Build King Holdings Limited — Proxy Solicitation & Information Statement 2014

Feb 19, 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Build King Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Stock Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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BUILD KING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 00240)

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to

the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 4 to 10 of this circular. A letter of advice from the Independent Financial Adviser (as defined herein) to the Independent Board Committee (as defined herein) and the Independent Shareholders (as defined herein) is set out on pages 13 to 23 of this circular. A letter of the Independent Board Committee is set out on pages 11 to 12 of this circular.

A notice convening the special general meeting of Build King Holdings Limited to be held at Units 601-605A, 6th Floor, Tower B, Manulife Financial Centre, 223 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Friday, 14 March 2014 at 10:00 a.m. is set out on Appendix II to this circular. Whether or not you intend to attend such meeting, please complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Progressive Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting. Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the meeting or any adjourned meeting if they so wish.

20 February 2014

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . .	11
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER. . . . . . . . . . . . . . . . . . .	13
APPENDIX I – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
APPENDIX II – NOTICE OF SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . .	33

i

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context requires otherwise:

“Announcement”

the announcement of the Company dated 14 February 2014

“associate”

has the meaning ascribed thereto under the Listing Rules

“Barge”

the Barge named “康運” owned and operated by Leader Marine with a capacity of 4,642 tonnes of aggregates

“Board”

the board of Directors

“Business Days”

a day (other than a Saturday or a Sunday) on which banks generally are open for business in Hong Kong

“Company”

Build King Holdings Limited, a company incorporated in Bermuda with limited liability whose shares are listed on the Main Board of the Stock Exchange (Stock Code: 240)

“Directors”

the directors of the Company

“Framework Agreement”

the framework agreement between Leader Marine and Grandeur Building dated 14 February 2014 in respect of the continuing provision of Transportation Service

“Grandeur Building”

Grandeur Building Material (Holdings) Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of Wai Kee

“Group”

the Company and its subsidiaries

“HK$”

Hong Kong dollars

“Hong Kong”

Hong Kong Special Administrative Region of the PRC

1

DEFINITIONS

• “Independent Board Committee”

• “Independent Financial Adviser” or “Crosby”

• “Independent Shareholders”

• “Individual Agreements”

• “Leader Marine”

• “Latest Practicable Date”

• “Listing Rules”

• “Party”

• “PRC”

• the committee of the Company comprising all independent non-executive Directors, namely Dr. Chow Ming Kuen, Joseph, Mr. Ng Chi Ming, James and Mr. Ho Tai Wai, David, established to make recommendation to the Independent Shareholders in respect of the terms of and the proposed caps in relation to the transactions under the Framework Agreement

• Crosby Securities Limited, a corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO and being the Independent Financial Adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of and the proposed caps in relation to the transactions under the Framework Agreement

• Shareholders other than Wai Kee and its associates (as defined in the Listing Rules)

• individual orders for individual transactions during the term of the Framework Agreement

• Leader Marine Contractors Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

• 14 February 2014, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

• the Rules Governing the Listing of Securities on the Stock Exchange

• Leader Marine or Grandeur Building

The People’s Republic of China

2

DEFINITIONS

“SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong “SGM” the special general meeting of the Company to be convened on Friday, 14 March 2014 at 10:00 a.m. for the purpose of considering, and if thought fit, approving the terms of and the proposed caps in relation to the transactions under the Framework Agreement

“Shares” ordinary share(s) of HK$0.10 each in the share capital of the Company

• “Shareholders” the shareholders of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited

“Transportation Service” the deployment of the Barge exclusively by Leader Marine to Grandeur Building for the delivery of aggregates from the loading port to the delivery port pursuant to the Framework Agreement

“Wai Kee” Wai Kee Holdings Limited, a holding company of the Company incorporated in Bermuda with limited liability whose shares are listed on the Main Board of the Stock Exchange (Stock Code: 610)

• “%” per cent.

3

LETTER FROM THE BOARD

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BUILD KING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 00240)

Executive Directors: Mr. Zen Wei Peu, Derek (Chairman, Chief Executive Officer and Managing Director) Mr. Chang Kam Chuen, Desmond

Non-executive Directors: Mr. David Howard Gem Dr. Cheng Chi Pang, Leslie Mr. Chan Chi Hung, Anthony

Independent Non-executive Directors: Dr. Chow Ming Kuen, Joseph Mr. Ng Chi Ming, James Mr. Ho Tai Wai, David

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal Place of Business in Hong Kong: Units 601-605A, 6th Floor Tower B, Manulife Financial Centre 223 Wai Yip Street Kwun Tong, Kowloon Hong Kong

20 February 2014

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

REASONS FOR THE CONTINUING CONNECTED TRANSACTIONS

Wai Kee is an investment holding company and is principally engaged in civil engineering, toll road, property development, construction materials and quarrying. Its wholly-owned subsidiary, Grandeur Building, is primarily engaged in the trading of construction materials from the PRC to Hong Kong. Amongst other things, Grandeur Building sources aggregates from quarries in the PRC and supplies aggregates to the concrete batching plant owned by Wai Kee in Hong Kong.

4

LETTER FROM THE BOARD

The Company is an investment holding company and its group companies are principally engaged in the undertaking of construction projects in Hong Kong, the PRC and the Middle East and are also engaged in environmental and waste management and marine engineering. Its wholly-owned subsidiary, Leader Marine, is principally engaged in marine engineering and provision of transportation services and owns the Barge.

