in the Mukim of Damansara, District of Petaling, State of Selangor, Malaysia the campus of Kingsley International School KIS Campus Land a parcel of land held under H.S.(D) , PT measuring approximately four acres in the Mukim of Damansara, District of Petaling, State of Selangor, Malaysia LAD or Liquidated and Ascertained Damages liquidated and ascertained damages payable under the Turnkey Contract Latest Practicable Date 20 April 2018, being the latest practicable date for the purpose of ascertaining certain information contained in this prospectus prior to the printing of this prospectus 26

34 DEFINITIONS Listing Listing Date Listing Division Main Board Malaysian Legal Advisers MCT Berhad Memorandum or Memorandum of Association MIRB MQA NOSS Nursery Offer Price Offer Shares the listing of our Shares on the GEM the date on which dealings of the Shares on the GEM first commence, which is expected to be on 16 May 2018 the Listing Division of the Stock Exchange the stock market operated by the Stock Exchange which excludes GEM of the Stock Exchange and the options market Mah-Kamariyah & Philip Koh, the Malaysia legal advisers of our Company MCT Berhad, a company listed on the Main Market of Bursa Malaysia Securities Berhad, which is owned as to 27.24% by Tan Sri Barry Goh the amended and restated memorandum of association of our Company conditionally adopted on 19 April 2018 and effective on the Listing Date as amended, supplemented or otherwise modified from time to time, a summary of certain provisions of which is set out in Appendix III to this prospectus Malaysian Inland Revenue Board Malaysian Qualifications Agency National Occupational Skills Standards of Malaysia First year in the Early Year Department of the Kingsley International School the final offer price per Offer Share (excluding brokerage fee, SFC transaction levy and Stock Exchange trading fee) which will not be more than HK$0.50 per Offer Share and is expected to be not less than HK$0.40 per Offer Share, such price to be determined in the manner as further described in the section headed Structure and Conditions of the Global Offering in this prospectus the Hong Kong Offer Shares and the International Offer Shares, together, where relevant with any additional shares issued pursuant to the Offer Size Adjustment Option Offer Size Adjustment Option the option to be granted by our Company to the International Underwriters, exercisable by the Joint Global Coordinators on behalf of the International 27

35 DEFINITIONS Underwriters, under the International Underwriting Agreement to require our Company to issue up to an additional 30,000,000 new Shares, representing 15% of the number of the Offer Shares, at the Offer Price to cover over-allocation in the International Placing, details of which are described in the section headed Structure and Conditions of the Global Offering in this prospectus PRC Predecessor Companies Ordinance Price Determination Agreement Price Determination Date Primary School Prof. Dr. Rozainun Property Valuer the People s Republic of China the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) as in force from time to time before 3 March 2014 the agreement to be entered into between the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company on the Price Determination Date to fix and record the Offer Price the date on which the Offer Price is to be determined, is expected to be on or about 4 May 2018 year one to year six of Kingsley International School Prof. Dr. Rozainun Binti Abdul Aziz, our independent non-executive Director Savills (Malaysia) Sdn. Bhd. prospectus this prospectus being issued in connection with the Global Offering Reception Second year in the Early Year Department of the Kingsley International School Reorganisation the corporate reorganisation of our Group in preparation for the Listing, further details of which are set out in the section headed History, Development and Reorganisation in this prospectus Repurchase Mandate the general unconditional mandate relating to the repurchase of the Shares granted to our Directors, further details of which are set out in the paragraphs headed A. Further information about our Company 6. Repurchase of our Shares in Appendix V to this prospectus RM Malaysian ringgit, the lawful currency of Malaysia 28

36 DEFINITIONS Sale and Purchase Agreement a sale and purchase agreement dated 19 April 2018 entered into between Kingsley International and Kingsley Hills pursuant to which Kingsley Hills agreed to sell, and Kingsley International agreed to purchase, the KIS Annex Land Secondary School SFC SFO Share(s) Shareholder(s) SJMC SKM or Malaysia Skills Certificate Sole Sponsor year 7 to 12 of Kingsley International School the Securities and Futures Commission of Hong Kong the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time ordinary share(s) with a par value of HK$0.01 each in the share capital of our Company holder(s) of the Share(s) Subang Jaya Municipal Council a skills and work-based certification in Malaysia that is achieved through assessment and training which is issued by JPK China Everbright Capital Limited SPM Sijil Pelajaran Malaysia (Malaysian Certificate of Education), a national examination taken by all fifth-year secondary school students in Malaysia sq. ft. sq. m. Star Shine Stock Exchange STPM Subang Jaya City Council square feet square metre Star Shine Finance Limited, a company incorporated in the BVI with limited liability on 28 September 2005 and is directly wholly-owned by Tan Sri Barry Goh The Stock Exchange of Hong Kong Limited Sijil Tinggi Persekolahan Malaysia (Malaysian Higher School Certificate), a pre-university examination taken by students in Malaysia City Council of Subang Jaya, Selangor, Malaysia subsidiary(ies) has the meaning given to it under the Companies Ordinance 29

37 DEFINITIONS substantial shareholder(s) has the meaning given thereto under the GEM Listing Rules Takeovers Code The Code on Takeovers and Mergers and Share Buy-backs, as amended, supplemented or otherwise modified from time to time Tan Sri Barry Goh Tan Sri Karim Tan Sri Salleh Tax Adviser Track Record Period Turnkey Contract UK UK Department for Education Tan Sri Dato Sri Goh Ming Choon, brother of, Dato Danny Goh, an executive Director and a Controlling Shareholder Tan Sri Dato Hj Abd Karim Bin Shaikh Munisar, our independent non-executive Director Professor Emeritus Tan Sri Dato Dr. Mohamed Salleh Bin Mohamed Yasin, our independent non-executive Director BDO Tax Services Sdn. Bhd. the period comprising the two financial years ended 30 June 2017 and four months ended 31 October 2017 the letter of award dated 8 July 2011 issued by Kingsley International and the letter of acceptance dated 11 July 2011 signed by One Beverly Hills Sdn. Bhd. (now known as Kingsley Hills) (as supplemented by a supplemental letter dated 19 April 2018) pursuant to which Kingsley International appointed Kingsley Hills as a turnkey developer for the construction and development of the Development Project United Kingdom of Great Britain and Northern Ireland the department for education, UK Underwriters the Hong Kong Underwriters and the International Underwriters Underwriting Agreements the Hong Kong Underwriting Agreement and the International Underwriting Agreement University of Cambridge WHITE Application Form(s) YELLOW Application Form(s) University of Cambridge, UK The application form(s) to be completed by the public who require the Hong Kong Public Offer Shares to be issued in the applicants own name The application form(s) to be completed by the public who require the Hong Kong Public Offer Shares to be deposited directly into CCASS 30

38 DEFINITIONS Unless otherwise specified, for the purpose of this prospectus and for the purpose of illustration only, Hong Kong dollar amounts have been translated using the following rates: US$1.0 : HK$7.8 RM1.0 : HK$2.03 In this prospectus, the terms associate, close associate, connected person, core connected person, connected transaction, controlling shareholder, substantial shareholder and significant shareholder shall have the meanings given to such terms in the GEM Listing Rules, unless the context otherwise requires. If there is any inconsistency between this prospectus and the Chinese translation of this prospectus, this prospectus shall prevail. Certain amounts and percentage figures included in this prospectus have been subject to rounding adjustment. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them. 31

39 GLOSSARY OF TECHNICAL TERMS This glossary contains explanations of certain terms used in this prospectus in connection with our Company and our business. These terminologies and their given meanings may not correspond to those standard meanings and usage adopted in the industry. CAGR GDP GFA Compound annual growth rate gross domestic product gross floor area ISO the International Organisation for Standardisation, a non-government organisation based in Geneva, Switzerland, for assessing the quality systems of business organisations 32

40 FORWARD-LOOKING STATEMENTS This prospectus contains certain forward-looking statements and information relating to us and our subsidiaries that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this prospectus, the words aim, anticipate, believe, could, estimate, expect, going forward, intend, may, ought to, plan, potential, predict, project, seek, shall, should, will, would and similar expressions, as they relate to our Company or our management, are intended to identify forward-looking statements. Such statements reflect the current views of our management with respect to future events, operations, liquidity and capital resources, some of which may not materialise or may change. These statements are, by their nature, subject to certain risks, uncertainties and assumptions, including but not limited to the risk factors as described in this prospectus. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. The risks and uncertainties facing our Company which could affect the accuracy of forward-looking statements include, but are not limited to, the following: our business prospect; future developments, trends and conditions in the industry and markets in which we operate; our strategies, plans, objectives and goals; general economic trends and conditions; changes to regulatory and operating conditions in the industry and markets in which we operate; our ability to control costs; our dividend policy; the amount and nature of, and potential for, future development of our business; capital market developments; the actions and developments of our competitors; and certain statements in Financial Information with respect to trend in prices, volumes, operations, margins, overall market trends, risk management and exchange rates. Subject to the requirements of the GEM Listing Rules, we do not intend to publicly update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus might not occur in the way we expect, or at all. Accordingly, you should not place undue reliance on any forward-looking statements. All forward-looking statements in this prospectus are qualified by reference to this cautionary statement. 33

41 RISK FACTORS You should consider carefully all the information set out in this prospectus and, in particular, the risks and uncertainties described below before making an investment in the Shares. The occurrence of any of the following events could harm us and our Group s business, financial condition or results of operations could be materially and adversely affected by any of these risks. If these events occur, the trading price of the Shares could decline and you may lose all or part of your investment. Our Group believes that there are certain risks involved in our operations. Many of these risks are beyond our control and can be categorised in the following manner: RISKS RELATING TO OUR BUSINESS AND OUR INDUSTRY If we fail to enroll and retain a sufficient number of students, our business could be materially and adversely affected Our ability to continue to enroll and retain students for our private education institutions and programmes is critical to the continued success and growth of our business. The success of our efforts to enroll and retain a sufficient number of students will depend on several factors, including our ability to: enhance existing education programmes and services to respond to market changes and student demands; develop new programmes and curriculum that appeal to our students and their parents; maintain and enhance our reputation as a leading operator of private education institutions offering quality education; expand the network and geographic reach of our private education institutions; effectively market our private education institutions and programmes to a broader base of prospective students; manage our growth while maintaining the consistency of our teaching quality; develop and obtain license of additional high quality education content; and respond to increasing competition in the market. In addition, government authorities in Malaysia may impose more stringent restrictions on the student-classroom ratio and/or student-to-teacher-ratio, thereby affecting the number of students we can enroll. Our business, financial condition and results of operation could be materially and adversely affected if we cannot maintain or increase our student base as we expand our offering of programmes and curriculum. If we fail to help our students achieve their academic goals, students and parents satisfaction with our private education services may decline The success of our business depends on our ability to deliver quality education experiences and help our students achieve their academic and/or vocational goals. Our private education institutions 34

42 RISK FACTORS may not always be able to meet the expectations of our students and their parents in terms of students performance. A student may not be able to attain the level of academic improvement that he or she seeks and his or her performance may otherwise not progress or decline due to reasons beyond our control. We may not be able to provide education that is satisfactory to all of our students and their parents, and students and parents satisfaction with our services may decline. In addition, we cannot guarantee that our students will be admitted to higher levels of education institutions of their choices or obtain job placements at their satisfaction. Any of the foregoing could result in a student s withdrawal from our private education institutions or programmes, and dissatisfied students or their parents may attempt to persuade other students or prospective students not to attend our private education institutions or programmes. If our ability to retain students decreases significantly or if we otherwise fail to continue to enroll and retain new students, our business, financial condition and results of operations may be materially and adversely affected. We may be unable to charge tuition fees at sufficient levels to be profitable or raise tuition fees as planned Our results of operations are affected in large part by the pricing of our private education services. We charge tuition fees based on each student s grade level as well as the programmes that the student is enrolled in. Subject to the applicable regulatory requirements, we generally determine tuition fees based on the demand for our private education services, the cost of our services, and the tuition fees and the fees charged by our competitors. Although we have been able to increase the tuition fees we charge our students in the past, we cannot guarantee that we will be able to maintain or increase our tuition fees in the future without adversely affecting the demand for our education services. The tuition fees we charge for some of our private education programmes is subject to regulatory restrictions. The regulatory authorities in Malaysia, at various levels, have broad powers to regulate the private education industry in Malaysia, including the registration fees, admission fees, tuition fees and other fees charged by private education institutions. Kingsley International School is entitled to adjust its tuition fees within the maximum limit ( Maximum Limit ) set in the approval issued by the Ministry of Education Malaysia. However, Kingsley International School is required to obtain prior approval from the Ministry of Education for any adjustment of the tuition fees exceeding the Maximum Limit. If the tuition fees we charge were required to be reduced or were not allowed to increase in line with increases in our costs, or if there are any changes in the regulations which may otherwise negatively affect or restrict our ability to adjust our tuition fees, our business, financial condition and results of operations may be materially and adversely affected. Furthermore, the tuition fees we are able to charge is subject to a number of other factors, such as the perception of our brand, the academic results achieved by our students, our ability to hire qualified teachers, and general local economic conditions. Any significant deterioration in these factors could have a material adverse effect on our ability to charge tuition fees at levels sufficient for us to remain profitable. Our contractor may not be able to complete the construction of KIS Annex Building by end of 2018 We intend to expand our Kingsley International School by constructing the KIS Annex Building conjunct to the KIS Campus, which will offer dormitories for students who opt for boarding at school and also facilities such as swimming pools, gymnasium activities rooms and cafeteria, Kingsley Hills, 35

43 RISK FACTORS the developer, was originally bound to complete the construction of KIS Annex Building on or before 1 September However, due to various reasons such as the temporary suspension period during which no construction work was allowed between January 2013 and December 2013, as well as the additional slope strengthening works required for the hillside slope near the Kingsley International School, the construction is still on-going. However, there is no assurance that the aforesaid timeline will be adhered to. In the event of further delay in completing the construction of KIS Annex Building, our growth could be hampered and Kingsley International School would be delayed in expanding its facilities or benefiting from additional income stream from boarding options to students. Our business depends on our ability to recruit and retain qualified and committed teachers and other school personnel. We rely substantially on our teachers for the provision of educational services to our students. Our teachers are critical to maintaining the quality of our programmes and upholding our brand and reputation. As at 31 October 2017, we had a team of 116 teachers at Kingsley International School comprising 19 non-malaysian teachers and 97 Malaysian teachers, 3 trainers at Kingsley Skills College and 3 lecturers at Kingsley College. We must continue to attract qualified teachers who are committed to teaching and loyal to our schools. We face competition from public schools, international schools, other private education providers and other institutions for high quality candidates and may have to incur additional costs for our recruitment efforts. We may not be able to recruit enough competent Malaysian or non-malaysian teachers to keep pace with the growth of our student enrolment while maintaining consistent teaching quality and the overall quality of our education programmes across different schools. In addition, criteria such as dedication, capability and loyalty are difficult to ascertain during the recruitment process and we may fail to identify and select the desired candidates. Furthermore, we may be unable to retain high quality teachers or have to incur significant expenditures for our retention efforts. For the year ended 30 June 2016 and 2017 and the four months ended 31 October 2017, 13, 18 and 6 teachers ceased employment with Kingsley International School (whether or not upon expiry of contract), representing approximately 16%, 18% and 5% of the number of teachers of Kingsley International School as at 30 June 2016 and 2017 and as at 31 October 2017, respectively. Teachers may be dissatisfied with their workload, compensation, benefits, career path or working environment, which may disrupt our school operations and teaching activities, adversely affect our reputation and damage our ability to attract and retain teachers and students. Similarly, other school personnel such as administrators, counselors and financial staff also play an important role in the efficient and smooth running of our schools. There is no guarantee that we can recruit and retain quality personnel to perform these functions in the future without incurring significant costs or at all. If we are unable to recruit and retain qualified and committed teachers and other school personnel at reasonable costs or at all, or if there is a significant decrease in teaching quality or educational experiences in our schools due to lack of qualified teachers or other school personnel, or if our teachers or other school personnel take disruptive actions to express their dissatisfaction with our schools or our Group, our business, financial condition and results of operations may be materially and adversely affected. Natural disasters such as landslide may affect our operations Kingsley International School is situated on a hillside in Putra Heights, Selangor, Malaysia. In January 2013, extreme rainfall resulted in landslide on another spot of the hill where Kingsley 36

44 RISK FACTORS International School is situated led to the Subang Jaya City Council ordering to temporarily halt the construction of KIS Campus and KIS Annex Building. While Kingsley Hills, the developer, has carried out slope strengthening works and submitted a geotechnical report to the Subang Jaya City Council who has subsequently permitted recommencement of the construction, there is no guarantee that similar landslide would not occur despite the slope strengthening works, which would adversely affect the operation of Kingsley International School and our Group s business, financial condition, results of operations and prospects. For details of the landslide which occurred in January 2013, please refer to the section headed Business Construction of KIS Campus and KIS Annex Building and Boarding Facilities. We might not continue to enjoy tax preferential treatment During the Track Record Period, Kingsley International, the operating company for Kingsley International School, was entitled to the following tax allowance: (a) Industrial Building Allowance ( IBA ) under the Income Tax Act 1967 (the Act ); and income tax exemption in the form of Investment Tax Allowance ( ITA ) under Income Tax (Exemption) (No. 9) Order 2012 (the Order ). There is no assurance that we will continue to enjoy tax preferential treatment. There might be future change to the Act and/or the Order to the effect that Kingsley International would be no longer entitled to ITA and IBA. For details of our entitlement to tax preferential treatment, please refer to Business Preferential Taxation Treatment. Our business relies on our ability to attract and retain our senior management and other dedicated and qualified teachers and school personnel We depend on our senior management and school administrators for the smooth operation of our private education institutions and execution of our business plans. In addition, we rely significantly on our teachers to deliver our education services to students. Our teachers are critical to maintaining the quality of our programmes and services and to upholding our reputation. The continuing services of our executive Directors, senior management team and the administrators of our private education institutions are crucial to our future success. If one or more of our executive Directors or members of senior management as set out in the section headed Directors and Senior Management in this prospectus and the administrators of our private education institutions are unable or unwilling to continue their employment with us, we may not be able to replace them with qualified personnel in a timely manner, or at all, which may result in material adverse changes to our established brand image, reputation, service quality or standards, and in turn, may disrupt our business, and materially and adversely affect our business, results of operations and financial condition. Furthermore, to maintain the quality of our education services and further grow our business, we need to continue to attract and retain qualified teachers who share our educational philosophy and meet our high standards. We seek to hire teachers who have expertise in their respective subject areas, and in particular, possess industry experience in relevant areas and are capable of delivering innovative and inspirational classroom instruction that focuses on the application of knowledge. There is no guarantee that we can recruit and retain such personnel in the future. As a result, we believe we will need to provide competitive compensation and benefits packages to attract and retain qualified teachers and school administrative personnel. In addition, criteria such as work ethic, commitment and dedication are difficult to ascertain during the recruitment process, particularly as we continue to expand and add teachers and other school personnel quickly in order to meet rising student enrollment. 37

45 RISK FACTORS We may not be able to retain experienced senior management members or other qualified personnel in the future. In the event we lose their services, or if any member of our executive Directors or senior management team or other key personnel joins our competitor(s) or forms a competing entity, our business, results of operations and financial condition may be materially and adversely affected. In addition, we may not be able to hire and retain a sufficient number of qualified teachers and qualified school administrative personnel to keep pace with our anticipated growth while maintaining consistent teaching quality and the overall quality of our education programmes. If we are unable to recruit and retain an appropriate number of qualified teachers and qualified school administrative personnel, the quality of our services or overall education programmes may decrease or be perceived to decrease in one or more of our private education institutions, which may have a material and adverse effect on our reputation, business and results of operations. If we lose the accreditations, permits or licenses required to provide our education or to operate our private education institutions, or if we fail to obtain the accreditations, permits or licenses for our private education institutions, our business could be materially and adversely affected In order to provide our education programmes or operate our private education institutions, we apply for and maintain various accreditations from accreditation bodies such as Cambridge International Examinations as well as permits from governmental authorities such as Ministry of Education Malaysia. To obtain or maintain our accreditations and permits, we must meet standards related to, among other things, performance, governance, institutional integrity, education quality, staff, administrative capability, resources and financial stability, on an ongoing basis. If any of our private education institutions fail to meet these standards, it could fail to obtain or lose its existing accreditations or permits, or be unable to expand its offerings of internationally-accredited curriculum that are popular among students and their parents, which could materially and adversely affect our business, results of operations and financial condition. Competition in the private education market could reduce enrollment at our private education institutions, increase our cost of recruiting and retaining students and teachers and put downward pressure on our tuition fees and profitability We may face competition from other existing or new private education institutions that target the same source of students as we do. Some of our existing and potential competitors may be able to devote greater resources than we can to the development of new programmes, curriculum or campus and respond more quickly to changes in demands of students and their parents, admissions standards, market needs or new technologies. Moreover, our competitors may increase capacity in any of the local markets to an extent that leads to an over-supply of placement positions at private schools and downward pressure on tuition fees. Our existing or potential competitors may also strategically price their tuition fees lower than ours to attract students and parents. If we are unable to differentiate our services from those of our competitors and successfully market our services to students and their parents, we could face competitive pressures that reduce our student enrollment. If our student enrollment falls, we may be required to reduce our tuition fees or increase spending in order to attract and retain students, which could materially and adversely affect our business, prospects, results of operations and financial condition. 38

46 RISK FACTORS Our business depends on the market recognition of our Kingsley education brand We believe that the market awareness and reputation of our Kingsley brand has contributed significantly to the success and growth of our business. We also believe that maintaining and enhancing the Kingsley education brand is critical to maintaining our competitive advantage. Our ability to maintain our brand reputation depends on a number of factors, some of which are beyond our control. As we continue to grow in size, expand our programmes, services and products, and extend our geographic reach, it may become difficult for us to maintain quality and consistency in the services we offer, which may lead to diminishing confidence in our brand name. Our reputation and the goodwill of our brand could be adversely affected under many circumstances, including the following: accidents, epidemics or other events adversely affect our students; we fail to properly manage accidents or other events that injure our students; our staff behave or are perceived to behave inappropriately or illegally; our staff fail to appropriately supervise students under their care; we fail to conduct proper background checks on our staff; we lose a license, permit, accreditation or other authorisation for our business; we do not maintain consistent education quality or fail to enable our students to achieve strong academic results; our facilities do not meet the standards expected by parents and students for private education; and operators of private education institutions with lower quality abusing our brand name or those with brand names similar to ours conduct fraudulent activities and create confusion among students and their parents. If our reputation deteriorates or if our brand is tarnished, our overall business, prospects, results of operations and financial condition could be adversely affected. We have developed our student base primarily by word-of-mouth referrals, employee recruitment efforts and third-party recruiters. However, we cannot assure you that our marketing efforts will be successful or sufficient in further promoting our brand or in helping us to remain competitive. If we are unable to further enhance our brand recognition and increase market awareness of our programmes and services, or if we are required to incur excessive marketing and promotional expenses in order to remain competitive, our business, financial condition and results of operations may be materially and adversely affected. If we are unable to maintain or sustain our brand reputation and recognition, we may also be unable to maintain or increase student enrollment, which may cause material adverse effects on our business, financial condition and results of operations. 39

47 RISK FACTORS We lease several premises for our private education institutions and may not be able to control the quality, maintenance and management of these premises, nor can we ensure we will be able to find suitable replacement for our existing premises in the event our landlords refuse to renew the relevant lease agreements upon the expiry of terms As at the Latest Practicable Date, our Kingsley Skills College and Kingsley College were situated in leased properties. For further details, please refer to the sub-section headed Business Properties in this prospectus. Such premises, school buildings and facilities were developed and maintained by our landlords. Accordingly, we are not in a position to effectively control the quality, maintenance and management of such premises, buildings and facilities. In the event the quality of such premises, buildings and facilities deteriorates, or if any or all of our landlords fail to properly maintain and renovate such premises, buildings or facilities in a timely manner or at all, the operation of our private education institutions could be materially and adversely affected. In addition, if any of our landlords terminates the existing lease agreements, refuses to continue to lease the premises to our private education institutions when such lease agreements expire, or increase rent to the level not acceptable to us, we will be forced to relocate our institutions to other locations. We may not be able to find suitable premises for such relocation without incurring significant time and costs, or at all. If this occurs, our business, results of operations and financial condition could be materially and adversely affected. We currently outsource meal catering services at Kingsley International School to Independent Third Party and, as a result, we cannot guarantee the quality and price of the food it serves to our students and therefore, we may be exposed to potential liabilities if we cannot maintain food quality standards Since September 2016, Kingsley International School outsourced the meal catering services to Independent Third Party, which provided such services to our students and staff. There is no assurance that we will be able to ensure the quality of food and to monitor the meal preparation process to ensure its quality or require the independent third-party service provider(s) to adhere to our food quality standards. In the event poor food quality results in any serious health violations or medical emergencies involving our students and staff, such as mass food poisoning, our business and reputation could be harmed. We are exposed to concentration risks as all of our institutions are located in Subang Jaya, Selangor, Malaysia Each of the Kingsley International School and Kingsley Tertiary Institutions (comprising Kingsley Skills College, Kingsley College and Kingsley Professional Centre) are located in Subang Jaya, Selangor, Malaysia. While we may expand into other cities in Malaysia or other countries in the future, we anticipate that the vast majority of our business operations in the foreseeable future will likely be concentrated in Subang Jaya, Selangor, Malaysia. Therefore, any material adverse social, economic or political development, or any natural disaster or epidemic affecting that region could have a material and adverse effect on our business, financial condition and results of operations. We may also be materially and adversely affected if new regulations relating to the private education businesses are adopted in Selangor or Malaysia that may place additional restrictions or burdens on us. In addition, because we currently operate only Kingsley International School and Kingsley Tertiary Institutions, any material negative development with respect to any of our education institutions could have a material and adverse effect on our business, financial condition and results of operations. 40

48 RISK FACTORS We may fail to implement our growth strategy for Kingsley International School Our long-term success is dependent on the successful implementation of our growth strategy. For the future growth and expansion of our business, our plan is for the KIS Annex Building to come into use in first quarter of These plans will require our management s attention and the allocation of significant resources. Our growth strategy may not be implemented successfully due to our failure to effectively market our academic programmes while attracting students and increasing student enrollment. There is no assurance that we are able to fully and/or successfully implement our growth strategies and expansions plans. If our growth strategy is not implemented successfully, our growth may be impaired and resources that have been expended may not yield an acceptable return or any return for us, both of which may materially and adversely affect our business, financial condition, results of operations and prospects. There is also no assurance that we will be able to obtain additional funding on terms that are acceptable to us. In such event, our future plans and growth prospects will be adversely affected. Our tertiary business plan may not be implemented successfully which may adversely affect our future prospects As at the Latest Practicable Date, Kingsley Tertiary Institutions are still in initial development stage and only represent 6.2%, 13.9% and (5.9%) of the gross profits of the Group during the year ended 30 June 2016 and 2017 and four months ended 31 October 2017, respectively. Although gross profit was noted during the Track Record Period, our Directors are of the view that while the Kingsley Tertiary Institutions would enable the Group to offer comprehensive education service but it would not become a major revenue contributor in the medium term. Strategically, our Directors are of the view that the future plan for the Kingsley Tertiary Institutions has been prepared after due enquiry by reference to, among other matters, the expected future prospects of the tertiary education industry in Malaysia and the continuation of our competitive advantages and other factors considered relevant. Some of our future business plans are based on certain assumptions. The successful implementation of our business plan may be affected by a number of factors including the availability of sufficient funds, government policies relevant for our industry, the economic conditions and our ability to maintain our existing competitive advantages. There is no assurance that our business plan can be successfully implemented. Should there be any material adverse change in our operating environment which results in our failure to implement any part of our business plan, our prospects may be adversely affected. We may be exposed to infringement claims by third parties, which, if successful, could cause us to pay significant damages We cannot assure you that education materials and content used in our private education institutions and programmes do not or will not infringe intellectual property rights of third parties. However, we cannot guarantee that third parties will not claim that we have infringed on their proprietary rights in the future. Although we plan to defend ourselves vigorously in any such litigation or legal proceedings, we cannot assure you that we will prevail in these matters. Participation in such litigation and legal 41

49 RISK FACTORS proceedings may also cause us to incur substantial expenses and divert the time and attention of our management. We may be required to pay damages or incur settlement expenses. In addition, in case we are required to pay any royalties or enter into any licensing agreements with the owners of intellectual property rights, we may find that the terms are not commercially acceptable and we may lose the ability to use the related materials or content, which in turn could adversely affect our education programmes. Any similar claim against us, even without any merit, could also damage our reputation and brand image. Any such event could have a material adverse effect on our business, financial condition and results of operations. We may not be able to register our trademarks in the PRC As at the Latest Practicable Date, we had applied for registration of the trademark in the PRC. Details of the applications are set out in the section headed Statutory and General Information B. Further information about our Group 2. Intellectual property rights in Appendix V to this prospectus. However, there is no assurance that the applications for the registration of the above trademark in the PRC will eventually be approved or that we would be granted exclusive rights to use these marks as registered trademarks in the PRC. If the trademark could not be registered, or if the registration process is delayed, our above trademarks may be infringed, which may materially and adversely affect our business, prospects, financial condition and results of operations. We may experience system disruptions to our computer systems and networks; and unauthorised disclosure of personal data that we collect and retain due to a system failure or otherwise could damage our business Our computer systems may be vulnerable to breakdowns, malfunction or disruption due to events beyond our control and there is no assurance that we will not suffer any damage or disruption caused by power outages, computer viruses, hardware and software failures, telecommunications failures, fires and other similar incidents. Any breakdown or disruption to any of our computer systems could have a material adverse effect on our business and results of operations. Furthermore, we maintain records that include personal data of our students, such as academic records, address and family information. If the security measures we use to protect personal data are ineffective due to a system failure or other reasons, we could be liable for claims of invasion of privacy, impersonation, unauthorized purchases or other claims. In addition, we could be held liable for the misuse of personal data, fraudulent or otherwise, by our employees, independent consultants or third-party contractors. We could incur significant expenses in connection with rectifying any security breaches, settling any resulting claims and providing additional protection to prevent additional breaches. In addition, any failure to protect personal information may adversely impact our ability to attract and retain students, harm our reputation and materially adversely affect our business, prospects and results of operations. We have limited insurance coverage with respect to our business and operations We are exposed to various risks associated with our business and operations, and we have limited insurance coverage. Please refer to the sub-section headed Business Insurance inthis 42

50 RISK FACTORS prospectus for more information. We are exposed to risks including, among other things, accidents or injuries in our private education institutions, loss of key management and personnel, business interruption, natural disasters, terrorist attacks and social instability or any other events beyond our control. We do not have any business disruption insurance or product liability insurance. Any business disruption, legal proceeding or natural disaster or other events beyond our control could result in substantial costs and diversion of our resources, which may materially and adversely affect our business, financial condition and results of operations. We face risks related to natural disasters, health epidemics or terrorist attacks in Malaysia Our business could be materially and adversely affected by natural disasters, such as earthquakes, floods, landslides, tornados and tsunamis, outbreaks of health epidemics such as avian influenza and severe acute respiratory syndrome (commonly referred to as SARS ), and Influenza A virus, such as H5N1 subtype and H5N2 subtype flu viruses, as well as terrorist attacks, other acts of violence or war or social instability in the locations and regions in which we operate or those generally affecting Malaysia. If any of these occur, our institutions and facilities may be required to temporarily or permanently close and our business operations may be suspended or terminated. Our students, teachers and staff may also be negatively affected by such event. In addition, any of these could adversely affect the Malaysia economy and demographics of the affected region, which could cause significant declines in the number of our students in that region and have a material adverse effect on our business, financial condition and results of operations. The appraisal value of our property may be different from their actual realizable values and are subject to uncertainty or change The Property Valuation Report set out in Appendix IV to this prospectus with respect to the appraised value of our property is based on various assumptions, certain of which are subjective and uncertain in nature. Please refer to the Property Valuation Report set out in Appendix IV to this prospectus for such assumptions that used by the Property Valuer in the valuation of our property interests. We cannot assure you that the assumptions used by the Property Valuer in the valuation of our property interests will be realised. Such assumptions may exceed the corresponding parameters in the current market and/or corresponding historical parameters associated with our property. Hence, the appraised value of our property should not be taken as its actual realizable value or a forecast of its realizable value. Unexpected changes to our property and to the national and local economic conditions may affect the value of such property. You should not place undue reliance on such appraised value attributable by the Property Valuer to our property. Our historical financial and operating results may not be indicative of future performance Our financial and operating results may not meet the expectations of public market analysts or investors. Our revenue, expenses and operating results may vary from quarter to quarter and from year to year in response to a variety of factors, some of which are beyond our control. Key factors affecting our business and results of operations include: our ability to increase student enrollments and charges of tuition fees; general economic conditions in Malaysia or the worldwide market; 43

51 RISK FACTORS laws, regulations, governmental policies or actions pertaining to the provision of private education services in Malaysia; and our ability to control cost of revenue and operating expenses. In light of such factors, our Directors consider that even quarter-to-quarter comparisons of our historical operating results may not be indicative of our future performance. Investors shall not place undue reliance on these comparisons to predict the future performance of our Shares. We experienced net current liabilities positions. If we fail to manage our liquidity situation carefully, our results of operations may be materially and adversely affected We had recorded net current liabilities of approximately RM16.7 million and RM21.9 million as at 30 June 2016 and 28 February 2018, respectively and relatively thin net current assets of approximately RM5.6 million and RM2.1 million as at 30 June 2017 and 31 October 2017, respectively. For further details and the reasons of recording net current liabilities, please refer to the sub-section headed Financial Information Working Capital. Our net current liabilities position exposes us to liquidity risk. Our future liquidity, the payment of accounts payable, other payables and the repayment of our outstanding debts will primarily depend on our ability to generate adequate cash inflows from our operations and sufficient external financing. We cannot assure you that we will not have net current liabilities in the future. If we fail to secure adequate funds as working capital, our financial condition and results of operations will be adversely affected. RISKS RELATING TO MALAYSIA Changes in the political, economic and social conditions, laws, regulations and policies of Malaysia may have an adverse effect on us Our business prospects, financial condition and prospects of the industry in which we operate will depend to some degree on the developments of the economic, political and regulatory front in Malaysia. Any adverse developments in the political, economic and regulatory environment including prolonged and/or widespread economic slowdown in Malaysia would affect our business and profitability. We may also be affected by any change in inflation rates, interest rates, and foreign exchange rates, war, terrorism activities, riots, expropriations, political developments and/or unfavourable changes in regulatory and government policies relating to the education industry in Malaysia. Such political and/or regulatory changes and uncertainties include, but not limited to, the introduction of new or revised laws and regulations which may impact and/or impose restrictions on the education industry, political developments, risk of war, expropriation, nationalisation, financial and banking policies and guidelines, as well as renegotiation or nullifying of contracts. There can be no assurance that adverse political, economic and regulatory changes, which are beyond our control, will not materially affect our Group s businesses. Similarly, any widespread and/or prolonged economic slowdown would affect business and consumer confidence, and subsequently decrease economic activities in Malaysia, which in turn could materially and adversely affect our business, financial condition, results of operations and prospects. 44

52 RISK FACTORS We may be subject to tax audit and investigation in Malaysia The Malaysian tax regime is based on a self-assessment system. Persons chargeable including companies in Malaysia have legal obligations to make self-assessment on the tax payable and file necessary tax returns annually with their remittance of tax. MIRB is empowered by the Malaysian Income Tax Act 1967 to carry out audit and investigation on persons chargeable to determine, inter alia, whether their tax returns are accurate and complete. The Malaysian Income Tax Act 1967 also empowers MIRB to impose additional tax and/or penalties on persons chargeable if MIRB determines that the persons chargeable are in fact subject to more tax payables than are reported in the selfassessed tax returns. We calculate the amount of our taxes and make payment thereof in accordance with the applicable tax laws. We may be subject to additional taxes or penalty if MIRB have a different view from us with respect to our self-assessed tax payables in our filed tax returns. As we may be subject to tax audit and investigation by MIRB from time to time, in the event that MIRB imposes additional tax or penalty on our Group, our profit margin may decrease and consequently our financial results may be adversely affected. The Malaysian ringgit may be subject to foreign exchange controls imposed by Malaysian government in the future or may be subject to exchange rate fluctuations The Central Bank of Malaysia has, in the past, intervened in the foreign exchange market to stabilize the Malaysian ringgit, and it pegged the Malaysian ringgit to the United States dollar in September On July 21, 2005, the Central Bank of Malaysia adopted a managed float system which benchmarked the Malaysian ringgit to a currency basket to ensure that the Malaysian ringgit remains close to its fair value. Fluctuations in the Malaysian ringgit s value against other currencies will create foreign currency translation gains or losses and may have an adverse effect on our business, financial condition and results of operations. Any imposition, variation or removal of foreign exchange controls may adversely affect the value, translated or converted into U.S. dollars or Hong Kong dollars, of our net assets, earnings or any declared dividends. Consequently, this may adversely affect the ability of our operating subsidiaries in Malaysia to liquidate the shares or repatriate the proceeds from the liquidation of such shares out of Malaysia. Our principal subsidiaries are incorporated in Malaysia and our main assets are located in Malaysia, and thus it could be difficult to enforce a foreign judgment against our Malaysian subsidiaries, our Directors or our executive officers Our principal subsidiaries are incorporated under the laws of Malaysia. The majority of our Directors and executive officers are residents of Malaysia and a substantial portion of our assets and the assets of these Directors and executive officers are located in Malaysia. Enforceability of certain foreign judgments in Malaysia is by virtue of the Reciprocal Enforcement of Judgments Act 1958, in which a foreign judgment must be registered before it can be enforceable. As a result, it could be difficult to enforce a foreign judgment against our Malaysian subsidiaries, our Directors or our executive officers. 45

53 RISK FACTORS Our ability to receive dividends and other payments from our subsidiaries in Malaysia may be restricted There are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies are administered according to the Foreign Exchange Administration Rules as promulgated by the Central Bank of Malaysia. The foreign exchange policies apply to both residents and non-residents. Under the current Foreign Exchange Administration Rules issued by the Central Bank of Malaysia, non-residents are free, at any time, to repatriate any amount of investment proceeds, including capital, divestment proceeds, profits, dividends, or any income arising from investments in Malaysia, subject to the applicable reporting requirements and any withholding tax, provided that repatriation of funds must be made in a foreign currency. If the Central Bank of Malaysia introduces any new foreign exchange policies which restrict such proceeds from being repatriated in the future, the ability to repatriate dividends or distributions to our Company could adversely affect our business, results of operations and financial condition. RISKS RELATING TO THE GLOBAL OFFERING AND OUR SHARES There has been no prior public market for the Share and the liquidity, market price and trading volume of the Share may be volatile Prior to the Listing, there is no public market for the Shares. The listing of, and the permission to deal with, the Shares on the Stock Exchange do not guarantee the development of an active public market or the sustainability thereof following completion of the Global Offering. Factors such as variations in our Group s turnovers, earnings and cash flows, strategic alliances or acquisitions made by our Group or its competitors, industrial or environmental accidents happened to our Group, loss of key personnel, litigation, fluctuations in the market prices for raw materials, the liquidity of the market for the Shares, or the general market sentiment, could cause the market price and trading volume of the Shares to change substantially. In addition, both the market price and liquidity of the Shares could be adversely affected by factors beyond our Group s control and unrelated to the performance of our Group s business, especially if the financial market in Hong Kong experiences a significant fluctuation. In such cases, investors may not be able to sell their Shares at or above the Offer Price. Investors may experience dilution if our Group issues additional Shares in the future, and future issues, offers or sale of Shares may also adversely affect the prevailing market price of the Shares Our Company may consider offering and issuing additional Shares in the future. The increase in the number of Shares outstanding after the issue would result in the reduction in the percentage ownership of the Shareholders and may result in a dilution in the earnings per Share and net asset value per Share. In addition, our Group may need to raise additional funds in the future to finance business expansion, new development and acquisitions. If additional funds are raised through the issuance of new equity or equity-linked securities of our Company other than on a pro-rata basis to the existing Shareholders, the shareholding of such Shareholders in our Company may be reduced or such new securities may confer rights and privileges that take priority over those conferred by the Offer Shares. Moreover, future issue of Shares by our Company or the disposal of Shares by any of the Shareholders or the perception that such issues or sale may occur, may negatively impact the 46

54 RISK FACTORS prevailing market price of the Shares. We cannot give any assurance that such event will not occur in the future. Any disposal by our Controlling Shareholders of a substantial number of Shares in the public market could materially and adversely affect the market price of the Shares There is no guarantee that our Controlling Shareholders will not dispose of their Shares following the expiration of their respective lock-up periods after the Listing. Our Group cannot predict the effect, if any, of any future sales of the Shares by any of our Controlling Shareholders, may have on the market price of the Shares. Sales of a substantial number of Shares by any of our Controlling Shareholders or the market perception that such sales may occur could materially and adversely affect the prevailing market price of the Shares. Investors may experience difficulties in enforcing their shareholders rights because our Company was incorporated in the Cayman Islands, and the protection to minority shareholders under Cayman Islands law may be different from that under the laws of Hong Kong or other jurisdictions Our Company was incorporated in the Cayman Islands and its affairs are governed by the Articles, the Companies Law and common law applicable in the Cayman Islands. The laws of the Cayman Islands may differ from those of Hong Kong or other jurisdictions where investors may be located. As a result, minority Shareholders may not enjoy the same rights as pursuant to the laws of Hong Kong or such other jurisdictions. A summary of the Cayman Companies Law on protection of minority Shareholders is set out in Appendix III to this prospectus. There can be no assurance that we will declare or distribute any dividend in the future Any decision to declare any dividend would require the recommendation of our Board and approval of our Shareholders. Any decision to pay any dividend will be made having regard to factors such as the results of operation, financial condition and position, and other factors deemed relevant. Any distributable profits that are not distributed in any given year may be retained and be made available for distribution in subsequent years. To the extent profits are distributed as dividends, such portion of profits will not be available to be reinvested in our operation. There can be no assurance that we will be able to declare or distribute any dividend. Our future declarations of dividends will be at the absolute discretion of our Board. Our Group s future results could differ materially from those expressed in or implied by the forward-looking statements Included in this prospectus are various forward-looking statements that are based on various assumptions. Our Group s future results could differ materially from those expressed in or implied by such forward-looking statements. For details of these statements and the associated risks, please refer to the section headed Forward-looking Statements in this prospectus. RISKS RELATING TO STATEMENTS MADE IN THIS DOCUMENT Statistics and industry information contained in this prospectus may not be accurate and should not be unduly relied upon Certain facts, information, statistics, and data presented in the section headed Industry Overview in this prospectus and elsewhere in this prospectus relating to the industry in which we 47

55 RISK FACTORS operate have been derived, in part, from various publications, industry-related sources prepared by government officials or independent third parties and a market research report commissioned by us and prepared by Frost & Sullivan, an independent market research agency. Our Company believes that the sources of such information are appropriate sources for such information, and the Sole Sponsor and our Directors have taken reasonable care to extract and reproduce the publications and industry-related sources in this prospectus. In addition, our Company has no reason to believe that such information is false or misleading, or that any material fact has been omitted, which omission would render such information false or misleading. However, neither our Group, our Directors, the Sole Sponsor, nor any parties involved in the Global Offering have independently verified, or make any representation as to, the accuracy of such information and statistics. It cannot be assured that statistics derived from such sources are prepared on a comparable basis or that such information and statistics are stated or prepared at the same standard or level of accuracy as, or consistent with, those in other publications within or outside Hong Kong. Accordingly, such information and statistics may not be accurate and should not be unduly relied upon. Investors should read this entire prospectus carefully and we strongly caution you not to place any reliance on any information contained in press articles, media coverage and/or research analyst reports regarding us and the Global Offering including, in particular, any financial projections, valuations or other forward looking statement Prior to the publication of this prospectus, there may be press or other media, which contains certain information referring to us and the Global Offering that is not set out in this prospectus. We wish to emphasize to prospective investors that neither we nor any of the Sole Sponsor, Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, our Directors, officers, employees, advisors, agents or representatives of any of them, or any other parties (collectively, the Professional Parties ) involved in the Global Offering have authorized the disclosure of such information in any press or media, and neither the press reports, any future press reports nor any repetition, elaboration or derivative work were prepared by, sourced from, or authorized by us or any of the Professional Parties. Neither we nor any of the Professional Parties accept any responsibility for any such press or media coverage or the accuracy or completeness of any such information. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication. To the extent that any such information is not contained in this prospectus or is inconsistent or conflicts with the information contained in this prospectus, we disclaim any responsibility, liability whatsoever in connection therewith or resulting therefrom. Accordingly, prospective investors should not rely on any such information in making your decision as to whether to subscribe the Offer Shares. You should rely only on the information contained in this prospectus and the Application Forms. 48

56 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING DIRECTORS RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS This prospectus, for which our Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the GEM Listing Rules for the purpose of giving information to the public with regard to us. Our Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this prospectus is accurate and complete in all material aspects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this prospectus misleading. INFORMATION ON THE GLOBAL OFFERING The Global Offering comprises the International Placing and the Hong Kong Public Offer. The Global Offering is an offer of 20,000,000 Shares under the Hong Kong Public Offer (subject to reallocation) and 180,000,000 Shares under the Placing (subject to reallocation and the Offer Size Adjustment Option), in each case at the Offer Price. Details of the structure of the Global Offering are set out in the section headed Structure and conditions of the Global Offering in this prospectus. The Offer Shares are offered solely on the basis of the information contained and the representations made in this prospectus and the Application Forms, on the terms and subject to the conditions set out herein. No person in connection with the Global Offering is authorised to give any information, or to make any representation not contained in this prospectus and the Application Forms, and any information or representation not contained herein must not be relied upon as having been authorised by our Company, our Directors, the Sole Sponsor, the Joint Global Coordinators and the Underwriters, and any of their respective directors, agents, employees or advisers or any other party involved in the Global Offering. UNDERWRITING This prospectus is published solely in connection with the Global Offering, comprising the International Placing and the Hong Kong Public Offer. Details of the structure of the Global Offering, including conditions of the Global Offering, are set out in section headed Structure and Conditions of the Global Offering in this prospectus. The Listing is sponsored by the Sole Sponsor and managed by the Joint Global Coordinators. The Hong Kong Public Offer will be fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to the agreement to the Offer Price between our Company and the Joint Global Coordinators (for itself and on behalf of the other Underwriters). The book of underwriting for the Global Offering is run by the Joint Global Coordinators. The Placing will be fully underwritten by the International Underwriters under the terms and conditions of the International Underwriting Agreement. For further details about the Underwriters and the Underwriting Agreements, please refer to the section headed Underwriting in this prospectus. DETERMINATION OF THE OFFER PRICE The Offer Shares are being offered at the Offer Price which will be determined by the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company on the Price Determination Date, or such later date or time as may be agreed by the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company. The Offer Price is currently expected to be 49

57 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING not more than HK$0.50 per Offer Share and not less than HK$0.40 per Offer Share. The Joint Global Coordinators (for itself and on behalf of the Underwriters) may reduce the indicative Offer Price range stated in this prospectus at any time prior to the Price Determination Date. In such case, a notice of the reduction of the indicative Offer Price range will be published on the Stock Exchange s website at and our Company s website at If the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company are unable to reach an agreement on the Offer Price on the Price Determination Date, or such later date or time as may be agreed between the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company, the Global Offering will not proceed. SELLING RESTRICTIONS OF OFFER SHARES No action has been taken to permit any offering of the Offer Shares or the distribution of this prospectus and/or the related Application Forms in any jurisdiction other than Hong Kong. Accordingly, this prospectus and/or the related Application Forms may not be used for the purpose of, and does not constitute, an offer or invitation nor is it calculated to invite or solicit offers in any jurisdiction or in any circumstances in which such offer or invitation is not authorised or to any person to whom it is unlawful to make such an offer or invitation. The distribution of this prospectus and/or the related Application Forms and the offering of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable laws, rules and regulations of such jurisdictions pursuant to registration with or authorisation by the relevant regulatory authorities or as an exemption therefrom. Each person acquiring the Offer Shares will be required to confirm, or by his/her acquisition of the Offer Shares be deemed to confirm, that he/she is aware of the restrictions on the offer of the Offer Shares described in this prospectus and/or the related Application Forms and that he/she is not acquiring, and has not been offered any such Offer Shares in circumstance that contravenes any such restrictions. Prospective subscribers for the Offer Shares should consult their financial advisers and take legal advice as appropriate, to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. Prospective investors for the Offer Shares should inform themselves as to the relevant legal requirements of applying for the Offer Shares and any applicable exchange control regulations and applicable taxes in the countries of their respective citizenship, residence or domicile. PROCEDURE FOR APPLICATION FOR THE HONG KONG PUBLIC OFFER SHARES The procedure for application for the Hong Kong Public Offer Shares is as set out in the section headed How to Apply for the Hong Kong Public Offer Shares in this prospectus and on the relevant Application Forms. STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING Details of the structure and conditions of the Global Offering are set out in the section headed Structure and Conditions of the Global Offering in this prospectus. APPLICATION FOR LISTING ON GEM Application has been made to the Stock Exchange for the listing of, and permission to deal in, the Shares in issue and to be issued pursuant to the Global Offering and the Capitalisation Issue. 50

58 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provision) Ordinance, if the permission for the Shares to be listed on GEM pursuant to this prospectus has been refused before the expiration of three weeks from the date of the closing of the Global Offering or such longer period not exceeding six weeks as may, within the said three weeks, be notified to our Company for permission by or on behalf of the Stock Exchange, then any allotment made on an application in pursuance of this prospectus shall, whenever made, be void. Pursuant to Rule 11.23(7) of the GEM Listing Rules, at the time of Listing and at all times thereafter, our Company must maintain the minimum prescribed percentage of 25% of the issued share capital of our Company in the hands of the public (as defined in the GEM Listing Rules). No part of the Shares or loan capital of our Company is listed, traded or dealt in on any other stock exchange. At present, our Company is not seeking or proposing to seek a listing of, or permission to deal in, any part of the Shares or loan capital on any other stock exchange. SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS Subject to the granting of the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus on GEM and the compliance with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing Date, or on any other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second Business Day after any trading day. Investors should seek the advice of their stockbroker or other professional adviser for details of those settlement arrangements as such arrangements will affect their rights and interests. All necessary arrangements have been made for the Shares to be admitted into CCASS. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. DEALINGS AND SETTLEMENT Dealings in the Shares on GEM are expected to commence at 9:00 a.m. (Hong Kong time) on or about Wednesday, 16 May Shares will be traded in board lots of 5,000 Shares each and are freely transferable. The GEM stock code for the Shares is HONG KONG SHARE REGISTER AND STAMP DUTY All of the Shares will be registered in our Company s branch register of members to be maintained in Hong Kong by the branch share registrar and transfer office, Tricor Investor Services Limited. Only Shares registered on our Company s branch register of members maintained in Hong Kong may be traded on GEM. 51

59 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING Our Company s principal register of members will be maintained by the principal share registrar and at the registered office at P.O. Box Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY Cayman Islands. Dealings in the Shares registered in the branch register of members of our Company in Hong Kong will be subject to Hong Kong stamp duty. Unless determined otherwise by our Company, dividends payable in Hong Kong dollars in respect of the Shares will be paid to the Shareholders listed on our Company s Hong Kong branch register of members to be maintained in Hong Kong, by ordinary post, at the Shareholders risk, to the registered address of each Shareholder or if joint Shareholders, to the first-named therein in accordance with the Articles. PROFESSIONAL TAX ADVICE RECOMMENDED Potential investors in the Global Offering are recommended to consult their professional advisers if they are in any doubt as to taxation implications of the subscription for, purchase, holding or disposal of, dealings in, or the exercise of any rights in relation to, the Offer Shares. None of our Company, our Directors, the Sole Sponsor, the Joint Global Coordinators, the Underwriters, any of their respective directors, advisers, officers, employees, agents or representatives (where applicable) or any other persons involved in the Global Offering accepts responsibility for any tax effects on or liabilities of any person resulting from the subscription for, purchase, holding or disposal of, dealings in, or the exercise of any rights in relation to, the Offer Shares. EXCHANGE RATE CONVERSION Solely for your convenience, this prospectus contains translation of certain RM amounts into Hong Kong dollars at a specified rate. Unless we indicate otherwise, the translations of RM into Hong Kong dollars and vice versa have been made at the rate of RM 1.00 to HK$2.03 in this prospectus. No representation is made that any amount in RM or Hong Kong dollars can be or could be, or have been, converted at the above rate or any other rate or at all. ROUNDING Certain amounts and percentage figures included in this prospectus have been subject to rounding adjustments. Accordingly, totals of rows or columns of numbers in tables may not be equal to the apparent total individual items. When information is presented in thousands or millions of units, amounts may have been rounded up or down. LANGUAGE If there is any inconsistency between the English version of this prospectus and the Chinese version of this prospectus, the English version of this prospectus shall prevail. Names of any laws and regulations, governmental authorities, institutions, natural persons or other entities which have been translated into English and included in this prospectus and for which no official English translation exists are unofficial translations for your reference only. 52

60 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING DIRECTORS Name Residential address Nationality Executive Directors Tan Sri Barry Goh (Chairman) No. 49, Jalan USJ 18/2A UEP Subang Jaya Selangor Malaysia Malaysian Dato Danny Goh Dr. Chua Independent Non-Executive Directors No. 2A, Jalan Anggerik Vanda 1 31/167A Kota Kemuning Hills Shah Alam Seksyen 1 Selangor Malaysia No. 439 Jalan B5 Taman Melawati Setapak W. Persekutuan W. Persekutuan Kuala Lumpur Malaysia Malaysian Malaysian Tan Sri Salleh No. 349 Jalan SS 2/2 Sea Park Petaling Jaya Malaysia Tan Sri Karim No. 4 Jalan Akik Satu 7/3A Shah Alam Selangor Malaysia Prof. Dr. Rozainun 19 Jalan Kristal Enam 7/70F Seksyen Shah Alam Selangor Malaysia Malaysian Malaysian Malaysian Please also refer to the section headed Directors and Senior Management in this prospectus for further details of our Directors. 53

61 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING PARTIES INVOLVED IN THE GLOBAL OFFERING Sole Sponsor Joint Global Coordinators and Joint Bookrunners China Everbright Capital Limited 24 th Floor, Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong China Everbright Securities (HK) Limited 24 th Floor, Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong Sinolink Securities (Hong Kong) Company Limited Units 2503, , 25/F, Low Block Grand Millennium Plaza 181 Queen s Road Central Hong Kong Joint Lead Managers China Everbright Securities (HK) Limited 24th Floor, Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong Sinolink Securities (Hong Kong) Company Limited Units 2503, , 25/F, Low Block Grand Millennium Plaza 181 Queen s Road Central Hong Kong Sinomax Securities Limited Room , 27/F Tower One, Lippo Centre 89 Queensway Hong Kong Legal advisers to the Sole Sponsor and the Underwriters Legal advisers to our Company as to Hong Kong law: Wilson Sonsini Goodrich & Rosati Suite 1509, 15/F, Jardine House 1 Connaught Place Central Hong Kong (Solicitors of Hong Kong SAR) as to Hong Kong law: Kwok Yih & Chan Suites , 21/F 9 Queen s Road Central Central Hong Kong (Solicitors of Hong Kong SAR) 54

62 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING as to Malaysian law: Mah-Kamariyah & Philip Koh 3A07, Block B, Phileo Damansara II 15 Jalan 16/11 Off Jalan Damansara Petaling Jaya Selangor Darul Ehsan Malaysia (Solicitors of Malaysia) as to Cayman Islands law: Appleby , Jardine House 1 Connaught Place Central Hong Kong Auditor and reporting accountants Property valuer Internal control consultant Industry Consultant BDO Limited 25/F, Wing On Centre 111 Connaught Road Central Hong Kong (Certified Public Accountants) Savills (Malaysia) Sdn. Bhd. Level 9, Menara Milenium Jalan Damanlela Bukit Damensara Kuala Lumpur Malaysia Zhonghui Anda Risk Services Limited Unit 701, 7/F Citicorp Centre,18 Whitfield Road Causeway Bay Hong Kong Frost & Sullivan Limited Room 1706 One Exchange Square Central Hong Kong 55

63 CORPORATE INFORMATION Registered office Headquarter and principal place of business in Malaysia Headquarters and principal place of business in Hong Kong registered under Part 16 of the Companies Ordinance Company secretary Authorised representatives Compliance officer Audit committee Remuneration committee Nomination committee P.O. Box Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY Cayman Islands LG5, Kingsley International School, Persiaran Kingsley, Kingsley Hills, Putra Heights, Subang Jaya, Selangor, Malaysia Level 54, Hopewell Centre 183 Queen s Road East Hong Kong Lee Mei Yi (fellow member, The Institute of Chartered Secretaries and Administrators; fellow member, The Hong Kong Institute of Chartered Secretaries) Level 54, Hopewell Centre 183 Queen s Road East Hong Kong Dr. Chua No. 439 Jalan B5 Taman Melawati Setapak Wilayah Persekutuan Kuala Lumpur Malaysia Lee Mei Yi Level 54, Hopewell Centre 183 Queen s Road East Hong Kong Dr. Chua No. 439 Jalan B5 Taman Melawati Setapak Wilayah Persekutuan Kuala Lumpur Malaysia Prof. Dr. Rozainun (Chairlady) Tan Sri Salleh Tan Sri Karim TanSriSalleh(Chairman) Tan Sri Karim Prof. Dr. Rozainun Tan Sri Barry Goh Dr. Chua Tan Sri Karim (Chairman) Tan Sri Salleh Prof. Dr. Rozainun Tan Sri Barry Goh Dr. Chua 56

64 CORPORATE INFORMATION Cayman Islands principal share registrar and transfer office Hong Kong branch share registrar and transfer office Principal banker Compliance adviser Company s website Receiving bank Estera Trust (Cayman) Limited P.O. Box 1350, Clifton House 75 Fort Street Grand Cayman KY Cayman Islands Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen s Road East Hong Kong CIMB Bank Berhad Level 13, Menara CIMB Jalan Stesen Sentral 2 Kuala Lumpur Sentral Kuala Lumpur China Everbright Capital Limited 24 th Floor, Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong (information contained in this website does not form part of this prospectus) DBS Bank (Hong Kong) Limited 16/F The Center 99 Queen s Road Central Hong Kong 57

65 INDUSTRY OVERVIEW The information presented in this section, unless otherwise indicated, is derived from various official government publications and other publications and from the market research report prepared by Frost & Sullivan, which was commissioned by us. We believe that the information has been derived from appropriate sources and we have taken reasonable care in extracting and reproducing the information. We have no reason to believe that the information is false or misleading in any material respect or that any fact has been omitted that would render the information false or misleading in any material respect. Our Directors confirm that, after making reasonable enquiries, there is no adverse change in the market information since the date of the Frost & Sullivan Report that would qualify, contradict or have a material impact on the information in this section. The information has not been independently verified by us, the Sole Sponsor, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, or any of our or their respective directors, officers or representatives or any other person involved in the Global Offering nor is any representation given as to its accuracy or completeness. SOURCE OF INFORMATION We commissioned Frost & Sullivan, an independent market research and consulting company, to conduct an analysis of, and to prepare a report on the international school, tertiary and professional education market in Malaysia. The report prepared by Frost & Sullivan for us is referred to in this prospectus as the Frost & Sullivan Report. We paid Frost & Sullivan a fee of HK$450,000 which we believe reflects market rates for reports of this type. Founded in 1961, Frost & Sullivan has 40 offices with more than 2,000 industry consultants, market research analysts, technology analysts and economists globally. Frost & Sullivan s services include technology research, independent market research, economic research, corporate best practises advising, training, client research, competitive intelligence and corporate strategy. We have included certain information from the Frost & Sullivan Report in this prospectus because we believe this information facilitates an understanding of the international school, tertiary and professional education market in Malaysia for the prospective investors. The Frost & Sullivan Report includes information on the international school, tertiary and professional education market in Malaysia as well as other economic data, which have been quoted in the prospectus. Frost & Sullivan s independent research consists of both primary and secondary research obtained from various sources in respect of the international school, tertiary and professional education market in Malaysia. Primary research involved in-depth interviews with leading industry participants and industry experts. Secondary research involved reviewing company reports, independent research reports and data based on Frost & Sullivan s own research database. Projected data were obtained from historical data analysis plotted against macroeconomic data with reference to specific industry-related factors. Except as otherwise noted, all of the data and forecasts contained in this section are derived from the Frost & Sullivan Report, various official government publications and other publications. In compiling and preparing the research, Frost & Sullivan assumed that the social, economic and political environments in the relevant markets are likely to remain stable in the forecast period, which ensures the stable and healthy development of the international school, tertiary and professional education market in Malaysia. OVERVIEW OF MACRO ECONOMY IN MALAYSIA According to International Monetary Fund ( IMF ), the nominal GDP of Malaysia has recorded a steady growth from RM971.3 billion in 2012 to RM1,229.4 billion in 2016, representing a CAGR of 58

66 INDUSTRY OVERVIEW 6.1%. The continuous infrastructure development and economic activities are expected to drive the growth of GDP. Hence, the nominal GDP is expected to grow at a CAGR of 8.1% during 2017 to 2021 and reaching RM1,806.4 billion in As supported by the new born and immigrants in the country, the total population in Malaysia has demonstrated a steady growth from 29.5 million in 2012 to 31.7 million in 2016, representing a CAGR of 1.8%. The population is estimated to grow at a CAGR of 1.7% during 2017 to 2021, reaching 34.4 million by the end of this period. According to Frost & Sullivan Report, Selangor is the largest region in terms of GDP in Malaysia in 2016, accounting for approximately 22.7% of total GDP in the country and is expected to grow at a CAGR of 8.1% during 2017 to Selangor is also the most populated state in Malaysia with approximately 6.3 million population in 2016 and is expected to grow at a CAGR of 2% during 2017 to OVERVIEW OF EDUCATION SYSTEM IN MALAYSIA Structure of Education System International school in Malaysia is under private sector and generally covers pre-tertiary level of education comprising pre-education, primary and secondary education with the use of international curriculum and English as the medium of instruction. On the other hand, as specified by the Education Act 1996, private schools in Malaysia are required to use National Curriculum for primary and secondary education. Public Sector Private Sector National School National-type Primary School Private School Independent Chinese School International School Government-aided Public-funded Chinese Tamil Source: Frost & Sullivan Number of Students by Type of Institutions The number of students in private sector has increased at a CAGR of 8.8% during 2012 to This indicates the growing importance of private sector in the overall education market in Malaysia due to the fact that private sector generally provides a more comprehensive education environment to students. In particular, number of students in private higher education institution ( PHEI ) increased significantly at a CAGR of 11.2% during 2012 to The similar trend also applies to Selangor. For example, according to Ministry of Education of Malaysia, the student enrollment in private primary and secondary schools in Selangor recorded a positive growth from 175,713 to 205,204 during the same period of time, which represents a CAGR of 5.3%. The expansion in private sector indicates the growth of international school education market in Malaysia. Revenue of Private Education Services With the growing awareness towards high quality education as well as students enrollment in private education institutions, the revenue of private education services increased steadily from approximately RM11.7 billion in 2012 to approximately RM15.7 billion in 2016, representing a CAGR of 7.7%. The rise of middle class and emergence of affordable private schools and international schools are expected to be key drivers to private education services in Malaysia. Hence, the revenue of private education services may increase at a CAGR of 8.8% during 2017 to 2021 and reaching approximately RM23.7 billion by

67 INDUSTRY OVERVIEW OVERVIEW OF INTERNATIONAL SCHOOL MARKET IN MALAYSIA AND SELANGOR International schools refer to the private schools that promote international education in an international environment by adopting international curriculum and using English as the primary medium of instruction. According to Frost & Sullivan, based on average annual tuition fee, international school in Malaysia can be divided into three segments, namely high-end (RM40,000 above), mid-range (RM20,000 to RM40,000) and low-end (below RM20,000). According to the Frost & Sullivan Report, as at the Latest Practicable Date, there are several accredited examination boards that offer IGCSE while Cambridge IGCSE is one of the common IGCSE programmes in Malaysia, offered by approximately 60% of international schools in Malaysia in Developed over 20 years ago, Cambridge IGCSE is one of the most recognised English language curriculum by leading universities and employers worldwide. Cambridge IGCSE covers over 70 subjects including 30 languages with a variety of combination and a choice between core and extended curricula depending on the requirement and abilities of students. In addition, many foreign universities require a combination of Cambridge International A Levels and Cambridge IGCSEs as an entry requirements. In particular, according to UK NARIC, a United Kingdom national agency for the recognition and comparison of international qualifications and skills, Cambridge IGCSE is comparable to the standard of UK GCSE. In the UK, Cambridge IGCSE is accepted as equivalent to the GCSE for admission of UK institutions. Student Enrollment in International School in Malaysia and Selangor According to Private Education Division, Ministry of Education, the student enrollment in primary and secondary international schools increased significantly from 27,804 in 2012 to 54,128 in 2016, which represents a CAGR of 18.1%. The growth was primarily due to government policy to encourage establishment of international schools in the country and open access of international schools to Malaysian students after removal of 40% enrollment cap for local students. The number of student enrollment in international school in Malaysia is expected to grow at a CAGR of 15.2% during 2017 to 2021, which is mainly attributable to the higher preference of Malaysian families in private education and international school. Student enrollment in primary and secondary international schools in Selangor has increased from approximately 10,615 in 2012 to approximately 21,473 in 2016, representing a CAGR of 19.3%. With the increase in economic activities and income level in Selangor, the student enrollment in primary and secondary international schools is expected to reach 44,808 in

68 INDUSTRY OVERVIEW Student Enrolment in Primary and Secondary International Schools (Malaysia), E Number 125, ,000 75,000 50,000 25, ,804 10,615 17, ,476 14,501 Selangor Other Malaysia Total 41,754 16,546 46,339 18,001 CAGR ( ) 19.3% 17.4% 18.1% 54,128 21,473 23,975 25,208 28,338 32,655 36, CAGR (2017E-2021E) 61,824 24, % 14.8% 15.2% 70,966 28,538 81,670 33,056 42,428 48,614 94,136 38,453 55, ,792 44,808 63, E 2018E 2019E 2020E 2021E Selangor Other Source: Private Education Division, Ministry of Education, Frost & Sullivan In 2016, Malaysian students accounted for approximately 64.0% of total student enrollment in international primary and secondary schools, followed by students from United Kingdom (8.1%) and South Korea (6.6%). The relatively higher proportion of international students from United Kingdom was attributable to English as medium for communication in Malaysia. Furthermore, Malaysia was once a British colony with adoption of similar culture, international schools structure and curriculum such as Cambridge IGCSE offered by schools in United Kingdom. On the other hand, attributable to demand for expatriates from South Korean enterprises in Malaysia as well as expansion of real estate investment by Korean in Malaysia, Korean community has been established in Malaysia and it is common for Korean families to send their children to international schools for a more relaxed educational environment as compared to schools in Korea, coupled with other reasons such as lower cost, multicultural environment with chance to study multiple languages like English, Chinese or Malay. On the other hand, majority of student enrollment came from international schools located in Selangor and Federal Territory of Kuala Lumpur, which respectively accounted for 39.7% and 26.8% of total number of international school student enrollment in Malaysia in 2016, which were the largest regions in terms of students enrollment due to relatively high population in these locations. In addition, Malaysia has become a popular destination for international students to pursue pre-university education due to (i) English speaking environment, (ii) a wide variety of curriculum (e.g. IGCSE, A- Levels) and diploma courses offered by different institutions, (iii) relatively well established international school system and (iv) relatively low tuition fee and cost of living. 61

69 INDUSTRY OVERVIEW Breakdown by Student Enrolment in Primary and Secondary International Schools (Malaysia), 2016 Approximate Breakdown by Source Country of Students, 2016 Approximate Breakdown by States/ Region of International Schools, % 24.9% 3.4% 6.6% 39.7% 8.1% 64.0% 8.6% 26.8% Malaysia United Kingdom South Korea United States Other Countries Selangor Federal Territory of Kuala Lumpur Johor Other States Source: Private Education Division, Ministry of Education, Frost & Sullivan In 2016, the average drop-out rate of primary and secondary students in Malaysia was approximately 5% to 10%, while the average drop-out rate in Selangor also fell into the same range. Revenue of International Schools Generated from Tuition Fee Under the supportive policy and government initiatives to drive the growth of education sector as one of the National Key Economic Areas ( NKEA ), the market of international schools has seen an expansion during recent years. The market size of international primary and secondary schools in Malaysia by revenue generated from tuition fee increased significantly from RM1,029.5 million in 2012 to RM1,553.2 million in 2016, representing a CAGR of 10.8%. With the growing demand for international school education as well as the government s target of 75,000 student enrollment by 2020, the market size of international primary and secondary schools by revenue generated from tuition fee is estimated to grow at a CAGR of 11.0% during 2017 to 2021 and attaining RM2,579.4 million in Market Drivers Supportive initiatives for development of international schools In line with the aspiration of positioning Malaysia as an education hub in Southeast Asia region with world-class education and campus facilities, international schools have received a strong support from Malaysia government in recent years, including the provision of Investment Tax Allowances for international schools by Malaysian Investment Development Authority ( MIDA ). In addition, the Ministry of Education has removed the 40% enrollment cap for Malaysian students in international schools since Moreover, according to the National Association of Private Educational Institutions ( NAPEI ), the government expects a student enrollment of 75,000 students in international schools in Hence, these initiatives had laid the groundwork for potential growth of international schools in Malaysia. Rise of foreign investment in Malaysia The growth of foreign investment in Malaysia is expected to drive the development of international schools mainly through introduction of expatriates and surge of demand for foreign 62

70 INDUSTRY OVERVIEW culture with adoption to international school education. According to Department of Statistics of Malaysia, the foreign direct investment has registered a substantial growth from RM28,537 million in 2012 to RM41,176 million in 2016, representing a CAGR of 9.6%. Meanwhile, the number of foreign affiliates, which refer to an enterprise operating in Malaysia with more than 50% equity owned by a foreign company, increased from 2,857 in 2012 to 2,922 in Given the rise of foreign investment and enterprise in the country, international school education market in Malaysia may see a potential growth in future. Key goal to strengthen language proficiency of students As outlined in the Malaysia Education Blueprint issued by the Ministry of Education Malaysia, the country is set to raise the quality of education to meet the international standards and achieve high-performing education systems, which include enhancement of language proficiency of Malaysian students by making the English language in Malaysian Certificate of Education (SPM) paper a compulsory pass in 2016 and expanding opportunities to students for greater exposure to foreign languages (e.g. encourage every child to learn an additional language by 2025). Moreover, the fast-growing middle class and their increasing awareness of well-rounded education will continue to be the driving forces for the development of international schools. With the key attribute of using English as medium of instruction, an increasing popularity of international schools is expected. Market Trend Diversifying international schools in Malaysia International school in Malaysia used to targeting expatriates and students from foreign countries due to the 40% enrollment cap on local students in international schools. With the removal of such enrollment cap since 2012 and supportive policies from the government for establishing international schools in Malaysia, international schools were on a trend of diversification afterwards, such as increase in Malaysian student enrollment in international schools and emergence of affordable international schools with competitive tuition fee as compared with the long established high-end international schools. Meanwhile, the infrastructure, facilities, extra-curricular activities and curriculum offered by international schools are expected to become diverse to cater the needs of different parents and students. Future Opportunities Connection between Malaysia with other countries To achieve the goal of becoming a high income nation, Malaysia government has taken various initiatives to drive the economic growth including strengthening the connection with other countries. Specifically, Malaysia is following South Korea on economic development and transition towards a knowledge-based and high value-added economy. Key measures highlighted include the education exchange between two countries. On the other hand, Malaysia has reached closer economic ties with the PRC through the One Belt, One Road initiatives and therefore the number of students from the PRC is expected to increase, offering a good opportunity for growth to international schools. Average Annual Tuition Fee of International School in Malaysia and Selangor The average tuition fee of international schools in Malaysia has revealed a down trend from RM37,026 in 2012 to RM28,696 in 2016, representing a CAGR of -6.2%. The decrease of average tuition fee was partly attributable to the emergence of international schools offering affordable fee structure and growing market competition for student enrollment among these international schools. The average annual tuition fee in Selangor was approximately RM32,000 in

71 INDUSTRY OVERVIEW The average annual tuition fee of international school falling into high-end (with average tuition fee of RM40,000 above) and mid-range segments (with average tuition fee ranging from RM20,000 to RM40,000) demonstrated a moderate growth at a CAGR of 1.0% and 0.4% respectively during 2012 to As it is not uncommon for established international schools to adjust their tuition fee annually, the average annual tuition fee of international school falling into high-end and mid-range segments are expected to increase during 2017 to 2021 at a CAGR of 1.1% and 0.7% respectively. Compared with international schools falling into low-end segment, some of the international schools falling into highend segment and mid-range segment are usually long established with strong reputation and focus on provision of high quality of learning environment and facilities. Such kind of established international schools may increase their tuition fee in view of increasing operation cost. On the other hand, international schools falling into low-end segment registered a decline in average annual tuition fee at a CAGR of -5.3% during 2012 to Demand and availability of teachers in Malaysia According to Department of Statistics of Malaysia, the number of person engaged in private education sector in Malaysia recorded a steady growth from steady growth from 113,292 in 2012 to 124,391 in 2016, representing a CAGR of 2.4%. Specifically, the number of teachers in international school in Malaysia demonstrated a growth from 4,358 in 2013 to 5,191 in 2016, representing a CAGR of 6.0%. In addition, according to Ministry of Education of Malaysia, the number of international schools in Malaysia also increased from 94 in 2013 to 116 in 2016, representing a CAGR of 7.3%. The number of teachers is expected to increase along with growing number of international schools in Malaysia. Apart from recruiting Malaysian teachers, international schools in Malaysia generally employ expatriates and foreign teachers from overseas to (i) create a bi-lingual or multi-lingual teaching environment where students can practice foreign languages skill with native speakers and enhance the language proficiency, (ii) bring in overseas culture to the classroom, thereby increasing students exposure to other countries and (iii) gain confidence for both local and expatriates parents through provision of international learning environment and diversified education culture. Generally, the cost of recruiting expatriate teachers is higher than local teachers with same grade and teaching subjects. For example, employers are required to provide accommodation, and/or housing allowance, in addition to inwards and outwards travelling cost for expatriate teachers. COMPETITIVE LANDSCAPE OF INTERNATIONAL SCHOOL IN MALAYSIA AND SELANGOR Overview of Market Competition in Malaysia The overall international schools market in Malaysia is fragmented in terms of the number of market players. According to Private Education Division, Ministry of Education, there were approximately 116 international schools in Malaysia and 37 international schools in Selangor as at 30 June The number of international primary and secondary schools in Selangor accounted for approximately 31.9% of the total number of international schools in Malaysia. In terms of total number of student enrollment, our Group has an approximate market share of 1.2% in 2016 and ranked approximately 29 th out of 116 international schools in the international school market in Malaysia in the same year. 64

72 INDUSTRY OVERVIEW Overview of Market Competition in Selangor The international school market in Selangor is concentrated, where top 20 market players accounted for an aggregated market share of approximately 87.8% in 2016 in terms of student enrolment. The Group ranked approximately 13th out of 37 international schools in Selangor with an approximate market share of 3.0% in terms of total number of student enrollment in Selangor in Rank Market player Year of Establishment Curricula and Programme Offered Boarding facilities Estimated total number of students in campus in Selangor, 2016 Market share, A 2011 International Baccalaureate, IGCSE, UK Curriculum, Malaysian Curriculum 2 B 1979 Cambridge Primary, IGCSE, O Levels 3 C 2016 International Baccalaureate, IGCSE, International Primary Curriculum 4 D 2015 UK Curriculum, IGCSE 5 E 2014 International Primary Curriculum, UK Curriculum, IGCSE, A- Levels, Cambridge Secondary 6 F 1985 Cambridge Primary, Cambridge Secondary, UK Curriculum, IGCSE, Malaysian Curriculum Not available 2, % Not available 1, % Not available 1, % Not available 1, % Not available 1, % Available 1, % 65

73 INDUSTRY OVERVIEW Rank Market player Year of Establishment Curricula and Programme Offered Boarding facilities Estimated total number of students in campus in Selangor, 2016 Market share, G 2009 UK Curriculum, Cambridge Secondary, IGCSE, A Levels, Edexcel and AQA 8 H 1987 UK Curriculum, IGCSE, Cambridge Secondary 9 I 1993 Cambridge IGCSE, O Levels, Malaysian Curriculum 10 J 2004 Cambridge Primary, Cambridge Secondary, IGCSE 11 K 1992 UK Curriculum, IGCSE, A Levels 12 L 1946 UK Curriculum, IGCSE, A Levels 13 Our Group 2011 UK Curriculum, Cambridge O Levels, Cambridge A Levels 14 M 2000 Australian Curriculum 15 N 1960 International Primary Curriculum, IGCSE, Cambridge A Levels, Malaysian Curriculum Not available 1, % Not available % Not available % Not available % Available % Not available % Not available % Not available % Not available % 66

74 INDUSTRY OVERVIEW Rank Market player Year of Establishment Curricula and Programme Offered Boarding facilities Estimated total number of students in campus in Selangor, 2016 Market share, O 1983 UK Curriculum, Available % Malaysian Curriculum, IGCSE, A Levels, International Baccalaureate 17 P 1965 American based Not available % Curriculum, International Baccalaureate, Advanced Placement 18 Q 1978 International Available % Baccalaureate, UK Curriculum 19 R 2013 International Not available % Primary Curriculum, IGCSE 20 S 2010 Cambridge, Not available % International Primary Curriculum, IGCSE, A Levels, Malay, Arabic, Islamic Civilisation Subtotal 18, % Other 2, % Total 21, % Source: Frost & Sullivan In addition, Kingsley International School was situated in Subang Jaya, Selangor, Malaysia, where it, according to Frost & Sullivan Report, ranked second out of a total of eight international schools, in terms of student enrollment in Subang Jaya. As at 30 June 2016, there were only 8 international schools in Subang Jaya and the surrounding municipals, most of which were built before According to the Frost & Sullivan Report, only approximately 35% of international schools in Malaysia and approximately 26% of international schools in Selangor offered boarding facilities as at 30 June As at 30 June 2016, there were less than five international schools, out of the 37 international schools in Selangor, built after 1992 and offered boarding facilities in Selangor. 67

75 INDUSTRY OVERVIEW Key Factors of Competition School fee School fee is one of the key considering factors for parents when choosing international schools. Apart from termly tuition fees, there are a number of miscellaneous fees such as resources fees, technology fees, meal plans, examination fees which may contribute to high expenditure of parents. Thus, the emergence of mid-range and low-end international schools which offer affordable school fees are driving market competition. Furthermore, some schools may offer early-bird discount on tuition fee to boost the number of student enrollment. Facilities and locations Established international schools are generally equipped with a wide range of comprehensive facilities for teaching and extra-curricular activities, such as art room, laboratory, sports ground, lounge, studio, library etc. On the other hand, international schools with campus in prime locations or close proximity to major states such as Selangor or Kuala Lumpur are more favourable for parents and students. Hence, owning well-equipped facilities and setting up campus in ideal location offer competitive advantage for international schools. According to the Frost & Sullivan Report, approximately 35% of international schools in Malaysia and approximately 26% of international schools in Selangor offered boarding facilities as at 30 June 2016, and that international students generally prefer international school with boarding facilities which are considered as more secure and more convenient compared to the rented premises outside the campus. Prospect of graduates Graduates of international schools usually pursue higher education in Malaysia or foreign countries such as United Kingdom, Australia and Korea. The overall results of assessment such as examination scores and grades for students in IGCSE, O-Levels or A-Levels are usually taken as reference and comparison for international schools. Entry Barriers Licencing requirements and accreditation International schools in Malaysia are regulated by Ministry of Education and the new entrants are required to obtain a variety of licences and approvals such as An Approval for the Establishment of an International School in Malaysia, the teaching permit, the approval for recruiting international students issued by Ministry of Education as well as other compliance requirement of change of use of premises from commercial building to educational use. In order to provide international curriculum such as Cambridge, UK curriculum and IB programmes, accreditation from relevant authorities or organisations are also considered as pre-requisite prior to recruiting students. Hence, new entrants without such licences or accreditation are unable to operate an international school in Malaysia. High initial investment Establishing an international school in Malaysia is considered as capital intensive as substantial investment is usually required for setting up campus and relies on private funding. For instance, operators of international schools usually prefer construction of building rather than renting an existing premise as a campus for international schools and a regular renovation is required, leading to a substantial amount of expenditure on construction and meanwhile the cost could be higher when the campus is established in prime location. In addition, high operating cost could be incurred from recruitment of experienced teaching and supporting staff. As a result, it is difficult for new entrants without sufficient capital investment and reserve to start and maintain normal operation of their international schools. 68

76 INDUSTRY OVERVIEW OVERVIEW OF TERTIARY AND PROFESSIONAL EDUCATION MARKET IN MALAYSIA Introduction In Malaysia, tertiary education institution or higher education institution ( HEI ) can be either publicly or privately funded, and they are inclusive of universities, university colleges, branch campuses of foreign universities with university status, colleges and institutions with non-university status, and technical and vocational training institutions. A majority of professional education is privately funded in Malaysia. Private higher education institution ( PHEI ) refers to the higher education institution under private sector. Malaysian Qualifications Framework Malaysian Qualifications Framework ( MQF ) is an eight-level post-secondary qualifications system administered by the Malaysian Qualifications Agency ( MQA ), which sets out the qualifications under the three sectors, namely skills, vocational and training, higher education. According to MQA, the levels are differentiated by learning outcomes, credit hours and student learning time. Lifelong education pathways cut across all levels of qualifications through accreditation of prior experiential learning. Malaysian Skill Certification System is a certification system focusing on skills training with workbased assessment, which offer potential personal and career development and is recognised by various industries in Malaysia. The System follows requirement of the National Occupational Skills Standard developed and is regulated by the Department of Skills Development. The System covers five levels of awards, namely SKM1, SKM2, SKM3, DKM and DLKM. The principal aim of SKM is to prepare students for employment with the accredited skill sets. In addition, the Skill Certificate covers over 20 sectors such as building construction, information technology and communications, chemicals etc. SKM and the advanced diploma will be awarded by recognised institution of higher education. Furthermore, with the attributes of provision of training and acquisitions of specific skills required in different industries, SKM is widely accepted by local employment market as SKM holders generally demonstrate certain level of competency in working environment through work-based assessment and SKM provides an attractive path for career and personal development. According to Frost & Sullivan Report, diploma as accredited by MQA are (1) generally recognised for employment purpose, and (2) acceptable admission criteria to some of the universities in Malaysia and overseas. Labour Force by Educational Attainment With the supportive policy towards education industry by the government, increase in student enrollment and literacy during the past years, the educational attainment has seen a structural change in recent years. During 2012 to 2016, the labour force with tertiary and secondary education level recorded a growth from 7.1% and 3.2% respectively while those with primary education level and labour force without received formal education decreased at a CAGR of -1.0% and -0.8% respectively during the same period of time. Thus, the proportion of labour force with tertiary level of education has increased from 24.1% in 2012 to 27.7% in 2016, while those with primary level decreased from 17.2% to 14.4% during the same period of time. During forecasted period, it is expected that the education attainment will shift towards higher education level (i.e. secondary and tertiary education). 69

77 INDUSTRY OVERVIEW Market Drivers Government policies supporting education sector The Government has laid out a target to receive 200,000 foreign students in higher education institution by To achieve the target, the Malaysian Government, together with tertiary and professional education industry players, have actively organised various marketing events. Incentives such as investment tax allowances, income tax exemptions, research and development ( R&D ) grants, and employment of expatriates are also provided to institutions. Furthermore, according to Malaysia Education Blueprint (Higher Education) issued by Ministry of Higher Education, the demand for additional workers in technical and vocational education and training (TVET) is expected to reach 1.3 million by 2020 in the 12 National Key Economic Areas (NKEA) identified under the government s Economic Transformation Programme (ETP). These initiatives are considered as key driving force for tertiary institution in Malaysia. Market Trend The growth of number of public tertiary education institutions in Malaysia is relatively stable, as the establishments greatly rely on government subsidies. The number of institutions in the private sector has always been higher due to free market activities, and it is expected that the uprising trend will continue during 2017 to 2021, so as to meet the demand from both local and foreign students. Future Opportunities and Challenges The building of Education City The Malaysian Government has proposed and implemented various initiatives such as clustering universities and professional education institutions into few strategic areas. In particular, KLEC Nilai, which was envisioned as an education city and international hub for education, collocates international universities and local higher education institutions. The surrounding areas are transformed into a smart city that supports commercial and residential areas. It is expected that more education city similar to KLEC to be developed in the near future, resulting in growing opportunities for industry players. Fierce local and foreign competition Competition is fierce within the tertiary and professional education market, and it is seen that some players have shown their intention of entering into price war to compete for students, which could cause potential mutual-lose for all industry players in terms of revenue and profit. There is also an increasing number of foreign tertiary education providers entering the market by setting up offshore campus to compete for market shares. Hence, with a variety of local and foreign participants in the market, the market competition may pose threats to small players in the market without sufficient resources to gain student enrollment. COMPETITIVE LANDSCAPE OF TERTIARY AND PROFESSIONAL EDUCATION MARKET IN MALAYSIA The overall tertiary and professional education market in Malaysia is fragmented in terms of number of market players. According to the Ministry of Higher Education, as at 30 June 2017, there were 495 PHEIs in Malaysia, consisting of universities, college universities, foreign university branch 70

78 INDUSTRY OVERVIEW campuses and colleges. Private colleges have taken up the majority proportion of PHEIs, accounting for approximately 80% of PHEIs. In terms of geographical distribution, approximately 27.7% of PHEIs were located in Selangor, followed by Federal Territory of Kuala Lumpur (22.2%) and Johor (6.5%). On the other hand, there were approximately 170 public tertiary education institutes in Malaysia in 2017, which include institutes of teacher education, public universities, polytechnics, and community colleges. In terms of number of student enrollment, our Group has an approximate market share of 0.002% and 0.005% in the total and private tertiary education market respectively in Entry Barriers Regulatory compliance The education sector is heavily regulated in Malaysia. To set up a PHEI, operators are required to follow the rules set out in The Private Higher Educational Institutions Act 1996, and the relating registration and accreditation process administered by various government departments, including the Ministry of Education, Ministry of Higher Education, Malaysian Quality Agency and approval-in-principle must be obtained prior to establishing a PHEI. Meanwhile, PHEI operators are required to follow the labour laws for recruiting teaching and supporting staff. Hence, the stringent regulatory requirement may be a barrier for certain new entrants. Financial capability New entrants in the private tertiary education sector will need a large sum of capital for land rental/acquisition, civil construction, operation cost such as employees salary, equipment procurements. In particular, the Ministry of Education further requires a minimum paid up capital of RM20,000,000 to establish a private university. A sufficient capital reserve is also required to support the institute throughout the entire operation period. As a result, new market participants without financial capability may not be able to maintain normal operation and face the risk of under-enrollment of students. 71

79 REGULATORY OVERVIEW LAWS AND REGULATIONS IN MALAYSIA The following is an overview of the material laws and regulations that are relevant to the business operations of our Group companies in Malaysia: 1. Laws and regulations relating to provision of education services (a) Education Act 1996 The Education Act 1996 ( Education Act ) regulates education and matters connected therewith. (i) Registration of educational institutions Section 79(1) of the Education Act mandatorily requires that every educational institution be registered under the Education Act. An educational institution has been defined under the Education Act as a school or any other place where, in the carrying on of the work of an organisation or institution, persons are habitually taught, whether in one or more classes, and includes a kindergarten and a distance education but does not include any place where the teaching is confined exclusively to the teaching of any religion or any place declared by the Minister by notification in the Gazette not to be an educational institution for the purposes of the Education Act. Pursuant to Section 82(1), the Registrar General of Educational Institutions and Teachers appointed by the Minister under Section 5 of the Education Act ( RGEI ) shall, upon an application for the registration of an educational institution duly made and after such inquiry as he may think necessary, and upon payment of such fee as may be prescribed, register the educational institution and issue to the chairman of the board of governors or to the person responsible for the management of the educational institution a certificate of registration. (A) Pre-school education Section 20(1) of the Education Act prohibits the establishment, operation or management of a kindergarten unless it is registered under the Education Act. A person who contravenes such Section 20(1) shall be guilty of an offence. Pursuant to the Education Act, kindergarten means any place where pre-school education is provided to 10 or more pupils; and pre-school education means an educational programmed for pupils from the ages of 4 to 6 years. The governing regulations for application to register kindergarten is Education (Kindergarten and Nursery School) (Registration) Rules (B) Other educational institutions The governing regulation for application to register other educational institutions is Education (Registration of Educational Institutions) Regulations 1997 ( Education Regulations 1997 ). Pursuant to Regulation 9(2) of the Education Regulations 1997, a certificate of registration issued by the RGEI to an educational institution 72

80 REGULATORY OVERVIEW under Section 82(1) of the Education Act shall be valid for a period of 5 years. It may be renewed upon application made to the RGEI in accordance with the provisions of the Education Regulations Regulation 7 of the Education Regulations 1997 provides that whilst waiting for the decision for the RGEI s decision for the application for registration of educational institution, the RGEI may in his discretion issue a provisional certificate of registration. Regulation 17 of the Education Regulations 1997 states that no educational institution shall collect any study fee or any other payment from any student unless such educational institution has been registered. Prior approval of the RGEI shall be obtained before any change to any fee or other payment imposed by an educational institution can be made. A list of fees or other payment approved by the RGEI shall be exhibited at a conspicuous place in the premises of an educational instruction and be included in the prospectus of the said educational institution. Pursuant to Regulation 20 of the Education Regulations 1997, any person who contravenes any provisions of the Education Regulations 1997 commits an offence and, on conviction, shall be liable to a fine not exceeding RM10,000 or imprisonment for a period not exceeding 6 months. Pursuant to Section 86(1) of the Education Act, no person shall promote an educational institution, whether by advertisement, prospectus, brochure or otherwise, unless the educational institution has been registered or a provisional certificate of registration has been issued under Section 81(1). A person who contravenes Section 86(1) shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM30,000 or to imprisonment for a term not exceeding 2 years or to both. (ii) Registration of governors and employees Section 88 of the Education Act requires every person who acts as a governor or employee of an educational institution to be registered as a governor or employee, as the case may be, in respect of the educational institution. Under the Education Act, governor means a person who is empowered under an instrument of government to administer or manage an educational institution; and employee means a person employed by a board of governors, other than a governor, a teacher or such other person as may be appointed or nominated by the Minister under Sections 58(2) or 61(2), as the case may be, employed or actively taking part in work connected with the running or the administration of an educational institution. The application may be made to the RGEI in accordance with the provisions of Regulation 11 of the Education Regulations

81 REGULATORY OVERVIEW (iii) Registration of teachers Section 103(1) of the Education Act states that subject to Section 103(2) of the Education Act, no person shall teach in an educational institution unless he is registered as a teacher under the Education Act. Pursuant to the Education Act, teacher means a person who teaches pupils in an educational institution; or prepares or issues lessons or corrects returned answers in, for or through a distance education centre, and includes a head teacher or principal. The governing regulations for application for a teaching permit in educational institutions is the Education (Teaching Permit) Regulations 2013 ( Education Regulations 2013 ). Regulation 4(2) of the Education Regulations 2013 states that a teaching permit issued may be issued by the RGEI for a maximum period of 5 years, which is renewable by the permit holder. Notwithstanding the foregoing provisions, a teaching permit for non-citizen applicant shall not be issued for a period exceeding the validity of work permit issued by the relevant authorities. (iv) Higher educational institution Section 71 of the Education Act states that no person shall (a) (b) (c) (d) establish, form, promote or carry on any activity for the purpose of establishing or forming, or towards the establishment or formation of, a higher educational institution; collect, give or receive any moneys, contributions, gifts or donations, or do any act or carry on any activity for the purpose of establishing or forming a higher educational institution; operate, manage or maintain any class for the teaching and learning of higher education unless the class is being operated, managed or maintained by a higher educational institution; and establish, operate, manage or maintain a higher educational institution by the use of the word university, except in accordance with any written law on higher education. A person who contravenes Section 71 shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding 5 years or to both. Pursuant to the Education Act, higher educational institution means an educational institution providing higher education leading to the award of a diploma, degree or the equivalent thereof; and higher education means education provided by a higher educational institution. (v) Private educational institutions Section 73(1) of the Education Act states that nothing in the Education Act shall be construed as prohibiting the establishment and maintenance of a private educational 74

82 REGULATORY OVERVIEW institution. Notwithstanding the foregoing provisions, every private educational institution shall comply with the Education Act and all regulations made under the Education Act and applicable to the educational institution. Pursuant to the Education Act, private school or private educational institution ( PEI ) means a school or an educational institution which is not a government or governmentaided school or educational institution. Section 74 of the Education Act states that a PEI providing primary education or secondary education or both shall comply with the requirements of the National Curriculum (as defined in the Education Act) and shall prepare pupils for prescribed examinations. Primary education means a course of study at primary level which is designed for a duration of 6 years but which may be completed within 5 to 7 years; and secondary education means education comprising lower secondary education, i.e. a 3-year course appropriate for a pupil who has completed primary education, and upper secondary education, i.e. education suitable to abilities and aptitudes of a pupil who has completed lower secondary education. Section 77(1) of the Education Act states that no PEI registered under the Education Act shall conduct any course of study or training programme jointly, in association, affiliation or collaboration or otherwise, with a university or institution of higher education or other educational institution or organisation within or outside Malaysia, except with the approval in writing of the Minister. A person who contravenes Section 77(1) or fails to comply with any term or condition imposed by the Minister under Section 77(3) shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM30,000 or to imprisonment for a term not exceeding 2 years or to both. According to the Guidelines for the Establishment of a Private Educational Institution and the Guidelines for the Establishment of an International School as well as the relevant application forms issued by the Ministry of Education ( MOE ), MOE imposes the following administrative requirements on PEI applying to be established and subsequently registered under the Education Act: (A) Business characteristics (1) Except for a mind enrichment centers, the owner of the PEI shall be a private limited company, organisation, society, foundation or cooperative. (2) The paid-up share capital of the owner of the PEI shall be RM100,000. In the case of an international school, the minimum amount is set at RM1,000,000. (3) The board of directors of the owner of the PEI shall consist of at least one Malaysian citizen. (4) At least 30% of the entire paid-up share capital of the owner of the PEI shall be owned by Bumiputra (Malaysian natives). However, in the case of an international school, 100% foreign equity ownership is permitted. 75

83 REGULATORY OVERVIEW (B) Management (1) There shall be a board of governors consisting of at least 5 persons. (2) A principal/headmaster shall be appointed. The principal/headmaster shall have a certificate or diploma or degree in education and may not be appointed to the board of governors. (3) There shall be an instrument of governance for the PEI. (C) Premises (1) The premises shall be suitable for a conducive learning environment. (2) The PEI is not allowed to operate while being based in temporary premises such as shop house, residential home or bungalow. (3) The PEI shall provide for the following facilities: (aa) special facilities such as science laboratory, music room, art room and prayer room. (bb) court or field for recreational activities and sports. (4) For an international school, the following requirements are imposed: (aa) The land where the premises are built shall be at least 5 acres in size and is selfowned or leased. (bb) The premises shall be located at a strategic location which is known to have a high expatriate population or be located at a new economic development corridor. (cc) The school shall have a total enrolment capacity of 1,000 persons or more. (D) Curriculum (1) Pursuant to Section 74 of the Education Act, a PEI providing primary education and/or secondary education shall comply with the requirements of the National Curriculum (as defined in EA) and shall prepare pupils for prescribed national examinations. An international school is exempt from this requirement and is allowed to use a foreign curriculum with English language as the medium of instruction. The international school shall however obtain accreditation from the relevant international accreditation body within 3 years after commencing operations. (E) Co-curricular activities The PEI shall propose to provide for at least one extra co-curricular activity from each of the following categories: (1) Clubs and societies. (2) Games and sports. (3) Uniformed bodies. 76

84 REGULATORY OVERVIEW (F) Fee structure (1) The PEI shall propose a fee structure which is relevant and reasonable in relation to the location and educational facilities of the PEI. (2) Deposit paid shall be refundable. (3) Development or building fee may not be charged from students. (G) Enrolment of students: (1) The maximum number of students for each class shall not exceed 35 for PEI. For international schools, the limit is set at 25 students. (2) There is currently no quota for the enrolment of Malaysian students in international schools. However, an international school shall ensure that it provides for the teaching and learning of the following subjects to its Malaysian students: (aa) Malay language. (bb) Islamic studies/moral studies. (cc) Malaysian history. Further, in view of the requirements under Sections 88 and 103 of the Education Act, Regulation 9 of the Immigration Regulations 1963 ( Immigration Regulations ) (as discussed at page 74 of this Prospectus) and the Procedures and Terms for New Application Letter of Support for Foreign Employment Pass issued by MOE, MOE imposes the following requirements on PEI: (A) (B) (C) Every governor or employee in a PEI shall be registered under Education Act and every person employed as a teacher in a PEI shall possess a valid teaching permit. Non-citizen governors or employees shall obtain a valid employment pass under the Immigration Regulations from the Immigration Department under the Ministry of Home Affairs ( MOHA ). The PEI shall assist in applying for a supporting letter from MOE in respect of the non-citizen governor or employee as part of the application for the employment pass to be submitted to MOHA. 77

85 REGULATORY OVERVIEW (D) A supporting letter from MOE for non-citizen persons employed as a teacher in a PEI for the purpose of the application to MOHA will only be issued if the following requirements are met: Age Minimum academic credentials/ qualifications Professional qualifications Minimum wage/ salary and employment contract The applicant shall be between 22 to 65 years old. The applicant shall possess at least a Bachelor s Degree. For applicants teaching at language or skills centres, the Bachelor s Degree shall be with the relevant specialization. The applicant shall possess a Degree/Diploma/Certificate in Education (majoring in the relevant field) (1) Category I: RM10, and above which includes salary excluding other perks and benefits received. The employment contract shall span a minimum of 2 years and a maximum of 5 years. (2) Category II: RM5, to RM RM9, which includes salary excluding other perks and benefits received. The employment contract shall span a minimum of 1 year and a maximum of 2 years. (3) Category III: RM3, to RM 4, which includes salary excluding other perks and benefits received. The employment contract shall be for a year and may not be renewed more than two times. In addition, in view of the requirements under Regulation 13 of the Immigration Regulations (as discussed at page 74 of this Prospectus) as well as the relevant forms for the application for the recruitment of international students in PEI and for obtaining a supporting letter for applying for a student pass issued by MOE, MOE imposes the following requirements on PEI: (A) (B) (C) The PEI shall obtain prior approval from MOHA and MOE in order to recruit and/or enrol international students. Each international student shall obtain a valid student pass under the Immigration Regulations from MOHA. The PEI shall assist in applying for a supporting letter from MOE in respect of the international student as part of the application process for the student pass to be submitted to MOHA. A supporting letter from MOE for the international student for the purpose of the MOHA application will only be issued if the following requirements are met: Age Academic qualifications Unless the applicant is sponsored by a government, company or any legal organisation, the applicant shall be between 22 to 65 years old. (1) For an applicant intending to study at a language center, the academic results for the subject intended to be studied from their home country must have been less than satisfactory. (2) The language course being undertaken by the applicant must be required to pursue studies at a higher educational institution. Other requirements (1) Other requirements as set out in the approval given to the educational institution shall apply. (2) The student shall attend classes at least 3 hours per day. 78

86 REGULATORY OVERVIEW (b) Private Higher Educational Institutions Act 1996 The Private Higher Educational Institutions Act 1996 ( PHEIA ) regulates the establishment, registration, management and supervision of, and the control of the quality of education provided by, private higher educational institutions and for matters connected therewith. For the purposes of the PHEIA: (A) private higher educational institution means amongst others an organisation or educational institution approved and registered under the PHEIA, which is not maintained by the Government, providing higher education, distance education or higher or distance education in affiliation, association or collaboration with other higher educational institutions; and (B) (i) higher education means instruction or training on or teaching of a course of study leading to the award of a certificate, diploma or degree upon the successful completion thereof. Approval for the establishment and maintenance of a private higher educational institution Pursuant to Section 6 of the PHEIA, the prior approval of the Minister shall be obtained before a private higher educational institution may be established or maintained. An application for an approval under Section 6 shall be made to the Registrar General of Private Higher Educational Institutions appointed under the PHEIA ( RGPHEI ) on the prescribed form and in the prescribed manner stipulated in the PHEIA. Pursuant to Section 12(1) of the PHEIA, upon being granted an approval for the establishment of a private higher educational institution, the successful applicant, whether it be a locally incorporated company or otherwise, shall ensure that (a) (b) (c) its issued and paid up capital shall be of an amount as determined by the Minister; its equity participation and composition of the board of directors shall be as determined by the Minister; and the sole object of the applicant s memorandum and articles of association shall be to establish and manage private higher educational institution. Pursuant to Section 15 of the PHEIA, unless prior approval from the Registrar General has been obtained, a company shall not change or alter (a) (b) (c) (d) (e) its name; its issued and paid-up capital; its equity participation; the composition of its board of directors; and its memorandum and articles of association. 79

87 REGULATORY OVERVIEW The governing regulations for the establishment of a private higher educational institutions is the Private Higher Educational Institutions (Establishment) Regulations Private higher educational institutions has the same meaning as that assigned to the term in the PHEIA and for the purposes of the Private Higher Educational Institutions (Establishment) Regulations 1997 comprises of (a) (b) a private higher educational institution without the status of a University or University College or a branch campus; or a private higher educational institution with the status of a University or University College or a branch campus. Section 72(1) of the PHEIA states that no person shall promote a private higher educational institution, whether by advertisement, prospectus, brochure or otherwise, unless the establishment of the private higher educational institution has been approved under the PHEIA. Any person who contravenes Section 72(1) shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding 6 months or to both. According to Section 76 of the PHEIA, no person shall (a) (b) establish, form, promote or carry on any activity for the purpose of establishing, forming or promoting or towards the establishment, formation or promotion of a private higher educational institution; operate, manage or maintain any class for the teaching and learning of higher education in a private higher educational institution; or (c) establish, form, promote, operate, manage or maintain a private higher educational institution by the use of the word University, University College or branch campus, except in accordance with the provisions of the PHEIA. Any person who contravenes such provisions shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM200,000 or to imprisonment for a term not exceeding 2 years or to both. Section 78 of the PHEIA states that any private higher educational institution contravening any condition imposed on the approval for its establishment and its registration, shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding 6 months or to both. (ii) Registration of private higher educational institution Section 24(1) of the PHEIA states that every private higher educational institution shall be registered under Part V of the PHEIA. The governing regulations for the application for registration of a private higher educational institution is the Private Higher Educational Institutions (Registration) Regulations Pursuant to Section 24(2) of the PHEIA, an application for registration shall be made to the RGPHEI within 3 years from the date of the approval for the establishment of the 80

88 REGULATORY OVERVIEW private higher educational institution granted under Part III of the PHEIA, on the prescribed form and in the prescribed manner, accompanied by the prescribed fee and together with a comprehensive fee structure to be imposed on students with respect to each course of study. Regulation 5(2) of the Private Higher Educational Institutions (Registration) Regulations 1997 stipulates that a certificate of registration issued by the RGPHEI shall be valid for a period of 5 years from the date of its issuance. (iii) Registration of chief executive Section 31(1) of the PHEIA states that every private higher educational institution shall appoint a chief executive and Section 31(2) of the PHEIA requires that a person appointed as a chief executive shall be registered under Part VI of the PHEIA. (iv) Registration of premises Section 27(1)(a) of the PHEIA, the RGPHEIA may refuse to register a private higher educational institution if he is satisfied amongst others that (a) the private higher educational institution or any part thereof, for reasons of safety and health (i) (ii) (iii) (iv) (v) is unsuitable for use as an educational institution; has no adequate and satisfactory area for the recreation of the students; is unsuitably sited; is unsuitable by reason of danger from fire; or is otherwise a dangerous building; (b) (c) that the name under which the private higher educational institution is to be registered is, in his opinion, undesirable; or that the fee structure proposed for the students is unreasonable. Section 28(1) of the PHEIA prescribes that a private higher educational institution shall not move premises without the prior approval of the RGPHEIA. An application for the registration of the new premises of a private higher educational institution shall be made to the RGPHEIA on the prescribed form, in the prescribed manner and upon payment of the prescribed fee. A private higher educational institution contravening Section 28(1) of the PHEIA shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding 6 months or to both. (v) Approval for course of study Section 38(1) of the PHEIA states that the prior approval of the RGPHEI shall be obtained before a private higher educational institution (a) may conduct a course of study or training programme; or 81

89 REGULATORY OVERVIEW (b) may conduct a course of study or training programme jointly or in affiliation, association or collaboration with any University, University College, higher educational institution, whether public or private, or professional body, within or outside Malaysia. A private higher educational institution which contravenes the provision of Section 38(1) shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding RM200,000 or to imprisonment for a term not exceeding 2 years or to both. The governing regulations for the application to conduct a course of study or an additional course of study is the Private Higher Educational Institutions (Conducting Courses of Study) Regulations Regulation 3(2) states that the application shall be submitted to the RGPHEI, and a copy to the Chief Executive of Lembaga Akreditasi Negara (National Accreditation Board of Malaysia), not later than 6 months before the proposed course of study or additional course of study commences. Regulation 5 of the Private Higher Educational Institutions (Conducting Courses of Study) Regulations 1997 states that where the Minister of Higher Education is satisfied with the application to conduct courses of study or additional courses of study, he may approve the application to conduct courses of study or additional courses of study by imposing the approval fee prescribed in the Second Schedule to the Regulations. An approval given to conduct courses of study or additional courses of study at certificate, diploma or degree level shall be valid for a period of not more than 5 years. (vi) Permit to teach Section 51(1) of the PHEIA states that a person shall obtain a permit to teach issued by the RGPHEI before he may be allowed to teach in any private higher educational institution. An application for a permit to teach under the PHEIA shall be made to the RGPHEI on the prescribed form and in the prescribed manner and upon payment of the prescribed fee. The governing regulations for the application for a permit to teach in a private higher educational institution is the Private Higher Educational Institutions (Permit to Teach) Regulations Regulation 4 states that a permit to teach which may be issued by the RGPHEI under the PHEIA shall be in the form prescribed in the Regulations. A permit to teach may only be issued for a maximum period of 5 years. Notwithstanding the foregoing, a permit to teach for a teacher who is not a citizen of Malaysia shall not be issued for a period exceeding the period of the validity of a work permit issued by the Department of Immigration. (c) Skills Development Fund Act 2004 Skills Development Fund Act 2004 ( SDFA ) regulates the establishment of the Skills Development Fund, to incorporate the Perbadanan Tabung Pembangunan Kemahiran and the provision of the related matters. For the purposes of the SDFA a fund called the Skills Development Fund which shall be administered and controlled by the Perbadanan Tabung Pembangunan Kemahiran ( PTPK ) established under Section 6 the SDFA. 82

90 REGULATORY OVERVIEW Pursuant to Section 8 of the SDFA, the functions of the PTPK shall be (a) (b) (c) to identify and to approve skills training programmes eligible for skills training loan; to provide and grant skills training loans and financial assistance other than skills training loans to trainees, and to provide services in administering, monitoring and collecting repayments of the loans; and to perform such other functions as are conferred on the PTPK by the SDFA or any other written law. For the purposes of the SDFA: (1) skill means an acquired and practised ability to competently carry out a task or job; (2) trainee means a person receiving skills training by a skills training providers; (3) skills training provider means an establishment or organisation which provides skills training either privately or through government funding; and (4) skills training loan means loan approved and paid out by the PTPK to a trainee under the SDFA, inclusive of any tuition fees, cost of living expenses, financial assistance for educational equipment and aids, insurance and any administrative fees or other charges imposed by the PTPK. (i) Registration of skills training provider Section 33(1) of the SDFA states that no skills training provider may apply for a skills training loan facility unless (a) (b) it is registered under Part VI of the SDFA; and it conducts a skills training programme registered under Part VII of the SDFA. Section 33(2) further qualifies that a skills training provider shall not be registered under Part VI of the SDFA unless (a) (b) it has been accredited by the National Vocational Training Council; and it conducts an approved training programme. National Vocational Training Council means the body by that name established by the Government for the purpose of formulating, promoting and co-ordinating vocational and industrial training strategies and programmes in keeping with the country s technological and economic developmental needs, or any other body which succeeds that Council; and approved training programme means a skills training programme conducted in Malaysia which is accredited by the National Vocational Training Council and which is approved by the PTPK under Section 44 of the SDFA. Pursuant to Section 36 of the SDFA, when a skills training provider is registered under Section 34, the principal executive officer of the PTPK appointed under Section 25 of 83

91 REGULATORY OVERVIEW the SDFA shall issue to the skills training provider a certificate of registration. The certificate of registration shall specify the principal premises where the skills training provided by the skills training provider is being carried on. Section 72(1) of the SDFA states that no person shall hold himself out to be, or promote, a skills training provider, whether by advertisement, prospectus, brochure or otherwise, as a skills training provider in respect of whose trainees loan facilities are available under the SDFA unless the skills training provider is registered under the SDFA. Any person who contravenes the foregoing provisions commits an offence and shall on conviction be liable to a fine not exceeding RM20,000 or to imprisonment for a term not exceeding 6 months or to both. (ii) Approved training programmes Section 44 of the SDFA provides that the PTPK may identify and approve any skills training programme as an approved training programmes for the purposes of skills training loans facilities under the SDFA. Pursuant to Section 45 of the SDFA, a skills training provider registered under Section 34 may apply to the PTPK to have any of its training programmes approved under Section 44 of the SDFA. (iii) Application for skills training loan Section 47(1) of the SDFA provides that a skills training provider registered under Section 34 may submit applications for skills training loans facilities to the PTPK for trainees undergoing skills training by the skills training provider in a programme approved by the PTPK. Pursuant to section 48 of the SDFA, the Chief Executive may approve or refuse the application, stating the grounds for his refusal. 2. Laws and regulations relating to accreditation (a) Malaysian Qualifications Agency Act 2007 Malaysian Qualifications Agency Act 2007 ( MQAA ) regulates, amongst others, the accreditation of higher educational programmes and qualifications as well as the supervision and regulation of the quality and standard of higher education providers. Section 37(1) of the MQAA provides that no programme or qualification shall be accredited unless it complies with the Malaysian Qualifications Framework ( MQF ). MQF is an instrument that develops and classifies qualifications based on a set of criteria that are approved nationally and benchmarked against international best practises, and which clarifies the earned academic levels, learning outcomes of study areas and credit system based on student academic load. The MQF has 8 levels of qualifications in 3 national higher education sectors and is supported by lifelong education pathways. The sectors are (1) skills; (2) vocational and technical; and (3) academic. Levels 1 to 3 are skills certificates awarded by the skills sectors. Academic and vocational and technical certificates are at Level 3. Meanwhile, diploma and advanced diploma are at Levels 4 and 5. Bachelors Degree is at Level 6, Masters Degree at Level 7 and Doctoral Degree at Level 8. 84

92 REGULATORY OVERVIEW Section 38(1) of the MQAA provides that an application by a higher education provider, other than a higher education provider referred to under Chapter 4 of Part VIII of MQAA, for the provisional accreditation of its programme or qualification shall be made to the Malaysian Qualifications Agency (a national body established by the MQAA) in such form and manner as may be prescribed. According to Section 40 of the MQAA, a certificate of provisional accreditation issued under Section 39(1)(a) shall be valid for such period as shall be specified in the certificate by the Malaysian Qualifications Agency and may be extended by the Malaysian Qualifications Agency upon an application by the higher education provider. The certificate of provisional accreditation shall also specify the period within which the higher education provider shall apply for accreditation and where applicable, shall state the premises in which the programme shall be conducted or facilitated. For the purpose of the MQAA: (a) (b) (c) higher education provider means means a body corporate, organisation or other body of persons which conducts higher education or training programmes including skills training programmes leading to the award of a higher education qualification or which awards a higher education qualification and includes the public or private higher education providers, examination or certification bodies or their branch representatives; higher education qualification means a certificate, diploma, advanced diploma or degree or their equivalent and includes any other qualification stipulated in the MQF; and skills training means work based and industry oriented activities which aim to provide the knowledge, skills and attitude required for effective and efficient performance of a task or job. Part VIII of the MQAA provides accreditation to amongst others the following programmes and qualifications: (1) programmes or qualifications which comply with the MQF (Chapter 1 of Part VIII of the MQAA); (2) local or foreign professional programmes or professional qualifications which comply with the MQF (Chapter 2 of Part VIII of the MQAA); (3) foreign programmes or qualifications, foreign qualification offered by distance learning and joint and collaborative qualifications (Chapter 3 of Part VIII of the MQAA); and (4) skills training programmes or qualifications which comply with the MQF or foreign skills training programmes or qualifications which comply with the MOF (Chapter 5 of Part VIII of the MQAA). In the event the Malaysian Qualifications Agency approves the application for accreditation, a certificate of accreditation will be issued to the higher education provider and the certificate of accreditation shall specify the programme and state the premises in which the accredited programme shall be conducted or facilitated. The higher education provider shall cause a copy of the certificate of accreditation to be exhibited in a conspicuous place in the premises specified in the certificate of accreditation. 85

93 REGULATORY OVERVIEW Section 96 of the MQAA states that any person who enrolls students for a programme claimed to be an accredited programme without a certificate commits an offence and shall be liable, on conviction, to a fine not exceeding RM100,000 or to imprisonment for a term not exceeding 2 years or to both. Section 97(1) of the MQAA states that no person shall hold himself out to be or promote a higher education provider as a higher education provider providing accredited programmes or granting accredited qualifications, whether by advertisement, prospectus, brochure or otherwise, unless the higher education provider is accredited under the MQAA. Section 97(2) further states that no person shall promote a programme as an accredited programme, whether by advertisement, prospectus, brochure or otherwise, unless the programme has been accredited under the MQAA. Any person who contravenes the foregoing sections commits an offence and shall be liable, on conviction, to a fine not exceeding RM200,000 or to imprisonment for a term not exceeding 3 years or to both. Section 98 of the MQAA further provides that any person which has not been granted accreditation under the MQAA issues or awards any higher education qualification claimed to be complying with the MQF commits an offence and shall be liable, on conviction, to a fine not exceeding RM200,000 or to imprisonment for a term not exceeding 5 years or to both. (b) National Skills Development Act 2006 National Skills Development Act 2006 ( NSDA ) intends to promote, through skills training, the development and improvement of a person s abilities, which are needed for vocation; and to provide for other matters connected therewith. A body by the name of the National Skills Development Council ( NSDC ) is established pursuant to Section 3 of the NSDA. The functions of the NSDC are amongst others to approve the National Occupational Skills Standards established under Part IV of the NSDA ( Standard ) and to advise the Minister on matters pertaining to the NSDA. (i) National Occupational Skills Standards Pursuant to Section 20 of the NSDA, the director general of skills development appointed under the NSDA ( Director General ) shall be responsible for developing Standards for the purposes of the National Occupational Skills Standards. The Director General may, at his discretion, authorise any person, organisation or other body of persons to develop National Occupational Skills Standards on his behalf. All Standards developed shall be submitted to the NSDC for its approval. Upon the approval of the NSDC, the Standards shall form part of the National Occupational Skills Standards. According to Section 22 of the NSDA, the National Occupational Skills Standards shall be used to develop national curriculum for skills training programmes. For the purposes of conducting skills training, all accredited programmes shall conform to the National Occupational Skills Standards. The National Occupational Skills Standards shall be used as a measure of proficiency leading to the award of a certificate. The National Occupational Skills Standards may be utilised in any other way as the Director General deems fit. 86

94 REGULATORY OVERVIEW (ii) Accreditation Section 23 of the NSDA provides that any skills training provider shall apply to the Director General for its skills training programme to be approved as an accredited programme and shall satisfy the following criteria: (a) (b) (c) (d) it has a training curriculum that is capable of providing skills training and assessment to meet the requirements of the relevant National Occupational Skills Standards; it has, or has access to premises, training facilities or technologies for the purpose of providing skills training and undertaking assessment to meet the requirements of the relevant Standards; it has under its employment, or has access to, qualified and skilled instructors capable of providing skills training and assessment to meet the requirements of the relevant National Occupational Skills Standards; and it is able to meet the quality assurance policies and procedures stipulated by the Director General. Pursuant to Section 24 of the NSDA, an application by any skills training provider for the accreditation of its training programme shall be made to the Director General in such form and manner as may be prescribed by the Minister in the regulations. The regulations governing the application for the accreditation of the training programme provided by skills training provider is National Skills Development (Fees and Charges) Regulations Section 25 of the NSDA provides that after having considered an application under Section 24(1) of the NSDA, the Director General may (a) (b) grant the application and issue a certificate of accreditation to the skills training provider for a period of 3 years; or refuse the application, stating the grounds for refusal. Further, Section 26(1) of the NSDA states that the certificate of accreditation shall specify the premises in which the accredited programme shall be conducted. Pursuant to Section 52 of the NSDA, any person who enrolls trainees for a training programme claimed to be an accredited programme without a valid certificate of accreditation issued under Section 26 commits an offence under the NSDA and shall, on conviction, be liable to a fine not exceeding RM100,000 or to imprisonment for a term not exceeding 2 years or to both. In addition, Section 53 of the NSDA states that no person shall hold himself out to be or promote a skills training provider as an accredited centre, whether by advertisement, prospectus, brochure or otherwise, unless the skills training provider has a skills training programme accredited under the NSDA; and no person shall promote a skills training programme as an accredited programme, whether by advertisement, 87

95 REGULATORY OVERVIEW prospectus, brochure or otherwise, unless the skills training programme has been accredited under the NSDA. Any person who contravenes any of the foregoing provisions commits an offence and shall, on conviction, be liable to a fine not exceeding RM200,000 or to imprisonment for a term not exceeding 3 years or to both. (iii) Certificate and recognition According to Section 34 of the NSDA, the Director General may award, to any person upon conforming to the Standards the following skills qualifications: (a) (b) (c) (d) Malaysian Skills Certificate; Malaysian Skills Diploma; Malaysian Skills Advanced Diploma; or Statements of Achievement. Section 35 of the NSDA states that no person shall be awarded a certificate unless he satisfies the requirements set by the Malaysian Skills Certification System. Section 36 of the NSDA states that the NSDC may give recognition to any skills qualifications issued by any body or organisation within and outside Malaysia as equivalent to the certificate awarded under Section 34. For the purpose of such recognition, the NSDC may establish an evaluation and recognition committee to advise and to make recommendations to the NSDC on matters relating to such recognition. Section 55 of the NSDA provides that any person who, or any institution or skills training provider which issues or awards any person, or is in possession of, any false certificate contrary to the provisions of the NSDA commits an offence and shall, on conviction, be liable to a fine not less than RM20,000 but not exceeding RM200,000 or to imprisonment for a term not less than one year but not exceeding 3 years or to both. Any skills training provider other than accredited centres which issues or awards any certification claimed to be complying with the Standards commits an offence under the NSDA and shall, on conviction, be liable to a fine not exceeding RM200,000 or to imprisonment for a term not exceeding 5 years or to both. 3. Laws and regulations relating to restriction on student enrolment at international school International school is not allowed to register and receive Malaysian students without the approval of the Ministry of Education, Malaysia in line with the Circular of Registrars of Schools and Teachers No. 3 of 2006 dated 21 July 2006 for the Implementation of 40% Malaysian Students Enrollment Policy to International Schools. Such circular was repealed via a Professional Circular No. 1 of 2012 dated 18 June 2012 for the Implementation of Malaysian Students Enrollment Policy to International Schools by removing the 40% Malaysian students enrollment policy with effective from 1 July With the new Professional Circular issued, the previous quota for the entrance of Malaysian students into international schools has been removed. Accordingly, the entrance of Malaysian students into international schools is currently open without any restriction. By changes in government policy, quota restriction previously imposed on the licence held by the Malaysian Kingsley Subsidiaries is no longer applicable by operation of law. 88

96 REGULATORY OVERVIEW 4. Laws and regulations relating to immigration (a) Immigration Act 1959/63 Immigration Act 1959/63 ( Immigration Act ) regulates various aspects of immigration into Malaysia, including the entry of foreign employees or students into Malaysia. Regulation 8(1) of the Immigration Regulations states that amongst others the following classes of passes may be issued under the Immigration Regulations for the purpose of entitling a person to enter and remain temporarily within the Federation or within Sabah or Sarawak: (a) an Employment Pass (issued pursuant to Regulation 9) or, for work or employment in Sabah, Work Pass (issued pursuant to Regulation 16); and (b) a Student s Pass (issued pursuant to Regulation 13). (1) Employment Pass Pursuant to Regulation 9(1) of the Immigration Regulations, an Employment Pass may be issued by the Controller (as defined in the Immigration Regulations) to any person other than a prohibited immigrant who satisfies the Controller that he wishes to enter the Federation (otherwise than as a visitor, tourist, transit passenger or student) in order to take up employment under a contract of service with the Government of the Federation or of any State in the Federation or of any City Council or Municipality in the Federation or to take up employment in the Federation under a contract (a) (b) for a minimum period of 2 years employment in the Federation with a company or firm approved for the purposes of this sub-paragraph; and under which such person is entitled to a salary of not less than RM1,200 per month: Regulation 9(2) of the Immigration Regulations states that where an Employment Pass has been granted, the holder is authorised enter the Federation on or before the date stated in such Pass and to remain therein for such period as may be so stated, but not exceeding 5 years from the date of such entry. According to Regulation 9(3) of the Immigration Regulations, every Employment Pass issued to any person under Regulation 9(1) shall be subject to the condition that during the validity of the Pass the holder shall not without the consent in writing of the Controller engage in any form of paid employment or in any business or professional occupation in the Federation, other than such particular employment, business or professional occupation as shall be specified in such Pass. (2) Student s Pass Regulation 13(1) of the Immigration Regulations states that a Student s Pass may be issued by the Controller to any person other than a prohibited immigrant who satisfies the Controller that (a) he has been accepted as a student by a recognised University or by an educational institution approved for the purpose of this subparagraph; or 89

97 REGULATORY OVERVIEW (b) he is in possession of a certificate issued by the Minister charged with responsibility for education to the effect that it is desirable that he should be accepted as a student at a specified educational institution in the Federation and that he has been so accepted. Regulation 13(5) of the Immigration Regulations further stipulates that for the purposes of Regulation 13(1)(a), an education institution must be approved by the Minister and, in the case of an institution in Sabah or Sarawak, by the State authority. Section 55A(1) of the Immigration Act states that any person involved (directly or indirectly) in conveying to Malaysia any person contrary to this act shall be guilty of an offence and on conviction, be liable to a fine of not less than RM10,000 but not more than RM50,000 and to imprisonment for a term of not less than 2 years but not more than 5 years and shall also be liable to whipping of not more than 6 strokes. Where the offence under Section 55A(1) has been committed by a body corporate, the body corporate shall be guilty of that offence and shall, on conviction, be liable to a fine of not less than RM30,000 but not more than RM100,000. Section 55B of the Immigration Act further states that any person who employs one or more persons, other than a citizen or a holder or a holder of an Entry Permit, who is not in possession of a valid Pass shall be guilty of an office and shall, on conviction, be liable to a fine of not less than RM10,000 but no more than RM50,000 or to imprisonment for a term not exceeding 12 months or to both for each such employee. Where, in the case of an offence under Section 55B(1) above, it is proved to the satisfaction of the court that the person has at the same time employed more than five such employees that person shall, on conviction be liable to imprisonment for a term of not less than 6 months but not more than 5 years and shall also be liable to whipping of not more than 6 strokes. Section 55E(1) of the Immigration Act stipulates that no occupier shall permit any illegal immigrant to enter or remain at any premises. An occupier who contravenes Section 55E(1) above shall be guilty of an offence and shall upon conviction, be liable to a fine of not less than RM5,000 and not more than RM50,000 or to imprisonment for a term not exceeding 12 months or to both for each illegal immigrant found at the premises and, in the case of a second or subsequent conviction, to a fine of not less than RM10,000 and not more than RM60,000 or to imprisonment for a term not exceeding 2 years or to both for each illegal immigrant found at the premises. 5. Laws and regulations relating to human resources development fund (a) Pembangunan Sumber Manusia Berhad Act 2001 Pembangunan Sumber Manusia Berhad Act 2001 ( PSMBA ) regulates the imposition and collection of a human resources development levy for the purpose of promoting the training and development of employees, apprentices and trainees, the establishment and the administration of the Human Resources Development Fund under Section 22 of the PSMBA ( HRD Fund ) by the Pembangunan Sumber Manusia Berhad ( PSMB ) and for matters connected therewith. PSMBA applies to the classes of employers in the industries specified in Part I of the First Schedule of the PSMBA, which includes: (1) employers with 10 or more employees in higher education industry, that is, the providing of instruction or training on or teaching of a course of study leading to the 90

98 REGULATORY OVERVIEW award of a certificate, diploma or degree upon the successful completion thereof or the providing of distance education, but does not include higher education or distance education provided by educational institutions established and managed directly by the Government or the Government of any State or provided by any University or University College established under the Universities and University Colleges Act 1971 or the Universiti Teknologi MARA Act 1976 or the Politeknik Ungku Omar established under the Politeknik Ungku Omar Act 1974; and (2) employers with 10 or more employees in early childhood education industry, that is, the provision of care or early education to the children below 6 years old by nurseries and kindergartens including the provision of special education for handicapped children at this level but excluding the child care or early education provided by nurseries or kindergartens owned or run by any Federal Government or State Government department or agency, or by any statutory body. The main objective of the PSMB shall be the imposition and collection of a human resources development levy for the purpose of promoting the training and development of employees, apprentices and trainees and the establishment and administration of the HRD Fund. The functions of the PSMB are (a) (b) (c) to assess and determine the types and extent of employees, apprentices and trainees training and retraining in keeping with the human resources needs of industries; to promote and stimulate manpower training; and to determine the terms and conditions under which any financial assistance or other benefits are to be given. Section 13(1) of the PSMBA states that every employer to whom the PSMBA applies shall register with the PSMB. Any employer who contravenes the foregoing provisions commits an offence and shall on conviction be liable to a fine not exceeding RM10,000 or to imprisonment for a term not exceeding one year or to both. The regulations governing the registration of employers and payment of levy under the PSMBA is Pembangunan Sumber Manusia Berhad (Registration of Employers and Payment of Levy) Regulations Section 14(1) of the PSMBA provides that, subject to an exemption from levy being given by the Minister pursuant to Section 19 of the PSMBA, there shall be paid by every employer to whom the PSMBA applies a human resources development levy in respect of each of his employees at the rate of 1% of the monthly wages of the employee. Any employer who fails to pay any levy due under Section 14(1) within such period as may be prescribed commits an offence and shall on conviction be liable to a fine not exceeding RM20,000 or to imprisonment for a term not exceeding 2 years or to both. 6. Laws and regulations relating to taxation (a) Dividends and distributions All dividends and other distributions payable on the shares of each of the Kingsley Malaysian Subsidiaries may under the current laws and regulations of Malaysia be 91

99 REGULATORY OVERVIEW converted and paid in any other foreign currency and be remitted out of Malaysia without the necessity of obtaining any authorisation, approval, consent or licence of any governmental or regulatory body or authority in Malaysia. All such dividends payable to its shareholders will not be subject to withholding or other taxes under the laws and regulations of Malaysia. (b) Corporate income tax The standard corporate tax rate is 24%, whilst the rate for resident small and medium sized companies (i.e. companies incorporated in Malaysia with paid-up capital of RM2.5 million or less and that are not part of a group containing a company exceeding this capitalisation threshold) is 18% on the first RM500,000.00, with the balance being taxed at the 24% rate with effect from year of assessment (c) Withholding Tax Pursuant to Section 107A(1) of the Income Tax Act 1967 ( ITA ), where any person ( payer ) is liable to make contract payment to a non-resident contractor in respect of services under a contract, he shall upon paying or crediting such contract payment deduct therefrom tax at the rate stated below: (i) (ii) 10% of the contract payment on account of tax which is or may be payable by that non-resident contractor for any year of assessment; and 3% of the contract payment on account of tax which is or may be payable by employees of that non-resident contractor for any year of assessment, and (whether or not that tax is so deducted) shall within one month after paying or crediting such contract payment render an account and pay the amount of that tax to the Director General of Inland Revenue ( Director General of Inland Revenue ). Pursuant to Section 107A(2) of the ITA, where the payer fails to pay any amount due from him under subsection (1) above, the amount which he fails to pay shall be increased by a sum equal to 10% of the amount which he fails to pay, and that amount and the increased sum shall be a debt due from him to the Government and shall be payable forthwith to the Director General of Inland Revenue. (d) Goods and Services Tax With effect from 1 April 2015, the Goods and Services Tax ( GST ) was implemented in Malaysia at a rate of 6% pursuant to the Goods and Services Tax Act GST is chargeable on all taxable supply of goods or services that are made by a taxable person in the course or furtherance of a business in Malaysia, and is also charged on the importation of goods or services into Malaysia. A taxable person is a person who makes taxable supplies in Malaysia that has an annual turnover exceeding RM500, A taxable person is required to be registered for GST purposes. 92

100 REGULATORY OVERVIEW In general, supply for GST purposes covers all forms of supply of goods and services in return for consideration, whether monetary or in kind. A taxable supply may either be standard rated or zero-rated. Standard rated supplies are goods or services supplied by businesses that are subject to GST at the standard rate of 6% unless prescribed as zero-rated or exempt. Zero-rated supplies are goods or services supplied by businesses that are subject to a GST rate of 0%. Exempt supplies are goods and services supplied by businesses that are not subject to GST. 7. Selling restrictions in respect of the Global Offering and Proposed Listing No action has been taken or will be taken to register the Prospectus (in whole or in part) or any offering material, circular or document in connection with the Global Offering and the Proposed Listing with the Securities Commission Malaysia ( Commission ) for the Commission s approval pursuant to the Capital Markets and Services Act 2007 ( CMSA ). Accordingly, the Prospectus and any offering material, circular or document in connection with the Global Offering and the Proposed Listing will not be circulated or distributed, nor will the Offer Shares under the Global Offering be offered for subscribe or purchase, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Malaysia other than (i) a unit trust scheme, prescribed investment scheme or private retirement scheme; (ii) Central Bank of Malaysia established under the Central Bank of Malaysia Act 2009; (iii) (iv) (v) (vi) (vii) (viii) (ix) a holder of a Capital Markets Services Licence granted pursuant to Section 61 of the CMSA; an executive director or a chief executive officer of a holder of a Capital Markets Services Licence; a closed end fund approved by the Commission; a bank licensee or insurance licensee as defined under the Labuan Financial Services and Securities Act 2010; an Islamic bank licensee or takaful licensee as defined in the Labuan Islamic Financial Services and Securities Act 2010; a licenced institution as defined in the Financial Services Act 2013 or an Islamic bank as defined in the Islamic Financial Services Act 2013; an insurance company registered under the Financial Services Act 2013 or a takaful operator registered under the Islamic Financial Services Act 2013; (x) a company that is registered as a trust company under the Trust Companies Act 1949 which has assets under management exceeding RM10 million or its equivalent in foreign currencies; (xi) a corporation that is a public company under the Companies Act which is approved by the Commission to be a trustee under the CMSA and has assets under management exceeding RM10 million or its equivalent in foreign currencies. 93

101 REGULATORY OVERVIEW (xii) (xiii) (xiv) (xv) (xvi) a corporation with total net assets exceeding RM10 million or its equivalent in foreign currencies based on the last audited accounts; a partnership with total net assets exceeding RM10 million or its equivalent in foreign currencies; a statutory body established by an Act of Parliament or an enactment of any State; a pension fund approved by the Director General of Inland Revenue under Section 150 of the Income Tax Act 1967; an individual whose total net personal assets or total net joint assets with his or her spouse exceeds RM3 million or its equivalent in foreign currencies, excluding the value of the primary residence of the individual; (xvii) an individual who has a gross annual income exceeding RM300, or its equivalent in foreign currencies per annum in the preceding 12 months; (xviii) an individual who, jointly with his or her spouse, has a gross annual income exceeding RM400, or its equivalent in foreign currencies per annum in the preceding 12 months; and (xix) any other person as may be specified by the Commission, in accordance with Section 229 of the CMSA provided that, in each of the preceding categories (i) to (xix), the distribution or circulation of the Prospectus or any offering material, circular or document in connection with the Global Offering and the Proposed Listing or the offer for subscribe or purchase of, or invitation to subscribe for or purchase of the Offer Shares under the Global Offering is made through a holder of a Capital Markets Services Licence (as defined in the CMSA) who carries on the business of dealing in securities. The distribution in Malaysia of the Prospectus is subject to Malaysian law. Under no circumstance shall the Prospectus constitute and be used for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of the Prospectus with the Commission under the CMSA. 94

102 HISTORY, DEVELOPMENT AND REORGANISATION GENERAL Our business can be traced back to the establishment of Kingsley International, which is one of our four principal operating subsidiaries, in Malaysia in 2010 by Tan Sri Barry Goh, our executive Director and one of our Controlling Shareholders. Please see the section headed Directors and Senior Management in this document for further details regarding the background of Tan Sri Barry Goh. In 2011, we established our first school, Kingsley International School, which offers education from early years up to secondary school students. In 2012, the school has been approved as a Cambridge International School by Cambridge International Examinations, the world s largest provider of international education programmes and qualifications for students aged three to 18 years. Kingsley International School has also been accredited to deliver the Duke of Edinburgh s International Award in From 2012 onwards, we expanded to offer tertiary education through the establishment of Kingsley College, Kingsley Skills College and Kingsley Professional Centre. Implementing a marketdriven work curriculum accredited by the Malaysian Qualifications Agency, Kingsley College provides programmes allowing learners to gain relevant work experience and industrial certification in the course of study. Kingsley Skills College offers technical education with skills training alongside, while Kingsley Professional Centre was established with a mission to equip professionals with knowledge and skills to drive organisational success. Since our inception, we have gradually built our student base. With our increasing number of students, Kingsley International School was relocated to a new campus in By the end of 2018, Kingsley International School will become a boarding school upon the completion of the construction of our two hostel blocks. IMPORTANT BUSINESS MILESTONES Set out below are the key milestones of our business development: Year Key milestones 2011 Our first school, Kingsley International School, began its operation. Kingsley International entered into a turnkey contract with Kingsley Hills to develop a new campus Kingsley College was established. Kingsley International School has been approved as a Cambridge International School by Cambridge International Examinations Kingsley Skills College began its operations. Kingsley Professional Centre was established The construction of a new campus was completed. Kingsley International School was relocated to a new campus. 95

103 HISTORY, DEVELOPMENT AND REORGANISATION Year Key milestones 2016 Kingsley Professional Centre began its operations. Kingsley International School has been accredited to deliver The Duke of Edinburgh s International Award Kingsley International entered into an agreement for the ownership of KIS Campus Land with Kingsley Hills. Kingsley College was accredited by the BTEC. CORPORATE HISTORY Our Group has a number of direct and indirect subsidiaries incorporated in Malaysia. Details of the members of our Group and their respective corporate history are set out below. OUR COMPANY On 12 January 2017, our Company was incorporated in the Cayman Islands as an exempted limited liability company and is authorised to issue up to a maximum of 5,000,000 shares of a nominal or par value of US$0.01 each. 800, 120 and 80 Shares were initially allotted and issued to Star Shine Finance Limited, DGMK Investment Limited and Eduking Investment Limited at the subscription price of US$0.01 each on the date of incorporation. Our Company completed the Reorganisation (other than the Capitalisation Issue and Global Offering) on 30 August 2017 in preparation for listing of the Shares. Please refer to the paragraph headed Reorganisation in this section for details of the Reorganisation. THE SUBSIDIARIES Kingsley Malaysia Kingsley Malaysia was incorporated in the British Virgin Islands on 25 January 2017 with limited liability and is authorised to issue a maximum of US$50,000 divided into 50,000 ordinary shares of US$1.00 each. On the date of its incorporation, one nil-paid share of Kingsley Malaysia was initially allotted and issued to our Company. Kingsley Malaysia is an investment holding company. Kingsley Edugroup (Malaysia) Kingsley Edugroup (Malaysia) was incorporated in Malaysia with limited liability on 14 December At the time of its incorporation, one ordinary share was initially allotted and issued to each of Chee Chan Long and Chee Sock Kion, respectively, being initial subscribers, who are Independent Third Parties. On 10 March 2017, each of Chee Chan Long and Chee Sock Kion transferred their respective one ordinary share in Kingsley Edugroup (Malaysia) to Kingsley Malaysia at RM1.00. Kingsley Edugroup (Malaysia) is an investment holding company. Kingsley International Kingsley International was incorporated in Malaysia with limited liability on 2 December

104 HISTORY, DEVELOPMENT AND REORGANISATION On 2 December 2010, one ordinary share was allotted and issued to Tan Sri Barry Goh, Dato Danny Goh and Dato Mazlan Bin Yusof, respectively, at RM1.00 each. The participation of Dato Mazlan Bin Yusof was to meet the then relevant regulatory requirement of Malaysia that at least 30% of the equity interest in a company involved in the provision of education related businesses, such as Kingsley International, be held by a bumiputra (a term used to describe the Malay race in Malaysia), such as Dato Mazlan Bin Yusof (the Bumiputra Requirement ). Further, on 19 January 2011, 199,999, 149,999 and 149,999 ordinary shares were allotted and issued to Tan Sri Barry Goh, Dato Danny Goh and Mr. Mazlan Bin Yusof, respectively, at RM1.00 each to provide further fundings to Kingsley International for its expansion and at the same time, meet the Bumiputra Requirement. On 14 September 2011, (i) Tan Sri Barry Goh transferred 200,000 ordinary shares to B&G Capital at a total consideration of RM200,000, and (ii) Dato Danny Goh transferred 150,000 ordinary shares to B&G Capital at a total consideration of RM150,000. These transfers were for the purposes of facilitating the obtaining of a loan by Kingsley International to finance the construction of the KIS Campus in that the financier requested a corporate guarantee from a corporate shareholder as security for the loan. Given that at the time of these transfers, Tan Sri Barry Goh and Dato Danny Goh were the directors and the shareholders of B&G Capital holding 55% and 45% equity interests of B&G Capital, respectively, they considered and decided to ask B&G Capital to be the corporate guarantor. Accordingly, these transfers were effected. For the similar purpose of providing further fundings to Kingsley International, 2,850,000 ordinary shares were allotted and issued to Dato Mazlan Bin Yusof at RM1.00 each and 6,650,000 ordinary shares were allotted and issued to B&G Capital at RM1.00 each on 15 September On 22 May 2014, due to his deteriorating health condition, Dato Mazlan Bin Yusof transferred 3,000,000 ordinary shares to Concept Cabling, which is a bumiputra for the purposes of complying with the Bumiputra Requirement, at a total consideration of RM3,000,000. Subsequently, on 24 December 2014, B&G Capital transferred 10,000 ordinary shares to Mr. Wang Zhaodong, being approximately 0.1% of the then total issued share capital of Kingsley International, at a total consideration of RM10,000. The transfer to Mr. Wang Zhaodong was to facilitate any future business opportunity in China as Kingsley International may undertake. Tan Sri Barry Goh ceased to be the shareholder of B&G Capital on 1 April 2015 and ceased to be the director of B&G Capital on 6 April Immediately prior to this, he and Dato Danny Goh held 55% and 45% of the equity interests in B&G Capital, respectively. B&G Capital was then principally engaged in property development activities through MCT Consortium Berhad and its subsidiaries, and other businesses through other subsidiaries, including Kingsley International. Tan Sri Barry Goh decided to proceed with the listing of property development businesses of MCT Consortium Berhad through MCT Berhad on the Main Market of Bursa Malaysia Securities Berhad while Dato Danny Goh was desirous of pursuing his business plans and career on his own through B&G Capital. Therefore, as part of the reorganisation exercise to facilitate the listing of MCT Berhad, which was eventually listed on 6 April 2015, MCT Consortium Bhd was demerged from B&G Capital and the existing shared equity holdings of Tan Sri Barry Goh were separated from Dato Danny Goh s in B&G Capital, MCT Consortium Berhad (held through B&G Capital) and various identified private companies. As a result, Tan Sri Barry Goh relinquished all his then 55% interest in B&G Capital, and resigned as a director of B&G Capital and Kingsley International on 6 April In consideration of him relinquishing his 55% 97

105 HISTORY, DEVELOPMENT AND REORGANISATION interest in B&G Capital (including B&G Capital s equity interest in Kingsley International), Tan Sri Barry Goh received his shareholding interest in MCT Berhad. Although a secondary reorganisation exercise was not carried out to carve out the Kingsley International business as part of the reorganisation exercise for the listing of MCT Bhd (so as to expedite and simplify such reorganisation exercise), Tan Sri Barry Goh was desirous from the outset of retaining an equity interest in Kingsley International. Accordingly, Tan Sri Barry Goh, Dato Danny Goh and B&G Capital agreed for all intents and purposes that all rights and interests to 4,000,000 ordinary shares in Kingsley International ( KIS Shares ) held by B&G Capital would be transferred by B&G Capital to Tan Sri Barry Goh at the instructions of Tan Sri Barry Goh following the completion of the above reorganisation exercise. Pending such transfer being effected, all such KIS Shares would be held by B&G Capital in trust for Tan Sri Barry Goh. On 18 March 2016, due to the removal of the Bumiputra Requirement imposed on international schools and as a step to rationalise the shareholding of Kingsley International, Tan Sri Barry Goh decided to retain and hold his beneficial interest in Kingsley International directly, (i) he acquired the entire 3,000,000 ordinary, representing 30% of the then total issued share capital of Kingsley International, held by Concept Cabling, at a total consideration of RM3,000,000, and (ii) at his request, B&G Capital transferred the KIS Shares to Tan Sri Barry Goh at a total consideration of RM4,000,000. In addition, on the same date, Mr. Wang Zhaodong transferred 10,000 ordinary shares, representing 0.1% of the then total issued share capital of Kingsley International, to B&G Capital at a total consideration of RM10,000 given that the intended pursuit of future business opportunity in China did not materialise. On 30 June 2016, 7,500,000 ordinary shares were allotted and issued to Tan Sri Barry Goh at RM1.00 each. Since then, Kingsley International was owned as to 82.86% and 17.14% by Tan Sri Barry Goh and B&G Capital, respectively, until the completion of the disposal of their entire shareholdings in Kingsley International by Tan Sri Barry Goh and B&G Capital to Kingsley Edugroup (Malaysia) on 23 August 2017 as part of the Reorganisation. Upon completion of such disposal on 23 August 2017, Kingsley International became a wholly-owned subsidiary of Kingsley Edugroup (Malaysia). Please refer to the section headed Reorganisation in this prospectus for further detail. As at the Latest Practicable Date, Kingsley International was principally engaged in the establishment and operation of an international school. Kingsley Graduate School Kingsley Graduate School was incorporated in Malaysia with limited liability on 9 May On 9 May 2012, 65 and 35 ordinary shares were allotted and issued to Tan Sri Barry Goh and Dato Mazlan Bin Yusof, respectively, at RM1.00 each. The participation of Dato Mazlan Bin Yusof was to comply with the Bumiputra Requirement. On 15 May 2012, 129,935 and 69,965 ordinary shares were allotted and issued to Tan Sri Barry Goh and Dato Mazlan Bin Yusof, respectively, at RM1.00 each to provide further funding to Kingsley Graduate. On 24 June 2013, (i) Dato Mazlan Bin Yusof transferred 10,000 ordinary shares to Tan Sri Barry Goh at a total consideration of RM10,000, (ii) 560,000 ordinary shares were allotted and issued to Tan Sri Barry Goh at RM1.00 each, and (iii) 240,000 ordinary shares were allotted and issued to Dato Mazlan Bin Yusof at RM1.00 each. 98

106 HISTORY, DEVELOPMENT AND REORGANISATION On 22 May 2014, due to his deteriorating health condition, Dato Mazlan Bin Yusof transferred 300,000 ordinary shares to Concept Cabling at a total consideration of RM300,000. On 18 July 2017, as part of the Reorganisation, Tan Sri Barry Goh disposed all his shareholding in Kingsley Graduate School to Kingsley Edugroup (Malaysia). Upon completion of such disposal on 30 August 2017, Kingsley Graduate School was owned as to 70% by Kingsley Edugroup (Malaysia) and as to 30% by Concept Cabling. Please refer to the section headed Reorganisation in this prospectus for further details. As at the Latest Practicable Date, Kingsley Graduate School was principally engaged in the establishment, management and operation of private higher learning institutions. Kingsley Skills Kingsley Skills was incorporated in Malaysia with limited liability on 30 October On the date of its incorporation, one ordinary share was allotted and issued to Tan Sri Barry Goh and Dato Danny Goh, respectively, at RM1.00 each. On 16 April 2014, 39,999 and 9,999 ordinary shares were allotted and issued to Tan Sri Barry Goh and Dato Danny Goh, respectively, at RM1.00 each. On 28 March 2016, 40,000 and 10,000 ordinary shares were allotted and issued to Tan Sri Barry Goh and Dato Danny Goh, respectively, at RM1.00 each. On 18 July 2017, as part of the Reorganisation, Tan Sri Barry Goh and Dato Danny Goh disposed all their shareholdings in Kingsley Skills to Kingsley Edugroup (Malaysia). Upon completion of such disposal on 23 August 2017, Kingsley Skills became a wholly-owned subsidiary of Kingsley Edugroup (Malaysia). Please refer to the section headed Reorganisation in this prospectus for further details. As at the Latest Practicable Date, Kingsley Skills was principally engaged in the business of skill training programmes. Kingsley Professional Kingsley Professional was incorporated in Malaysia with limited liability on 31 October On the date of its incorporation, one ordinary share was allotted and issued to Tan Sri Barry Goh and Dato Danny Goh, respectively, at RM1.00 each. On 18 July 2017, as part of the Reorganisation, Tan Sri Barry Goh and Dato Danny Goh disposed all their shareholdings in Kingsley Professional to Kingsley Edugroup (Malaysia). Upon completion of such disposal on 23 August 2017, Kingsley Professional became a wholly-owned subsidiary of Kingsley Edugroup (Malaysia). Please refer to the section headed Reorganisation in this prospectus for further details. As at the Latest Practicable Date, Kingsley Professional was principally engaged in the business of corporate training. Kingsley Language House Kingsley Language House was incorporated in Malaysia with limited liability on 8 November At the time of its incorporation, 70 and 30 ordinary shares were allotted and issued to Kingsley International and Concept Cabling, respectively, at RM1.00 each. 99

107 HISTORY, DEVELOPMENT AND REORGANISATION On 9 June 2017, 34,930 and 14,970 ordinary shares were allotted and issued to Kingsley International and Concept Cabling, respectively, at RM1.00 each. Kingsley Catering Kingsley Catering was incorporated in Malaysia with limited liability on 7 January At the time of its incorporation, one ordinary share was allotted and issued to Ms. Sumami Binti Kiman and Mr. Saharuddin Bin Abdullah, respectively, at RM1.00 each. On 8 March 2010, (i) Ms. Sumami Binti Kiman transferred one ordinary share to Mr. Teh Chin An at a total consideration of RM1.00, and (ii) Mr. Saharuddin Bin Abdullah transferred one ordinary share to Mr. Law Boon Hee at a total consideration of RM1.00. On 17 October 2011, (i) 38, 30 and 30 ordinary shares were allotted and issued to Kingsley International, Dato Mazlan Bin Yusof and Mr. Loh Peng Kai, respectively, at RM1.00 each, (ii) Mr. Teh Chin An transferred one ordinary share to Kingsley International at a total consideration of RM1.00, and (iii) Mr. Law Boon Hee transferred one ordinary share to Kingsley International at a total consideration of RM1.00. On 20 February 2012, Mr. Loh Peng Kai transferred 30 ordinary shares to Kingsley International at a total consideration of RM30. On 22 May 2014, Dato Mazlan Bin Yusof transferred 30 ordinary shares to Concept Cabling at a total consideration of RM30. Kingsley Digital Solutions Kingsley Digital Solutions was incorporated in Malaysia with limited liability on 21 November At the time of its incorporation, one ordinary share was allotted and issued to Kingsley Edugroup (Malaysia) at a consideration of RM1.00. As at the Latest Practicable Date, Kingsley Digital Solutions was principally engaged in exploring business opportunities in development of on-line training platform. REORGANISATION We underwent the Reorganisation in contemplation of the Listing through the following major steps, including for all intents and purposes, the acquisitions referred to in step two to step five below by our Company through Kingsley Edugroup (Malaysia). 1. Incorporation of our Company, Kingsley Malaysia and Kingsley Edugroup (Malaysia) Our Company was incorporated in the Cayman Islands on 12 January 2017 as an exempted limited liability company and is authorised to issue up to a maximum of 5,000,000 shares of a nominal or par value of US$0.01 each. 800,120 and 80 shares were initially allotted and issued to Star Shine, DGMK Investment and Eduking Investment at the subscription price of US$0.01 each on the date of its incorporation. Kingsley Malaysia was incorporated in the British Virgin Islands on 25 January 2017 and is authorised to issue up to a maximum of 50,000 ordinary shares of a single class with a par value of 100

108 HISTORY, DEVELOPMENT AND REORGANISATION US$1.00 each. One nil-paid share of Kingsley Malaysia was initially allotted and issued to our Company on the date of its incorporation. Kingsley Edugroup (Malaysia) was incorporated in Malaysia on 14 December 2016 with a capital of RM2.00 divided into two ordinary shares. One share was initially allotted and issued to Chee Chan Long and Chee Sock Kion, being the initial subscribers who are Independent Third Parties, respectively, at RM1.00 each on the date of its incorporation. On 10 March 2017, each of Chee Chan Long and Chee Sock Kion transferred their respective one share to Kingsley Malaysia at RM Acquisition of Shares of Kingsley International by Kingsley Edugroup (Malaysia) Immediately prior to the implementation of this step, Kingsley International was owned as to 82.86% by Tan Sri Barry Goh and as to 17.14% by B&G Capital. On 18 July 2017, a share sale agreement (as varied by a supplemental letter agreement dated 23 August 2017) in respect of Kingsley International was entered into between Tan Sri Barry Goh and B&G Capital (as vendors), Kingsley Edugroup (Malaysia) (as purchaser) and our Company, pursuant to which Tan Sri Barry Goh and B&G Capital agreed to sell, and Kingsley Edugroup (Malaysia) agreed to purchase the entire issued share capital of Kingsley International, being 17,500,000 shares in Kingsley International. The consideration of the acquisition was RM17,500,000 (comprising RM14,500,000 payable to Tan Sri Barry Goh and RM3,000,000 payable to B&G Capital), which was arrived at on a willing-buyer willing-seller basis based on the net asset value of Kingsley International as at 30 June Our Company paid the consideration on behalf of Kingsley Edugroup (Malaysia) by allotting and issuing (i) 1,656 Shares, credited as fully paid up, to Star Shine at the instruction of Tan Sri Barry Goh, and (ii) 184 and 160 shares, credited as fully paid up, to DGMK Investment and Eduking Investment, respectively, at the instruction of B&G Capital. Upon settlement and completion of the above acquisition on 23 August 2017, Kingsley International becomes a wholly-owned subsidiary of Kingsley Edugroup (Malaysia). 3. Acquisition of Shares of Kingsley Graduate by Kingsley Edugroup (Malaysia) Immediately prior to the implementation of this step, Kingsley Graduate was owned as to 70% by Tan Sri Barry Goh and as to 30% by Concept Cabling. On 18 July 2017, Tan Sri Barry Goh (as vendor) and Kingsley Edugroup (Malaysia) (as purchaser) entered into a share sale agreement in respect of Kingsley Graduate, whereby Kingsley Edugroup (Malaysia) agreed to purchase 70% of the entire issued share capital, being 700,000 shares in Kingsley Graduate. A consideration of RM10 was arrived at on a willing-buyer willing-seller basis. On 30 August 2017, being the completion date as contemplated under the share sale agreement in respect of Kingsley Graduate, Kingsley Edugroup (Malaysia) settled the consideration by way of cash. Following the completion, Kingsley Graduate is owned as to 70% by Kingsley Edugroup (Malaysia) and as to 30% by Concept Cabling. 4. Acquisition of Shares of Kingsley Skills by Kingsley Edugroup (Malaysia) Immediately prior to the implementation of this step, Kingsley Skills was owned as to 80% by Tan Sri Barry Goh and as to 20% by Dato Danny Goh. 101

109 HISTORY, DEVELOPMENT AND REORGANISATION On 18 July 2017, as part of the Reorganisation, Tan Sri Barry Goh and Dato Danny Goh (as vendors) and Kingsley Edugroup (Malaysia) (as purchaser) entered into a share sale agreement in respect of Kingsley Skills, whereby Kingsley Edugroup (Malaysia) agreed to purchase the entire issued share capital, being 100,000 shares in Kingsley Skills. A consideration of RM10 was arrived at on a willing-buyer willing-seller basis. On 23 August 2017, being the completion date as contemplated under the share sale agreement in respect of Kingsley Skills, Kingsley Edugroup (Malaysia) settled the consideration by way of cash. Following the completion, Kingsley Skills becomes a wholly-owned subsidiary of Kingsley Edugroup (Malaysia). 5. Acquisition of Shares of Kingsley Professional by Kingsley Edugroup (Malaysia) Before the Reorganisation, Kingsley Professional was owned as to 50% by Tan Sri Barry Goh and as to 50% by Dato Danny Goh. On 18 July 2017, as part of the Reorganisation, Tan Sri Barry Goh and Dato Danny Goh (as vendors) and Kingsley Edugroup (Malaysia) (as purchaser) entered into a share sale agreement in respect of Kingsley Professional, pursuant to which Kingsley Edugroup (Malaysia) agreed to purchase the entire issued share capital of Kingsley Professional, being two shares in Kingsley Professional. A consideration of RM10 was arrived at on a willing-seller willing-buyer basis. On 23 August 2017, being the completion date as contemplated under the share sale agreement in respect of Kingsley Professional, Kingsley Edugroup (Malaysia) settled the consideration by way of cash. Following the completion, Kingsley Professional becomes a wholly owned subsidiary of Kingsley Edugroup (Malaysia). 6. Increase in authorised share capital of our Company On 19 April 2018, the authorised share capital of our Company was increased from HK$380,000 divided into 38,000,000 Shares of par value HK$0.01 each to HK$10,000,000 divided into 1,000,000,000 Shares of par value HK$0.01 each, by the creation of an additional 962,000,000 new Shares of par value HK$0.01 each. 7. The Capitalisation issue Conditional upon (i) all the shareholders of our Company passing the necessary shareholders resolutions; and (ii) the Global Offering becoming unconditional and the share premium account of our Company having sufficient balance, an appropriate sum will be capitalised and applied in paying up in full such number of shares of our Company to be allotted and issued to Star Shine, DGMK Investment and Eduking Investment whose name appear on the register of members or the principal share register of our Company prior to the Global Offering. 8. Global Offering Our Company will offer 200,000,000 new Shares under the Global Offering for subscription by professional, institutional and other investors, representing a total of 25% of the enlarged issued share capital of our Company upon listing of our Shares on the GEM. 102

110 HISTORY, DEVELOPMENT AND REORGANISATION GROUP STRUCTURE The chart below sets out the corporate structure of our Group prior to the commencement of the Reorganisation: Kingsley International, Kingsley Language House and Kingsley Catering Dato' Danny Goh Dato' Law Boon Hee 95% 5% Syapurna Sdn Bhd (Malaysia) Dato' Danny Goh 77.4% 22.6% Tan Sri Barry Goh B&G Capital (Malaysia) 82.86% 17.14% Kingsley International School Kingsley International (Malaysia) Concept Cabling (Note) (Malaysia) 70% 30% Kingsley Language (Malaysia) Kingsley Catering (Malaysia) Note: Concept Cabling is an Independent Third Party. 103

111 HISTORY, DEVELOPMENT AND REORGANISATION Kingsley Graduate School Tan Sri Barry Goh Concept Cabling (Note) 70% 30% Kingsley Graduate (Malaysia) Kingsley College Kingsley Professional Centre Tan Sri Barry Goh Dato' Danny Goh 50% 50% Kingsley Professional (Malaysia) Kingsley Professional Centre Note: Concept Cabling is an Independent Third Party. 104

112 HISTORY, DEVELOPMENT AND REORGANISATION Kingsley Skills Tan Sri Barry Goh Dato' Danny Goh 80% 20% Kingsley Skills (Malaysia) Kingsley Skills College 105

113 HISTORY, DEVELOPMENT AND REORGANISATION The chart below sets out the corporate structure of our Group immediately after the completion of the Acquisitions and the establishment of Kingsley Digital Solutions: Tan Sri Barry Goh Dato' Danny Goh Dato' Law Boon Hee 100% 100% 100% Star Shine (BVI) DGMK Investment (BVI) Eduking Investment (BVI) 82.8% 9.2% 8% Our Company (Cayman Islands) 100% Kingsley Malaysia (BVI) 100% Kingsley Edugroup (Malaysia) (Malaysia) 100% 100% 70% 100% 100% Kingsley Digital Solutions (Malaysia) Kingsley International (Malaysia) Kingsley Graduate (Malaysia) (Note) Kingsley Professional (Malaysia) Kingsley Skills (Malaysia) 70% 70% Kingsley Language House (Note) (Malaysia) Kingsley Catering (Note) (Malaysia) Note: The remaining 30% of the issued share capital is owned by Concept Cabling, an Independent Third Party. 106

114 HISTORY, DEVELOPMENT AND REORGANISATION The chart below sets out the corporate structure of our Group immediately following the completion of the Capitalisation and the Global Offering: Tan Sri Barry Goh Dato' Danny Goh Dato' Law Boon Hee 100% 100% 100% Star Shine (BVI) DGMK Investment (BVI) Eduking Investment (BVI) Public 62% 7% 6% 25% Our Company (Cayman Islands) 100% Kingsley Malaysia (BVI) 100% Kingsley Edugroup (Malaysia) (Malaysia) 100% 100% 70% 100% 100% Kingsley Digital Solutions (Malaysia) Kingsley International (Malaysia) Kingsley Graduate (Note) (Malaysia) Kingsley Professional (Malaysia) Kingsley Skills (Malaysia) 70% 70% Kingsley Language (Note) (Malaysia) Kingsley Catering (Note) (Malaysia) Note: The remaining 30% of the issued share capital is owned by Concept Cabling, an Independent Third Party. REGULATORY ISSUES RELATING TO THE REORGANISATION Approval of the registrar general appointed under the Private Higher Educational Institutions Act 1996 is required for the change or alteration of the equity participation of Kingsley Graduate pursuant to Section 15(c) of the Private Higher Educational Institutions Act Kingsley Graduate had on 24 August 2017 obtained the requisite approval. 107

115 HISTORY, DEVELOPMENT AND REORGANISATION Save for the above approval of the registrar general, no regulatory approval from any governmental authority is required for our Reorganisation. Our Malaysian Legal Advisers have confirmed that the share transfer involving the shares of our subsidiaries in Malaysia had been lawfully completed. CONFIRMATION DEED On 14 September 2017, Tan Sri Barry Goh and Dato Danny Goh entered into the Confirmation Deed to acknowledge and confirm, among other things, that since 2 December 2010, being the date when they first became the shareholders of Kingsley International, being a principal subsidiary of our Group: (a) (b) (c) (d) that they have been and will be actively cooperating, communicating and acting in concert with each other to maintain the consolidated control of our Group, and adopting a consensus building approach with an aim to achieving decisions on a unanimous basis on all major affairs relating to Kingsley International, our Company and other relevant members of our Group, including matters required to be approved by its shareholders under the articles of association of Kingsley International, our Company and other relevant members of our Group; that all decisions based on the consensus achieved in the meetings of the shareholders of Kingsley International, our Company and other relevant members of our Group were not and will not be challenged by any of them nor had they ever attempted to exercise their voting rights independently without the concurrence of the other for any reason; that they have been and will be exercising their voting rights and have been and will be casting unanimous vote collectively as a group for or against all resolutions in all meetings and discussions of our Company and the relevant members of our Group; and that in relation to all corporate matters, they have been and will be given sufficient time and information to consider and discuss in order to reach consensus. 108

116 BUSINESS OVERVIEW We are a private education service provider based in Subang Jaya, Selangor, Malaysia. According to Frost & Sullivan Report, Selangor is the largest region in terms of GDP in Malaysia in 2016, accounting for approximately 22.7% of total GDP in the country and is expected to grow at a CAGR of 8.1% during 2017 to Selangor is also the most populated state in Malaysia with approximately 6.3 million population and is expected to grow at a CAGR of 2% during 2017 to The geographical location of Subang Jaya, Selangor, Malaysia is set out below: 109

117 BUSINESS We principally offer (1) courses ranging from Nursery to A-levels Courses primarily based on curriculum developed by University of Cambridge International Examinations and England National Curriculum through our Kingsley International School, and (2) tertiary education programmes through our Kingsley Tertiary Institutions (comprising Kingsley Skills College, Kingsley Professional Centre and Kingsley College). Our history can be traced back to September 2011 when Kingsley International School recorded the first intake of students. According to the Frost & Sullivan Report, Kingsley International School had an approximate market share of 1.2% and ranked 29 th out of 116 international schools in Malaysia in terms of total number of student enrollment as at 30 June According to Frost & Sullivan Report, international schools refer to the private schools that promote international education in an international environment by adopting international curriculum and using English as the primary medium of instruction. The structure of Kingsley EduGroup as at the Latest Practicable Date can be simplified as follows: Kingsley EduGroup Kingsley International School Kingsley Skills College Kingsley College Kingsley Professional Centre Kingsley Language House Kingsley Tertiary Institutions 110

118 BUSINESS During the Track Record Period, we have experienced year-on-year growth of 35.7% and 82.7% in terms of student enrollment and gross profit respectively. For the four months ended 31 October 2017, we have experienced growth of 21.6% in terms of student enrolment and decrease of 7.3% in terms of gross profit. The table below sets out our revenue by business segments for the periods indicated: For the year ended 30 June For the four months ended 31 October Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 30 June 2016 Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 30 June 2017 Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 31 October 2016 Revenue (% of total revenue) Gross Profit (% of total gross profit) Student Enrollment as at 31 October 2017 Kingsley International School RM18,046,703 (95.88%) RM8,963,460 (93.80%) 650 RM26,802,388 (89.96%) RM15,028,616 (86.08%) (unaudited) (unaudited) 872 RM5,548,884 (96.7%) RM1,882,217 (96.6%) 743 RM6,319,348 (99.0%) RM1,913,274 (105.9%) 885 Kingsley Tertiary Institutions RM776,075 (4.12%) RM592,970 (6.20%) 16 (note) RM2,992,604 (10.04%) RM2,430,036 (13.92%) 32 (note) RM190,600 (3.3%) RM66,919 (3.4%) 25 (Note) RM60,899 (1.0%) RM(106,098) (-5.9%) 48 (Note) Total: RM18,822,778 (100%) RM9,556,430 (100%) 666 RM29,794,992 (100%) RM17,458,652 (100%) 904 RM5,739,484 (100%) RM1,949,136 (100%) 768 RM6,380,247 (100%) RM1,807,176 (100%) 933 Note: Student enrollment of Kingsley Tertiary Institutions refers to the full-time students of Kingsley Skills College and part-time students of Kingsley College and excludes the corporate customers of Kingsley Professional Centre. Kingsley Language House did not record any student intake during the Track Record Period and as at the Latest Practicable Date. Kingsley College has recorded first student intake in October

119 BUSINESS Kingsley International School recorded its first student intake in September 2011 and is accredited by the University of Cambridge International Examinations as a Cambridge International School since January As a Cambridge International School, Kingsley International School offers courses primarily based on curriculum developed by the University of Cambridge International Examinations. Kingsley International School is progressing steadily in terms of students academic achievements as measured by the continuous improvement of average Cambridge Checkpoint Examinations results for compulsory subjects since 2013 to 2017, and a number of Kingsley International School graduates have achieved 8A* and 9A* in Cambridge IGCSE Examinations and are currently studying in universities worldwide, such as London School of Economics and Political Science, University College London, University of Hong Kong, Royal College of Surgeons in Ireland and University of Queensland in Australia. We moved to our self-owned KIS Campus in September The KIS Annex Building is expected to come into use in the first quarter of The KIS Annex Building, upon completion, will consist of dormitories with accommodation capacity for approximately 883 students, classrooms with capacity for approximately 667 students, olympic-sized swimming pool and other facilities, which we believe will hold attraction for international as well as local students. Kingsley International was granted the approval for establishment and registration of Kingsley Language House by the Department of Education of Selangor, Malaysia in September During the Track Record Period, Kingsley International focused on operating Kingsley International School and has not started offering language courses through Kingsley Language House. For further details, please refer to the section headed Business Kingsley Language House. While we were focused on the development of Kingsley International School during the Track Record Period, we have acquired various accreditations for the Kingsley Tertiary Institutions comprising Kingsley Skills College, Kingsley Professional Centre and Kingsley College. Our Kingsley Skills College has been accredited by Ministry of Human Resources Malaysia to offer programmes for certificates accredited by the Department of Skills Development Malaysia and recorded first student intake in January Our Kingsley Professional Centre has been accredited as an accredited training provider under Human Resource Development Limited Act 2003 in April 2016 and provided its first training in April Our Kingsley College had been accredited by Malaysia Qualifications Agency and Pearson Business and Technology Education Council, UK to provide various diploma programmes, and entered into a cooperation agreement with Sejong University, Korea, which agreed to admit the Kingsley College graduates into the third year of the relevant bachelor degree programmes subject to admission criteria. We believe that textbooks and tests are no longer the primary tools for delivering knowledge and measuring achievement. Learners of all levels or fields of study will discover stimulating curricula realized through high engagement and experiential learning across Kingsley EduGroup. Learning is further enhanced by educators who model resourcefulness, resilience and good character. In short, innovation and positive values become part of daily life for learners. Learners then absorb these experiences and contribute ideas of their own, gaining practical knowledge and demonstrating enterprising traits as they progress. We hope that all the learners, at the end of their journey with Kingsley EduGroup, will discover what the world can offer and what they can offer the world. To summarize, our core values, mission and vision are: CORE VALUES investing in people, instil lifelong learning, and impart an innovative spirit. 112