The Barge was chartered on a bareboat basis from Leader Marine to, and operated by a joint venture held as to 40% by the Group and 60% by an independent third party between Leader Marine and Honwin Engineering Limited, and was specially made and configured to enclose building materials (such as aggregates) carried to limit dust dispersion when the Barge passes en route any residential areas. Since April 2012, when the Barge came into operation, the Barge has been exclusively transporting aggregates for Grandeur Building from Grandeur Building’s sourcing quarry (located in Niu Tou Island, the PRC) to the concrete batching plant (located in Tin Wan, Hong Kong) to which Grandeur Building supplies aggregates. In November 2013, Leader Marine entered into an agreement to acquire the interests of its joint venture partner. The acquisition will be completed by the end of February 2014, upon which Leader Marine will become the sole operator of the Barge and the provision of transportation services will become continuing connected transactions for the Company under the Listing Rules. Accordingly, in order to facilitate the continuation of business which has so far proven to have provided positive contribution to the Group’s profits in a manner that complies with the Listing Rules, Leader Marine and Grandeur Building entered into the Framework Agreement.

The purpose of this circular is to provide the Shareholders with further information on the terms of the Framework Agreement and to convene the SGM to seek the approval of the Independent Shareholders with respect to the Framework Agreement.

THE FRAMEWORK AGREEMENT

On 14 February 2014, Leader Marine, a wholly-owned subsidiary of the Company, entered into a Framework Agreement with Grandeur Building, a wholly-owned subsidiary of Wai Kee, whereby Leader Marine is obliged to provide Transportation Service exclusively to Grandeur Building from time to time during the term of the Framework Agreement.

Leader Marine and Grandeur Building will enter into Individual Agreements for individual transactions during the term of the Framework Agreement, which shall contain details of transactions including but not limited to details of the loading and delivery ports, transportation unit price, quantities and descriptions of aggregates to be delivered and the date of delivery. The terms of the Individual Agreements shall not conflict with the general principles set out in the Framework Agreement. Should there be any conflict, the Parties shall discuss and agree such adjustments to the Individual Agreements so that the general principles in the Framework Agreement should prevail.

Principal terms of the Framework Agreement are set out below.

5

LETTER FROM THE BOARD

Term and Exclusivity

Under the Framework Agreement, Leader Marine is obliged to provide Transportation Service exclusively to Grandeur Building on all days during the term of the Framework Agreement other than public holidays in Hong Kong, Chinese New Year holidays in the PRC, days on which weather conditions are deemed by Leader Marine to be unsafe for the operation of the Barge and the periods during which the Barge undergoes maintenance.

The Framework Agreement is conditional upon approval by the Shareholders pursuant to the Listing Rules. Subject to satisfaction of such condition and unless earlier terminated, the Framework Agreement is for a term commencing from 1 March 2014 and ending on 31 December 2016, both dates inclusive.

If there is a material breach of obligations pursuant to the Framework Agreement by a Party, the other Party may terminate the Framework Agreement immediately by giving the defaulting Party a written notice.

Transportation Fee

The Framework Agreement contains pre-agreed formulae for determining the transportation price per round trip between the port at which aggregates are loaded and the destination port, based on (i) a base price determined by the Parties based on the average transportation price of aggregates per tonne over the period from January 2013 to December 2013; (ii) the weight of the aggregates being carried (which affects fuel consumption); (iii) the distance between the two ports; (iv) adjustments on a month to month basis by reference to 40% of the movements in diesel costs against the December 2013 Government published price index of diesel fuel on the basis that diesel costs accounted for about 40% of the price over the past two years of operation of the Barge.

Under the Framework Agreement, Grandeur Building has committed to requiring Transportation Service for not less than 600,000 tonnes of aggregates per year, or to make up any shortfall by a cash payment. The cash payment will be determined based on the shortfall quantities and the average transportation unit price (being the total transportation fee for the relevant year divided by the total quantities delivered in that particular year).

Transportation fees are to be invoiced on a monthly basis, and settled within 30 days of invoice.

6

LETTER FROM THE BOARD

The initial transportation price in 2012 was negotiated between the joint venture that operated the Barge with Grandeur Building at arm’s length and was thereafter adjusted for increases in diesel price with reference to the actual expenditure of diesel fuel by the joint venture. Under that arrangement, the transportation price agreed by the joint venture was based on different unit price per tonne that reduces by reference to an agreed scale as the quantities of aggregates delivered per month increase. It provided for price adjustments should diesel costs increased over 10% and did not provide for any minimum transportation fees. The Company considers that the formulae adopted in the Framework Agreement that uses Government published diesel price index provides a more objective, transparent and scientific way of determining price adjustments going forward, and obviates the need to negotiate on a monthly basis by reference to actual diesel expenditure which renders pricing agreement a more administratively cumbersome process. Clearly, the removal of the old requirement that no price adjustment is triggered if diesel costs increases within a 10% margin and the guaranteed minimum transportation quantity under the Framework Agreement are changes from the pre-existing arrangements that are financially beneficial to the Group.

Historical transaction amounts involving the Barge engaged by the joint venture are set out in the table below:

		Historical transaction amounts	Historical transaction amounts
		From 1 April	From 1 January
		2012 to	2013 to
		31 December	31 December
		2012	2013
		(“Period 2012”)	(“Year 2013”)
		HK$’000	HK$’000
		(unaudited)	(unaudited)
Total	value of the contract sum in respect of the provision of
the	transportation service by the Barge	13,203	15,743

7

LETTER FROM THE BOARD

Proposed Caps

Under the Framework Agreement, Leader Marine and Grandeur Building agreed that the maximum total value of the contract sum in respect of the continuing provision of Transportation Service for the periods concerned under the Framework Agreement shall not exceed the amounts set out below.