120 BUSINESS MISSION inspiring enterprising mindsets. VISION raising a new generation of entrepreneurial achievers. Our long-term goal is to become an established private education service provider in Asia. COMPETITIVE STRENGTHS Established private education service provider in Malaysia with track record and growth potential Since first student intake in September 2011, we have steadily grown in terms of student enrollment and revenue. According to the Frost & Sullivan Report, in terms of student enrollment, our Kingsley International School ranked approximately 29th out of 116 international schools in Malaysia and 13 th out of 37 international schools in Selangor, Malaysia in Our revenue increased from RM18,822,778 for the year ended 30 June 2016 to RM29,794,992 for the year ended 30 June 2017, representing a year-on-year increase of 58.29% while our gross profit increased from RM9,556,430 for the year ended 30 June 2016 to RM17,458,652 for the year ended 30 June 2017, representing a yearon-year increase of 82.69%. For the four months ended 31 October 2017, our revenue increased to RM 6,380,247, from RM 5,739,484 for the four months ended 31 October 2016 and our gross profit decreased from RM 1,949,136 for the four months ended 31 October 2016 to RM 1,807,176 for the four months ended 31 October 2017, representing a decrease of 7.3%. We have become a registered Cambridge International School since January 2012 while our Kingsley Skills College was accredited by the Department of Skills Development Malaysia to provide programmes for certain types of Malaysia Skills Certificate. We believe that our accreditations facilities and teaching quality foster potential students and parents confidence in our capabilities to offer quality education and training, which is illustrated by the steady increase of student enrollment in Kingsley International School during the past five years. Latest Practicable Date 30 June June June June June October 2017 Student enrollment in Kingsley International School We expect to benefit from the continuous growth of student enrollment in Selangor, Malaysia. According to Frost & Sullivan Report, student enrollment in primary and secondary international schools in Selangor has increased from approximately 10,615 in 2012 to approximately 21,473 in 2016, representing a CAGR of 19.3%, and is expected to further increase to 44,808 in 2021, representing a CAGR of 15.7% between 2017 to We believe that the private education industry has strong growth potential and that we are able to capitalise on the business opportunities in the private education market based on our established reputation and track record. Strong reputation for student performance Students of Year 6 and Year 9 in Kingsley International School undertake the Cambridge Checkpoint Examinations marked by the University of Cambridge International Examinations each year. Our Cambridge Checkpoint Examinations have seen year-on-year steady improvement indicating the strength of our academic programme and quality of teaching in the core subjects of math, science and English in both our Secondary School and Primary School. 113

121 BUSINESS Since 2012, Kingsley International School students achieved a higher distinctions rate (attaining A or A*) than the cumulative world percentage as released by Cambridge International Examinations in 14 subjects out of a total of 18 subjects in 2015, 11 subjects out of a total of 17 subjects in 2016 and 12 out of 17 subjects in Two of our students have been awarded and recognized as being the top in Malaysia for First Language English (2013) and English as a Second Language (2014). A number of our graduates who have achieved 8 A* and 9 A* in Cambridge IGCSE and some of our graduates are currently studying in universities worldwide, such as London School of Economics and Political Science, University College London, University of Hong Kong, Royal College of Surgeons in Ireland and University of Queensland in Australia. In order to emphasize the well-rounded development of our students, the students of Kingsley International School are required to select at least One Sports and One Society for extra-curriculum activities. We offer a wide range of school-based elective courses, including courses for sports, art, music, Chinese and Indian culture, as well as activities for the development of character of our students. Our students have made significant achievements and awards in extra-curriculum activities such as national championship for Smart Kids Asia Talent Quest 2017, winner of speed race under 6 years in Ice Skate Asia 2017 Competition and champion in Taekwondo Competition Asia. Our relatively new campus, facilities, boarding facilities upon completion of KIS Annex Building Kingsley International School moved into the current campus in September 2015 which is newly built and accommodates one 10-storey school block with a total of 104 classrooms, and facilities such as science laboratories, computer laboratories, art rooms, language laboratories, music rooms, libraries, multi-purpose hall and dance & drama rooms. According to Frost & Sullivan Report, as at 30 June 2016, there were only 8 international schools in Subang Jaya and the surrounding municipals, most of which were built before We believe that our comparatively new campus and new facilities are attractive to parents who have high regard for campus infrastructure and facilities. Our KIS Annex Building is expected to come into use in the first quarter of 2019, which is expected to consist of dormitory rooms with accommodation capacity for approximately 883 students, classrooms with capacity for approximately 667 students, an olympic-sized swimming pool, a gymnasium and other facilities. The establishment of student dormitory is expected to facilitate the learning process, enrich the campus life of students as well as offering convenience for parents and students by providing accommodation. These value-added facilities may underpin the future growth of our Group in international school market in Malaysia. According to the Frost & Sullivan Report, approximately 35% of international schools in Malaysia and approximately 26% of international schools in Selangor offered boarding facilities as at 30 June 2016, and that international students generally prefer international school with boarding facilities which are considered as more secure and more convenient compared to the rented premises outside the campus. According to the Frost & Sullivan Report, Malaysia has also become a popular destination for international student to pursue pre-university education. This is due to Malaysia s English-speaking environment, relatively well established international school system inherited from its British colonial era as well as relatively low tuition fee and cost of living. We believe the relatively new campus facilities will hold attraction for prospective students in Malaysia and the boarding facilities will enhance our competitiveness in attracting international students. 114

122 BUSINESS With the relatively new facilities of KIS Campus and the upcoming boarding facilities upon completion of KIS Annex Building, combined with our reasonable fee structure we believe we will be attractive to both Malaysian and international students and hence will increase the campus utilisation rate of Kingsley International School. Experienced senior management team and qualified teachers We have an experienced and proven senior management team with extensive knowledge and experience in the Malaysia private education industry. Our management team consists of our executive directors and senior management, including the chief executive and principal of our Kingsley International School. Tan Sri Barry Goh, our founder, chairman and executive Director, has over 20 years of experience in various industries and has accumulated vast experiences in corporate governance and business strategies formulation. Dato Danny Goh, our executive Director, has over seven years of experience in the education industry strategic planning, and was one of the founding management members of Kingsley International School. Tan Sri Barry Goh and Dato Danny Goh are both founding members of Kingsley International School and are mainly responsible for strategic planning since the founding of our Group. Dr. Chua Ping Yong, the executive Director, will be responsible for overseeing the operation of Kingsley Tertiary Institutions and the overall strategies of Kingsley International School. Before joining our Group, Dr. Chua has more than 25 years of experience in Malaysia education sector after serving various positions ranging from instructor, lecturer, senior lecturer, head of division, head of school and dean of Tunku Abdul Rahman University College, Malaysia (formerly known as Tunku Abdul Rahman College) between July 1990 and April Ms. Ellis Lee, the current chief executive of Kingsley International School, is principally responsible for overseeing the day-to-day operation of Kingsley International School. Ms. Ellis Lee worked in the education sector since September 1997 and was associate dean of the School of Hotel Management, UCSI University before she joined our Group in Ms. May King, the current principal of the Kingsley International School had worked in the education sector since 1992 and joined Kingsley International School before the first student intake of Kingsley International School in September 2011, she was promoted through the ranks of teacher, head of department, head of keystage and principal. All of our teachers and trainers are qualified in teaching their respective subject at Kingsley International School and Kingsley Tertiary Institutions. As at 31 October 2017, our Kingsley International School has a total of 116 teachers. Teachers of Kingsley International School are generally required to undergo training programmes provided by the University of Cambridge Examinations to enhance their teaching techniques. Four of our teachers were awarded Outstanding Teachers National Outstanding Educator Award by Ministry of Education Malaysia during the Track Record Period. Provision of comprehensive private education services Our Group is capable of offering a full range of private education services for a variety of age group from pre-education, primary, secondary and tertiary education. According to Frost & Sullivan Report, many of the operators in private education market may only specialise in either international school or tertiary education. Hence, the capability of providing comprehensive educational service has been a key competitive edge of our Group, which enables our Group to penetrate further in the private education market by increasing student enrollment and retention. 115

123 BUSINESS Competitive fee structure According to Frost & Sullivan Report, based on average annual tuition fee, international school in Malaysia can be divided into three segments, namely high-end (RM40,000 above), mid-range (RM20,000 to RM40,000) and low-end (below RM20,000). As disclosed in the section headed Business Tuition Fee on page 124 of the prospectus, the average tuition fee charged by Kingsley International School fall within the mid-range. Our Group offers competitive and affordable tuition fee for students enrolled in international schools in Malaysia. According to Department of Statistics of Malaysia, the median monthly household gross income in Malaysia registered a growth from RM3,626 in 2012 to RM5,228 in 2016, representing a CAGR of 9.6%. In particular, the mean monthly household gross income of middle class recorded a growth from RM4,573 in 2012 to RM6,502 in In addition, the income share of middle class has increased from 36.6% in 2012 to 37.4% in With the rise of middle class in Malaysia, our Group is expected to be more competitive in terms of its level of tuition fees as compared with those operators in high-end segment. BUSINESS STRATEGIES Increasing student enrollment and revenue source of the Kingsley International School We intend to increase the student enrollment of our education institution, especially our Kingsley International School. We believe a further increase of student enrollment at our existing schools can help us further increase our revenue and profitability. To achieve this goal, our Kingsley International School intends to leverage on the new facilities of the KIS Annex Building which is expected to come into use in the first quarter of 2019 to attract both Malaysian and non-malaysian students. We believe that the brand-new olympic-sized swimming pool, gymnasium, other sports facilities and activities rooms will hold attractions for local and international students. In addition, we will work with overseas partners and recruitment agents to attract international students from East Asia and other countries in South East Asia with emphasis on our relatively new campus and boarding options. We expect the boarding fee will become a new source of revenue. In addition, we intend to upgrade and expand our facilities and employ additional high quality teachers in our education institutions, which we believe will help attract more high quality students to enroll in our schools. Further, while we will continue to leverage on word-of-mouth referrals based on the established reputation of our Kingsley International School as a main source of attracting new students, we plan to increase our sales and marketing efforts to promote our brand name. Specifically, we intend to (i) expand our cooperation with mainstream media to enhance our reputation and social influence, (ii) effectively utilise online media outlets and school websites to enhance our marketing efforts, (iii) continue to rely on online social platforms, to promote our schools and educational programmes, while reflecting distinguished characteristics of Kingsley International School, (iv) use promotional materials to highlight the advantages of our schools and to strengthen our brand name, and (v) conduct market research to better understand the needs of students and their parents and appropriately tailor our curriculum and other education programmes we offer to improve our reputation. Development of Kingsley Tertiary Institutions While we were focused on the development of Kingsley International School during the Track Record Period, we have acquired various accreditations for the Kingsley Tertiary Institutions comprising Kingsley Skills College, Kingsley Professional Centre and Kingsley College. As at the Latest Practicable Date, Kingsley Tertiary Institutions is still in development stage and only represented 6.2% and 13.9% of the gross profits of our Group during the year ended 30 June

124 BUSINESS and 2017 and recorded gross loss of RM106,098 during the four months ended 31 October 2017, respectively. Our Group is of the view that the development focus of our Group has been and will continue to be the Kingsley International School, while the Kingsley Tertiary Institutions enable our Group to offer comprehensive education service but it would not become a major revenue contribution in the medium term. The specific strategies for development and increasing student intake are as follows: For Kingsley Skills College, we intend to leverage on our track record of accreditation by the Department of Skills Development Malaysia to develop more Malaysia Skills Certificates programmes to cater for the increasing needs of the industry for skilled workers. We will also consider other short-term training programmes with an aim to target students who wish to acquire work skills certification through short-term courses. For Kingsley College, we intend to leverage on our track record of programmes accredited by Malaysian Qualifications Agency and Pearson BTEC to develop more accredited diplomas and also to pursue collaboration with overseas universities for recognition of our diploma programmes to mainly attract secondary school graduates who wish to have the option of choosing between employment or pursuing bachelor degree. As at the Latest Practicable Date, Kingsley College has entered into a cooperation agreement with Sejong University, Korea, according to which Sejong University agrees to admit graduates of Kingsley College into the third year of relevant bachelor degree programme at Sejong University subject to admission criteria. For Kingsley Professional Centre, we intend to broaden our programmes offerings to corporate customers by lining up with more external trainers and devote more resources to marketing efforts by engaging more marketing staff to approach targeted corporate customers. For Kingsley Language House, we intend to devote more resources to acquire necessary accreditation and marketing efforts. As at the Latest Practicable Date, Kingsley Language House has submitted application for accreditation as an IELTS test centre and plans to develop English programmes leading to IELTS qualification. In long term, Kingsley Language House also intends to promote one-on-one tailor-made training to students by leveraging on the English teaching resources of our Kingsley International School. Continue to enhance our reputation as a provider of high-quality education Academic performance is one of the key factors that prospective parents and students consider when selecting schools. In order to maintain and improve the quality of education in our schools, we plan to continue to monitor the academic performance of our students, provide tailored guidance to our students, and to encourage academic achievements and maintain active contact with parents to seek their feedback on our schools. We will continue to emphasize the well-rounded development of our students. We intend to review, adjust and expand from time to time our school-based elective courses in order to provide a happy learning environment that stimulates interests and helps build the confidence of our students. We plan to continue to provide a high standard of educational services to our students across our entire range of grades and levels, which we believe is a foundation to our future success and growth. One of our educational goals is to continue to focus on quality. To achieve this goal, we plan to continue to pay close attention to our students academic performance in the Cambridge Checkpoint Examinations, Cambridge IGCSE Examinations and assessment test for Malaysia Skills Certificates. 117

125 BUSINESS We believe good teachers and appropriate teaching methods are critical to the success of our schools. We will continue our efforts to recruit and retain high-quality teachers. We plan to further enhance discussion and sharing among our teachers by holding regular group meetings and subjectspecific seminars. We also plan to organize campus visits to, and exchange programmes with, other schools and educational institutions from time to time, with a view to expose our teachers to different teaching methods and approaches and our students to different education environment. In addition, we intend to further promote our brand name through various marketing channels, including increasing media coverage of our schools and our Group, conducting promotional events. 118

126 BUSINESS OUR SCHOOLS We currently own and operate Kingsley International School and Kingsley Tertiary Institutions (comprising Kingsley Skills College, Kingsley College and Kingsley Professional Centre), all of which are situated in Subang Jaya, Selangor, Malaysia, salient features of which are set out as follows: First intake of students Full-time Student enrollment as at Latest Practicable Date Major accreditation Qualifications awarded to students upon graduation Placement upon graduation (note 1) Kingsley International School September Cambridge International School Cambridge IGCSE Certificate Cambridge International A Levels IGCSE A-level Courses offered by overseas / Malaysian institutions Foundation courses / bachelor degree curriculum offered by universities in Malaysia or overseas Kingsley Skills College January Registered examination centre accredited by Department of Skills Development, Malaysia Skills Certificate in Computer System Operation (Level 3) Skills Certificate in Civil & Structural Engineering Draughting (Level 1-3) Employment Skills Certificate in Architecture Draughting (Level 3) Kingsley College October College accredited by Malaysian Qualifications Agency ( MQA ), a statutory body in Malaysia set up under the Malaysian Qualifications Act 2007 to accredit academic programs provided by educational institutions providing postsecondary or higher education and to facilitate the accreditation and articulation of qualifications. Approved centre accredited by Pearson Business and Technology Education Council ( Pearson BTEC, a provider of secondary school leaving qualifications and further education qualifications in England, Wales and Northern Ireland) Diploma in Building Technology (accredited by MQA) Diploma in Business Studies (accredited by MQA) Diploma in Information Technology (accredited by MQA) Pearson BTEC Level 5 Higher National Diploma in Business Pearson BTEC Level 5 Higher National Diploma in Business (Accounting and Finance) Pearson BTEC Level 5 Higher National Diploma in Business (Business Management) Employment or admission to bachelor degree curriculum offered by universities in Malaysia or overseas 119

127 BUSINESS First intake of students Full-time Student enrollment as at Latest Practicable Date Major accreditation Qualifications awarded to students upon graduation Placement upon graduation (note 1) Kingsley Professional Centre First training to customer was provided in April 2016 Not applicable (note 2) Institution accredited by HRDF Not applicable Not applicable Note 1: Majority of student s placement upon graduation is based on the best knowledge of our Directors. Note 2: To our Directors best knowledge, all of the training participants are employees of our corporate customers. 120

128 BUSINESS Student Enrollment, school utilisation rate, teacher and student-to-teacher ratio As at Latest Practicable Date, we had an aggregate of approximately 987 students enrolled in Kingsley International School, 7 students enrolled in Kingsley Skills College and 20 students enrolled in Kingsley College. During the Track Record Period and as at the Latest Practicable Date, Kingsley Language House has not recorded student intake, while Kingsley Professional Centre was focused on providing training to corporate customers. The following table sets out information relating to the student enrollment, capacity and school utilisation rate for each of our schools as of the dates indicated: As at 30 June June October 2017 Latest Practicable Date Kingsley International School Student enrollment Student Capacity (Note 1) 2,600 2,600 2,600 2,600 School utilisation rate (Note 2) 25.00% 33.54% 34.04% 37.96% Teacher Student-to-teacher ratio (Note 4) (Statutory maximum limit: 25) Kingsley Skills College Student enrollment Student Capacity (Note 3) School utilisation rate (Note 2) 21.33% 42.67% 48.00% 9.33% Trainer Student-to-trainer ratio (Note 5) (Government policy maximum limit: 25) Kingsley College Student enrollment Nil Nil Student Capacity (Note 6) School utilisation rate Nil Nil 8% 13.33% Lecturer 2 (Note 7) 3 (Note 7) 3 4 Student-to-lecturer ratio Note 1: Kingsley International School s student capacity = 104 classrooms x 25 students per classroom. Based on the current floor plan filed with the Ministry of Education Malaysia, Kingsley International School has designated 104 rooms as classrooms as at the Latest Practicable Date. The student enrollment capacity may change according to the rooms designated by Kingsley International School from time to time. Note 2: School utilisation = student number student capacity Note 3: Kingsley Skills College s student capacity = 3 teaching trainers x 25 students per trainer. As confirmed by the Malaysian Legal Advisers, the maximum ratio of students per registered teaching trainer is 25. In addition, Kingsley Skills College also engaged one program head and one English teacher. As confirmed by our Malaysian Legal Advisers, the trainers of Kingsley Skills College are qualified to teach as they have been 121

129 BUSINESS certified as accreditation personnel by the Department of Skills Development Malaysia, an agency under the Ministry of Human Resources of Malaysia for the implementation and supervision of competency-based learning and training. They are distinct from teachers registered under the Ministry of Education or the Ministry of Higher Education. Note 4: Student-to-teacher ratio = student number teacher number Note 5: Student-to-trainer ratio = student number trainer number Note 6: Kingsley College s student capacity = 6 classroom x 25 students per classroom. Pursuant to Kingsley College s internal policy, the maximum capacity per classroom is 25 students. Note 7: Lecturers were not employed as full-time lecturer and were mainly involved in administrative works as at 30 June 2016 and 2017 since the first student intake was recorded in October Kingsley International School s student capacity upon completion of KIS Annex Building According to the current designation plan for the KIS Annex Building which was agreed before the construction of Kingsley International School commenced in 2011, the student enrollment capacity is expected to increase by 667: Designated usage Number Designated capacity per classroom (note) Total designed capacity Classroom students 667 Note: Subject to the final approval by governmental authorities upon completion. The originally planned 29 classrooms of the KIS Annex Building with potential capacity of 667 students provides spare or contingent capacity for long-term growth when needed. In light of the current utilisation rate of the classrooms in KIS Campus being approximately 37.96% as at the Latest Practicable Date and the students demand for greater variety of facilities and function rooms, these classrooms might potentially be utilised as facility rooms for activities such as Aikido, Robotics, Yoga, Scale / Clay Modelling etc. Subject to students demand, those facility rooms will come into use in stages. These facility rooms can also be reverted back to classroom use depending on the future student enrolment and students demand for facilities. Such additional facility rooms are not within the original designation plan of the KIS Annex Building, but are in demand by the current students. Based on the architect confirmation, utilisation of the originally designated classrooms as facility rooms are within the approved usage plans for the KIS Annex Building. As confirmed by the Malaysian Legal Advisers, in the event that the Group intends to utilise the originally designated classrooms as facility rooms for educational purposes, the Group may make an application to the Ministry of Education. Such application is a procedural application and if all safety and building plan approval requirements have been fulfilled, there should be no legal impediment to such approval being obtained. Kingsley International School s small class policy Based on approval by Ministry of Education Malaysia, the maximum ratio for student per classroom of the KIS Campus is 30. Notwithstanding, Kingsley International School s current smallclass policy is to set a cap of 25 students per classroom so that our teachers can tailor their teaching according to the specific levels and needs of our students in their grade levels. We will closely monitor the market practice and the effectiveness of our small class policy, and adjust the number of students per classroom from time to time. 122

130 BUSINESS Teachers and Recruitment We believe that our team of experienced and dedicated teachers has been crucial to our success. As an operator of private education institutions, we are able to provide better incentives to independently recruit qualified teachers who fit our hiring criteria and can thrive in our schools and programmes. Teachers are the key to maintaining high-quality educational programmes and services as well as maintaining our brand and reputation. Our aim is to continue hiring teachers with a strong command of their respective subject areas who are open to innovative teaching methods and who have a caring heart towards students well-being. In our recruitment efforts, we also place a strong emphasis on strong communication skills and a passion for the education career. As at 31 October 2017, Kingsley International School had a total number of 116 teachers. All teachers of Kingsley International School need to undergo mandatory and refresher CIE Teaching Programmes on Pedagogy and Classroom Management Skills to enhance their teaching calibres and techniques. Teachers The following table sets out the number of our teachers for all of our schools for the periods indicated: As at 30 June As at 31 October Kingsley International School Kingsley Skills College Kingsley College Nil Nil 3 Kingsley Professional Centre Nil Nil Nil Total As at 30 June As at 31 October Local teachers (Malaysians) Expatriate teachers (Non-Malaysians) Total Turnover During the Track Record Period, the number of teachers who ceased employment with Kingsley International School (whether or not upon expiry of contract) are as follows: Year ended 30 June 2016 Year ended 30 June 2017 Four months ended 31 October 2017 Early Years Department Primary School Secondary School Total

131 BUSINESS Recruitment Policy Our teacher recruitment policy is based on the size of our current student enrollment and the number of newly admitted students at the beginning of each academic year or the commencement of respective education programmes. We employ our teachers through different channels and methods, including campus recruitment, general public recruitment, candidate self-nominations and the use of online recruiting websites. It is our internal policy to meet with the teacher recruitment agent to understand the market compensation rate for both Malaysian and non-malaysian teachers. With a view to maintain stable and high quality academic staff force, it is also our policy to have formal or informal conversation with teachers who have indicated their intention to cease employment. Through such conversation, the management of the Kingsley International School would have an opportunity to understand the reason for wishing to cease employment, and the management of Kingsley International School would, as it considered appropriate, try to allocate more suitable workload, working hours, and compensation. Before hiring each teacher, we usually consider his or her prior teaching experience, academic record, graduation certificate and reference letters as well as his or her performance in the interview. We also conduct background check of our candidates during the recruiting process. For the positions of certain programmes, we require applicants to teach a live class as part of his or her application process so that we can evaluate his or her performance in class. Newly hired teachers undergo mandatory training programmes (such as CIE Teaching Programmes on Pedagogy and Classroom Management Skills) that cover teaching skills and techniques. We also provide continuing training for our teachers (such as CIE Teaching Programmes on Pedagogy and Classroom Management Skills) so that they can stay abreast of the changes in student demands, new teaching theories and/or methodologies, changing testing and admission standards and other trends. We also implement ongoing monitoring and evaluation procedures for our teachers. All teachers are observed and evaluated every term of their teaching and delivery skills. We take into consideration the performance of each teacher when making decisions regarding their compensation. As a private educational institution, it is our policy to offer relatively competitive compensation to our teachers. Compensation typically includes a base salary and a performance bonus, which is generally based on the teaching quality, performance of the students, work attendance and other factors. Tuition Fee Tuition fee was our principal source of income during the Track Record Period. 124

132 BUSINESS The following table sets out the annual tuition fee for our schools for 2015/2016, 2016/2017 and 2017/2018 academic years (Notes 2 and 3): 2015/ / /2018 Kingsley International School Nursery RM15,960 RM15,960 RM15,960 Reception RM16,590 RM16,590 RM16,590 Primary School (Year 1 6) RM20,580 RM20,580 RM20,580 Secondary School (Year 7 9) RM27,540 RM27,540 RM27,540 Secondary School (Year 10-11) RM27,540 RM27,540 RM33,048 Sixth Form (note 1) RM26,000 RM32,500 RM32,500 Kingsley Skills College Certificate in Architectural Draughting RM8,000 RM6,200 RM6,200 Certificate in Computer Operation System RM10,000 RM7,200 RM7,200 Certificate in Civil & Structural Engineering Draughting RM9,000 RM6,850 RM6,850 Kingsley Professional Centre Negotiated on training-by-training basis Note 1: Students progressing from year 11 of Kingsley International School are entitled to an internal annual rate of RM13,000. Note 2: One academic year typically consists of three terms. Annual tuition fee is payable in equal instalments before each term. Note 3: In addition to tuition fee, students are also required to pay facilities fees, in-campus canteen, uniform, sport uniform, academic progress folder, study trip and science lab fee, as the case may be. The revenue generated from ancillary services consists of, among others, fees collected with respect to extra-curriculum activities, facilities, in-campus canteen, study trip, and other miscellaneous services provided to students. Note 4: Same tuition fees scale applies to both Malaysian students and non-malaysian students. Our Company does not have concrete plan to increase tuition fee upon completion of KIS Annex Building, but will expect to record higher revenue arising from facilities fee and also additional income stream of accommodation fee. During the Track Record Period, the tuition fees recorded from Kingsley International School s early years department (comprising reception and nursery), primary school and secondary school were as follows: Year ended 30 June 2016 Year ended 30 June 2017 Four months ended 31 October 2017 RM % RM % RM % Early Years Department (Nursery and Reception) 601, % 968, % 140, % Primary School (Year 1-6) 3,801, % 5,325, % 1,253, % Secondary School (Year 7-11 and Sixth Form) 8,393, % 12,592, % 2,656, % 12,796, % 18,885, % 4,049, % 125

133 BUSINESS Ancillary service fee The revenue generated from ancillary services consists of, among others, fees collected with respect to extra-curriculum activities, facilities, in-campus canteen, study trip, and other miscellaneous services provided to students. For the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, revenue generated from ancillary services contributed to 28.3%, 26.7% and 35.6% of our total revenue, respectively. Tuition fee discounts During the year ended 30 June 2016, Kingsley International School provided discounts in a total amount of RM0.8 million to, among others, students who are siblings of current students or based on academic merits. Discounts was offered as an incentive for student to enrol at Kingsley International School since our first student intake in September 2011 up to the academic year 2015/2016, since Kingsley International School was back then a relatively new market player and was just moving into the new KIS Campus for the academic year 2015/2016. KIS did not offer any such discounts starting from academic year 2016/2017. As confirmed by Frost & Sullivan, it is common for relatively new international schools in Malaysia to offer discounted tuition fee rate so as to gain a higher student enrolment. The Malaysian Legal Advisers confirm that the fee schedule of Kingsley International School is within the maximum tuition fee limit prescribed by the Ministry of Education Malaysia during the Track Record Period: Maximum fees (RM) (a) Nursery 40,500 (b) Reception 55,500 (c) Year 1 Year 5 60,000 (d) Year 6 Year 8 70,500 (e) Year 9 Year 12 75,000 TUITION FEE COLLECTION During the Track Record Period and as at the Latest Practicable Date, we typically issued tuition fee invoice in advance of the commencement of the academic term: Kingsley International School Invoice Date Due Date/Settlement Date Commencement of academic term Term 1 July During the Track Record Period, there was no 1 st week of September specific credit term offered to our students but the students usually settle prior to the commencement of academic term. Term 2 November 1 st week of January next year Term 3 February 2 nd week of April 126

134 BUSINESS Kingsley Skills College Invoice Date Due Date/Settlement Date Commencement of academic term Term 1 Term 2 One month before the new term One month before the new term During the Track Record Period, there was no specific credit term offered to our students but the students usually settle prior to the commencement of academic term, subject to separate arrangement for government-funded students whose tuition fees are usually settled within 3 months after commencement of the academic term. The academic term typically commences in September while admission acceptance are open all year round. The academic term typically commences in September while admission acceptance are open all year round. Kingsley College Kingsley College only recorded first student intake in October 2017, and requested the first batch of students to settle the termly tuition fee within 1 month after commencement of the academic term. Kingsley College will formulate formal credit policy in the next student intake in line with market practice. Kingsley Professional Centre With respect to the training fee, Kingsley Professional Centre typically requested full payment before training but might consider to grant a credit term up to 30 days for select customers. Accounting Treatment While the cash inflow of tuition fee is generated before commencement of academic term, our Company cannot immediately recognise all the cash inflow as revenue from accounting perspectives, as Kingsley International School has not yet provided the education service for the forthcoming academic term. As such, the cash inflow will be accounted as receipt in advance and deferred revenue but will be recognised as revenue as the academic term progresses, while the receipt in advance and deferred revenue will decrease accordingly. Since the cash inflow will be recognised as revenue progressively throughout the relevant financial years, there is no material effect of such difference on our Group s financial position and performance as at the financial year end. Refund policy Kingsley International School s academic year comprises three academic terms. Students may only apply for termly tuition fee refund upon serving at least six months prior notice before the particular academic term starts. 127

135 BUSINESS Tuition fee refund policy of both Kingsley Skills College and Kingsley College are: (1) 100% of the tuition fee is refunded if student withdraws more than 2 weeks before the academic year starts; (2) 50% of the tuition fee is refunded if student withdraws during the period between less than 2 weeks before and not more than 2 weeks after the academic year starts; and (3) no tuition fee is refunded if student withdraws more than 2 weeks after the academic year starts. The Malaysian Legal Advisers have confirmed that our refund policy as set out above is not in contravention of any applicable laws and regulations. The following table sets out the number of students who have paid tuition fee but withdrew from our schools before the end of the term during the Track Record Period. We agreed to refund on a case-bycase basis. None of the withdrawing students raised any complaint with respect to the non-refunding of the tuition fees already paid by such students. During the Track Record Period, tuition fees of RM0.5 million, RM0.1 million and RM0.02 million were refunded to the withdrawing students during each of the year ended 30 June 2016 and 2017 and for the four months ended 31 October 2017, respectively. Year ended 30 June 2016 Year ended 30 June 2017 Four months ended 31 October 2017 Kingsley International School Kingsley Skills College Kingsley International School Based on the departure forms signed by the withdrawn students of Kingsley International School, the summary of withdrawal reasons provided by the withdrawn students during the Track Record Period are as follows: Withdrawal reason Number of students Percentage of the total withdrawals during Track Record Period Transfer to other school (personal preference) % Relocation (including return to home country) % Absent/Left without notice % Insufficient financial resources % Others (note) % Total: % Note: others refer to common withdrawal reasons provided by less than 5 students during the Track Record Period. Kingsley Skills College Based on the departure forms signed by the withdrawn students of Kingsley Skills College, 8 out of the total of 9 withdrawn students indicate do not wish to continue for reasons such as further study in other field, not interested in courses, campus location far from home, family matter, financial issue and no specific reason other than do not wish to continue, while 1 student indicated Health as reason for withdrawal. 128

136 BUSINESS Kingsley College Kingsley College recorded first student intake in October 2017, all of whom were enrolled in the part-time diploma in business programme which are expected to be completed within a period up to 4 years. As at the Latest Practicable Date, the Kingsley College had not been formally notified of withdrawal by students who may schedule their course timetable according to own need. Comparison of select operation statistics is set out as follows: Malaysia Selangor Kingsley International School Student-to-teacher ratio 8:1 to 15:1 9:1 to 11:1 8.8:1 Average utilisation rate (Note 1) 20% to 40% 25% to 45% 37% Average rate of withdrawal (Note 2) 5% to 10% 5% to 10% 10.5% Level of tuition fees RM29,000 RM32,000 RM15,960 RM32,500 Note 1: According to Frost & Sullivan, the industry utilisation rate refers to the range that the average utilisation rate may fall into. The average utilisation rate of Kingsley International School (i.e. approximately 37.96% as at the Latest Practicable Date) falls within the range of average utilisation rate of international schools in both Malaysia and Selangor. As disclosed on page 130 of the prospectus, the average school utilisation rate of long established international schools in Malaysia was approximately 50% to 65%. The long established international school refers to those built around 10 years ago. Kingsley International School is considered as a relatively new school since it commenced first student intake in September 2011 with less than 10 years history as at now and has moved its campus with an expanded capacity in September Note 2: According to Frost & Sullivan, the average rate of withdrawal refers to the range that the average withdrawal rate may fall into. The withdrawal rate of Kingsley International School (i.e. 10.5%) was slightly higher than the average withdrawal rate in Selangor and Malaysia. According to Frost & Sullivan, it is common for the withdrawal rate of newly established international schools to be slightly higher than the industry average because the parents choosing newly established schools are relatively more sensitive to offerings from other schools based on factors such as curriculum, activities, facilities and cost of study. Since Kingsley International School moved into the KIS Campus in September 2015 and was a comparatively newly established international school, our Directors are of the view that it is therefore in line with market norm that the withdrawal rate of Kingsley International School is slightly higher than the industry average. KINGSLEY INTERNATIONAL SCHOOL Kingsley International School recorded the first student intake in September 2011 and moved to the current KIS Campus starting from September Kingsley International School was accredited as Cambridge International School since January Business Prospects Our Directors are of the view that Kingsley International School has been and will continue to be the focus of our Group s development. The gross profit of Kingsley International School represents 93.8%, 86.1% and 105.9% of the total gross profit of the Group during the two years ended 30 June 2017 and four months ended 31 October 2017, respectively. 129

137 BUSINESS Utilisation rate of Kingsley International School The current utilisation rate of Kingsley International School (i.e % as at the Latest Practicable Date) is in line with the industry average. According to the Frost & Sullivan Report, as at 30 June 2016, the average utilisation rate of international school in Malaysia (including both the long-established schools and the newly established schools) was approximately 20% to 40% and the average utilisation rate of international school in Selangor (including both the long-established schools and the newly established schools) was approximately 25% to 45% while the average utilisation rate of long established international schools (i.e. those built in approximately 10 years ago) in Malaysia was approximately 50% to 65% in 2016, therefore, those international schools in Malaysia and Selangor with low utilisation rates were generally newly established/built. According to the Frost & Sullivan, the average utilisation rate for such long established international schools are higher than that of the relatively new international schools because of their more established reputation and track record throughout years of operation along with the steady growth of student enrolment. These long established international schools also generally did not move campus or did not undertake capacity expansion during their operating history. In contrast, Kingsley International School is considered as a relatively new school, because it commenced first student intake in September 2011 with less than 10 years history as at now and has moved into a new campus on Kingsley Hill in September 2015 and strategically expanded its capacity. Hence, the current average utilisation rate of Kingsley International School is considered in line with the range of industry average (i.e. 20% to 40%) while there is a potential growth in utilisation in the future to increase it to that of the long established international school. Further, construction of international school is capital intensive and given the significant financial resources, design of international schools with a large capacity is generally adopted in the industry to prepare for growing student enrolment in the long term future. The average utilisation rate of Kingsley International School is expected to increase gradually with further established reputation, boarding options and more facilities through the KIS Annex Building, coupled with an expected growth of student enrolment in international schools in the next five years. In calculating the average utilisation rate of international schools in Malaysia, Frost & Sullivan has considered, among others, (1) the total student enrolment in primary and secondary international schools in Malaysia which amounted to 54,128 in 2016 according to Private Education Division, Ministry of Education, Malaysia; (2) the total number of primary and secondary international schools which amounted to 116 in 2016; (3) student enrolment and capacity obtained from international schools, including both long and newly established international schools in Selangor and other states in Malaysia on sample basis; and (4) interviews with market participants, including committee of industry associations, educational advisors and senior staff of international schools in Malaysia who are experienced in the industry, and reviewing their opinions and feedback. Frost & Sullivan is of the view that the methodology for the calculation of average of utilisation rate for international school market is appropriate, given that the industry is considered as fragmented and the total capacity of international schools is not publicly available. 130

138 BUSINESS We consider the education sector in Malaysia is rapidly evolving, highly fragmented and competitive. Our Directors are of the view that our business will be sustainable and are confident about the business prospects and improving the utilisation rate, for the following reasons: (a) proven track record of growth in student enrolment: As at 30 June Year CAGR ( ) Student Enrolment of Kingsley International School % (b) expected benefit from the growth in economies and population of Selangor, Malaysia: According to Frost & Sullivan Report, GDP of Selangor increased from approximately RM200.9 billion in 2012 to approximately RM251.6 billion in 2016 representing a CAGR of 5.8%. In 2016, Selangor was the largest region in terms of GDP in Malaysia, accounting for approximately 22.7% of total GDP in the country. Selangor is expected to grow at a CAGR of 8.1% during 2017 to According to Frost & Sullivan Report, affordability of school fee is one of the key determination factors that parents and students take into account in choosing school. Furthermore, GDP is a broad measurement of economic activity and prosperity in a nation or region, which has impact on wealth and disposable income of general household. As such, given that (i) Selangor was the largest region in terms of GDP in Malaysia in 2016; (ii) expected GDP growth of CAGR of 8.1%, it is expected that more parents will be willing to and may be able to choose internationals schools for their children and thus will boost KIS s business prospects. According to Frost & Sullivan Report, Selangor was the largest state in Malaysia and accounted for approximately 19.9% of total population in the country in 2016, representing approximately 6.3 million of population. The population in Selangor has demonstrated a steady growth from approximately 5.7 million in 2012 to approximately 6.3 million in 2016, representing a CAGR of 2.5%. The population in Selangor is expected to continue to grow at a CAGR of 2.0% during 2017 to According to Frost & Sullivan Report, the student enrolment in public primary and secondary schools in Selangor decreased from 915,213 in 2013 to 893,759 in 2016, representing a CAGR of -0.8% while the student enrolment in private primary and secondary schools in Selangor recorded a positive growth from 175,713 to 205,204 during the same period of time, which represents a CAGR of 5.3%. The expansion in private sector indicates the growth of international school education market in Malaysia. With the growing awareness towards high quality education as well as student enrollment in private education institutions, the revenue of private education services increased steadily from approximately RM11.7 billion in 2012 to approximately RM15.7 billion in 2016, representing a CAGR of 7.7%. The rise of middle class and emergence of affordable private schools and international schools are expected to be key drivers to private education services in Malaysia. Hence, the revenue of private education services may increase at a CAGR of 8.8% during 2017 to 2021 and reaching approximately RM23.7 billion by

139 BUSINESS (c) expected benefit from the completion of construction of KIS Annex Building which is expected to come into use in first quarter of 2019, details of which is set out in the section headed Benefits of KIS Annex Building and expected increase in student enrolment and utilisation rate of Kingsley International School on page 153 of the prospectus below. 132

140 BUSINESS Curriculum Kingsley International School offers programmes ranging from Nursery to Cambridge A-levels Examinations preparatory courses, primarily based on curriculum developed by University of Cambridge International Examinations and the England National Curriculum to students generally aged between 3 and 18. For illustrative purpose, a simplified chart is set out below to illustrate the different programmes of Kingsley International School and a roadmap from nursery to university. Nursery Reception Early Years Department Year 1-6 Primary School Year 7-9 Cambridge IGCSE Preparatory Course (Year 10-11) Secondary School Foundation Course offered by Universities in Malaysia or Overseas Cambridge IGCSE Examinations Cambridge A-levels Examinations preparatory courses (Year 12-13) Bachelor Degree of University 133

141 BUSINESS In addition to the curriculum developed by University of Cambridge International Examinations for different group of students, Kingsley International School also offers other extra-curriculum activities and programmes. Early Years Department Principal curricula Learning through in-class activities based on England National Curriculum Featured extra-curriculum programmes One Sports One Society Duke of Edinburgh Award Primary School (Year 1 Year 6) Cambridge Primary London Trinity College (Speech & Drama) Study Trips Exchange Programmes Charity Events Secondary School (Year 7 Year 9) Secondary School (Year 10 Year 11) Sixth Form (Year 12 13) Cambridge Secondary Cambridge IGCSE Examinations preparatory course Cambridge A-levels Examinations preparatory course England National Curriculum and Early Years Department The England National Curriculum is administered and amended by the Department for Education UK from time to time, and contains the early years curriculum. The framework and guidance materials are published by the Department of Education UK from time to time, and are available through internet access free of charge. The latest version of Statutory Framework for the Early Years Foundation Stage Setting the standards for learning, development and care for children from birth to five years old ( Early Years Framework ) published by the Department for Education UK in March 2017 sets out, among others: the Seven Areas of Learning (as defined below) and the educational programmes the early learning goals, which summarise the knowledge, skills and understanding that all young children should have gained by the end of the Reception year the assessment requirements (when and how practitioners must assess children s achievements, and when and how they should discuss children s progress with parents and/ or carers) The Early Years Department consists of (1) Nursery, which targets students aged 3 or 4 years old, and (2) Reception for students aged 4 or 5 years old. In line with the England National 134

142 BUSINESS Curriculum, our teaching philosophy for the Early Year Department students are to develop 7 areas of learning and development ( Seven Areas Learning ) as set out in the Early Years Framework published by the Department for Education UK: (1) personal, social and emotional development, (2) communication & language, (3) physical development, (4) literacy, (5) mathematics, (6) understanding the world, and (7) expressive arts and design. The medium of instruction is English. The programme generally comprises a variety of creative games as well as role playing. The course materials we use combine different aspects of learning to expose our students to various important subjects, including social studies, health, language, science and arts. Curriculum developed by University of Cambridge International Examinations According to the Frost & Sullivan Report, as at the Latest Practicable Date, there are several accredited examination boards that offer IGCSE while Cambridge IGCSE is one of the common IGCSE programmes in Malaysia, offered by approximately 60% of international schools in Malaysia in Agreement between Kingsley International and University of Cambridge International Examinations ( CIE ) In December 2011, Kingsley International entered into an agreement with CIE, according to which both parties agree that the arrangements between CIE and Kingsley International School will be governed by the latest version of the Cambridge Standard Terms of School Registration which is available on line from time to time. Below is a summary of the key terms of the current version of Cambridge Standard Terms of School Registration: Term : Initial term up to 1st October 2012, which shall be automatically renewed for a further period of 12 months from the 1st of October in that and each subsequent year Obligations of Kingsley International School : Kingsley International School shall: hold and administer the Cambridge Syllabuses and Cambridge Assessments at the Kingsley International School s registered premises in accordance with the agreement and the Cambridge Handbook. obtain and keep in place the relevant licences and permissions which are necessary in the country and region in which Kingsley International School is located in order to perform its obligations under the agreement. comply with all laws, statutes, and regulations of a governmental nature applicable in the country and region in which Kingsley International School is located relating to the operation of Kingsley International School and the administration of the Cambridge Assessments. Rights and obligations of CIE : CIE will provide the services (as described in Cambridge Handbook) for the duration of the agreement in accordance with the terms of the agreement. CIE will be entitled in its absolute discretion, and without liability to Kingsley International School to alter the form, style, content or substance of its syllabuses, assessments, qualifications and certificates. 135

143 BUSINESS CIE may either itself or through its agents require Kingsley International School to supply such information relating to the assessments as may be reasonably requested and allow persons nominated by CIE to inspect relevant extracts of the records and files of Kingsley International School for the purpose of ensuring it is complying with its obligations under the agreement. CIE will be entitled to conduct unannounced inspections of any of Kingsley International School s premises or its systems and procedures connected with the delivery of assessments at any time, including when candidates may be sitting examinations. Fees : Kingsley International School shall pay a non-refundable sum to CIE as annual registration fee, at such amounts specified by CIE from time to time. Kingsley International School shall pay fees to CIE for registering students for examinations administered by CIE in such amounts specified by CIE from time to time. Termination : Either party will be entitled to terminate the agreement immediately upon occurrence of certain events such as non-observance of the agreement terms. MAINTAINING CERTIFICATION AND INSPECTION BY CIE Either party may terminate the agreement without cause at any time by giving 6 months notice in writing. Pursuant to the agreement between Kingsley International and CIE, CIE was entitled to conduct inspection on Kingsley International School. Since 2012 up to the Latest Practicable Date, Kingsley International School passed the annual inspection in each of the past six inspections and maintained the status as Cambridge International School as at the Latest Practicable Date. Benefits as Cambridge International School As a registered Cambridge International School, Kingsley International School was supported by Cambridge International Examination in various aspects: (1) Access to the catalogue of recommended text books, and the training and supporting materials for teaching on the official website administered by the University of Cambridge International Examinations. (2) Access to past exam papers of Cambridge Checkpoint Examinations, Cambridge IGCSE Examinations and Cambridge A-levels Examinations by the University of Cambridge International Examinations. (3) Ability to register students to sit in examinations administered by University of Cambridge International Examinations. To our Directors knowledge and belief, the University of Cambridge International Examinations only allowed Cambridge International School or institutions affiliated with CIE to register students to participate in the Cambridge Checkpoint Examinations, Cambridge IGCSE Examinations and Cambridge A-levels Examinations. 136

144 BUSINESS Following the curriculum developed by the University of Cambridge International Examinations, we offer the following core/elective courses during the 2016/2017 academic year while the electives are offered subject to sufficient demand by students. Primary School (Year 1 Year 6) The core subjects taught in our primary school during the Track Record Period are: English Mathematics Science Humanities Information & Communication Technology Art Performing Arts (Speech & Drama, Music) Personal, Social & Health Education Physical education Malay (compulsory for Malaysian students) Modern Foreign language (e.g. Mandarin or Spanish) Secondary School (Year 7 Year 9) The core subjects taught in our secondary school during the Track Record Period are: English Mathematics Science Humanities Information & Communication Technology Art Music Personal, Social & Health Education Physical Education Malay (compulsory for Malaysian students) Modern Foreign language (Mandarin or Spanish) Secondary School (Year 10 Year 11) Our student in Year undertake subjects in preparation for the Cambridge IGCSE Examinations. Based on the Cambridge IGCSE syllabus, the core subjects taught in our secondary school during the Track Record Period are: Core Subjects: First language English / English as a second language Mathematics Malay (compulsory for Malaysian students) 137

145 BUSINESS Elective subjects (choose five): Physics Biology Music Drama Environmental management Chemistry English literature Economics Additional Mathematics History Geography Business studies Accounting Art & Design Global perspectives Physical Education Modern foreign language (Mandarin or Spanish) Sixth Form (Year 12-13) Our Sixth Form recorded the first intake of students in July 2016 and the first batch of our A-level students are due to complete the Cambridge A-levels Examinations in June The Sixth Form offers 24-months programme for students generally aged between 17 and 18. The focus of Sixth Form education is to prepare students for the Cambridge A-levels Examinations. We recommended students in respect to subject combinations based on university course requirements. Students can opt to sit for a minimum of three subjects up to a maximum of four subjects. Biology Sociology Accounting Chemistry Business studies Travel & tourism Physics Media studies Mathematics Economics Psychology Law English literature Environmental management Further Mathematics Selection and design of teaching materials and textbooks We adhere to strict procedures for selecting teaching materials and textbooks in order to maintain the quality of our education. Our school has a set of teaching material management policies, which covers the selection, procurement, distribution and management of the teaching materials to be used by our school. As a Cambridge International School, Kingsley International School chose appropriate textbooks primarily based on recommendations by Cambridge International Examinations such as Cambridge International Examinations Catalogue. From January to April of each year, our head of subject teachers would decide on the selection of textbooks for the following academic year. By the beginning of the following school term, the school would provide a book list to the students. Due to inventory risk, our school has decided not to be a retailer of the books. Instead, our students could purchase books at our school bookstore which is an independent sub-contractor. Students are free to choose where they would like to purchase the books found on the book list. FEATURED EXTRA-CURRICULUM ACTIVITIES In addition to academic programmes, Kingsley International School also strives to offer extracurriculum activities for students to excel and fulfil potentials in different areas of interest. 138

146 BUSINESS One Sports One Society All students in Primary School and Secondary School of Kingsley International School are generally required to choose at least one sports team and one cultural activity as extra-curriculum activities. Duke of Edinburgh Award Kingsley International School is accredited as an Independent Award Centre by the Duke of Edinburgh s International Award Foundation, and therefore is certified to provide training under the Duke of Edinburgh Award Scheme since We believe the award under the Duke of Edinburgh Award plays a vital role in providing opportunities for the participating students to develop essential life skills, increase their employability and foster their chance of admission into universities worldwide. Trinity College London (Drama & Speech) Kingsley International School is a qualified institution to teach, speech & drama, based on the syllabus specified by Trinity College London. We sponsored our staff to attend the Trinity Workshop facilitated by the Trinity s Academic Consultant for speech & drama and one of our staff now accredited as an instructor to teach the relevant qualifications. Study trips To broaden our students exposure, Kingsley International School organises study trips and exchange programmes from time to time. During the Track Record Period, we have organised such study trips to other sites in Malaysia as well as The Chandra Kusuma International School in Indonesia. Besides going on the trips, the students will be involved in the preparation of presentations and the organisation of the trips. We believe that such outside-campus trips provide opportunities for our students to combine travel and cultural experiences with academic work bringing classroom lessons to life. Exchange programmes Kingsley International School students in Year 8 and 9 also have opportunities to participate in overseas exchange programmes with partner schools which provide a unique platform for overseas learning experience so as to broaden their global exposure. Charity Events To foster our students awareness of their social responsibilities, we organised periodic charity events in partnership with charity organisation such as National Cancer Council Malaysia, a Malaysian organisation to provide care and assistance to cancer patients. We encourage students to make donations and provide volunteer work from time to time. EXAMINATIONS AND ACADEMIC PERFORMANCE As a Cambridge International School, Kingsley International School was authorised to administer Cambridge Checkpoint Examinations and Cambridge IGCSE which were monitored and marked by Cambridge International Examinations. 139

147 BUSINESS Cambridge Checkpoint Examinations Students of Year 6 and Year 9 in Kingsley International School are required to undertake the checkpoint examinations monitored and marked by Cambridge International Examinations each year. Our checkpoint results have seen year-on-year improvement indicating the strength of our academic programme: Primary Average Checkpoint Results (note) Mathematics Science English Secondary Average Checkpoint Results (note) Mathematics Science English English (2 nd language) Nil Nil Nil Nil 4.1 Note 1: the average scores = total checkpoint examination scores / total participating students Note 2: maximum point is 6 140

148 BUSINESS Cambridge IGCSE Examinations Since our first batch of student intake in September 2011, Kingsley International School students achieved a higher distinction rate (attaining A or A*) than the world cumulative percentage as released by Cambridge International Examinations in 14 out of a total of 18 subjects in 2015, 11 out of 17 subjects in 2016 and 12 out of 17 subjects in Two of our students have been awarded and recognised as being the top in Malaysia for First Language English (2013) and English as a Second Language (2014). A number of our graduates are currently studying in universities worldwide, such as London School of Economics and Political Science, University College London and University of Hong Kong, Royal College of Surgeons in Ireland and University of Queensland in Australia. Our Cambridge IGCSE Examinations performance and the respective statistics released on the official website of Cambridge International Examinations are set out as follows: SUBJECT Kingsley International School Cumulative world total % achieving A or above Kingsley International School Cumulative world total % achieving A or above Kingsley International School Cumulative world total % achieving A or above Accounting 57% 36.9% 50.0% 38.7% 57.0% 36.5% Additional Mathematics 73% 50.2% 64.0% 52.1% 57.0% 53.7% Art & Design 9% 22.2% 13.0% 22.2% 0.0% 18.9% Biology 65% 42.5% 44.0% 42.5% 45.0% 42.7% Business Studies 29% 27.4% 32.0% 27.6% 29.0% 28.0% Chemistry 64% 47.9% 61.0% 48.2% 61.0% 47.6% Chinese as a Second Language 55% 69.5% 62.0% 67.3% 50.0% 68.0% Combined Science 13% 17.7% 17.1% 15.9% Economics 42% 37.0% 15.0% 36.3% 42.0% 38.0% First Language Chinese 76% 67.3% 75.0% 68.8% 44.0% 68.7% First Language English 33% 14.1% 33.0% 15.3% 30.0% 27.2% Mandarin Foreign Language 100% 82.6% 100.0% 82.9% 100.0% 84.6% Foreign Language Malay 100% 90.2% 80.0% 87.3% 98.0% 88.8% Geography 33% 33.5% 33.0% 34.9% 33.0% 34.9% History 67% 50.6% 50.0% 50.3% Mathematics 64% 34.5% 73.0% 35.3% 82.0% 36.1% Physics 80% 46.9% 68.0% 47.0% 71.0% 48.1% English as Second Language 22% 19.9% 7.0% 20.7% 0.0% 20.4% Environmental Management 27.2% 29.0% 28.2% 40.0% 30.0% 141

149 BUSINESS CONSTRUCTION OF KIS CAMPUS AND KIS ANNEX BUILDING AND BOARDING FACILITIES Kingsley International School is situated on a hill named Kingsley Hill, in Putra Heights, Subang Jaya, Selangor, Malaysia. The KIS Campus commenced operations in September As at the Latest Practicable Date, the KIS Annex Building was still under construction. Kingsley International School did not offer boarding facilities to students during the Track Record Period and as at the Latest Practicable Date, but would start to offer boarding facilities after the KIS Annex Building comes into use. The completion of the KIS Annex Building is expected in the fourth quarter of A picture of KIS Campus and KIS Annex Building is set out below: 142

150 BUSINESS In 2010, Kingsley Hills, an entity controlled by Dato Danny Goh, our executive director and the brother of Tan Sri Barry Goh, our executive Director, was engaged in real estate development on various sites on the Kingsley Hill. Kingsley Hills is also the land owner of the majority part of Kingsley Hill where the KIS Campus Land and the KIS Annex Land are situated. Kingsley Hills approached Kingsley International with the idea of building an international school in Putra Heights, Selangor, Malaysia where Kingsley Hills undertook various construction development. Kingsley Hills subsequently identified BGMC, a licenced construction company, as a sub-contractor to undertake the BGMC Contract Works while Kingsley Hills would continue to be ultimately responsible for the whole development and construction. After negotiation, Kingsley International entered into a turnkey contract ( Turnkey Contract ) with Kingsley Hills in July 2011, and entered into a separate contract ( BGMC Contract ) with BGMC in August 2011 so as to be entitled to direct contractual claims against BGMC if disputes arise between them with respect to the BGMC Contract Works. The salient terms of the Turnkey Contract and BGMC Contract are set out as follows: Work Scope Contract Sum Scheduled Completion Date and Liquidated and Ascertained Damages Remarks Kingsley Hills Above-ground-floor portion of the KIS Annex Building ( Kingsley Hills Contract Works ) (Note 1) and being responsible for the whole development of KIS Campus and KIS Annex Building which includes the BGMC Contract Works RM27,280, ( Kingsley Hills Contract Sum ) The Kingsley Hills Contract Works and the BGMC Contract Works shall be completed on or before 1 September 2015 ( Scheduled Completion Date ), failing which our Group shall be entitled to claim Liquidated and Ascertained Damages against Kingsley Hills as mentioned below Expectedtobe completedinthe fourth quarter of 2018 BGMC KIS Campus and foundation up to ground floor of the KIS Annex Building ( BGMC Contract Works ) (Note 1) RM110,837, ( BGMC Contract Sum ) (Note 2) Total: RM138,118,000 Completed Note 1: Including interior renovation for KIS Campus but excluding interior renovation for KIS Annex Building. Note 2:BGMC Contract Sum has been fully settled through various progress payments. 143

151 BUSINESS As at the Latest Practicable Date, the amount settled and to be settled by our Group with respect to the Kingsley Hills Contract Sums and the BGMC Contract Sums are as follows: Contractor Total Contract Sum Amount settled by our Group Amount to be settled by our Group Remarks BGMC RM110,837, RM110,837, Nil RM84,000,000 RM26,837, A total amount of RM84,000,000 was settled by our Group through various progress payments up to March 2016 A total amount of RM26,837, was initially paid by Kingsley Hills to BGMC up to March This amount was subsequently repaid by our Group to Kingsley Hills by utilising a revolving facility from an independent commercial bank in February 2018 Kingsley Hills RM27,280, RM2,500,000 RM24,780, RM10,000,000 To be settled within 6 months after the Handover Date Total: RM138,118,000 RM113,337, RM24,780, Note: RM10,000,000 To be settled within 12 months after the Handover Date RM4,780, To be settled within 18 months after the Handover Date our Group is entitled to Liquidated and Ascertained Damages against Kingsley Hills, which is equivalent to RM15,000 multiplied by the days lapsing between the Handover Date and the scheduled completion date, being 1 September Kingsley Hills partial payment of the BGMC Contract Sum and subsequent settlement by our Company prior to Listing Up to March 2016, Kingsley Hills has paid BGMC an aggregate amount of RM26,837, as partial payment of the BGMC Contract Sum. Our Group has drawn down a revolving facility of RM27.0 million from an independent commercial bank in February 2018 for general working purpose. The 144

152 BUSINESS revolving facility carries an effective interest rate of 4.75% per annum which is subject to fluctuation of the bank s cost of fund rate. Each drawdown of the revolving loan may be for a tenure of up to 12 months subject to the agreement between our Group and the bank, while the whole facility shall be fully settled within 24 months after the first drawdown. Our Group has utilised the aforesaid facility to settle the aforesaid remaining balance for the BGMC Contract Works in the amount of RM26.8 million in February 2018, and has subsequently partially repaid the said revolving facility with its own funds in the amount of RM7.37 million. Our Group intends to settle the remaining balance of the aforesaid facility with its own funds. Please refer to section headed Statement of Business Objectives and Use of Proceeds for details. For further details, please refer to the section headed Statement of Business Objectives and Use of Proceeds in this prospectus. The above historical partial payment of the BGMC Contract Sum by Kingsley Hills, which has been settled by our Company as at Latest Practicable Date, was part of the overall commercial arrangement that was discussed and agreed among the Group, Kingsley Hills and BGMC, having taken into account of the following: (1) in July 2011, Kingsley International was negotiating to obtain banking facility before it decided on the agreed payment terms under the Turnkey Contract with Kingsley Hills for the construction project. Kingsley International obtained a banking facility of RM76,000,000, in light of which Kingsley International suggested during the negotiation that it was prepared to settle an amount up to RM86,500,000 ( Pre-handover Payment ) before the Handover Date so that Kingsley International would not be subject to overly cash outlay pressure. Kingsley Hills has considered the overall prevailing circumstances which were set out in the section headed Background of Commercial Negotiations below, agreed to the Prehandover Payment while the total contractual amount under the Turnkey Contract was RM138,118,000; (2) it was agreed in August 2011 that Kingsley Hills continued to be ultimately responsible for the overall construction project and development, notwithstanding that Kingsley Hills has identified BGMC as a sub-contractor to undertake the BGMC Contract Works which covered the KIS Campus and the foundation portion of the KIS Annex Building. On the other hand, Kingsley International proposed to enter into contract with BGMC directly, since the direct contractual relationships between Kingsley International and BGMC would provide additional legal protection if disputes arise between them with respect to the BGMC Contract Works. Without such direct contract, our Group would not be entitled to contractual claim against BGMC; (3) BGMC demanded full settlement of the BGMC contract amount of RM110,837, ( BGMC Contract Amount ) upon completion of BGMC Contract Works which is before the Handover Date; (4) in light of Kingsley International s insistence of Pre-handover Payment being not more than RM86,500,000, as well as BGMC s request of the BGMC Contract Amount upon completion of the BGMC Contract Works which was before the Handover Date, there was a shortfall being RM26,837, After considering the overall benefits of constructing international school to Kingsley Hills which were set out in the section headed Background of Commercial Negotiations below, Kingsley Hills agreed to pay the said shortfall to BGMC on behalf of Kingsley International. This was an incentive offered by Kingsley Hills to Kingsley International to motivate our Group to establish an international school on Kingsley Hill. The 145

153 BUSINESS Group has utilised a revolving facility from an independent commercial bank to settle the aforesaid amount in February 2018; and (5) DK Consultants, a firm of chartered quantity surveyors registered with the Board of Quantity Surveyors Malaysia, which is specialised in assessing and advising on costs and contracts relating to construction projects, confirms that it is in line with normal market practice for turnkey contractor (such as Kingsley Hills) to directly settle whole or part of contractual sum payable to the sub-contractor (such as BGMC) before completion of the construction project, while the turnkey contractor will receive the full amount of its contract sum after completion of the construction project. Liquidated and Ascertained Damages ( LAD ) According to the Turnkey Contract, our Group is entitled to LAD against Kingsley Hills which LAD is equivalent to RM15,000 multiplied by the days lapsing between the Handover Date and the scheduled completion date, being 1 September As at the Latest Practicable Date, Kingsley Hills had settled a total amount of RM11,880,000 in favour of Kingsley International as LAD for the period from 1 September 2015 to 31 October 2017 (i.e. 792 days). Kingsley Hills has irrevocably confirmed that it shall settle the LAD for the period between 1 November 2017 and the Handover Date in the following manner: (1) LAD payable for the period from 1 November 2017 to 30 June 2018 shall be settled on or before 30 June 2018; and (2) LAD payable for the period from 1 July 2018 to the Handover Date shall be settled within 6 months after the Handover Date. Our Group s acquisition of KIS Campus Land and KIS Annex Land For the purpose of Listing and the benefits of the long term development of Kingsley International School, Kingsley Hills has transferred the KIS Campus Land to our Group at a nominal consideration of RM10 in June There is no fixed lease term between Kingsley Hills and our Group upon completion of KIS Annex Building and Kingsley Hills has agreed to transfer the KIS Annex Land to our Group at a nominal consideration of RM10 upon completion of KIS Annex Building which is expected to be in the fourth quarter of Background of Commercial Negotiations The transactions and business arrangements between our Group and its related parties, Kingsley Hills and BGMC for the construction of KIS Campus and KIS Annex Building (such as the payment amount and the payment schedules) were entered into after commercial negotiation among our Group, Kingsley Hills and BGMC after taking into account of prevailing circumstances and the business needs of the relevant parties as set out below. Our Directors are of the view that the transactions were conducted on normal commercial terms and are in line with normal market practice. For details of the views of DK Consultants (a chartered quantity surveyor firm) on the terms of the Turnkey Contract, please refer to the section headed Chartered Quantity Surveyor s View on Construction Costs, Payment Schedule and Liquidated and Ascertained Damages ( LAD ) below. 146

154 BUSINESS (1) Kingsley Hills, an entity ultimately controlled by Dato Danny Goh, who was the brother of Tan Sri Barry Goh (the controlling shareholder and chairman of our Company) had agreed to the payment amount and payment schedules, after considering all relevant commercial factors and the overall benefits to Kingsley Hills. (2) Kingsley Hills is the land owner and developer of the majority part of the Kingsley Hill on which the KIS Campus and KIS Annex Building were situated, and considered that the value of other land and residential development thereon would be enhanced by the presence of Kingsley International School, since an international school was expected to enhance the recognition of the Kingsley Hill and nearby area, bring in more population, increase the value of the community, and become an essential part for the overall property development project in Kingsley Hill. (3) At the relevant time, Dato Danny Goh was a director in Kingsley International responsible for strategic development of the international school, while Tan Sri Barry Goh was the controlling shareholder of Kingsley International and also a director responsible for its overall management and corporate development. As such, Dato Danny Goh took initiatives to approach Tan Sri Barry Goh to operate an international school on Kingsley Hill. Tan Sri Barry Goh was receptive to the idea of further developing the international school in a spacious environment like Kingsley Hill which could provide the necessary larger area for the school, and other facilities. (4) Dato Danny Goh has looked for a few other international school operators but preferred Tan Sri Barry Goh as business partner, since he trusted his brother would be able to secure the necessary funding for the construction and operate a successful international school on Kingsley Hill. In addition, Dato Danny Goh was also a director of Kingsley International and hence he considered that Kingsley International would be an ideal choice for operating international school on Kingsley Hill. (5) In line with market practice, our Group proposed to settle the total amount of the Kingsley Hills Contract Sum only after the Handover Date. As such, there was a remaining balance that would be paid by our Group after Handover Date. For the BGMC Contract Amount of RM110,837,641.71, BGMC demanded full settlement before Handover Date. (6) Kingsley International was willing to bear investment risks in constructing the KIS Campus and KIS Annex Building on the Kingsley Hill which was an area under development and not well known back in (7) While Kingsley Hills was ultimately responsible for the overall construction project, Kingsley Hills does not possess the particular technical expertise for the foundation portion of both the KIS Campus and KIS Annex Building, for which BGMC was responsible. (8) For the purpose of Listing and the benefits of the long term development of Kingsley International School, Kingsley Hills has transferred the KIS Campus Land to the Group at a nominal consideration of RM10 in June 2017 and agreed to transfer the KIS Annex Land to the Group at a nominal consideration of RM10 upon completion of KIS Annex Building which is expected in the fourth quarter of

155 BUSINESS Chartered Quantity Surveyor s View on Construction Costs, Payment Schedule and Liquidated and Ascertained Damages ( LAD ) DK Consultants, a firm of chartered quantity surveyors registered with the Board of Quantity Surveyors Malaysia, which is specialized in assessing and advising on costs and contracts relating to construction projects, is of the view that: (1) The construction costs under the Turnkey Contract, being RM138,118,000, is fair and reasonable for similar construction project on the basis that, the fairness of construction costs are assessed based on comparison between the construction cost per square feet and that in the data base maintained by the Board of Quantity Surveyors Malaysia, according to which the market construction costs per square feet when the Turnkey Contract was signed in 2011 is between RM100 and RM200. The total floor area of the KIS Annex Building and KIS Campus is 1,014,552 square feet while the total construction cost under the Turnkey Contract is RM138,118,000, and hence the unit construction costs is approximately RM136 per square feet which is between the range of RM100 and RM200. (2) The payment schedule under the Turnkey Contract is in line with normal market practice. For construction project which is similar to the construction of KIS Campus and KIS Annex Building, the post-completion payment arrangement is in line with normal market practice, while the exact terms of post-completion payment arrangement (such as portion of the amounts and length of the payment period) would vary on a case-by-case basis. Based on its professional experience, it is reasonable for the post-completion payment schedule to be up to 36 months. The post-completion payment period under the Turnkey Contract is less than 36 months after Handover Date and hence is within the aforesaid reasonable range. It is also in line with normal market practice to set the post-completion amount within a range up to 50% of the total construction costs which is subject to commercial negotiation between contracting parties. The post-completion payment of RM24,780, under the Turnkey Contract represents approximately 18% of the total construction costs of RM138,118,000 and hence is within the reasonable range. (3) With respect to the liquidated and ascertained damages ( LAD ): (a) (b) inserting LAD clause in construction agreement is in line with normal market practice so as to avoid disputes with respect to compensation payable by developer in case of delay. while there is no specific market parameter with regards to the amounts of LAD which is normally subject to commercial negotiation between contracting parties, the LAD under Turnkey Contract being calculated at a daily rate of RM15,000 is reasonable and not excessive for similar construction contracts on the following basis: (i) (ii) it is in line with normal market practice for parties to agree on the amount of the annual LAD being up to 10% of the contractual amount under the construction agreement. based on the total contractual amount for construction of KIS Campus and KIS Annex Building being RM138,118,000 and daily rate of LAD being RM15,000, the effective annual rate of LAD is approximately 4% of the contractual amount and therefore is within the reasonable range. 148

156 BUSINESS Construction status of Kingsley Hills Contract Works (i.e. the above-ground-floor portion of KIS Annex Building) As at the Latest Practicable Date, Kingsley Hills had appointed B&G Global Property Sdn. Bhd., a licensed construction company controlled by Dato Danny Goh, to undertake the construction work of the Kingsley Hills Contract Works. As confirmed by Kingsley Hills, we expect the construction of the KIS Annex Building will adhere to the following milestone timeline: Date Milestone 1. Third quarter of Completion of construction of all the floors and building structures Fourth quarter of 2018 Completion of interior structure works such as water piping, electronical piping and obtaining the Certificate of Completion and Compliance 3. End of 2018 Completion of interior renovation 4. First quarter of 2019 Coming into full or partial use Reasons for delay in completing construction of KIS Annex Building To best knowledge of our Directors and as confirmed by Kingsley Hills and the Geotechnical Adviser (as defined below), additional time is required for construction of the KIS Annex Building mainly due to the following reasons: (1) in January 2013, following rainfall, landslide occurred on another side of Kingsley Hill. The landslide area was situated approximately 1.4 km away from Kingsley International School in terms of road surface distance. As confirmed by Kingsley Hills, to the best of its knowledge, the landslide did not cause any casualty. (2) following the landslide, Subang Jaya Municipal Council issued an order ( Stop Work Order ) to the effect that all the construction projects on Kingsley Hill (including Kingsley International School and KIS Annex Building) shall be temporarily halted with effect from 4 January 2013, requesting for (a) implementing measures to stabilise the slope and preparing a geotechnical report to the Subang Jaya Municipal Council; (b) constructing temporary earth drain at construction site; (c) carrying out maintenance work for reservoirs located nearby the development area; and (d) cleaning the main road near the landslide spot. (3) in compliance with the Stop Work Order, Kingsley Hills engaged a licenced geotechnical adviser ( Geotechnical Adviser ) to prepare a geotechnical report ( Geotechnical Report ) to Subang Jaya Municipal Council in September 2013 which has been reviewed by Subang Jaya Municipal Council and its appointed geotechnical adviser. (4) after reviewing the Geotechnical Report, the Subang Jaya Municipal Council issued a withdrawal order ( Resumption Order ) to withdraw the Stop Work Order and allow the recommencement of all the construction projects on Kingsley Hill, which includes the Kingsley International School and the KIS Annex Building, with effect from 6 December (5) in compliance with the Stop Work Order and the Resumption Order, the construction of Kingsley International School and the KIS Annex Building was halted during the temporary suspension period between 4 January 2013 and 6 December 2013 ( Stop Work Period ), 149

157 BUSINESS which affected the overall construction work to the extent beyond the Stop Work Period since various construction works need to be re-scheduled. (6) upon receipt of the Resumption Order and to alleviate any safety concern, Kingsley Hills, as a developer of various construction projects on Kingsley Hill, prioritised slope stabilisation and strengthening works ( Slope Strengthening Works ) along the hillside to ensure the safety of all the development projects on Kingsley Hill (including Kingsley International School and the KIS Annex Building). The Slope Strengthening Works mainly include strengthening the slope wall along the hillside; and (7) upon receipt of the Resumption Order, BGMC has prioritised completing the KIS Campus, so that the KIS Campus could come into full operation in September Delay Timetable in completing construction of KIS Annex Building While the Stop Work Period only lasted for approximately 11 months during the period between 4 January 2013 and 6 December 2013, the chaining effect of the Stop Word Period postponed the Handover Date of the KIS Annex Building from 1 September 2015 to the fourth quarter of As confirmed by Kingsley Hills and BGMC, the timetable has been delayed for the following principal reasons: (1) due to the landslide, extra slope strengthening works are required and prioritized and hence the completion date of the KIS Campus and KIS Annex Building were rescheduled due to the additional slope strengthening works in the construction process; and (2) due to the Stop Work Order and the delay, the construction of KIS Campus has been prioritized so that it can come into use in September 2015, while the slope strengthening works for the KIS Annex Building only commenced in March 2014 and was completed in August As such, the construction of KIS Annex Building only commenced from August Details of the delayed milestones as illustrated by the original timetable and the current timetable were set out as follows: Work 1. Earth Work and Pilling for both KIS Campus and KIS Annex Building Structural work for lower ground floors of KIS building 2. Suspension during Stop Work Period Removal of machinery out of the work site Original Expected Timetable December 2011 December 2012 NA Current Expected Timetable December 2011 December 2012 January 2013 December 2013 Remarks No delay prior to Stop Work Order 3. Removing of machinery back to site NA January KIS Campus Slope Strengthening Works NA February 2014 June

158 BUSINESS Work Original Expected Timetable Current Expected Timetable Remarks 5. KIS Campus completion of floors and structures and interior renovation, and obtaining Certificate of Completion and Compliance January 2013 June 2015 July 2014 All the resources and staff from September BGMC were 2015 deployed to focus on the KIS Campus and hence the construction of the KIS Annex Building was delayed 6. KIS Campus came into use September 2015 September KIS Annex Building Slope strengthening and protection NA March 2014 August 2015 Resources and staff were prioritized to complete the KIS Campus in September 2015, and therefore the slope strengthening works and construction of the KIS Annex Building only commenced from March KIS Annex Building foundation up to ground floor, and completion of construction of all the floors and building structures January 2013 September 2015 for steps 8 11 August 2015 first quarter of 2019 for steps 8 11 After the KIS Campus was substantially completed, BGMC started to deploy recourses on construction of the KIS Annex Building. Approximately six months extra safety works are required under the current timetable as compared to the original timetable. 151

159 BUSINESS Work Original Expected Timetable Current Expected Timetable Remarks 9. KIS Annex Building Completion of interior structure works such as water piping, electronical piping and obtaining the Certificate of Completion and Compliance 10. KIS Annex Building Completion of interior renovation 11. KIS Annex Building Coming into full or partial use Director s view on safety of KIS Campus and KIS Annex Building Our Directors, are of the view that there is no foreseeable safety issues pertaining to Kingsley International School and KIS Annex Building, based on the following reasons: (1) the Subang Jaya Municipal Council, upon review of the Geotechnical Report, has issued the Resumption Order permitting the re-commencement of the construction of Kingsley International School in December As confirmed by the Malaysian Legal Advisers, the re-commencement of the construction of Kingsley International School (including the KIS Campus and the KIS Annex Building) after the Resumption Order is in compliance with the relevant laws and regulations of Malaysia; (2) no landslide has occurred which affected the operation of Kingsley International School since it came into operations in September 2015, and the governmental authorities have not issued any further Stop Work Order; (3) as confirmed by the Malaysian Legal Advisers, the KIS Campus has been issued with a valid Certificate of Completion and Compliance. Through the issuance of the Certificate of Completion and Compliance under applicable Malaysian laws, a professional advisor ( Technical Adviser ) who is certified architect registered with the Board of Architects Malaysia, a statutory authority responsible for the enforcement of the Architects Act 1967, has certified that the construction of the KIS Campus has been completed in accordance with statutory requirements before KIS Campus came into use in September The Malaysian Legal Advisers are of the view that following the issuance of the CCC all applicable statutory requirements in respect of the construction of the KIS Campus shall be deemed to have been fulfilled and KIS Campus is capable of occupation; and (4) in 2017, the Technical Adviser has reconfirmed that (1) the construction of the KIS Campus, the KIS Annex Building, and the Slope Strengthening Works have complied with the regulatory requirements as well as other requirements imposed by the governmental authorities, and (2) the completion of the building structural works and the Slope Strengthening Works have observed the recommendation and advised by the Geotechnical Adviser and other authority requirements and has no foreseeable stability issue. 152

160 BUSINESS Benefits of KIS Annex Building and expected increase in student enrolment and utilisation rate of Kingsley International School Our Directors are of the view that the construction of the KIS Annex Building are commercially justified and to the benefits of the Group s development on the following grounds: (1) the construction of the KIS Annex Building was already an integral part of the overall development plan when the construction of Kingsley International School commenced in 2011, which will benefit the Group in the long term; (2) the primary purpose of the KIS Annex Building is to provide dormitory rooms (designed to accommodate 883 students), multi-purpose rooms (which consist of workshops, computer laboratory, AV room, lecture halls and multi-purpose hall etc) and facilities (which include the olympic-sized swimming pool, gymnasium and cafeteria) to the students, particularly for the international students because the KIS Campus does not have any dormitory rooms for the international students enrolled at the Kingsley International School. The KIS Campus also does not have facilities that the KIS Annex Building is built to provide. As such, the KIS Annex Building is not built primarily for adding classroom capacities on top of KIS Campus, since the primary purpose is on providing dormitory rooms and facilities; (3) in terms of gross floor area of the KIS Annex Building, dormitory rooms occupy approximately 30%, facilities (such as multi-purpose rooms, olympic-sized swimming pool, gymnasium, cafeteria etc) occupy approximately 24%, and classrooms occupy approximately 3%. Other areas (open area, walkways, corridors, landscape and parking etc) occupy approximately 43%. Therefore, the classrooms only take up a relatively small portion of the total area of the KIS Annex Building; (4) according to Frost & Sullivan Report as set out on page 67 of the prospectus, only 35% international schools in Malaysia and 26% international schools in Selangor offer dormitory rooms/ boarding facilities. Out of the top twenty international schools in Selangor in terms of student enrolment, only four offer dormitory rooms/ boarding facilities, all of these four international schools with dormitory rooms/ boarding facilities were built between 1978 and 1992 (i.e. the remaining top 16 international schools does not have boarding facilities). Our Directors are of the view that the brand-new boarding and other facilities of KIS Annex Building will become a differentiator between Kingsley International School and those four international boarding schools which were built between 1978 and 1992 with comparatively outdated facilities, and hold attraction for prospective students who have preference for new facilities. According to Frost & Sullivan Report, those international schools with comparatively new facilities generally recorded a higher growth rate in student enrolment as compared to those with comparatively outdated facilities during 2012 and Kingsley International School would become one of the newest international schools (which also provide dormitory rooms/ boarding facilities) in Selangor. According to the Frost & Sullivan Report, majority of the top 20 international schools in Selangor are built before 2011, while those four international schools (with dormitory rooms/ boarding facilities) were built between 1978 and Hence, upon the completion of KIS Annex Building, Kingsley International School is expected to become a more competitive international school in Selangor with newer dormitories and other facilities; (5) the additional facilities (such as gymnastic room, an Olympic-sized swimming pool as well as the dormitories) that the KIS Annex Building is providing will hold attraction for students 153

161 BUSINESS from both Malaysia and overseas because according to the Frost & Sullivan Report, dormitories and facilities generally offer (i) a comprehensive and supportive learning experience through additional guidance from tutors and/or housemasters, (ii) full-time, interactive learning environment and networking with peers, (iii) all-rounded development through a variety of additional extra-curricular activities after school hours, (iv) acquisition of soft-skills and social skills for study abroad in the future and (v) more secure and more convenient compared to the rented premises outside the campus. According to the Frost & Sullivan Report, spacious environment and variety of facilities are favourable factors which the parents and students generally take into account when choosing international school; (6) according to Frost & Sullivan, Malaysian students accounted for approximately 64.0% of total student enrolment in international primary and secondary schools, followed by students from United Kingdom (8.1%) and South Korea (6.6%) in According to the Frost & Sullivan Report, Malaysia has also become a popular destination for international students from East Asia and other countries in South East Asia to pursue pre-university education such as IGCSE and A-levels programmes in light of Malaysia s English-speaking environment, relatively well established international school system inherited from its British colonial era as well as competitive pricing compared to international schools in countries such as Korea and Japan, the top two sources of international students of Kingsley International School during the Track Record Period. In addition, according to Frost & Sullivan, the number of international migrants increased from approximately 2.9 million in 2012 to approximately 3.5 million in 2016, representing a CAGR of 4.2%. The number is estimated to grow at a CAGR of 3.9% during 2017 to 2021, reaching 4.2 million in Hence, given the growth of international migrants, boarding options and other facilities are expected to become major attractions for international students who generally prefer incampus dormitories rather than renting residence outside campus. Therefore, our Directors are of the view that there will be sufficient demand for the boarding facilities from the international student enrolment upon completion of KIS Annex Building; (7) the construction of campus and facilities are capital intensive, costly and time-consuming, it is therefore beneficial for the Group to plan and build in more classroom capacity and facilities in any expansion or construction project such as the KIS Annex Building which are sufficient not only for the short to medium term but can also cater for the long term development of Kingsley International School; (8) the originally planned 29 classrooms of the KIS Annex Building with potential capacity of 667 students provides spare or contingent capacity for long-term growth when needed. In light of the current utilisation rate of the classrooms in the KIS Campus being approximately 37.96% as at the Latest Practicable Date and the students demand for greater variety of facilities and function rooms, these classrooms might potentially be utilised as facility rooms for activities such as Aikido, Robotics, Yoga, Scale / Clay Modelling. Subject to students demand, those facility rooms will come into use in stages. These facility rooms can also be reverted back to classroom use depending on the future student enrolment and students demand for facilities. Such additional facility rooms are not within the original designation plan of the KIS Annex Building, but are in demand by the current students; Based on the architect confirmation, utilisation of the originally designated classrooms as facility rooms are within the approved usage plans for the KIS Annex Building. As confirmed by the Malaysian Legal Advisers, in the event that our Group intends to utilise the originally 154

162 BUSINESS designated classrooms as facility rooms for educational purposes, our Group may make an application to the Ministry of Education. Such application is a procedural application and if all safety and building plan approval requirements have been fulfilled, there should be no legal impediment to such approval being obtained; (9) assuming only moderate or no increase of tuition fee upon completion of the KIS Annex Building, Kingsley International School will be more competitive because it can offer comparatively new facilities at a competitive tuition fee level as a mid-range market player (i.e. with annual tuition fee in the range of RM20,000 to RM40,000) according to the Frost & Sullivan Report; (10) Kingsley International School has a proven track record of steady increase in student enrolment during the past five years and the growing reputation accumulated since the first student intake in September 2011 which have been achieved without the facilities of the KIS Annex Building. Our Directors are optimistic that the upward trend in student enrolment will continue and is expected to be boosted by the additional facilities and boarding options upon completion of the KIS Annex Building. The steady growth in student enrolment and comparison with Selangor can be illustrated as follows: As at 30 June Year CAGR ( ) Student Enrolment of Kingsley International School % International School Market in Selangor* 14,501 16,546 18,001 21,473 24, % * Note: Student enrolment of international school in Selangor is quoted from Frost & Sullivan Report (11) Our Directors are of the view that Kingsley International School will benefit from the continuous growth of student enrolment in Selangor, Malaysia. According to Frost & Sullivan Report, student enrolment in primary and secondary international schools in Selangor is expected to further increase to 44,808 in 2021, representing a CAGR of 15.7% between 2017 to 2021; and (12) The current utilisation rate of Kingsley International School (i.e % as at Latest Practicable Date) is in line with the industry average. According to the Frost & Sullivan Report, as at 30th June 2016, the average utilisation rate of international school in Malaysia was approximately 20% to 40% and the average utilisation rate of international school in Selangor was approximately 25% to 45%, which was mainly attributable to the following reasons: (i) unlike public schools, international schools in Malaysia are built to provide comprehensive and better learning environment with sufficient space, facilities and relatively low student-to-teacher ratio in order to maintain a higher teaching quality. In addition, large capacity and well-equipped environment are an attraction to parents and students. (ii) Construction of international school is capital intensive and given the significant financial resources involved in its development and construction, design of international schools with a much more additional capacity is generally adopted to prepare for growing student enrollment in the long term future. The average utilisation rate of international school is expected to increase gradually when existing established international school had built up a steady source of student enrollment based on their reputation, coupled with an expected growth of student enrollment in international schools in the next five years. According to 155