	Total value
Period	not exceeding
	(HK$’000)
	(Note)
1 March 2014 – 31 December 2014	17,000
1 January 2015 – 31 December 2015	21,000
1 January 2016 – 31 December 2016	21,000

Note: These figures represent the estimated maximum cap in respect of the continuing provision of Transportation Service for the periods concerned under the Framework Agreement. The actual amount payable for the Transportation Service may be different.

The above proposed caps have been determined based on an assumption that the Barge makes 250 round trips per year (based on the number of days on which the Barge is expected to be available with reference to public holidays in Hong Kong, Chinese New Year holidays in the PRC, estimated bad weather days based on historical average thunderstorm days data from the Hong Kong Observatory and the periods during which the Barge is expected to undergo maintenance) at an average capacity of 75% (based on the average quantities of aggregates delivered per carriage by the Barge since it commenced operation), annual inflation of diesel prices at 2.6% based on Hong Kong Government published price index of diesel fuel and allowing a modest 5% buffer in such estimations. The proposed cap for 2014 (which relates only to a ten-month period) had been pro-rated accordingly.

The proposed caps for the periods concerned under the Framework Agreement (annualized, in the case of 2014) represent an increase when compared to the annualized transaction amount for the Period 2012 and the transaction amount for the Year 2013, during which 162 (or annualized 216 round trips) and 192 round trips respectively were undertaken. During those periods, the values of the transactions were limited mainly by the number of trips the Barge was able to make. Once Leader Marine acquires control over the Barge on completion of its acquisition, the Group can draw upon its decades deep experience and expertise in marine engineering operations and fleet management and improve the overall operations of the Barge through better maintenance and closer supervision by its experienced marine engineers. Accordingly, the management of the Company expects to see an increase in the number of trips per year that the Barge can undertake going forward and considers it reasonable to work towards 250 trips per year, which represents just over 16% increase over the annualized round trips for the Period 2012 since Barge availability in the Year 2013 had been affected by longer maintenance periods.

8

LETTER FROM THE BOARD

The terms of the Framework Agreement were arrived at after arm’s length negotiations between the Parties. The Directors (including the Independent Non-executive Directors) are of the view that the terms of the Framework Agreement are on normal commercial terms, and that the terms and proposed caps set out above are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Pursuant to the bye-laws of the Company, where a company in which a Director and/or his associate(s) (which has the meaning ascribed to it under the Listing Rules) holds 5% or more is/are materially interested in a transaction, then that Director and/or his associate(s) shall also be deemed materially interested in such transaction and that Director shall not vote on any resolution of the Board approving any contract or arrangement or proposal concerning that transaction. On the date of the Board meeting approving the terms of and the proposed caps in relation to the transactions under the Framework Agreement, Mr. Zen Wei Peu, Derek (“Mr. Zen”) held 185,557,078 shares (23.40%) in Wai Kee. Therefore, Mr. Zen is deemed to have a material interest in the Framework Agreement and accordingly, he has abstained from voting in the Board resolution approving the terms of and the proposed caps in relation to the transactions under the Framework Agreement.

LISTING RULES IMPLICATIONS

Wai Kee is a majority shareholder of the Company. As at the Latest Practicable Date, Wai Kee (through its subsidiaries) was interested in 635,415,033 Shares, representing approximately 51.17% of the Company’s issued share capital. Accordingly, Wai Kee is a substantial shareholder of the Company and therefore a connected person of the Company under the Listing Rules. Transactions under the Framework Agreement and the Individual Agreements constitute continuing connected transactions of the Company under the Listing Rules.

As the applicable percentage ratios (as defined in the Listing Rules) in respect of the transactions under the Framework Agreement exceed 5%, the Framework Agreement is subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As Grandeur Building (a wholly-owned subsidiary of Wai Kee) is a Party to the Framework Agreement, Wai Kee and its associates are required under the Listing Rules to abstain from voting at the SGM on the resolution for approving the terms of and the proposed caps in relation to the transactions under the Framework Agreement. Mr. Zen (who, as at the Latest Practicable Date, held 113,945,228 Shares (9.18%) in the Company and 185,557,078 shares (23.40%) in Wai Kee) confirmed to the Company that he will voluntarily abstain from voting in the SGM.

9

LETTER FROM THE BOARD

SGM

It is proposed that the SGM be convened and held at Units 601-605A, 6th Floor, Tower B, Manulife Financial Centre, 223 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Friday, 14 March 2014 at 10:00 a.m. to consider and, if thought fit, approve the terms of and the proposed caps in relation to the transactions under the Framework Agreement. A notice of the SGM is set out on pages 33 to 34 of this circular.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising Dr. Chow Ming Kuen, Joseph, Mr. Ng Chi Ming, James and Mr. Ho Tai Wai, David has been formed to advise the Independent Shareholders in respect of the transactions and the proposed caps pursuant to the Framework Agreement. Crosby has also been appointed as the Independent Financial Adviser for the purpose of advising the Independent Board Committee and the Independent Shareholders in respect of the terms of and the proposed caps in relation to the transactions under the Framework Agreement.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

RECOMMENDATION

The Directors (including the Independent Non-executive Directors) consider that the terms of the transactions pursuant to the Framework Agreement and the proposed caps to be fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend that all Independent Shareholders to vote in favour of the ordinary resolution set out in the notice of the SGM.

Yours faithfully, By Order of the Board Build King Holdings Limited Zen Wei Peu, Derek Chairman

10

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee, which has been prepared for the purpose of incorporation into this circular, setting out its recommendation to the Independent Shareholders in respect of the terms of and the proposed caps in relation to the transactions under the Framework Agreement as set out in the Circular.

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BUILD KING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 00240)

20 February 2014

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular issued by Company to the Shareholders dated 20 February 2014 (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as the Independent Board Committee to consider and to advise you on the terms of and the proposed caps in relation to the transactions under the Framework Agreement, as set out in the Circular as to the fairness and reasonableness and to recommend whether or not the Independent Shareholders should approve the terms of and the proposed caps in relation to the transactions under the Framework Agreement as set out in the Circular. Crosby has been appointed as the Independent Financial Adviser to advise you and us in this regard. Details of the independent advice of the Independent Financial Adviser, together with the principal factors and reasons the Independent Financial Adviser has taken into consideration, are set out on pages 13 to 23 of the Circular.

11

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

We wish to draw your attention to the letter from the Board and the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders which contains its advice to us in relation to the Framework Agreement.

Having taken into account principal factors and reasons considered by and the opinion of the Independent Financial Adviser as stated in its letter of advice, we consider that the continuing connected transactions contemplated under the terms of the Framework Agreement (including the relevant proposed caps) as set out in the Circular to be fair and reasonable so far as the interests of the Independent Shareholders are concerned and to be in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to support and to vote in favour of the resolution to approve the terms of and the proposed caps in relation to the transactions under the Framework Agreement.

Yours faithfully, For and on behalf of Independent Board Committee of Build King Holdings Limited Chow Ming Kuen, Joseph Ng Chi Ming, James Ho Tai Wai, David

Independent Non-executive Directors

12

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of and the proposed caps in relation to the transactions under the Framework Agreement.

5/F, AXA Centre 151 Gloucester Road Wanchai, Hong Kong

20 February 2014

To the Independent Board Committee and

the Independent Shareholders of Build King Holdings Limited

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company (the “ Circular ”) to the Shareholders dated 20 February 2014, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

On 14 February 2014, Leader Marine, a wholly-owned subsidiary of the Company, entered into the Framework Agreement with Grandeur Building, a wholly-owned subsidiary of Wai Kee, whereby Leader Marine is obliged to provide the Transportation Service exclusively to Grandeur Building from time to time for a period from 1 March 2014 to 31 December 2016 (both dates inclusive), subject to the terms and conditions of the Framework Agreement.

As at the Latest Practicable Date, Wai Kee (through its subsidiaries) was interested in 635,415,033 Shares, representing approximately 51.17% of the Company’s issued share capital. Accordingly, Wai Kee is a substantial shareholder of the Company and therefore a connected person of the Company under the Listing Rules and the transactions contemplated under the Framework Agreement and the Individual Agreements constitute continuing connected transactions of the Company under the Listing Rules (the “ Continuing Connected Transactions ”).

13

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As the applicable percentage ratios (as defined in the Listing Rules) in respect of the Continuing Connected Transactions exceed 5%, the Framework Agreement is subject to the reporting, annual review, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. As Grandeur Building (a wholly-owned subsidiary of Wai Kee) is a Party to the Framework Agreement, Wai Kee and its associates are required under the Listing Rules to abstain from voting at the SGM on the resolution for approving the Framework Agreement, the transactions and the proposed caps thereunder. Further, Mr. Zen Wei Peu, Derek (“ Mr. Zen ”) (who, as at the Latest Practicable Date, held 113,945,228 Shares (9.18%) in the Company and 185,557,078 shares (23.40%) in Wai Kee) confirmed to the Company that he will voluntarily abstain from voting at the SGM.

Pursuant to the bye-laws of the Company, Mr. Zen is deemed to have a material interest in the Framework Agreement and accordingly, he has abstained from voting in the Board resolution approving the terms of and the proposed caps in relation to the transactions under the Framework Agreement.

The Independent Board Committee, comprising Dr. Chow Ming Kuen, Joseph, Mr. Ng Chi Ming, James and Mr. Ho Tai Wai, David, has been formed to advise the Independent Shareholders in respect of the terms of and the proposed caps in relation to the transactions under the Framework Agreement.

BASIS OF OUR OPINION

In formulating our recommendation, we have relied on the information and facts contained or referred to in the Circular as well as the representations made or provided by the Directors and the senior management of the Company. The Directors have declared in a responsibility statement set out in Appendix I to the Circular that the Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular misleading. We have also assumed that the information and the representations made by the Directors as contained or referred to in the Circular were true and accurate at the time they were made and continue to be so up to the date of the SGM. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the senior management of the Company. We have also been advised by the Directors and believe that no material facts the omission of which would make any statement in the Circular misleading have been omitted from the Circular.

14

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs or the prospects of the Company, Wai Kee or any of their respective subsidiaries or associates.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, our sole responsibility is to ensure that such information has been correctly extracted from the relevant sources.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the terms of and the proposed caps in relation to the transactions under the Framework Agreement, we have considered the following principal factors and reasons:

A. Background and reasons for entering into the Framework Agreement

The Company is an investment holding company and its group companies are principally engaged in the undertaking of construction projects in Hong Kong, the PRC and the Middle East and are also engaged in environmental and waste management and marine engineering. Leader Marine, being a wholly-owned subsidiary of the Company, is principally engaged in marine engineering and provision of transportation services and owns the Barge.