163 BUSINESS Frost & Sullivan, the average utilisation rate of long established international schools (i.e. those built in around 10 years ago) in Malaysia was approximately 50% to 65% in Original financing plan Back in 2011, we entered into the Turnkey Contract for a total contractual sum of RM138,118,000 with respect to construction of KIS Campus and KIS Annex Building as one construction project. Kingsley International School recorded its first student intake at the previous campus in September 2011 with a plan to move into the current KIS Campus for its strategic long-term development. Kingsley International s original plan was to fund the construction cost primarily with a bank facility of RM76,000,000 in 2011, with the rest to be funded by existing cash balances, cash flow from operation, advances from shareholders and bank refinancing (which was expected to occur when the buildings were completed). All the historical advances from shareholders of Kingsley International School and their related parties have been settled as at the Latest Practicable Date. Estimated Breakeven Period and Estimated Investment Payback Period We believe that the construction of KIS Campus and KIS Annex Building will deliver steady increase and larger number of students considering the boarding facilities and other additional facilities (such as gymnastic room, olympic sized swimming pool), which will generate cash flows for our Company. We expect our KIS Campus and KIS Annex Building would achieve a breakeven point when the yearly revenue is at least equal to yearly expense of our KIS Campus and KIS Annex Building. We expect our KIS Campus and KIS Annex Building will achieve breakeven in the first full financial year after the KIS Annex Building comes into use. Based on the above and the assumptions in the notes below, in the event that if Kingsley International School s student number enrolled is less than 874 or our average tuition fee charged is less than RM18,717 per student, we may not be able to achieve breakeven. We define the estimated investment payback period of our KIS Campus and KIS Annex Building to be the amount of time it takes for the accumulated operating cashflow generated from such KIS Campus and KIS Annex Building to equal the initial cost of constructing and renovating our KIS Campus and KIS Annex Building. The estimated investment payback period will be approximately 18 years. Notes: (1) The expected yearly revenue generated from our KIS Campus and KIS Annex Building is estimated with reference to (i) the number of students as at Latest Practicable Date, (ii) average tuition fee per student for 2017/2018 academic year, and (iii) ancillary service fee generated for the year ended 30 June (2) The expected yearly expenses is estimated with reference to (i) operating cost incurred by our operation on the KIS Campus for the year ended 30 June 2017 (excluding the depreciation expenses as our Directors consider that depreciation expenses are not cash outflow), (ii) gross floor area of both KIS Campus and KIS Annex Building. (3) The estimated breakeven period and estimated investment payback period may vary and are dependent on various factors including, among others, (i) student enrolment; and (ii) completion time of the KIS Annex Building. 156

164 BUSINESS KIS Campus Facilities The KIS Campus comprises one 10-storey building with a total gross floor area of 44,737 sq. m. (481,545 sq. ft.), which accommodates the following principal facilities: Usage Number Designated capacity per room Total designed capacity Classroom ,600 Multi-purpose room (i.e. lecture room etc) Science Laboratory Computer Laboratory Art Room Language Laboratory Music room Library (Primary School) Library (Secondary School) Multi Purpose Hall Dance & Drama Room Futsal Court 1 NA NA We acquired the KIS Campus and KIS Campus Land in June 2017 Kingsley International and Kingsley Hills entered into a sale and purchase agreement in June 2017, pursuant to which Kingsley International shall acquire the KIS Campus and the KIS Campus Land from Kingsley Hills at a nominal consideration of RM10. For the purpose of Listing and the benefits of the long-term development of Kingsley International School, Kingsley Hills, an entity controlled by Dato Danny Goh who was our executive Director, brother and concert party of Tan Sri Barry Goh, had agreed to transfer the KIS Campus and KIS Campus Land to the Group, and hence the consideration was set at a nominal amount of RM10 in June Such arrangement was not contemplated when Kingsley International and Kingsley Hills entered into Turnkey Contract for construction of KIS Campus and KIS Annex Building in As confirmed by Kingsley Hills and BGMC, no portion of the subject land cost was allocated as the construction costs under the Turnkey Contract for the purpose of claiming tax allowance under Industrial Building Allowance ( IBA ) under the Income Tax Act 1967 (the Act ); and income tax exemption in the form of Investment Tax Allowance ( ITA ) under Income Tax (Exemption) (No. 9) Order 2012 (the Order ). As set out in the section headed Preferential Taxation Treatment on page 164 of this prospectus, Kingsley International is entitled to and has claimed tax allowance under IBA and ITA on the ground that construction costs are qualifying expenditure for the purpose of IBA and ITA. As confirmed by our Tax Adviser, the aforesaid transfer of KIS Campus and KIS Campus Land at a nominal consideration of RM10 should not lead to any non-compliance with respect to the IBA and ITA claims. Our Group and the Tax Adviser confirm that currently there is no indication that the nominal acquisition cost for the KIS Campus and KIS Campus Land is or would be subject to challenge by tax authorities (Inland Revenue Board of Malaysia) for the following reasons: (1) As confirmed by the Company and Kingsley Hills, the arrangement in June 2017 whereby Kingsley Hills agreed to transfer KIS Campus and the land on which it situated at a nominal 157

165 BUSINESS value of RM10 was for the purpose of listing of our Company and was not contemplated when Kingsley International and Kingsley Hills agreed on the construction costs in July As confirmed by the Company and Kingsley Hills, that no portion of the subject land cost was allocated as part of the construction costs to Kingsley Hills and BGMC for the purpose of IBA and ITA claims. (2) Kingsley International has strong ground to substantiate its ITA and IBA claims if there are any future tax audits by the Inland Revenue Board of Malaysia which reserved the power to randomly conduct tax audits, on the basis that they are computed in compliance with the conditions set by the Malaysian Investment Development Authority (MIDA) and the Income Tax Act 1967, and the construction costs incurred are fair and reasonable. (3) As confirmed by DK Consultants (a firm of chartered quantity surveyors which is registered with the Board of Quantity Surveyors Malaysia whose role is predominantly to assess and advise on costs and contracts relating to construction projects), the construction costs as well as the payment schedule under the Turnkey Contract, being RM138,118,000, is fair and reasonable for similar construction project. (4) As confirmed by our Malaysian Legal Advisers, the aforesaid transfer at a nominal consideration of RM10 is not in contravention of the relevant laws and regulations of Malaysia. KIS Annex Building facilities The KIS Annex Building is adjunct to the KIS Campus. Upon completion, the KIS Annex Building will comprise 2 hostel towers of 13 and 15-storey high on a 13-storey multi-level carpark and facilities podium with a planned total gross floor area of approximately 49,518 sq.m. (533,007 sq.ft.). For illustrative purpose, an architecture impression chart is set out below: KIS Annex Building KIS Campus 158

166 BUSINESS Based on the agreement between Kingsley Hills and Kingsley International but subject to the government s final approval upon completion, the designated classroom and capacity are as follows: Usage Number Designated gross floor area (sq. ft.) Designated capacity per room Total designed capacity Dormitory room Sub-total: , Facilities Multi-purpose room Workshop Computer Laboratory AV room Lecture Hall Lecture Hall Lecture Hall Lecture Hall Multi Purpose Hall 1 1,144 1,144 Olympic-sized swimming pool 1 NA NA Gymnasium 1 NA NA Cafeteria 1 NA NA Room & Compartment Services NA NA NA Service Compartment NA NA NA Sub-total: NA 126,430 NA NA Classroom (Note) 29 18, Other areas (open area, walkways, corridors, landscape and parking etc) NA 229,879 NA NA Total: 533,007 Note 1: The originally planned 29 classrooms of the KIS Annex Building with potential capacity of 667 students provides spare or contingent capacity for long-term growth when needed. In light of the current utilisation rate of the classrooms in KIS Campus being approximately 37.96% as at the Latest Practicable Date and the students demand for greater variety of facilities and function rooms, these classrooms might potentially be utilised as facility rooms for activities such as Aikido, Robotics, Yoga, Scale / Clay Modelling etc. Subject to students demand, those facility rooms will come into use in stages. These facility rooms can also be reverted back to classroom use depending on the future student enrolment and students demand for facilities. Such additional facility rooms are not within the original designation plan of the KIS Annex Building, but are in demand by the current students. Based on the architect confirmation, utilisation of the originally designated classrooms as facility rooms are within the approved usage plans for the KIS Annex Building. As confirmed by the Malaysian Legal Advisers, in the event that the Group intends to utilise the originally designated classrooms as facility rooms for educational purposes, the Group may make an application to the Ministry of Education. Such application is a procedural application and if all safety and building plan approval requirements have been fulfilled, there should be no legal impediment to such approval being obtained. 159

167 BUSINESS Our Group s acquisition of KIS Campus Land and KIS Annex Land For the purpose of Listing and the benefits of the long term development of Kingsley International School, Kingsley Hills has transferred the KIS Campus Land to our Group at a nominal consideration of RM10 in June 2017 and has agreed to transfer the KIS Annex Land to our Group at a nominal consideration of RM10 upon completion of KIS Annex Building which is expected to be in the fourth quarter of Previous campus before Kingsley International School moved into KIS Campus Before moving into KIS Campus in September 2015, Kingsley International School was operated in five separate three-storey high buildings for a total gross floor area of 2,675 sq. m. in Putra Heights, Subang Jaya, Selangor, Malaysia, which is approximately 4 km by road distance from the current KIS Campus where Kingsley International School was operated since September The previous campus was leased from landlords who are independent third parties. Usage The facilities of the then campus principally comprise the following: Number Designated capacity per room Total designated capacity Classroom 25 7 to Library Science Laboratory The teacher number and student number are as follows: 30 June June June June 2017 As of 31 October 2017 Student Teacher

168 BUSINESS STUDENT ENROLLMENT, ADMISSION AND RECRUITMENT Enrollment Kingsley International School recorded steady increase in student enrollment during the past five years: 30 June June June June June October 2017 Latest Practicable Date Early Years Department Primary School Secondary School (Year 7-9) Secondary School Cambridge IGCSE preparatory classes (Year 10 11) Secondary School Sixth Form (Year 12 13) Total Student enrollment Geographic sources of students Kingsley International School has a mixed source of student from both Malaysia and other countries, the breakdown of which is as follows: 30 June June October 2017 Latest Practicable Date Malaysian 529 (81.38%) 673 (77.18%) 649 (73.33%) 726 (73.56%) Non-Malaysia 121 (18.62%) 199 (22.82%) 236 (26.67%) 261 (26.44%) South Korea 54 (8.31%) 117 (13.42%) 128 (14.47%) 167 (16.92%) Japan 37 (5.69%) 39 (4.47%) 41 (4.63%) 43 (4.36%) Other nationalities 30 (4.62%) 43 (4.93%) 67 (7.57%) 51 (5.16%) Total: 650 (100%) 872 (100%) 885 (100%) 987 (100%) Our Malaysian Legal Advisers confirm that (1) during the Track Record Period and as at the Latest Practicable Date, there was no prescribed quota for Malaysian and non-malaysian students to be enrolled at Kingsley International School. For further details, please refer to Laws and Regulations in Malaysia 3. Laws and regulations relating to restriction on student enrolment at international school ; and (2) there is no specific licence required in respect of our appointment and engagement of recruitment agent(s) for the purpose of recruiting international students for Kingsley International School. During the Track Record Period, the top sources of non-malaysian students are Korea and Japan, who were from expatriate working families in Malaysia or came to study in Malaysia together with their guardians. To the best knowledge of our Directors, the English language learning environment and competitive pricing are the major attractions. In addition, we engaged student recruitment agents to specifically target Korean and Japanese students, and also attended education fair in Korea every year during the Track Record Period. 161

169 BUSINESS Admission, application fee and placement test fee We accept enquiries for application all year around. Each applicant may conduct a site-visit to our campus during which our admission officer usually provides a campus tour and placement test with the principal aim to assess the applicant s English proficiency and mathematics capabilities. During the Track Record Period, we generally charge placement test fee of RM250 per student. We typically inform students of our admission decision within one week after the placement test. It is our practice to offer admission for suitable grade year based on the placement test results, instead of rejection. Upon receipt of our admission decision, the prospective student may choose to submit a formal application together with one-off non-refundable admission application fee of RM3,500. For non- Malaysian students, an additional foreign student registration fee of RM6,000 is payable. The prospective students would not submit formal application together with admission application fee if they are not satisfied with the grade year recommended in the admission decision. Based on the number of students who have paid the admission application fee and the number of students who have paid the admission application fee and subsequently enrolled and paid tuition fee within the same academic year in KIS, the admission rate are 96%, 96% and 99% for the year ended 30 June 2016 and 2017 and the four months end 31 October For the academic year 2015/16 and 2016/17, 96% and 100% of the students who completed the Reception course (i.e. the last year of Early Years Department) advanced to the Primary School of Kingsley International School. For the academic year 2015/16 and 2016/17, 100% and 100% of the students who completed the Year 6 course (i.e. the last year of Primary School) advanced to the Secondary School of Kingsley International School. Trial courses Upon request and subject to classroom capacity, we also provide trial courses free of charge which typically last around 2 weeks, during this period the prospective students can join our classes and make the decision to apply for a full-time place afterwards. Marketing We have implemented a variety of marketing methods to enhance the brand recognition of our schools and programmes. By doing so, we intend to continue creating and implementing a standard corporate identity across all our schools. We take measures to increase word-of-mouth referrals which have been instrumental to attracting new students and building our brand. Promotional events. From time to time, we organise promotional and recruiting events to provide real-time, on-site opportunities for our prospective students to learn more about our services and programmes, as well as to meet our teachers and staff. We also organise event-driven marketing campaigns such as seminars for our Kingsley International School so that prospective students interested in studying abroad or pursuing higher education locally can meet with teachers and recruiting personnel from overseas institutions and learn more about our international programmes. 162

170 BUSINESS Referrals. Word-of-mouth referrals by former and current students and their families have been a significant source of our student enrollment. Recommendations made by our alumni who excelled in the respective academic or vocational examinations, matriculated into reputable overseas education institutions, or secured ideal employment placement upon graduation provide convincing testimonials to prospective students. We actively work with our alumni and current students to encourage them to recommend our programmes to prospective students. Media advertising. We maintain an official social media account and promote our courses through updates on our website as well as social media account. In addition, we also prepare brochures and marketing material packs with information about our schools and programmes and distribute such material to our prospective students and their parents at our schools and during our marketing campaigns. Our website also contains extensive information about our schools and programmes which include description about our KIS Campus and other teaching facilities, overview of our curriculum, as well as extra-curricular activities. We have also placed advertisements on searching engines, social media and internet portals in Malaysia. External recruitment agents. We also carry out our marketing activities through third-party recruiting agents. As at 30 June 2016 and 2017 and 31 October 2017, we had engaged approximately 6, 6 and 6 third party recruitment agents. These recruiting agents acted as independent contractors on a commission basis to market our schools in various geographic regions, introduce our schools to local parents and recruit new students. Under our agreements with them, each agent is paid a commission for every student who successfully enrolled at our school. For further details, please refer to the section headed Student Recruitment Agents below. Student Recruitment Agents During the Track Record Period, we engaged third-party recruiting agents as independent contractors on a commission basis to undertake marketing activities so as to recruit new students. Salient features of the subsisting student recruitment agent agreements are as follows: Exclusivity : All the recruitment agents are engaged on non-exclusive basis Term : Initial term of one year, renewable by mutual agreement Termination : Engagement may be terminated without cause with one to two months notice Recruitment agent s obligations Decision to recruit student : To promote Kingsley International School at agent s own costs, and to compile and deliver all necessary documents such as student s application form : Kingsley International School reserves its rights to decide whether to admit students at its discretion Recruitment agent shall not enroll or accept students on behalf of the Kingsley International School 163

171 BUSINESS Fees collection : All school fees and any other fees shall be collected by Kingsley International School directly and the student recruitment agent shall not collect any tuition or such other fees directly from the student Commission payment : Commission is calculated based on the agreed commission rate per student, and shall be paid to recruitment agent within a specified time in lump sum or instalments after the student has settled the fees During the Track Record Period, particulars of our arrangements with the recruitment agents are set out as follows: Year ended 30 June 2016 Year ended 30 June 2017 Four months ended 31 October 2017 Number of recruitment agents 6 6 (Note 2) 6 New students recruited through recruitment agents (Note 1) 48 (representing 17.65% of the total new students) 71 (representing 21.58% of the total new students) 44 (representing 35.48% of the total new students) Commission per student RM4,000 RM6,000 RM4,000 RM6,000 RM4,000 RM6,000 Total commission paid/payable to recruitment agents (Note 3) RM246,840 RM444,000 RM253,500 Note 1: new students refer to those students who have successfully enrolled at Kingsley International School and have settled the requisite fees for one to two terms of the academic year, but exclude those existing students who have been procured by recruitment agents. Note 2: subsequent to the Track Record Period, we have terminated engagement with one student recruitment agent who have failed to recruit any student since engagement. Note 3: certain commission were paid to recruitment agents for student recruited in the previous financial year. Preferential Taxation Treatment During the Track Record Period, Kingsley International, the operating company for Kingsley International School, is entitled to and has claimed: IBA (1) Industrial Building Allowance ( IBA ) under the Income Tax Act 1967 (the Act ); and (2) Income tax exemption which is equivalent to Investment Tax Allowance ( ITA ) under Income Tax (Exemption) (No. 9) Order 2012 (the Order ). Generally, buildings used for schools do not qualify as industrial buildings. However, where in the basis period for a year of assessment a person has for the purposes of a business of his incurred capital expenditure on the construction of a building for a school approved by the Malaysian Minister of Education, the building shall be treated as an industrial building for the purposes of that business and IBA allowance ( IBA ) shall be calculated at a rate of 10% the qualifying expenditure ( IBA Qualifying Expenditure ) shall be accorded to that person for that year and for each of the 9 following years of assessment. 164

172 BUSINESS The IBA can be claimed in a year of assessment provided that at the end of the basis period for that year of assessment that person is the owner of the building and the building is used in that business. Qualifying expenditure for purposes of claiming IBA generally includes construction costs but excludes the acquisition cost of land and borrowing costs in relation to the financing of the acquisition and construction. In respect of buildings under construction, the construction expenditure is deemed to be incurred on the day the building is completed. In any other case, the expenditure is incurred on the day it becomes payable. With effect from the year of assessment 2016, if in a year of assessment the building or part thereof is used for the purpose of letting of property, then IBA cannot be claimed in respect of the building or part thereof. However, IBA may still be claimed in respect of the whole building if the floor area of the part that is let out is not more than 10% of the floor area of the whole building. Kingsley International has confirmed that the portion of floor area let out in its building is less than 10% of the total floor area. The IBA claimed in a year of assessment may be set-off against the adjusted business income from the international school business of Kingsley International for that year of assessment. Where there is insufficient adjusted business income from that business, the unabsorbed IBA may be carried forward to the following years of assessment for set-off until it is fully absorbed. However, if that business ceases permanently, then any unabsorbed IBA is also permanently lost. Our Tax Adviser is of the view that (i) as of the Latest Practicable Date, the IBA Qualifying Expenditure as at 30 June 2017 amounts to RM85,995,896, of which IBA amounting to RM17,199,180 has been claimed. Additional IBA Qualifying Expenditure may be incurred upon the expected completion of the construction of the KIS Campus and KIS Annex Building during the year ended 30 June 2018; and (ii) as of the Latest Practicable Date, the IBA claimed has been aggregated with the other capital allowances claimed by Kingsley International. As at 30 June 2017, the total unutilized capital allowances by Kingsley International is RM475,725. The unutilized capital allowances can be carried forward and set-off against the adjusted business income from the international school business of Kingsley International. ITA Under the Order, a company incorporated and tax resident in Malaysia which is registered with the Ministry of Education and has complied with the terms of the Education Act 1996 is allowed to claim ITA on qualifying capital expenditure on building, plant and machinery used in Malaysia in connection with or for the purpose of an activity relating to teaching and training in an international school. However, such qualifying capital expenditure shall not include expenditure incurred on any building used as living accommodation, plant and machinery which are provided wholly or partly for the use of a director or individual who is a member of the management, administrative or clerical staff. Under the Order, 100% of the qualifying capital expenditure incurred for a period of 5 years from the date determined by the Malaysian Investment Development Authority ( MIDA ) may be utilised against a maximum of 70% of the statutory business income of the claimant. However, this tax exemption is subject to the conditions stated in the letter issued by MIDA. 165

173 BUSINESS Kingsley International s ITA application was approved by MIDA on 23 July 2013 which allows Kingsley International to claim ITA on 100% of the qualifying capital expenditure incurred in accordance to the Order for a period of 5 years for implementing the expansion/modernisation project for an international school which is the Kingsley International School. This allowance may be utilised against 70% of the statutory income for the each year of assessment. The key conditions stated in the letter dated 23 July 2013 are as follows:- i) The location of the international school is in: Lot PT22964-PT and part of Lot PT Bukit Cermin, Putra Heights Mukim Damansara, Daerah Petaling Jaya Selangor Darul Ehsan ii) iii) iv) Kingsley International School is required to be registered with the Malaysian Ministry of Education. The construction of KIS Campus and KIS Annex Building is subject to the approval conditions stipulated by the Malaysian Ministry of Education. Kingsley International is required to invest at least RM85 million (after revision) into fixed assets (excluding land cost) for a period of 5 years from the effective date of the incentive as determined by the Ministry of International Trade and Industry ( MITI ). The qualifying period of the ITA as set by MIDA is from 30 September 2011 to 29 September 2016 subject to Kingsley International submitting a compliance report to MIDA and the Malaysian Inland Revenue Board which is approved by an accredited auditor. Kingsley International is not entitled to claim ITA on capital expenditure incurred after 29 September Where the ITA claimed for the year of assessment is not fully utilised against the statutory business income, the unutilized amounts may be carried forward to future years of assessment. In the event that the building, plant and machinery which is entitled to ITA is disposed within 2 years from the date of acquisition, any ITA claim which was made will be withdrawn. IBA and ITA claimed on the same year The ITA claim for each year of assessment may only be utilised against a maximum of 70% statutory business income from the business of an international school after capital allowances and IBA have been deducted. Our Tax Adviser is of the view that (i) as of the Latest Practicable Date, the ITA amount which were claimed as at 30 June 2017 is RM85,995,896 and (ii) as of the Latest Practicable Date, the ITA Allowance utilized for set off against statutory business income was nil since statutory business income was fully utilized by the capital allowances and IBA, and therefore the balance of unutilized ITA as at 30 June 2017 is RM85,995,

174 BUSINESS Security Kingsley International School engaged an independent third party contractor for professional security guard service during the Track Record Period and as of the Latest Practicable Date. Pursuant to the service contract, the service fee is payable on a monthly basis with reference to agreed fee per guard, number of guards and number of days during the month. In accordance with Kingsley International School s internal procedure, all the security guards are required to attend operational training once every two weeks. Kingsley International School has a total of approximately 9 security guards patrolling the whole areas for 24-hours with two shifts, and are required to make their rounds every one hour covering the whole building with the two entrances and lobby as the main priority. All the areas are also being monitored during each round as well as recorded in the CCTV. Medical room During the Track Record Period, Kingsley International School employed one full-time registered nurse with a dedicated treatment room equipped with beds and basic first aid box facilities to offer a temporary rest place for students who are not feeling well. In serious and emergency medical situations, we will promptly send out students to local hospitals for treatment. In all medical situations, parents are informed prior to the administrating of any medical aids or the school will have their permission to accompany the sick students for treatments in local clinics or the local hospital. Meal catering services During the Track Record Period, we operated the in-campus canteen during the academic year of 2015/2016, and outsourced the meal catering services at Kingsley International School to an independent third party catering service provider ( Catering Contractor ) for the academic year of 2016/2017. Our Directors are of the view that catering management requires expertise and day-to-day management, and hence outsourcing arrangement is beneficial for our Group to focus on education service. However, our Group will re-evaluate the outsourcing arrangement from time to time. Salient terms of the contract between the Catering Contractor and us is set out below: Catering Contractor s obligation : to obtain all the relevant licences and permits required by laws and regulations to provide breakfast and lunch to the student and school staff during school days Menu : Shall be agreed by Catering Contractor and our Group Pricing : Shall be agreed by Catering Contractor and our Group Payment arrangement : Group will collect prescribed meal fees from students who subscribe for student meal plan and pay 98% of the amounts to the Catering Contractor Utility charges : All utilities charges such as electricity and water shall be borne by our Group During the Track Record, the meal plan fee is as follows: Academic year of 2015/2016 Academic year of 2016/2017 Academic year of 2017/2018 Nursery to Year 2 RM720 RM735 RM795 Year 3 RM725 RM800 RM795 Year 4 above RM725 RM800 RM

175 BUSINESS Note 1: the meal plan fee refers to termly fee. One academic year has three terms. Note 2: the meal plan covers breakfast and lunch on a school day. In principle, students are compulsorily required to subscribe for meal plan, but can apply for exemption with sufficient reason such as doctor certificate on food allergy. Our Malaysian Legal Advisers advised that our Group s outsourcing arrangement with the Catering Contractor and the fees charged for the students is in compliance with applicable laws and regulations of Malaysia. School Uniform During the Track Record Period, we sourced and sold school uniform to students. Starting from September 2017, in order to focus on principal education purpose, we engaged independent third party to sell school uniform to students at the in-campus bookstore. Scholarships During the Track Record Period, Kingsley International School recommended selected students to apply for external scholarships such as Kingsley Seeds Foundation ( Kingsley Seeds Foundation ), a foundation partially sponsored by Tan Sri Barry Goh. During the Track Record Period, a number of students have received scholarships from Kingsley Seeds Foundation. Kingsley Seeds Foundation provides scholarships to Malaysian students studying locally and abroad (including students of Kingsley International School), and the decision on awarding and amount of award is entirely subject to the discretion of Kingsley Seeds Foundation. KINGSLEY TERTIARY INSTITUTIONS As at the Latest Practicable Date, Kingsley Tertiary Institutions are still in development stage and only represent 6.2%, 13.92% and (5.87%) of the gross profits of the Group during the year ended 30 June 2016 and 2017 and four months ended 31 October 2017 respectively. Our Directors are of the view that while the Kingsley Tertiary Institutions would enable the Group to offer comprehensive education service but is not expected to become a major revenue contributor in the medium term. Since founding in 2011, our Group has focused on Kingsley International School and has not devoted substantial resources to develop Kingsley Tertiary Institutions for the following principal reasons: (i) Between 2011 and 2012, the Group s overall development strategy was to identify potential areas for development and applied for the requisite licences as part of potential but not immediate development plan. As such, the Group obtained various approvals for registration for Kingsley Tertiary Institutions such as Kingsley College and Kingsley Language House in (ii) Up to September 2015, the Group s focus have been the preparation for Kingsley International School moving into the current KIS Campus and also communication with developer with respect to the construction progress of Kingsley International School. As such, only Kingsley Skills College recorded first student intake in January

176 BUSINESS (iii) In May 2015, while the Kingsley International School was in final stage of moving into the KIS Campus, the Group started to re-evaluate the strategy for developing the Kingsley Tertiary Institutions. One of the key measures is to hire Dr. Chua (an executive director of our Company) and other management to lead the development of Kingsley Tertiary Institutions. Kingsley College and Kingsley Professional Centre have been identified as areas for development. Details of the development status is set out in the respective subsections of each Kingsley Tertiary Institutions below. KINGSLEY SKILLS COLLEGE Accreditation Our Kingsley Skills College is a centre ( JPK Accredited Centre ) accredited by Department of Skills Development Malaysia ( JPK ) to provide training for acquiring one of the Malaysia Skills Certificate ( SKM ) set out below since January Training Programmes Our Kingsley Skills College recorded the first student intake in January 2014 and is focused on providing hands-on training to students generally aged 16 above to acquire one of the following SKM, all of which are accredited and issued by JPK: Certificate in Computer Operation System (level 3) Certificate in Civil & Structural Engineering Draughting (level 1-3) Certificate in Architectural Draughting (level 3) Duration of programme 1 year 2 years 2 years Each academic year typically consists of two semesters. The last six months of the 2-year programme for SKM (Civil & Structural Engineering Draughting) and SKM (Architectural Draughting) consists of on-site training at external companies within the respective industry. For details, please refer to the section headed Cooperation with prospective employer in this section. JPK recognizes various SKM in a five-level system ranging from level 1 to level 5. Kingsley Skills College chose to offer the aforesaid types and authentication levels of SKM after considering various factors such as market demand for the above skills sets. According to the website of JPK, the principal aim of SKM is to prepare students for employment with the accredited skill sets, and the benefits of SKM include: (1) it is recognised by local employment market in Malaysia; and (2) it provides an attractive path for career and personal development. 169

177 BUSINESS The following simplified chart demonstrates the typical steps for a student to go through the process from admission to graduation: Other prospective students generally aged between 16 and 45 Prospective students studying in the final year for SPM (note 2) Complete SPM STPM (note 3) or A-levels in preparation for University admission Apply for admission to JPK Accredited Centre (such as Kingsley Skills College) for acquiring SKM Kingsley Skills College 1-2 years training Assessment SKM awarded by JPK (Note 1) Employment Note 1: To our Directors best knowledge, all of our graduated proceed to take up employment or self-employment after being awarded the SKM. Note 2: The Sijil Pelajaran Malaysia ( SPM, or the Malaysian Certificate of Education), is a national examination taken by all fifth-year secondary school students in Malaysia. Note 3: The Sijil Tinggi Persekolahan Malaysia ( STPM, or the Malaysian Higher School Certificate) is a pre-university examination taken by students in Malaysia. Marketing Kingsley Skills College s marketing activities mainly include: (1) engaging external student recruitment agents, (2) attending education fair, (3) hosting of secondary school students and teachers for demonstration classes and motivational talks, (4) visit to secondary schools, and (5) social media advertisement. 170

178 BUSINESS As at the Latest Practicable Date, Kingsley Skills College engaged a total of 10 external recruitment agents who are entitled to commission in a range between RM750 and RM1,500 per successful student enrollment. Year ended 30 June 2016 Year ended 30 June 2017 Four months ended 31 October 2017 Students procured by external recruitment agents Commission paid/payable to the external recruitment agents RM750 RM4,350 RM7,200 Admission and student enrollment Kingsley Skills College is open for admission application all year round. Kingsley Skills College generally accepts students who (1) are aged 16 and above; and (2) have the ability to speak and write in both Malay language and English. During the Track Record Period, its student enrollment are as follows: Commencement of programme Student enrollment as at 30 June 2016 Student enrollment as at 30 June 2017 Student enrollment as at 31 October 2017 Student enrollment as at the Latest Practicable Date Certificate in Architectural Draughting (level 3) January (Note) Certificate in Computer Operation System (level 3) July 2016 Nil Certificate in Civil & Structural Engineering Draughting (level 1-3) July 2016 Nil Total: Note: Thirteen students enrolled for certificate in architectural draughting graduated in December It is expected that the new batch of incoming students will commence enrollment in the second half of

179 BUSINESS Facilities, trainers, textbooks and training materials The training for Malaysia Skills Certificates is based on National Occupational Skills Standard ( NOSS ) which spells out the topics to be covered, and our trainers recommended text books (if necessary) to students and developed the written teaching materials accordingly, or recommends relevant textbooks. In addition to the training required for SKM assessment, Kingsley Skills College also offered English language courses to students so as to enhance their competitiveness in seeking employment. As at the Latest Practicable Date, our Kingsley Skills College employed 3 full-time teaching trainers, and was equipped with the following facilities to support hands-on training for each SKM offered: Certificate in Computer Operation System (level 3) Certificate in Civil & Structural Engineering Draughting (level 1-3) Certificate in Architectural Draughting (level 3) Facilities Classroom, laptops and software with technical specification Civil engineering training room and software with technical specification Architecture drawing room and software with technical specification Trainers Total: In addition, Kingsley Skills College also engaged one program head and one English teacher. The number of trainers remained the same during Track Record Period and as at the Latest Practicable Date. As confirmed by our Malaysian Legal Advisers, all of our trainers have acquired the requisite permit to provide training for SKM assessment during the Track Record Period. Venue During the Track Record Period, Kingsley Skills College leased a three-storey building as teaching venue which comprises classroom, trainer office, computer laboratory, architecture drawing room and civil engineering training room. For details of the said venue, please refer to Business Properties. 172

180 BUSINESS Examinations As a JPK Accredited Centre, Kingsley Skills College is authorised to monitor the assessment for awarding SKM, while the officials from JPK came to monitor the assessment progress and endorse the assessment results on site. A typical process of SKM assessment would involve the following steps: Kingsley Skills College informs JPK of the intended date of SKM assessment ahead of the SKM assessment Kingsley Skills College prepares 3 sets of assessment instructions/papers Officials from SKM assessment arrive at Kingsley Skills College to designate any one of the aforesaid three sets of assessments as the SKM assessment on that assessment date SKM assessment consists of both theory part and also students demonstrating the technique in operating a certain computer software, drawing a graph according to the specified need of architecture or civil engineering assignment Officials of JPK decide whether the students shall be awarded the SKM on site During the Track Record Period, a total 12 students have completed all the coursework and assessment required for SKM. All of them have acquired the SKM. Students who failed to pass the SKM assessment are allowed to re-take the assessment in the next available opportunity. Boarding facilities Kingsley Skills College leased a total of five residential sites as students accommodation. A total of 9, 6 and 5 students of Kingsley Skills College opted for such boarding options during the year ended 30 June 2016 and 2017, and the four months ended 31 October Given the limited number of students of Kingsley Skills College who opted for accommodation, the fluctuation of boarding students do not have any significant impact on the Group. 173

181 BUSINESS Cooperation with prospective employer To facilitate students securing employment upon graduation as well as to enhance the hands-on experience, Kingsley Skills College entered into collaboration agreements with external companies within the respective industry, pursuant to which the external companies provide up to 6 months onsite training to our students who shall be considered for employment prospects upon completion of the training. During the on-site training, our students were entitled to living expense allowance. Tuition fees Tuition fees per programme are set out as follows (Notes 2 and 3). Programme tuition fee per student Year ended 30 June 2016 Year ended 30 June 2017 (Note 1) Four months ended 31 October 2017 Certificate in Architectural Draughting (level 3) RM16,000 RM12,400 RM12,400 Certificate in Computer Operation System (level 3) RM10,000 RM7,200 RM7,200 Certificate in Civil & Structural Engineering Draughting (level 1-3) RM18,000 RM13,700 RM13,700 Note 1: We lowered the programme tuition fee to strengthen competitiveness. Note 2: As confirmed by Malaysian Legal Advisers, there was no maximum cap fee restriction on the tuition fees charged by Kingsley Skills College. Note 3: Kingsley Skills College assisted students to apply for student loan from the governmental authorities and might receive the tuition fee from the governmental authorities direct. In addition to the aforesaid tuition fees, we also charged other fees such as registration fees for all students during the Track Record Period. Our tuition fee collection policy is: (1) for self-funded students, we generally require full settlement of semi-annual tuition fee ahead of the commencement of each semester of the academic year; and (2) for students who are recipients of government loan, we collect the school fee direct from the governmental authorities. KINGSLEY COLLEGE Development milestones The milestones of development of Kingsley College is as follows: In 2012, the Group acquired the approval for registration of Kingsley College as part of potential but not immediate development plan. The Group s focus has always been on development of Kingsley International School and the construction of KIS Campus and KIS Annex Building. In May 2015, while the Kingsley International School was in final stage of moving into the KIS Campus, the Group started to re-evaluate the strategy for developing the Kingsley 174

182 BUSINESS Tertiary Institutions. One of the key measures is to hire Dr. Chua (an executive director of Company) and other management to lead the development of Kingsley Tertiary Institutions including Kingsley College. In April 2016, Kingsley College entered into a cooperation agreement with Sejong University, Korea, according to which Sejong University agrees to admit graduates of Kingsley College to attend the third year in the bachelor degree programme at Sejong University. In November 2016, Kingsley College completed acquiring all the necessary accreditation for the programs of diploma in building technology, information technology and business studies, all of which are recognized by Malaysian Qualifications Agency (MQA). In June 2017, Kingsley College completed obtaining all the necessary accreditation for the programmes of Pearson Level 5 Higher National Diploma in Business, Business (Accounting and Finance) and Business (Business Management) In October 2017, Kingsley College recorded its first student intake of 12 students. The Group does not expect Kingsley College to become a major revenue contributor in the medium term. Kingsley College has been (1) approved by Ministry of Higher Education Malaysia to provide programmes for the following diplomas recognised by Malaysian Qualifications Agency ( MQA ); and (2) accredited by Pearson Business & Technology Education Council ( BTEC ) to provide programmes for the following diplomas: (1) Diploma in Building Technology (recognised by MQA) (2) Diploma in Information Technology (recognised by MQA) (3) Diploma in Business Studies (recognised by MQA) (4) Pearson BTEC Level 5 Higher National Diploma in Business (5) Pearson BTEC Level 5 Higher National Diploma in Business (Accounting and Finance) (6) Pearson BTEC Level 5 Higher National Diploma in Business (Business Management) MQA is a Malaysian governmental body which administers the Malaysian Qualifications Register ( MQR ). According to Frost & Sullivan Report, diploma as accredited by MQA are (1) generally recognized for employment purpose, and (2) acceptable admission criteria to some of the universities in Malaysia and overseas. Pearson Business and Technology Education Council ( Pearson BTEC ) is an organization based in UK which awards vocational qualifications. BTEC-accredited qualifications are career-based vocational qualifications designed to give students the skills required to move on to higher education or straight to employment. The qualification is accepted by many universities when assessing the suitability of applicants. 175

183 BUSINESS Simplified flowchart The following simplified chart demonstrates the typical steps for prospective student to go through the process from application to graduation: Other prospective students Prospective students studying in the final year for SPM (Note 1) Complete SPM Apply for MQA/Pearson BTEC Diploma STPM/A-levels (Note 2) 2-5 year course Obtaining MQA or Pearson BTEC Diploma First year of University Employment Admission into University s second year or above in bachelor programme Note 1: The Sijil Pelajaran Malaysia ( SPM, or the Malaysian Certificate of Education), is a national examination taken by all fifth-year secondary school students in Malaysia. Note 2: The Sijil Tinggi Persekolahan Malaysia ( STPM, or the Malaysian Higher School Certificate) is a pre-university examination taken by students in Malaysia. Cooperation with Overseas Universities Kingsley College entered into a cooperation agreement with Sejong University, Korea for an initial term of five years starting from 1 April 2016, according to which Sejong University agrees, subject to certain terms and conditions, to admit graduates of Kingsley College to attend the third year in the bachelor degree programme at Sejong University. Marketing Since October 2016, Kingsley College has been conducting marketing activities in social media websites as well as engaging external recruitment agents. Student intake As at the Latest Practicable Date, Kingsley College employed 4 lecturers and had 20 students while its total student capacity is 150 students. Kingsley College recorded first student intake of

184 BUSINESS students in October 2017, all of whom were enrolled in diploma in business programme. As set out in the section headed Development milestones on page 174 of this prospectus, the Group acquired the approval for registration of Kingsley College in 2012 as part of potential but not immediate development plan. The Group s focus has always been on development of Kingsley International School and the construction of KIS Campus and KIS Annex Building. While the Group hired certain personnel (including Dr. Chua, our executive Director) to lead the development of Kingsley College in May 2015, Kingsley College was in preparation stage and only obtained all the necessary accreditation for the programs recognized by Malaysian Qualifications Agency (MQA) in November 2016 and the programmes of Pearson Level 5 Higher National Diploma in June Hence, Kingsley College did not record student intake during the preparation stage up to June 2017 and only recorded the first student intake in October Our Group does not expect Kingsley College to become a major revenue contributor in the medium term. Tuition Fee Kingsley College intends to charge different levels of tuition fee for different programmes. Students enrolled in the part-time diploma in business programme are expected to complete within a period up to 4 years at a total tuition fee of RM 26,400. Requirement for campus before acquiring registration approval As confirmed by Malaysian Legal Advisers, the teaching venue was a necessary condition for obtaining and maintaining registration as private higher educational registration under the Private Higher Educational Institutional Act 1996 ( PHEIA ) and accreditation for the diploma programmes recognised by Malaysian Qualification Agency (MQA). As such, Kingsley College has maintained a registered campus even before the first student intake. The current campus has been used as classroom since the first student intake in October KINGSLEY PROFESSIONAL CENTRE Kingsley Professional Centre was an accredited training provider under the Human Resource Development Limited Act 2003 since April 2016 and provided its first professional training course in April It provides tailored-made courses to corporate customers for its employee training. In Malaysia, certain employers are mandatorily required to contribute an amount equivalent to between 0.5% and 1% of the monthly wages of each of their Malaysian employees to the Human Resources Development Fund ( HRDF ) which was established under Human Resources Development Act All the employers who have contributed to the HRDF are entitled to reimbursement of all or a portion of the costs incurred in employee training provided by an accredited training provider such as Kingsley Professional Centre. According to Frost & Sullivan Report, it is estimated that approximately 63% of companies in Malaysia offer financial provision for staff development. In light of the employer s need for training and improving the employee s skills, our Group established Kingsley Professional Centre which focuses on employees training and offers tailor-made courses according to the corporate customer s specific needs. 177

185 BUSINESS The following chart demonstrates the business model of Kingsley Professional Centre: KPC leveraged on the network of other Group companies and approached prospective clients by call or If prospective clients show interest, KPC will arrange for further meeting to understand the specific needs Sign engagement letter and collect advance payment (if necessary) Arrange for third-party venue (such as hotel board room) and negotiate on venue fee Liaise with external trainers to design specific training materials KPC staff accompanies external trainers to provide training to clients Collect final payment from client Provide certificate of attendance to client Assist clients in claiming reimbursement under HRDF Collect after-training feedback from clients Settlement of fees with external trainers and third-party venue provider It is our marketing strategies to leverage on the network of other Group companies and approach prospective client by speculative calls and s. If clients show interest, we usually arrange for faceto-face interviews with the clients and separately brief the trainers who will then develop suitable training materials in the form of written notes or power point presentation. During the Track Record Period, the trainings cover various subjects such as How to use Excel, Learning English, Leadership, Team Building etc, and each training typically lasted for two to four hours. While we deploy our Group s own staff to provide training, we also maintain a list of our approved external trainers to develop training materials and conduct the training according to the specific needs of the clients. We do not enter into any long-term agreement with the external trainer and/or IT service providers, and each engagement is negotiated on a case-by-case basis. As confirmed by our Malaysian Legal Advisers, subject to specific requirements for accreditations by professional bodies, the trainers are not required to obtain teaching permit which is required for teachers at school, and there are no licensing requirements upon trainers to provide such training. Our Malaysian Legal 178

186 BUSINESS Advisers also confirms that there is no licensing requirement on developing, providing and maintaining on-line training platform provided by the Group. During the Track Record Period, the number of trainings held are as follows: Year ended 30 June 2016 Year ended 30 June 2017 Four months ended 31 October 2017 Total number of trainings by Kingsley Professional Centre 38 (Note 1) 64 (Note 1) 18 (Note 1) Note 1: all the trainings were provided to related parties for the year ended 30 June 2016, while 26 trainings and 17 trainings were provided to related parties during the year ended 30 June 2017 and four months ended 31 October 2017 respectively. Kingsley Professional Centre s office is situated in an office within the Kingsley International School campus and normally conducted training at the client s own venue or third-party venue such as hotel board room. Should the clients opt to hold the training at third-party venue which requires additional fees, our charges will be marked up accordingly. KINGSLEY LANGUAGE HOUSE Between 2011 and 2012, the Group s overall development strategy was to identify potential areas for development and applied for the requisite licences as part of potential but not immediate development plan. Kingsley International was granted the approval for the establishment and registration of Kingsley Language House by Department of Education of Selangor, Malaysia in September During the Track Record Period, Kingsley International focused primarily on operating Kingsley International School and has not started offering language courses through Kingsley Language House. During the Track Record Period and as at the Latest Practicable Date, Kingsley Language House did not employ any teacher, nor did it conduct any courses. For the future strategy, we intend to start devoting more resources to acquire necessary accreditation and marketing efforts. As at the latest practicable date Kingsley Language House has submitted application for accreditation as an IELTS examination centre and plans to develop English programmes leading to IELTS qualification. In long term, Kingsley Language House also intends to promote one-on-one tailor-made training to students by leveraging on the English teaching resources of our Kingsley International School. OUR CUSTOMERS AND SUPPLIERS Our customers Our customers primarily consist of our students and their parents. We did not have any single customer who accounted for more than 5% of our revenue for each of the year ended 30 June 2016 and 2017 and four months ended 31 October Our suppliers Our suppliers primarily consist of security guard service supplier, canteen service supplier, student recruitment agents. For the year ended 30 June 2016 and 2017 and four months ended 179

187 BUSINESS 31 October 2017, purchases from our five largest suppliers amounted to approximately RM1.49 million, RM2.14 million and RM0.91 million, respectively, representing approximately 16.1%, 17.4% and 19.9% of our total cost of sales for the relevant periods. For the same periods, purchases from our largest supplier amounted to approximately RM0.37 million, RM1.13 million and RM0.31 million, respectively, accounting for approximately 4.02%, 9.17% and 6.9% of our total costs of sales for the relevant periods. The tables below set out the details of our five largest suppliers in terms of purchase value during the Track Record Period: For the year ended 30 June 2016 Rank Supplier 1. Uniexpress Direct Clothing 2. Universal Guards Sdn Bhd 3. PT Foods Enterprise 4. Ilmiah Sbl Sdn Bhd 5. SK Frozen Food Enterprise Major products we purchased School uniforms Security guard firm offering security services Meals Books Meals Approximate years of relationship less than 2 years less than 1 year less than 2 years less than 3 years less than 3 years Amount of cost of sales RM372,905 RM290,216 RM285,224 RM272,509 RM271,704 %oftotal cost of sales Typical credit terms and payment method 4.02% Credit term of 30 days 3.13% Payment upon delivery 3.08% Payment upon delivery 2.94% Credit term of 30 days 2.93% Payment upon delivery 180

188 BUSINESS Rank For the year ended 30 June 2017 Supplier 1. KT Food Catering (note 1) 2. Shen Ein Jae 3. Universal Guards Sdn Bhd Major Principal products business we nature purchased Catering service Student recruitment Agent Security and safety services Meals Student recruitment service Security services 4. Sofie Seafood & Grille (Note 1) Restaurant Meals 5. Uniexpress Uniform School Direct supplier uniforms Clothing Approximate years of relationship less than 1 year less than 7 years less than 2 years less than 2 years less than 4 years Amount of cost of sales RM1,131,645 RM368,000 RM307,992 RM200,641 RM138,093 %oftotal cost of sales Typical credit terms and payment method 9.17% Payment upon delivery 2.98% Payment upon delivery 2.50% Payment upon delivery 1.63% Credit term of 30 days 1.12% Credit term of 30 days Note 1: KT Food Catering and Sofie Seafood & Grille are owned by the same owner. Rank For the four months ended 31 October 2017 Supplier Principal business nature 1. KT Food Catering Catering Service 2. Shen Ein Jae Student Recruitment 3. Trans- Edventure Sdn Bhd 4. Universal Guards Sdn Bhd Travel agent for Student trips Security guard firm offering security services 5. Sky All Sports Sports training Major products we purchased Approximate years of relationship Meals less than 1 year Student less than 7 recruitment years service Student trips travel package Security guard service Training courses less than 2 years less than 2 years less than 2 years Amount of cost of sales RM314,519 RM241,500 RM151,368 RM104,210 RM99,512 %of total cost of sales Typical credit terms and payment method 6.9% Payment upon delivery 5.3% Payment upon delivery 3.3% 30 days 2.3% Payment upon delivery 2.2% Payment upon delivery Saved as disclosed in this prospectus, during the Track Record Period and up to the Latest Practicable Date, none of our Directors, their respective close associates, or any Shareholder (who, to the knowledge of our Directors, owned more than 5% of our issued capital as at the Latest Practicable Date), held any interest in any of our five largest suppliers. 181

189 BUSINESS INTELLECTUAL PROPERTY As at the Latest Practicable Date, we owned one trademark in Malaysia. In addition, we have made two trademark applications in Hong Kong and the PRC. We are also the registered owner of three domain name. Please refer to paragraph headed B. Further information about our business 2. Intellectual property rights in Appendix V to this prospectus for further details. During the Track Record Period and up to the Latest Practicable Date, we had not been subject to any intellectual property infringement claims which had any material impact on our Group. COMPETITION The education sector in Malaysia is rapidly evolving, highly fragmented and competitive. We believe we primarily compete with our peers on the basis of the following factors: the reputation of our group and our schools; the scope and quality of our education programmes, services and offerings; the academic performance and achievement of our students; the quality of our campus and teaching facilities; the ability to provide training programmes and practical opportunities to students; our emphasis on the holistic development of students and student achievements in the fields of sports, music and art; the ability to rapidly evolve and expand; students and parents satisfaction; and the quality of our teachers. We expect the competition in the private education market to persist and intensify. We believe we are able to compete effectively due to our strong reputation and established programmes. However, our competitors may devote greater resources, financial or otherwise, than we can to student recruitment, campus development and brand promotion, and respond more quickly than we can to changes in student demands and market needs. 182

190 BUSINESS PROPERTIES As at the Latest Practicable Date, our Group had entered into separate agreements with Kingsley Hills in June 2017 and April 2018, respectively, to acquire the following property at a nominal consideration of RM10 of each property respectively, details of which is set out in the section headed Our Group s acquisition of KIS Campus Land and KIS Annex Land in this prospectus. The procedure for charge of registered had not been completed as at the Latest Practicable Date. Property Gross floor area Usage The school block, Kingsley 44,737 sq. m. KIS Campus International School located within Putra Heights, Subang Jaya, Selangor Darul Ehsan, Malaysia The hostel blocks (annexed school building), Kingsley International School located within Putra Heights, Subang Jaya, Selangor Darul Ehsan, Malaysia 49,518 sq. m. KIS Annex Building As at the Latest Practicable Date, the material properties leased by our Group were as follows. Property 28G, 28-1 & 28-2, Jalan Putra Mahkota 7/8E, Putra Heights, Subang Jaya, Selangor Darul Ehsan, Malaysia 12, 12-1 & 12-2, Jalan Putra Mahkota 7/8E, Putra heights, Subang Jaya, Selangor Darul Ehsan, Malaysia 12A, 12A-1 & 12A-2, Jalan Putra Mahkota 7/8E, Putra Heights, Subang Jaya, Selangor Darul Ehsan, Malaysia Monthly Rental Landlord/ registered owner RM6,500 Global Kiara Sdn Bhd RM5,700 Yap Kim Ping RM5,500 Chong Kim Fah Gross floor area Duration of tenancy agreement (as to leased properties) 535 sq. m. From 1 March 2018 to 28 February sq. m. From 1 September 2017 to 31 August 2018, with an option exercisable by our Group to renew for another one year 535 sq. m. From 1 September 2015 to 31 August 2018, with an option exercisable by our Group to renew for a further term of one year Usage Kingsley Skills College Kingsley College Kingsley College 183

191 BUSINESS INSURANCE We maintain various insurance policies, such as school liability insurance to safeguard against risks and unexpected events. We consider our insurance coverage to be in line with what we believe to be customary practise in Malaysia. Our Directors believe that our insurance coverage is generally consistent with the industry practise and provides adequate protection for our assets and operations. Nevertheless, we may be exposed to other claims or liabilities not covered by our insurance. The Malaysian Legal Advisers confirm that there are no mandatory insurances in respect of the education business that are required to be obtained by Kingsley International School, Kingsley College or Kingsley Skills College under the laws of Malaysia. LICENCES, PERMITS AND ACCREDITATIONS Our Malaysian Legal Advisers have advised that during the Track Record Period and up to the Latest Practicable Date, we had obtained all material licences, permits, approvals, certificates and accreditations necessary to conduct our operations in all material respects from the relevant government authorities in Malaysia and the respective competent institutions or organisations, and such licences, permits, approvals, certificates and accreditations remain in full effect as at the Latest Practicable Date for all the schools we operate currently. 1. Certificate of registration as a Cambridge International School 2. Approval for establishment of private educational institution Kingsley International School 3. Certificate of Registration of Educational Institution certifying Kingsley International School has been registered under Education Act Approval to recruit international students at Kingsley International School 5. Approval for establishment and registration of Kingsley Language House Licence Awarding authority Awardee Validity Period University of Cambridge International Examinations Ministry of Education, Malaysia Ministry of Education, Malaysia Ministry of Home Affairs, Malaysia Department of Education of Selangor, Malaysia Kingsley International Kingsley International Kingsley International Kingsley International Kingsley International Since 31 January 2012 Since 16 June July 2016 to 30 September October October 2018(Note 1) Since 13 September

192 BUSINESS Licence Awarding authority Awardee Validity Period 6. Registration certificates for the following programmes: (a) Civil & Structural Engineering Draughting Level 1 (b) Civil & Structural Engineering Draughting Level 2 (c) Civil & Structural Engineering Draughting Level 3 (d) Computer Operation System (e) Architectural Draughting 7. Accreditation to provide the following BTEC-accredited programmes: (a) (b) (c) Pearson BTEC Level 5 Higher National Diploma in Business Pearson BTEC Level 5 Higher National Diploma in Business (Accounting and Finance) Pearson BTEC Level 5 Higher National Diploma in Business (Business Management) 8. Approval for the establishment of private higher educational institution Kingsley College 9. Certificate of Registration of Kingsley College as private higher educational institution Department of Skills Development, Ministry of Human Resources, Malaysia Pearson Business and Technology Education Council ( Pearson BTEC ) Ministry of Higher Education, Malaysia Ministry of Higher Education, Malaysia Kingsley Skills Kingsley Graduate Kingsley Graduate Kingsley Graduate (a) 29 July July 2018 (b) 29 January January 2019 (c) 29 January January 2019 (d) 29 January January 2019 (e) 27 November November 2020 (a) 15 June August 2021 (b) 15 June August 2021 (c) 15 June August 2021 Since 13 December September 2016 to 7 July

193 BUSINESS Licence Awarding authority Awardee Validity Period 10. Programmes registration for Ministry of Higher Education, Malaysia (a) Diploma in Building Technology Kingsley Graduate (a) 10 June June 2018 (b) Diploma in Business Studies (b) 6 September September 2018 (c) Diploma in Information Technology (c) 1 July June Certificate of Registration as training provider under Human Resource Development Limited Act 2003 Human Resource Development Limited, Malaysia Kingsley Professional 22 April April 2019 Note 1: The first approval to recruit international students was granted on 4 January 2012 ( First Approval Date ) and was subsequently renewed on several occasions up to 14 October During the period between the first student intake in September 2011 and the First Approval Date, Kingsley International School was unable to sponsor student visa and was accordingly only allowed to recruit international students who were holding dependent visa as they did not require separate student visa. Our Malaysian Legal Advisers advised that, based on the currently available information, and subject to us submitting an application which complies with the requirements of the relevant authorities, there are no foreseeable legal impediments for us to renew the licences and permits upon expiry. HEALTH, SAFETY AND ENVIRONMENTAL MATTERS We are dedicated to protecting the health and safety of our students. In certain serious and emergency medical situations, we promptly send our students to local hospitals for treatment. With respect to school safety, we engaged a qualified property management company to provide property security services at our school premises. During the Track Record Period and up to the Latest Practicable Date, we did not experience any serious accident, medical situation or safety issue involving our students. We endeavour to minimise any adverse impact on the environment resulting from our business activities. We had implemented our environmental management policy to ensure proper management of environmental protection and compliance of environmental laws and regulations. During the Track Record Period and up to the Latest Practicable Date, we did not record any non-compliance with applicable environmental requirements that resulted in prosecution or penalty being brought against us. 186

194 BUSINESS EMPLOYEES As at the Latest Practicable Date, we had 178 full-time employees, all of whom are based in Malaysia. The following table sets out a breakdown of the number of our employees by functions as at the Latest Practicable Date: Function No. of employees % of total employees Teaching Staff % Sales & Marketing 11 6% Accounting & Finance 4 2% Management & administration 40 23% Total % Our employees remuneration comprises salaries, bonuses, employees provident fund and social security contributions. Our Directors believe that we maintain a strong working relationship with our employees. We did not experience any significant labour dispute with our employees during the Track Record Period. None of our employees are members of trade unions. LEGAL COMPLIANCE The table below summaries our non-compliances during the Track Record Period and up to the Latest Practicable Date: Name of our subsidiary(ies) Details of No. involved non-compliance 1 Kingsley International Pursuant to By- Law 7 of the Advertisement (Subang Jaya Municipal Council) By-Laws 2007, no person shall exhibit any advertisement without a licence issued by the Subang Jaya Municipal Council ( SJMC ) licensing authority under the bylaws. Kingsley International was found to display banner on the school building Reasons for the non-compliance The respective responsible officer of Kingsley International was unaware of the licensing requirement for placing banner on the school building. Legal consequences and potential maximum penalty for the relevant member of our Group Pursuant to By- Law 37 of the Advertisement (Subang Jaya Municipal Council) By-Laws 2007, any person who contravenes any of the provisions of the By-Laws shall be guilty of an offence and shall upon conviction be liable to a fine not exceeding RM2,000 or to imprisonment for a term not exceeding one year or both such fine and imprisonment and inthecaseofa Rectification Kingsley International was fined for RM200 and had paid the fine in full on 22 January Kingsley International had on 26 January 2016 submitted the application of advertisement licence to SJMC and obtained the requisite licence from SJMC on 27 May Internal control measures adopted to prevent recurrence Relevant staff of Kingsley International are currently required to follow the revised standard operation procedure ( SOP ) of Request for Advertisement procedure relating to the distribution of all the published materials, including online material, social media, advertisement, 187

195 BUSINESS Name of our subsidiary(ies) Details of No. involved non-compliance without an advertisement licence from SJMC on 21 January Kingsley International Pursuant to section 88(1) of Education Act 1996, every person who acts as a governor or employee of an educational institution shall be registered as a governor or employee, as the case may be, in respect of the educational institution. However, Kingsley International failed to register one staff with the Ministry of Education Malaysia during the period of 1 August 2013 to 10 July Reasons for the non-compliance The records of the person in charge of the Human Resources Department of KIS handling application for licences and approvals were not properly/ accurately kept in respect of the particular staff and accordingly accurate and complete record of the role and designation of the particular staff was not maintained. As such, there was an administrative oversight on the part of the relevant person in charge to attend to the requisite Legal consequences and potential maximum penalty for the relevant member of our Group continuing offencetoafine not exceeding RM200 for each day during which such offence is continued after conviction. Pursuant to Section 135(1) of Education Act 1996, a person who is guilty of an offence under this Act for which no penalty is expressly provided shall, on conviction, be liabletoafinenot exceeding RM5, or to imprisonment for a term not exceeding six months or to both. Rectification Internal control measures adopted to prevent recurrence Basedonour banner, etc. to Malaysian ensure Legal compliance Advisers view with relevant and rules and experience regulations. and with the benefit of verbal clarifications obtained from the enforcement division of SJMC,itis unlikely that further penalty will be imposed on Kingsley International for the breach/ non-compliance. The registration of the said one staff was completed on 11 July Basedonour Malaysian Legal Advisers view and experience and with the benefit of verbal clarifications obtained from the relevant division of the Department of Education of Selangor in charge of registration of teaching/staff permits,itis unlikely that any penalty will be imposed by Relevant staff of Kingsley International are currently required to follow the revised SOP of Staff Recruitment and Appointment of Kingsley International to ensure compliance with relevant rules and regulations. 188

196 BUSINESS Name of our subsidiary(ies) Details of No. involved non-compliance Reasons for the non-compliance registration of the particular staff as an academic staff. Legal consequences and potential maximum penalty for the relevant member of our Group Rectification the Ministry of Education against KIS for its failure to register the said staff prior to 11 July Internal control measures adopted to prevent recurrence During the same period, save as otherwise disclosed in this prospectus, our Directors were not aware of any other non-compliance incidents of material impact or systemic nature in respect of applicable laws and regulations. Our Directors are of the view, that the non-compliance incidents as described in the sub-section headed Legal compliance in this section would not affect the suitability of our executive Directors under Rules 5.01 and 5.02 of the GEM Listing Rules or the suitability of listing our Company under Rule of the GEM Listing Rules; and that the abovementioned internal control measures adopted by our Group are adequate and effective to prevent the reoccurrence of such non-compliance incidents in the future, having taken into account that: (i) we have fully rectified all of the noncompliance incidents; (ii) there was no recurrence of similar non-compliance incidents since the implementation of enhanced internal control measures; and (iii) the non-compliance incidents were unintentional. Our Directors consider that the abovementioned non-compliance incidents will not have any material adverse impact on the operation or financial position or business of our Group. LEGAL PROCEEDINGS During the Track Record Period and up to the Latest Practicable Date, we were not involved in any actual, pending or threatened arbitration, litigation or administrative proceedings of material importance, which had or could have had a material adverse impact on our business, results of operation or financial condition. During the same period, save as otherwise disclosed in this prospectus, our Directors were not aware of any other non-compliance incidents of material impact or systemic nature in respect of applicable laws and regulations. INTERNAL CONTROL AND RISK MANAGEMENT INTERNAL CONTROL In addition to the internal control measures as set out in the paragraph headed Legal Compliance in this section above, we have adopted or will adopt the following corporate governance and internal control measures to monitor the ongoing implementation of our risk management policies and corporate governance measures after Listing. We believe that our internal control system is sufficient in terms of comprehensiveness, practicability and effectiveness. We will refine and enhance our internal control systems to respond to any new requirements of our operations as appropriate. To strengthen our internal control and ensure future compliance with the applicable laws and regulations 189

197 BUSINESS (including the GEM Listing Rules) after the Listing, we have adopted the following additional internal control measures: we will establish an audit committee prior to the Listing, which will establish formal arrangements to apply financial reporting and internal control principles in accounting and financial matters to ensure compliance with the GEM Listing Rules and all relevant laws and regulations; our internal control measures, policies and procedures which were codified, adopted and implemented by us, have been updated and revised; subject to recommendation from our audit committee, we will appoint an external internal control adviser to perform periodic review of our internal control system to evaluate the effectiveness and formulate plans and recommendations for improvement of our internal control measures and policies; our Group will appoint our Dr. Chua Ping Yong, our executive Director, as compliance officer, who will be responsible for, among other things, the oversight of compliance of applicable laws and regulations; we have appointed China Everbright Capital Limited as our compliance adviser upon the GEM Listing to provide advice to our Directors and management team in respect of matters relating to the GEM Listing Rules; and each of our Directors has received and reviewed a training memorandum prepared by our Hong Kong legal advisers and attended a training session conducted by our Hong Kong legal advisers in relation to responsibilities and duties of directors of a listed company in Hong Kong. 190

198 DIRECTORS AND SENIOR MANAGEMENT DIRECTORS Our Board consists of six Directors, comprising three executive Directors and three independent non-executive Directors. The table below sets out certain information relating to our Directors: Name Tan Sri Barry Goh Ming Choon ( Tan Sri Barry Goh ) Dato Danny Goh Meng Keong ( Dato Danny Goh ) Dr. Chua Ping Yong ( Dr. Chua ) Prof. Emeritus Tan Sri Dato Dr. Mohamed Salleh Bin Mohamed Yasin ( Tan Sri Salleh ) Tan Sri Dato Hj Abd Karim Bin Shaikh Munisar ( Tan Sri Karim ) Prof. Dr. Rozainun Binti Abdul Aziz ( Prof. Dr. Rozainun ) Age Date of Appointment as Director January January September 2017 Date of Joining our Group 2 December December April April April April April April 2018 Position/ Roles and Relationship with other Title Responsibilities Directors Executive Director Executive Director 1 May 2015 Executive Director Overseeing the Brother of overall Dato Danny management, Goh corporate development and strategic planning of our Group Overseeing the Brother of corporate Tan Sri Barry development and Goh strategic planning of our Group The overall growth and development of our Group Independent Providing non-executive independent Director advice to our Board Independent Providing non-executive independent Director advice to our Board Independent Providing non-executive independent Director advice to our Board Nil Nil Nil Nil EXECUTIVE DIRECTORS Tan Sri Barry Goh, aged 54, is an executive Director and the chairman of our Board. He is primarily responsible for formulating the overall development strategies and business plans and overseeing the management and strategic development of our Group. Tan Sri Barry Goh is the brother of Dato Danny Goh. 191

199 DIRECTORS AND SENIOR MANAGEMENT Tan Sri Barry Goh has over 20 years of experience as an entrepreneur in various businesses including education, property development and construction. Tan Sri Barry Goh established our Group by setting up our principal operating subsidiary, Kingsley International in 2010, together with, among others, Dato Danny Goh, our executive Director. Tan Sri Barry Goh subsequently expanded our Group through establishing Kingsley International School (through Kingsley International), Kingsley College (through Kingsley Graduate), Kingsley Professional Centre (through Kingsley Professional) and Kingsley Skills College (through Kingsley Skills). Tan Sri Barry Goh has been the executive advisor to the TARcian Alumni Association of Tunku Abdul Rahman University College (now known as Tunku Abdul Rahman University College, TAR University College ) since May Since September 2013, he has been a member of the Board of Governors of TAR University College, where he was responsible for the governing and policy-making of the university. He, as a member of the Board of Governors, has also undertaken key roles in providing strategic planning-oversight of the educational character and mission of the university, promoting efficient management of the university, fostering global linkages and internationalization in relation to higher education and research, as well as developing links with the community, corporate sector and industry. He has also assisted with the implementation of the university s constitution, laws and policies. Tan Sri Barry Goh has been an executive director of MCT Berhad since April 2015, and Odenza Corp., a mining company quoted on the over-the-counter markets in the United States with the symbol ODZA since February He has also been and an executive director of BGMC International Limited (stock code: 1693), a construction services company listed on the Main Board of the Stock Exchange, since November Tan Sri Barry Goh graduated from TAR University College with a Diploma in Technology (Electronic Engineering) in July He furthered his studies to pursue a master s degree in business administration at Tsinghua University s PBC School of Finance in September 2017, a part time course which is due to be completed in July Tan Sri Barry Goh was a director of the following companies incorporated in Malaysia prior to their dissolutions: Name of company Juarakon Projek Sdn. Bhd. Principal business activity or nature of business prior to dissolution Dormant Date of commencement of dissolution procedure/date of dissolution 18 February 1999 / 20 January 2000 Means of dissolution Striking out Reasons for dissolution Cessation of business KT Village Sdn. Bhd. Dormant 9 June 2010 /11 January 2011 Striking out Cessation of business Tan Sri Barry Goh confirmed that the above companies were not in operations immediately prior to their dissolutions and there is no wrongful act on his part leading to the dissolutions and is not aware of any actual or potential claim has been or will be made against him as result of the dissolution, and that no misconduct or misfeasance has been involved in the dissolutions of these companies. 192

200 DIRECTORS AND SENIOR MANAGEMENT Dato Danny Goh, aged 49, is our executive Director. He is primarily responsible for overseeing the corporate development and strategic planning of our Group. Dato Danny Goh is the brother of Tan Sri Barry Goh. Dato Danny Goh has over seven years of experience in the education industry strategic planning. In December 2010, Dato Danny Goh was appointed as the director of Kingsley International and was involved in the establishment of Kingsley International School. In October 2013, Dato Danny Goh was appointed as directors of Kingsley Skills and Kingsley Professional Centre and was involved in the establishment of Kingsley Skills College and Kingsley Professional Centre. Dato Danny Goh is also a strong advocate for Chinese education. He was involved in the fund raising for the construction of the new SJK(C) Union in Cyberjaya, Malaysia, a union that caters to the Chinese education needs of students from different racial backgrounds, in May Dato Danny Goh graduated from TAR University College in May 1992 with a diploma in technology (building). Dato Danny Goh was a director of the following company incorporated in Malaysia prior to its dissolution: Name of company Principal business activity or nature of business prior to dissolution Date of commencement of dissolution procedure/date of dissolution Means of dissolution Reasons for dissolution KT Village Sdn. Bhd. Dormant 9 June 2010 /11 January 2011 Striking out Cessation of business Dato Danny Goh confirmed that the above company was not in operations immediately prior to its dissolution and there is no wrongful act on his part leading to the dissolutions and is not aware of any actual or potential claim has been or will be made against him as result of the dissolution, and that no misconduct or misfeasance has been involved in the dissolutions of the company. Dr. Chua, aged 53, is an executive Director. He is primarily responsible for the overall growth and development of our Group. Dr. Chua has more than 27 years of experience in the education field. Prior to joining our Group as senior vice president in May 2015, Dr. Chua had been employed at TAR University College from July 1990 to September 2013, where he has undertaken positions of instructor, lecturer, senior lecturer, head of division and head of school. Since October 2013, Dr. Chua had been the dean of the Faculty of Engineering and Built Environment at the TAR University College, where he was responsible for the management of staff and resources. Dr. Chua was also responsible for overseeing administration and providing academic leadership, such as strategic planning, developing policy and providing overall leadership, vision and direction for the faculty. These include strategic issues related to the challenges and opportunities of new academic structures, students expectations and performance, widening participation and recruitment. He has also undertaken key roles in academic planning and decision-making. He was also responsible for strategic management where he took the lead in driving the faculty s strategic response to internal and external challenges, staff management, where he evaluated and determined the training needs of the staff, management of resources and research initiatives. 193

201 DIRECTORS AND SENIOR MANAGEMENT Dr. Chua s educational background expands across the fields of science, engineering, and philosophy. Dr. Chua was awarded the Diploma in Technology (Electronic Engineering) from TAR University College in May He later obtained a Master of Science degree in Industrial Control Systems from the University of Salford in the United Kingdom in July 1993, prior to completing the Engineering Council Examination organised by the Engineering Council in March He then continued his education in the University of Salford, United Kingdom, obtaining the degree of Doctor of Philosophy in April Save as disclosed above, each of our executive Directors has confirmed that he (i) has no interests in the Shares within the meaning of Part XV of the SFO, (ii) is independent from, and is not related to, any other Directors, members of senior management, Substantial Shareholders or Controlling Shareholders, (iii) has not held any directorship in any other public companies in securities of which are listed on any securities market in Hong Kong or overseas in the past three years, and (iv) there is no other information which is required to be disclosed pursuant to any of the requirements under Rules 17.50(2)(h) to 17.50(2)(v) of the GEM Listing Rules nor are there any matters which need to be brought to the attention of the Shareholders in connection with his appointment. INDEPENDENT NON-EXECUTIVE DIRECTORS Tan Sri Salleh, aged 67, is an independent non-executive Director. He is primarily responsible for providing independent advice to our Board. Tan Sri Salleh has over 38 years of experience in the education industry. In 1980, he was appointed as a lecturer in the Department of Medical Microbiology and Immunology, Faculty of Medicine, National University of Malaysia ( UKM ), where he was promoted as head of department and served as deputy Dean until In 1992, he became the founding Dean of Faculty of Allied Health Sciences at UKM and was also appointed as the professor in medical mycology. From 1995 to 2002, Tan Sri Salleh served as the deputy vice chancellor for development affairs and student affairs. From 2003, he had been acting as UKM s vice chancellor until he retired in In 2006, Tan Sri Salleh was appointed as the Founding Director of United Nations University s International Institute for Global Health until his retirement in Tan Sri Salleh was also appointed as a board member of SIRIM Berhad since In March 2014, Tan Sri Salleh was appointed as the vice chancellor of Manipal International University. Tan Sri Salleh was awarded a Doctorate in Science (Honoris Causa) from the University of Bath, United Kingdom in July In October 2015, he was awarded an Honorary Doctorate in Health Sciences from Univesiti Sultan Zainal Abidin in Malaysia. Tan Sri Karim, aged 67, is an independent non-executive Director. He is primarily responsible for providing independent advice to our Board. Tan Sri Karim has over 44 years of experiences in both the government and the corporate sectors. From 1974 to 1986, he had held positions in various governmental departments. In 1987, Tan Sri Karim had been the Chief Assistant State Secretary of Selangor (Local Authority Division) From 1992 to 1998, he was the president of Ampang Jaya Municipal Council. He had served as the District Officer and the Acting President of Sepang District Council from 1998 to In 2003 and 2004, he had been the President of Petaling Jaya Municipal Council. Tan Sri Karim has also made various contributions in the corporate sector. He has previously been the group president of Kumpulan Darul Ehsan Berhad (KDEB), a Government Link Company 194

202 DIRECTORS AND SENIOR MANAGEMENT (GLC) that is an investment arm of the Selangor State Government. He had also been the chairman of two companies listed on the Main Market of Bursa Malaysia Securities Berhad, namely Kumpulan Perangsang Selangor Berhad (stock code: 5843), and Taliworks Corporation Berhad (stock code: 8524), between 2004 to Tan Sri Karim obtained a Bachelor in Economics from University Malaya in Malaysia in June 1974 and a Master in Business Administration from University of Edinburgh in the United Kingdom in May In July 1980, he obtained an advance diploma in Economic Development in the Victoria University of Manchester (with distinction) in the United Kingdom. Tan Sri Karim also completed a course in urban development organised by Japan International Cooperation Agency in Tokyo, Japan in March Professor Dr. Rozainun, aged 57, is an independent non-executive Director. She is primarily responsible for providing independent advice to our Board. Prof. Dr. Rozainun has over 31 years of experiences in the education industry. Since 1986, Prof. Dr. Rozainun has held various positions at the Universiti Teknologi MARA in Malaysia where she was mainly involved in the teaching of risk management for the Masters in Forensic Accounting and Financial Criminology, Master of Accountancy, Cost and Management Accounting, Master in Business Administration and Master of Sport Science. She is currently the dean of the Faculty of Accountancy in Universiti Teknologi MARA, where she is responsible for managing and promoting accounting education towards the development of the accounting profession and human capital through various academic programs, such as CIMA and ACCA, as well as postgraduate programs, Master of Accountancy, Master in Forensic Accounting and Financial Criminology. Prof. Dr. Rozainun has also received various external appointments. She participated in the ASEAN Accounting Educator Forum organized by the ASEAN Accounting Educators Workgroup in 2015 and has been the chairperson of the examination body for the Malaysia Institute of Accountants Qualifying Examination since In 2015, Prof. Dr. Rozainun was awarded the royalty award Paduka Mahkota Kelantan by the Sultan of Kelantan. Prof. Dr. Rozainun obtained a diploma in accountancy from the Institute Teknologi MARA in September She became a fellow of the Chartered Institute of Management Accountants qualifications in June In September 1996, she obtained a Master of Economic and Social Studies in Accounting and Finance from the University of Wales, Aberystwyth in the United Kingdom. In January 2005, she obtained a Doctor of Philosophy from the University of Salford in the United Kingdom. She was also qualified as a chartered accountant of the Malaysian Institute of Accountants in March Save as disclosed above, each of our independent non-executive Directors has confirmed that he/she (i) has no interests in the Shares within the meaning of Part XV of the SFO, (ii) is independent from, and is not related to, any other Directors, members of senior management, Substantial Shareholders or Controlling Shareholders, (iii) has not held any directorship in any other public companies in securities of which are listed on any securities market in Hong Kong or overseas in the past three years, and (iv) there is no other information which is required to be disclosed pursuant to any of the requirements under Rules 17.50(2)(h) to 17.50(2)(v) of the GEM Listing Rules nor are there any matters which need to be brought to the attention of the Shareholders in connection with his/her appointment. 195

203 DIRECTORS AND SENIOR MANAGEMENT COMMON DIRECTORSHIP OF OUR DIRECTORS Tan Sri Barry Goh is our Director and an executive director of BGMC International Limited, a company listed on the Main Board of the Stock Exchange ( BGMC ), and Dato Danny Goh is our Director and a director of Kingsley Hills. Notwithstanding this, we believe that our Board will be able to function properly and effectively in managing our Group s daily operations even if each of Tan Sri Barry Goh and Dato Danny Goh have directorship in BGMC and Kingsley Hill, respectively. Our Company is involved in the education industry which is a service providing industry that requires close communications with students and parents alike as part of the day-to-day running of the business of our Group. While acting as our executive Directors, both Tan Sri Barry Goh and Dato Danny Goh are mainly involved in strategic planning our Group. The day-to-day running of our business operations is carried out by the core management team of our Company which have extensive experience in the running our business operations, including Dr. Chua, our executive Director, who is principally responsible for the overall growth and development of our Group, Ms. Ellis Lee, being the chief executive of Kingsley International School and Ms. May King, being the principal of Kingsley International School. In the case of Tan Sri Barry Goh, he is not the only executive director of BGMC and indeed, the day-to-day management of BGMC is primarily carried out by another executive director of BGMC, namely Dato Michael Teh, who is also the chief executive officer of BGMC. In addition, the business of our Company is entirely different from those of BGMC and Kingsley Hills. As such, our Directors consider that there will not be potential future transactions with BGMC and Kingsley Hills, which may give rise to potential conflicts, other than those disclosed in the section headed Transactions with our Controlling Shareholders in this prospectus. Assuming that there might be such new future transactions with BGMC and/or Kingsley Hills, these transactions are not likely to be material. In the event that there is a potential conflict of interest in, or arising out of, any transaction to be considered and approved by our Board, any Director who has a material interest in actual or potential connected transactions, such as transactions with BGMC or Kinglsey Hills, shall abstain from voting at the relevant meeting of our Board considering and approving such transaction and shall not be counted towards the quorum of such Board meeting unless this is otherwise permitted under the Articles and/or the GEM Listing Rules. In the absence of Tan Sri Barry Goh (where the transactions involved our Company and BGMC and he has to abstain) and Dato Danny Goh (where the transactions involved our Company and Kingsley Hills, and he has to abstain), which is unlikely unless a transaction is entered into among our Company, BGMC and Kingsley Hills, the operations of our Board will not be affected materially. We believe that in these circumstances, our Directors will be able to fully discharge their functions as a collective Board. Apart from Dr. Chua, our executive Director, we have three independent non-executive Directors who are not associated with our Controlling Shareholders or their respective associates. Resolutions of our Board approving any matters in which Tan Sri Barry Goh or Dato Danny Goh has a potential conflict of interest and/or material interest will only be considered and approved by our independent non-executive Directors (as under the provisions of the Articles and the GEM Listing Rules, our executive Directors will then be prohibited from voting on the resolution(s) and will not be counted towards the quorum of the relevant Board meetings at which the relevant resolution(s) is/are approved). Hence, the independence of our Board s decisions in respect of any matters in which any of our Group s executive Directors has a potential conflict of interest and/or material interest is and can be ensured. 196

204 DIRECTORS AND SENIOR MANAGEMENT Further, Tan Sri Barry Goh and Dato Danny Goh are our Controlling Shareholders. Given this, it is important and commercial viable to have them as our executive Directors so that they can monitor their interests in our Company. In addition, Tan Sri Barry Goh and Dato Danny Goh have been performing well in their dual directorship role since 2015 when Tan Sri Barry Goh re-joined BGMC as a director and Dato Danny Goh was appointed as a director of Kingsley Hills. During this period, the business and operations of both our Group, BGMC and Kingsley Hills have been carried out smoothly. We believe that each of them is fully aware of the allocation of duties as director of listed companies and the fiduciary duties they owe to the respective shareholders of our Company, BGMC and Kingsley Hills such that they would ensure no conflicts of interest exists among themselves, our Company, BGMC and Kingsley Hills. SENIOR MANAGEMENT Our senior management is responsible for the day-to-day management of our business. The following table sets out certain information in respect of the senior management of our Group: Name Age Date of Joining our Group Position Principal roles and responsibilities Shim Nyuk Kong 51 1 July 2015 Chief financial officer Overseeing the overall accounts and financial operation of our Group Teo Kah Chin 52 1 April 2013 Director of human capital and systems Overseeing the overall management of human resources, administrative matters and internal control of our Group Ellis Lee Swee Pheng February 2012 May King 51 1 September 2011 Chief executive of Kingsley International School Principal of Kingsley International School Management and dayto-day operations of Kingsley International School Managing and promoting the educational development of Kingsley International School Shim Nyuk Kong ( Mr. Shim ), aged 51, is the chief financial officer of our Group. He joined our Group in July 2015 and is primarily responsible for overseeing the accounts and finance operation of our Group. Mr. Shim has more than 26 years of working experience in finance and accounting. From 1991 to 1994, he had worked as an accountant in Hume Industries (Malaysia) Berhad. From 1995 to 1998, he had worked in Metro Kajang Holdings Berhad as an accountant principally responsible for project financing and monitoring. From 1998 to 2005, he had worked in Malub Industry (M) Sdn Bhd as a finance executive responsible for the accounting, finance and payroll. In 2005, Mr. Shim joined Modular Construction Technology as a finance manager responsible for the overall direction and 197

205 DIRECTORS AND SENIOR MANAGEMENT control of all financial matters. He was promoted to group finance manager in January 2009 and further promoted to general manager in corporate finance in January In September 2014, he joined Sky Park Properties Sdn. Bhd., an indirect subsidiary of B&G Capital and was subsequently transferred to B&G Global Property Sdn. Bhd., a subsidiary of B&G Capital, from 1 April Mr. Shim was seconded to Kingsley International on 1 July 2015 until his employment was transferred to Kingsley International from 1 August 2017 in line with the restructuring of B&G Capital group and the establishment of our Company as chief financial officer responsible for Kingsley International s financials and accounting. Kingsley International was then a subsidiary of B&G Capital and was acquired by our Company on 23 August Please refer to the section headed History, Development and Reorganisation in this prospectus for further details. Mr. Shim has been an associate member of The Chartered Institute of Management Accounts (CIMA) since August 1993 and a Chartered Accountant of the Malaysian Institute of Accountants (MIA) since June In December 1984, Mr. Shim attended a one-year course leading to the London Chamber of Commerce and Industry Examination in the United Kingdom. In spring 1987, he obtained a diploma for proficiency in Cost Accounting, Business Statistics and Economics with credit from the London Chamber of Commerce and Industry in the United Kingdom. Teo Kah Chin ( Mr. Teo ), aged 52, is the director of human capital and systems of our Group. He joined B&G Global Property Sdn. Bdn. in April 2013, a subsidiary of B&G Capital and was then seconded to Kingsley International on 1 January 2015 until his employment was subsequently transferred to Kingsley International from 1 August 2017 in line with the restructuring of B&G Capital group and the establishment of our Company. Mr. Teo is primarily responsible for the overall management of human resources, administrative matters and internal control of our Group. Mr. Teo has more than 27 years of experience in managing administrative matters and internal control. Since 1990, Mr. Teo worked as an engineering assistant in Innopower Electronics Sdn Bhd, a company involved in the manufacturing of electronics and electrical power and products. where he was responsible for product assurance and product safety compliance. He had worked as a consultant in Inter Technology Link Consultants from 1994 to 1996 and NOVO Quality Services (M) Sdn Bhd from 1996 to 2001, respectively. Mr. Teo incorporated EPC Management Sdn Bhd in June 2001 to provide quality management advice and services. Subsequently in August 2010, he ceased the business operation of EPC Management Sdn Bhd and incorporated Lean Sigma International Centre Sdn Bhd in 2007, a company principally engaged in providing business management systems. Lean Sigma International Centre Sdn Bhd ceased operation in April Since November 2015, Mr. Teo has been the fellow member of Institute of Quality Malaysia. He has also been a registered lead auditor with International Register of Certificated Auditors, United Kingdom since October 2002 and Institute of Environmental Management & Assessment in November Mr. Teo graduated from TAR University College in May 1990 with a diploma in technology (electronic engineering). In August 1991, he obtained an external certificate in quality assurance management from Sheffield City Polytechnic School of Computing and Management Sciences in the United Kingdom, which is a part-time long-distance programme. In February 1999, Mr. Teo obtained a 198