Wai Kee is an investment holding company and is principally engaged in civil engineering, toll road, property development, construction materials and quarrying. Grandeur Building, being a wholly-owned subsidiary of Wai Kee, is primarily engaged in the trading of construction materials from the PRC to Hong Kong. Amongst other things, Grandeur Building sources aggregates from quarries in the PRC and supplies aggregates to the concrete batching plant owned by Wai Kee in Hong Kong.

As stated in the Letter from the Board, the Barge was chartered on a bareboat basis from Leader Marine to, and operated by a joint venture (the “ JV ”) held as to 40% by the Group and 60% by an independent third party between Leader Marine and Honwin Engineering Limited, and was specially made and configured to enclose building materials (such as aggregates) carried to limit dust dispersion when the Barge passes en route any residential areas. Since April 2012 when the Barge came into operation, the Barge has been exclusively transporting aggregates for Grandeur Building from its sourcing quarry (located in Niu Tou Island, the PRC) to the concrete batching plant (located in Tin Wan, Hong Kong) to

15

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

which Grandeur Building supplies aggregates. In November 2013, Leader Marine entered into an agreement to acquire the interests of its joint venture partner. The acquisition will be completed by the end of February 2014, upon which Leader Marine will become the sole operator of the Barge and thus the provision of transportation services will become continuing connected transactions for the Company under the Listing Rules. Accordingly, in order to facilitate the continuation of business which has so far proven to have provided positive contribution to the Group’s profits in a manner that complies with the Listing Rules, Leader Marine and Grandeur Building entered into the Framework Agreement.

Having considered the above, in particular the provision of the Transportation Service helps the Group to maintain its revenue base, and our analysis and view on the major terms of the Framework Agreement (as explained below), we concur with the view of the Directors that the entering into of the Framework Agreement falls within the ordinary and usual course of business of the Group and is in the interests of the Group and the Shareholders as a whole.

B. Major terms of the Framework Agreement

(i) Individual Agreements arrangement

Under the Framework Agreement, Leader Marine is obliged to provide the Transportation Service exclusively to Grandeur Building on all days during the term of the Framework Agreement commencing from 1 March 2014 and ending on 31 December 2016 (both dates inclusive) other than public holidays in Hong Kong, Chinese New Year holidays in the PRC, days on which weather conditions are deemed by Leader Marine to be unsafe for the operation of the Barge and the periods during which the Barge undergoes maintenance (collectively, the “ Non-Operation Days of the Barge ”).

Leader Marine and Grandeur Building will enter into Individual Agreements for individual transactions during the term of the Framework Agreement, which shall contain details of transactions including, but not limited to, details of the loading and delivery ports, Transportation Unit Price (as defined below), quantities and descriptions of aggregates to be delivered and the date of delivery. The terms of the Individual Agreements shall not conflict with the general principles set out in the Framework Agreement. Should there be any conflict, the Parties shall discuss and agree such adjustments to the Individual Agreements so that the general principles in the Framework Agreement should prevail.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Transportation Fee

The Framework Agreement contains a pre-agreed formulae (the “ Formulae ”) for determining the transportation fee (the “ Transportation Fee ”) per round trip between the port at which aggregates are loaded (the “ Loading Port ”) and the destination port (the “ Delivery Port ”), based on (i) the weight of the aggregates to be delivered by the Barge; (ii) the transportation unit price of aggregates to be delivered by the Barge for each particular month (the “ Transportation Unit Price ”) (as elaborated below); and (iii) the distance adjustment (the “ Distance Adjustment ”) to cater for the difference in delivery distance for each particular delivery as compared to that implied under the Base Price (as defined below).

As stated in the Letter from the Board, the Transportation Unit Price for each particular month is determined by the Parties based on the average transportation unit price of aggregates per tonne to be delivered by the Barge from Niu Tou Island, the PRC, to Tin Wan, Hong Kong, over the period (the “ Price Review Period ”) from January 2013 to December 2013 (the “ Base Price ”) subject to the adjustments on a month to month basis by reference to the 40% of the movements in the price index of diesel fuel (the “ Diesel Index ”) published monthly by Hong Kong Government Census and Statistics Department against that for December 2013. We have discussed with the management of the Company about the mechanism adopted by the Company to determine the Base Price and the adjustment ratio of 40%, and understand that the Base Price is determined based on the average transportation unit price charged by the JV over the Price Review Period and the adjustment ratio of 40% is determined with reference to the percentage of the diesel fuel cost to the transportation unit price charged by the JV over the Price Review Period. We have reviewed the monthly transaction amount charged by the JV for the delivery service provided by the Barge together with the corresponding monthly quantity of aggregates delivered by the Barge and the monthly diesel fuel cost for the delivery service provided by the Barge over the same period. As advised by the Company, the Barge is designed to exclusively provide delivery service for Grandeur Building and thus there is not any comparable transaction for comparison purpose with respect to the Base Price. As a reference, we have reviewed a quotation from an independent transportation service provider of Wai Kee for provision of the same delivery service to Wai Kee provided by the Company and note that the Base Price was higher than that offered by such independent service provider after adjustment of delivery distance.

17

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As the Transportation Unit Price is determined based on the Base Price, the latter of which represents the transportation unit price to be charged by Leader Marine for the Transportation Service from Niu Tou Island, the PRC to Tin Wan, Hong Kong, the Distance Adjustment is included in the Formulae to cater for the difference in the delivery distance as compared to that implied under the Base Price. We have also reviewed the aforementioned historical transportation unit price of the Barge and note that the Formulae has taken into account the two major variable factors affecting the Transportation Fee (being the diesel fuel cost and the distance between the two ports).

Given the above, we concur with the Director’s view that the Formulae is fair and reasonable.

(iii) Payment

Transportation fees shall be paid by Grandeur Building to Leader Marine within 30 days against receipt of an invoice from Leader Marine by cheque, bank draft or other method of bank transfer.

(iv) Guaranteed Transportation Service by Grandeur Building

Grandeur Building commits to requiring Transportation Service to deliver at least 600,000 tonnes of aggregates for each calendar year during the term of the Framework Agreement. If in any year and to the extent which the annual aggregate quantity is less than 600,000 tonnes, Grandeur Building shall pay within 30 days a reimbursement fee, which shall be determined based on the shortfall quantities and the average transportation unit price (the latter being the total transportation fee for the relevant year divided by the total quantities delivered in that particular year).

We understand that in determining the guaranteed delivery quantity of 600,000 tonnes, the Company has made reference to the annual rental profit if the Group does not enter into the Framework Agreement but leases the Barge to an independent third party. In this regard, we have reviewed the information provided by the Company relating to the lease rate of the Barge and the estimated cost relating to the lease of the Barge to an independent third party and note that based on (i) the guaranteed quantity of 600,000 tonnes; (ii) the Base Price; and (iii) the average diesel fuel cost and other cost including, among others, staff, insurance and depreciation during the Price Review Period and the assumed maintenance cost (with reference to the maintenance cost of the Group’s another barge with similar capacity to the Barge over the past three years), the estimated annual profit derived from the Transportation Service for 600,000 tonnes of aggregates would be higher than the estimated annual rental profit if the Barge is leased to an independent third party.

18

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) Termination

If there is a material breach of obligations pursuant to the Framework Agreement by either Leader Marine or Grandeur Building, the other Party may terminate the Framework Agreement immediately by giving the defaulting Party a written notice.

Based on the above, in particular that (i) the Formulae is fair and reasonable; and (ii) Grandeur Building commits to requiring Transportation Service to deliver at least 600,000 tonnes of aggregates for each calendar year or to make up any shortfall, we concur with the view of the Directors that the terms of the Framework Agreement are fair and reasonable, on normal commercial terms and in the interests of the Group and the Shareholders as a whole.

C. The proposed caps

The table below sets out the historical transaction amounts of the Transportation Service provided by the Barge for Grandeur Building for the periods indicated (during which the Transportation Service does not constitute continuing connected transactions of the Company under the Listing Rules):

Total value of the contract sum in respect of the provision of the Transportation Service by the Barge	Historical transaction amounts
	From 1 April 2012 to 31 December 2012 (“Period 2012”) From 1 January 2013 to 31 December 2013 (“Year 2013”) HK$’000 HK$’000 (unaudited) (unaudited) 13,203 15,743

The table below sets out the proposed caps for the transactions contemplated under the Framework Agreement for the periods indicated:

Maximum total value of the contract sum in respect of the provision of the Transportation Service by the Barge	Proposed caps
	From 1 March 2014 to 31 December 2014 (“Period 2014”) For the year ending 31 December 2015 For the year ending 31 December 2016 HK$’000 HK$’000 HK$’000 17,000 21,000 21,000

19

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that the proposed caps for the Period 2014 (on an annualized basis) and each of the two years ending 31 December 2016 represented an increase as compared to the annualized transaction amount for the Period 2012 and the transaction amount for the Year 2013. As advised by the management of the Company, the value of the transactions mainly depends on the number of round trips the Barge is able to complete. As stated in the Letter from the Board, during the Period 2012 and the Year 2013, the Barge completed 162 (or annualized 216 round trips) and 192 round trips respectively and the lower number of round trips completed by the Barge during the Year 2013 was due to the longer maintenance periods. The management considers it possible for the Barge to work towards 250 round trips per year after Leader Marine has become the sole operator of the Barge through improving the overall operations of the Barge by better maintenance and closer supervision by its experienced marine engineers. After taking into account the Company’s experience and expertise in marine engineering operations and fleet management together with our analysis below regarding the basis for estimation of the expected 250 round trips to be completed by the Barge per year over the term of the Framework Agreement, we concur with the view of the Company that there would be room for Leader Marine to improve the overall operation of the Barge during the term of the Framework Agreement.

As set out in the Letter from the Board, the proposed caps have been determined based on (i) an assumption that the Barge makes 250 round trips per year (based on the number of days on which the Barge is expected to be available with reference to public holidays in Hong Kong, Chinese New Year holidays in the PRC, estimated days on which weather conditions are deemed by Leader Marine to be unsafe for the operation of the Barge and the periods during which the Barge undergoes maintenance) at an average capacity of 75% (based on the average quantities of aggregates delivered per carriage by the Barge since it commenced operation); (ii) an annual inflation of diesel prices at 2.6% based on the Diesel Index; and (iii) allowing a modest 5% buffer in such estimations.