206 DIRECTORS AND SENIOR MANAGEMENT Master in Business Administration by distance learning from the University of Leicester, United Kingdom. Ellis Lee Swee Pheng ( Ms. Lee ), aged 54, is the chief executive of our Group. She joined our Group in February 2012 and is primarily responsible for the overall business and operation of Kingsley International School. Ms. Lee joined Kingsley International School in February 2012 and was appointed chief executive of our Group in January Ms. Lee has over 20 years of experience in the management of, an education business. From 1996 to 1997, Ms. Lee had worked as an Australia trade officer in Malaysia Trade Commission, MATRADE, where she was responsible for the promotion of trade between Malaysia and Australia. Between 1997 and 1998, she had worked in Sunway College and was responsible for setting up the School of Hospitality Management and recruitment of students. She had served in Education Ventures Sdn Bhd, where she was responsible in the development of education programme for the international school and early year study. Between 2007 and 2009, Ms. Lee had been the head of RMIT programme in Metropolitan College in Malaysia, where she was responsible for the operation of a business programme in collaboration with RMIT University in Australia. In 2011, she had been the associate dean and director of operation of UCSI University in Malaysia. Ms. Lee obtained a Master in Business Administration from Irish International University in Ireland in September She obtained a Master of Education from Asia e University in Malaysia in September May King ( Ms. King ), aged 51, joined our Group in September Ms. King was appointed as the principal of Kingsley International School on 1 January She is responsible for managing and promoting the educational development of Kingsley International School. Ms. King has worked in Kingsley International School since September In September 2011, Ms. King joined Kingsley International School as a mathematics teacher. She was appointed the head of key stage in September 2012 and was promoted to acting vice principal, vice principal and principal of Kingsley International School in April 2015, September 2016 and July 2017, respectively. Between January 2011 and August 2011, Ms. King had worked in Sri Sedaya School in Malaysia as a teacher. Ms. King graduated from University of Malaya in Malaysia in August 1990 with a Bachelor of Science in Mathematics. To the best of the knowledge, information and belief of our Directors having made all reasonable enquiries, our senior management has not been a director of any public company the securities of which are listed on any securities market in Hong Kong or overseas in the three years immediately preceding the date of this prospectus. COMPANY SECRETARY Ms. Lee Mei Yi, aged 50, was appointed as the company secretary of our Company on 14 September Ms. Lee Mei Yi is ordinarily resident in Hong Kong. She is a chartered secretary and a fellow of both the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators in the United Kingdom. Ms. Lee Mei Yi has over 25 years of experience in the corporate secretarial field. She is a director of corporate services of Tricor Services Limited, a global professional services provider specializing in integrated business, corporate and investor services. 199

207 DIRECTORS AND SENIOR MANAGEMENT BOARD COMMITTEE Audit Committee Our Company has established an audit committee ( Audit Committee ) in compliance with Rule 5.28 of the GEM Listing Rules. Written terms of reference in compliance with paragraph C3 of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules has been adopted. Among other things, the primary duties of the Audit Committee are to make recommendations to our Board on appointment or reappointment and removal of external auditor; review financial statements of our Company and judgments in respect of financial reporting; and oversee internal control procedures of our Company. The Audit Committee consists of three independent non-executive Directors, namely Prof. Dr. Rozainun, Tan Sri Salleh and Tan Sri Karim. Prof. Dr. Rozainun is the chairman of the Audit Committee. Remuneration Committee Our Company has established a remuneration committee ( Remuneration Committee ) in compliance with Rule 5.34 of the GEM Listing Rules with written terms of reference in compliance with paragraph B.1.2 of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules. The primary duties of the Remuneration Committee are to make recommendations to our Board on the overall remuneration policy and structure relating to all Directors and senior management of our Group and ensure that none of our Directors determine their own remuneration. The Remuneration Committee consists of five members, namely Tan Sri Salleh, Tan Sri Karim, Tan Sri Barry Goh and Dr. Chua, Tan Sri Salleh is the chairman of the Remuneration Committee. Nomination Committee Our Company has established a nomination committee ( Nomination Committee ) with written terms of reference in compliance with paragraph A.5.2 of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules. The primary duties of the Nomination Committee are to review the structure, size and composition of our Board annually; identify individuals suitably qualified to become Board members; assess the independence of our independent non-executive Directors; and make recommendations to the Board on relevant matters relating to appointment or re-appointment of Directors and succession planning for our Directors. The Nomination Committee consists of five members, namely Tan Sri Karim, Tan Sri Salleh, Prof. Dr. Rozainun, Tan Sri Barry Goh and Dr. Chua. Tan Sri Karim is the chairman of the Nomination Committee. COMPLIANCE OFFICER Dr. Chua is the compliance officer of our Company. Please refer to the section headed Executive Directors in this prospectus for his biography. REMUNERATION POLICY Our Directors remuneration is determined with reference to the prevailing market practice, our Company s remuneration policy and their duties and responsibilities with our Group. During the two 200

208 DIRECTORS AND SENIOR MANAGEMENT financial years ended 30 June 2016 and 2017, no remuneration was paid and no benefits in kind were granted to our Directors by any member of our Company. Each of our executive Directors has entered into a service agreement with our Company for an initial term of three years commencing from the Listing Date subject to termination provisions contained therein. Each of our executive Directors is entitled to a basic salary. Under the service agreements, the basic annual remunerations payable by our Company to our executive Directors are set out below: Executive Director RM$ Tan Sri Barry Goh 20,000 Dato Danny Goh 20,000 Dr. Chua 20,000 Each of our independent non-executive Directors has signed an appointment letter with our Company with an initial term of three years commencing from the Listing Date subject to termination provisions contained therein. Under the appointment letters, the basic annual remuneration payable by our Company to our independent non-executive Directors are as follows: Independent Non-Executive Director RM$ Tan Sri Salleh 60,000 Tan Sri Karim 60,000 Prof. Dr. Rozainun 60,000 Our Director s fee for each of the independent non-executive Directors during the two-year term is initially fixed, subject to our Board s review from time to time in its discretion after taking into account the recommendation of the Remuneration Committee. The remuneration of each of our independent non-executive Directors is determined by reference to market terms, seniority, his/her experiences, duties and responsibilities within our Group. Our Directors are entitled to statutory benefits as required by law from time to time such as pension. Save as disclosed above, no other remuneration have been made or are payable by our Group to our Directors in respect of the Track Record Period. Our Directors estimate that under the current proposed arrangement, the aggregate basic annual remuneration (excluding payment pursuant to any discretionary benefits or bonus or other fringe benefits) payable by our Company to each executive Director will be approximately RM$240,000. Prior to the Listing, the remuneration policy of our Group to reward its employees and directors is based on their performance, qualifications, competence displayed and market comparables. Remuneration package typically comprises salary, contribution to pension schemes and discretionary bonuses relating to the profit of the relevant company. Upon and after the Listing, the remuneration package of our executive Directors and our senior management will be linked more to the performance of our Group and the return to its Shareholders. The Remuneration Committee will review annually the remuneration of all our Directors to ensure that it is attractive enough to attract and retain a competent team of executive members. COMPLIANCE ADVISER Our Group has appointed China Everbright Capital Limited as our Company s compliance adviser in accordance with Rule 6A.19 of the GEM Listing Rules from the Listing Date. The compliance 201

209 DIRECTORS AND SENIOR MANAGEMENT adviser will advise our Group on on-going compliance requirements and other issues under the GEM Listing Rules and other applicable laws and regulations in Hong Kong after the Listing. Save for the obligations of China Everbright Capital Limited under the Underwriting Agreement as disclosed in the section headed Underwriting in this prospectus, China Everbright Capital Limited does not have any shareholding interest in our Group nor any right to subscribe for or to nominate any person to subscribe for securities in our Company or any member of our Group. Services to be provided by China Everbright Capital Limited under the compliance adviser agreement between our Group and China Everbright Capital Limited include: to advise our Company with regard to its obligations under various rules and regulations of the Stock Exchange and the SFC, and to provide our Company with proper guidance and advice with due care and skill as to compliance with the requirements under the GEM Listing Rules and all other applicable laws, rules, codes and guidelines; upon the request of our Company, to accompany our Group to any meetings with the Stock Exchange, unless otherwise declined by the Stock Exchange; no less frequently than at the time of reviewing the financial reporting of our Company and upon our Company notifying the compliance adviser of a proposed change in the use of proceeds of the Global Offering, to discuss the following (as appropriate) with our Company: (i) (ii) (iii) (iv) our Group s operating performance and financial condition by reference to its business plans and use of proceeds as stated in this prospectus; our Company s compliance with the terms and conditions of the waivers granted by the Stock Exchange from the GEM Listing Rules and exemption granted by the SFC with strict compliance with the Companies Ordinance at the time of Listing; whether any profit estimate in this prospectus will be or has been met or will be or has been failed to be duly met by our Company and, to advise our Group to notify the Stock Exchange and inform the public in a timely and appropriate manner; our Company s compliance with any undertakings provided by our Company and our Directors at the time of the Listing as more particularly disclosed in this prospectus, and, in the event of non-compliance, to discuss the issue with our Board and make recommendations to our Board regarding appropriate remedial steps; in relation to an application by our Company for a waiver from any of the requirements in Chapter 20 of the GEM Listing Rules, to advise our Company on its obligations and in particular the requirement to appoint an independent financial adviser; to assess the understanding of all new appointees to our Board regarding the nature of their responsibilities and fiduciary duties as a director of a listed company, and, to the extent the compliance adviser forms an opinion that the new appointees understanding is inadequate, discuss the inadequacies with the Board and make recommendations to our Board regarding appropriate remedial steps such as training; and 202

210 DIRECTORS AND SENIOR MANAGEMENT to discharge such duties and functions as may be required to be performed by the compliance adviser under the GEM Listing Rules from time to time and as reasonably requested by our Company. The term of the appointment shall commence on the Listing Date and end on the date of which our Group complies with Rule of the GEM Listing Rules in respect of its financial results for the first full financial year after the date of the Listing and this appointment may be subject to extension by mutual agreement. 203

211 SUBSTANTIAL SHAREHOLDERS SUBSTANTIAL SHAREHOLDERS So far as our Directors are aware, immediately following completion of the Capitalisation Issue and the Global Offering, the following persons will have interests or short positions in the Shares or underlying Shares which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which would be directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of our Group. Name of shareholder Star Shine Capacity/Nature of Interest Beneficial owner and interests held jointly with others (Notes 3 and 5) Number of underlying Shares held as at thedateof this prospectus Approximate Percentage of shareholding as at the date of this prospectus Number of underlying Shares (Note 1) Approximate Percentage of shareholding immediately following the completion of the Capitalisation and the Global Offering (Note 2) 1,840 92% 552,000,000 69% Tan Sri Barry Goh Interests of controlled corporation (Note 4) and interests held jointly with other persons (Notes 3 and 5) 1,840 92% 552,000,000 69% Puan Sri Toh Siew Choo Interest of 1,840 92% 552,000,000 69% spouse (Note 6) DGMK Investment Dato Danny Goh Datin See Choon Keok Eduking Investment Beneficial owner and interests held jointly with others (Notes 4 and 5) Interests of controlled corporation (Note 7) and interests held jointly with other persons (Notes 4 and 5) Interest of spouse (Note 7) Beneficial owner 1,840 92% 552,000,000 69% 1,840 92% 552,000,000 69% 1,840 92% 552,000,000 69% 160 8% 48,000,000 6% 204

212 SUBSTANTIAL SHAREHOLDERS Name of shareholder Dato Law Boon Hee Capacity/Nature of Interest Interests of controlled corporation (8) Number of underlying Shares held as at thedateof this prospectus Approximate Percentage of shareholding as at the date of this prospectus Number of underlying Shares (Note 1) Approximate Percentage of shareholding immediately following the completion of the Capitalisation and the Global Offering (Note 2) 160 8% 48,000,000 6% Notes: (1) All interests stated are long positions. (2) The calculation is based on the total number of 800,000,000 Shares in issue immediately following the completion of the Capitalisation Issue and the Global Offering. (3) Tan Sri Barry Goh holds the entire issued share capital of Star Shine. Star Shine, in turn, will directly hold 496,000,000 Shares after the completion of the Global Offering and is deemed to be interested in the 56,000,000 Shares held by DGMK Investment as described in note 5 below. Accordingly, Tan Sri Barry Goh is deemed to be interested in the 552,000,000 Shares which Star Shine is deemed to be interested in by virtue of the disclosure requirements of the SFO. (4) Dato Danny Goh holds the entire issued share capital of DGMK Investment. DGMK Investment, in turn, will directly hold 56,000,000 Shares after the completion of the Global Offering and is deemed to be interested in the 496,000,000 Shares held by Star Shine as described in note 5 below. Accordingly, Dato Danny Goh is deemed to be interested in the 552,000,000 Shares which DGMK Investment is deemed to be interested in by virtue of the disclosure requirements of the SFO. (5) On 14 September 2017, Tan Sri Barry Goh and Dato Danny Goh entered into the Confirmation Deed to acknowledge and confirm, among other things, that they have been and will be actively cooperating, communicating and acting in concert with each other with respect to their interests in or the business of the relevant members of our Group since they became shareholders of Kingsley International and will continue to act in concert after the signing of the Confirmation Deed. For further details, please refer to the section headed History, Development and Reorganisation Confirmation Deed in this prospectus. (6) Puan Sri Toh Siew Choo is the spouse of Tan Sri Barry Goh and is deemed to be interested in the shareholding interests of Tan Sri Barry Goh by virtue of the disclosure requirements of the SFO. (7) Datin See Choon Keok is the spouse of Dato Danny Goh and is deemed to be interested in the shareholding interests of Dato Danny Goh by virtue of the disclosure requirements of the SFO. (8) Dato Law Boon Hee holds the entire issued share capital of Eduking Investment and accordingly, Dato Law Boon Hee is deemed to be interested in 48,000,000 Shares held by Eduking Investment by virtue of the disclosure requirements of the SFO. Save as disclosed herein, our Directors are not aware of any person who will, immediately following completion of the Global Offering and Capitalisation Issue, have an interest or a short position in Shares or underlying Shares which would be required to be disclosed to our Company and 205

213 SUBSTANTIAL SHAREHOLDERS the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of our Company. SIGNIFICANT SHAREHOLDERS So far as our Directors are aware, save for the persons disclosed in the paragraph headed Substantial Shareholders under this section, no persons individually and/or collectively will, immediately following completion of the Capitalisation Issue and the Global Offering, be entitled to exercise or control the exercise of 5% or more of the voting power at the general meetings of our Company and are therefore regarded as significant shareholders under the GEM Listing Rules. UNDERTAKINGS Each of our Controlling Shareholders has jointly and severally given certain undertakings in respect of the Shares held by them to our Company, the Sole Sponsor, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers (for itself and on behalf of the Underwriters) and the Stock Exchange, details of which are set out in the section headed Underwriting Undertakings in this prospectus. Our Controlling Shareholders have also given undertakings in respect of the Shares to our Company and the Stock Exchange as required by Rules 13.16A(1) and of the GEM Listing Rules. 206

214 TRANSACTIONS WITH CONTROLLING SHAREHOLDERS We have entered into a number of agreements with Kingsley Hills, an associate of one of our Controlling Shareholders, the details of which are set out below. CONTROLLING SHAREHOLDER AND CONNECTED PERSONS Dato Danny Goh is one of our Controlling Shareholders and our executive Directors. He is the controlling shareholder of Kingsley Hills. Accordingly, Kingsley Hills is an associate of Dato Danny Goh and a connected person of our Company. ONE-OFF TRANSACTIONS 1. THE TURNKEY CONTRACT Pursuant to the Turnkey Contract for a total contract sum of RM138,118,000 ( Construction Service Fee ), Kingsley Hills is the ultimate party responsible for the Development Project under the terms of the Turnkey Contract. Kingsley Hills subsequently identified BGMC, a licensed construction company, as a contractor to undertake part of the BGMC Contract Works while Kingsley Hills would continue to be ultimately responsible for the whole development and construction. After negotiation, Kingsley International entered into a separate contract with BGMC in August 2011 in respect of the BGMC Contract Works. Under the terms of the Turnkey Contract, Kingsley Hills shall complete the construction of, and deliver together with the CCC in respect of, the Development Project to Kingsley International on or before 1 September Kingsley International and Kingsley Hills have subsequently on 14 September 2017 agreed that completion and delivery should be on or before 31 December The Turnkey Contract was entered into prior to Listing and the transaction thereunder is one-off in nature even if further payments are to be made by us pursuant to the terms of the Turnkey Contract. As at the Latest Practicable Date, while the construction of the Development Project on KIS Campus Land had been completed, the construction of the KIS Annex Building Project was on-going. We expect to make further payments to Kingsley Hills after Listing pursuant to the terms of the Turnkey Contract. (b) Reasons for the transaction Kingsley Hills is the landowner and developer of a high-end mixed residential development project known as Kingsley Hills@Putra Heights that spreads across 96 acres of land in Putra Heights, Selangor, Malaysia where Kingsley International School is currently situated. Kingsley Hills is a whollyowned subsidiary of B&G Capital, which, in turn, was a shareholder of Kingsley International before we acquired the entire equity interest of Kingsley International as part of the Reorganisation. Please refer to the section headed History, Development and Reorganisation for further details of the Reorganisation. Kingsley Hills approached Kingsley International with the idea of building an international school in Putra Height, Selangor, Malaysia which Kingsley Hills developed. Having considered the above proposal of Kingsley Hills and given Kingsley Hills experience and reputation in property development and construction as well as its network and ability to select appropriate sub-contractors to undertake construction projects, we decide to engage Kingsley Hills to undertake the construction of the Development Project in accordance with the terms of the Turnkey Contract. While Kingsley Hills continues to be ultimately responsible for the entire development and construction of the Development Project, Kingsley Hills subsequently appointed BGMC as a contractor to undertake the BGMC Contract Works. 207

215 TRANSACTIONS WITH CONTROLLING SHAREHOLDERS (c) Pricing terms The total Construction Service Fee payable by us to Kingsley Hills under the Turnkey Contract was RM138,118,000 and will not be subject to adjustments due to wages, materials or other costs arising out of any amendment to existing legislation or subsequent enactments. The above Construction Service Fee was agreed between Kingsley Hills and us after the commercial negotiations between the parties and taking into account, among others, (i) general construction costs for projects of similar nature and size in the vicinity, (ii) the complexity of the Development Project, (iii) the overall benefits of the Development Project to Kingsley Hills which is the land owner and developer of the majority part of the Kingsley Hill on which KIS Campus and KIS Annex Building were situated, and that Kingsley International School was expected to enhance the recognition of the Kingsley Hill and nearby area, and (iv) the experience and reputation of Kingsley Hills in property development and construction as well as its ability to select appropriate subcontractors to undertake construction projects. Please also refer to the sub-section headed Background of Commercial Negotiation in the section headed Business KIS Campus and KIS Annex Building and Boarding Facilities for further details of the factors that we took into account when agreeing to the Construction Service Fee. Further, DK Consultants is of the view that the total Construction Service Fee and the payment schedule under the Turnkey Contract, being RM138,118,000, is fair and reasonable for similar construction projects. Please refer to the sub-section headed Chartered Quantity Surveyor s View on Construction Costs, Payment Schedule and Liquidated and Ascertained Damages ( LAD ) in the section headed Business KIS Campus and KIS Annex Building in this prospectus for further details. In the event that Kingsley Hills fails to deliver the completed Development Project on or before 1 September 2015, we are entitled to claim Liquidated and Ascertained Damages against Kingsley Hills in the sum of RM15,000 for each day of delay. (d) GEM Listing Rules implications As the Turnkey Contract was entered into prior to Listing and the transaction thereunder is oneoff in nature, the transaction (including further payments to be made by us pursuant to the terms of the Turnkey Contract) will not be classified as a notifiable transaction under Chapter 19 of the GEM Listing Rules or connected transactions or continuing connected transactions under Chapter 20 of the GEM Listing Rules. Accordingly, the transaction contemplated under the Turnkey Contract will not be subject to any of the reporting, announcement, annual review and independent Shareholder s approval requirements under Chapters 19 and 20 of the GEM Listing Rules. In the event that there are any material changes to the terms and conditions of the Turnkey Contract (including where the actual fee to be incurred under any of such agreements exceeds the fee estimate as disclosed in this document), we shall comply with Chapter 19 and 20 of the GEM Listing Rules (as the case may be) in respect of such agreement as and when appropriate, including, where required, seeking independent Shareholders approval prior to effecting such changes. 208

216 TRANSACTIONS WITH CONTROLLING SHAREHOLDERS 2. THE SALE AND PURCHASE AGREEMENT a) Description of the agreement On 19 April 2018, Kingsley Hills entered into the Sale and Purchase Agreement with Kingsley International pursuant to which Kingsley Hills agreed to sell, and Kingsley International agreed to purchase, the KIS Annex Land, details of the key terms of the Sale and Purchase Agreement are as follows: Date: 19 April 2018 Vendor: Purchaser: Consideration: Completion: Default by Vendor: Kingsley Hills Kingsley International RM10 31 December 2018 or any other date as may be agreed in writing between the Vendor and the Purchaser In the event the Vendor fails, refuses and/or neglects to complete the sale and/or transfer the KIS Annex Land to the Purchaser after the Purchaser has paid consideration, then the Purchaser shall by his option, be entitled to seek specific performance or to terminate and rescind the Sale and Purchase Agreement by notice in writing and in the latter event, the Vendor shall refund all monies paid by the Purchaser under the Sale and Purchase Agreement to the Purchaser. Default by Purchaser: In the event the Purchaser shall fail, refuse and/or neglect to pay the consideration in the manner and at the time stipulated in the Sale and Purchase Agreement (save and except where the non-payment is caused by the Vendor s default in any of his obligation herein), the Vendor shall be at liberty to terminate the Sale and Purchase Agreement by giving a 14 days notice in writing to the Purchaser to that effect. (b) Reasons for the transaction The KIS Annex Building, which is currently being constructed on the KIS Annex Land, forms part of the overall long term development of Kingsley International School. As such, for the purpose of Listing and the long term benefit of our Company that Kingsley International acquires and becomes the registered owner of the KIS Annex Land, together with the KIS Annex Building. Accordingly, Kingsley International has entered into the Sale and Purchase Agreement with Kingsley Hills. (c) GEM Listing Rule Implications As the Sale and Purchase Agreement was entered into prior to Listing and the transaction thereunder is one-off in nature, the transaction will not be classified as a notifiable transaction under Chapter 19 of the GEM Listing Rules or connected transactions or continuing connected transactions under Chapter 20 of the GEM Listing Rules. Accordingly, the transaction contemplated under the Sale and Purchase Agreement will not be subject to any of the reporting, announcement, annual review and independent Shareholder s approval requirements under Chapters 19 and 20 of the GEM Listing Rules. In the event that there are any material changes to the terms and conditions of the Sale and Purchase Agreement, we shall comply with Chapter 19 and 20 of the GEM Listing Rules (as the case may be) in respect of such agreement as and when appropriate, including, where required, seeking independent Shareholders approval prior to effecting such changes. 209

217 RELATIONSHIP WITH CONTROLLING SHAREHOLDERS CONTROLLING SHAREHOLDERS Our Company was incorporated in the Cayman Islands on 12 January 2017 whose entire issued shares are held by Star Shine Finance, DGMK Investment and Eduking Investment. Immediately upon the completion of the Global Offering, our Controlling Shareholders, comprising Tan Sri Barry Goh and Dato Danny Goh, are together entitled to control the exercise of voting rights of 69% of the Shares in a general meeting of our Company. Save as disclosed above, there is no other person who will, immediately following completion of the Global Offering and assuming that the Offer Size Adjustment Option is not exercised in full, be directly or indirectly interested in 30% or more of the Shares then in issue or have a direct or indirect equity interest in any member of our Group representing 30% or above. Competing Interests Save and except for their respective interest in our Company, none of our Controlling Shareholders, our Directors, substantial Shareholders nor any of their respective associates had interests in any other companies and/or any businesses that compete or are likely to compete, either directly or indirectly, with the business of our Company during Track Record Period and as at the Latest Practicable Date. Undertakings Our Controlling Shareholders have given certain undertakings in respect of the Shares (including those as required by Rules 13.16A and Rule of the GEM Listing Rules) to our Company, the Stock Exchange, the Sole Sponsor, the Joint Global Coordinators, the Joint Bookrunners and the Underwriters. Please refer to the section headed Underwriting Undertakings in this prospectus for further details. INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS Our Directors consider that we are capable of carrying its business independent of our Controlling Shareholders and their respective associates following the Listing. Management independence Our Board comprises three executive Directors and three independent non-executive Directors. Save as disclosed in the section headed Directors and Senior Management in this prospectus, there is no other relationship among our Directors. Notwithstanding that each of Tan Sri Barry Goh and Dato Danny Goh, an executive Director, is our Controlling Shareholder and they are brothers, our Directors are of the view that our Company is capable of maintaining management independence as: our Group s strategies, management, operations and affairs are formulated, led, managed and/or supervised by the Board and not by any individual Director. All major and important corporate actions of our Company are and will be fully deliberated and determined by the Board collectively and objectively as a collective body; 210

218 RELATIONSHIP WITH CONTROLLING SHAREHOLDERS pursuant to the terms of the service contracts entered into between our Company and our executive Directors, every executive Director is required to devote substantially the whole of his time, attention and abilities during normal business hours and such additional hours as may reasonably be requisite to our Group; in the event that there is a potential conflict of interest in or arising out of any transaction to be considered and approved by our Board, the interested Director(s) shall abstain from voting at the relevant meeting of our Board considering and approving such transaction and shall not be counted towards the quorum of such Board meeting unless this is otherwise permitted under the Articles and/or the GEM Listing Rules; we have three independent non-executive Directors, who are not associated with our Controlling Shareholders or their respective associates. Resolutions of our Board approving any matters in which any of the executive Directors has a potential conflict of interest and/or material interest will, only be considered and approved by our independent non-executive Directors (as under the provisions of the Articles and the GEM Listing Rules, our executive Directors will then be prohibited from voting on the resolution(s) and will not be counted towards the quorum of the relevant Board meetings at which the relevant resolution(s) is/are approved). The independence of our Board s decisions in respect of any matters in which any of our Group s executive Directors has a potential conflict of interest and/or material interest is and can be ensured; our Company has established corporate governance procedures in safeguarding the interests of the shareholders and enhancing shareholders value. Each Director is fully aware of his/her fiduciary duty to our Group, and will abstain from voting on any matter where there is or may be a conflict of interest as required under and in accordance with the applicable Articles and the GEM Listing Rules; and our Board from time to time delegates certain functions to, and is assisted by its senior management in the implementation of the business plan and strategy as laid down by our Board. The day-to-day management and operations of our Group is operated independently from the influence of our Controlling Shareholders and their respective associates. Operational independence Our Group has its own organisational structure made up of divisions including management and administration, finance and accounting, sales and marketing, production, design and development, quality control and other divisions. Each division has a clear delineation of duties and functions as determined by our Board to promote efficiency, effectiveness and quality in the development of our Group s business. We have independent access to sources of suppliers necessary for the operation of its business as well as customers which are all Independent Third Parties. All our operating subsidiaries of our Company hold the licences necessary for the operation of our Group s business in their own names. Financial independence We have established a financial system (including bank accounts) that operate independently. During the Track Record Period, the banking facilities granted to our Group were secured by 211

219 RELATIONSHIP WITH CONTROLLING SHAREHOLDERS guarantees and collateral security provided by our Controlling Shareholders and their respective associates. As at the close of business on 31 July 2017, these banking facilities that were secured by the guarantees and collateral security provided by our Controlling Shareholder and their respective associates amounted to RM69.6 million. The relevant financial institution has agreed to release and discharge the guarantees provided by Tan Sri Barry Goh and Dato Danny Goh upon the successful Listing and the execution of a corporate guarantee by our Company. As such, upon Listing, our Group will have independent access to third party financing without relying on any guarantee from our Controlling Shareholders, certain Directors and their respective associates. All loans and advances due from/to our Controlling Shareholders, certain Directors, related parties and their respective associates had been settled as at the Latest Practicable Date. Our Directors are of the view that our Group is able to obtain external financing on market terms and conditions for its business operations as and when required and is not financially dependent on our Controlling Shareholders, Directors, related parties or any of their respective associates in the operation of its business. DEED OF NON-COMPETITION Our Controlling Shareholders have entered into the Deed of Non-competition in favour of our Company, pursuant to which each of our Controlling Shareholders has undertaken to us (for ourselves and for the benefit of our subsidiaries) that with effect from the Listing Date, they would not and would procure that none of their associates (except for any members of our Group) shall, except through their interests in our Company, whether as principal or agent and whether undertaken directly or indirectly, either on their own account or in conjunction with or on behalf of any person, corporate, partnership, joint venture or other contractual arrangement and whether for profit or otherwise, among other things, carry on, participate, acquire or hold any right or interest or otherwise be interested, involved or engaged in or connected with, directly or indirectly, any business which is, directly or indirectly, in any respect in competition with or similar to or is likely to be in competition with the business of our Group in Malaysia or such other places as our Group may conduct or carry on business from time to time including but not limited to the provision of private educational services ( Restricted Business ). Each of our Controlling Shareholders has further undertaken to our Company (for ourselves and for the benefit of our subsidiaries) that, with effect from the Listing Date, in the event that any of them and/or any of their associates (except any members of our Group) is offered or becomes aware of any future business opportunity that may, directly or indirectly, compete with the Restricted Business ( Competing Business Opportunity ), directly or indirectly, to engage or become interested in a Restricted Business, they: shall promptly notify our Company in writing and refer such Competing Business Opportunity to our Company for consideration within a period of ten days from the date of receipt of such notification, and provide such information as reasonably required by our Company in order to enable it to come to an informed assessment of such Competing Business Opportunity; and shall not, and shall procure their associates (other than members of our Group) not to, invest or participate in any project or the Competing Business Opportunity unless such project or the Competing Business Opportunity has been rejected by our Company and in respect of such projects and Competing Business Opportunity, the principal terms on which our Controlling Shareholders or their respective associates shall invest or participate are no more favourable than those made available to our Company. 212

220 RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Each of our Controlling Shareholders has further undertaken to our Company (for itself and for the benefit of its subsidiaries) that, with effect from the Listing Date, they shall not and shall procure that none of their associate (except any members of our Group) shall directly or indirectly: at any time induce or attempt to induce any director, manager or employee or consultant of any member of our Group to terminate his or her employment or consultancy (as applicable) with our Group, whether or not such act of that person would constitute a breach of that person s contract of employment or consultancy (as applicable); or at any time employ any person who has been a director, manager, employee of or consultant to any member of our Group who is or may be likely to be in possession of any confidential information or trade secrets relating to the Restricted Business; or alone or jointly with any other person through or as manager, advisor, consultant, employee or agent for or shareholder in any person, firm or company, in competition with any member of our Group, canvass, solicit or accept orders from or do business with any person with whom any member of our Group has done business or solicit or persuade any person who has dealt with our Group or is in the process of negotiating with our Group in relation to the Restricted Business to cease to deal with our Group or to reduce the amount of business which the person would normally do with our Group or seek to improve their terms of trade with any member of our Group. The above undertakings do not apply where our Controlling Shareholders and/or their respective associates have interests in the shares or any securities of a company that engages in the Restricted Business whose shares are listed on a recognised stock exchange provided that (a) the total number of shares held by our Controlling Shareholders and/or their respective associates in aggregate shall not exceed 10% of the issued shares of that class of our Company in question, (b) our Controlling Shareholders and their respective associates are not entitled to appoint a majority of the directors of that company, and (c) at any time there should exist at least another shareholder of that company whose shareholdings in that company is more than the total number of shares held by our Controlling Shareholders and their respective associates in aggregate. Furthermore, our Controlling Shareholders have undertaken that they will use their best endeavours and will procure their associates (except for members of our Group) to use their best endeavours to procure that their respective employees and any company under their control, whether individually or jointly, directly or indirectly (except for those within our Group), to observe the restrictions and undertakings contained in the Deed of Non-competition. Our Controlling Shareholders represented and warranted that, as of the date of the Deed of Non-competition, none of them or any of the persons or companies in their control is currently interested or engaging, directly or indirectly, in (whether as a shareholder, partner, agent or otherwise and whether for profit, reward or otherwise) the Restricted Business otherwise through our Group or is otherwise engaged in any business which is in competition or material competition to those of our Group. Under the Deed of Non-competition, our Controlling Shareholders further undertake to and covenant with our Company that during the period for which the Deed of Non-competition is in force: they shall allow, and shall procure that the relevant associates (excluding members of our Group) to allow the independent non-executive Directors to review, at least on an annual 213

221 RELATIONSHIP WITH CONTROLLING SHAREHOLDERS basis, whether our Controlling Shareholders are in compliance with the Deed of Noncompetition; they shall provide all information necessary for the annual review by the independent non-executive Directors and the enforcement of the Deed of Non-competition; our Company shall disclose decisions on matters reviewed by the independent nonexecutive Directors relating to the compliance and enforcement of the Deed of Noncompetition either through the annual report, or by way of announcement to the public; and they shall provide our Company with a confirmation annually for inclusion by our Company in the annual report, in respect of their compliance with the terms of the Deed of Non-competition. The undertakings given by each of our Controlling Shareholders under the Deed of Noncompetition shall lapse and our Controlling Shareholders shall be released from the restrictions imposed on them upon the occurrence of the earliest of any of the following events or circumstances: the day on which the Shares cease to be listed on the Stock Exchange; the day on which the relevant Controlling Shareholder and/or his/its associates cease to hold, taken together, 30% or more of the issued share capital of our Company or otherwise the relevant Controlling Shareholder ceases to be a controlling shareholder of our Company; or the day on which the relevant Controlling Shareholder beneficially owns or is interested in the entire issued share capital of our Company. CORPORATE GOVERNANCE MEASURES To further protect the interests of the minority Shareholders of our Company, our Company will adopt the following corporate governance measures to manage any potential conflicts of interest: the independent non-executive Directors will review, on an annual basis, the compliance with the Deed of Non-competition by our Controlling Shareholders; each of our Controlling Shareholders undertakes to provide all information requested by us which is necessary for fulfilment of the Deed of Non-competition, including the annual review by the independent non-executive Directors; our Company will disclose decisions on matters reviewed by the independent non- executive Directors relating to the compliance with the Deed of Non-competition in our Company s annual reports; and our Controlling Shareholders will make an annual declaration in relation to compliance with the Deed of Non-competition in the annual reports of our Company Further, any transaction that is proposed between our Group and our Controlling Shareholders and/or their respective associates will be required to comply with the requirements of the GEM Listing Rules, including, where appropriate, the reporting, annual review, announcement and independent shareholders approval requirements. 214

222 SHARE CAPITAL SHARE CAPITAL The share capital of our Company immediately following the completion of the Global Offering and the Capitalisation Issue is set out in the table below. The table is prepared on the basis of the Global Offering becoming unconditional and the issue of Offer Shares and the Capitalisation Issue pursuant thereto is made as described herein. It takes no account of any Shares which may be allotted and issued or repurchased by our Company under the general mandates for the allotment and issue or repurchase of Shares granted to our Directors as referred to below or otherwise. Issued and to be issued, fully paid or credited as fully paid upon completion of the Capitalisation Issue and the Global Offering: 2,000 Shares in issue as at the date of this prospectus ,998,000 Shares to be issued pursuant to the Capitalisation Issue 5,999, ,000,000 Shares to be issued pursuant to the Global Offering 2,000, ,000,000 8,000,000 MINIMUM PUBLIC FLOAT Pursuant to Rule 11.23(7) of the GEM Listing Rules, at least 25% of the total issued share capital of our Company must at all times be held by the public. The 200,000,000 Shares represent 25% of the issued share capital of our Company upon Listing. RANKING The Offer Shares will rank pari passu in all respects with all the Shares now in issue or to be allotted and issued as mentioned in this prospectus and will qualify for all dividends or other distributions declared, made or paid on the Shares in respect of a record date which falls after the Listing Date save for any entitlement to the Capitalisation Issue. CAPITALISATION ISSUE Pursuant to the resolutions in writing of all of our Shareholders passed on 19 April 2018, conditional upon the share premium account of our Company being credited as a result of the issue of Offer Shares pursuant to the Global Offering, our Directors are authorised to allot and issue a total of 599,998,000 Shares credited as fully paid to the holders of Shares on the register of members of our Company at the close of business on 19 April 2018 (or as they may direct) in proportion to their respective shareholdings (save that no Shareholder shall be entitled to be allotted or issued any fraction of a Share) by way of capitalisation of the sum of HK$5,999,980 standing to the credit of the share premium account of our Company, and the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the existing issued Shares. GENERAL MANDATE TO ISSUE SHARES Subject to the Global Offering becoming unconditional, our Directors have been granted a general unconditional mandate to allot, issue and deal with the Shares or securities convertible into Shares or options, warrants or similar rights to subscribe for Shares or such securities convertible into Shares, and to make or grant offers, agreements or options which might require such Shares to be HK$ 215

223 SHARE CAPITAL allotted and issued or dealt with subject to the requirement that the aggregate number of the Shares so allotted and issued or agreed conditionally or unconditionally to be allotted and issued (otherwise than pursuant to a rights issue, or scrip dividend scheme or similar arrangements, or a specific authority granted by the Shareholders) shall not exceed: (a) (b) 20% of the aggregate number of Shares in issue immediately following the completion of the Capitalisation Issue and the Global Offering (but not taking into account any Shares which may be allotted and issued pursuant to the Offer Size Adjustment Option); and the aggregate number of Shares repurchased by our Company (if any) pursuant to the general mandate to repurchase Shares referred to in the paragraph headed General Mandate to Repurchase Shares below. This general mandate to issue Shares will remain in effect until whichever is the earliest of: (a) (b) (c) the conclusion of the next annual general meeting of our Company; the expiration of the period within which the next annual general meeting of our Company is required by the Articles or the Companies Ordinance to be held; or the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders at a general meeting. Please refer to the sub-paragraph headed Written resolutions of the Shareholders under the paragraph Further information about our Company in Appendix V to this prospectus for further details. GENERAL MANDATE TO REPURCHASE SHARES Subject to the Global Offering becoming unconditional, our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with an aggregate number of Shares of not more than 10% of the aggregate number of Shares in issue following the completion of the Global Offering and the Capitalisation Issue. This mandate only relates to repurchases made on the Stock Exchange, or on any other stock exchange on which the Shares which may be listed on the Stock Exchange or any other stock exchange which is recognised by the SFC and the Stock Exchange for this purpose, and such repurchases are made in accordance with all applicable laws and the requirements of the GEM Listing Rules. A summary of the relevant GEM Listing Rules is set out in the sub-paragraph headed Repurchase of our Company s Securities under the paragraph headed Further information about our Company in Appendix V to this prospectus. The general mandates to issue and repurchase Shares will remain in effect until whichever is the earliest of: (a) (b) the conclusion of the next annual general meeting of our Company; the expiration of the period within which the next annual general meeting of our Company is required by the Companies Ordinance or the Articles to be held; or 216

224 SHARE CAPITAL (c) the time when such mandate is varied, revoked or renewed by an ordinary resolution of the Shareholders in general meeting. For further details of this general mandate, please refer to the sub-paragraph headed Repurchase of our Company s Securities under the paragraph headed Further information about our Company in Appendix V to this prospectus. CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED Pursuant to the Companies Ordinance and the Articles, our Company may from time to time by ordinary resolution of shareholders (i) divide its shares into several classes; (ii) cancel any shares which have not been taken or agreed to be taken by any person; (iii) convert any or all of its shares into a larger or smaller number of existing shares. In addition, our Company may by special resolution reduce its share capital in any manner and with, and subject to any conditions prescribed by law. For details, see the paragraph headed Articles of Association Alteration of capital in Appendix III to this prospectus. Pursuant to the Companies Ordinance and the Articles, if at any time the capital of our Company is divided into different classes of shares, the rights attached to any class (unless otherwise provided for in the terms of issue of the shares of that class) may be varied, either while our Company is a going concern or during or in contemplation of a winding-up, either with the consent in writing of the holders of not less than 75% of the total voting rights of holders of shares in that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. For details, see the paragraph headed Articles of Association Variation of rights of existing shares or classes of shares in Appendix III to this prospectus. 217

225 FINANCIAL INFORMATION You should read this section in conjunction with our audited consolidated financial statements, including the notes thereto, as set out in the Accountant s Report set out in Appendix I to this prospectus. Our Group s consolidated financial statements have been prepared in accordance with the Hong Kong Financial Reporting Standards ( HKFRSs ). You should read the entire Accountants Report and not merely rely on the information contained in this section. The following discussion and analysis contains certain forward-looking statements that reflect the current views with respect to future events and financial performance. These statements are based on assumptions and analyses made by our Group in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors our Group believes are appropriate under the circumstances. However, whether actual outcomes and developments will meet our Group s expectations and projections depends on a number of risks and uncertainties over which our Group does not have control. For further information, you should refer to the section Risk Factors of this prospectus. The following discussion and analysis also contain certain amounts and percentage figures that 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 and all monetary amounts shown are approximate amounts only. OVERVIEW We are a private education service provider based in Subang Jaya, Selangor, Malaysia. We principally offer (1) courses ranging from Nursery to A-levels Courses primarily based on curriculum developed by University of Cambridge International Examinations and England National Curriculum through our Kingsley International School, and (2) tertiary education programmes through our Kingsley Tertiary Institutions (comprising Kingsley Skills College, Kingsley Professional Centre and Kingsley College). Our revenue for the two years ended 30 June 2016 and 2017 increased by 58.3% from RM18.8 million to RM29.8 million. For the same period, our profit and total comprehensive income for the year increased by 253.2% from RM3.2 million to RM11.3 million. Our revenue for the four months ended 31 October 2016 and 2017 increased by 11.2% from RM5.7 million to RM6.4 million. For the same period, our loss and total comprehensive income for the period increased by RM2.1 million from RM0.3 million to RM2.4 million. The accumulated losses of the Group as at 1 July 2015 was mainly due to the losses from Kingsley Skills College of approximately RM140,000 and Kingsley College of approximately RM739,000 in previous years. The losses were incurred during their early stage of operation, primarily consist of staff costs, depreciation and other administrative expenses. BASIS OF PRESENTATION The historical financial information has been prepared in accordance with HKFRSs (which include all HKFRSs, Hong Kong Accounting Standards ( HKASs ) and interpretations) issued by the HKICPA. In addition, the historical financial information includes applicable disclosures required by the GEM Listing Rules and the Hong Kong Companies Ordinance. All HKFRSs effective for the accounting period commencing from 1 July 2017, together with the relevant transitional provisions, have been early adopted by our Group in the preparation of the historical financial information throughout the Track Record Period. 218

226 FINANCIAL INFORMATION For the purpose of preparing and presenting the historical financial information, our Group has adopted all applicable new/revised HKFRSs effective for the accounting periods commencing from 1 July 2017 throughout the Track Record Period. The historical financial information has been prepared under the historical cost convention. Prior to the incorporation of our Company and the completion of the Reorganisation, our business was carried on by companies now comprising our Group. All intra-group transactions and balances have been eliminated on combination. For further details on the basis of presentation, see Note 3 to the accountant s report included in Appendix I to this prospectus. FACTORS AFFECTING OUR FINANCIAL RESULTS Our results of operations and financial performance have been and will continue to be affected by a number of factors, many of which may be beyond our control, including those factors set out in Risk Factors in this prospectus and those set out below. Demand for private education in Malaysia With the characteristics of diverse culture in the society, the education system in Malaysia had undergone development and turns into a well-structured system that meet the demand from various local and international communities. With the growing awareness towards high quality education as well as students enrollment in private education institutions, according to the Frost & Sullivan Report, the revenue of private education services increased steadily from approximately RM11.7 billion in 2012 to approximately RM15.7 billion in 2016, representing a CAGR of 7.7%. The rise of middle class and emergence of affordable private schools and international schools are expected to be key drivers to private education services in Malaysia. Hence, the revenue of private education services may increase at a CAGR of 8.8% during 2017 to 2021 and reaching approximately RM23.7 billion by Further, according to the Frost & Sullivan Report, the student enrollment in primary and secondary international schools increased significantly from 27,804 in 2012 to 54,128 in 2016, which represents a CAGR of 18.1%. The growth was primarily due to government policy to encourage establishment of international schools in the country and open access of international schools to Malaysian students after removal of quota assigned for local students. The number of student enrollment in international school in Malaysia is expected to grow at a CAGR of 15.2% during 2017 to 2021, which is mainly attributable to the higher preference of Malaysian families in private education and international schools. Student enrollment in primary and secondary international schools in Selangor has increased from approximately 10,615 in 2012 to approximately 21,473 in 2016, representing a CAGR of 19.3%. With the increase in economic activities and income level in Selangor, the student enrollment in primary and secondary international schools is expected to reach 44,808 in With the strong support from Malaysia government in recent years, including the provision of Investment Tax Allowance for international schools by Malaysian Investment Development Authority and rise of foreign investment in Malaysia, we anticipate the demand for high quality private education in Malaysia to continue to increase. 219

227 FINANCIAL INFORMATION Student enrollment levels Our financial performance generally depends on the number of students enrolled at our international school and tertiary education. During the Track Record Period, the total number of students enrolled at our international school increased from 650 as at 30 June 2016 to 872 as at 30 June 2017 and further increased to 885 as at 31 October Our student enrollment levels depends on a number of factors, including, but not limited to (i) our reputation, which is driven by the quality of education we provide, such as our curriculums, the quality of our teachers and the our student performance; (ii) our tuition level; and (iii) our capacity. We believe that the courses we offer ranging from Nursery to A-levels Courses primarily based on curriculum developed by University of Cambridge International Examinations through our Kingsley International School and our student performance help us maintain our reputation and attract students who seek quality private education. Tuition fee Our financial performance is also affected by the level of tuition fees we are able to charge. The table below sets out the tuition fee for our schools for 2015/2016, 2016/2017 and 2017/2018 academic years: 2015/ / /2018 Kingsley International School Nursery RM15,960 RM15,960 RM15,960 Reception RM16,590 RM16,590 RM16,590 Primary School (Year 1 6) RM20,580 RM20,580 RM20,580 Secondary School (Year 7 9) RM27,540 RM27,540 RM27,540 Secondary School (Year 10-11) RM27,540 RM27,540 RM33,048 Sixth Form (note 1) RM26,000 RM32,500 RM32,500 Kingsley Skills College Certificate in Architectural Draughting RM8,000 RM6,200 RM6,200 Certificate in Computer Operation System RM10,000 RM7,200 RM7,200 Certificate in Civil & Structural Engineering Draughting RM9,000 RM6,850 RM6,850 Kingsley Professional Centre Negotiated on training-by-training basis Note 1: Students progressing from year 11 of Kingsley International School are entitled to an internal annual rate of RM13,000. Note 2: One academic year typically consists of three terms. Annual tuition fee is payable in equal instalments before each term. Note 3: In addition to tuition fee, students are also required to pay facilities fees, in-campus canteen, uniform, sport uniform, academic progress folder, study trip and science lab fee, as the case may be. During recent years, competition in international schools market in Malaysia become more fierce due to the rise of market participants offering competitive tuition fee to gain a higher student enrollment. Furthermore, it is not uncommon for some mid-range and low-end international schools to offer early-bird discount to secure student enrollment. On the other hand, the average annual salary of persons engaged in private education in Malaysia recorded a growth from RM29,459.4 in 2012 to RM31,540.8 in This represents a higher operating cost and meanwhile with the price competition the profit of international schools may be affected. While our tuition fee remained stable 220

228 FINANCIAL INFORMATION during the Track Record Period, there is no guarantee that we will be able to continue to charge the same level of tuition fee. Please refer to the sub-section headed Risk Factors Risks relating to our business and our industry We may be unable to charge tuition fees at sufficient levels to be profitable or raise tuition fees as planned of this prospectus. Fluctuations in our cost of revenue Our financial performance is also affected by our ability to control our teachers salaries. Staff cost is the largest component of our cost of revenue, which primarily consist of salaries and other benefits for our teachers. For the years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, our staff cost amounted to RM3.6 million, RM5.6 million and RM2.3 million, respectively, representing 39.2%, 45.4% and 51.1% of our cost of revenue for the same period, respectively. Our staff cost increased during the Track Record Period primarily due to the increase in number of teachers employed by us because of the increase in students enrolled to Kingsley International School. The following sensitivity analysis illustrates the impact of hypothetical fluctuations in our staff cost on our profit before income tax during the Track Record Period, assuming the fluctuation of staff cost to be 10% and 20% and the historical fluctuation of 54% for the two years ended 30 June 2017 and the four months ended 31 October 2017 with other variables remained constant: RM$ 000, except percentage + 10% - 10% + 20% - 20% +54% -54% Changes in profit before income tax For the year ended 30 June 2016 (363) 363 (726) 726 (1,961) 1,961 For the year ended 30 June 2017 (560) 560 (1,121) 1,121 (3,027) 3,027 For the four months ended 31 October 2017 (233) 233 (467) 467 (1,261) 1,261 CRITICAL ACCOUNTING POLICIES, ESTIMATE AND JUDGEMENTS Our Directors have identified certain accounting policies that are significant to the preparation of our consolidated financial statements. The significant accounting policies which are important for an understanding of our financial condition and results of operation are set out in detail in Note 5 to the accountants report included in Appendix I to this prospectus. Some of the accounting policies involve subjective assumptions and estimates, as well as complex judgements relating to accounting items, the significant accounting estimates and judgements are set out in detail in Note 6 to the accountants report included in Appendix I to this prospectus. The determination of these items requires management judgements based on information and financial data that may change in future periods. 221

229 FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Revenue 18,822,778 29,794,992 5,739,484 6,380,247 Cost of revenue (9,266,348) (12,336,340) (3,790,348) (4,573,071) Gross profit 9,556,430 17,458,652 1,949,136 1,807,176 Other revenue and gains 5,421,855 5,995,609 1,882,801 2,366,667 Selling and distribution expenses (144,833) (275,381) (105,569) (60,464) Administrative expenses (7,060,434) (7,181,335) (2,239,481) (5,512,607) Operating profit/(loss) 7,773,018 15,997,545 1,486,887 (1,399,228) Finance costs (4,592,413) (4,635,592) (1,787,100) (1,030,194) Profit/(loss) before income tax 3,180,605 11,361,953 (300,213) (2,429,422) Income tax benefit/(expense) 16,151 (70,384) (7,771) (1,608) Profit/(loss) and total comprehensive income for the year/period 3,196,756 11,291,569 (307,984) (2,431,030) Attributable to: Owners of our Company 3,206,237 11,021,974 (219,924) (2,353,194) Non-controlling interests (9,481) 269,595 (88,060) (77,836) 3,196,756 11,291,569 (307,984) (2,431,030) PRINCIPAL CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME COMPONENTS Revenue Our revenue represents the value of services rendered, after deducting discounts and refunds during the Track Record Period. During the Track Record Period, we generated revenue from tuition fees collected from our students and from ancillary services provided to our students of our (i) international school, and (ii) tertiary education. Our revenue for the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017 was RM18.8 million, RM29.8 million and RM6.4 million respectively. 222

230 FINANCIAL INFORMATION The following table sets out the revenue generated from tuition fees and ancillary services for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Tuition fees 13,497,678 21,850,083 3,890,003 4,106,516 Ancillary services 5,325,100 7,944,909 1,849,481 2,273,731 18,822,778 29,794,992 5,739,484 6,380,247 The following table sets out the breakdown of our revenue by segment for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) International school 18,046,703 26,802,388 5,548,884 6,319,348 Tertiary education 776,075 2,992, ,600 60,899 18,822,778 29,794,992 5,739,484 6,380,247 International school Our revenue generated from international school was RM18.0 million, RM26.8 million and RM6.3 million for the two years ended 30 June 2016 and 2017 and for the four months ended 31 October 2017, respectively, which represent 95.9%, 90.0% and 99.0% of our total revenue for the same period. During the Track Record Period, our total revenue was predominantly contributed by our international school and we expect our revenue generated from this segment to continue to account for a substantial portion of our total revenue. The following table sets out the revenue generated from tuition fees and ancillary services for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Tuition fees 12,796,350 18,885,729 3,704,503 4,049,632 Ancillary services 5,250,353 7,916,659 1,844,381 2,269,716 18,046,703 26,802,388 5,548,884 6,319,

231 FINANCIAL INFORMATION Tertiary education Our revenue generated from tertiary education was RM0.8 million, RM3.0 million and RM0.1 million for the two years ended 30 June 2016 and 2017 and for the four months ended 31 October 2017, respectively, which represent 4.1%, 10.0% and 1.0% of our total revenue for the same period. The following table sets out the revenue generated from tuition fees and ancillary services for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Tuition fees 701,328 2,964, ,500 56,884 Ancillary services 74,747 28,250 5,100 4, ,075 2,992, ,600 60,899 Cost of revenue Our cost of revenue primarily consists of teaching staff cost, depreciation of property, plant and equipment and other operational expenses. Cost of revenue was the largest component of our expenses during the Track Record Period. For the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, our cost of revenue amounted to RM9.3 million, RM12.3 million and RM4.6 million respectively, representing 49.2%, 41.4% and 71.7% of our revenue for the same period, respectively. The following table sets out the breakdown of our cost of revenue for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Staff cost 3,631,715 5,604,756 1,732,688 2,334,770 Depreciation of property, plant and equipment 1,667,492 1,942, , ,254 Commission 294, , , ,750 Exam fee 149, ,087 46,110 40,651 Food and beverage 772,024 1,478, , ,282 Rental of premises 185, ,160 31,320 35,320 Security services 456, , , ,224 Student book 311, Student activities 674, , , ,248 Teaching materials 116, ,532 92,268 57,622 Uniforms 537, , ,531 Upkeep of property, plant and equipment 271, , , ,575 Others 98, ,011 86, ,075 Hostel expenses 88, ,162 30,355 29,600 Training cost 9,681 41,572 11,700 9,266,348 12,336,340 3,790,348 4,573,

232 FINANCIAL INFORMATION The following table sets out the breakdown of our cost of revenue by segment for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) International school 9,083,243 11,773,772 3,666,667 4,406,074 Tertiary education 183, , , ,997 9,266,348 12,336,340 3,790,348 4,573,071 International school Our cost of revenue generated from international school was RM9.1 million, RM11.8 million and RM4.4 million for the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, respectively, which represent 50.3%, 43.9% and 69.7% of our total revenue generated from our international school for the same period. Tertiary education Our cost of revenue generated from tertiary education was RM0.2 million, RM0.6 million and RM0.2 million for the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, respectively, which represent 23.6%, 18.8% and 274.2% of our total revenue generated from our tertiary education for the same period. Gross profit Our gross profit was RM9.6 million, RM17.5 million and RM1.8 million for the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, respectively, representing gross profit margin of 50.8%, 58.6% and 28.3% for the same period, respectively. The following table sets out the breakdown of our gross profit/(loss) by segment for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) International school 8,963,460 15,028,616 1,882,217 1,913,274 Tertiary education 592,970 2,430,036 66,919 (106,098) 9,556,430 17,458,652 1,949,136 1,807,176 International school Our gross profit generated from international school was RM9.0 million, RM15.0 million and RM1.9 million for the two years ended 30 June 2016 and 2017 and the four months ended 31 October 225

233 FINANCIAL INFORMATION 2017, respectively, which represent gross profit margin of 49.7%, 56.1% and 30.3% for the same period, respectively. Tertiary education Our gross profit generated from tertiary education was RM0.6 million, RM2.4 million for the two years ended 30 June 2016 and 2017 and we recorded gross loss of RM0.1 million for the four months ended 31 October 2017, respectively, which represent gross profit/(loss) margin of 76.4%, 81.2% and (174.2)% for the same period, respectively. Other revenue and gains Our other revenue and gains primarily consist of interest income, liquidated and ascertained damages, others and gain on disposal of property, plant and equipment. For the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, we had other revenue and gains of RM5.4 million, RM6.0 million and RM2.4 million, respectively. The following table sets out the breakdown of our other revenue and gains for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Interest income 35,684 83,202 15,575 7,743 Liquidated and ascertained damages 4,560,000 5,475,000 1,845,000 1,845,000 Others 823, ,407 22, ,924 Gain on disposal of property, plant and equipment 2,778 5,421,855 5,995,609 1,882,801 2,366,667 Liquidated and ascertained damages Our liquidated and ascertained damages represent the liquidated and ascertained damages our Group entitled to as a result of the delay in completion of the construction of the Annex Building under the Turnkey Contract. For the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, we had liquidated and ascertained damages of RM4.6 million, RM5.5 million and RM1.8 million, respectively. After the Track Record Period, under the assumption that the construction will be completed on 31 December 2018, our Group will be entitled to liquidated and ascertained damages of RM5.5 million and RM2.8 million for the two years ending 30 June 2018 and 2019, respectively. Selling and distribution expenses Our selling and distribution expenses primarily consist of advertisement and exhibition expenses and travelling expense. For the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, our selling and distribution expenses amounted to RM0.1 million, RM0.3 million and RM0.1 million, respectively, representing 0.8%, 0.9% and 0.9% of our revenue for the same period, respectively. 226

234 FINANCIAL INFORMATION The following table sets out the breakdown of our selling and distribution expenses for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Advertisement and exhibition expenses 134, ,904 74,217 39,638 Travelling expense 9,908 73,477 31,352 20, , , ,569 60,464 Administrative expenses Our administrative expenses primarily consist of staff cost, Listing expenses and other administrative expenses. For the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, our administrative expenses amounted to RM7.1 million, RM7.2 million and RM5.5 million, respectively, representing 37.5%, 24.1% and 86.4% of our revenue for the same period, respectively. If the Listing expenses were excluded, the administrative expenses would amounted to RM7.1 million, RM6.7 million and RM2.8 million, respectively, representing 37.5%, 22.5% and 43.2% of our revenue for the same period, respectively. 227

235 FINANCIAL INFORMATION The following table sets out the breakdown of our administrative expenses for the periods indicated: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Audit fees 59,700 62,110 19,172 26,505 Bank charges 5,798 3, ,251 Bad debt 16,200 40,793 Cleaning expenses 334, ,630 97, ,579 Depreciation of property, plant and equipment 562, , , ,870 Education fair and event expenses 243, ,560 34,095 55,785 Fixed assets expensed off ,506 21, Insurance 165, ,473 56,308 90,806 Meal plan 6,380 60,813 16,926 Office rental 131, ,014 53,810 44,800 Printing and stationery and photostat 269, , , ,031 Professional fees and consultant fees 21, , ,143 56,603 Preliminary fee 38,185 Staff cost 3,867,748 2,752, ,273 1,130,277 Telephone charges 98, ,346 46,668 67,291 Upkeep of property, plant and equipment 391, , ,765 60,360 Water and electricity 591, , , ,388 Others 285, , , ,401 Impairment loss on trade debtors 32,900 Listing expenses 491,273 2,759,449 Traveling and accommodation 27, ,015 Stamp duty 60,501 7,060,434 7,181,335 2,239,481 5,512,607 Operating profit/(loss) Our operating profit/(loss) was RM7.8 million, RM16.0 million and RM(1.4) million for the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, respectively, representing 41.3%, 53.7% and (21.9%) of our revenue for the same period, respectively. If Listing expenses were excluded, our operating profit was RM7.8 million, RM16.5 million and RM1.4 million for the two years ended 30 June 2016 and 2017 and four months ended 31 October 2017, respectively. Finance costs Our finance costs consist of interest on bank borrowings and interest on finance leases. Our finance costs amounted to RM4.6 million, RM4.6 million and RM1.0 million for the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017, respectively, representing 24.4%, 15.6% and 16.1% of our revenue for the same period, respectively. 228

236 FINANCIAL INFORMATION The following table sets out the breakdown of our finance costs: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Interest on bank borrowings 5,481,172 4,595,000 1,780,876 1,382,759 Amortised debt issuance cost 33,788 3,754 15,017 Interest on finance leases 6,641 6,804 2,470 1,418 5,487,813 4,635,592 1,787,100 1,399,194 Less: interests capitalised on qualifying assets (895,400) (369,000) 4,592,413 4,635,592 1,787,100 1,030,194 Income tax (benefit)/ expense Malaysian profits tax is calculated at the statutory tax rate of 24% of the estimated taxable profit for each of the years ended 30 June 2016 and 2017 and for the four months ended 31 October 2016 and Our subsidiaries located in Malaysia were recognised as small and medium scale companies by the Malaysia tax authority and entitled a preferential tax rate of 18% for the year ended 30 June 2017 and for the four months ended 31 October 2016 and For estimated taxable profit in excess of RM500,000, statutory tax rate of 24% is still applicable. The following table sets out the breakdown of our income tax expense: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Current tax Malaysian profit tax charge of the year 52, ,080 (over)/ under provision in respect of prior year (16,151) 9,861 7,317 6,162 (16,151) 62,175 7,771 52,242 Deferred tax 8,209 (50,634) Income tax (benefit)/ expense (16,151) 70,384 7,771 1,

237 FINANCIAL INFORMATION The income tax (benefit)/expense for the Track Record Period can be reconciled to the profit/ (loss) before income tax per the consolidated statements of profit or loss and other comprehensive income as follows: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Profit/(loss) before income tax 3,180,605 11,361,953 (300,213) (2,429,422) Tax calculated at the domestic tax rate 763,346 2,728,870 (72,052) (561,652) Tax effect of expenses not deductible for tax purposes 183, ,940 72, ,689 Tax losses and unutilised capital allowance not recognised during the year 22,726 7,833 59,497 Utilisation of previously unrecognised tax losses and unutilised capital allowance (3,718) (550,201) (Over)/under provision of tax expense in prior year (16,151) 9,861 7,317 6,162 Deferred tax recognised in respect of previously unrecognised tax losses and unutilised capital allowance (1,028,054) (658,739) Deferred tax recognised respect of investment tax allowance (1,985,758) (317,406) Others 85, ,685 (8,216) (21,682) Income tax (benefit)/expense (16,151) 70,384 7,771 1,608 During the Track Record Period, Kingsley International, the operating company for Kingsley International School, is entitled to and has claimed (i) Industrial Building Allowance ( IBA ) under the Income Tax Act 1967 (the Act ); and (ii) Income tax exemption which is equivalent to Investment Tax Allowance ( ITA ) under Income Tax (Exemption) (No. 9) Order 2012 (the Order ). Industrial Building Allowance Generally, buildings used for schools do not qualify as industrial buildings. However, where in the basis period for a year of assessment a person has for the purposes of a business of his incurred capital expenditure on the construction of a building for a school approved by the Malaysian Minister of Education, the building shall be treated as an industrial building for the purposes of that business and IBA allowance ( IBA ) shall be calculated at a rate of 10% the qualifying expenditure ( IBA Qualifying Expenditure ) shall be accorded to that person for that year and for each of the 9 following years of assessment. The IBA can be claimed in a year of assessment provided that at the end of the basis period for that year of assessment that person is the owner of the building and the building is used in that business. Qualifying Expenditure generally includes construction costs but excludes the acquisition cost of land and borrowing costs in relation to the financing of the acquisition and construction. 230

238 FINANCIAL INFORMATION In respect of buildings under construction, the construction expenditure is deemed to be incurred on the day the building is completed. In any other case, the expenditure is incurred on the day it becomes payable. With effect from the year of assessment 2016, if in a year of assessment the building or part thereof is used for the purpose of letting of property, then IBA cannot be claimed in respect of the building or part thereof. However, IBA may still be claimed in respect of the whole building if the floor area of the part that is let out is not more than 10% of the floor area of the whole building. Kingsley International has confirmed that the portion of floor area let out in its building is less than 10% of the total floor area. The IBA claimed in a year of assessment can only be set-off against the adjusted business income from the international school business of Kingsley International for that year of assessment. Where there is insufficient adjusted business income from that business, the unabsorbed IBA Allowance can be carried forward to the following years of assessment for set-off until it is fully absorbed. However, if that business ceases permanently, then any unabsorbed IBA is also permanently lost. Our Tax Adviser is of the view that (i) as of the Latest Practicable Date, the IBA Qualifying Expenditure as at 30 June 2017 amounts to RM85,995,896, of which IBA amounting to RM17,199,180 has been claimed. Additional IBA Qualifying Expenditure may be incurred upon the expected completion of the construction of the KIS Campus and KIS Annex Building during the year ended 30 June 2018; and (ii) as of the Latest Practicable Date, the IBA claimed has been aggregated with the other capital allowances claimed by Kingsley International. As at 30 June 2017, the total unutilized capital allowances by Kingsley International is RM475,725. The unutilized capital allowances can be carried forward and set-off against the adjusted business income from the international school business of Kingsley International. Investment Tax Allowance Under the Order, a company incorporated and tax resident in Malaysia which is registered with the Ministry of Education and has complied with the terms of the Education Act 1996 is allowed to claim ITA on qualifying capital expenditure on building, plant and machinery used in Malaysia in connection with or for the purpose of an activity relating to teaching and training in an international school. However, such qualifying capital expenditure shall not include expenditure incurred on any building used as living accommodation, plant and machinery which are provided wholly or partly for the use of a director or individual who is a member of the management, administrative or clerical staff. Under the Order, 100% of the qualifying capital expenditure incurred for a period of 5 years from the date determined by the Malaysian Investment Development Authority ( MIDA ) can be utilized against a maximum of 70% of the statutory business income of the claimant. However, this tax exemption is subject to the conditions stated in the letter issued by MIDA. Kingsley International s ITA application was approved by MIDA on 23 July 2013 which allows Kingsley International to claim ITA on 100% of the qualifying capital expenditure incurred in accordance to the Order for a period of 5 years for implementing the expansion/ modernisation project for an international school which is the Kingsley International School. This allowance may be utilized for deduction against 70% of the statutory income for the each year of assessment. 231

239 FINANCIAL INFORMATION The key conditions stated in the letter dated 23 July 2013 are as follows:- i) The location of the international school is in: Lot PT22964-PT and part of Lot PT Bukit Cermin, Putra Heights Mukim Damansara, Daerah Petaling Jaya Selangor Darul Ehsan ii) iii) iv) Kingsley International School is required to be registered with the Malaysian Ministry of Education. The construction of KIS Campus and KIS Annex Building is subject to the approval conditions stipulated by the Malaysian Ministry of Education. Kingsley International is required to invest at least RM85 million (after revision) into fixed assets (excluding land cost) for a period of 5 years from the effective date of the incentive as determined by the Ministry of International Trade and Industry ( MITI ). The qualifying period of the ITA as set by MIDA is from 30 September 2011 to 29 September 2016 subject to Kingsley International submitting a compliance report to MIDA and the Malaysian Inland Revenue Board which is approved by an accredited auditor. Kingsley International is not entitled to claim ITA on capital expenditure incurred after 29 September Where the ITA claimed for the year of assessment is not fully utilized against the statutory business income, the unutilized amounts may be carried forward to future years of assessment. In the event that the building, plant and machinery which is entitled to ITA is disposed within 2 years from the date of acquisition, any ITA claim which was made will be withdrawn. IBA and ITA claimed on the same year The ITA claim for each year of assessment may only be utilized against a maximum of 70% statutory business income from the business of an international school after capital allowances and IBA have been deducted. Our Tax Adviser is of the view that (i) as of the Latest Practicable Date, the ITA amount which were claimed as at 30 June 2017 is RM85,995,896 and (ii) as of the Latest Practicable Date, the ITA Allowance utilized for set off against statutory business income was nil since statutory business income was fully utilized by the capital allowances and IBA, and therefore the balance of unutilized ITA as at 30 June 2017 is RM85,995,896. For details of our income tax benefit/expense, see Notes 15 and 28 to the accountant s report included in Appendix I to this prospectus. 232

240 FINANCIAL INFORMATION RESULTS OF OPERATION OF OUR GROUP Comparison of the four months ended 31 October 2017 to the four months ended 31 October 2016 Revenue Our revenue increased by RM0.7 million from RM5.7 million for the four months ended 31 October 2016 to RM6.4 million for the four months ended 31 October 2017, representing an increase of 11.2%. The increase in our revenue was primarily due to the increase in revenue from our international school. International school Our revenue generated from international school increased by RM0.8 million from RM5.5 million for the four months ended 31 October 2016 to RM6.3 million for the four months ended 31 October 2017, representing an increase of 13.9%. The increase in our revenue generated from international school was primarily due to (i) the increase of student enrolment, from the total student enrolment of 743 as at 31 October 2016 to 885 as at 31 October 2017, representing an increase of 19.1%; (ii) the increase of extra-curricular activities fee by RM0.2 million due to the increase of student participation in the extra-curricular activities; and (iii) the increase in the excursion trip fee by RM0.2 million due to the increase number of students and increased number of excursion trips arranged. Tertiary education Our revenue generated from tertiary education decreased by RM0.1 million from RM0.2 million for the four months ended 31 October 2016 to RM0.1 million for the four months ended 31 October 2017, representing a decrease of 68.0%. The decrease in our revenue generated from tertiary education was primarily due to the decrease in number of students enrolled. Cost of revenue Our cost of revenue increased by RM0.8 million from RM3.8 million for the four months ended 31 October 2016 to RM4.6 million for the four months ended 31 October 2017, representing an increase of 20.7%. The increase in our cost of revenue was primarily due to the increase in number of teachers from 92 to 122 for our schools, which is in line with the increase in number of students enrolled. International school Our cost of revenue for the revenue generated from international school increased by RM0.7 million from RM3.7 million for the four months ended 31 October 2016 to RM4.4 million for the four months ended 31 October 2017, representing an increase of 20.2%. The increase in our cost of revenue of our international school was primarily due to the increase in staff costs from RM1.6 million for the four months ended 31 October 2016 to RM2.3 million for the four months ended 31 October 2017, which is line with the increase in number of teachers from 89 to 116 for the same period. Tertiary education Our cost of revenue for the revenue generated from tertiary education increased by RM43,316 from RM123,681 for the four months ended 31 October 2016 to RM166,997 for the four months ended 233

241 FINANCIAL INFORMATION 31 October 2017, representing an increase of 35.0%. The increase was mainly due to the costs incurred in relation to the development of learning management system by Kingsley Profession Centre during the four months ended 31 October Gross profit Our gross profit decreased by RM0.1 million from RM1.9 million for the four months ended 31 October 2016 to RM1.8 million for the four months ended 31 October 2017, representing a decrease of 7.3%. Our gross profit margin decreased from 34.0% for the four months ended 31 October 2016 to 28.3% for the four months ended 31 October Such decrease was mainly due to increase of staff cost. International school Our gross profit generated from international school increased by approximately RM31,000 from approximately RM1,882,000 for the four months ended 31 October 2016 to approximately RM1,913,000 for the four months ended 31 October 2017, representing an increase of 1.7%. Our gross profit margin decreased from 33.9% for the four months ended 31 October 2016 to 30.3% for the four months ended 31 October 2017, representing a decrease of 3.6%. The decrease in gross profit margin was primarily due to the percentage increase in the number of teachers outweighs the percentage increase in the number of students. Tertiary education Our gross profit/(loss) generated from tertiary education decreased by approximately RM0.2 million from gross profit of RM0.1 million for the four months ended 31 October 2016 to gross loss of RM0.1 million for the four months ended 31 October 2017, representing a decrease of 258.5%. Our gross profit/(loss) margin decreased from 35.1% for the four months ended 31 October 2016 to (174.2%) for the four months ended 31 October The decrease in gross profit for the four months ended 31 October 2017 was mainly due to the decrease in number of students enrolled. Other revenue and gains Our other revenue and gains increased by RM0.5 million from RM1.9 million for the four months ended 31 October 2016 to RM2.4 million for the four months ended 31 October 2017, representing an increase of 25.7%. The increase was mainly due to the revenue of RM159,000 generated from selling of school uniform. Selling and distribution expenses Our selling and distribution expenses decreased by approximately RM45,000 from RM105,569 for the four months ended 31 October 2016 to RM60,464 thousand for the four months ended 31 October 2017, representing a decrease of 42.7%. The decrease in our selling and distribution expenses was primarily due to decrease in advertisement and exhibition expense by RM34,579. Administrative expenses Our administrative expenses increased by RM3.3 million from RM2.2 million for the four months ended 31 October 2016 to RM5.5 million for the four months ended 31 October 2017, representing an increase of 146.2%. The increase in our administrative expenses was primarily due to the Listing 234

242 FINANCIAL INFORMATION expenses of RM2.8 million for the fourth months ended 31 October 2017 and the increase in staff cost of RM0.3 million due to an increase in headcount from 31 as at 31 October 2016 to 37 as at 31 October Operating profit/(loss) As a result of the foregoing, our operating profit decreased by RM2.9 million from RM1.5 million for the four months ended 31 October 2016 to (RM1.4 million) for the four months ended 31 October 2017, representing a decrease of 194.1%. If Listing expenses were excluded, our operating profit will be maintain relatively stable amounted to RM1.5 million for the four months ended 31 October 2016 and RM1.4 million for the four months ended 31 October 2017, respectively. Finance costs Our finance costs decreased by approximately RM0.8 million from RM1.8 million for the four months ended 31 October 2016 to RM1.0 million for the four months ended 31 October 2017, representing a decrease of 42.4% due to the finance cost being capitalised as a result of the resumption on the development of the KIS Annex Building during the four months ended 31 October Loss before income tax As a result of the foregoing, our loss before income tax increased by RM2.1 million from RM0.3 million for the four months ended 31 October 2016 to RM2.4 million for the four months ended 31 October Income tax expense We had income tax expense of RM7,771 for the four months ended 31 October 2016 and RM1,608 for the four months ended 31 October 2017, representing a decrease of 79.3%. The decrease in income tax expense is primarily due to the deferred tax benefit recognised in respect of investment tax allowance, for details please refer to Notes 28 of Appendix I Accountant s Report in this prospectus. Loss and total comprehensive income for the period Our loss and total comprehensive income for the period increased by RM2.1 million from RM0.3 million for the four months ended 31 October 2016 to RM2.4 million for the four months ended 31 October Our net loss margin decreased from 5.4% for the four months ended 31 October 2016 to 38.1% for the four months ended 31 October 2017 which was primarily due to (i) the increase in staff cost; and (ii) increase of Listing expenses. Comparison of the financial year ended 30 June 2017 to the financial year ended 30 June 2016 Revenue Our revenue increased by RM11.0 million from RM18.8 million for the year ended 30 June 2016 to RM29.8 million for the year ended 30 June 2017, representing an increase of 58.3%. The increase in our revenue was primarily due to the increase in revenue from our international school. 235

243 FINANCIAL INFORMATION International school Our revenue generated from international school increased by RM8.8 million from RM18.0 million for the year ended 30 June 2016 to RM26.8 million for the year ended 30 June 2017, representing an increase of 48.5%. The increase in our revenue generated from international school was primarily due to the increase in number of students enrolled from 650 as at 30 June 2016 to 872 as at 30 June 2017 as a result of the relocation of Kingsley International School to the current campus in September Other than that, the increase in our revenue was also due to (i) the increase of the proportion of student enrolment in Secondary School as set out on page 161 of the prospectus, which had a relatively higher annual tuition fee compared to other departments as set out on page 125 of the prospectus, from the total student enrolment of 353 as at 30 June 2016 to 496 as at 30 June 2017, representing an increase of 40.5%; and (ii) the increase of meal plan fee by RM742,000 due to the increase of student participation in the meal plan after the meal catering services at Kingsley International School was outsourced to an independent catering contracting company for the academic year of 2016/2017. The contractor was comparatively more experienced with providing catering service than KIS which operated the canteen before the academic year of 2016/2017. Tertiary education Our revenue generated from tertiary education increased by RM2.2 million from RM0.8 million for the year ended 30 June 2016 to RM3.0 million for the year ended 30 June 2017, representing an increase of 285.6%. The increase in our revenue generated from tertiary education was primarily due to the offering of corporate training programmes by Kingsley Professional Centre to our corporate clients during the year ended 30 June Cost of revenue Our cost of revenue increased by RM3.1 million from RM9.3 million for the year ended 30 June 2016 to RM12.3 million for the year ended 30 June 2017, representing an increase of 33.1%. The increase in our cost of revenue was primarily due to the increase in number of teachers, which is in line with the increase in number of students enrolled. International school Our cost of revenue for the revenue generated from international school increased by RM2.7 million from RM9.1 million for the year ended 30 June 2016 to RM11.8 million for the year ended 30 June 2017, representing an increase of 29.6%. The increase in our cost of revenue of our international school was primarily due to the increase in number of teachers employed by Kingsley International School from 79 as at 30 June 2016 to 99 as at 30 June Tertiary education Our cost of revenue for the revenue generated from tertiary education increased by RM0.4 million from RM0.2 million for the year ended 30 June 2016 to RM0.6 million for the year ended 30 June 2017, representing an increase of 207.2%. The increase in our cost of revenue of our tertiary education was primarily due to the increase in teaching staff costs as a result of the offering of new courses such as corporate training programmes offered by Kingsley Professional Centre to our corporate clients during the year ended 30 June

244 FINANCIAL INFORMATION Gross profit Our gross profit increased by RM7.9 million from RM9.6 million for the year ended 30 June 2016 to RM17.5 million for the year ended 30 June 2017, representing an increase of 82.7%. Our gross profit margin increased from 50.8% for the year ended 30 June 2016 to 58.6% for the year ended 30 June International school Our gross profit generated from international school increased by RM6.1 million from RM9.0 million for the year ended 30 June 2016 to RM15.0 million for the year ended 30 June 2017, representing an increase of 67.7%. Our gross profit margin increased from 49.7% for the year ended 30 June 2016 to 56.1% for the year ended 30 June 2017, representing an increase of 6.4%. The increase in gross profit margin was primarily due to the larger increase in revenue as compare with the increase in cost of revenue as a result of (i) the increase in student to teacher ratio from 8.2 as at 30 June 2016 to 8.8 as at 30 June 2017; and (ii) the stable depreciation on property, plant and equipment. Tertiary education Our gross profit generated from tertiary education increased by RM1.8 million from RM0.6 million for the year ended 30 June 2016 to RM2.4 million for the year ended 30 June 2017, representing an increase of 309.8%. Our gross profit margin increased from 76.4% for the year ended 30 June 2016 to 81.2% for the year ended 30 June 2017, representing an increase of 4.8%. The increase in gross profit margin was primarily due to the larger increase in revenue as compare with the increase in cost of revenue as a result of the increase in student to trainer ratio from 5.3 as at 30 June 2016 to 10.7 as at 30 June Other revenue and gains Our other revenue and gains increased by RM0.6 million from RM5.4 million for the year ended 30 June 2016 to RM6.0 million for the year ended 30 June 2017, representing an increase of 10.6%. The increase in our other revenue and gains was primarily due to the increase in liquidated and ascertained damages as a result of the delay in completion of Annex Building. For further information on the reason for delay in completion of Annex Building, please refer to the sub-section headed Business KIS Campus, KIS Annex Building and Facilities Reason for delay in completion of Annex Building of this prospectus. Selling and distribution expenses Our selling and distribution expenses increased by RM0.2 million from RM0.1 million for the year ended 30 June 2016 to RM0.3 million for the year ended 30 June 2017, representing an increase of 90.1%. The increase in our selling and distribution expenses was primarily due to the increase in advertisement and exhibition expenses of RM0.1 million and traveling expense of RM0.1 million. Administrative expenses Our administrative expenses increased by RM0.1 million from RM7.1 million for the year ended 30 June 2016 to RM7.2 million for the year ended 30 June 2017, representing an increase of 1.7%. The increase in our administrative expenses was primarily due to the Listing expenses of 0.5 million 237

245 FINANCIAL INFORMATION for the year ended 30 June 2017 and increase in professional fees and consultant fees of RM0.2 million, off set by the decrease in staff cost of RM1.1 million as a result of the relocation of Kingsley International School to our self-owned KIS Campus in September 2015, for which we hired additional administrative staff for the relocation of campus during the year ended 30 June As the relocation was completed in September 2015 and no additional administrative staff was hired during the year ended 30 June 2017 for the relocation, our staff cost under administrative expenses for the year ended 30 June 2016 was higher than the year ended 30 June Operating profit As a result of the foregoing, our operating profit increased by RM8.2 million from RM7.8 million for the year ended 30 June 2016 to RM16.0 million for the year ended 30 June 2017, representing an increase of 105.8%. Finance costs Our finance costs remained stable at RM4.6 million for the two years ended 30 June 2017 primarily due to the decrease in interest on bank borrowings of RM0.9 million from RM5.5 million for the year ended 30 June 2016 to RM4.6 million for the year ended 30 June 2017 as a result of the refinancing of term loan and the one off interests capitalised on qualifying assets of RM0.9 million for the year ended 30 June Profit before income tax As a result of the foregoing, our profit before income tax increased by RM8.2 million from RM3.2 million for the year ended 30 June 2016 to RM11.4 million for the year ended 30 June 2017, representing an increase of 257.2%. Income tax benefit/expense We had income tax benefit of RM16.2 thousand for the year ended 30 June 2016 and we had income tax expense of RM70,384 for the year ended 30 June Even though our Company enjoy tax allowances such as industrial building allowance and investment tax allowance, we had incurred income tax expense primarily due to the increase in profit before income tax of RM8.2 million. Profit and total comprehensive income for the year As a result of the factors discussed above, including the liquidated and ascertained damages of RM4.6 million and RM5.5 million for the year ended 30 June 2016 and 2017, respectively, our profit and total comprehensive income for the year increased by RM8.1 million from RM3.2 million for the year ended 30 June 2016 to RM11.3 million for the year ended 30 June 2017, representing an increase of 253.2%. Our net profit margin increased from 17.0% for the year ended 30 June 2016 to 37.9% for the year ended 30 June The net loss of RM1.4 million for the year ended 30 June 2016 after excluding the liquidated and ascertained damages was primarily due to (i) the lower number of students enrolled during the year ended 30 June 2016 as compared with the year ended 30 June 2017; and (ii) the administrative expenses of approximately RM7.1 million and finance costs of approximately RM 4.6 million during the year ended 30 June

246 FINANCIAL INFORMATION The accumulated losses of the Group as at 1 July 2015 was mainly due to the losses from Kingsley Skills College of approximately RM140,000 and Kingsley College of approximately RM739,000 in previous years. The losses were incurred during their early stage of operation, primarily consist of staff costs, depreciation and other administrative expenses. The accumulated losses of our Company as at 30 June 2017 was mainly due to the Listing expenses of approximately RM491,000. LIQUIDITY AND CAPITAL RESOURCES We have historically funded our liquidity and capital requirements primarily through a combination of capital contributions from our Controlling Shareholders, credit facilities and internally generated funds from our operating activities. As at 30 June 2016 and 2017, and 31 October 2017, we had cash and cash equivalent of RM1.7 million, RM6.7 million and RM9.8 million, respectively. We had net cash from operating activities of RM6.9 million, RM14.3 million and RM9.3 million for the year ended 30 June 2016 and 2017 and the four months ended 31 October 2017, respectively. We require cash primarily for our operation, general working capital needs and capital expenditures for the construction of the KIS Annex Building. Going forward, we expect to fund our working capital requirements with a combination of various sources, including but not limited to cash generated from our operations, the net proceeds from the Global Offering, the bank balances and cash and other possible equity and debt financings as and when appropriate. As at the Latest Practicable Date, we do not have any additional external financing plans. For more information on our expected capital expenditure requirements, please refer to the sub-section headed Financial Information Capital Expenditure of this prospectus. Cash flows of our Group The following table sets out the selected cash flow data from the consolidated statements of cash flows for the Track Record Period: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Net cash from operating activities 6,940,917 14,317,755 6,789,928 9,315,678 Net cash used in investing activities (12,262,112) (86,898) (6,702) (377,740) Net cash from/ (used in) financing activities 5,468,978 (9,214,835) (2,617,623) (5,871,617) Net increase in cash and cash equivalents 147,783 5,016,022 4,165,603 3,066,321 Cash and cash equivalents at beginning of the year/period 1,541,293 1,689,076 1,689,076 6,705,098 Cash and cash equivalents at end of the year/period 1,689,076 6,705,098 5,854,679 9,771,419 Net cash from operating activities Our cash inflow from operating activities is principally derived from the receipts from international school and tertiary education. Our cash outflow from operating activities comprised mainly cost of 239