In assessing the fairness and reasonableness of the proposed caps, we have reviewed and discussed with the management of the Company about the underlying calculation and note that the Company has taken into account the following factors to determine the proposed caps, that is (i) the estimated annual quantity of aggregates to be delivered by the Barge for Grandeur Building for each of the three years ending 31 December 2016; (ii) the estimated Transportation Unit Price for each of the three years ending 31 December 2016; and (iii) a buffer of 5% to cater for the potential increase in service demand, delivery distance and/or transportation cost of the Barge during the term of the Framework Agreement. In addition, we understand from the management of the Company that the proposed cap for the Period 2014 was arrived at based on the Company’s estimated annual transaction amount for the year ending 31 December 2014 on a pro-rata basis.

20

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

To justify the estimated annual quantity of aggregates to be delivered by the Barge in the coming three years (which in turn is arrived at based on the expected number of round trips to be made by the Barge per year (i.e. 250 round trips), the maximum delivery capacity of the Barge and an estimated utilisation rate of the delivery capacity of the Barge (i.e. 75%)), we have reviewed the information provided by the Company relating to (i) the average normal time it takes the Barge to make a round trip from Tin Wan, Hong Kong to Niu Tou Island, the PRC including the average normal speed of the Barge and the distance between Tin Wan and Niu Tou Island; (ii) the details of the Non-Operation Days of the Barge including the number of public holidays in Hong Kong, Chinese New Year holidays in the PRC and average number of days with thunderstorm in Hong Kong from 1947 to 2012 issued by the Hong Kong Observatory; and (iii) the monthly quantity of aggregates delivered by the Barge per round trip from Tin Wan, Hong Kong to Niu Tou Island, the PRC for the Period 2012 and the Year 2013. Based on our review, we consider the basis adopted by the Company for estimating the annual quantity of aggregates to be delivered by the Barge is fair and reasonable for cap purpose.

With regard to the estimated Transportation Unit Price during the term of the Framework Agreement, we note from the cap calculation that the Company estimates the Transportation Unit Price based on (i) the Base Price (our analysis of which is set out above); (ii) an estimated annual growth rate of approximately 1.0% in the Transportation Unit Price; and (iii) an assumption that the delivery distance would remain constant, being the distance between Niu Tou Island, the PRC and Tin Wan, Hong Kong. As advised by the Company, the aforesaid estimated growth rate of approximately 1.0% in the Transportation Unit Price represents 40% of the compounded annual growth rate (“ CAGR ”) of approximately 2.6% of the Diesel Index during the period from September 2011 to November 2013. Based on our review of the Diesel Index during the relevant period and the aforementioned factor that the Transportation Unit Price is mainly affected by diesel cost (which accounted for about 40% of the historical transportation unit price of the Barge), we consider that the Company’s estimation on the annual growth rate of approximately 1.0% is reasonable.

Given the above, together with our analysis on the Base Price as mentioned above, we consider that the basis adopted by the Company for estimating the Transportation Unit Price during the term of the Framework Agreement is fair and reasonable for cap purpose.

21

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the various factors described above, we concur with the view of the Directors that the proposed caps are fair and reasonable so far as the Group and the Shareholders are concerned and in the interests of the Group and the Shareholders as a whole. However, as the proposed caps relate to future events and are based upon assumptions that may or may not remain valid for the whole period up to 31 December 2016, we express no opinion as to how closely the actual contract sum for the Transportation Service pursuant to the Framework Agreement shall correspond to the proposed caps.

D. Requirements by the Listing Rules regarding the Continuing Connected Transactions

Pursuant to Rules 14A.37 to 14A.40 of the Listing Rules, the Continuing Connected Transactions are subject to the following annual review requirements:

• (a) each year the independent non-executive Directors must review the Continuing Connected Transactions and confirm in the annual report and accounts that the Continuing Connected Transactions have been entered into:

• in the ordinary and usual course of business of the Company;

• either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than the terms available to or from (as appropriate) independent third parties; and

• in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

• (b) each year the auditors of the Company must provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the Company’s annual report) confirming that the Continuing Connected Transactions:

• have received the approval of the Board;

• are in accordance with the pricing policies of the Company if the transactions involve provision of goods or services by the Company;

• have been entered into in accordance with the relevant agreement governing the Continuing Connected Transactions; and

• have not exceeded the proposed caps.

22

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (c) the Company shall allow, and shall procure the relevant counterparty to the Continuing Connected Transactions to allow, the Company’s auditors sufficient access to their records for the purpose of reporting on the Continuing Connected Transactions. The Board must state in the annual report whether its auditors have confirmed the matters stated in paragraph (b) above; and

• (d) the Company shall promptly notify the Stock Exchange and publish an announcement in accordance with the Listing Rules if it knows or has reason to believe that the independent non-executive Directors and/or the auditors of the Company will not be able to confirm the matters set out in paragraphs (a) and/or (b) above respectively.

In light of the reporting requirements relating to the Continuing Connected Transactions, in particular, (i) the restriction of the value of the Continuing Connected Transactions by way of the proposed caps; and (ii) the ongoing review by the independent non-executive Directors and the auditors of the Company on the terms of the Continuing Connected Transactions and the proposed caps not being exceeded, we are of the view that appropriate measures will be in place to govern the conduct of the Continuing Connected Transactions and safeguard the interests of the Independent Shareholders.

RECOMMENDATION

Having considered the principal factors and reasons referred to above, we are of the opinion that the Framework Agreement and the transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Group and the Shareholders as a whole, and the terms thereof as well as the proposed caps are fair and reasonable so far as the Group and the Independent Shareholders are concerned.