247 FINANCIAL INFORMATION revenue and administrative expenses. During the Track Record Period, our net cash flows from operating activities represented profit before income tax for the year adjusted for (i) interest income, liquidated and ascertained damages, finance costs, depreciation of property, plant and equipment, gain on disposal of property, plant and equipment, listing expenses and written off of property, plant and equipment, and (ii) changes in working capital. For the four months ended 31 October 2017, we had net cash flows generated from operating activities of approximately RM9.3 million. This amount represents loss before income tax of approximately RM2.4 million, (i) adjusted for certain non-cash gains and expenses, mainly included liquidated and ascertained damages of RM1.8 million, and the Listing expenses of RM2.8 million; and (ii) for changes in certain working capital items that positively affected operating cash flow, mainly included the increase in other payables and accruals of RM8.9 million. For the year ended 30 June 2017, we had net cash flows generated from operating activities of approximately RM14.3 million. This amount represents profit before income tax of approximately RM11.4 million, (i) adjusted for certain non-cash gains and expenses, mainly included liquidated and ascertained damages of RM5.5 million and finance costs of RM4.6 million, and (ii) for changes in certain working capital items that positively affected operating cash flow, mainly included the increase in other payables and accruals of RM1.5 million, offset by changes in certain working capital items that negatively affected operating cash flow, mainly included the increase in account receivable of RM0.6 million and increase in prepayments, deposits and other receivables of RM0.1 million. For the year ended 30 June 2016, we had net cash flows generated from operating activities of approximately RM6.9 million. This amount represents profit before income tax of approximately RM3.2 million, (i) adjusted for certain non-cash gains and expenses, mainly included liquidated and ascertained damages of RM4.6 million, and (ii) for changes in certain working capital items that positively affected operating cash flow, mainly included the increase in other payables and accruals of RM1.2 million and increase in accounts payable of RM0.2 million. Net cash used in investing activities Our cash flows from investing activities primarily consist of purchase of property, plant and equipment, proceeds from disposal of property, plant and equipment, increase or decrease in pledged bank deposit and interest received. For the four months ended 31 October 2017, we had net cash used in investing activities of RM0.4 million, which primarily due to the purchase of property, plant and equipment of RM0.4 million. For the year ended 30 June 2017, we had net cash used in investing activities of RM86.9 thousand, which primarily consists of the purchase of property, plant and equipment of RM0.9 million and decrease in pledged bank deposit of RM0.7 million. For the year ended 30 June 2016, we had net cash used in investing activities of RM12.3 million, which primarily due to the purchase of property, plant and equipment of RM12.0 million. Net cash from/ used in financing activities Our cash flows from financing activities mainly consist of proceeds from issuance of new shares, proceeds from bank borrowings, repayment of bank borrowings, decrease in amounts due from related companies, increase or decrease in amounts due to related companies, increase or decrease 240

248 FINANCIAL INFORMATION in amount due to a director, repayment of obligations under finance leases, interest paid and payment of listing expenses. For the four months ended 31 October 2017, we had net cash used in financing activities of RM5.9 million, which primarily consists of payment of Listing expenses of RM3.9 million and interest paid of RM1.4 million. For the year ended 30 June 2017, we had net cash used in financing activities of RM9.2 million, which primarily consists of proceeds from bank borrowings of RM69.5 million, repayment of bank borrowings of RM65.5 million, repayment to related companies of RM5.5 million and interest paid of RM4.3 million. For the year ended 30 June 2016, we had net cash from financing activities of RM5.5 million, which primarily consists of proceeds from bank borrowing of RM8.2 million, increased in advances from related companies of RM5.6 million, repayment of bank borrowings of RM5.5 million and interest paid of RM5.5 million. WORKING CAPITAL The following table sets out the breakdown of our current assets and current liabilities as at 30 June 2016 and 2017, 31 October 2017 and 28 February 2018: As at 30 June As at 31 October As at 28 February RM RM RM RM (Unaudited) Current assets Accounts receivable 263, , ,239 10,112 Prepayment, deposits and other receivables 372, ,992 1,953,648 1,966,405 Amount due from a shareholder 2,209 Amounts due from related companies 1,015,925 5,130,456 7,371,300 1,800,000 Tax recoverable 141,250 76,662 Pledged bank deposit 518, , ,242 Cash and cash equivalents 1,689,076 6,705,098 9,771,419 9,100,780 Total current assets 3,482,359 13,941,080 19,861,289 13,405,539 Current liabilities Accounts payable 396, , , ,708 Other payables and accruals 3,600,090 5,906,907 14,389,263 11,717,363 Amounts due to related companies 6,966,318 66, Amount due to a director 3,222,163 Amounts due to shareholders Bank borrowings, secured 5,922,212 1,704,950 2,704,950 22,902,847 Tax payable 75,894 9,217 Obligations under finance leases 33,611 35,425 Total current liabilities 20,141,067 8,295,241 17,758,694 35,292,221 Net current (liabilities)/ assets (16,658,708) 5,645,839 2,102,595 (21,886,682) 241

249 FINANCIAL INFORMATION Our total current assets as at 30 June 2016 and 2017 and 31 October 2017 and 28 February 2018 amounted to RM3.5 million, RM13.9 million, RM19.9 million and RM13.4 million, respectively, which primarily consisted of accounts receivable, prepayments, deposits and other receivables, amounts due from related companies, tax recoverable, pledged bank deposit and cash and cash equivalents. Our total current liabilities for the same period amounted to RM20.1 million, RM8.3 million, RM17.8 million and RM35.3 million, respectively, which primarily consisted of account payable, other payables and accruals, amounts due to related companies, amount due to a director, bank borrowings (secured), tax payable and obligations under finance leases. Our Group s net current liabilities/ assets increased from net current liabilities of RM16.7 million as at 30 June 2016 to net current assets of RM5.6 million as at 30 June We had net current liabilities as at 30 June 2016 of RM16.7 million primarily due to (i) amount due to related companies of RM7.0 million, which had been settled during the year ended 30 June 2017, (ii) amount due to a director of RM3.2 million, which had been settled during the year ended 30 June 2017, and (iii) secured bank borrowings of RM5.9 million. The increase in net current assets as at 30 June 2017 was primarily due to the increase in amounts due from related companies of RM4.1 million, increase in cash and cash equivalents of RM5.0 million and decrease in amounts due to related companies of RM6.9 million, and partially off-set by the increase in other payables and accruals of RM2.3 million. Our net current assets decreased from RM5.6 million as at 30 June 2017 to RM2.1 million as at 31 October 2017 mainly due to (i) the decrease in the accounts receivable of RM0.6 million; and (ii) the increase in other payables and accruals of RM8.5 million; and partially offset by the increase in cash and cash equivalents of RM3.1 million. Our accounts receivable decreased from RM0.9 million as at 30 June 2017 to RM0.2 million as at 31 October 2017 primarily due to more stringent credit policy enforced by our Group. Our other payables and accruals also increased from RM5.9 million as at 30 June 2017 to RM14.4 million as at 31 October 2017 primarily due to the tuition fees we have received in advance before the commencement of term 2 and term 3 for the 2017/2018 academic year and deferred revenue in relation to remaining tuition fees for term 1 which has not yet been fully recognised as at 31 October Our net current assets decreased from RM2.1 million as at 31 October 2017 to net current liabilities of RM21.9 million as at 28 February 2018 mainly due to increase in bank borrowings from RM2.7 million as at 31 October 2017 to RM22.9 million as at 28 February Such increase was due to our Group has drawn down a revolving facility of RM27.0 million from an independent commercial bank in February Our Group has utilised the aforesaid facility to settle the remaining balance for the BGMC Contract Works in the amount of RM26.8 million in February 2018, and has subsequently partially repaid the aforesaid facility with its own funds in the amount of RM7.37 million. Our Group intends to settle the remaining balance of the aforesaid facility with its own funds. Please refer to section headed Statement of Business Objectives and Use of Proceeds for details. Our Directors confirm that, taking into consideration the financial resources presently available to us, including our existing cash and cash equivalents, cash flows from operations, banking facilities and net proceeds from the Global Offering, we have sufficient working capital for our present requirements for at least the next 12 months commencing on the date of this prospectus. 242

250 FINANCIAL INFORMATION DISCUSSION OF SELECTED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ITEMS As at 30 June As at 31 October RM RM RM Non-current assets Property, plant and equipment 120,073, ,807, ,299,124 Deferred tax assets 42,425 Pledged bank deposit 1,242,818 Total non-current assets 121,315, ,807, ,341,549 Current assets Accounts receivable 263, , ,239 Prepayment, deposits and other receivables 372, ,992 1,953,648 Amount due from a shareholder 2,209 Amounts due from related companies 1,015,925 5,130,456 7,371,300 Tax recoverable 141,250 76,662 Pledged bank deposit 518, ,683 Cash and cash equivalents 1,689,076 6,705,098 9,771,419 Total current assets 3,482,359 13,941,080 19,861,289 Current liabilities Accounts payable 396, , ,511 Other payables and accruals 3,600,090 5,906,907 14,389,263 Amounts due to related companies 6,966,318 66,000 Amount due to a director 3,222,163 Amounts due to shareholders 76 Bank borrowings, secured 5,922,212 1,704,950 2,704,950 Tax payable 75,894 Obligations under finance leases 33,611 35,425 Total current liabilities 20,141,067 8,295,241 17,758,694 Net current (liabilities)/ assets (16,658,708) 5,645,839 2,102,595 Total assets less current liabilities 104,657, ,453, ,444,144 Non-current liabilities Amounts due to a related company 24,337,642 25,592,113 29,092,113 Bank borrowings, secured 59,616,338 67,878,338 66,893,355 Deferred tax liabilities 8,209 Obligations under finance leases 120,067 84,642 Total non-current liabilities 84,074,047 93,563,302 95,985,468 Net assets 20,583,199 31,889,813 29,458,676 Equity Share capital Reserves 20,629,018 31,650,992 29,297,725 Equity attributable to owners of the Company 20,629,018 31,651,037 29,297,736 Non-controlling interests (45,819) 238, ,940 Total equity 20,583,199 31,889,813 29,458,

251 FINANCIAL INFORMATION Property, plant and equipment Our property, plant and equipment consist of construction in progress, land and buildings, motor vehicles, leasehold improvements, computer and furniture, fixture and equipment. We had property, plant and equipment of RM120.1 million, RM119.8 million and RM123.3 million as at 30 June 2016 and 2017 and 31 October 2017, respectively. The following table sets out the breakdown of our property, plant and equipment as at the respective dates indicated: As at 30 June As at 31 October RM RM RM Construction in progress 26,209,312 27,463,783 31,332,783 Land and buildings 93,000,408 91,108,884 90,478,373 Motor vehicles 171, , ,368 Leasehold improvements 15,403 35,079 Computer 350, , ,222 Furniture, fixture and equipment 326, , , ,073, ,807, ,299,124 Our property, plant and equipment remained stable at RM120.1 million as at 30 June 2016 and RM119.8 million as at 30 June It increased to RM123.3 million as at 31 October 2017 primarily due to the additions to the construction in progress of RM3.9 million for the four months period ended 31 October 2017 for the construction of the Annex Building. For details of our amounts due from customers for contract work, see Note 17 to the accountant s report included in Appendix I to this prospectus. PROPERTY INTERESTS AND VALUATION OF PROPERTIES Property Valuer valued our property interests as at 6 March 2018 at approximately RM116 million. Details of the valuation are summarised in Appendix IV to this prospectus. The following table sets out a reconciliation of the fair value of our relevant property interests as at 6 March 2018 to their net book value as at 31 October 2017: RM 000 Valuation as at 6 March 2018 as set out in the Property Valuation Report in Appendix IV 116,000 Less: net book value of our property interest as at 31 October ,478 Add: depreciation for the period from 1 November 2017 to 6 March 2018 (unaudited) 661 Valuation surplus 26,183 Pledged bank deposit Our pledged bank deposits represent deposits placed to a bank to secure term loan and banking facility granted to our Group. We had pledged bank deposits of RM1.2 million, RM0.5 million and RM0.5 million, as at 30 June 2016 and 2017 and 31 October 2017, respectively. 244

252 FINANCIAL INFORMATION As at 30 June 2016, our Group had pledged a bank deposit of RM1.2 million to secure a term loan granted to our Group, the pledged bank deposit was released on 26 October 2016 upon repayment of the term loan. As at 30 June 2017 and 31 October 2017, our Group had pledged a bank deposit of RM0.5 million and RM0.5 million, respectively to secure a banking facility granted to our Group. The pledged deposit was matured on 4 August 2017 and 4 November 2017, respectively. Accounts receivable During the Track Record Period, invoices issued by our Group are due on presentation and no credit term was granted. As at 30 June 2016 and 2017 and 31 October 2017, we had accounts receivable of RM0.3 million, RM0.9 million and RM0.2 million, respectively. The following table sets out the breakdown of our accounts receivable as at 30 June 2016 and 2017 and as at 31 October 2017: As at 30 June As at 31 October RM RM RM Accounts receivable 263, , ,239 Less: impairment of accounts receivable (32,900) 263, , ,239 Our accounts receivable increased by RM0.6 million from RM0.3 million as at 30 June 2016 to RM0.9 million as at 30 June 2017, representing an increase of 230.9%. The increase in accounts receivable was primarily due to the increase in number of students who were unable to pay their tuition fees on time and they agreed to settle the outstanding amounts by instalments. Our accounts receivable decreased by RM0.7 million from RM0.9 million as at 30 June 2017 to RM0.2 million as at 31 October 2017, representing a decrease of 72.2%. The decrease in accounts receivable was primarily due to more stringent credit policy enforced by our Group. The table below sets out an analysis of accounts receivable by age presented based on the invoice date at the end of each period: As at 30 June As at 31 October RM RM RM Within 1 month 125,393 24,281 44,323 1 to 2 months 28, ,218 23,714 2 to 3 months 7,943 87,854 20,045 Over 3 months 101, , , , , ,

253 FINANCIAL INFORMATION The below table reconciled the impairment loss of trade debtors for each year/period: As at 30 June As at 31 October RM RM RM Balance at the beginning of the year/period 32,900 Impairment loss recognised 32,900 Bad debts written off (32,900) Balance at the end of the year/period 32,900 Accounts receivable that were past due but not impaired related to a number of students that have a good track record of credit with our Group. Our Group adopts an internal account receivable monitoring process to ensure effective credit control system is in place to reduce bad debts. Our accounts executive will prepare the monthly debtors aging for the accounts & finance manager s review, our accounts & finance manager will then discuss the overdue payment with the Bursary Department, which will communicate with the students for collection and issue of payment reminders. Furthermore, our Group reserves right to impose a late payment charge of 5.0% per annum on all outstanding fees which have not been paid by the 7th day from the due date according to revised credit policy. The following table sets out our accounts receivable turnover days for the Track Record Period: Year ended 30 June Four months ended 31 October Accounts receivable turnover days Note: Trade receivables turnover days were calculated based on the closing accounts receivables divided by revenue for the relevant years/period multiplied by 365/123 Our accounts receivable turnover days increased from 5.1 days as at 30 June 2016 to 10.7 days as at 30 June 2017 primarily due to the increase in accounts receivable as a result of the increase in number of students who were unable to pay their tuition fees on time as at 30 June Our accounts receivable turnover days increased from 10.7 days as at 30 June 2017 to 13.9 days as at 31 October 2017 primarily due to summer vacation of our school between July and August of each year which sees later payment of our school fees by our students. As at Latest Practicable Date, 98.2% of accounts receivable as at 31 October 2017 have been settled after the Track Record Period. Our accounts receivable are monitored continuously and evaluated on an individual basis with respect to the appropriate follow-up actions to be taken, taking into consideration the students normal payment practice and payment history and our Group s relationship with the students. During the Track Record Period, follow-up actions taken by the Group for receiving long-overdue payments included issue of payment reminders and active communications with the students. 246

254 FINANCIAL INFORMATION Prepayments, deposits and other receivables Our prepayments, deposits and other receivables represent rental prepayment, insurance prepayment, Listing expenses prepayment, utilities deposits and other receivables. As at 30 June 2016 and 2017 and as at 31 October 2017, we had prepayments, deposits and other receivables of RM0.4 million, RM0.6 million and RM2.0 million, respectively. The following table sets out the breakdown of our prepayments, deposits and other receivables as at 30 June 2016 and 2017, and as at 31 October 2017: As at 30 June As at 31 October RM RM RM Prepayments 30, ,591 1,328,742 Deposits 196, , ,893 Other receivables 146, , , , ,992 1,953,648 Our prepayments, deposits and other receivables increased from RM0.4 million as at 30 June 2016 to RM0.6 million as at 30 June 2017 primarily due to the Listing expenses prepayment of RM0.1 million as at 30 June Our prepayments, deposits and other receivables increased from RM0.6 million as at 30 June 2017 to RM2.0 million as at 31 October 2017 primarily due to the increase in the prepayment of the Listing expenses of RM0.8 million for the four months ended 31 October Amount due from a shareholder Our amount due from a shareholder was nil, RM2,209 and nil as at 30 June 2016 and 2017, and 31 October For details of our amount due from a shareholder, see Note 21 to the accountant s report included in Appendix I to this prospectus. 247

255 FINANCIAL INFORMATION Amounts due from related companies The following table sets out the breakdown of our amounts due from related companies as at 30 June 2016 and 2017 and as at 31 October 2017: Related parties Relationship Nature of transaction As at 30 June B&G Global Property Sdn. Bhd. BGMC Corporation Kingsley Hills Modular Construction Technology Sdn. Bhd. One City Properties Sdn. Bhd. Sky Park Properties Sdn. Bhd. Dato Danny Goh is a director of the related party Tan Sri Barry Goh is a director of the related party Dato Danny Goh is a director of the related party Tan Sri Barry Goh is a director of the related party Tan Sri Barry Goh is a director of the related party Tan Sri Barry Goh is a director of the related party As at 31 October RM RM RM Provision of training 1,015,925 Provision of training 4,500 Liquidated and ascertained damages and other expense payments 5,114,447 7,371,300 Provision of training 2,558 Provision of training 3,836 Provision of training 5,115 1,015,925 5,130,456 7,371,300 Our Group was entitled to RM5.1 million and RM7.4 million of liquidated and ascertained damages as at 30 June 2017 and 31 October 2017 from Kingsley Hills as a result of the delay in completion of Annex Building. Kingsley Hills has irrevocably confirmed that it will pay the liquidated and ascertained damages. For further information on the reason for delay in completion of Annex Building, please refer to the sub-section headed Business Campus, Annex Building and Facilities Reason for delay in completion of Annex Building of this prospectus. Our amounts due from related companies were unsecured, interest-free, repayable on demand and will be fully settled before Listing. Our Directors believe that each of the related party transactions set out above was conducted in the ordinary course of business on an arm s length basis. For details of our amounts due from related companies, see Note 21 to the accountant s report included in Appendix I to this prospectus. 248

256 FINANCIAL INFORMATION Tax recoverable Our tax recoverable represents the excess of the provisional tax paid over the estimated tax liabilities. As at 30 June 2016 and 2017 and 31 October 2017, we had tax recoverable of RM141.3 thousand, RM76.7 thousand and nil, respectively. Accounts payable Our accounts payable represents payable to our food and beverage suppliers and commission payable. As at 30 June 2016 and 2017 and 31 October 2017, we had accounts payable of RM0.4 million, RM0.6 million and RM0.6 million, respectively. The normal credit terms granted to our Group range from 15 to 30 days and 0 to 30 days for each of the years ended 30 June 2016 and 2017 and 0 to 30 days for the four months ended 31 October 2017, respectively. Our accounts payable increased from RM0.4 million as at 30 June 2016 to RM0.6 million as at 30 June 2017 which was in line with the corresponding increase in food and beverage under cost of revenue from RM0.8 million for the year ended 30 June 2016 to RM1.5 million for the year ended 30 June Our accounts payable remained relatively stable as at 31 October 2017 amounted to RM0.6 million. As at Latest Practicable Date, 86.7% of accounts payable as at 31 October 2017 have been settled by us after the Track Record Period. Other payables and accruals Our other payables and accruals represent accruals, deposit refundable to students, other payables and receipt in advance. As at 30 June 2016 and 2017 and as at 31 October 2017, we had other payables and accruals of RM3.6 million, RM5.9 million and RM14.4 million, respectively. The following table sets out the breakdown of our other payables and accruals as at 30 June 2016 and 2017: As at 30 June As at 31 October RM RM RM Accruals 193,166 1,009,914 1,118,381 Deposit refundable to students 2,507,682 3,400,012 3,552,380 Deferred revenue 3,368,421 Other payables 355, , ,523 Receipt in advance 543,867 1,128,316 6,007,558 3,600,090 5,906,907 14,389,263 Our other payables and accruals increased by RM2.3 million or 64.1% from RM3.6 million as at 30 June 2016 to RM5.9 million as at 30 June 2017 primarily due to the accruals in relation to the Listing expenses of RM0.4 million as at 30 June 2017 and the increase in deposit refundable to students by RM0.9 million due to the increase in number of students enrolled. 249

257 FINANCIAL INFORMATION Our other payables and accruals increased by RM8.5 million or 143.6% from RM5.9 million as at 30 June 2017 to RM14.4 million as at 31 October 2017 primarily due to tuition fees we have received in advance before the commencement of term 2 and term 3 for the 2017/2018 academic year and deferred revenue in relation to tuition fees for term 1 which has not yet been fully recognised as at 31 October Deposit refundable to students Our deposit refundable to students represents deposit monies we received from our students upon enrolment. Such deposit is refundable to our students upon (i) graduation; or (ii) withdrawal as stated in the admission form. As at 30 June 2016 and 2017 and as at 31 October 2017, we had deposit refundable to students of RM2.5 million, RM3.4 million and RM3.6 million, respectively. Amounts due to related companies Trade in nature The following table sets out the breakdown of our amounts due to related companies that were trade in nature as at 30 June 2016 and 2017 and as at 31 October 2017: Related parties Relationship Nature of transaction As at 30 June Current Ecity Hotel Sdn. Bhd. Tan Sri Barry Goh is a controlling shareholder of the related party Provision of accommodation to our students As at 31 October RM RM RM 66,000 Non-current Kingsley Hills Dato Danny Goh is a director of the related party Unpaid construction expenses 24,337,642 25,592,113 29,092,113 Prior to the Track Record Period, we entered into an agreement with Kingsley Hills for the construction of the KIS Campus and KIS Annex Building. For further information on KIS Campus and KIS Annex Building, please refer to the sub-section headed Business KIS Campus, KIS Annex Building and Facilities of this prospectus. Our amount due to Ecity Hotel Sdn. Bhd. was unsecured, interest-free, repayable on demand and was fully settled as at Latest Practicable Date. Our amount due to Kingsley Hills represents unpaid construction expenses of the buildings being constructed in Malaysia, which were unsecured, interest-free and repayable within three years after the handover date of the buildings. Our Directors believe that each of the related party transactions set out above was conducted in the ordinary course of business on an arm s length basis. For details of our amounts due to related companies, see Note 24 to the accountant s report included in Appendix I to this prospectus. 250

258 FINANCIAL INFORMATION Non-trade in nature The following table sets out the breakdown of our amounts due to related companies that were non-trade in nature as at 30 June 2016 and 2017 and as at 31 October 2017: Related parties Relationship As at 30 June Current Kingsley Hills BGMC Corporation Dato Danny Goh is a director of the related party Tan Sri Barry Goh is a director of the related party As at 31 October RM RM RM 5,863,171 1,103,147 The abovementioned amounts due to related companies were non-trade in nature, unsecured, interest-free, repayable on demand. As at 31 October 2017, we did not have any outstanding amounts due to related companies. For details of our amounts due to related companies, see Note 24 to the accountant s report included in Appendix I to this prospectus. Amount due to a director Our amount due to a director represents amount due to Tan Sri Barry Goh which was non-trade related, unsecured, interest-free, repayable on demand. We had amount due to a director of RM3.2 million, nil and nil as at 30 June 2016 and 2017 and 31 October Amounts due to shareholders Amounts due to shareholders are non-trade related, unsecured, interest-free and repayable on demand. For details of the amounts due to shareholders, please refer to Note 24 to the accountant s report included in Appendix I to this prospectus. Borrowings For details of borrowing, please refer to the paragraph headed Indebtedness in this section. Tax payable Our tax payable amounted to nil and nil as at 30 June 2016 and 2017 and RM75,894 as at 31 October Obligations under finance leases Our Group leases certain motor vehicles which are classified as finance leases as the rental period amounts to the estimated useful economic life of the assets concerned and often our Group has the right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount. Our Group had obligation under finance leases of RM0.2 million, RM0.1 million and nil as at 30 June 2016 and 2017 and 31 October

259 FINANCIAL INFORMATION The following table sets out our obligation under finance leases as at 30 June 2016 and 2017 and as at 31 October 2017: As at 30 June As at 31 October RM RM RM Current Obligations under finance leases 33,611 35,425 Non-current Obligations under finance leases 120,067 84, , ,067 The effective interest rates of our obligations under finance leases as at 30 June 2016 and 2017 and as at 31 October 2017 were 4.96% per annum. Deferred tax liabilities As at 30 June 2016 and 2017 and as at 31 October 2017, we had deferred tax liabilities of nil, RM8,209 and nil, respectively. As at 30 June 2016, 30 June 2017 and 31 October 2017, we had unused tax losses of RM4.5 million, RM3.7 million and RM4.3 million available for offset against future profits respectively. A deferred tax asset of RM0.4 million, RM0.9 million and RM0.9 million has been recognised in respect of unused tax losses of approximately RM1.6 million, RM3.5 million and RM3.8 million respectively. No deferred tax has been recognised in respect of the remaining unused tax losses of RM2.9 million, RM0.1 million and RM0.5 million respectively, due to unpredictability of future profit streams. The unused tax losses can be carried forward indefinitely. As at 30 June 2016, 30 June 2017 and 31 October 2017, we had unutilised capital allowances of RM5.6 million, RM2.8 million and RM3.8 million available for offset against future profits respectively. A deferred tax asset of RM1.3 million and RM0.6 million and RM0.9 million has been recognised in respect of unutilised capital allowances of approximately RM5.5 million, RM2.7 million and RM3.6 million respectively. No deferred tax has been recognised in respect of the remaining unutilised capital allowances of RM0.1 million, RM0.1 million and RM0.1 million respectively, due to unpredictability of future profit streams. The unutilised capital allowances can be carried forward indefinitely. Capital allowance is a term used by Malaysian income tax authority, which carries the same meaning as tax depreciation as provided in Paragraph 17(b) of IAS 12 Income Taxes in determining taxable profit of the current and prior periods As at 30 June 2016, 30 June 2017 and 31 October 2017, we have unused investment tax allowance of RM86.0 million available for offset against future profits respectively. No deferred tax has been recognised in respect of the investment tax allowance of RM86.0 million as at 30 June 2016 due to unpredictability of future profit streams. As at 30 June 2017 and 31 October 2017, a deferred tax asset RM2.0 million and RM2.3 million has been recognised in respect of investment tax allowance of approximately RM8.3 million and RM9.6 million respectively. No deferred tax has been recognised in respect of the remaining investment tax allowance of RM77.7 million and RM76.4 million respectively, 252

260 FINANCIAL INFORMATION due to unpredictability of future profit streams. The unused investment tax allowance can be carried forward indefinitely. For details of our deferred tax liabilities, see Note 28 to the accountant s report included in Appendix I to this prospectus. INDEBTEDNESS At the close of business on 28 February 2018, being the latest practicable date on which such information was available to us, our Group had outstanding indebtedness comprising secured bank borrowings of RM88.6 million, which were secured by (i) personal guarantee by Tan Sri Barry Goh and Dato Danny Goh, Directors of our Company, (ii) open charge on a piece of land PT36307 belonging to Kingsley Hills, a related company, (iii) corporate guarantee by B&G Capital, a related company for RM70,000,000, (iv) debenture incorporating fixed and floating charge over all the Kingsley International s assets and undertakings, both present and future; and (v) pledged bank deposit of RM0.5 million. All of the abovementioned guarantees and securities will be replaced and substituted by corporate guarantees provided by our Company upon Listing and there are no material covenants relating to these outstanding indebtedness. We have unutilised banking facility of RM7.5 million as at 28 February As at 30 June 2016 and 2017, 31 October 2017 and 28 February 2018, we had secured bank borrowings of RM65.5 million, RM69.6 million, RM69.6 million and RM88.6 million, respectively. The table below sets out breakdown of our secured bank borrowings as at 30 June 2016 and 2017, 31 October 2017 and 28 February 2018: As at 30 June As at 31 October As at 28 February RM RM RM RM (Unaudited) Current Revolving loan 19,697,397 Term loan I due for repayment within one year 5,922,212 Term loan II due for repayment within one year 1,750,000 2,750,000 3,250,500 Less: unamortised debt issuance cost (45,050) (45,050) (45,050) Total current 5,922,212 1,704,950 2,704,950 22,902,847 Non-current Term loan I 59,616,338 Term loan II 68,250,000 67,250,000 65,999,500 Less: unamortised debt issuance cost (371,662) (356,645) (341,629) Total non-current 59,616,338 67,878,338 66,893,355 65,657,

261 FINANCIAL INFORMATION The table below sets out a breakdown of our secured bank borrowings as at 30 June 2016 and 2017 and as at 31 October 2017 and 28 February 2018 by scheduled repayment date the amount only includes the actual drawdown from the credit facility: As at 30 June As at 31 October As at 28 February RM RM RM RM (Unaudited) Within one year 5,922,212 1,750,000 2,750,000 22,947,897 More than one year, but not exceeding two years 6,396,279 3,584,500 3,918,500 4,501,500 More than two years, but not exceeding five years 22,569,610 19,919,500 21,585,500 23,002,500 After five years 30,650,449 44,746,000 41,746,000 38,495,500 65,538,550 70,000,000 70,000,000 88,947,397 Term loan I was repayable in 120 monthly installments of RM916,077 each commencing in December Term loan I was interest-bearing at the banks base lending rate plus 1.25% per annum on monthly rests. The average interest rates of our Group s bank borrowings as at 30 June 2016 granted under banking facilities is 8.10% per annum. On 20 October 2016, Term loan I was fully refinanced by Term loan II, which is repayable in 108 monthly installments commencing in December Term loan II is interest-bearing at the bank s monthly cost of fund rate plus 2.00% per annum on monthly rests. The average interest rates of Term loan II as at 30 June 2017, 31 October 2017 and 28 February 2018 is 5.36%, 5.8% and 6.01% per annum, respectively. Our Group has drawn down a revolving facility of RM27.0 million from an independent commercial bank in February 2018 for general working purpose. The revolving facility carries an effective interest rate of 4.75% per annum which is subject to fluctuation of the bank s cost of fund rate. Each drawdown of the revolving loan may be for a tenure of up to 12 months subject to the agreement between the Group and the bank, while the whole facility shall be fully settled within 24 months after the first drawdown. Our Group has utilised the aforesaid facility to settle the remaining balance for the BGMC Contract Works in the amount of RM26.8 million in February 2018, and has subsequently partially repaid the said revolving facility with its own funds in the amount of RM7.37 million. Our Group intends to settle the remaining balance of the aforesaid facility with its own funds. Please refer to section headed Statement of Business Objectives and Use of Proceeds for details. CONTINGENT LIABILITIES As at the Latest Practicable Date, we were not involved in any legal proceedings pending or, to our knowledge, threatened against our Group which could have a material adverse effect on our business or operations. Our Directors confirm that as at the Latest Practicable Date, we did not have any material contingent liabilities. 254

262 FINANCIAL INFORMATION CAPITAL EXPENDITURES AND COMMITMENTS Capital expenditures Our capital expenditures during the Track Record Period primarily related to the construction of KIS Campus and KIS Annex Building. Our capital expenditures for the years ended 30 June 2016 and 2017 and the four months ended 31 October 2017 amounted to RM13.1 million, RM2.1 million and RM4.2 million, respectively. For details of our capital expenditures, see Note 17 to the accountant s report included in Appendix I to this prospectus. Capital commitments Our capital commitments primarily relate to the construction of KIS Campus and KIS Annex Building. The following table sets out a summary of our capital commitments as at 30 June 2016 and 2017 and as at 31 October 2017: As at 30 June As at 31 October RM RM RM Commitments for the acquisition of property, plant and equipment 27,280,358 26,025,887 22,525,887 OPERATING LEASE COMMITMENTS Our operating lease payments represent rentals payable by our Group for certain of our leased properties. Leases are negotiated for terms from one year to fifty years at fixed rentals. Our operating lease commitments represent the minimum lease payments under non-cancellable operating leases. We had operating lease commitments of RM3.9 million as at 30 June 2016, RM3.6 million as at 30 June 2017 and RM3.6 million as at 31 October As lessor As at 31 October 2017, our Group leased its properties under operating lease arrangements which run for an initial period of two years. As at 30 June 2016 and 2017 and as at 31 October 2017, our Group had total future minimum lease receivables in respect of leased properties under noncancellable lease as follows: As at 30 June As at 31 October RM RM RM Not later than one year 18,000 13,500 Later than one year and not later than five years 1,500 19,500 13,500 As lessee Operating lease payments represent rentals payable by our Group for certain of its lease properties. Leases are negotiated for terms between one year to fifty years at fixed rentals. 255

263 FINANCIAL INFORMATION As at 30 June 2016 and 2017 and as at 31 October 2017, our Group had operating lease commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: As at 30 June As at 31 October RM RM RM Not later than one year 369, , ,632 Later than one year and not later than five years 554, , ,457 Later than five years 2,985,865 2,923,005 2,902,051 3,910,263 3,552,107 3,582,140 On 19 April 2018, Kingsley International and Kingsley Hills entered the Sale and Purchase Agreement in relation to the KIS Annex Land upon which the KIS Annex Building is being constructed. The land will be transferred to the Group at a nominal consideration at RM10 upon completion of the construction in progress, the initial lease arrangement with respect to the land was then ceased to apply. 256

264 FINANCIAL INFORMATION RELATED PARTY TRANSACTIONS During the Track Record Period, other than the personal guarantee provided by our Controlling Shareholders as disclosed in the sub-section headed Indebtedness of this section and the remuneration of Directors and senior management as disclosed in Note 33 to the accountants report included in Appendix I to this prospectus, we entered into the following significant transactions with related parties: Related parties Relationship Nature of transaction Year ended 30 June Four months ended 31 October B&G Global Property Sdn. Bhd. B&G Global Property Sdn. Bhd. BGMC Corporation Ecity Hotel Sdn. Bhd. Kingsley Hills Kingsley Hills Kingsley Hills Kingsley SEEDS Foundation Dato Danny Goh is a director of the related party Dato Danny Goh is a director of the related company Tan Sri Barry Goh is a director of the related party Tan Sri Barry Goh is a controlling shareholder of the holding company of the related party Dato Danny Goh is a director of the related party Dato Danny Goh is a director of the related party Dato Danny Goh is a director of the related party Tan Sri Barry Goh and Dato Danny Goh are directors of the related party Provision of training to the related party Provision of training (not related to our international school and tertiary education programmes) to related party Provision of training to the related party Provision of accommodation by the related party Liquidated and ascertained damages from the related party Construction expenses to the related party Acquisition of land from the related party Scholarships provided by the related party to our students RM RM RM RM (Unaudited) 473,925 23,925 23, ,000 23,242 48,609 28,029 17, ,140 8,440 6,000 4,560,000 5,475,000 1,845,000 1,845,000 11,460,545 1,254,471 2,158,618 3,500, ,457 17,866,169 6,918,155 4,064,012 5,359,750 Saved for the liquidated and ascertained damage from Kingsley Hills and the construction expenses to Kingsley Hills under the turnkey contract as disclosed in the sub-section headed Controlling Shareholder and Connected Persons One-off transaction, we expect to discontinue the aforesaid related parties transactions. 257

265 FINANCIAL INFORMATION During the Track Record Period, our Group provided training such as Microsoft excel and project series and Business English to B&G Global Property Sdn. Bhd. and BGMC Corporation in the ordinary and usual course of business and on normal commercial terms, such transactions are fair and reasonable and are in the interest of our Company and our Shareholders as a whole. During the year ended 30 June 2016, Kingsley Seeds Foundation, a foundation partially sponsored by Tan Sri Barry Goh, provided scholarships to a number of our Kingsley International School students. The decision of awarding and the amount of award were entirely subject to the discretion of Kingsley Seeds Foundation. For further details, please refer to the sub-section headed Business Scholarships of this prospectus. It was our Group s commercial decision not to pay our Directors remuneration during the Track Record Period. Each of our executive Directors has entered into a service agreement with our Company for an initial term of three years commencing from the Listing Date subject to termination provisions contained therein. Each of our executive Directors is entitled to a basic salary. Each of our independent non-executive Directors has signed an appointment letter with our Company with an initial term of three years commencing from the Listing Date subject to termination provisions contained therein. Under the appointment letters, basic annual remuneration will be paid by our Company to our independent non-executive Directors. Our Directors believe that each of the related party transactions set out above and in Note 33 to the accountants report included in Appendix I to this prospectus were carried out on negotiated terms and conditions in the ordinary course of business and on an arm s length basis between the related party and our Group. OFF BALANCE SHEET ARRANGEMENTS During the Track Record Period and up to the Latest Practicable Date, save as disclosed herein, we had no other material off-balance sheet arrangements. CAPITAL RISK MANAGEMENT AND FINANCIAL RISK MANAGEMENT Capital risk management Our Group s objective of managing capital is to safeguard our Group s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital. Our Group monitors capital using gearing ratio, which is total debt to equity. Total debts include bank borrowings and finance lease obligation. Equity represents total equity of our Group. Our Directors actively and regularly reviews and manages our Group s capital structure, taking into consideration the future capital requirements of our Group, to ensure optimal shareholders returns. Our Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, our Group may adjust the amount of dividends paid to Shareholders, return capital to Shareholders, issue new shares and raise new debts or sells assets to reduce debt. 258

266 FINANCIAL INFORMATION Financial risk management The main risks arising from our Group s financial instruments in the normal course of our business are credit risk, liquidity risk and interest rate risk. For further details, please refer to Note 37 to the accountants report included in Appendix I to this prospectus. KEY FINANCIAL RATIOS Year ended 30 June Four months ended 31 October % % % Profitability ratios Gross profit margin (1) Netprofitmargin (2) (38.1) Return on equity (3) (8.0) Return on total assets (4) (1.7) Year ended 30 June Four months ended 31 October % % % Adjusted Profitability ratios Adjusted Net profit margin (8) Adjusted return on equity (8) Adjusted return of total assets (8) As at 30 June Four months ended 31 October Times Liquidity ratios Current ratio (5) Quick ratio (6) % % % Capital adequacy ratios Gearing ratio (7) Notes: 1. The calculation of gross profit margin is based on gross profit divided by revenue and multiplied by 100%. 2. The calculation of net profit margin is based on profit for the period divided by revenue and multiplied by 100%. 259

267 FINANCIAL INFORMATION 3. The calculation of return on equity is based on profit for the year/period attributable to the owners of the company divided by total equity and multiplied by 100%. 4. The calculation of return on total assets is based on profit for the year/period divided by total assets and multiplied by 100%. 5. The calculation of current ratio is based on current assets divided by current liabilities. 6. The calculation of quick ratio is based on current assets less inventories divided by current liabilities. 7. The calculation of gearing ratio is based on interest-bearing liabilities divided by total equity and multiplied by 100%. 8. The calculation of adjusted financial ratio excluding the Listing expenses. See the section headed Financial Information Results of Operation of Our Group for a discussion of the factors affecting our gross profit margin and net profit margin during the Track Record Period. Return on equity Our return on equity was 15.6%, 34.6% and (8.0%) for the year ended 30 June 2016 and 2017 and four months ended 31 October 2017, respectively. Our adjusted return on equity was 15.6%, 36.1% and 1.4% as at 30 June 2016 and 2017 and four months ended 31 October 2017, respectively. The increase of our return on equity from the year ended 30 June 2016 to the year ended 30 June 2017 was primarily due to the increase in our profit and total comprehensive income. The decrease in the four months ended 31 October 2017 was mainly due to the loss incurred for the period, which was primarily due to (i) the increase in staff cost; and (ii) the incur of Listing expenses. Return on total assets and adjusted return on total assets Our return on total assets was 2.6%, 8.4% and (1.7)% as at 30 June 2016 and 2017 and as at 31 October 2017, respectively. Our adjusted return on total assets was 2.6%, 8.8% and 0.2% for the year ended 30 June 2016 and 2017 and the four months ended 31 October 2017, respectively. The increase of our return on total assets between 30 June 2016 and 30 June 2017 was primarily due to the increase in our profit and total comprehensive income. The decrease of our return on total assets for the four months ended 31 October 2017 was primarily due to the loss in incurred for the period. Current ratio Our current ratio increased from 0.2 times as at 30 June 2016 to 1.7 as at 30 June 2017 primarily due to the increase in cash and cash equivalents of RM5.0 million and the decrease in current secured bank borrowings of RM4.2 million. Our current ratio decreased from 1.7 as at 30 June 2017 to 1.1 as at 31 October 2017 primarily due to tuition fees we have received in advance before the commencement of term 2 and term 3 the 2017/2018 academic year and deferred revenue in relation to tuition fee for term 1 which has not yet been fully recognised as at 31 October Quick ratio Our quick ratio is the same as current ratio during the Track Record Period because our Group did not hold any inventories. 260

268 FINANCIAL INFORMATION Gearing ratio Our gearing ratio decreased from 319.2% as at 30 June 2016 to 219.9% as at 30 June 2017 primarily due to the increase in retained earnings by RM11.0 million from RM2.3 million for the year ended 30 June 2016 to RM13.4 million for the year ended 30 June Our gearing ratio increased from 219.9% as at 30 June 2017 to 237.6% as at 31 October 2017 primarily due to the decrease in retained earnings by RM2.4 million from RM13.4 million for the year ended 30 June 2017 to RM11.0 million for the four months ended 31 October DIVIDENDS During the two years ended 30 June 2016 and 2017 and the four months ended 31 October 2017 and up to the Latest Practicable Date, no dividend has been paid or proposed by our Company. In future, declaration and payment of any dividends would require the recommendation of the Board and will be at their discretion. In addition, any final dividend for a financial year will be subject to Shareholders approval, but no dividend shall be declared in excess of the amount recommended by the Board. A decision to declare or to pay any dividend in the future, and the amount of any dividends, depends on a number of factors, including our results of operations, financial condition, the payment by our subsidiaries of cash dividends to us, and other factors the Board may deem relevant. There will be no assurance that our Company will be able to declare or distribute any dividend in the amount set out in any plan of the Board or at all. The dividend distribution record in the past may not be used as a reference or basis to determine the level of dividends that may be declared or paid by our Company in the future. As at the Latest Practicable Date, we did not have any specific dividend policy nor pre-determined dividend payout ratios. LISTING EXPENSES Assuming the Offer Price of HK$0.45 per Offer Share, being the mid-point of the indicative range of the Offer Price stated in this prospectus, the total amount of expenses in relation to the Listing are estimated to be approximately HK$27.5 million. During the Track Record Period, our Group incurred Listing expenses of approximately HK$8.4 million, of which HK$6.6 million was charged to our consolidated statement of profit or loss and HK$1.8 million was capitalized as prepayments that would be charged against equity upon Listing. We expect to incur an additional Listing expenses of approximately HK$19.1 million after 31 October 2017, of which HK$9.7 million is expected to be charged to our consolidated statements of profit or loss and HK$9.4 million is expected to be charged against equity upon Listing. EFFECT ON OUR FINANCIAL PERFORMANCE DUE TO LISTING EXPENSES Our net profit for the year ending 30 June 2018 will have a considerable reduction due to the incurrence of listing expenses during the year ending 30 June Our financial performance for the year ending 30 June 2018 will be affected by such expenses as compared with our financial performance for the year ended 30 June DISTRIBUTABLE RESERVE As at 31 October 2017, our Company had no reserves available for distribution to our Shareholders. 261

269 FINANCIAL INFORMATION UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS Please refer to Appendix II of this prospectus for the unaudited pro forma adjusted net tangible assets. DISCLOSURE UNDER RULES TO OF THE GEM LISTING RULES Our Directors confirm that as at the Latest Practicable Date, they were not aware of any circumstances that would give rise to a disclosure requirement under Rules to of the GEM Listing Rules. NO MATERIAL ADVERSE CHANGE Our Directors confirm that, up to the date of this prospectus, there has been no material adverse change in our financial, operational or trading position since 31 October 2017, being the end of the period reported on in the accountants report in Appendix I to this prospectus. 262

270 STATEMENT OF BUSINESS OBJECTIVES AND USE OF PROCEEDS BUSINESS OBJECTIVES AND STRATEGIES For a detailed description of our business objectives and strategies, please refer to the section headed Business Strategies in this prospectus. REASONS FOR OUR LISTING IN HONG KONG One of our main strategies to grow is to increase student enrollment and revenue source of the Kingsley International School. To achieve this goal, Our Kingsley International School intends to leverage on the boarding facilities and other new facilities of the KIS Annex Building which is expected to come into use in the first quarter of 2019 to attract both Malaysian and non-malaysian students. In addition, we will work with overseas partners and recruitment agents to attract international students from East Asia and other countries in South East Asia with emphasis on our relatively new campus and boarding options. In this regard, our Directors believe that Global Offering on the GEM in Hong Kong will enhance our profile and competitiveness, for the following reasons: (1) as Hong Kong is a hub of Asia, listing in Hong Kong would enhance our profile amongst prospective international students especially in East Asia and other countries in South East Asia. This is of particular importance to us. To the best of Directors knowledge and belief, we will become the first Malaysia-based education service provider to be listed on the Stock Exchange. The expected media coverage is expected enhance our brand awareness, which will in turn boost prospective students confidence in our education services; (2) although currently all of our business operations are in Malaysia, we believe an enhanced international profile brought about by the Listing will help differentiate ourselves from our counterparts in Malaysia and enable us to diversify our student base more effectively and contribute to our future expansion and business growth in both Malaysia and overseas. As at 31 October 2017, 26.7% of Kingsley International School students are non-malaysians. We believe that the prospective non-malaysian parents and students generally prefer an education service provider with international profile which will be enhanced by a listing status on the Stock Exchange; (3) while without concrete immediate expansion plan, we might grow into overseas market by establishing campus in overseas countries such as China. A listing status on Stock Exchange of Hong Kong will provide solid corporate image and potential post-listing financing for our possible expansion to overseas market. As an education service provider, if we intend to grow into overseas market by establishing campus, we will be required to devote significant capital investment for not only campus construction but also acquisition of land if desirable, start-up working capital for purchase of facilities and recruitment of quality academic staff. As such, listing on the Hong Kong Stock Exchange would provide a platform for our Group to access the capital market for future secondary fund raising; (4) investment in constructing the KIS Campus and the KIS Annex Building is capital intensive and the infrastructure, equipment and facilities had a long use life. Our Group has a longterm vision for the establishment and development of our schools. To build capacity and sustainability, our Directors consider that, given the long-term nature of the capital expenditure, it will be in the interests of our Group to finance the long-term capital expenditure (such as the construction of the KIS Annex Building) with equity financing which is long term in nature instead of bank borrowings; and 263

271 STATEMENT OF BUSINESS OBJECTIVES AND USE OF PROCEEDS (5) if our Group be able to finance a major part of its future capital expenditure for constructing the KIS Annex Building by way of equity financing, the finance cost of our Group will be less as compared to debt financing. In addition, in view of the increasing trend of interest rate, our Directors consider that the cost of debt financing might increase in the coming years. It would, therefore, be prudent to consider equity fund raising to finance the majority portion of the costs and expenses in connection with the construction of the KIS Annex Building. Despite that the total amount of expenses in relation to the Listing are estimated to be approximately HK$27.5 million including the underwriting commission (assuming mid-point of the indicative range of the Offer Price stated in this prospectus), the net proceeds from the Global Offering will be approximately HK$62.5 million, still applicable as now will be repayment of bank loan. Further our Directors believe that listing on GEM would provide a platform for our Group to access the capital market for future secondary fund raising through the issuance of shares and for debt securities to fund its further expansion and long-term development needs. This could involve lower financing cost as opposed to interest-bearing bank loans and enhance our Group s ability to obtain favourable terms of bank financing as a listed entity as compared to a private entity. Our Directors also believe that Listing will enhance the corporate governance practice of our Group in long term. Accordingly, our Directors believe that the Global Offering is beneficial to the future growth and development of our Group in the long-run. USE OF PROCEEDS Our Group estimates the net proceeds from the Global Offering based on the Offer Price of HK$0.45 per Share, being the mid-point of the indicative Offer Price range and after deducting the underwriting fees, commissions and estimated expenses payable by us in relation to the Global Offering, will be HK$62.5 million (assuming the Offer Size Adjustment Option is not exercised). approximately HK$29.9 million (representing approximately 47.8% of the net proceeds) will be used for renovation of the KIS Annex Building; approximately HK$23.8 million (representing approximately 38.1% of the net proceeds) will be used for settlement of fees for constructing the KIS Annex Building which mainly consists of dormitories and other facilities such as swimming pool, gymnasium and cafeteria; approximately HK$8.8 million (representing approximately 14.1% of the net proceeds) will be used for purchase of facilities for KIS Annex Building. If the final Offer Price is set at: (i) the low-end; or (ii) the high-end of the indicative Offer Price range, the net proceeds from the Global Offering, after deducting the underwriting fees, commissions and estimated expenses payable by us in relation to the Global Offering, are estimated to be (i) approximately HK$53.3 million; or (ii) approximately HK$71.7 million respectively (assuming the Offer Size Adjustment Option is not exercised). The net proceeds are intended to be used in the same proportions as disclosed above. To the extent that the net proceeds from the Global Offering are not immediately required for the above purposes, it is our present intention that such net proceeds be placed in short-term interest bearing deposit accounts held with authorized financial institutions in Hong Kong or Malaysia. 264

272 STATEMENT OF BUSINESS OBJECTIVES AND USE OF PROCEEDS IMPLEMENTATION PLANS We will endeavor to achieve the following milestone events during the period from the Latest Practicable Date to 30 June 2020, and their respective scheduled completion times are based on certain bases and assumptions as set out in the paragraph headed Bases and assumptions in this section. These bases and assumptions are inherently subject to many uncertainties and unpredictable factors, in particular the risk factors as set out under the section headed Risk Factors in this prospectus. Therefore, there is no assurance that our business plans will materialize in accordance with the estimated time frame and that our future plans will be accomplished at all. From the Latest Practicable Date to 30 June 2018 Objective Settlement of fees for constructing the KIS Annex Building Renovation of the KIS Annex Building Purchase of facilities for KIS Annex Building Implementation Plans Settlement of Kingsley Hills Contract Sum (Note) Sourcing quotes for renovation of KIS Annex Building and initial payment Sourcing quotes for purchase of facilities for KIS Annex Building and initial payment Use of proceeds (HK$ million) Nil (Note) 15.0 (Note) 4.4 (Note) Note: proceeds to be utilized for settlement of construction fee, renovation fee and purchase of facilities during the period might vary depending on the Handover Date For the six months ending 31 December 2018 Objective Settlement of fees for constructing the KIS Annex Building Renovation of the KIS Annex Building Purchase of facilities for KIS Annex Building Implementation Plans Nil (Note) Payment for renovation Payment for purchase of facilities for KIS Annex Building Use of proceeds (HK$ million) 20.3 (Note) 12.0 (Note) 3.5 (Note) Note: proceeds to be utilized for settlement of construction fee, renovation fee and purchase of facilities during the period might vary depending on the Handover Date 265

273 STATEMENT OF BUSINESS OBJECTIVES AND USE OF PROCEEDS For the six months ending 30 June 2019 Objective Settlement of fees for constructing the KIS Annex Building Renovation of the KIS Annex Building Purchase of facilities for KIS Annex Building Implementation Plans Nil (Note) Payment for the renovation (Note) Payment for purchase of facilities for KIS Annex Building Use of proceeds (HK$ million) 3.5 (Note) 2.9 (Note) 0.9 (Note) Note: proceeds to be utilized for settlement of construction fee, renovation fee and purchase of facilities might vary depending on the Handover Date For the six months ending 31 December 2019 Objective Settlement of fees for constructing the KIS Annex Building Renovation of the KIS Annex Building Purchase of facilities for KIS Annex Building Implementation Plans Nil (Note) Nil (Note) Nil (Note) Use of proceeds (HK$ million) Nil (Note) Nil (Note) Nil (Note) Note: proceeds to be utilized for settlement of construction fee, renovation fee and purchase of facilities during the period might vary depending on the Handover Date For the six months ending 30 June 2020 Objective Settlement of fees for constructing the KIS Annex Building Renovation of the KIS Annex Building Purchase of facilities for KIS Annex Building Implementation Plans Nil (Note) Nil (Note) Nil (Note) Use of proceeds (HK$ million) Nil (Note) Nil (Note) Nil (Note) Note: proceeds to be utilized for settlement of construction fee, renovation fee and purchase of facilities during the period might vary depending on the Handover Date Renovation of KIS Annex Building and purchase of facilities for KIS Annex Building Renovation of KIS Annex Building covers renovation of classroom, dormitories, gymnasium, lift lobby, maintenance office, staff office, cafeteria, toilet etc, which is expected to be partially funded by the use of proceeds. 266

274 STATEMENT OF BUSINESS OBJECTIVES AND USE OF PROCEEDS The net proceeds to be used over the period from the Latest Practicable Date up to 30 June 2020 is summarized as follows (after deducting the underwriting fees, commissions and estimated expenses payable by us in relation to the Global Offering, assuming the final Offer Price is set at the mid-point of the indicative Offer Price range and the Offer Size Adjustment Option is not exercised): From the Latest Practicable Date to 30 June 2018 For the six months ending 31 December 2018 For the six months ending 30 June 2019 For the six months ending 31 December 2019 For the six months ending 30 June 2020 Total Approximate percentage of net proceeds HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million % Settlement of fees for constructing the KIS Annex Building which consists of dormitories, classrooms and other facilities such as swimming pool, gymnasium and cafeteria Renovation of the KIS Annex Building Purchase of facilities for KIS Annex Building Total: BASES AND ASSUMPTIONS Potential investors should note that the attainability of our Group s business objectives depends on a number of assumptions, in particular: the Handover Date for the KIS Annex Building will be in the fourth quarter of 2018; there will be no material changes in the bases or rates of taxation in Malaysia and also our entitlement to income tax allowance under (1) Investment Tax Allowance (ITA) under Promotion of Investment Act, 1986; and (2) Industrial Building Allowance ( IBA ) under Income Tax Act 1967; there will be no material changes in the existing political, legal, fiscal, social or economic conditions in the jurisdictions in which we carry out our operation; there will be no material changes with respect to the relationship with our customers and suppliers; there will be no outbreak of contagious diseases or occurrence of force majeure events or natural disasters in the jurisdictions in which we carry out our operation, which would materially disrupt our business operations; we will have sufficient financial resources to meet the planned capital expenditure and business development requirements during the period to which the business objectives relate; 267

275 STATEMENT OF BUSINESS OBJECTIVES AND USE OF PROCEEDS there will be no material changes in legislation or regulations in Malaysia or elsewhere materially affecting the business carried on by our Group; the Global Offering will be completed as described in the section headed Structure of the Global Offering in this prospectus; there will be no material changes in the funding required for each of the scheduled achievements as outlined under the paragraphs headed Use of Proceeds and Implementation Plans in this section; and we will not be materially affected by the risk factors as set out in the section headed Risk Factors in this prospectus. 268

276 CORNERSTONE INVESTOR CORNERSTONE PLACING As part of the International Placing, we have entered into a cornerstone investment agreement (the Cornerstone Investment Agreement ) with the Cornerstone Investor, Sole Sponsor and Joint Global Coordinators, pursuant to which the Cornerstone Investor has agreed to subscribe for or purchase, at the Offer Price, such number of Offer Shares (rounded down to the nearest whole board lot of 5,000 Shares) that may be purchased for an amount of HK$15 million (the Cornerstone Placing ). The tables below sets forth a summary of the number of International Placing Shares that would be subscribed based on the low-end, mid-point and high-end of the indicative range of the Offer Price respectively: Percentage to the Indicative range Offer Price Maximum number of Shares (rounded down to the nearest whole board lot of 5,000 Shares) agreed to be subscribed for Percentage to the initial number of our International Placing Shares (1) Percentage to the initial number of our Offer Shares (1) enlarged number of Shares in issue immediately upon completion of the Global Offering and the Capitalisation Issue (1) Low-end... HK$ ,500, % 18.75% 4.69% Mid-point... HK$ ,330, % 16.67% 4.17% High-end... HK$ ,000, % 15.00% 3.75% Note: (1) The percentages are based on such number of Shares without taking into consideration our Shares that may be issued pursuant to the exercise of the Offer Size Adjustment Option. To the best knowledge of our Directors, the Cornerstone Investor is independent from our Company, our connected persons and our associates. The Cornerstone Investor will not subscribe for any Offer Shares under the Global Offering other than pursuant to the Cornerstone Investment Agreement. Immediately following the completion of the Global Offering, the Cornerstone Investor will not have any board representation in our Company, nor will the Cornerstone Investor become a substantial shareholder of our Company. The Offer Shares to be subscribed by the Cornerstone Investor will rank pari passu with the fully paid Shares then in issue and to be listed on the Stock Exchange and will be counted towards the public float of our Shares. No special rights have been granted to the Cornerstone Investor as part of the Cornerstone Placing. The Cornerstone Placing forms part of the International Placing. The total number of Offer Shares to be purchased by the Cornerstone Investor will not be affected by reallocation of the Offer Shares between the International Placing and the Hong Kong Public Offer in the event of excess demand under the Hong Kong Public Offer as described in the section headed Structure and conditions of the Global Offering The Hong Kong Public Offer Reallocation in this prospectus. In the event that the requirement pursuant to Rule 11.23(8) of the GEM Listing Rules (i.e. no more than 50% of our Shares in public hands at the time of listing can be beneficially owned by the three largest public shareholders) cannot be satisfied by our Company, the Joint Global Coordinators and our Company have the right to adjust the allocation of the number of International Placing Shares on prorata basis to be subscribed by the Cornerstone Investor. Details of the allocations to the Cornerstone Investor will be disclosed in the announcement of results of allocations in the Hong Kong Public Offer which is expected to be published on 15 May

277 CORNERSTONE INVESTOR INFORMATION OF CORNERSTONE INVESTOR The following sets forth a brief description of our Cornerstone Investor: Mountain High Capital Ltd (the Cornerstone Investor ) Cornerstone Investor is a limited liability company established in the British Virgin Islands in May Cornerstone Investor is a company principally engaged in investment holding and is ultimately and beneficially owned by Tan Sri Lim Wee Chai who is the chairman of Top Glove Corporation Berhad, a company listed on Kuala Lumpur Stock Exchange and Singapore Exchange, which was principally engaged in producing rubber gloves. Tan Sri Lim Wee Chai is also deputy chairman and director of Tropicana Corporation Berhad, a company listed on the main board of Bursa Malaysia Securities Berhad which is principally engaged in property development business. No special right is granted to the Cornerstone Investor under the Cornerstone Investment Agreement. Based on the above, the Company is of the view, and the Sole Sponsor concurs, that other than guaranteed allocation of the Offer Shares under Cornerstone Placing, no preferential treatment will be given to the Cornerstone Investor pursuant to the transactions contemplated under the Cornerstone Investment Agreement. CONDITIONS PRECEDENT The obligation of the Cornerstone Investor to subscribe for the Offer Shares is subject to the following conditions precedent summarised as follows: (1) the Hong Kong Underwriting Agreement and International Underwriting Agreement being entered into and having become effective and unconditional (in accordance with the original terms or as subsequently waived or varied by agreement of the parties thereto) by no later than the time and date as specified in the Underwriting Agreements; (2) neither of the Underwriting Agreements having been terminated; (3) the Stock Exchange having granted the listing of, and permission to deal in, the Shares (including the Shares to be issued and allotted under Cornerstone Placing) and that such approval or permission having not been revoked; (4) no laws shall have been enacted or promulgated which prohibit the consummation of the transactions contemplated in the Hong Kong Public Offer, the International Placing or the Cornerstone Investment Agreement and there shall be no orders or injunctions from a court of competent jurisdiction in effect precluding or prohibiting consummation of such transactions; and (5) the respective representations, warranties, undertakings and confirmations of the respective Cornerstone Investor are accurate and true in all material respects and that there is no material breach of the Cornerstone Investment Agreement on the part of the Cornerstone Investor. RESTRICTIONS ON THE CORNERSTONE INVESTOR S INVESTMENT The Cornerstone Investor has agreed that, without the prior written consent of our Company and the Joint Global Coordinators, it will not, whether directly or indirectly, at any time during the period of 270

278 CORNERSTONE INVESTOR six months starting from and inclusive of the Listing Date, dispose of any of the Offer Shares subscribed for by it pursuant to the Cornerstone Investment Agreement or any interest in any company or entity holding thereof, nor will it agree or contract to, or publicly announce any intention to enter into a transaction with a third party for disposal thereof, other than transfers to any wholly-owned subsidiary of the Cornerstone Investor provided that such wholly-owned subsidiary undertakes to, and the Cornerstone Investor undertakes to procure that such wholly-owned subsidiary will, be bound by the restrictions on disposals imposed on the Cornerstone Investor. 271

279 UNDERWRITING HONG KONG UNDERWRITERS China Everbright Securities (HK) Limited Sinolink Securities (Hong Kong) Company Limited Sinomax Securities Limited UNDERWRITING ARRANGEMENTS AND EXPENSES Hong Kong Underwriting Agreement Pursuant to the Hong Kong Underwriting Agreement, our Company has agreed to offer the Hong Kong Public Offer Shares for subscription by the public in Hong Kong on and subject to the terms and conditions of this prospectus and the Application Forms. Subject to, among other conditions, the granting of the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus by the Listing Committee and to certain other conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters have agreed to subscribe or procure subscribers for their respective applicable proportions of the Hong Kong Public Offer Shares now being offered which are not taken up under the Hong Kong Public Offer on the terms and conditions of this prospectus, the Application Forms and the Hong Kong Underwriting Agreement. The Hong Kong Underwriting Agreement is conditional on and subject to the Hong Kong Underwriting Agreement having been signed and becoming unconditional and not having been terminated in accordance with its terms. Grounds for termination The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for the Hong Kong Public Offer Shares are subject to termination if certain events, including force majeure, shall occur at any time at or before 8:00 a.m. (Hong Kong time) on the Listing Date. Each of the Sole Sponsor and the Joint Global Coordinators (for themselves and on behalf of the Hong Kong Underwriters) have the right, in its sole and absolute discretion, upon giving notice orally or in writing to our Company, without liability to any or all of the parties hereto terminate this Agreement with immediate effect at any time prior to 8:00 am on the Listing Date upon the occurrence of any of the following events: (a) there has come to the notice of the Sole Sponsor or the Joint Global Coordinators: (i) (ii) that any statement contained in any of this prospectus, the Application Forms and the formal notice (including any supplement or amendment thereto) or any other document to be published by our Company in connection with the Hong Kong Public Offer was, when it was issued, or has become, untrue, incorrect, inaccurate or misleading, or that any forecasts, expressions of opinion, intention or expectation expressed in the this prospectus, the Application Forms, the formal notice and/or any announcements issued by our Company in connection with the Hong Kong Public Offer (including any supplement or amendment thereto) are not fair and honest nor based on reasonable assumptions; or that any matter has arisen or has been discovered which would, had it arisen or been discovered immediately before the date of this prospectus, not having been disclosed in this prospectus result in a misstatement in, constitute an omission therefrom, any of 272

280 UNDERWRITING this prospectus, the Application Forms, the formal notice and/or any announcements issued by our Company in connection with the Hong Kong Public Offer (including any supplement or amendment thereto); or (iii) (iv) (v) (vi) (vii) any breach of any of the obligations, warranties or undertakings imposed upon any party to the Hong Kong Underwriting Agreement (other than any of the Hong Kong Underwriters or the International Underwriters); or any event, act or omission which gives or is likely to give rise to any liability of any of our Company, our Controlling Shareholders or the executive Directors pursuant to the terms of the Hong Kong Underwriting Agreement; or any adverse change or development involving an adverse change or a prospective adverse change in the earnings, business, operations, assets, liabilities, conditions, business affairs, prospects, profits, losses or financial or trading position or performance of any member of our Group; or any breach of any of the warranties or undertakings given by any of our Company, our Controlling Shareholders or the executive Directors under the Hong Kong Underwriting Agreement or the International Underwriting Agreement or any matter or event showing any of such warranties or undertakings to be untrue, incorrect, inaccurate or misleading in any respect when given or repeated; or approval by the Listing Committee of the listing of, and permission to deal in, the Shares in issue and to be issued or sold under the Global Offering or the Share Option Scheme is refused or not granted, other than subject to customary conditions, on or before the Listing Date, or if granted, the approval is subsequently withdrawn, qualified (other than by customary conditions) or withheld; or (viii) our Company withdraws this prospectus (and any other documents used in connection with the contemplated subscription of the Offer Shares) or the Global Offering; or (ix) any loss or damage sustained by any member of our Group (howsoever caused and whether or not the subject of any insurance or claim against any person); or (b) there develops, occurs, exists or comes into force: (i) any act of force majeure or any event, or series of events, beyond the control of the Sole Sponsor or the Joint Global Coordinators including, without limitation, acts of government, economic sanctions, strikes, lock-outs, fire, explosion, flooding, civil commotion, riots, public disorder, acts of war, acts of God, acts of terrorism, outbreak of diseases or epidemics (including, but not limited to, SARS and H5N1 and such related/ mutated forms) or interruption or delay in transportation and any local, national, regional or international outbreak or escalation of hostilities (whether or not war is or has been declared) or any other state of emergency or calamity or crisis in or affecting Malaysia, Hong Kong, the PRC, the United States, Canada, the European Union, the United Kingdom, Australia, the British Virgin Islands, the Cayman Islands, Japan, Singapore or any other jurisdiction relevant to any member of our Group (collectively, the Relevant Jurisdictions ); or 273

281 UNDERWRITING (ii) (iii) (iv) (v) (vi) (vii) any change or development involving a prospective change or development, or any event or series of events likely to result in any change or development involving a prospective change, in local, national, regional or international financial, economic, political, military, industrial, fiscal, regulatory, currency or market conditions or any monetary or trading settlement system or matters and/or disaster in the Relevant Jurisdictions (including, without limitation, any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange, the Kuala Lumpur Stock Exchange, the Shanghai Stock Exchange, the New York Stock Exchange or the London Stock Exchange or a material devaluation of Hong Kong dollars or the Malaysian Ringgit against any foreign currencies (including but not limited to a change in the system under which the value of the Hong Kong currency is linked to that of the United States), or any suspension of trading of any of the securities of our Company on any exchange or over-the-counter market or any disruption in securities settlement or clearance services or procedures in or affecting any of the Relevant Jurisdictions); or any general moratorium on commercial banking activities in any of the Relevant Jurisdictions, or there is any disruption in commercial banking, foreign exchange trading or securities settlement or clearance services, procedure or matters in any of those jurisdictions; or any new law or change or development involving a prospective change in existing laws or any change or development involving a prospective change in the interpretation or application thereof by any court or other competent authority in or affecting any of the Relevant Jurisdictions; or the imposition of economic sanctions, in whatever form, directly or indirectly, by the Relevant Jurisdictions; or a change or development occurs involving a prospective change in taxation or exchange control, currency exchange rates or foreign investment regulations (or the implementation of any exchange control) (including without limitation a material devaluation of the Hong Kong dollar, the Malaysian Ringgit, the United States dollar, the Euro, the Japanese yen or the British pound sterling against any foreign currencies and any disruptions in monetary, trading or securities settlement or clearance services, procedures or matters) in any of the Relevant Jurisdictions adversely affecting an investment in the Shares; or any actions, suits, claims (whether or not any such claim involves or results in any actions or proceedings), demands, investigations, judgment, awards and proceedings, joint or several, from time to time instituted, made or brought or threatened or alleged to be instituted, made or brought against or otherwise involve (together, the Actions ) of any third party being threatened or instigated against any; or (viii) a Director being charged with an indictable offence or prohibited by operation of law or otherwise disqualified from taking part in the management of a company; or (ix) the chairman or chief executive officer of our Company vacating his or her office in circumstances where the operations of our Group may be affected; or 274

282 UNDERWRITING (x) (xi) (xii) the commencement by any regulatory or political body or organisation of any Action against a Director or any member of our Group or an announcement by any regulatory or political body or organisation that it intends to take any such Action; or a contravention by any member of our Group of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Companies Ordinance or the Companies Law or any of the GEM Listing Rules or applicable laws; or a prohibition on our Company for whatever reason from offering, allotting, issuing or selling any of its Shares pursuant to the terms of the Global Offering; or (xiii) non-compliance of this prospectus (or any other documents used in connection with the contemplated subscription or purchase of the Shares) or any aspect of the Global Offering with the GEM Listing Rules or any other applicable law; or (xiv) other than with the approval of the Sole Sponsor and the Joint Global Coordinators, the issue or requirement to issue by our Company of a supplementary prospectus (or any other documents used in connection with the contemplated subscription or purchase of the Shares) pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance or the GEM Listing Rules or any requirement or request of the Stock Exchange and/or the SFC; or (xv) a valid demand by any creditor for repayment or payment of any indebtedness of any member of our Group or in respect of which any member of our Group is liable prior to its stated maturity; or (xvi) an order or a petition is presented for the winding up or liquidation of any member of our Group or any member of our Group makes any composition or arrangement with its creditors or enters into a scheme of arrangement or any resolution is passed for the winding-up of any member of our Group or a provisional liquidator, receiver or manager is appointed over all or part of the assets or undertaking of any member of our Group or anything analogous thereto occurs in respect of any member of our Group; or (xvii) any change or prospective change, or a materialisation of, any of the risks set out in the section headed Risk Factors in this prospectus, which, individually or in aggregate, in the sole and absolute opinion of the Sole Sponsor or the Joint Global Coordinators (for themselves and on behalf of the Hong Kong Underwriters): (i) (ii) (iii) is or is likely to or will or may have an adverse effect on the business, financial, trading or other condition or prospects of our Company or the Group as a whole or, to any present or prospective shareholder of our Company in his/her/its capacity as such; or has or will have or may have an adverse effect on the success of the Global Offering or the level of Offer Shares being applied for, accepted, subscribed for or purchased or the distribution of Offer Shares or dealings in the Shares in the secondary market; or makes it inadvisable, inexpedient or impracticable to proceed with or market the Global Offering or the delivery of the Offer Shares on the terms and in the manner contemplated in the Prospectus; or 275

283 UNDERWRITING (iv) has or will or is likely to have the effect of making any part of the Hong Kong Underwriting Agreement incapable of performance in accordance with its terms or which prevents the processing of applications and/or payments pursuant to the Global Offering or pursuant to the Hong Kong Underwriting Agreement. Commission and expenses In connection with the Global Offering, the Joint Global Coordinators (for themselves and on behalf of the Hong Kong Underwriters) will receive an underwriting commission of up to 8.0% of the aggregate Offer Price payable for the Hong Kong Public Offers Shares initially offered under the Hong Kong Public Offer, which is payable by our Company according to the Hong Kong Underwriting Agreement. Based on the Offer Price of HK$0.45 per Share, being the mid-point of the Offer Price, the total listing expenses are estimated to be HK$27.5 million, including the underwriting commission, the listing fees, legal and other professional fees and printing and other expenses relating to the Listing of the existing Shares, shall be borne by our Company. INDEMNITY Our Company, our Controlling Shareholder and our executive Directors have agreed to jointly and severally indemnify the Sole Sponsor, the Joint Global Coordinators and each of the Hong Kong Underwriters for certain losses which they may suffer, including, among other things, losses arising from the performance of their obligations under the Hong Kong Underwriting Agreement and any breach by us of the provisions of the Hong Kong Underwriting Agreement. HONG KONG UNDERWRITERS INTEREST IN OUR COMPANY The Joint Global Coordinators and the other Hong Kong Underwriters will receive an underwriting commission. Particulars of these underwriting commission and expenses are set out under the paragraph headed Underwriting Underwriting Arrangements Commission and expenses above. None of the Hong Kong Underwriters or any of their close associates has any shareholding interests in any member of our Group nor has any right (whether legally enforceable or not) to subscribe for or purchase or nominate persons to subscribe for or purchase any Shares. SOLE SPONSOR AND ITS INDEPENDENCE China Everbright Capital Limited as the Sole Sponsor satisfies the independence criteria applicable to the sponsor as set out in Rule 6A.07 of the GEM Listing Rules. The Sole Sponsor made an application on our behalf to the Stock Exchange for listing of, and permission to deal in, the Shares in issue and to be issued as mentioned herein. The Sole Sponsor has received or will receive a sponsor fee of approximately HK$4.5 million in connection with the Listing. The sponsor fee relates solely to services provided by the Sole Sponsor in its capacity as a sponsor, and not other services which it may provide, such as (without limitation) book-building, pricing and underwriting. SOLE SPONSOR S INTERESTS IN OUR COMPANY Save for the advisory and documentation fees to be paid to the Sole Sponsor as the sponsor to the Global Offering, neither the Sole Sponsor nor any of its directors or their close associates has or may have any interest in any class of securities in any members of our Group or any right or option 276

284 UNDERWRITING (whether legally enforceable or not) to subscribe for or purchase or to nominate persons to subscribe for or purchase securities in any members of our Group nor any interest in the Global Offering. No director or employee of the Sole Sponsor who is involved in providing advice to our Company has or may have, as a result of the Global Offering, any interest in any class of securities of our Company or any of our subsidiaries (including options or rights to subscribe for such securities that may be subscribed for or purchased by any such director or employee pursuant to the Global Offering). Certain close associates of the Sole Sponsor whose usual and ordinary courses of business involve trading of and dealing in securities may derive commissions from the trading of and dealing in securities of our Company or provide margin financing in connection thereto or purchase or sell securities of our Company or hold securities of our Company for investment purposes after the Listing. No director or employee of the Sole Sponsor has a directorship or substantial shareholding (as defined under the GEM Listing Rules) in our Company or any of our subsidiaries. UNDERTAKINGS Undertaking to the Stock Exchange (A) Undertakings by our Company Pursuant to Rule of the GEM Listing Rules, our Company has undertaken to the Stock Exchange that no further Shares or securities convertible into equity securities (whether or not of a class already listed) may be issued by our Company or form the subject of any agreement to such an issue by our Company within the six months from the Listing Date (the First Six-Month Period ) (whether or not such issue of Shares or securities will be completed within the First Six-Month Period), except in certain circumstances prescribed by Rule of the GEM Listing Rules. (B) Undertakings by our Controlling Shareholders In light of Rule 13.16A(1) of the GEM Listing Rules, each of our Controlling Shareholders has undertaken to the Stock Exchange and our Company that except pursuant to the Global Offering, he/it shall not and shall procure that the relevant registered holder(s) (if any) shall not: (i) (ii) save as provided in Rule of the GEM Listing Rules, in the period commencing on the date by reference to which disclosure of his/its shareholding is made in this prospectus and ending on the date when first six months expire (the First Six-Month Period ), dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares in respect of which he/it is shown by this prospectus to be the beneficial owner (as defined in Rule 13.16A(2) of the GEM Listing Rules) (the Relevant Securities ); and save as provided in Rule of the GEM Listing Rules, in the period of six months commencing from the expiry of the First Six-Month Period (the Second Six-Month Period ), dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of any of the Relevant Securities if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, our Controlling Shareholder would cease to be a controlling shareholder (as defined in the GEM Listing Rules) of our Company. 277

285 UNDERWRITING In addition, in light of Rule of the GEM Listing Rules, our Controlling Shareholder has undertaken to the Stock Exchange and our Company that he/she/it will comply with the following requirements: (i) (ii) in the event that he/it pledges or charges any direct or indirect interest in the Relevant Securities in favour of an authorised institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)), as security for a bona fide commercial loan or pursuant to any right or waiver granted by the Stock Exchange pursuant to Rule 13.18(4) of the GEM Listing Rules, at any time during the First Six-Month Period and the Second Six- Month Period, he/it must inform our Company immediately thereafter, disclosing the details specified in Rules 17.43(1) to (4) of the GEM Listing Rules; and having pledged or charged any interest in the Shares under (a) above, he/it must inform our Company immediately in the event that he/it becomes aware that the pledgee or chargee has disposed of or intends to dispose of such interest and of the number of Shares affected. Pursuant to Rule of the GEM Listing Rules, in the event that our Company has been informed of any matter under Rule of the GEM Listing Rules as described above, we shall forthwith publish an announcement giving details of the same in accordance with the requirements of Rule of the GEM Listing Rules. Undertaking pursuant to the Hong Kong Underwriting Agreement Undertakings by our Company We have undertaken to the Sole Sponsor, the Joint Global Coordinators and each of the Hong Kong Underwriters that we will not and each of our Controlling Shareholders has undertaken to the Sole Sponsor, the Joint Global Coordinators and each of the Hong Kong Underwriters that it/he shall procure that our Company will not, except pursuant to the Capitalisation Issue, the Global Offering and the offer size Adjustment Option, at any time from the date of the Hong Kong Underwriting Agreement until the date falling the First Six-Month Period without the prior written consent of the Sole Sponsor and the Joint Global Coordinators (on behalf of the Hong Kong Underwriters) and unless in compliance with the GEM Listing Rules: (i) (ii) (iii) offer, accept subscription for, pledge, charge, allot, issue, sell, lend, mortgage, assign, contract to allot, issue or sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, conditionally or unconditionally, or repurchase any of its share capital or other securities of our Company or any of the subsidiaries or any interest therein (including but not limited to any securities convertible into or exercisable or exchangeable for or that represent the right to receive any such share capital or securities or any interest therein); or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such share capital or securities or any interest therein; or enter into any transaction with the same economic effect as any transaction specified in (i) or (ii) above; or 278

286 UNDERWRITING (iv) offer to or agree to do any of the foregoing or announce any intention to do so, whether any of the foregoing transactions is to be settled by delivery of share capital or such other securities, in cash or otherwise, and in the event of our Company doing any of the foregoing during the period of six months immediately following the expiry of the First Six-Month Period, our Company will, and each of our Controlling Shareholders shall procure that our Company will take all reasonable steps to ensure that any such act will not create a disorderly or false market for any Shares or other securities of our Company. Undertakings by our Controlling Shareholders Each of our Controlling Shareholders has undertaken to our Company, the Sole Sponsor, the Joint Global Coordinators and each of the Hong Kong Underwriters that except pursuant to the Global Offering, at any time during the First Six-Month Period, it will not, and will procure that none of its associates (as defined in the GEM Listing Rules) or companies controlled by it or any nominee or trustee holding in trust for it will, without the prior written consent of the Sole Sponsor and the Joint Global Co-ordinators (for itself and on behalf of the Hong Kong Underwriters) and unless in compliance with the GEM Listing Rules: (i) (ii) (iii) (iv) offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend, make any short sale or otherwise transfer or dispose of (nor enter into any agreement to transfer or dispose of or otherwise create any options, rights, interests or encumbrances in respect of), either directly or indirectly, conditionally or unconditionally, any of the share or debt capital or other securities of our Company or any interest therein (including, but not limited to any securities that are convertible into or exercisable or exchangeable for, or that represent the right to receive, any such capital or securities or any interest therein) whether now owned or hereinafter acquired, owned directly or indirectly by it/him (including holding as a custodian) or with respect to which it/ he has beneficial ownership (collectively the Lock-up Shares ) (the foregoing restriction is expressly agreed to preclude it/him from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Lock-up Shares even if such Shares would be disposed of by someone other than it/him. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Lock-up Shares or with respect to any security that includes, relates to, or derives any significant part of its value from such Shares); or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any such capital or securities or any interest therein; or enter into any transaction with the same economic effect as any transaction described in (i) or (ii) above; or offer or agree or contract to, or publicly announce any intention to enter into, any transaction described in (i), (ii) or (iii) above, whether any such transaction above is to be settled by delivery of Shares or such other securities, in cash or otherwise. 279

287 UNDERWRITING Each of our Controlling Shareholders has further undertaken that within the Second Six-Month Period, it will not enter into any of the foregoing transactions described in (i), (ii), (iii) or (iv) above or agree or contract to or publicly announce any intention to enter into any such transactions if, immediately following such transaction, our Controlling Shareholders in aggregate will cease to be controlling shareholders of our Company within the meaning of the GEM Listing Rules. Each of our Controlling Shareholders has further undertaken that subject to the restrictions set out above, until the expiry of the Second Six-Month Period, if any of them enters into any of the foregoing transactions described in (i), (ii), (iii) or (iv) above or agree or contract to or publicly announce any intention to enter into any such transactions, it/he will take all reasonable steps to ensure that it/he will not create a disorderly or false market in the Shares or other securities of our Company. THE INTERNATIONAL PLACING International Underwriting Agreement In connection with the International Placing, it is expected that our Company will enter into the International Underwriting Agreement with, inter alia, the International Underwriters, on terms and conditions that are substantially similar to the Hong Kong Underwriting Agreement and on the additional terms described below. Pursuant to the International Underwriting Agreement, our Company is offering the International Placing Shares for subscription by way of International Placing, on and subject to the terms and conditions in the International Underwriting Agreement and this prospectus, at the Offer Price. Under the International Underwriting Agreement, subject to, among other conditions, (i) the Listing Committee of the Stock Exchange granting the Listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus and (ii) certain other conditions set out in the International Underwriting Agreement, the International Underwriters have severally agreed to subscribe for, or procure subscribers for their respective applicable proportions of the International Placing Shares on the terms and conditions of the Placing. The International Underwriting Agreement is expected to provide that it may be terminated on grounds similar to those provided in the International Underwriting Agreement. Potential investors are reminded that in the event that the International Underwriting Agreement is not entered into, the Global Offering will not proceed. It is expected that our Company will grant the Offer Size Adjustment Option to the International Underwriters, exercisable by the Joint Global Coordinator on behalf of the International Underwriters at any time prior to the Listing Date, to require our Company to issue up to an aggregate of 30,000,000 additional new Shares, representing in aggregate 15% of the Offer Shares initially available under the Global Offering at the Offer Price, under the International Placing to cover overallocations (if any) in the International Placing. It is expected that, pursuant to the International Underwriting Agreement, our Company, our executive Directors and our Controlling Shareholders will give undertakings similar to those given pursuant to the Hong Kong Underwriting Agreement, as described in the paragraph headed Underwriting Arrangements and Expenses The Hong Kong Public Offer Undertakings pursuant to the Hong Kong Underwriting Agreement in this section. 280

288 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING THE GLOBAL OFFERING The Global Offering comprises: (a) (b) the Hong Kong Public Offer of 20,000,000 new Shares (subject to reallocation as mentioned below) for subscription by the public in Hong Kong as described in the sub-section headed The Hong Kong Public Offer in this section; and the International Placing of an aggregate of 180,000,000 new Shares (subject to reallocation as mentioned below and the Offer Size Adjustment Option) outside the United States (including the professional, institutional and/or other investors, but excluding the public in Hong Kong). Investors may apply for Offer Shares under the Hong Kong Public Offer or apply for or indicate an interest for Offer Shares under the International Placing, but may not do both. References in this prospectus to applications, Application Forms, application monies or the procedures for application relate solely to the Hong Kong Public Offer. The Offer Shares will represent 25% of the total issued share capital of our Company immediately after completion of the Global Offering and the Capitalisation Issue (assuming that the Offer Size Adjustment Option is not exercised). THE HONG KONG PUBLIC OFFER Number of Shares initially offered We are initially offering 20,000,000 Shares for subscription by the public in Hong Kong at the Offer Price, representing 10% of the total number of Shares initially available under the Global Offering. Subject to the reallocation of Shares between the Hong Kong Public Offer and the International Placing, the Hong Kong Public Offer Shares will represent approximately 2.5% of the total issued share capital of our Company immediately following the completion of the Global Offering and the Capitalisation Issue (assuming that the Offer Size Adjustment Option is not exercised). The Hong Kong Public Offer is open to members of the public in Hong Kong as well as to professional, institutional and/or other investors. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealings in shares and other securities and corporate entities which regularly invest in shares and other securities. Completion of the Hong Kong Public Offer is subject to the conditions as set out in the sub-section headed Conditions of the Hong Kong Public Offer in this section. Allocation Allocation of Hong Kong Public Offer Shares to investors under the Global Offering will be based solely on the level of valid applications received under the Hong Kong Public Offer. The basis of allocation may vary, depending on the number of Hong Kong Public Offer Shares validly applied for by applicants. Such allocation could, where appropriate, consist of balloting, which could mean that some applicants may receive a higher allocation than others who have applied for the same number of Hong Kong Public Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong Public Offer Shares. 281

289 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING Multiple or suspected multiple applications and any application for more than 20,000,000 Hong Kong Public Offer Shares are liable to be rejected. Reallocation The allocation of Offer Shares between the Hong Kong Public Offer and the International Placing is subject to reallocation on the following basis: (a) Where the International Placing Shares are fully subscribed or oversubscribed: (i) if the Hong Kong Public Offer Shares are undersubscribed, the Joint Global Coordinators have the discretion (but shall not be under any obligation) to reallocate all or any unsubscribed Hong Kong Public Offer Shares to the International Placing, in such amounts as the Joint Global Coordinators deem appropriate; (ii) (iii) (iv) (v) if the Hong Kong Public Offer Shares are not undersubscribed but the number of Offer Shares validly applied for under the Hong Kong Public Offer represents less than 15 times the number of the Offer Shares initially available for subscription under the Hong Kong Public Offer, then up to 20,000,000 Offer Shares may be reallocated to the Hong Kong Public Offer from the International Placing, so that the total number of the Offer Shares available under the Hong Kong Public Offer will be increased to 40,000,000 Offer Shares, representing approximately 20% of the number of the Offer Shares initially available under the Global Offering; if the number of Offer Shares validly applied for under the Hong Kong Public Offer represents 15 times or more but less than 50 times the number of the Offer Shares initially available for subscription under the Hong Kong Public Offer, then 40,000,000 Offer Shares will be reallocated to the Hong Kong Public Offer from the International Placing, so that the total number of the Offer Shares available under the Hong Kong Public Offer will be increased to 60,000,000 Offer Shares, representing approximately 30% of the number of the Offer Shares initially available for subscription under the Global Offering; if the number of Offer Shares validly applied for under the Hong Kong Public Offer represents 50 times or more but less than 100 times the number of the Offer Shares initially available for subscription under the Hong Kong Public Offer, then 60,000,000 Offer Shares will be reallocated to the Hong Kong Public Offer from the International Placing, so that the total number of the Offer Shares available under the Hong Kong Public Offer will be increased to 80,000,000 Offer Shares, representing approximately 40% of the number of the Offer Shares initially available for subscription under the Global Offering; and if the number of Offer Shares validly applied for under the Hong Kong Public Offer represents 100 times or more the number of the Offer Shares initially available for subscription under the Hong Kong Public Offer, then 80,000,000 Offer Shares will be reallocated to the Hong Kong Public Offer from the International Placing, so that the number of the Offer Shares available under the Hong Kong Public Offer will be increased to 100,000,000 Offer Shares, representing approximately 50% of the number of the Offer Shares initially available under the Global Offering. 282

290 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING (b) Where the International Placing Shares are undersubscribed: (i) (ii) if the Hong Kong Public Offer Shares are undersubscribed, the Global Offering will not proceed unless the Underwriters would subscribe or procure subscribers for their respective applicable proportions of the Offer Shares being offered which are not taken up under the Global Offering on the terms and conditions of this prospectus, the Application Forms and the Underwriting Agreements; and if the Hong Kong Public Offer Shares are oversubscribed, irrespective of the number of times the number of Offer Shares initially available for subscription under the Hong Kong Public Offer, then up to 20,000,000 Offer Shares may be reallocated to the Hong Kong Public Offer from the International Placing, so that the total number of the Offer Shares available under the Hong Kong Public Offer will be increased to 40,000,000 Offer Shares, representing approximately 20% of the number of the Offer Shares initially available under the Global Offering. In the event of reallocation of Offer Shares between the Hong Kong Public Offer and the International Placing in the circumstances where (x) the International Placing Shares are fully subscribed or oversubscribed and the Hong Kong Public Offer Shares are oversubscribed by less than 15 times under paragraph (a)(ii) above or (y) the International Placing Shares are undersubscribed and the Public Offer Shares are fully subscribed or oversubscribed under paragraph (b)(ii) above, the final Hong Kong Offer Price shall be fixed at the low-end of the indicative Offer Price range (i.e. HK$0.40 per Offer Share) stated in this prospectus. In the event of a reallocation of Offer Shares from the International Placing to the Hong Kong Public Offer in circumstances under paragraph (a)(ii), (a)(iii), (a)(iv), (a)(v) and (b)(ii) above, the number of Offer Shares allocated to the International Placing will be correspondingly reduced. In each case, based on the additional Offer Shares reallocated to the Hong Kong Public Offer, the number of Offer Shares allocated to the International Placing will be correspondingly reduced, in such manner as the Joint Global Coordinators deems appropriate. In addition, the Joint Global Coordinators may reallocate Offer Shares from the International Placing to the Hong Kong Public Offer to satisfy valid applications under the Hong Kong Public Offer. In accordance with Guidance Letter HKEX-GL91-18 issued by the Stock Exchange, if such reallocation is done other than pursuant to Practice Note 6 of the GEM Listing Rules, the maximum total number of Offer Shares that may be reallocated to the Hong Kong Public Offer following such reallocation shall be not more than double the initial allocation to the Hong Kong Public Offer (i.e. 40,000,000 Offer Shares). If the Hong Kong Public Offer Shares are not fully subscribed, the Joint Global Coordinators will have the discretion (but shall not be under any obligation) to reallocate all or any unsubscribed Hong Kong Public Offer Shares in such amount as the Joint Bookrunners deems appropriate subject to the Guidance Letter HKEX-GL91-18 issued by the Stock Exchange. Applications Each applicant under the Hong Kong Public Offer will also be required to give an undertaking and confirmation in the application submitted by him/her/it that he/she/it and any person(s) for whose benefit he is making the application have not applied for or taken up, or indicated an interest for, and 283

291 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing, and such applicant s application is liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or it has been or will be placed or allocated Offer Shares under the International Placing. Multiple or suspected multiple applications and any application for more than the Hong Kong Public Offer Shares initially comprised in the Hong Kong Public Offer (that is 20,000,000 Hong Kong Public Offer Shares) are liable to be rejected. Applicants under the Hong Kong Public Offer are required to pay, on application, the maximum price of HK$0.50 per Offer Share in addition to the brokerage, SFC transaction levy and Stock Exchange trading fee per board lot of 5,000 Offer Shares. If the Offer Price, as finally determined in the manner described in the sub-section headed Price determination of the Global Offering in this section, is less than the maximum price of HK$0.50 per Offer Share, appropriate refund payments (including the brokerage, SFC transaction levy and Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Further details are set out below in the section headed How to Apply for the Hong Kong Public Offer Shares in this prospectus. THE INTERNATIONAL PLACING Number of Offer Shares offered The International Placing will consist of an initial offering of 180,000,000 Shares (subject to reallocation and the Offer Size Adjustment Option), representing 90% of the total number of Offer Shares initially available under the Global Offering and approximately 22.5% of the total issued share capital immediately after completion of the Global Offering and the Capitalisation Issue (assuming that the Offer Size Adjustment Option is not exercised). The International Placing will be offered outside the United States (including professional, institutional and/or other investors, but excluding the public, in Hong Kong) by us. Allocation The Placing will include selective marketing of the International Placing Shares to professional, institutional and/or other investors outside the United States anticipated to have a sizeable demand for the International Placing Shares. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealings in shares and other securities and corporate entities which regularly invest in shares and other securities. Allocation of the International Placing Shares pursuant to the International Placing will be effected in accordance with the book-building process described in the paragraph headed Price Determination of the Global Offering below and based on a number of factors, including the level and timing of demand, and whether or not it is expected that the relevant investor is likely to buy further Offer Shares, and/or hold or sell its Offer Shares, after the listing of the Offer Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the Offer Shares on a basis which would lead to the establishment of a solid shareholder base to the benefit of our Company and the Shareholders as a whole. The Joint Global Coordinators (for itself and on behalf of the Underwriters) may require any investor who has been offered Placing Shares under the Placing, and who has made an application 284

292 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING under the Hong Kong Public Offer to provide sufficient information to the Joint Global Coordinators so as to allow them to identify the relevant applications under the Hong Kong Public Offer and to ensure that it is excluded from any application of the Hong Kong Public Offer Shares under the Hong Kong Public Offer. Reallocation The total number of Offer Shares to be issued pursuant to the International Placing may change as a result of the claw back arrangement as described in the paragraph headed The Hong Kong Public Offer Reallocation in this section and/or the exercise of the Offer Size Adjustment Option in whole or in part. In addition, the Joint Global Coordinators may reallocate International Placing Shares from the International Placing to the Hong Kong Public Offer to satisfy the valid applications under the Hong Kong Public Offer that exceeds the number of Hong Kong Public Offer Shares initially offered. The Offer Shares to be offered in the Hong Kong Public Offer and the International Placing may, in certain circumstances, be reallocated as between these offerings at the discretion of the Joint Global Coordinators. PRICE DETERMINATION OF THE GLOBAL OFFERING The International Placing Underwriters will be soliciting from prospective investors indications of interest in acquiring Offer Shares in the International Placing. Prospective investors will be required to specify the number of the International Placing Shares under the International Placing they would be prepared to acquire either at different prices or at a particular price. This process, known as bookbuilding, is expected to continue up to, and to cease on or around, the last day for lodging applications under the Hong Kong Public Offer. Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering will be fixed on the Price Determination Date, which is expected to be on or about Friday, 4 May 2018 by agreement between the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company, and the number of Offer Shares to be allocated or sold under various offerings will be determined shortly thereafter. The Offer Price will not be more than HK$0.50 per Offer Share and is expected to be not less than HK$0.40 per Offer Share unless otherwise announced, as further explained below, not later than the morning of the last day for lodging applications under the Hong Kong Public Offer. Prospective investors should be aware that the Offer Price to be determined on the Price Determination Date may be, but is not expected to be, lower than the indicative Offer Price range stated in this prospectus. The Joint Global Coordinators (for itself and on behalf of the Underwriters) may, where considered appropriate, based on the level of interest expressed by prospective professional, institutional and/or other investors during the book-building process, and with the consent of our Company, reduce the number of Offer Shares offered in the Global Offering and/or the indicative Offer Price range below that stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offer. In such a case, we will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offer, cause there to be published on the website of our Company ( and the website of the Stock Exchange ( a notice of the reduction or to be announced in such manner as permitted under the GEM Listing Rules and agreed between our Company and the Joint Global 285

293 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING Coordinators. Upon issue of such a notice, the number of Offer Shares offered in the Global Offering and/or the revised Offer Price range will be final and conclusive and the Offer Price, if agreed upon by the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company, will be fixed within such revised offer price range. Before submitting applications for the Hong Kong Public Offer Shares, applicants should have regard to the possibility that any announcement of a reduction in the number of Offer Shares being offered under the Global Offering and/or the indicative Offer Price range may not be made until the day which is the last day for lodging applications under the Hong Kong Public Offer. In the event there is a reduction in the Offer Shares and/or indicative Offer Price range, if the applicants have already submitted an application for the Hong Kong Public Offer Shares before the last day for lodging applications under the Hong Kong Public Offer, they will be allowed to subsequently withdraw their applications. However, if the Offer Price range is reduced, applicants will be notified that they are required to confirm their applications. If applicants have been notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked. In the absence of any such notice so published, the Offer Price, if agreed upon with our Company and the Joint Global Coordinators, will under no circumstances be set outside the Offer Price range as stated in this prospectus. The net proceeds of the Global Offering accruing to our Company (after deduction of underwriting fees and estimated expenses payable by our Company in relation to the Global Offering) are estimated to be approximately HK$62.5 million, assuming an Offer Price per Offer Share of HK$0.45 (being the mid-point of the stated indicative Offer Price range of HK$0.40 to HK$0.50 per Offer Share). The final Offer Price, the indications of interest in the Global Offering, the results of applications and the basis of allotment of the Hong Kong Public Offer Shares available under the Hong Kong Public Offer, are expected to be announced on Tuesday, 15 May 2018 on the website of our Company ( and the website of the Stock Exchange ( If the Joint Global Coordinators (for itself and on behalf of the Underwriters) and our Company are unable to reach an agreement on the Offer Price on or about Monday, 14 May 2018, the Global Offering will not become unconditional and will lapse immediately. UNDERWRITING AGREEMENTS The Hong Kong Public Offer is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is conditional upon the International Underwriting Agreement being signed and becoming unconditional. Our Company, our Controlling Shareholders, our executive Directors, the Sole Sponsor, the Joint Global Coordinators and the International Underwriters expect to enter into the International Underwriting Agreement relating to the International Placing on or about the Price Determination Date. These underwriting arrangements, and the respective Underwriting Agreements, are summarised in the section headed Underwriting in this prospectus. SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS Subject to the approval of the listing of, and permission to deal in, the Shares on GEM and the compliance with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing Date 286

294 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING or any other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second business day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. All necessary arrangements have been made for the Shares to be admitted into CCASS. OFFER SIZE ADJUSTMENT OPTION In connection with the Global Offering, our Company granted to the Joint Global Coordinators (for itself and on behalf of the Underwriters) the Offer Size Adjustment Option to cover over-allocations under the Placing (if any). Pursuant to the Offer Size Adjustment Option, our Company may be required to allot and issue, at the final Offer Price, up to an aggregate of 30,000,000 additional new Shares, representing 15% of the Offer Shares initially available under the Global Offering. The Offer Size Adjustment Option can only be exercised by the Joint Global Coordinators (for itself and on behalf of the Underwriters) prior to the Listing Date; otherwise it will lapse. The Shares to be issued pursuant to the exercise of the Offer Size Adjustment Option will not be used for price stabilisation purpose and are not subject to the Securities and Futures (Price Stabilising) Rules of the SFO (Chapter 571W of the Laws of Hong Kong). If the Offer Size Adjustment Option is exercised in full, the additional Offer Shares will represent approximately 3.6% of the enlarged issued share capital of our Company in issue following completion of the Capitalisation Issue, the Global Offering and the exercise of the Offer Size Adjustment Option. The additional net proceeds that we would receive if the Offer Size Adjustment Option is exercised in full (assuming the Offer Price of HK$0.45 per Share (being the mid-point of the indicative Offer Price range)) are estimated to be approximately HK$13.5 million, which would be applied to the respective uses on a pro-rata basis as disclosed in the section headed Statement of Business Objectives and Use of Proceeds Implementation Plans in this prospectus. We will disclose in the allotment results announcement whether the Offer Size Adjustment Option is exercised. CONDITIONS OF THE HONG KONG PUBLIC OFFER Acceptance of all applications for the Hong Kong Public Offer Shares pursuant to the Hong Kong Public Offer will be conditional on: (a) (b) (c) the Listing Division of the Stock Exchange granting listing of, and permission to deal in, the Shares being offered pursuant to the Global Offering (including any Shares to be issued upon the exercise of the Offer Size Adjustment Option); the Offer Price having been fixed on or about the Price Determination Date; the execution and delivery of the International Underwriting Agreement on or about the Price Determination Date; and (d) the obligations of the International Underwriters under the International Underwriting Agreement becoming and remaining unconditional and not having been terminated in accordance with its terms, on or before the dates and times specified in the International Underwriting Agreement. 287

295 STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING If, for any reason, the Offer Price is not agreed between our Company and the Joint Global Coordinators (for itself and on behalf of the Underwriters), or the International Underwriting Agreement is not entered into, the Global Offering will not proceed. The consummation of each of the Hong Kong Public Offer and the International Placing is conditional upon, among other things, the other offering becoming unconditional and not having been terminated in accordance with its terms. If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of the Global Offering will be published by on our Company s website ( and the Stock Exchange s website ( on the next day following such lapse. In such eventuality, all application monies will be returned, without interest, on the terms set out in the section headed How to Apply for the Hong Kong Public Offer Shares in this prospectus. In the meantime, all application monies will be held in (a) separate bank account(s) with the receiving bank or other licenced bank(s) in Hong Kong licenced under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended). Share certificates for the Shares are expected to be issued on Tuesday, 15 May 2018 but will only become valid certificates of title at 8:00 a.m. on Wednesday, 16 May 2018 provided that (i) the Global Offering has become unconditional in all respects and (ii) the right of termination as described in the section headed Underwriting Underwriting arrangements and expenses Grounds for termination in this prospectus has not been exercised. DEALINGS Assuming that the Global Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on Wednesday, 16 May 2018, it is expected that dealings in the Shares on the Stock Exchange will commence at 9:00 a.m. on Wednesday, 16 May The Shares will be traded in board lots of 5,000 Shares each. The stock code of the Shares is

296 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES 1. HOW TO APPLY If you apply for the Hong Kong Public Offer Shares, then you may not apply for or indicate an interest for the International Placing Shares. To apply for the Hong Kong Public Offer Shares, you may: use a WHITE or YELLOW Application Form; apply online via the HK eipo White Form service at or electronically cause HKSCC Nominees to apply on your behalf. None of you or your joint applicant(s) may make more than one application, except where you are a nominee and provide the required information in your application. Our Company, the Sole Sponsor, the Joint Global Coordinators, the HK eipo White Form Service Provider and their respective agents may reject or accept any application in full or in part for any reason at their discretion. 2. WHO CAN APPLY You can apply for Public Offer Shares on a WHITE or YELLOW Application Form if you or the person(s) for whose benefit you are applying: are 18 years of age or older; have a Hong Kong address; are outside the United States, and are not a United States Person (as defined in Regulation S under the U.S. Securities Act); and are not a legal or natural person of the PRC. If you apply online through the HK eipo White Form service, in addition to the above, you must also: (i) have a valid Hong Kong identity card number and (ii) provide a valid address and a contact telephone number. If you are a firm, the application must be in the individual members names. If you are a body corporate, the application form must be signed by a duly authorized officer, who must state his representative capacity, and stamped with your corporation s chop. If an application is made by a person under a power of attorney, the Sole Sponsor or the Joint Global Coordinators may accept it at their discretion and on any conditions they think fit, including evidence of the attorney s authority. The number of joint applicants may not exceed four and they may not apply by means of HK eipo White Form for the Hong Kong Public Offer Shares. 289

297 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Unless permitted by the GEM Listing Rules, you cannot apply for any Hong Kong Public Offer Shares if you are: an existing beneficial owner of Shares in our Company and/or any its subsidiaries; a director or chief executive officer of our Company and/or any of its subsidiaries; an associate (as defined in the GEM Listing Rules) of any of the above; a connected person (as defined in the GEM Listing Rules) of our Company or will become a connected person of our Company immediately upon completion of the Global Offering; or have been allocated or have applied for any International Placing Shares or otherwise participate in the Placing. 3. APPLYING FOR HONG KONG PUBLIC OFFER SHARES Which Application Channel to Use For Hong Kong Public Offer Shares to be issued in your own name, use a WHITE Application Form or apply online through For Hong Kong Public Offer Shares to be issued in the name of HKSCC Nominees and deposited directly into CASS to be credited to your or a designated CCASS Participant s stock account, use a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you. Where to Collect the Prospectus and Application Forms You can collect a WHITE Application Form and a prospectus during normal business hours from 9:00 a.m. on Monday, 30 April 2018 until 12:00 noon on Friday, 4 May 2018 from: (i) (ii) China Everbright Securities (HK) Limited at 24 th Floor, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong Sinolink Securities (Hong Kong) Company Limited at Units 2503, , 25/F, Low Block, Grand Millennium Plaza, 181 Queen s Road Central, Hong Kong 290

298 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES (iii) any of the following branches of DBS Bank (Hong Kong) Limited, the receiving bank for the Hong Kong Public Offer: District Branch Name Address Hong Kong United Centre Branch Shops on 1/F & Shops on 2/F, United Centre, 95 Queensway, Admiralty Kowloon Amoy Plaza Branch Shops G , Amoy Plaza, 77 Ngau Tau Kok Road, Ngau Tau Kok, Kowloon Yaumatei Branch G/F & 1/F, Woosung Street, Yaumatei New Territories Tuen Mun Town Plaza SME Banking Centre Shop 23, G/F, Tuen Mun Town Plaza (II), 3 Tuen Lung Street, Tuen Mun You can collect a YELLOW Application Form and a prospectus during normal business hours from 9:00 a.m. on Monday, 30 April 2018 until 12:00 noon on Friday, 4 May 2018 from the Depository Counter of HKSCC at 1/F., One & Two Exchange Square, 8 Connaught Place, Central, Hong Kong or from your stockbroker. Time for Lodging Application Forms Your completed WHITE or YELLOW Application Form, together with a cheque or a banker s cashier order attached and marked payable to Ting Hong Nominees Limited Kingsley Public Offer for the payment, should be deposited in the special collection boxes provided at any of the branches of the receiving bank listed above, at the following times: Monday, 30 April :00 a.m to 5:00 p.m. Wednesday, 2 May :00 a.m to 5:00 p.m. Thursday, 3 May :00 a.m to 5:00 p.m. Friday, 4 May :00 a.m to 12:00 noon The application lists will be open from 11:45 a.m. to 12:00 noon on Friday, 4 May 2018, the last application day or such later time as described in the paragraph headed 10. Effect of Bad Weather on the Opening of the Application Lists in this section. 4. TERMS AND CONDITIONS OF AN APPLICATION Follow the detailed instructions in the Application Form carefully; otherwise, your application may be rejected. By submitting an Application Form or applying through the HK eipo White Form service, among other things, you: (i) undertake to execute all relevant documents and instruct and authorize our Company and/ or the Joint Global Coordinators (or their agents or nominees), as agents of our Company, 291

299 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES to execute any documents for you and to do on your behalf all things necessary to register any Hong Kong Public Offer Shares allocated to you in your name or in the name of HKSCC Nominees as required by the Articles of Association; (ii) agree to comply with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Companies Ordinance and the Articles of Association; (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) confirm that you have read the terms and conditions and application procedures set out in this prospectus and in the Application Form and agree to be bound by them; confirm that you have received and read this prospectus and have only relied on the information and representations contained in this prospectus in making your application and will not rely on any other information or representations except those in any supplement to this prospectus; confirm that you are aware of the restrictions on the Global Offering in this prospectus; agree that none of our Company, the Sole Sponsor, the Joint Global Coordinators, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering is or will be liable for any information and representations not in this prospectus (and any supplement to it); undertake and confirm that you or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing nor participated in the International Placing; agree to disclose to our Company, our Hong Kong branch share registrar, the receiving bank, the Sole Sponsor, the Joint Global Coordinators, the Underwriters and/or their respective advisers and agents any personal data which they may require about you and the person(s) for whose benefit you have made the application; if the laws of any place outside Hong Kong apply to your application, agree and warrant that you have complied with all such laws and none of our Company, the Sole Sponsor, the Joint Global Coordinators and the Underwriters nor any of their respective officers or advisers will breach any law outside Hong Kong as a result of the acceptance of your offer to purchase, or any action arising from your rights and obligations under the terms and conditions contained in this prospectus and the Application Forms; agree that once your application has been accepted, you may not rescind it because of an innocent misrepresentation; agree that your application will be governed by the laws of Hong Kong; represent, warrant and undertake that (i) you understand that the Hong Kong Public Offer Shares have not been and will not be registered under the U.S. Securities Act; and (ii) you and any person for whose benefit you are applying for the Hong Kong Public Offer Shares are outside the United States of America (as defined in Regulation S) or are a person described in paragraph (h)(3) of Rule 902 of Regulation S; 292

300 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES (xiii) (xiv) (xv) (xvi) warrant that the information you have provided is true and accurate; agree to accept the Hong Kong Public Offer Shares applied for, or any lesser number allocated to you under the application; authorize our Company to place your name(s) or the name of the HKSCC Nominees, on our Company s register of members as the holder(s) of any Hong Kong Public Offer Shares allocated to you, and our Company and/or its agents to send any share certificate(s) and/or any e-auto Refund payment instructions and/or any refund cheque(s) to you or the firstnamed applicant for joint application by ordinary post at your own risk to the address stated on the application, unless you have chosen to collect the share certificate(s) and/or refund cheque(s) in person; declare and represent that this is the only application made and the only application intended by you to be made to benefit you or the person for whose benefit you are applying; (xvii) understand that our Company and the Joint Global Coordinators will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Public Offer Shares to you and that you may be prosecuted for making a false declaration; (xviii) (if the application is made for your own benefit) warrant that no other application has been or will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or through the HK eipo White Form by you or by any one as your agent or by any other person; and (xix) (if you are making the application as an agent for the benefit of another person) warrant that (i) no other application has been or will be made by you as agent for or for the benefit of that person or by that person or by any other person as agent for that person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; and (ii) you have due authority to sign the Application Form or give electronic application instructions on behalf of that other person as their agent. Additional Instructions for Yellow Application Form YoumayrefertotheYELLOW Application Form for details. 5. APPLYING THROUGH HK eipo WHITE FORM General Individuals who meet the criteria in the paragraph headed Who can apply, may apply through the HK eipo White Form service for the Offer Shares to be allotted and registered in their own names through the designated website at Detailed instructions for application through the HK eipo White Form service are on the designated website. If you do not follow the instructions, your application may be rejected and may not be submitted to our Company. If you apply through the designated website, you authorize the HK eipo White Form Service Provider to apply on the terms and conditions in this prospectus, as supplemented and amended by the terms and conditions of the HK eipo White Form service. 293

301 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Time for Submitting Applications under the HK eipo White Form You may submit your application through the HK eipo White Form Service Provider at (24 hours daily, except on the last application day) from 9:00 a.m. on Monday, 30 April 2018 until 11:30 a.m. on Friday, 4 May 2018 and the latest time for completing full payment of application monies in respect of such applications will be 12:00 noon on Friday, 4 May 2018 or such later time under the paragraph headed 10. Effects of Bad Weather on the Opening of the Application Lists in this section. No Multiple Applications If you apply by means of HK eipo White Form, once you complete payment in respect of any electronic application instructions given by you or for your benefit through the HK eipo White Form service to make an application for Hong Kong Public Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instructions under HK eipo White Form more than once and obtaining different payment reference numbers without effecting full payment in respect of a particular reference number will not constitute an actual application. If you are suspected of submitting more than one application through the HK eipo White Form or by any other means, all of your applications are liable to be rejected. Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance For the avoidance of doubt, our Company and all other parties involved in the preparation of this prospectus acknowledge that each applicant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance). 6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS General CCASS Participants may give electronic application instructions to apply for the Hong Kong Public Offer Shares and to arrange payment of the money due on application and payment of refunds under their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures. If you are a CCASS Investor Participant, you may give these electronic application instructions through the CCASS Phone System by calling (852) or through the CCASS Internet System ( (using the procedures in HKSCC s An Operating Guide for Investor Participants in effect from time to time). 294

302 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES HKSCC can also input electronic application instructions for you if you go to: Hong Kong Securities Clearing Company Limited Customer Service Center 1/F., One & Two Exchange Square 8 Connaught Place Central Hong Kong and complete an input request form. You can also collect a prospectus from this address. If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Public Offer Shares on your behalf. You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details of your application to our Company, the Sole Sponsor, the Joint Global Coordinators and our Tricor Investor Services Limited. Giving Electronic Application Instructions to HKSCC via CCASS Where you have given electronic application instructions to apply for the Hong Kong Public Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf: (i) (ii) HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach of the terms and conditions of the WHITE Application Form or this prospectus; HKSCC Nominees will do the following things on your behalf: agree that the Hong Kong Public Offer Shares to be allotted shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS Participant s stock account on your behalf or your CCASS Investor Participant s stock account; agree to accept the Hong Kong Public Offer Shares applied for or any lesser number allocated; undertake and confirm that you have not applied for or taken up, will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing; (if the electronic application instructions are given for your benefit) declare that only one set of electronic application instructions has been given for your benefit; (if you are an agent for another person) declare that you have only given one set of electronic application instructions for the other person s benefit and are duly authorized to give those instructions as their agent; confirm that you understand that our Company, our Directors and the Joint Global Coordinators will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Public Offer Shares to you and that you may be prosecuted if you make a false declaration; 295

303 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES authorise our Company to place HKSCC Nominees name on our Company s register of members as the holder of the Hong Kong Public Offer Shares allocated to you and to send share certificate(s) and/or refund monies under the arrangements separately agreed between us and HKSCC; confirm that you have read the terms and conditions and application procedures set out in this prospectus and agree to be bound by them; confirm that you have received and/or read a copy of this prospectus and have relied only on the information and representations in this prospectus in causing the application to be made, save as set out in any supplement to this prospectus; agree that none of our Company, the Sole Sponsor, the Joint Global Coordinators, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering, is or will be liable for any information and representations not contained in this prospectus (and any supplement to it); agree to disclose your personal data to our Company, our Hong Kong branch share registrar, receiving bank, the Sole Sponsor, the Joint Global Coordinators, the Underwriters and/or its respective advisers and agents; agree (without prejudice to any other rights which you may have) that once HKSCC Nominees application has been accepted, it cannot be rescinded for innocent misrepresentation; agree that any application made by HKSCC Nominees on your behalf is irrevocable before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to take effect as a collateral contract with us and to become binding when you give the instructions and such collateral contract to be in consideration of our Company agreeing that it will not offer any Hong Kong Public Offer Shares to any person before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is a Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance gives a public notice under that section which excludes or limits that person s responsibility for this prospectus; agree that once HKSCC Nominees application is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by our Company s announcement of the Hong Kong Public Offer results; agree to the arrangements, undertakings and warranties under the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, for the giving electronic application instructions to apply for Hong Kong Public Offer Shares; 296

304 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES agree with our Company, for itself and for the benefit of each Shareholder (and so that our Company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the Shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Companies Ordinance and the Articles of Association; and agree that your application, any acceptance of it and the resulting contract will be governed by the laws of Hong Kong. Effect of Giving Electronic Application Instructions to HKSCC via CCASS By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to our Company or any other person in respect of the things mentioned below: instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Hong Kong Public Offer Shares on your behalf; instructed and authorized HKSCC to arrange payment of the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per Offer Share initially paid on application, refund of the application monies (including brokerage, SFC transaction levy and the Stock Exchange trading fee) by crediting your designated bank account; and instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the things stated in the WHITE Application Form and in this prospectus. Minimum Purchase Amount and Permitted Numbers You may give or cause your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions for a minimum of 5,000 Hong Kong Public Offer Shares. Instructions for more than 5,000 Hong Kong Public Offer Shares must be in one of the numbers set out in the table in the Application Forms. No application for any other number of Hong Kong Public Offer Shares will be considered and any such application is liable to be rejected. 297

305 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Time for Inputting Electronic Application Instructions CCASS Clearing/Custodian Participants can input electronic application instructions at the following times on the following dates: Note: Monday, 30 April :00 a.m. to 8:30 p.m. (1) Wednesday, 2 May :00 a.m. to 8:30 p.m. (1) Thursday, 3 May :00 a.m. to 8:30 p.m. (1) Friday, 4 May :00 a.m. (1) to 12:00 noon 1. These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/ Custodian Participants. CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Monday, 30 April 2018 until 12:00 noon on Friday, 4 May 2018 (24 hours daily, except on the last application day). The latest time for inputting your electronic application instructions will be 12:00 noon on Friday, 4 May 2018, the last application day or such later time as described in the paragraph headed 10. Effect of Bad Weather on the Opening of the Application Lists in this section. No Multiple Applications If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Public Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Public Offer Shares for which you have given such instructions and/or for which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Public Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made. Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance For the avoidance of doubt, our Company and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance). Personal Data The section of the Application Form headed Personal Data applies to any personal data held by our Company, the branch share registrar Tricor Investor Services Limited, the receiving bank, the Sole Sponsor, the Joint Global Coordinators, the Underwriters and any of their respective advisers and agents about you in the same way as it applies to personal data about applicants other than HKSCC Nominees. 7. WARNING FOR ELECTRONIC APPLICATIONS The subscription of the Hong Kong Public Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the application for 298

306 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Hong Kong Public Offer Shares through the HK eipo White Form service is also only a facility provided by the HK eipo White Form Service Provider to public investors. Such facilities are subject to capacity limitations and potential service interruptions and you are advised not to wait until the last application day in making your electronic applications. Our Company, our Directors, the Sole Sponsor, the Joint Global Coordinators and the Underwriters take no responsibility for such applications and provide no assurance that any CCASS Participant or person applying through the HK eipo White Form service will be allotted any Hong Kong Public Offer Shares. To ensure that CCASS Investor Participants can give their electronic application instructions, they are advised not to wait until the last minute to input their instructions to the systems. In the event that CCASS Investor Participants have problems in the connection to CCASS Phone System/CCASS Internet System for submission of electronic application instructions, they should either (i) submit a WHITE or YELLOW Application Form, or (ii) go to HKSCC s Customer Service Center to complete an input request form for electronic application instructions before 12:00 noon on Friday, 4 May HOW MANY APPLICATIONS CAN YOU MAKE Multiple applications for the Hong Kong Public Offer Shares are not allowed except by nominees. If you are a nominee, in the box on the Application Form marked For nominees you must include: an account number; or some other identification code, for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If you do not include this information, the application will be treated as being made for your benefit. All of your applications will be rejected if more than one application on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or through HK eipo White Form service, is made for your benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and: the principal business of that company is dealings in securities; and you exercise statutory control over that company, then the application will be treated as being for your benefit. Unlisted company means a company with no equity securities listed on the Stock Exchange. Statutory control means you: control the composition of the board of directors of the company; control more than half of the voting power of the company; or hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital). 299

307 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES 9. HOW MUCH ARE THE HONG KONG PUBLIC OFFER SHARES The WHITE and YELLOW Application Forms have tables showing the exact amount payable for Shares. You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee in full upon application for Shares under the terms set out in the Application Forms. You may submit an application using a WHITE or YELLOW Application Form or through the HK eipo White Form service in respect of a minimum of 5,000 Hong Kong Public Offer Shares. Each application or electronic application instructions in respect of more than 5,000 Hong Kong Public Offer Shares must be in one of the numbers set out in the table in the Application Form, or as otherwise specified on the designated website at If your application is successful, brokerage will be paid to the Exchange Participants, and the SFC transaction levy and the Stock Exchange trading fee are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on behalf of the SFC). For further details on the Offer Price, see the section headed Structure and Conditions of the Global Offering in this prospectus. 10. EFFECT OF BAD WEATHER ON THE OPENING OF THE APPLICATION LISTS The application lists will not open if there is: a tropical cyclone warning signal number 8 or above; or a black rainstorm warning, in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, 4 May Instead they will open between 11:45 a.m. and 12:00 noon on the next business day which does not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and 12:00 noon. If the application lists do not open and close on Friday, 4 May 2018 or if there is a tropical cyclone warning signal number 8 or above or a black rainstorm warning signal in force in Hong Kong that may affect the dates mentioned in the section headed Expected Timetable in this prospectus, an announcement will be made in such event. 11. PUBLICATION OF RESULTS Our Company expects to announce the final Offer Price, the level of indication of interest in the International Placing, the level of applications in the Hong Kong Public Offer and the basis of allocation of the Hong Kong Public Offer Shares on Tuesday, 15 May 2018 on our Company s website at and the website of the Stock Exchange at The results of allocations and the Hong Kong identity card/passport/hong Kong business registration numbers of successful applicants under the Hong Kong Public Offer will be available at the times and date and in the manner specified below: in the announcement to be posted on our Company s website at and the Stock Exchange s website at by no later than 9:00 a.m. on Tuesday, 15 May 2018; 300

308 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES from the designated results of allocations website at with a search by ID function on a 24-hour basis from 8:00 a.m. on Tuesday, 15 May 2018 to 12:00 midnight on Monday, 21 May 2018; by telephone enquiry line by calling between 9:00 a.m. and 6:00 p.m. from Tuesday, 15 May 2018 to Friday, 18 May 2018 on a business day; in the special allocation results booklets which will be available for inspection during opening hours from Tuesday, 15 May 2018 to Thursday, 17 May 2018 at all the receiving bank s designated sub-branches. If our Company accepts your offer to purchase (in whole or in part), which it may do by announcing the basis of allocations and/or making available the results of allocations publicly, there will be a binding contract under which you will be required to purchase the Hong Kong Public Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is not otherwise terminated. Further details are contained in the section headed Structure and Conditions of the Global Offering in this prospectus. You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not affect any other right you may have. 12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED HONG KONG PUBLIC OFFER SHARES You should note the following situations in which the Hong Kong Public Offer shares will not be allottedtoyou: (i) If your application is revoked: By completing and submitting an Application Form or giving electronic application instructions to HKSCC or through the HK eipo White Form, you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a collateral contract with our Company. Your application or the application made by HKSCC Nominees on your behalf may only be revoked on or before such fifth day if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that section which excludes or limits that person s responsibility for this prospectus. If any supplement to this prospectus is issued, applicants who have already submitted an application will be notified that they are required to confirm their applications. If applicants have been so notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked. If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively. 301

309 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES (ii) If our Company or its agents exercise their discretion to reject your application: Our Company, the Sole Sponsor, the Joint Global Coordinators, the HK eipo White Form Service Provider and their respective agents and nominees have full discretion to reject or accept any application, or to accept only part of any application, without giving any reasons. (iii) If the allotment of Hong Kong Public Offer Shares is void: The allotment of Hong Kong Public Offer Shares will be void if the Listing Committee does not grant permission to list the Shares either: within three weeks from the closing date of the application lists; or within a longer period of up to six weeks if the Listing Committee notifies our Company of that longer period within three weeks of the closing date of the application lists. (iv) If: you make multiple applications or suspected multiple applications; you or the person for whose benefit you are applying have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Hong Kong Public Offer Shares and International Placing Shares; your Application Form is not completed in accordance with the stated instructions; your electronic application instructions through the HK eipo White Form are not completed in accordance with the instructions, terms and conditions on the designated website; your payment is not made correctly or the cheque or banker s cashier order paid by you is dishonoured upon its first presentation; the Underwriting Agreements do not become unconditional or are terminated; our Company or the Joint Global Coordinators believe that by accepting your application, it or they would violate applicable securities or other laws, rules or regulations; or your application is for more than 100% of the Hong Kong Public Offer Shares initially offered under the Hong Kong Public Offer. 13. REFUND OF APPLICATION MONIES If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the maximum Offer Price of HK$0.50 per Offer Share (excluding brokerage, SFC transaction levy and the Stock Exchange trading Fee thereon), or if the conditions of the Hong Kong Public Offer set out in the paragraph headed Structure and Conditions of the Global Offering Conditions of the Hong Kong Public Offer in this prospectus are not fulfilled or if any application is revoked, the application monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy and the Stock Exchange trading fee, will be refunded, without interest or the cheque or banker s cashier order will not be cleared. 302

310 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Any refund of your application monies will be made on 15 May DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES You will receive one share certificate for all Hong Kong Public Offer Shares allotted to you under the Hong Kong Public Offer (except pursuant to applications made on YELLOW Application Forms or by electronic application instructions to HKSCC via CCASS where the share certificates will be deposited into CCASS as described below). No temporary document of title will be issued in respect of the Shares. No receipt will be issued for sums paid on application. If you apply by WHITE or YELLOW Application Form, subject to personal collection as mentioned below, the following will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on the Application Form: share certificate(s) for all the Hong Kong Public Offer Shares allotted to you (for YELLOW Application Forms, share certificates will be deposited into CCASS as described below); and refund cheque(s) crossed Account Payee Only in favor of the applicant (or, in the case of joint applicants, the first-named applicant) for (i) all or the surplus application monies for the Hong Kong Public Offer Shares, wholly or partially unsuccessfully applied for; and/or (ii) the difference between the Offer Price and the maximum Offer Price per Offer Share paid on application in the event that the Offer Price is less than the maximum Offer Price (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest). Part of the Hong Kong identity card number/passport number, provided by you or the first-named applicant (if you are joint applicants), may be printed on your refund cheque, if any. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque(s). Inaccurate completion of your Hong Kong identity card number/passport number may invalidate or delay encashment of your refund cheque(s). Subject to arrangement on despatch/collection of share certificates and refund monies as mentioned below, any refund cheque(s) and share certificates are expected to be posted on or around Tuesday, 15 May The right is reserved to retain any share certificate(s) and any surplus application monies pending clearance of cheque(s) or banker s cashier order(s). Share certificates will only become valid at 8:00 a.m. on Wednesday, 16 May 2018 provided that the Global Offering has become unconditional and the right of termination described in the section headed Underwriting in this prospectus has not been exercised. Investors who trade Shares prior to the receipt of share certificates or the share certificates becoming valid do so at their own risk. Personal Collection (i) If you apply using a WHITE Application Form If you apply for 1,000,000 or more Hong Kong Public Offer Shares and have provided all information required by your Application Form, you may collect your refund cheque(s) and/or share certificate(s) from Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Tuesday, 15 May 2018 or such other date as notified by us in the newspapers. 303

311 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES If you are an individual who is eligible for personal collection, you must not authorize any other person to collect for you. If you are a corporate applicant which is eligible for personal collection, your authorized representative must bear a letter of authorization from your corporation stamped with your corporation s chop. Both individuals and authorized representatives must produce, at the time of collection, evidence of identity acceptable to the Hong Kong branch share registrar. If you do not collect your refund cheque(s) and/or share certificate(s) personally within the time specified for collection, they will be despatched promptly to the address specified in your Application Form by ordinary post at your own risk. If you apply for less than 1,000,000 Hong Kong Public Offer Shares, your refund cheque(s) and/ or share certificate(s) will be sent to the address on the relevant Application Form on Tuesday, 15 May 2018, by ordinary post and at your own risk. (ii) If you apply using a YELLOW Application Form If you apply for 1,000,000 Hong Kong Public Offer Shares or more, please follow the same instructions as described above. If you have applied for less than 1,000,000 Hong Kong Public Offer Shares, your refund cheque(s) will be sent to the address on the relevant Application Form on Tuesday, 15 May 2018, by ordinary post and at your own risk. If you apply by using a YELLOW Application Form and your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your or the designated CCASS Participant s stock account as stated in your Application Form on Tuesday, 15 May 2018, or upon contingency, on any other date determined by HKSCC or HKSCC Nominees. If you apply through a designated CCASS participant (other than a CCASS investor participant) For Public Offer Shares credited to your designated CCASS participant s stock account (other than CCASS Investor Participant), you can check the number of Public Offer Shares allotted to you with that CCASS participant. If you apply as a CCASS investor participant Our Company will publish the results of CCASS Investor Participants applications together with the results of the Hong Kong Public Offer in the manner described in the paragraph headed 11. Publication of results above. You should check the announcement published by our Company and report any discrepancies to HKSCC before 5:00 p.m. on Tuesday, 15 May 2018 or any other date as determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong Public Offer Shares to your stock account, you can check your new account balance via the CCASS Phone System and CCASS Internet System. (iii) If you apply through the HK eipo White Form If you apply for 1,000,000 Hong Kong Public Offer Shares or more and your application is wholly or partially successful, you may collect your share certificate(s) from Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Tuesday, 15 May 2018, or such other date as notified by our Company in the newspapers as the date of despatch/collection of share certificates/e-auto Refund payment instructions/refund cheque(s). 304

312 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES If you do not collect your share certificate(s) personally within the time specified for collection, they will be sent to the address specified in your application instructions by ordinary post at your own risk. If you apply for less than 1,000,000 Hong Kong Public Offer Shares, your share certificate(s) (where applicable) will be sent to the address specified in your application instructions on Tuesday, 15 May 2018 by ordinary post at your own risk. If you apply and pay the application monies from a single bank account, any refund monies will be despatched to that bank account in the form of e-auto Refund payment instructions. If you apply and pay the application monies from multiple bank accounts, any refund monies will be despatched to the address as specified in your application instructions in the form of refund cheque(s) by ordinary post at your own risk. (iv) If you apply via Electronic Application Instructions to HKSCC Allocation of Hong Kong Public Offer Shares For the purposes of allocating Hong Kong Public Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit instructions are given will be treated as an applicant. Deposit of Share Certificates into CCASS and Refund of Application Monies If your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS Participant s stock account or your CCASS Investor Participant stock account on Tuesday, 15 May 2018, or, on any other date determined by HKSCC or HKSCC Nominees. Our Company expects to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, our Company will include information relating to the relevant beneficial owner), your Hong Kong identity card number/passport number or other identification code (Hong Kong business registration number for corporations) and the basis of allotment of the Hong Kong Public Offer in the manner specified in the paragraph headed Publication of results above on Tuesday, 15 May You should check the announcement published by our Company and report any discrepancies to HKSCC before 5:00 p.m. on Tuesday, 15 May 2018 or such other date as determined by HKSCC or HKSCC Nominees. If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong Public Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian. If you have applied as a CCASS Investor Participant, you can also check the number of Public Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC s An Operating Guide for Investor Participants in effect from time to time) on Tuesday, 15 May Immediately following the credit of the Hong Kong Public 305

313 HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Offer Shares to your stock account and the credit of refund monies to your bank account, HKSCC will also make available to you an activity statement showing the number of Public Offer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account. Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the maximum Offer Price per Offer Share initially paid on application (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest) will be credited to your designated bank account or the designated bank account of your broker or custodian on Tuesday, 15 May ADMISSION OF THE SHARES INTO CCASS If the Stock Exchange grants the listing of, and permission to deal in, the Shares and we comply with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares or any other date HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the GEM Listing Rules) is required to take place in CCASS on the second Business Day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should seek the advice of their stockbrokers or other professional advisers for details of the settlement arrangement as such arrangements may affect their rights and interests. All necessary arrangements have been made enabling the Shares to be admitted into CCASS. 306

314 APPENDIX I ACCOUNTANT S REPORT The following is the text of a report set out on pages I-1 to I-58, received from the Company s reporting accountant, BDO Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus. ACCOUNTANT S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF KINGSLEY EDUGROUP LIMITED AND CHINA EVERBRIGHT CAPITAL LIMITED Introduction We report on the historical financial information of Kingsley Edugroup Limited (the Company ) and its subsidiaries (hereinafter collectively referred to as the Group ) set out on pages I-4 to I-58, which comprises the consolidated statements of financial position as at 30 June 2016, 30 June 2017 and 31 October 2017, the statements of financial position of the Company as at 30 June 2017 and 31 October 2017, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the two years ended 30 June 2017 and the four months ended 31 October 2017 (the Track Record Period ), and a summary of significant accounting policies and other explanatory information (together the Historical Financial Information ). The Historical Financial Information set out on pages I-4 to I-58 forms an integral part of this report, which has been prepared for inclusion in the prospectus of the Company dated 30 April 2018 (the Prospectus ) in connection with the initial listing of shares of the Company on GEM of The Stock Exchange of Hong Kong Limited (the Stock Exchange ). Directors responsibility for the Historical Financial Information The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 3 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error. Reporting accountant s responsibility Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 Accountants Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement. I-1

315 APPENDIX I ACCOUNTANT S REPORT Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant s judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant considers internal control relevant to the entity s preparation of Historical Financial Information that give a true and fair view in accordance with the basis of preparation and presentation set out in Note 3 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion the Historical Financial Information gives, for the purposes of the accountant s report, a true and fair view of the Group s financial position as at 30 June 2016, 30 June 2017 and 31 October 2017, the Company s financial position as at 30 June 2017 and 31 October 2017, and of the Group s financial performance and cash flows for the Track Record Period in accordance with the basis of preparation and presentation set out in Note 3 to the Historical Financial Information. Review of stub period comparative financial information We have reviewed the stub period comparative financial information of the Group which comprises the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the four months ended 31 October 2016 and other explanatory information (the Stub Period Comparative Financial Information ). The directors of the Company are responsible for the preparation and presentation of the Stub Period Comparative Financial Information in accordance with the basis of preparation and presentation set out in Note 3 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountant s report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in Note 3 to the Historical Financial Information. I-2

316 APPENDIX I ACCOUNTANT S REPORT Report on matters under the Rules Governing the Listing of Securities on GEM of the Stock Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance Adjustments In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-4 have been made. Dividends We refer to Note 10 to the Historical Financial Information which stated that no dividend has been paid by the Company in respect of the Track Record Period. No historical financial statements for the Company No financial statements have been prepared for the Company since its date of incorporation. BDO Limited Certified Public Accountants Pak Tak Lun Practising Certificate number: P06170 Hong Kong 30 April 2018 I-3

317 APPENDIX I ACCOUNTANT S REPORT HISTORICAL FINANCIAL INFORMATION OF THE GROUP Preparation of Historical Financial Information Set out below is the Historical Financial Information which forms an integral part of this accountant s report. The consolidated financial statements of the Group for the Track Record Period, on which the Historical Financial Information is based, have been prepared in accordance with the accounting policies conform with the Hong Kong Financial Reporting Standards (the HKFRSs ) issued by HKICPA and were audited by BDO Limited in accordance with Hong Kong Standards on Auditing issued by the HKICPA (the Underlying Financial Statements ). The Historical Financial Information is presented in Malaysian Ringgit ( RM ) except when otherwise indicated. I-4

318 APPENDIX I ACCOUNTANT S REPORT I. HISTORICAL FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year ended 30 June Four months ended 31 October Notes RM RM RM RM (Unaudited) Revenue ,822,778 29,794,992 5,739,484 6,380,247 Cost of revenue... (9,266,348) (12,336,340) (3,790,348) (4,573,071) Grossprofit... 9,556,430 17,458,652 1,949,136 1,807,176 Other revenue and gains ,421,855 5,995,609 1,882,801 2,366,667 Selling and distribution expenses... (144,833) (275,381) (105,569) (60,464) Administrative expenses... (7,060,434) (7,181,335) (2,239,481) (5,512,607) Operatingprofit/(loss)... 7,773,018 15,997,545 1,486,887 (1,399,228) Finance costs (4,592,413) (4,635,592) (1,787,100) (1,030,194) Profit/(loss) before income tax ,180,605 11,361,953 (300,213) (2,429,422) Income tax benefit/(expense) ,151 (70,384) (7,771) (1,608) Profit /(loss) and total comprehensive income for the year/period 3,196,756 11,291,569 (307,984) (2,431,030) Attributable to: Owners of the Company... 3,206,237 11,021,974 (219,924) (2,353,194) Non-controlling interests... (9,481) 269,595 (88,060) (77,836) 3,196,756 11,291,569 (307,984) (2,431,030) I-5

319 APPENDIX I ACCOUNTANT S REPORT CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at 30 June As at 31 October Notes RM RM RM Non-current assets Property, plant and equipment ,073, ,807, ,299,124 Deferredtaxassets ,425 Pledged bank deposit ,242,818 Total non-current assets ,315, ,807, ,341,549 Current assets Accounts receivable , , ,239 Prepayments, deposits and other receivables , ,992 1,953,648 Amount due from a shareholder ,209 Amounts due from related companies ,015,925 5,130,456 7,371,300 Taxrecoverable ,250 76,662 Pledged bank deposit , ,683 Cash and cash equivalents... 1,689,076 6,705,098 9,771,419 Total current assets... 3,482,359 13,941,080 19,861,289 Current liabilities Accounts payable , , ,511 Otherpayablesandaccruals ,600,090 5,906,907 14,389,263 Amounts due to related companies ,966,318 66,000 Amount due to a director ,222,163 Amounts due to shareholders Bankborrowings,secured ,922,212 1,704,950 2,704,950 Taxpayable... 75,894 Obligations under finance leases ,611 35,425 Total current liabilities... 20,141,067 8,295,241 17,758,694 Net current (liabilities)/assets... (16,658,708) 5,645,839 2,102,595 Total assets less current liabilities ,657, ,453, ,444,144 Non-current liabilities Amount due to a related company ,337,642 25,592,113 29,092,113 Bankborrowings,secured ,616,338 67,878,338 66,893,355 Deferred tax liabilities ,209 Obligations under finance leases ,067 84,642 Total non-current liabilities... 84,074,047 93,563,302 95,985,468 Net assets... 20,583,199 31,889,813 29,458,676 I-6

320 APPENDIX I ACCOUNTANT S REPORT CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at 30 June As at 31 October Notes RM RM RM Equity Sharecapital Reserves ,629,018 31,650,992 29,297,725 Equity attributable to owners of the Company... 20,629,018 31,651,037 29,297,736 Non-controlling interests (45,819) 238, ,940 Total equity... 20,583,199 31,889,813 29,458,676 I-7

321 APPENDIX I ACCOUNTANT S REPORT STATEMENTS OF FINANCIAL POSITION OF THE COMPANY As at 30 June As at 31 October Notes Non-current assets Investment in a subsidiary Current assets Prepayments, deposits and other receivables , ,716 Amount due from a subsidiary Cash and cash equivalents , ,213 RM RM Total current assets ,656 1,425,972 Current liabilities Other payables and accruals , ,705 Amount due to a subsidiary ,704 4,870,224 Amounts due to shareholders Total current liabilities... 1,054,319 5,008,005 Net current liabilities... (566,663) (3,582,033) Net liabilities... (566,659) (3,582,029) Equity Share capital Accumulated losses... (566,704) (3,582,040) (566,659) (3,582,029) I-8

322 APPENDIX I ACCOUNTANT S REPORT CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Share capital (Note 29) Attributable to owners of the Company Merger reserve (Note 29) Retained earnings/ (accumulated losses) Sub-total Noncontrolling interests Total equity RM RM RM RM RM RM At 1 July ,750,002 (877,221) 9,872,781 (36,338) 9,836,443 Profit and total comprehensive income for the year... 3,206,237 3,206,237 (9,481) 3,196,756 Issuance of new shares by Kingsley International and Kingsley Skills (Note29)... 7,550,000 7,550,000 7,550,000 At 30 June 2016 and 1 July ,300,002 2,329,016 20,629,018 (45,819)20,583,199 Profit and total comprehensive income for the year... 11,021,974 11,021, ,595 11,291,569 Issuance of new shares (Note29) Issuance of new shares to a non-controlling shareholder by Kingsley Language House... 15,000 15,000 At 30 June 2017 and 1 July ,300,002 13,350,990 31,651, ,776 31,889,813 Loss and total comprehensive income for the period... (2,353,194) (2,353,194) (77,836) (2,431,030) Issuance of new shares (Note29) I-9

323 APPENDIX I ACCOUNTANT S REPORT CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Share capital (Note 29) Attributable to owners of the Company Merger reserve (Note 29) Retained earnings/ (accumulated losses) Sub-total Noncontrolling interests Total equity RM RM RM RM RM RM Shares repurchased and cancelled (Note29)... (87) (87) (87) Effect of Reorganisation... (73) (73) (73) At 31 October ,299,929 10,997,796 29,297, ,940 29,458,676 At 1 July ,300,002 2,329,016 20,629,018 (45,819)20,583,199 Loss and total comprehensive income for the period... (219,924) (219,924) (88,060) (307,984) At 31 October 2016 (Unaudited)... 18,300,002 2,109,092 20,409,094 (133,879)20,275,215 I-10

324 APPENDIX I ACCOUNTANT S REPORT CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended 30 June Four months ended 31 October Notes RM RM RM RM (Unaudited) Cash flows from operating activities Profit/(loss)beforeincometax... 3,180,605 11,361,953 (300,213) (2,429,422) Adjustments for: Interestincome... 8 (35,684) (83,202) (15,575) (7,743) Liquidated and ascertained damages... 8 (4,560,000) (5,475,000) (1,845,000) (1,845,000) Finance costs ,592,413 4,635,592 1,787,100 1,030,194 Depreciation of property, plant and equipment ,229,718 2,373, , ,124 Gain on disposal of property, plant and equipment... 8 (2,778) Listing expenses ,273 2,759,449 Written off of property, plant and equipment ,734 Operating profit before working capital changes... 5,404,663 13,345, , ,602 Decrease/(increase) in accounts receivable... 54,680 (608,074) (663,922) 629,179 Decrease/(increase) in prepayments, deposits and other receivables ,327 (127,767) (389,966) (540,028) (Increase)/decrease in amount due from a shareholder... (2,209) 2,209 Increase/decrease in accounts payable , ,286 (270,723) 6,552 Increase in other payables and accruals... 1,201,074 1,522,476 7,722,085 8,851,850 Cash generated from operations... 7,105,513 14,315,342 6,795,948 9,215,364 Incometaxespaid... (189,596) (18,837) (6,020) (11,122) Income taxes refunded... 25,000 21, ,436 Net cash from operating activities... 6,940,917 14,317,755 6,789,928 9,315,678 Cash flows from investing activities Purchases of property, plant and equipment... (12,007,961) (894,673) (762,272) (380,972) Proceeds from disposal of property, plant and equipment... 3,900 Considerations paid upon Reorganisation... (73) (Increase)/decrease in pledged bank deposit... (293,735) 724, ,995 (4,438) Interestreceived... 35,684 83,202 15,575 7,743 Net cash used in investing activities... (12,262,112) (86,898) (6,702) (377,740) I-11

325 APPENDIX I ACCOUNTANT S REPORT CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Cash flows from financing activities Proceeds from issuance of new shares... 50,000 15, Proceeds from bank borrowings... 8,193,379 69,549,500 63,205,672 Repayment of bank borrowings... (5,511,753) (65,538,550) (65,538,550) Advances from/(repayments to) related companies... 5,567,818 (5,539,859) 1,463,272 (461,844) Advances from/(repayments to) a director... 2,682,669 (3,222,163) (302,058) Repayment of obligations under finance leases... (25,322) (33,611) (11,002) (120,067) Interestpaid... (5,487,813) (4,264,078) (1,434,957) (1,373,514) Payment of listing expenses... (181,119) (3,916,234) Net cash from/(used in) financing activities... 5,468,978 (9,214,835) (2,617,623) (5,871,617) Net increase in cash and cash equivalents ,783 5,016,022 4,165,603 3,066,321 Cash and cash equivalents at beginning of year/period... 1,541,293 1,689,076 1,689,076 6,705,098 Cash and cash equivalents at end of year/ period... 1,689,076 6,705,098 5,854,679 9,771,419 I-12

326 APPENDIX I ACCOUNTANT S REPORT II. NOTES TO THE FINANCIAL INFORMATION 1. GENERAL The Company was incorporated in the Cayman Islands on 12 January 2017 as an exempted company with limited liability under the Companies Law of the Cayman Islands. The address of the Company s registered office and the principal place of business have been disclosed in the section Corporate Information in the Prospectus. Through a group reorganisation, as more fully explained in the Section headed History, Development and Reorganisation in the Prospectus (the Reorganisation ), the Company became the holding company of the companies now comprising the Group on 30 August The principal activity of the Company is investment holding while its subsidiaries are principally engaged in provision of education and related services (the Listing Business ). The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates ( functional currency ). The principal activities of the Group are expressed in RM. Accordingly, the Group uses RM as its reporting currency. 2. REORGANISATION AND PARTICULARS OF SUBSIDIARIES (a) Reorganisation Prior to the Reorganisation, the operating subsidiaries of the Group including Kingsley International Sdn. Bhd. ( Kingsley International ), Kingsley Skills Sdn. Bhd. ( Kingsley Skills ) and Kingsley Professional Centre Sdn. Bhd. ( Kingsley Professional Centre ) were controlled by Tan Sri Dato Sri Goh Ming Choon and Dato Goh Meng Keong, who are sibling and have always been acting in concert (together referred to the Controlling Shareholders ) and Kingsley Graduate School Malaysia Sdn. Bhd. ( Kingsley Graduate School ) was controlled by Tan Sri Dato Sri Goh Ming Choon. In preparation for the listing of shares of the Company on GEM of the Stock Exchange, the companies comprising the Group underwent a group reorganisation as described below: (i) (ii) (iii) (iv) On 12 January 2017, the Company was incorporated in the Cayman Islands with an authorised share capital of United States Dollar ( US$ ) 50,000 divided into 5,000,000 shares of US$0.01 each, of which 800, 120 and 80 shares, representing 80%, 12% and 8% of the entire issued share capital of the Company, were allotted and issued at par to Star Shine Finance Limited, DGMK Investment Limited and Eduking Investment Limited respectively. Star Shine Finance Limited and DGMK Investment Limited, not forming part of the Group, are wholly owned by Tan Sri Dato Sri Goh Ming Choon and Dato Goh Meng Keong on the same date respectively. Eduking Investment Limited, not forming part of the Group, is the non-controlling shareholder of the Group. On 25 January 2017, Kingsley Malaysia Limited was incorporated in the British Virgin Islands ( BVI ) with limited liability, and authorised to issue a maximum of 50,000 shares with a par value of US$1 each. One share in Kingsley Malaysia Limited was allotted and issued to the Company to act as intermediate holding company of the Group on that date. On 14 December 2016, Kingsley Edugroup Berhad was incorporated in Malaysia with an authorised share capital of RM400,000 divided into 400,000 ordinary shares of RM1 each. Two shares of Kingsley Edugroup Berhad were initially allotted and issued to two initial subscribers, both are independent third party, on the date of its incorporation. On 10 March 2017, each of initial subscribers transferred their respective one share of Kingsley Edugroup Berhad to Kingsley Malaysia Limited at par. On 23 August 2017, Tan Sri Dato Sri Goh Ming Choon and B&G Capital Resources Berhad, a company controlled by Dato Goh Meng Keong, transferred the entire issued capital in Kingsley International to Kingsley Edugroup Berhad. Kingsley International became an indirect wholly-owned subsidiary of the Company. Kingsley International owned 70% of entire issued share capital in Kingsley Language House Sdn. Bhd. ( Kingsley Language House ) and Kingsley Catering Sdn. Bhd. ( Kingsley Catering ) respectively. I-13

327 APPENDIX I ACCOUNTANT S REPORT (v) On 23 August 2017, each of the Controlling Shareholders transferred the entire issued capital in Kingsley Skills and Kingsley Professional Centre to Kingsley Edugroup Berhad. After completion of above share transfer, these companies became indirect wholly-owned subsidiaries of the Company. (vi) On 30 August 2017, Tan Sri Dato Sri Goh Ming Choon transferred 70% of the entire issued capital in Kingsley Graduate School to Kingsley Edugroup Berhad. Kingsley Graduate School became an indirect subsidiary of the Company. The remaining 30% of the entire issued capital in Kingsley Graduate School is owned by an independent third party. (b) Particulars of subsidiaries The Company As at 30 June As at 31 October RM RM Unlisted investment at cost Upon completion of the Reorganisation and as of the date of this report, the Company had direct or indirect interests in the following subsidiaries with limited liability: Country and date of Place of operation and Particulars of Percentage of issued and fully ownership interests/ paid up share voting rights / capital/ registered profit share Name incorporation principal activity capital Directly Indirectly Kingsley Malaysia Limited Kingsley Edugroup Berhad Kingsley International Kingsley Graduate School Kingsley Skills Kingsley Professional Centre Kingsley Language House Kingsley Catering Kingsley Digital Solutions Sdn. Bhd. BVI, 25 January 2017 Malaysia, 14 December 2016 Malaysia, 2 December 2010 Malaysia, 9 May 2012 Malaysia, 30 October 2013 Malaysia, 31 October 2013 Malaysia, 8 November 2016 Malaysia, 7 January 2009 Malaysia, 21 November 2017 BVI, Investment holdings US$1 (equivalent to RM4) 100% Malaysia, RM2 100% Investment holdings Malaysia, RM17,500, % international school Malaysia, college for RM1,000,000 70% higher education Malaysia, provision RM100, % of skills training programme Malaysia, provision RM2 100% of education and related services Malaysia, inactive RM50,000 70% Malaysia, inactive RM100 70% Malaysia, inactive RM1 100% All subsidiaries now comprising the Group are limited liability companies and have adopted 30 June as their financial year end date. I-14

328 APPENDIX I ACCOUNTANT S REPORT The statutory financial statements of Kingsley International, Kingsley Graduate School, Kingsley Skills and Kingsley Professional Centre for the years ended 30 June 2016 and 30 June 2017 and the statutory financial statements of Kingsley Language House for the period from 8 November 2016 to 30 June 2017 were prepared under Malaysian Financial Reporting Standards (the MFRSs ), International Financial Reporting Standards (the IFRSs ) and the requirements of the Companies Act, 2016 in Malaysia and audited by BDO Malaysia (AF0206). The statutory financial statements of Kingsley Catering for the years ended 30 June 2016 and 30 June 2017 and the statutory financial statements of Kingsley Edugroup Berhad for the period from 14 December 2016 to 30 June 2017 were prepared under MFRSs, IFRSs and the requirements of the Companies Act, 2016 in Malaysia and audited by Y.L. Chee & Co. (AF0725). No audited financial statements have been issued for Kingsley Digital Solutions Sdn. Bhd. as it is newly incorporated. No audited financial statements have been issued for other entities as it is not required to issue audited financial statements under the statutory requirements of its place of incorporation. I-15

329 APPENDIX I ACCOUNTANT S REPORT 3. BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION The Historical Financial Information has been prepared in accordance with HKFRSs (which include all HKFRSs, Hong Kong Accounting Standards ( HKASs ) and Interpretations) issued by the HKICPA. In addition, the Historical Financial Information includes applicable disclosures required by the GEM Listing Rules and the Hong Kong Companies Ordinance. All HKFRSs effective for the accounting period commencing from 1 July 2017, together with the relevant transitional provisions, have been early adopted by the Group in the preparation of the Historical Financial Information throughout the Track Record Period. For the purpose of preparing and presenting the Historical Financial Information, the Group has adopted all applicable new/revised HKFRSs effective for the accounting periods commencing from 1 July 2017 throughout the Track Record Period. The Historical Financial Information has been prepared under the historical cost convention. Prior to the incorporation of the Company and the completion of the Reorganisation, the Listing Business was carried on by companies now comprising the Group. Pursuant to the Reorganisation, as more fully explained in the section headed History, Development and Reorganisation in the Prospectus, the Company became the holding company of the companies now comprising the Group on 30 August Immediately prior to and after the Reorganisation, the Listing Business is held by the companies now comprising the Group together with the Listing Business are transferred to and held by the Company. By inserting those companies over the companies now comprising the Group, have no substance and do not form a business combination, and accordingly, the Financial Information of the Company was combined with that of the operating subsidiaries using the predecessor carrying amounts. The Reorganisation is therefore merely a reorganisation of the Listing Business and does not constitute a business combination, as if the group structure under the Reorganisation had been in existence throughout the Track Record Period or since the respective dates of incorporation of the entities now comprising the Group, whichever is the shorter period. The consolidated statement of profit and loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the Group for the Track Record Period included the results, changes in equity and cash flows of the companies now comprising the Group from the earliest date presented or since their respective dates of incorporation, whichever was shorter, as if the current group structure had been in existence through those years. The consolidated statements of financial position of the Group as at 30 June 2016 and 30 June 2017 have been prepared to present the assets and liabilities of the companies now comprising the Group as if the current group structure had been in existence at those dates. No adjustment is made to reflect fair values, or recognise any new assets or liabilities as a result of the Reorganisation. All intra-group transactions and balances have been eliminated on consolidation. I-16

330 APPENDIX I ACCOUNTANT S REPORT 4. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS The following new/revised HKFRSs, have been issued, but are not yet effective and have not been early adopted by the Group. The Group s current intention is to apply these changes on the date they become effective. Amendments to HKAS 40 Transfers of Investment Property 1 Amendments to HKFRS 2 Share-Based Payment 1 Amendments to HKFRS 4 Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts 1 HKFRS 9 Financial Instruments 1 HKFRS 15 Revenue from Contracts with Customers 1 Amendments to HKFRS 15 Clarifications to HKFRS 15 Revenue from Contracts with Customers 1 HKFRS 16 Leases 2 Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 3 HK(IFRIC) Interpretation 22 Foreign Currency Transactions and Advance Consideration 1 HK(IFRIC) Interpretation 23 Uncertainty over Income Tax Treatments 2 Amendments to HKFRSs Annual improvements to HKFRSs cycle 1 1 Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after a date to be determined Amendments to HKFRS 2 Share-based Payment The amendments provide requirements on the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based payment transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a sharebased payment that changes the classification of the transaction from cash-settled to equity-settled. HKFRS 9 Financial Instruments HKFRS 9 introduces new requirements for the classification and measurement of financial assets. Debt instruments that are held within a business model whose objective is to hold assets in order to collect contractual cash flows (the business model test) and that have contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (the contractual cash flow characteristics test) are generally measured at amortised cost. Debt instruments that meet the contractual cash flow characteristics test are measured at fair value through other comprehensive income if the objective of the entity s business model is both to hold and collect the contractual cash flows and to sell the financial assets. Entities may make an irrevocable election at initial recognition to measure equity instruments that are not held for trading at fair value through other comprehensive income. All other debt and equity instruments are measured at fair value through profit or loss. HKFRS 9 includes a new expected credit loss model for all financial assets not measured at fair value through profit or loss replacing the incurred loss model in HKAS 39 and new general hedge accounting requirements to allow entities to better reflect their risk management activities in financial statements. HKFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from HKAS 39, except for financial liabilities designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of the liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, HKFRS 9 retains the requirements in HKAS 39 for derecognition of financial assets and financial liabilities. I-17

331 APPENDIX I ACCOUNTANT S REPORT Based on the Group s financial instruments and risk management policies as at 31 October 2017, the directors of the Company preliminarily assess that the adoption of HKFRS 9 in the future will not have a significant impact on the classification and measurement of the Group s financial assets and financial liabilities. The directors of the Company have performed a preliminary assessment and expect that the application of the expected credit loss model will not have significant impact on the Group s consolidated financial statements. HKFRS 15 Revenue from contracts with customers The new standard establishes a single revenue recognition framework. The core principle of the framework is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. HKFRS 15 supersedes existing revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and related interpretations. HKFRS 15 requires the application of a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligation Step 5: Recognise revenue when each performance obligation is satisfied HKFRS 15 includes specific guidance on particular revenue related topics that may change the current approach taken under HKFRS. The standard also significantly enhances the qualitative and quantitative disclosures related to revenue. The directors of the Company have performed a preliminary assessment and expect that the implementation of the HKFRS 15 would not result in any significant impact on the Group s financial position and results of operations. Meanwhile, there will be additional disclosure requirement under HKFRS 15 upon its adoption. HKFRS 15 is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. Amendments HKFRS 15 Clarifications to HKFRS 15 Revenue from Contracts with Customers The amendments to HKFRS 15 included clarifications on identification of performance obligations; application of principal versus agent; licences of intellectual property; and transition requirements. HKFRS 16 Leases HKFRS 16, which upon the effective date will supersede HKAS 17 Leases and related interpretations, introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Specifically, under HKFRS 16, a lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Accordingly, a lessee should recognise depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows. Also, the right-of-use asset and the lease liability are initially measured on a present I-18

332 APPENDIX I ACCOUNTANT S REPORT value basis. The measurement includes non-cancellable lease payments and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or to exercise an option to terminate the lease. This accounting treatment is significantly different from the lessee accounting for leases that are classified as operating leases under the predecessor standard, HKAS 17. In respect of the lessor accounting, HKFRS 16 substantially carries forward the lessor accounting requirements in HKAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. Furthermore, extensive disclosures are required by HKFRS 16. As at 31 October 2017, the Group has non-cancellable operating lease commitments of RM3,582,140 as disclosed in note 30. These arrangements will meet the definition of a lease under HKFRS 16, and hence the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application of HKFRS 16. In the consolidated statements of profit or loss and other comprehensive income, lease will be recognised in the future as depreciation and will no longer be recorded as rental expenses. Interest expense on the lease liability will be presented separately from depreciation under finance costs. The combination of a straight-line depreciation of the right-of-use asset and the effective interest rate method applied to the lease liability will result in a higher total charge to profit or loss in the initial year of the lease, and decreasing expenses during the latter part of the lease term on a lease by lease basis. Nevertheless, it is expected that there will be no material impact on the total expenses to be recognised by the Group over the entire lease period and the total net profit over the lease period is not expected to be materially affected. The adoption of HKFRS 16 would not affect the total cash flows in respect of the leases. The Group is continuing to assess the specific magnitude of the adoption of HKFRS 16 to the relevant financial statement areas and will conduct a more detailed assessment on the impact as information become available closer to the planned initial date of the adoption of 1 July Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments clarify the extent of gains or losses to be recognised when an entity sells or contributes assets to its associate or joint venture. When the transaction involves a business the gain or loss is recognised in full, conversely when the transaction involves assets that do not constitute a business the gain or loss is recognised only to the extent of the unrelated investors interests in the joint venture or associate. Except for those stated as above, the directors of the Company anticipate that the application of the other new or amendments to HKFRSs and interpretations will have no material impact on the Group s consolidated financial statements in the future. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation The Historical Financial Information incorporates the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the Track Record Period are included in the consolidation statements of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. I-19

333 APPENDIX I ACCOUNTANT S REPORT Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group s accounting policies. All intra-group assets, liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Non-controlling interests in subsidiaries are presented separately from the Group s equity therein. Changes in the Group s ownership interests in existing subsidiaries Changes in the Group s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s relevant components of equity including reserves and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted after re-attribution of the relevant equity impairment, and the fair value of the consideration paid or received is recognised directly in equity and attributable to owners of the Company. Merger accounting for common control combination The Historical Financial Information incorporates the financial statements of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties perspective. No amount is recognised in consideration for goodwill or excess of acquirers interest in the net fair value of acquirer s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party s interest. The consolidated statements of profit or loss and other comprehensive income includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where there is a shorter period, regardless of the date of the common control combination. The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been combined at the previous financial position date or when they first came under common control, whichever is shorter. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipment includes its purchase price and the costs directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as an expense in profit or loss during the financial period in which they are incurred. I-20

334 APPENDIX I ACCOUNTANT S REPORT Property, plant and equipment are depreciated so as to write off their cost or valuation net of expected residual value over their estimated useful lives on a straight-line basis. The useful lives, residual value and depreciation method are reviewed, and adjusted if appropriate, at the end of each reporting period. The useful lives are as follows: Freehold land Buildings Motor vehicles Leasehold improvement Computer Furniture, fixture and equipment N/A 50 years 5 years 5 years 5 years 5 years An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset s estimated recoverable amount. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the relevant lease. The gain or loss on disposal of an item of property, plant and equipment is the difference between the net sale proceeds and its carrying amount, and is recognised in profit or loss on disposal. Construction in progress represents buildings, plant and machinery under construction or pending installation and is stated at cost less accumulated impairment losses (if any). Cost includes the costs of construction and acquisition and capitalised borrowing costs. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and ready for intended use. When the assets concerned are available for use, the costs are transferred to the respective categories of property, plant and equipment and depreciated in accordance with the policy as stated above. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to lessee. All other leases are classified as operating leases. The Group as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group s net investment outstanding in respect of the leases. Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on the straight-line basis over the lease term. The Group as lessee Assets held under finance leases are initially recognised as assets at their fair value or, if lower, the present value of the minimum lease payments. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to profit or loss over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor. The total rentals payable under the operating leases are recognised in profit or loss on a straight-line basis over the lease term. Lease incentives received are recognised as an integrated part of the total rental expense, over the term of the lease. I-21

335 APPENDIX I ACCOUNTANT S REPORT Financial Instruments (i) Financial assets The Group classifies its financial assets at initial recognition, depending on the purpose for which the asset was acquired. Financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned. Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), and also incorporate other types of contractual monetary asset. Subsequent to initial recognition, they are carried at amortised cost using the effective interest method, less any identified impairment losses. (ii) Impairment loss on financial assets The Group assesses, at the end of each reporting period, whether there is any objective evidence that financial asset is impaired. Financial asset is impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Evidence of impairment may include: significant financial difficulty of the debtor; a breach of contract, such as a default or delinquency in interest or principal payments; granting concession to a debtor because of debtor s financial difficulty; it becoming probable that the debtor will enter bankruptcy or other financial reorganisation. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. The carrying amount of financial asset is reduced through the use of an allowance account. When any part of financial asset is determined as uncollectible, it is written off against the allowance account for the relevant financial asset. (iii) Financial liabilities Financial liabilities at amortised cost including trade and other payables, amounts due to related companies, amount due to a director, bank borrowings and obligations under finance leases are initially measured at fair value, net of directly attributable costs incurred and are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised in profit or loss. Gains or losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process. (iv) Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability, or where appropriate, a shorter period. I-22

336 APPENDIX I ACCOUNTANT S REPORT (v) Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. (vi) Derecognition The Group derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39. Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, after deducting discounts and refunds. Tuition fees received from colleges are recognised after a service contract is signed, the price is fixed or determinable, and services are provided. Tuition fees received from international school are generally paid in advance prior to the beginning of each academic term, and are initially recorded as deferred revenue. Tuition fees are recognised proportionately over the relevant period of the academic terms. The portion of tuition payments received from students but not earned is recorded as deferred revenue and is reflected as a current liability as such amounts represent revenue that the Group expects to earn within one year. Other ancillary fees, including (i) the goods and services provided at the on-campus canteens; (ii) other miscellaneous sales of goods and services provided for students; and (iii) other training related services, are recognised when the goods are delivered and titles have passed or the services have been rendered. Interest income is recognised on accruals basis using the effective interest method. Income tax Income taxes for the year comprise current tax and deferred tax. Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the end of reporting period. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes. Except for goodwill and recognised assets and liabilities that affect neither accounting nor taxable profits, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates appropriate to the expected manner in which the carrying amount of the asset or liability is realised or settled and that have been enacted or substantively enacted at the end of reporting period. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. I-23

337 APPENDIX I ACCOUNTANT S REPORT Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income or when they relate to items recognised directly in equity in which case the taxes are also recognised directly in equity. Employee benefits (i) Short-term employee benefits Short term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. Short term employee benefits are recognised in the year when the employees render the related service. (ii) Defined contribution retirement plan Contributions to defined contribution retirement plans are recognised as an expense in profit or loss when the services are rendered by the employees. (iii) Termination benefits Termination benefits are recognised on the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises restructuring costs involving the payment of termination benefits. Impairment of assets (other than financial assets) At the end of each reporting period, the Group reviews the carrying amounts of property, plant and equipment to determine whether there is any indication that these assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased. If the recoverable amount (i.e. the greater of the fair value less costs of disposal and value in use) of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately. Capitalisation of borrowing costs Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of time to be ready for their intended use or sale, are capitalised as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalised. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Provisions and contingent liabilities Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, which it is probable will result in an outflow of economic benefits that can be reliably estimated. I-24

338 APPENDIX I ACCOUNTANT S REPORT Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. Segment reporting The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the executive directors for their decisions about resources allocation to the Group s business components and for their review of the performance of those components. Related parties (a) A person or a close member of that person s family is related to the Group if that person: (i) has control or joint control over the Group; (ii) has significant influence over the Group; or (iii) is a member of key management personnel of the Group or the Company s parent. (b) An entity is related to the Group if any of the following conditions apply: (i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of the employees of the Group or an entity related to the Group. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of key management personnel of the entity (or of a parent of the entity). (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the Company s parent. Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include: (i) that person s children and spouse or domestic partner; (ii) children of that person s spouse or domestic partner; and (iii) dependents of that person or that person s spouse or domestic partner. I-25

339 APPENDIX I ACCOUNTANT S REPORT 6. ACCOUNTING ESTIMATES AND JUDGEMENTS In the application of the Group s accounting policies, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. (i) Useful lives of property, plant and equipment The Group regularly reviews the estimated useful lives of property, plant and equipment based on factors such as business plan and strategies, expected level of usage and future technological developments. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment. (ii) Impairment of non-financial assets The Group assesses at the end of each reporting period whether there is an indication that an asset may be impaired. If any such indication exists, the Group makes an estimate of the recoverable amount of the asset. This requires an estimation of the value-in-use of the cash-generating unit to which the asset is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cashgenerating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. A change in the estimated future cash flows and/or the discount rate applied will result in an adjustment to the estimated impairment provision previously made. (iii) Impairment of loans and receivables The policy for the impairment of receivables of the Group is based on the evaluation of collectability and ageing analysis of accounts and on the management s judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each debtor. (iv) Income taxes Judgement is involved in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. I-26

340 APPENDIX I ACCOUNTANT S REPORT 7. SEGMENT INFORMATION (a) Business segment The Group s operating segments are determined based on information reported to the chief operating decision maker of the Group (the directors of the Company who are also directors of all operating subsidiaries) (the CODM ), for the purpose of resource allocation and performance assessment and focus on type of services performed. The CODM considers the business from the service perspective. When the Group companies have similar economic characteristics and the segments are similar in each of the following respects: (i) the nature of the services; (ii) the type or class of students for their services; and (iii) the methods used to provide their services, the Group s operating segments are aggregated. In the view of CODM, the Group is principally engaged in two different segments which are subject to different business risks and different economic characteristics and the Group s operating and reportable segments for segment reporting purpose are International school and Tertiary education respectively. The segment information provided to the CODM for the reportable segments for the Relevant Periods are as follows: International Tertiary Inter-segment school education Unallocated elimination Total RM RM RM RM RM For the year ended 30 June 2016 Revenue 18,046, ,075 18,822,778 Cost of revenue (9,083,243) (183,105) (9,266,348) Gross profit 8,963, ,970 9,556,430 Selling and distribution expenses (125,643) (19,190) (144,833) Administrative expenses (5,837,997) (1,222,437) (7,060,434) Other revenue and gains 4,749, ,000 5,421,855 Operating profit 7,749,675 23,343 7,773,018 Finance costs (4,592,413) (4,592,413) Profit before income tax 3,157,262 23,343 3,180,605 As at 30 June 2016 Segment assets 123,206,583 2,340,648 (748,918) 124,798,313 Segment liabilities 102,542,945 2,421,087 (748,918) 104,215,114 Other segment information Additions to non-current assets (Note 17) 13,000,194 82,167 13,082,361 Depreciation (Note 9) 2,148,324 81,394 2,229,718 Gain on disposal of property, plant and equipment (Note 8) 2,778 2,778 I-27

341 APPENDIX I ACCOUNTANT S REPORT International Tertiary Inter-segment school education Unallocated elimination Total RM RM RM RM RM For the year ended 30 June 2017 Revenue 26,802,388 2,992,604 29,794,992 Cost of revenue (11,773,772) (562,568) (12,336,340) Gross profit 15,028,616 2,430,036 17,458,652 Selling and distribution expenses (160,810) (114,571) (275,381) Administrative expenses (5,175,205) (1,358,695) (647,435) (7,181,335) Other revenue and gains 5,995,609 5,995,609 Operating profit 15,688, ,770 (647,435) 15,997,545 Finance costs (4,635,592) (4,635,592) Profit/(loss) before income tax 11,052, ,770 (647,435) 11,361,953 As at 30 June 2017 Segment assets 133,066,904 1,005, ,346 (860,333) 133,748,356 Segment liabilities 101,248, ,928 1,244,468 (825,327) 101,858,543 Other segment information Additions to non-current assets (Note 17) 2,142,063 7,091 2,149,154 Depreciation (Note 9) 2,307,033 66,247 2,373,280 For the four months ended 31 October 2017 Revenue 6,319,348 60,899 6,380,247 Cost of revenue (4,406,074) (166,997) (4,573,071) Gross profit/(loss) 1,913,274 (106,098) 1,807,176 Selling and distribution Expenses (42,762) (17,702) (60,464) Administrative expenses (1,954,339) (490,664) (3,067,604) (5,512,607) Other revenue and gains 2,061, ,008 2,366,667 Operating profit/(loss) 1,977,832 (309,456) (3,067,604) (1,399,228) Finance costs (1,030,194) (1,030,194) Profit/(loss) before income tax 947,638 (309,456) (3,067,604) (2,429,422) I-28

342 APPENDIX I ACCOUNTANT S REPORT International Tertiary Inter-segment school education Unallocated elimination Total RM RM RM RM RM As at 31 October 2017 Segment assets 146,059, ,386 1,472,113 (5,146,296) 143,202,838 Segment liabilities 113,293, ,777 5,254,041 (5,111,223) 113,744,162 Other segment information Additions to non-current assets (Note 17) 4,171,501 78,471 4,249,972 Depreciation (Note 9) 748,028 10, ,124 For the four months ended 31 October 2016 (Unaudited) Revenue 5,548, ,600 5,739,484 Cost of revenue (3,666,667) (123,681) (3,790,348) Gross profit 1,882,217 66,919 1,949,136 Selling and distribution expenses (61,428) (44,141) (105,569) Administrative expenses (1,847,500) (391,981) (2,239,481) Other revenue and gains 1,882, ,882,801 Operating profit/(loss) 1,855,990 (369,103) 1,486,887 Finance costs (1,787,100) (1,787,100) Profit/(loss) before income tax 68,890 (369,103) (300,213) (b) Geographic information For the geographical information, revenue from external customers are based on the location of operations. Since the Group solely operates business in Malaysia and all of the non-current assets of the Group are located in Malaysia, no geographical segment information is presented in accordance with HKFRS 8 Operating Segments. (c) Information about major customers No revenue from a single customer contributes 10% or more of total revenue of the Group during the Track Record Period. I-29

343 APPENDIX I ACCOUNTANT S REPORT 8. REVENUE, OTHER REVENUE AND GAINS Revenue, which is also the Group s turnover, represents the value of services rendered, after deducting discounts and refunds during the Track Record Period. An analysis of revenue, other income and gains is as follows: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Revenue Tuition fees... 13,497,678 21,850,083 3,890,003 4,106,516 Ancillary services... 5,325,100 7,944,909 1,849,481 2,273,731 18,822,778 29,794,992 5,739,484 6,380,247 Other revenue and gains Interest income... 35,684 83,202 15,575 7,743 Liquidated and ascertained damages (note)... 4,560,000 5,475,000 1,845,000 1,845,000 Others , ,407 22, ,924 Gain on disposal of property, plant and equipment... 2,778 5,421,855 5,995,609 1,882,801 2,366,667 note: The Group is entitled to the liquidated and ascertained damages as a result of the delay in completion of the construction of the annex building under a contractual contract with Kingsley Hills Sdn. Bhd., a related company controlled by Dato Goh Meng Keong, one of the Controlling Shareholders, under normal commercial terms. Judgement has been made by the directors of the Company to recognise the liquidated and ascertained damages received from Kingsley Hills Sdn. Bhd. as other revenue as, in the opinion of the directors of the Company, Kingsley Hills Sdn. Bhd. entered into the construction contract with the Group was not in its capacity as a shareholder. I-30

344 APPENDIX I ACCOUNTANT S REPORT 9. PROFIT / (LOSS) BEFORE INCOME TAX Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Profit / (loss) before income tax is arrived at after charging/(crediting): Auditor s remuneration... 59,700 62,110 19,172 26,505 Employee costs (Note 11)... 7,468,398 8,348,217 2,589,961 3,464,997 Impairment of accounts receivable (Note 19)... 32,900 Written off of accounts receivable... 16,200 40,793 Written off of property, plant and equipment (Note 17) ,734 Depreciation of property, plant and equipment (Note 17): Owned... 2,186,830 2,330, , ,407 Held under finance leases... 42,888 42,888 14,296 8,717 Minimum lease payments received under operating leases from leasing of properties less outgoings in the year... (26,900) (8,700) (7,600) Minimum lease payments under operating leases recognised as expense in the year , , , ,264 Listing expenses (including professional fees and other expenses) ,273 2,759, DIVIDENDS No dividend has been paid or proposed by the Company during the Track Record Period, nor has any dividend been proposed since the end of the reporting period. 11. EMPLOYEE COSTS Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Employee costs (including directors) comprise: Wages and salaries... 6,694,657 7,481,401 2,322,966 3,110,233 Short-term non-monetary benefits , ,796 36,242 57,631 Contributions to retirement benefit schemes , , , ,133 7,468,398 8,348,217 2,589,961 3,464,997 I-31

345 APPENDIX I ACCOUNTANT S REPORT 12. DIRECTORS EMOLUMENTS The aggregate amount of emoluments paid or payable to each of the directors of the Company as at the date of this report during the Track Record Period are as follow: Year ended 30 June 2016: Salaries and Contributions to other retirement Fees benefits benefit schemes Total RM RM RM RM Executive directors Tan Sri Dato Sri Goh Ming Choon... Dato Goh Meng Keong... Year ended 30 June 2017: Salaries and Contributions to other retirement Fees benefits benefit schemes Total RM RM RM RM Executive directors Tan Sri Dato Sri Goh Ming Choon... Dato Goh Meng Keong... Period ended 31 October 2017: Salaries and Contributions to other retirement Fees benefits benefit schemes Total RM RM RM RM Executive directors Tan Sri Dato Sri Goh Ming Choon... Dato Goh Meng Keong... Dr. Chua Ping Yong (note)... 73,000 8,784 81,784 73,000 8,784 81,784 I-32

346 APPENDIX I ACCOUNTANT S REPORT Period ended 31 October 2016 (Unaudited): Salaries and Contributions to other retirement Fees benefits benefit schemes Total RM RM RM RM Executive directors Tan Sri Dato Sri Goh Ming Choon... Dato Goh Meng Keong... note: Dr. Chua Ping Yong was appointed as an executive director of the Company on 13 September FIVE HIGHEST PAID INDIVIDUALS Of the five individuals with the highest emoluments in the Group, none of them were directors of the Company whose emoluments are included in the disclosures in Note 12 above for each of the years ended 30 June 2016 and 2017 and the four months ended 31 October The five highest paid individuals included one director for the four months ended 31 October The emoluments of the remaining individuals for the Track Record Period are as follows: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Salaries and other benefits , , , ,000 Contributions to retirement benefit schemes... 71,882 88,650 24,852 19, , , , ,824 Their emoluments were within the following bands: Year ended 30 June Four months ended 31 October No. of No. of No. of No. of individuals individuals individuals individuals (Unaudited) Nil to RM550,000 (approximately nil to HK$1,000,000) I-33

347 APPENDIX I ACCOUNTANT S REPORT The emoluments paid or payable to members of senior management were within the following bands: Year ended 30 June Four months ended 31 October No. of No. of No. of No. of individuals individuals individuals individuals (Unaudited) Nil to RM550,000 (approximately nil to HK$1,000,000) During the Track Record Period, no emoluments were paid by the Group to the directors of the Company or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors nor the five highest paid individuals have waived or agreed to waive any emoluments during the Track Record Period. 14. FINANCE COSTS Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Interest on bank borrowings... 5,481,172 4,595,000 1,780,876 1,382,759 Amortised debt issuance cost... 33,788 3,754 15,017 Interest on finance leases... 6,641 6,804 2,470 1,418 5,487,813 4,635,592 1,787,100 1,399,194 Less: interest capitalised on qualifying assets... (895,400) (369,000) 4,592,413 4,635,592 1,787,100 1,030,194 I-34

348 APPENDIX I ACCOUNTANT S REPORT 15. INCOME TAX BENEFIT/(EXPENSE) The amount of income tax benefit/(expense) in the consolidated statements of profit or loss and other comprehensive income represents: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Current tax Malaysian profits tax charge for the year / period... 52, ,080 (over)/under provision in respect of prior years... (16,151) 9,861 7,317 6,162 (16,151) 62,175 7,771 52,242 Deferred tax (Note 28)... 8,209 (50,634) Income tax (benefit)/expense... (16,151) 70,384 7,771 1,608 Malaysian profits tax is calculated at the statutory tax rate of 24% of the estimated taxable profit for the years ended 30 June 2016 and 30 June 2017 and the four months ended 31 October 2016 and 31 October Kingsley Edugroup Berhad, Kingsley Skills and Kingsley Professional Centre, these subsidiaries located in Malaysia were recognised as small and medium scale companies by the Malaysia tax authority and entitled a preferential tax rate of 18% for the year ended 30 June 2017 and the four months ended 31 October 2016 and 31 October For estimated taxable profit in excess of RM500,000, statutory tax rate of 24% is still applicable. No provision for Hong Kong profits tax has been made as the Group had no taxable profits arising in Hong Kong for the years ended 30 June 2016 and 30 June 2017 and the four months ended 31 October 2016 and 31 October Taxation for overseas subsidiaries is similarly charged at the appropriate current rates of taxation ruling in the relevant jurisdictions. I-35

349 APPENDIX I ACCOUNTANT S REPORT The income tax benefit/(expense) for the Track Record Period can be reconciled to the profit before income tax per the consolidated statements of profit or loss and other comprehensive income as follows: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Profit/(loss) before income tax... 3,180,605 11,361,953 (300,213) (2,429,422) Tax calculated at the domestic tax rate ,346 2,728,870 (72,052) (561,652) Tax effect of expenses not deductible for tax purposes , ,940 72, ,689 Tax losses and unutilised capital allowance not recognised during the year/period... 22,726 7,833 59,497 Utilisation of previously unrecognised tax losses and unutilised capital allowance... (3,718) (550,201) (Over)/under provision for income tax in prior years... (16,151) 9,861 7,317 6,162 Deferred tax recognised in respect of previously unrecognised tax losses and unutilised capital allowance... (1,028,054) (658,739) Deferred tax recognised in respect of investment tax allowance... (1,985,758) (317,406) Others... 85, ,685 (8,216) (21,682) Income tax (benefit)/expense... (16,151) 70,384 7,771 1, EARNINGS PER SHARE Earnings per share information is not presented as its inclusion, for the purpose of this report, is not considered meaningful due to the group reorganisation and the presentation of the results for the Track Record Period on a consolidated basis as disclosed in Note 3 above. I-36

350 APPENDIX I ACCOUNTANT S REPORT 17. PROPERTY, PLANT AND EQUIPMENT Construction in progress Land and buildings Motor vehicles Leasehold improvements Computer Furniture, fixture and equipment Total RM RM RM RM RM RM RM Cost: At 1 July ,434,056 1,605, ,588 1,583, ,443,047 Additions... 12,351, , , ,259 13,082,361 Written off... (25,260) (25,260) Disposals... (5,608) (5,608) Transfer... (94,576,687) 94,576,687 At 30 June 2016 and 1 July ,209,312 94,576, ,440 1,605,024 1,060,307 1,828, ,494,540 Additions... 1,254, , ,287 2,149,154 Written off... (1,528,014) (10,567) (157,055) (1,695,636) At 30 June 2017 and 1 July ,463,783 94,576, ,440 77,010 1,580,126 2,036, ,948,058 Additions... 3,869,000 35, , ,276 4,249,972 At 31 October ,332,783 94,576, , ,648 1,741,184 2,220, ,198,030 Accumulated depreciation: At 1 July ,430, ,641 1,276,122 3,221,043 Charge for the year... 1,576,279 42, , , ,810 2,229,718 Written off... (24,871) (24,871) Disposals... (4,486) (4,486) At 30 June 2016 and 1 July ,576,279 42,888 1,589, ,041 1,502,575 5,421,404 Charge for the year... 1,891,534 42,888 15, , ,686 2,373,280 Written off... (1,528,013) (10,124) (115,765) (1,653,902) At 30 June 2017 and 1 July ,467,813 85,776 77, ,687 1,584,496 6,140,782 Charge for the period ,511 14, ,275 39, ,124 At 31 October ,098, ,072 77, ,962 1,623,979 6,898,906 Net carrying amount: At 30 June ,209,312 93,000, ,552 15, , , ,073,136 At 30 June ,463,783 91,108, , , , ,807,276 At 31 October ,332,783 90,478, ,368 35, , , ,299,124 I-37

351 APPENDIX I ACCOUNTANT S REPORT Construction in progress as at 30 June 2016, 30 June 2017 and 31 October 2017 comprises buildings being constructed in Malaysia. As at 30 June 2016, 30 June 2017 and 31 October 2017, the carrying amount of construction in progress without legal title were RM26,209,312, RM27,463,783 and RM31,332,783 respectively. The Group has entered into a 50 years lease with respect to the land of construction in progress starting from the handover date of the building. The Group are also entitled to the right of first refusal and option to purchase the land. On 19 April 2018, the Group has entered a sale and purchase agreement in relation to the land of construction in progress with Kingsley Hills Sdn. Bhd., a related company. The land will be transferred to the Group at a nominal consideration of RM10 upon completion of the construction in progress, the initial lease arrangement with respect to the land was then ceased to apply. The Group has capitalised borrowing costs amounting to RM895,400 and RM369,000 on qualifying assets (Note 14), and the borrowing costs were capitalised at the weight average rate of its specific borrowings of 8.1% and 6.0% for the year ended 30 June 2016 and the four months ended 31 October 2017 respectively. Land included in property, plant and equipment with a net carrying amount of RM10 as at 30 June 2017 and 31 October 2017, is situated in Malaysia and is held freehold. As at 30 June 2016, the carrying amount of buildings without legal title were RM93,000,408. In accordance with the Malaysian Land Law, the legal title of the buildings is not separable from the land title. On 30 June 2017, the Group has obtained the legal title of the buildings upon acquisition of the land from Kingsley Hills Sdn. Bhd., a related company. Before the acquisition of the land, the Group has utilised the land with no rental charged for the period from 1 September 2015 to 29 June As at 30 June 2016, there were no property, plant and equipment of the Group pledged as security for bank borrowings. As at 30 June 2017 and 31 October 2017, the Group had pledged its land and buildings to secure for general banking facilities granted to Kingsley International (Note 26). As at 30 June 2016 and 30 June 2017, the carrying amount of the Group s motor vehicles includes an amount of RM171,552 and RM128,664 respectively in respect of assets acquired under finance leases (Note 27). 18. PLEDGED BANK DEPOSIT As at 30 June 2016, the Group has pledged a bank deposit of RM1,242,818 to secure Term Loan I granted to the Group (Note 26), the pledged bank deposit was released on 26 October 2016 upon repayment of the Term Loan I. As at 30 June 2017 and 31 October 2017, the Group has pledged a bank deposit of RM518,245 and RM522,683 to secure a banking facility granted to the Group (Note 32), respectively. The pledged deposit was matured on or before 4 August 2017 and 4 November 2017 respectively. 19. ACCOUNTS RECEIVABLE As at 30 June As at 31 October RM RM RM Accounts receivable , , ,239 Less: impairment of accounts receivable... (32,900) 263, , ,239 I-38

352 APPENDIX I ACCOUNTANT S REPORT The invoices issued by the Group to its customers are due on presentation and no credit term is granted. Included in accounts receivable are trade debtors (net of impairment losses) with the following ageing analysis, based on invoice dates, as at 30 June 2016, 30 June 2017 and 31 October 2017: As at 30 June As at 31 October RM RM RM Within 1 month ,393 24,281 44,323 1 to 2 months... 28, ,218 23,714 2 to 3 months... 7,943 87,854 20,045 Over 3 months , , , , , ,239 At the end of each reporting period, the Group reviews accounts receivable for evidence of impairment on both an individual and collective basis. Based on the impairment assessment, impairment loss has been recognised as at 30 June The Group did not hold any collateral as security or other credit enhancement over the accounts receivable. The ageing of accounts receivable which are past due but not impaired, based on invoice dates, is as follows: As at 30 June As at 31 October RM RM RM Neither past due nor impaired... Past due but not impaired: Less than 1 month ,393 24,281 44,323 1 to 3 months... 36, ,072 43,759 More than 3 months but less than 12 months , , , , , ,239 I-39

353 APPENDIX I ACCOUNTANT S REPORT The below table reconciled the impairment loss of accounts receivable for the year/period: As at 30 June As at 31 October RM RM RM Balance at the beginning of the year/period... 32,900 Impairment loss recognised... 32,900 Bad debts written off... (32,900) Balance at the end of the year/period... 32,900 Accounts receivable that were past due but not impaired related to a number of independent students who are in temporary financial difficulties. Based on the individual assessment, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these student s various efforts over fund raising. The Group recognised impairment loss based on the accounting policy stated in Note PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES As at 30 June As at 31 October RM RM RM Prepayments... 30, ,591 1,328,742 Deposits , , ,893 Other receivables , , , , ,992 1,953, AMOUNTS DUE FROM A SHAREHOLDER/RELATED COMPANIES/A SUBSIDIARY (a) The amount due from a shareholder is as follow: The Group As at 30 June As at 31 October RM RM RM DGMK Investment Limited... 2,209 Maximum outstanding amount during the year/period: DGMK Investment Limited... 2,209 2,209 I-40

354 APPENDIX I ACCOUNTANT S REPORT Amount due from DGMK Investment Limited is non-trade related, unsecured, interest-free and repayable on demand. (b) The amounts due from related companies are as follow: The Group As at 30 June As at 31 October RM RM RM B & G Global Property Sdn. Bhd. (note a)... 1,015,925 BGMC Corporation Sdn. Bhd. (note b)... 4,500 Kingsley Hills Sdn. Bhd. (note a)... 5,114,447 7,371,300 Modular Construction Technology Sdn. Bhd. (note b)... 2,558 One City Properties Sdn. Bhd. (note b)... 3,836 Sky Park Properties Sdn. Bhd. (note b)... 5,115 1,015,925 5,130,456 7,371,300 Maximum outstanding amount during the year/period: B & G Global Property Sdn. Bhd. (note a)... 8,735,125 1,015,925 BGMC Corporation Sdn. Bhd. (note b)... 26,300 4,500 Kingsley Hills Sdn. Bhd. (note a)... 5,114,447 7,371,300 Modular Construction Technology Sdn. Bhd. (note b)... 2,558 2,558 One City Properties Sdn. Bhd. (note b)... 3,836 3,836 Sky Park Properties Sdn. Bhd. (note b)... 5,115 5,115 Except for the amounts due from BGMC Corporation Sdn. Bhd. and Kingsley Hills Sdn. Bhd., the amounts due from above related companies are trade related, unsecured, interest-free and repayable on demand. Amounts due from BGMC Corporation Sdn. Bhd. and Kingsley Hills Sdn. Bhd. are non-trade related, unsecured, interest-free and repayable on demand. note a: Dato Goh Meng Keong, a director of Kingsley Hills Sdn. Bhd. and B & G Global Property Sdn. Bhd., is also a director and shareholder of the Company. note b: Tan Sri Dato Sri Goh Ming Choon, a director of BGMC Corporation Sdn. Bhd., Modular Construction Technology Sdn. Bhd., One City Properties Sdn. Bhd. and Sky Park Properties Sdn. Bhd., is also a director and shareholder of the Company. I-41

355 APPENDIX I ACCOUNTANT S REPORT (c) The amount due from a subsidiary is as follow: The Company As at 30 June As at 31 October RM RM Kingsley Edugroup Berhad Maximum outstanding amount during the year/period: Kingsley Edugroup Berhad Amount due from Kingsley Edugroup Berhad is non-trade related, unsecured, interest-free and repayable on demand. 22. ACCOUNTS PAYABLE As at 30 June As at 31 October RM RM RM Accounts payable , , ,511 The ageing analysis of the Group s accounts payable, based on invoice dates, is as follows: As at 30 June As at 31 October RM RM RM Within 1 month , , ,217 1 to 2 months... 51,239 6,733 17,640 2 to 3 months... 4,910 4,208 Over 3 months... 30, , , , ,511 The normal credit terms granted to the Group range from 15 to 30 days, 0 to 30 days and 0 to 30 days respectively for the years ended 30 June 2016 and 30 June 2017 and the four months ended 31 October I-42

356 APPENDIX I ACCOUNTANT S REPORT 23. OTHER PAYABLES AND ACCRUALS As at 30 June As at 31 October RM RM RM Accruals ,166 1,009,914 1,118,381 Deposit refundable to students... 2,507,682 3,400,012 3,552,380 Deferred revenue... 3,368,421 Other payables , , ,523 Receipt in advance ,867 1,128,316 6,007,558 3,600,090 5,906,907 14,389,263 The directors of the Company consider that the carrying amount of other payables and accruals approximate their fair value. 24. AMOUNTS DUE TO RELATED COMPANIES/SHAREHOLDERS/A SUBSIDIARY (a) The amounts due to related companies are as follow: The Group As at 30 June As at 31 October RM RM RM Current Kingsley Hills Sdn. Bhd. (note a)... 5,863,171 BGMC Corporation Sdn. Bhd. (note b)... 1,103,147 Ecity Hotel Sdn. Bhd. (note c)... 66,000 6,966,318 66,000 Amounts due to Kingsley Hills Sdn. Bhd. and BGMC Corporation Sdn. Bhd. are non-trade related, unsecured, interest-free and repayable on demand. Amount due to Ecity Hotel Sdn. Bhd. is trade related, unsecured, interest-free and repayable on demand. As at 30 June As at 31 October RM RM RM Non-current Kingsley Hills Sdn. Bhd. (note a)... 24,337,642 25,592,113 29,092,113 Amount represented unpaid construction expenses of the buildings being constructed in Malaysia (Note 17). The amount is unsecured, interest-free and repayable within three years after the handover date of the building. I-43

357 APPENDIX I ACCOUNTANT S REPORT note a:dato Goh Meng Keong, a director of Kingsley Hills Sdn. Bhd., is also a director and shareholder of the Company. note b:tan Sri Dato Sri Goh Ming Choon, a director of BGMC Corporation Sdn. Bhd., is also a director and shareholder of the Company. note c: Tan Sri Dato Sri Goh Ming Choon, a controlling shareholder of the holding company of Ecity Hotel Sdn. Bhd., is also a director and shareholder of the Company. (b) The amounts due to shareholders are as follow: The Group and The Company As at 30 June As at 31 October RM RM RM Star Shine Finance Limited DGMK Investment Limited... 7 Eduking Investment Limited Amounts due to the above shareholders are non-trade related, unsecured, interest-free and repayable on demand. (c) The amount due to a subsidiary is as follow: The Company As at 30 June As at 31 October RM RM Kingsley International ,704 4,870,224 Amount due to Kingsley International is non-trade related, unsecured, interest-free and repayable on demand. Kingsley International became an indirect wholly-owned subsidiary of the Company upon completion of the share transfer on 23 August Prior to 23 August 2017, Kingsley International is a related company with common controlling shareholders of the Company. 25. AMOUNT DUE TO A DIRECTOR Amount due to a director is non-trade related, unsecured, interest-free and repayable on demand. I-44

358 APPENDIX I ACCOUNTANT S REPORT 26. BANK BORROWINGS, SECURED As at 30 June As at 31 October RM RM RM Current Secured Term loan I due for repayment within one year... 5,922,212 Term loan II due for repayment within one year... 1,750,000 2,750,000 Less: unamortised debt issuance cost... (45,050) (45,050) Total current 5,922,212 1,704,950 2,704,950 Non-current Secured Term loan I... 59,616,338 Term loan II... 68,250,000 67,250,000 Less: unamortised debt issuance cost... (371,662) (356,645) Total non-current 59,616,338 67,878,338 66,893,355 Total 65,538,550 69,583,288 69,598,305 Notes: (i) Details of the securities provided to banks on the borrowings are disclosed in Note 32. (ii) Term loan I is repayable in 120 monthly instalments of RM916,077 each, commencing in December Term loan I was fully refinanced by Term loan II on 20 October (iii) Term loan I is interest-bearing at the banks base lending rate plus 1.25% per annum on monthly rests. The average interest rates of the Group s bank borrowings as at 30 June 2016 granted under banking facilities is 8.1% per annum. (iv) Term loan II is repayable in 108 monthly instalments, commencing in December (v) Term loan II is interest-bearing at the bank s monthly cost of fund rate plus 2.00% per annum on monthly rests. The average interest rates of the Group s bank borrowings as at 30 June 2017 and 31 October 2017 granted under banking facilities is 5.36% and 5.8% per annum respectively. I-45

359 APPENDIX I ACCOUNTANT S REPORT The bank borrowings were scheduled to repay as follows: As at 30 June As at 31 October RM RM RM Within one year... 5,922,212 1,750,000 2,750,000 More than one year, but not exceeding two years... 6,396,279 3,584,500 3,918,500 More than two years, but not exceeding five years... 22,569,610 19,919,500 21,585,500 After five years... 30,650,449 44,746,000 41,746,000 65,538,550 70,000,000 70,000,000 The amount only includes the actual drawdown from the credit facility. 27. OBLIGATIONS UNDER FINANCE LEASES The Group leases certain motor vehicles. Such assets are generally classified as finance leases as the rental period amounts to the estimated useful economic life of the assets concerned and often the Group has the right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount. Future lease payments are due as follows: Minimum lease payments Finance lease charges Present value At 30 June 2016 RM RM RM Not later than one year... 40,415 6,804 33,611 More than 1 year but less than 2 years... 40,416 4,991 35,425 Later than 2 years and not later than 5 years... 89,256 4,614 84, ,087 16, ,678 Minimum lease payments Finance lease charges Present value At 30 June 2017 RM RM RM Not later than one year... 40,416 4,991 35,425 More than 1 year but less than 2 years... 40,416 3,176 37,240 Later than 2 years and not later than 5 years... 48,840 1,438 47, ,672 9, ,067 I-46

360 APPENDIX I ACCOUNTANT S REPORT The present value of future lease payments is analysed as: As at 30 June As at 31 October RM RM RM Current liabilities... 33,611 35,425 Non-current liabilities ,067 84, , ,067 The effective interest rates of the Group s obligations under finance leases as at 30 June 2016 and 30 June 2017 are 4.96% per annum. During the four months ended 31 October 2017, the Group has fully settled the obligations under finance leases. 28. DEFERRED TAX LIABILITIES/(ASSETS) Details of the deferred tax liabilities/(assets) recognised and movements during the Track Record Period: Investment tax allowance Accelerated tax depreciation Others Total RM RM RM RM At 1 July (Credited)/charged to profit or loss... 1,707,407 (1,707,407) At 30 June 2016 and 1 July ,707,407 (1,707,407) (Credited)/charged to profit or loss... (1,985,758) 1,773, ,614 8,209 At 30 June 2017 and 1 July (1,985,758) 3,480,760 (1,486,793) 8,209 (Credited)/charged to profit or loss... (317,406) 549,452 (282,680) (50,634) At 31 October (2,303,164) 4,030,212 (1,769,473) (42,425) Others represents deferred tax recognised for unused tax losses and unutilised capital allowances available for offset against future taxable profits. As at 30 June 2016, 30 June 2017 and 31 October 2017, the Group has unused tax losses of RM4,538,480, RM3,674,611 and RM4,292,608 available for offset against future profits respectively. A deferred tax asset of RM391,788, RM850,527 and RM902,817 has been recognised in respect of unused tax losses of approximately RM1,632,450, RM3,543,864 and RM3,834,364 respectively. No deferred tax has been recognised in respect of the remaining unused tax losses of RM2,906,030, RM130,747 and RM458,244 respectively, due to unpredictability of future profit streams. The unused tax losses can be carried forward indefinitely. As at 30 June 2016, 30 June 2017 and 31 October 2017, the Group has unutilised capital allowances of RM5,617,191, RM2,753,781 and RM3,714,509 available for offset against future profits respectively. A deferred tax asset of RM1,315,619 and RM636,266 and RM866,656 has been recognised in respect of unutilised capital allowances of approximately RM5,481,746, RM2,651,109 and RM3,611,567 respectively. No deferred tax has been recognised in respect of the remaining unutilised capital allowances of RM135,445, RM102,672 and RM102,942 respectively, due to unpredictability of future profit streams. The unutilised capital allowances can be carried forward indefinitely. I-47

361 APPENDIX I ACCOUNTANT S REPORT As at 30 June 2016, 30 June 2017 and 31 October 2017, the Group has unused investment tax allowance of RM85,995,896 available for offset against future profits respectively. No deferred tax has been recognised in respect of the investment tax allowance of RM85,995,896 as at 30 June 2016 due to unpredictability of future profit streams. As at 30 June 2017 and 31 October 2017, a deferred tax asset RM1,985,758 and RM2,303,164 has been recognised in respect of investment tax allowance of approximately RM8,273,992 and RM9,596,517 respectively. No deferred tax has been recognised in respect of the remaining investment tax allowance of RM77,721,904 and RM76,399,379 respectively, due to unpredictability of future profit streams. The unused investment tax allowance can be carried forward indefinitely. 29. CAPITAL AND RESERVES Share capital The Company was incorporated on 12 January 2017 with authorised share capital of US50,000 divided into 5,000,000 ordinary shares of US$0.01 each (equivalent to RM0.045), 1,000 new ordinary shares were issued and fully paid-up. Star Shine Finance Limited, DGMK Investment Limited and Eduking Investment Limited subscribed for 800,120 and 80 shares at par respectively. Share capital information sets out below represents the amount of authorised and issued capital of the Company as at the date of this report: As at 30 June As at 31 October Number of Number of Number of shares Amount shares Amount shares Amount RM RM RM Authorised : Ordinary shares of the Company of US$0.01 each... 5,000, ,000 Ordinary shares of the Company of HK$0.01 each... 38,000, ,874 Issued and fully paid: Ordinary shares of the Company of US$0.01 each... 1, Ordinary shares of the Company of HK$0.01 each... 2, On 13 September 2017, another 1,000 new ordinary shares of the Company of par value US$0.01 each were issued and fully paid-up to the then existing shareholders. Pursuant to respective written resolution of all the directors of the Company and all the shareholders of the Company on 13 September 2017, the authorised share capital of the Company was increased to the aggregate of US$50,000 and HK$380,000 by the creation of an additional 38,000,000 shares with a par value of HK$0.01 each. On the same date, 2,000 shares of par value HK$0.01 each (the HKD Shares ) were issued to the then existing shareholders in proportion to their existing number of shares with a par value of US$0.01 each (the USD Shares ) owned. Subsequent to the issue of the HKD Shares, the USD Shares were repurchased by the Company and cancelled immediately. Upon completion of the repurchase, 5,000,000 unissued USD Shares of the Company were cancelled so that the authorised share capital of the Company be reduced to HK$380,000 divided into 38,000,000 shares with a par value of HK$0.01 each. I-48

362 APPENDIX I ACCOUNTANT S REPORT Reserves Pursuant to the Reorganisation, the subsidiary of the Company entered into sales and purchase agreements to acquire the issued shares of the subsidiaries. The merger reserve represents the transfer of the difference between the consideration paid by the Company and the original investment costs of the issued share capital of Kingsley International, Kingsley Skills, Kingsley Professional Centre, and Kingsley Graduate School to the merger reserve when the Company became the ultimate holding company of these companies upon the completion of reorganisation on 30 August As at 30 June 2017, an amount of RM18,300,002, being the original investment costs made into the subsidiaries, was recorded in the merger reserve account. As at 31 October 2017, an amount of RM18,299,929, being the difference between the considerations paid by the Company and the original investment costs of the issued share capital of the subsidiaries, was recorded in the merger reserve account. Merger Reserve Retained earnings/ (accumulated losses) Total RM RM RM At 1 July ,750,002 (877,221) 9,872,781 Profit for the year... 3,206,237 3,206,237 Issuance of new shares by Kingsley International and Kingsley Skills... 7,550,000 7,550,000 At 30 June 2016 and 1 July ,300,002 2,329,016 20,629,018 Profit for the year... 11,021,974 11,021,974 At 30 June 2017 and 1 July ,300,002 13,350,990 31,650,992 Loss for the period... (2,353,194) (2,353,194) Effect of Reorganisation... (73) (73) At 31 October ,299,929 10,997,796 29,297,725 During the year ended 30 June 2016, 7,500,000 and 50,000 new ordinary shares of RM1 each were issued by Kingsley International and Kingsley Skills to their shareholders, respectively. 7,500,000 of the new ordinary shares issued by Kingsley International were subscribed by Tan Sri Dato Sri Goh Ming Choon, a director of the Company, and the consideration amounted to RM7,500,000 was debited to the current account with Tan Sri Dato Sri Goh Ming Choon. 40,000 and 10,000 of the new ordinary shares issued by Kingsley Skills were subscribed by Tan Sri Dato Sri Goh Ming Choon and Dato Goh Meng Keong, directors of the Company, respectively. The movement of merger reserve during the four months ended 31 October 2017 was arisen from the Reorganisation, which represents the consideration paid for the acquisition of Kingsley International, Kingsley Graduate School, Kingsley Skills and Kingsley Professional Centre. I-49

363 APPENDIX I ACCOUNTANT S REPORT 30. OPERATING LEASES As lessor At the end of each reporting period, the Group had total future minimum lease receivables in respect of leased properties under non-cancellable lease as follows: As at 30 June As at 31 October RM RM RM Not later than one year... 18,000 13,500 Later than one year and not later than five years... 1,500 19,500 13,500 At 31 October 2017, the Group leases its properties (Note 17) under operating lease arrangements which run for an initial period of two years. As lessee Operating lease payments represent rentals payable by the Group for certain of its lease properties. Leases are negotiated for terms between 1 year to 50 years at fixed rentals. At the end of each reporting period, the Group had operating lease commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows: As at 30 June As at 31 October RM RM RM Not later than one year , , ,632 Later than one year and not later than five years , , ,457 Later than five years... 2,985,865 2,923,005 2,902,051 3,910,263 3,552,107 3,582,140 On 19 April 2018, the Group has entered a sale and purchase agreement in relation to land of construction in progress, which the Group has originally entered a 50 years lease, with Kingsley Hills Sdn. Bhd., a related company. The land will be transferred to the Group upon completion of the construction in progress, the initial lease arrangement with respect to the land was then ceased to apply. 31. NON-CONTROLLING INTERESTS The total non-controlling interests as at 30 June 2016, 30 June 2017 and 31 October 2017 are attributed to certain subsidiaries not wholly-owned by the Group. In the opinion of the directors of the Company, none of the non-controlling interests of these subsidiaries are material to the Group. I-50

364 APPENDIX I ACCOUNTANT S REPORT 32. BANKING FACILITIES At 30 June 2016, 30 June 2017 and 31 October 2017, the Group, through Kingsley International, had banking facilities of in aggregate, approximately RM76,500,000, RM70,500,000 and RM70,500,000 respectively. Balance of RM65,538,550, RM70,000,000 and RM70,000,000 were outstanding as at 30 June 2016, 30 June 2017 and 31 October 2017 respectively. At 30 June 2016, the Group s banking facilities were secured by the following: Facility agreement of RM76,500,000: legal charge for RM76,500,000 over 148 pieces of land belonging to Kingsley Hills Sdn. Bhd., a related company with a common director; guarantee by Tan Sri Dato Sri Goh Ming Choon and Dato Goh Meng Keong, directors of the Company; corporate guarantee by B&G Capital Resources Bhd., a related company with a common director for RM76,500,000; and debenture for RM76,500,000 over fixed and floating assets, both present and future. At 30 June 2017 and 31 October 2017, the Group s banking facilities were secured by the following: (a) Facility agreement of RM70,000,000: open charge on a piece of land PT36307 belonging to Kingsley Hills Sdn. Bhd., a related company with a common director; guarantee by Tan Sri Dato Sri Goh Ming Choon and Dato Goh Meng Keong, directors of the Company; corporate guarantee by B&G Capital Resources Bhd., a related company with a common director for RM70,000,000; and debenture incorporating fixed and floating charge over all the Kingsley International s assets and undertakings, both present and future. (b) Facility agreement of RM500,000: upfront fixed deposit (Note 18). 33. RELATED PARTY TRANSACTIONS (a) At 30 June 2016, 30 June 2017 and 31 October 2017, Tan Sri Dato Sri Goh Ming Choon and Dato Goh Meng Keong provided personal guarantee to secure for the bank borrowings (Note 26) and banking facilities (Note 32) grant to the Group. (b) The remuneration of members of key management during the Track Record Period were as follows: Year ended 30 June Four months ended 31 October RM RM RM RM (Unaudited) Fees, salaries and staff welfare benefits (short-term employee benefits) , , , ,967 Contributions to retirement benefits schemes (post employment benefits)... 32,602 58,644 19,032 33, , , , ,991 I-51

365 APPENDIX I ACCOUNTANT S REPORT (c) During the Track Record Period, the Group entered into the following significant transactions with related parties: Transaction amount Name of Type of Four months ended related party transaction Year ended 30 June 31 October RM RM RM RM (Unaudited) B & G Global Property Sdn. Bhd.... Revenue 473,925 23,925 23,925 B & G Global Property Sdn. Bhd.... Other revenue and gains 552,000 BGMC Corporation Sdn. Bhd.... Revenue 23,242 48,609 28,029 17,750 Ecity Hotel Sdn. Bhd.... Cost of revenue 116,140 8,440 6,000 Kingsley Hills Sdn. Bhd.... Other revenue and gains 4,560,000 5,475,000 1,845,000 1,845,000 Kingsley Hills Sdn. Bhd.... Construction expenses 11,460,545 1,254,471 2,158,618 3,500,000 Kingsley Hills Sdn. Bhd.... Acquisition of land 10 Kingsley SEEDS Foundation... Revenue 796,457 Name of related party Type of transaction Balance owed/(owing) As at 30 June As at 31 October RM RM RM B & G Global Property Sdn. Bhd.... Revenue 463,925 B & G Global Property Sdn. Bhd.... Other revenue and gains 552,000 BGMC Corporation Sdn. Bhd.... Revenue 4,500 Ecity Hotel Sdn. Bhd.... Cost of revenue (66,000) Kingsley Hills Sdn. Bhd.... Other revenue and gains 5,114,447 1,845,000 Kingsley Hills Sdn. Bhd.... Construction expenses (11,460,545) (1,254,471) (3,500,000) Kingsley Hills Sdn. Bhd.... Acquisition of land (10) Kingsley SEEDS Foundation... Revenue Dato Goh Meng Keong, a director of B&G Global Property Sdn. Bhd., is also a director of the Company. Tan Sri Dato Sri Goh Ming Choon, a director of BGMC Corporation Sdn. Bhd. (formerly known as B&G Corporation Sdn. Bhd.), is also a director of the Company. Tan Sri Dato Sri Goh Ming Choon and Dato Goh Meng Keong, directors of Kingsley SEEDS Foundation, are also directors of the Company. I-52

366 APPENDIX I ACCOUNTANT S REPORT Tan Sri Dato Sri Goh Ming Choon, a controlling shareholder of the holding company of Ecity Hotel Sdn. Bhd., is also a director and shareholder of the Company. The related party transactions were carried out on negotiated terms and conditions in the ordinary course of business between related party and the Group. Above balances are included in amounts due from related companies and amounts due to related companies. 34. CONTINGENT LIABILITIES At the end of each reporting period, the Group did not have any significant contingent liabilities. 35. CAPITAL COMMITMENTS As at 30 June As at 31 October RM RM RM Commitments for the acquisition of property, plant and equipment... 27,280,358 26,025,887 22,525, SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY The following table shows the carrying amount of financial assets and liabilities: As at 30 June As at 31 October RM RM RM Financial assets Loans and receivables Accounts receivable , , ,239 Deposits and other receivables , , ,906 Amount due from a shareholder... 2,209 Amounts due from related companies... 1,015,925 5,130,456 7,371,300 Pledged bank deposit... 1,242, , ,683 Cash and cash equivalents... 1,689,076 6,705,098 9,771,419 4,553,714 13,666,827 18,532,547 I-53

367 APPENDIX I ACCOUNTANT S REPORT As at 30 June As at 31 October RM RM RM Financial liabilities measured at amortised cost Accounts payable , , ,511 Other payables and accruals... 3,600,090 5,906,907 14,389,263 Amounts due to related companies... 31,303,960 25,658,113 29,092,113 Amounts due to shareholders Amount due to a director... 3,222,163 Bank borrowings... 65,538,550 69,583,288 69,598,305 Obligations under finance leases , , ,215, ,850, ,668, FINANCIAL RISK MANAGEMENT The main risks arising from the Group s financial instruments in the normal course of the Group s business are credit risk, liquidity risk and interest rate risk. These risks are limited by the Group s financial management policies and practises described below. (a) Credit risk The Group s credit risk is primarily attributable to its accounts and other receivables and bank deposits. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. In respect of accounts and other receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer s past history of making payments when due and current ability to pay, and take into account information specific to the customers as well as pertaining to the economic environment in which the customers operate. Ongoing credit evaluation is performed on the financial condition of trade customers. Accounts receivable are due on presentation of invoices. Normally, the Group does not obtain collateral from customers. The Group s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. At 30 June 2016, 30 June 2017 and 31 October 2017, the Group has a certain concentration of credit risk as 23%, 14 and 10% of the total accounts receivable respectively was due from the Group s largest customer. At 30 June 2016, 30 June 2017 and 31 October 2017, 60%, 45 and 31% of the total accounts receivable respectively was due from the Group s five largest customers. Substantial bank deposits are held in major financial institutions which management believes are of high credit quality. (b) Liquidity risk Individual operating entities within the Group are responsible for their own cash management, including the short term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the parent company s board when the borrowings exceed certain predetermined levels of authority. The Group s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. I-54

368 APPENDIX I ACCOUNTANT S REPORT The following tables show the remaining contractual maturities at the end of each reporting period of the Group s bank borrowings, based on undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at each of the reporting date) and the earliest date the Group can be required to pay. Total Within 1 More than 1 More than 2 contractual year or year but years but Carrying undiscounted repayable less than 2 Less than 5 More than amount cash flow on demand years years 5 years RM RM RM RM RM RM 30 June 2016 Other payables and accruals... 3,600,090 3,600,090 3,600,090 Bank borrowings... 65,538,550 89,852,491 10,992,924 10,992,924 32,978,772 34,887,871 Finance lease obligations , ,087 40,415 40,416 89,256 69,292,318 93,622,668 14,633,429 11,033,340 33,068,028 34,887,871 Total Within 1 More than More than 2 contractual year or 1 year but years but Carrying undiscounted repayable less than 2 Less than 5 More than amount cash flow on demand years years 5 years RM RM RM RM RM RM 30 June 2017 Other payables and accruals... 5,906,907 5,906,907 5,906,907 Bank borrowings... 69,583,288 93,286,260 5,768,939 7,430,533 29,582,015 50,504,773 Finance lease obligations , ,672 40,416 40,416 48,840 75,610,262 99,322,839 11,716,262 7,470,949 29,630,855 50,504, October 2017 Other payables and accruals... 14,389,263 14,389,263 14,389,263 Bank borrowings... 69,583,288 91,935,356 6,723,105 7,691,329 30,843,501 46,677,421 83,972, ,324,619 21,112,368 7,691,329 30,843,501 46,677,421 (c) Interest rate risk Interest rate risk relates to the risk that the fair value or cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Group s interest rate risk mainly arises from bank balances, bank borrowings and obligations under finance leases. Borrowings arranged at variable rates and fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. All of the Group s bank borrowings as at 30 June 2016, 30 June 2017 and 31 October 2017, bore interest at floating rates whereas its obligations under finance leases bore interest at fixed rates. Details of bank borrowings and obligations under finance leases are disclosed in Notes 26 and 27, respectively. The Group s bank balances, including pledged bank deposit also expose it to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. The directors of the Company I-55

369 APPENDIX I ACCOUNTANT S REPORT consider the Group s exposure to interest rate risk in respect of bank balances is not significant due to low level of deposit interest rate. The Group currently does not have an interest rate hedging policy. However, the management closely monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise. At 30 June 2016, 30 June 2017 and 31 October 2017, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would decrease/increase the Group s profit for the year and retained earnings by approximately RM498,093, RM532,000 and RM532,000 respectively. The changes in interest rates do not affect the Group s other component of equity. The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of each reporting period and had been applied to the exposure to interest rate risk for the borrowings in existence at that date. The 100 basis point increase or decrease represents management s assessment of a reasonably possible change in interest rates over the period until the next annual reporting date. 38. CAPITAL MANAGEMENT The Group s objective of managing capital is to safeguard the Group s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital. The Group monitors capital using gearing ratio, which is total debt to equity. Total debts include bank borrowings and finance lease obligation. Equity represents total equity of the Group. The directors of the Company actively and regularly reviews and manages the Group s capital structure, taking into consideration the future capital requirements of the Group, to ensure optimal shareholders returns. The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares and raise new debts or sells assets to reduce debt. The gearing ratios were as follows: As at 30 June As at 31 October RM RM RM Bank borrowings (note)... 65,538,550 70,000,000 70,000,000 Finance lease obligations , ,067 65,692,228 70,120,067 70,000,000 Total equity... 20,583,199 31,889,813 29,458,676 Gearing ratio % 220% 238% note: This amount only includes the actual drawdown from the credit facility. The Group targets to maintain a gearing ratio to be in line with the expected changes in economic and financial conditions. The Group s overall strategy on capital management remains unchanged throughout the Track Record Period. I-56

370 APPENDIX I ACCOUNTANT S REPORT 39. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS Major non-cash transactions For the year ended 30 June 2016, the Group entered into finance lease arrangements in respect of property, plant and equipment with a total capital value at the inception of leases of RM179,000. For the year ended 30 June 2016, the considerations of 7,500,000 new shares issued by certain group entities amounting RM7,500,000 were debited to the current account with the shareholders. For the years ended 30 June 2016 and 30 June 2017 and the four months ended 31 October 2017, the liquidated and ascertained damages of RM4,560,000, RM5,475,000 and RM1,845,000 were debited to the current account with Kingsley Hills Sdn. Bhd. respectively. Reconciliation of liabilities arising from financing activities The table below details changes in the Group s liabilities from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the Group s consolidated statements of cash flows as cash flows from financing activities. Amounts due Obligations (from)/to under related Amounts Bank finance companies due to a Interest borrowings leases (Notes director payable (Note 26) (Note 27) 21 and 24) (Note 25) Total RM RM RM RM RM RM At 1 July ,856,924 4,942, ,494 68,338,993 Financing cash flows (note) (5,481,172) 2,681,626 (31,963) 5,567,818 2,682,669 5,418,978 Non-cash changes Liquidated and ascertained damages (4,560,000) (4,560,000) Interest accrued 5,481,172 6,641 5,487,813 New finance leases 179, ,000 At 30 June 2016 and 1 July ,538, ,678 5,950,393 3,222,163 74,864,784 Financing cash flows (note) (4,257,274) 4,010,950 (40,415) (5,539,859) (3,222,163) (9,048,761) Non-cash changes Liquidated and ascertained damages (5,475,000) (5,475,000) Acquisition of land Interest accrued 4,595,000 6,804 4,601,804 Amortised debt issuance cost 33,788 33,788 At 30 June 2017 and 1 July ,726 69,583, ,067 (5,064,456) 64,976,625 I-57

371 APPENDIX I ACCOUNTANT S REPORT Amounts due Obligations (from)/to Amounts under related due to a Bank finance companies director Interest borrowings leases (Notes (Note payable (Note 26) (Note 27) 21 and 24) 25) Total RM RM RM RM RM RM Financing cash flows (note) (1,372,096) (121,485) (461,844) (1,955,425) Non-cash changes Liquidated and ascertained damages (1,845,000) (1,845,000) Interest accrued 1,382,759 1,418 1,384,177 Amortised debt issuance cost 15,017 15,017 At 31 October ,389 69,598,305 (7,371,300) 62,575,394 note: The cash flows represent the proceeds from/repayment of bank borrowings, advances from/repayments to related companies, advances from/repayments to a director, repayment of obligations under finance leases and interest paid in the consolidated statements of cash flows. III. SUBSEQUENT FINANCIAL STATEMENTS No audited financial statements have been prepared by the Company, or its subsidiaries in respect of any period subsequent to 31 October I-58

372 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION The information set forth in this appendix does not form part of the Accountant s Report prepared by BDO Limited, Certified Public Accountants, Hong Kong, the reporting accountant of the Company, as set forth in Appendix I to this prospectus, and is included herein for illustrative purposes only. The unaudited pro forma financial information should be read in conjunction with the section headed Financial Information in this prospectus and the Accountant s Report set forth in Appendix I to this prospectus. (A) UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group prepared in accordance with Rule 7.31 of the GEM Listing Rules is set out below to illustrate the effect of the net tangible assets of the Group as at 31 October 2017 as if the Global Offering had taken place on 31 October This unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of the Group as at 31 October 2017 or at any future dates following the Global Offering. II-1

373 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma statement of adjusted consolidated net tangible assets of the Group is prepared based on the consolidated net tangible assets of the Group as at 31 October 2017 as shown in the Accountant s Report set out in Appendix I to this prospectus, and adjusted as follows: Consolidated net tangible assets of the Group as at 31 October 2017 Estimated net proceeds from the Global Offering Unaudited pro forma adjusted consolidated net tangible assets of the Group as at 31 October 2017 Unaudited pro forma adjusted consolidated net tangible assets of the Group as at 31 October 2017 per Share RM RM RM RM HK$ (Note 1) (Note 2) (Note 3) (Note 4) Based on the Offer Price of HK$0.40 per Share 29,458,676 30,407,441 59,866, Based on the Offer Price of HK$0.50 per Share 29,458,676 39,470,496 68,929, Notes: (1) The consolidated net tangible assets of the Group as at 31 October 2017 is extracted from the Accountant s Report set out in Appendix I to this prospectus. (2) A total of 200,000,000 Offer Shares representing 25% of 800,000,000 Shares expected to be in issue immediately following the completion of the Global Offering and the Capitalisation Issue and upon Listing. The estimated net proceeds from the Global Offering are based on the Offer Price of HK$0.40 per Share or HK$0.50 per Share, after deduction of the underwriting fees and other related expenses (excluding those listing expenses which had been accounted for on or prior to 31 October 2017) payable by the Company. (3) The unaudited pro forma adjusted consolidated net tangible assets of the Group as at 31 October 2017 per Share is calculated based on 800,000,000 Shares expected to be in issue immediately following the completion of the Global Offering but takes no account of any Shares which may be allotted and issued or repurchased by the Company pursuant to the general mandates. (4) The unaudited pro forma adjusted consolidated net tangible assets of the Group as at 31 October 2017 per Share are converted from Malaysian Ringgit to Hong Kong dollars at the rate of RM1.00 to HK$2.03. No representation is made that the amounts in Malaysian ringgit have been, could have been or could be converted into Hong Kong dollars, or vice versa, at the rate or at any other rates or at all. (5) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group to reflect any trading results or other transactions of the Group entered into subsequent to 31 October II-2

374 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION (B) INDEPENDENT REPORTING ACCOUNTANT S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION The following is the text of a report received from our Company s reporting accountant, BDO Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus. To the directors of Kingsley Edugroup Limited We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Kingsley Edugroup Limited (the Company ) and its subsidiaries (hereinafter collectively referred to as the Group ) by the directors of the Company for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of consolidated net tangible assets of the Group as at 31 October 2017 and related notes as set out on pages II-1 to II-2 of Appendix II of the Company s prospectus dated 30 April 2018 (the Prospectus ) in connection with the proposed initial public offering of the shares of the Company (the Proposed Public Offer ). The applicable criteria on the basis of which the directors of the Company have compiled the unaudited pro forma financial information are described on II-1 to II-2 of Appendix II of the Prospectus. The unaudited pro forma financial information has been compiled by the directors of the Company to illustrate the impact of the Proposed Public Offer on the Group s consolidated financial position as at 31 October 2017 as if the Proposed Public Offer had taken place at 31 October As part of this process, information about the Group s consolidated financial position has been extracted by the directors of the Company from the Group s consolidated financial information for the four months ended 31 October 2017, on which an accountant s report set out in Appendix I of the Prospectus has been published. Directors Responsibility for the Unaudited Pro Forma Financial Information The directors of the Company are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited (the GEM Rules ) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars ( AG 7 ) issued by the Hong Kong Institute of Certified Public Accountants ( the HKICPA ). Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. II-3

375 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Reporting Accountant s Responsibilities Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the GEM Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue. We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the directors of the Company have compiled the unaudited pro forma financial information in accordance with paragraph 7.31 of the GEM Rules and with reference to AG 7 issued by the HKICPA. For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information. The purpose of unaudited pro forma financial information included in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Proposed Public Offer at 31 October 2017 would have been as presented. A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether: the related unaudited pro forma adjustments give appropriate effect to those criteria; and the unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information. The procedures selected depend on the reporting accountant s judgement, having regard to the reporting accountant s understanding of the nature of the entity, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances. The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information. II-4

376 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion: (a) (b) (c) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated; such basis is consistent with the accounting policies of the Group; and the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 7.31(1) of the GEM Rules. BDO Limited Certified Public Accountants Hong Kong 30 April 2018 II-5

377 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW Set out below is a summary of certain provisions of the Memorandum and the Articles and of certain aspects of Cayman Islands company law. The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 12 January 2017 under the Cayman Companies Law. The Company s constitutional documents consist of its Amended and Restated Memorandum of Association (Memorandum) and its Amended and Restated Articles of Association (Articles). 1. MEMORANDUM OF ASSOCIATION (a) (b) The Memorandum provides, inter alia, that the liability of members of the Company is limited and that the objects for which the Company is established are unrestricted (and therefore include acting as an investment company), and that the Company shall have and be capable of exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate whether as principal, agent, contractor or otherwise and, since the Company is an exempted company, that the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands. By special resolution the Company may alter the Memorandum with respect to any objects, powers or other matters specified in it. 2. ARTICLES OF ASSOCIATION The Articles were adopted on 19 April 2018 with effect from the Listing Date. A summary of certain provisions of the Articles is set out below. (a) Shares (i) Classes of shares The share capital of the Company consists of ordinary shares. (ii) Variation of rights of existing shares or classes of shares Subject to the Cayman Companies Law, if at any time the share capital of the Company is divided into different classes of shares, all or any of the special rights attached to any class of shares may (unless otherwise provided for by the terms of issue of the shares of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The provisions of the Articles relating to general meetings shall mutatis mutandis apply to every such separate general meeting, but so that the necessary quorum (other than at an adjourned meeting) shall be not less than two persons together holding (or, in the case of a shareholder being a corporation, by its duly authorised representative) or representing by proxy not less than one-third in nominal value of the issued shares of that class. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll. III-1

378 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW Any special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. (iii) Alteration of capital The Company may, by an ordinary resolution of its members: (a) increase its share 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 smaller amount than its existing shares; (c) divide its unissued shares into several classes and attach to such shares any preferential, deferred, qualified or special rights, privileges or conditions; (d) subdivide its shares or any of them into shares of an amount smaller than that fixed by the Memorandum; (e) cancel any shares which, at the date of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled; (f) make provision 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 Law and the requirements of The Stock Exchange of Hong Kong Limited (the Stock Exchange ), all transfers of shares shall be effected by an instrument of transfer in the usual or common form or in such other form as the Board may approve and may be under hand or, if the transferor or transferee is a Clearing House or its nominee(s), under hand or by machine imprinted signature, or by such other manner of execution as the Board may approve from time to time. Execution of the instrument of transfer shall be by or on behalf of the transferor and the transferee, provided that the Board may dispense with the execution of the instrument of transfer by the transferor or transferee or accept mechanically executed transfers. The transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register of members of the Company in respect of that share. The Board may, in its absolute discretion, at any time and from time to time remove any share on the principal register to any branch register or any share on any branch register to the principal register or any other branch register. Unless the Board otherwise agrees, no shares on the principal register shall be removed to any branch register nor shall shares on any branch register be removed to the principal register or any other branch register. All removals and other documents of title shall be lodged for registration and registered, in the case of shares on any branch register, at the relevant registration office and, in the case of shares on the principal register, at the place at which the principal register is located. The Board may, in its absolute discretion, decline to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or on which the Company has a lien. It may also decline to register a transfer of any share issued under any share option scheme upon which a restriction on transfer subsists or a transfer of any share to more than four joint holders. III-2

379 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The Board may decline to recognise any instrument of transfer unless a certain fee, up to such maximum sum as the Stock Exchange may determine to be payable, is paid to the Company, the instrument of transfer is properly stamped (if applicable), is in respect of only one class of share and is lodged at the relevant registration office or the place at which the principal register is located accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require is provided to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do). The register of members may, subject to the GEM Listing Rules, be closed at such time or for such period not exceeding in the whole 30 days in each year as the Board may determine. Fully paid shares shall be free from any restriction on transfer (except when permitted by the Stock Exchange) and shall also be free from all liens. (v) Power of the Company to purchase its own shares The Company may purchase its own shares subject to certain restrictions and the Board may only exercise this power on behalf of the Company subject to any applicable requirement imposed from time to time by the Articles or any, code, rules or regulations issued from time to time by the Stock Exchange and/or the Securities and Futures Commission of Hong Kong. Where the Company purchases for redemption a redeemable Share, purchases not made through the market or by tender shall be limited to a maximum price and, if purchases are by tender, tenders shall be available to all members alike. (vi) Power of any subsidiary of the Company to own shares in the Company There are no provisions in the Articles relating to the ownership of shares in the Company 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 the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment of such shares made payable at fixed times. A call may be made payable either in one sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20% per annum as the Board shall fix from the day appointed for payment to the time of actual payment, but the Board may waive payment of such interest wholly or in part. The Board may, if it thinks fit, receive from any member willing to advance the same, either in money or money s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced the Company may pay interest at such rate (if any) not exceeding 20% per annum as the Board may decide. III-3

380 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW If a member fails to pay any call or instalment of a call on the day appointed for payment, the Board may, for so long as any part of the call or instalment remains unpaid, serve not less than 14 days notice on the member requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment. The notice shall name a further day (not earlier than the expiration of 14 days from the date of the notice) on or before which the payment required by the notice is to be made, and shall also name the place where payment is to be made. The notice shall also state that, in the event of non-payment at or before the appointed time, the shares in respect of which the call was made will be liable to be forfeited. If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture. A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, nevertheless, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares together with (if the Board shall in its discretion so require) interest thereon from the date of forfeiture until payment at such rate not exceeding 20% 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 any person as a Director either to fill a casual vacancy on the Board or as an additional Director to the existing Board subject to any maximum number of Directors, if any, as may be determined by the members in general meeting. Any Director so appointed to fill a casual vacancy shall hold office only until the first general meeting of the Company after his appointment and be subject to re-election at such meeting. Any Director so appointed as an addition to the existing Board shall hold office only until the first annual general meeting of the Company after his appointment and be eligible for re-election at such meeting. Any Director so appointed by the Board shall not be taken into account in determining the Directors or the number of Directors who are to retire by rotation at an annual general meeting. At each annual general meeting, one third of the Directors for the time being shall retire from office by rotation. However, if the number of Directors is not a multiple of three, then the number nearest to but not less than one third shall be the number of retiring Directors. The Directors to retire in each year shall be those who have been in office longest since their last re-election or appointment but, as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. III-4

381 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW No person, other than a retiring Director, shall, unless recommended by the Board for election, be eligible for election to the office of Director at any general meeting, unless notice in writing of the intention to propose that person for election as a Director and notice in writing by that person of his willingness to be elected has been lodged at the head office or at the registration office of the Company. The period for lodgment of such notices shall commence no earlier than the day after despatch of the notice of the relevant meeting and end no later than seven days before the date of such meeting and the minimum length of the period during which such notices may be lodged must be at least seven days. A Director is not required to hold any shares in the Company by way of qualification nor is there any specified upper or lower age limit for Directors either for accession to or retirement from the Board. A Director may be removed by an ordinary resolution of the Company before the expiration of his term of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and the Company may by ordinary resolution appoint another in his place. Any Director so appointed shall be subject to the retirement by rotation provisions. The number of Directors shall not be less than two. The office of a Director shall be vacated if he: (aa) resign; (bb) dies; (cc) is declared to be of unsound mind and the Board resolves that his office be vacated; (dd) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally; (ee) he 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 six consecutive months, and the Board resolves that his office is vacated; (gg) has been required by the stock exchange of the Relevant Territory (as defined in thearticles)toceasetobeadirector;or (hh) is removed from office by the requisite majority of the Directors or otherwise pursuant to the Articles. From time to time the Board may appoint one or more of its body to be managing director, joint managing director or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the Board may determine, and the Board may revoke or terminate any of such appointments. The Board may also delegate any of its powers to committees consisting III-5

382 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW of such Director(s) or other person(s) as the Board thinks fit, and from time to time it may also revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board. (ii) Power to allot and issue shares and warrants Subject to the provisions of the Cayman Companies Law, the Memorandum and Articles and without prejudice to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached to it such rights, or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the Board may determine). Any share may be issued on terms that, upon the happening of a specified event or upon a given date and either at the option of the Company 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 other securities of the Company on such terms as it may from time to time determine. Where warrants are issued to bearer, no certificate in respect of such warrants shall be issued to replace one that has been lost unless the Board is satisfied beyond reasonable doubt that the original certificate has been destroyed and the Company has received an indemnity in such form as the Board thinks fit with regard to the issue of any such replacement certificate. Subject to the provisions of the Cayman Companies Law, the Articles and, where applicable, the rules of any stock exchange of the Relevant Territory (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount. Neither the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others whose registered addresses are in any particular territory or territories where, in the absence of a registration statement or other special formalities, this is or may, in the opinion of the Board, be unlawful or impracticable. However, no member affected as a result of the foregoing shall be, or be deemed to be, a separate class of members for any purpose whatsoever. (iii) Power to dispose of the assets of the Company or any of its subsidiaries While there are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries, the Board may exercise all powers III-6

383 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Cayman Companies Law to be exercised or done by the Company in general meeting, but if such power or act is regulated by the Company in general meeting, such regulation shall not invalidate any prior act of the Board which would have been valid if such regulation had not been made. (iv) Borrowing powers The Board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and uncalled capital of the Company and, subject to the Cayman Companies Law, to issue debentures, debenture stock, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. (v) Remuneration The Directors shall be entitled to receive, as ordinary remuneration for their services, such sums as shall from time to time be determined by the Board or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided among the Directors in such proportions and in such manner as they may agree or, failing agreement, either equally or, in the case of any Director holding office for only a portion of the period in respect of which the remuneration is payable, pro rata. The Directors shall also be entitled to be repaid all expenses reasonably incurred by them in attending any Board meetings, committee meetings or general meetings or otherwise in connection with the discharge of their duties as Directors. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office. Any Director who, at the request of the Company, performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such special or extra remuneration as the Board may determine, in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration and such other benefits and allowances as the Board may from time to time decide. Such remuneration shall be in addition to his ordinary remuneration as a Director. The Board may establish, either on its own or jointly in concurrence or agreement with subsidiaries of the Company or companies with which the Company is associated in business, or may make contributions out of the Company s monies to, any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or former Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and former employees of the Company and their dependents or any class or classes of such persons. III-7

384 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW The Board may also pay, enter into agreements to pay or make grants of revocable or irrevocable, whether or not subject to any terms or conditions, pensions or other benefits to employees and former employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or former employees or their dependents are or may become entitled under any such scheme or fund as mentioned above. Such pension or benefit may, if deemed desirable by the Board, be granted to an employee either before and in anticipation of, or upon or at 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 of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually or statutorily entitled) must be approved by the Company in general meeting. (vii) Loans and provision of security for loans to Directors The Company shall not directly or indirectly make a loan to a Director or a director of any holding company of the Company or any of their respective close associates, enter into any guarantee or provide any security in connection with a loan made by any person to a Director or a director of any holding company of the Company or any of their respective close associates, or, if any one or more of the Directors hold(s) (jointly or severally or directly or indirectly) a controlling interest in another company, make a loan to that other company or enter into any guarantee or provide any security in connection with a loan made by any person to that other company. (viii) Disclosure of interest in contracts with the Company or any of its subsidiaries With the exception of the office of auditor of the Company, a Director may hold any other office or place of profit with the Company in conjunction with his office of Director for such period and upon such terms as the Board may determine, and may be paid such extra remuneration 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. A Director may be or become a director, officer or member of any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration or other benefits received by him as a director, officer or member of such other company. The Board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company. No Director or intended Director shall be disqualified by his office from contracting with the Company, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director III-8

385 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW holding that office or the fiduciary relationship established by it. A Director who is, in any way, materially interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest 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 any share by reason that the person or persons who are interested directly or indirectly in that share have failed to disclose their interests to the Company. A Director shall not vote or be counted in the quorum on any resolution of the Board in respect of any contract or arrangement or proposal in which he or any of his close associate(s) has/have a material interest, and if he shall do so his vote shall not be counted nor shall he be counted in the quorum for that resolution, but this prohibition shall not apply to any of the following matters: (aa) the giving of any security or indemnity to the Director or his close associate(s) in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries; (bb) the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his close associate(s) has/have himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security; (cc) any proposal concerning an offer of shares, debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer; (dd) any proposal or arrangement concerning the benefit of employees of the Company or any of its subsidiaries, including the adoption, modification or operation of either: (i) any employees share scheme or any share incentive or 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 disability benefits scheme which relates to Directors, their close associates and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or his close associate(s) any privilege or advantage not generally accorded to the class of persons to which such scheme 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, debentures or other securities of the Company by virtue only of his/their interest in those shares, debentures or other securities. III-9

386 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (ix) Proceedings of the Board The Board may meet anywhere in the world for the despatch of business and may adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote. (c) Alterations to the constitutional documents and the Company s name To the extent that the same is permissible under Cayman Islands law and subject to the Articles, the Memorandum and Articles of the Company may only be altered or amended, and the name of the Company may only be changed, with the sanction of a special resolution of the Company. (d) Meetings of member (i) Special and ordinary resolutions A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or by proxy or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given. Under Cayman Companies Law, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within 15 days of being passed. An ordinary resolution, by contrast, is a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given. A resolution in writing signed by or on behalf of all members shall be treated as an ordinary resolution duly passed at a general meeting of the Company duly convened and held, and where relevant as a special resolution so passed. (ii) Voting rights and right to demand a poll Subject to any special rights, restrictions or privileges as to voting for the time being attached to any class or classes of shares at any general meeting: (a) on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every share which is fully paid or credited as fully paid registered in his name in the register of members of the Company but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for this purpose as paid up on the share; and (b) on a show of hands every member who is present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy shall have one vote. Where more than one proxy is appointed by a member which is a Clearing House III-10

387 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (as defined in the Articles) or its nominee(s), each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he does use in the same way. At any general meeting a resolution put to the vote of the meeting is to be decided by poll save that the chairman of the meeting may, pursuant to the GEM Listing Rules, allow a resolution to be voted on by a show of hands. Where a show of hands is allowed, before or on the declaration of the result of the show of hands, a poll may be demanded by (in each case by members present in person or by proxy or by a duly authorised corporate representative): (A) (B) (C) at least two members; any member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or a member or members holding shares in the Company conferring a right to vote at the meeting on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. Should a Clearing House or its nominee(s) be a member of the Company, such person or persons may be authorised as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised in accordance with this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same rights and powers on behalf of the Clearing House or its nominee(s) as if such person were an individual member including the right to vote individually on a show of hands. Where the Company has knowledge that any member is, under the GEM Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted. (iii) Annual general meetings The Company must hold an annual general meeting each year other than the year of the Company s adoption of the Articles. Such meeting must be held not more than 15 months after the holding of the last preceding annual general meeting, or such longer period as may be authorised by the Stock Exchange at such time and place as may be determined by the Board. (iv) Notices of meetings and business to be conducted An annual general meeting of the Company shall be called by at least 21 days notice in writing, and any other general meeting of the Company shall be called by at least 14 days notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and must specify the time, III-11

388 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW place and agenda of the meeting and particulars of the resolution(s) to be considered at that meeting and, in the case of special business, the general nature of that business. Except where otherwise expressly stated, any notice or document (including a share certificate) to be given or issued under the Articles shall be in writing, and may be served by the Company on any member personally, by post to such member s registered address or (in the case of a notice) by advertisement in the newspapers. Any member whose registered address is outside Hong Kong may notify the Company in writing of an address in Hong Kong which shall be deemed to be his registered address for this purpose. Subject to the Cayman Companies Law and the GEM Listing Rules, a notice or document may also be served or delivered by the Company to any member by electronic means. Although a meeting of the Company may be called by shorter notice than as specified above, such meeting may be deemed to have been duly called if it is so agreed: (i) (ii) in the case of an annual general meeting, by all members of the Company entitled to attend and vote thereat; and in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting holding not less than 95% of the total voting rights in the Company. All business transacted at an extraordinary general meeting shall be deemed special business. All business shall also be deemed special business where it is transacted at an annual general meeting, with the exception of certain routine matters which shall be deemed ordinary business. (v) Quorum for meetings and separate class meetings No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, and continues to be present until the conclusion of the meeting. The quorum for a general meeting shall be two members present in person (or in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class. (vi) Proxies Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company and shall be entitled to III-12

389 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. On a poll or on a show of hands, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of a duly authorised officer or attorney. 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 it shall not preclude the use of the two-way form. Any form issued to a member for appointing a proxy to attend and vote at an extraordinary general meeting or at an annual general meeting at which any business is to be transacted shall be such as to enable the member, according to his intentions, to instruct the proxy to vote in favour of or against (or, in default of instructions, to exercise his discretion in respect of) each resolution dealing with any such business. (e) Accounts and audit The Board shall cause proper books of account to be kept of the sums of money received and expended by the Company, and of the assets and liabilities of the Company and of all other matters required by the Cayman Companies Law (which include all sales and purchases of goods by the company) necessary to give a true and fair view of the state of the Company s affairs and to show and explain its transactions. The books of accounts of the Company shall be kept at the head office of the Company or at such other place or places as the Board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any account, book or document of the Company except as conferred by the Cayman Companies Law or ordered by a court of competent jurisdiction or authorised by the Board or the Company in general meeting. The Board shall from time to time cause to be prepared and laid before the Company at its annual general meeting balance sheets and profit and loss accounts (including every document 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 annual general meeting. Copies of these documents shall be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles together with the notice of annual general meeting, not less than 21 days before the date of the meeting. Subject to the rules of the stock exchange of the Relevant Territory (as defined in the Articles), the Company may send summarised financial statements to shareholders who have, in accordance with the rules of the stock exchange of the Relevant Territory, consented and elected to receive summarised financial statements instead of the full financial statements. The summarised financial statements must be accompanied by III-13

390 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW any other documents as may be required under the rules of the stock exchange of the Relevant Territory, and must be sent to those shareholders that have consented and elected to receive the summarised financial statements not less than 21 days before the general meeting. The Company shall appoint auditor(s) to hold office until the conclusion of the next annual general meeting on such terms and with such duties as may be agreed with the Board. The auditors remuneration shall be fixed by the Company in general meeting or by the Board if authority is so delegated by the members. The auditors shall audit the financial statements of the Company in accordance with generally accepted accounting principles of Hong Kong, the International Accounting Standards or such other standards as may be permitted by the Stock Exchange. (f) Dividends and other methods of distribution The Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the Board. Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide: (i) (ii) (iii) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, although no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share; all dividends shall be apportioned and paid pro rata in accordance with the amount paid up on the shares during any portion(s) of the period in respect of which the dividend is paid; and the Board may deduct from any dividend or other monies payable to any member all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise. Where the Board or the Company in general meeting has resolved that a dividend should be paid or declared, the Board may resolve: (aa) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the members entitled to such dividend will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment; or (bb) that the members entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit. Upon the recommendation of the Board, the Company may by ordinary resolution in respect of any one particular dividend of the Company determine that it may be III-14

391 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to members to elect to receive such dividend in cash in lieu of such allotment. Any dividend, bonus or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent and shall be sent at the holder s or joint holders risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders. Whenever the Board or the Company in general meeting has resolved that a dividend be paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind. The Board may, if it thinks fit, receive from any member willing to advance the same, and either in money or money s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced may pay interest at such rate (if any) not exceeding 20% per annum, as the Board may decide, but a payment in advance of a call shall not entitle the member to receive any dividend or to exercise any other rights or privileges as a member in respect of the share or the due portion of the shares upon which payment has been advanced by such member before it is called up. All dividends, bonuses or other distributions unclaimed for one year after having been declared may be invested or otherwise used by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends, bonuses or other distributions unclaimed for six years after having been declared may be forfeited by the Board and, upon such forfeiture, shall revert to the Company. No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company. The Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants remain uncashed on two consecutive occasions or after the first occasion on which such a cheque or warrant is returned undelivered. (g) Inspection of corporate records For so long as any part of the share capital of the Company is listed on the Stock Exchange, any member may inspect any register of members of the Company maintained in Hong Kong (except when the register of members is closed) without charge and require the provision to him of copies or extracts of such register in all respects as if the Company were incorporated under and were subject to the Hong Kong Companies Ordinance. III-15

392 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (h) Rights of minorities in relation to fraud or oppression There are no provisions in the Articles concerning the rights of minority members in relation to fraud or oppression. However, certain remedies may be available to members of the Company under Cayman Companies Law, as summarised in paragraph 3(f) of this Appendix. (i) Procedures on liquidation A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution. Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares: (i) (ii) if the Company is wound up, the surplus assets remaining after payment to all creditors shall be divided among the members in proportion to the capital paid up on the shares held by them respectively; and if the Company is wound up and the surplus assets available for distribution among 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 be issued on special terms and conditions, so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up on the shares held by them, respectively. If the Company is wound up (whether the liquidation is voluntary or compelled by the court), the liquidator may, with the sanction of a special resolution and any other sanction required by the Cayman Companies Law, divide among the members in specie or kind the whole or any part of the assets of the Company, whether the assets consist of property of one kind or different kinds, and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be so divided and may determine how such division shall be carried out as between the members or different classes of members and the members within each class. The liquidator may, with the like sanction, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator thinks fit, but so that no member shall be compelled to accept any shares or 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 Cayman Companies Law, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of the shares to be issued on the exercise of such warrants, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of such shares. III-16

393 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW 3. CAYMAN ISLANDS COMPANY LAW The Company was incorporated in the Cayman Islands as an exempted company on 12 January 2017 subject to the Cayman Companies Law. Certain provisions of Cayman Islands company law are set out below but this section does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of the Cayman Companies Law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar. (a) Company operations An exempted company such as the Company must conduct its operations mainly outside the Cayman Islands. An exempted company is also required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital. (b) Share capital Under Cayman Companies Law, a Cayman Islands company may issue ordinary, preference or redeemable shares or any combination thereof. Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the share premium account. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangements in consideration of 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, if any, of its memorandum and articles of association, in such manner as the company may from time to time determine including, but without limitation, the following: (i) (ii) (iii) (iv) (v) paying distributions or dividends to members; paying up unissued shares of the company to be issued to members as fully paid bonus shares; any manner provided in section 37 of the Cayman Companies Law; writing-off the preliminary expenses of the company; and writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company. Notwithstanding the foregoing, no distribution or dividend may be paid to members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course of business. Subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital may, if authorised to do so by its articles of association, by special resolution reduce its share capital in any way. III-17

394 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (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 financial assistance 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 financial assistance provided the directors of the company, when proposing to grant such financial assistance, discharge their duties of care and act in good faith, for a proper purpose and in the 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 share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a member and, for the 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 such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares; an ordinary resolution of the company approving the manner and terms of the purchase will be required if the articles of association do not authorise the manner and terms of such purchase. A company may not redeem or purchase its shares unless they are fully paid. Furthermore, a company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any issued shares of the company other than shares held as treasury shares. In addition, a payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless, immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business. Shares that have been purchased or redeemed by a company or surrendered to the company shall not be treated as cancelled but shall be classified as treasury shares if held in compliance with the requirements of Section 37A(1) of the Cayman Companies Law. Any such shares shall continue to be classified as treasury shares until such shares are either cancelled or transferred pursuant to the Cayman Companies Law. A Cayman Islands company may be able to purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus there is no requirement under Cayman Companies Law that a company s memorandum or articles of association contain a specific provision enabling such purchases. The directors of a company may under the general power contained in its memorandum 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. (e) Dividends and distributions Subject to a solvency test, as prescribed in the Cayman Companies Law, and the provisions, if any, of the company s memorandum and articles of association, a company III-18

395 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW may pay dividends and distributions out of its share premium account. In addition, based upon English case law which is likely to be persuasive in the Cayman Islands, dividends may 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 (including any distribution of assets to members on a winding up) may be made, in respect of a treasury share. (f) Protection of minorities and shareholders suits It can be expected that the Cayman Islands courts will ordinarily follow English case law precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions to that rule) which permit a minority member to commence a representative action against or derivative actions in the name of the company to challenge acts which are ultra vires, illegal, fraudulent (and performed by those in control of the Company) against the minority, or represent an irregularity in the passing of a resolution which requires a qualified (or special) majority which has not been obtained. Where a company (not being a bank) is one which has a share capital divided into shares, the court may, on the application of members holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and, at the direction of the court, to report on such affairs. In addition, any member of a company may petition the court, which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up. In general, claims against a company by its members must be based on the general laws of contract or tort applicable in the Cayman Islands or be based on potential violation of their individual rights as members as established by a company s memorandum and articles of association. (g) Disposal of assets There are no specific restrictions on the power of directors to dispose of assets of a company, however, the directors are expected to exercise certain duties of care, diligence and skill to the standard that a reasonably prudent person would exercise in comparable circumstances, in addition to fiduciary duties to act in good faith, for proper purpose and in the best interests of the company under English common law (which the Cayman Islands courts will ordinarily follow). (h) Accounting and auditing requirements A company must cause proper records of accounts to be kept with respect to: (i) all sums 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 such books as are necessary to give a true and fair view of the state of the company s affairs and to explain its transactions. III-19

396 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW If a company keeps its books of account at any place other than at its registered office or any other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2013 Revision) 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 are specified in such order or notice. (i) Exchange control There are no exchange control regulations or currency restrictions in effect in the Cayman Islands. (j) Taxation The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save for certain stamp duties which may be applicable, from time to time, on certain instruments. (k) Stamp duty on transfers No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands 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 of its directors. However, the company s articles of association may provide for the prohibition 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 the register of members or corporate records of the company. They will, however, have such rights as may be set out in the company s articles of association. (n) Register of members A Cayman Islands exempted company may maintain its principal register of members and any branch registers in any country or territory, whether within or outside the Cayman Islands, as the company may determine from time to time. There is no requirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of member, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2013 Revision) of the Cayman Islands. III-20

397 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW (o) Register of Directors and officers Pursuant to the Cayman Companies Law, the Company is required to maintain at its registered office a register of directors, alternate directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within 60 days of any change in such directors or officers, including a change of the name of such directors or officers. (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 circumstances including where, in the opinion of the court, it is just and equitable that such company be so wound up. A voluntary winding up of a company (other than a limited duration company, for which specific rules apply) occurs where the company resolves by special resolution that it be wound up voluntarily or where the company in general meeting resolves that it be wound up voluntarily because it is unable to pay its debt as they fall due. In the case of a voluntary winding up, the company is obliged to cease to carry on its business from the commencement 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 so far 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 liquidators are appointed for the purpose of winding up the affairs of the company and distributing its assets. As soon as the affairs of a company are fully wound up, the liquidator must make a report and an account of the winding up, showing how the winding up has been conducted and the property of the company disposed of, and call a general meeting of the company for 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, the liquidator or any contributory or creditor may apply to the court for an order for the continuation 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 will facilitate a more effective, economic or expeditious liquidation of the company in the interests of the contributories and creditors. A supervision order takes effect for all purposes as if it was an order that the company be wound up by the court except that a commenced voluntary winding up and the prior actions of the voluntary liquidator shall be valid and binding upon the company and its official liquidator. For the purpose of conducting the proceedings in winding up a company and assisting the court, one or more persons may be appointed to be called an official liquidator(s). The court may appoint to such office such person or persons, either provisionally or otherwise, as it III-21

398 APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW thinks fit, and if more than one person is appointed to such office, the court shall declare whether any act required or authorised to be done by the official liquidator is to be done by all or any one or more of such persons. The court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the court. (q) Reconstructions Reconstructions and amalgamations may be approved by a majority in number representing 75% in value of the members or creditors, depending on the circumstances, as are 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 the transaction for which approval is being sought would not provide the members with a fair value for their shares, the courts are unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management, and if the transaction were approved and consummated the dissenting member would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of their shares) ordinarily available, for example, to dissenting members of a United States corporation. (r) Take-overs Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offeror may, at any time within two months after the expiration of that four-month period, by notice require the dissenting members to transfer their shares on the terms of the offer. A dissenting member may apply to the Cayman Islands courts within one month of the notice objecting to the transfer. The burden is on the dissenting member to show that the court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority members. (s) Indemnification 4. GENERAL Cayman Islands law does not limit the extent to which a company s articles of association may provide for indemnification of officers and directors, save to the extent any such provision may be held by the court to be contrary to public policy, for example, where a provision purports to provide indemnification against the consequences of committing a crime. Appleby, our Company s legal adviser on Cayman Islands law, has sent to our Company a letter of advice which summarises certain aspects of the Cayman Islands company law. This letter, together with a copy of the Cayman Companies Law, is available for inspection as referred to in the paragraph headed Documents Available for Inspection in Appendix VI. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice. III-22

399 APPENDIX IV PROPERTY VALUATION REPORT The following is the summary of values and valuation report prepared for the purpose of incorporation in this prospectus received from Savills (Malaysia) Sdn Bhd, an independent property valuer, in connection with their opinion of values of the property interests of the Group as at 6 March The Directors Kingsley International Sdn. Bhd. Persiaran Kingsley Kingsley Hill, Putra Heights Subang Jaya Selangor Darul Ehsan Malaysia 30 April 2018 Dear Sirs, INSTRUCTIONS In accordance with the instructions from Kingsley International Sdn. Bhd. (referred to as the Company ) and its subsidiaries (together referred to as the Group ) to value the properties situated in Malaysia (as more particularly described in the attached valuation report), we confirm that we have inspected the properties, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of values of the properties as at 6 March 2018 (the valuation date ). DEFINITION OF MARKET VALUE Our valuation of each of the properties represent its Market Value. The definition of Market Value adopted in Malaysian Valuation Standards (Fifth Edition 2015) issued by the Board of Valuers, Appraisers and Estate Agents Malaysia ( BOVAEA ) follows the International Valuation Standards published by the International Valuation Standard Council ( IVSC ). Market Value is defined by the IVSC as the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. IV-1