Accordingly, we advise the Independent Shareholders and the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the terms of and the proposed caps in relation to the transactions under the Framework Agreement.

Yours faithfully, For and on behalf of

Crosby Securities Limited Heidi Cheng Lily Li Managing Director Assistant Director Corporate Finance Corporate Finance

23

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(I) Directors’ Interests

As at the Latest Practicable Date, the Directors and the chief executive of the Company and their respective associates had the following interests and short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Director or, chief executive of the Company was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange:

(A) The Company

Interests in Shares

	Capacity/	Number of Shares held	Number of Shares held
Name of	Nature of	Long	Short	Percentage of
Director	interest	position	position	shareholding
		(Note)		(%)
Zen Wei Peu, Derek	Personal	113,945,228	–	9.18
Chang Kam Chuen,	Personal	1,400,000	–	0.11
Desmond
David Howard Gem	Personal	900,000	–	0.07
Cheng Chi Pang, Leslie	Personal	1,170,000	–	0.09

Note:

Long position in the Shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds).

24

GENERAL INFORMATION

APPENDIX I

(B) Associated corporations

Interests in shares

		Capacity/	Number of	shares held
Name of		Nature of	Long	Short		Percentage of
Director	Name of company	interest	position	position		shareholding
			(Note)			(%)
Zen Wei Peu,	Wai Kee	Personal	185,557,078		–	23.40
Derek
	Wai Kee (Zens) Construction	Personal	2,000,000		–	10.00
	& Transportation Company
	Limited
	Wai Luen Stone Products	Personal	30,000		–	37.50
	Limited

Note:

Long position in the shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds).

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company and their respective associates had any interests or short positions in the shares, underlying shares and/or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to the Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Director or chief executive of the Company was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

25

GENERAL INFORMATION

APPENDIX I

(II) Substantial Shareholders’ Interests

(A) Interests in the Company

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the following persons (“Substantial Shareholders”) (other than the Directors or the chief executive of the Company) had an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provision of Divisions 2 and 3 of Part XV of the SFO:

	Capacity/	Number of Shares held and	Number of Shares held and	Number of Shares held and
	Nature of	percentage of		shareholding
Name of Substantial Shareholder	interest	Long position	(Note (1))	Short position
		Number of		Number of
		Shares	%	Shares	%
Top Horizon Holdings Limited	Personal/	635,415,033	51.17	–	–
(“Top Horizon”) (Note (2))	Beneficiary
Wai Kee (Zens) Holding Limited	Corporate	635,415,033	51.17	–	–
(“Wai Kee (Zens)”) (Note (3))
Wai Kee (Note (4))	Corporate	635,415,033	51.17	–	–
Vast Earn Group Limited (Note (5))	Personal/	67,404,052	5.43	–	–
	Beneficiary
NWS Service Management Limited	Corporate	67,404,052	5.43	–	–
(incorporated in the British Virgin
Islands) (Note (6))
NWS Service Management Limited	Corporate	67,404,052	5.43	–	–
(incorporated in the Cayman
Islands) (Note (7))
NWS Holdings Limited (Note (8))	Corporate	67,404,052	5.43	–	–
New World Development Company	Corporate	67,404,052	5.43	–	–
Limited (Note (9))
Chow Tai Fook Enterprises Limited	Corporate	67,404,052	5.43	–	–
(Note (10))
Chow Tai Fook (Holding) Limited	Corporate	67,404,052	5.43	–	–
(Note (11))

26

APPENDIX I

GENERAL INFORMATION

	Capacity/	Number of Shares held and	Number of Shares held and	Number of Shares held and
	Nature of	percentage of		shareholding
Name of Substantial Shareholder	interest	Long position	(Note (1))	Short position
		Number of		Number of
		Shares	%	Shares	%
Chow Tai Fook Capital Limited	Corporate	67,404,052	5.43	–	–
(Note (12))
Cheng Yu Tung Family (Holdings II)	Corporate	67,404,052	5.43	–	–
Limited (Note (13))
Cheng Yu Tung Family (Holdings)	Corporate	67,404,052	5.43	–	–
Limited (Note (14))

Notes:

• (1) Long position in the Shares.

• (2) Top Horizon is a direct wholly owned subsidiary of Wai Kee (Zens).

• (3) Wai Kee (Zens) is deemed to be interested in the Shares through its interests in Top Horizon.

• (4) Wai Kee (Zens) is a direct wholly owned subsidiary of Wai Kee. Accordingly, Wai Kee is deemed to be interested in the Shares through its interests in its wholly owned subsidiaries, namely Wai Kee (Zens) and Top Horizon.

• (5) Vast Earn Group Limited is a wholly owned subsidiary of NWS Service Management Limited (incorporated in the British Virgin Islands).

• (6) NWS Service Management Limited (incorporated in the British Virgin Islands) is deemed to be interested in the Shares through its interests in its wholly owned subsidiary, namely Vast Earn Group Limited.

• (7) NWS Service Management Limited (incorporated in the Cayman Islands) is deemed to be interested in the Shares through its interests in its wholly owned subsidiary, namely NWS Service Management Limited (incorporated in the British Virgin Islands).

• (8) NWS Holdings Limited is deemed to be interested in the Shares through its interests in its wholly owned subsidiary, namely NWS Service Management Limited (incorporated in the Cayman Islands).

27

GENERAL INFORMATION

APPENDIX I

• (9) New World Development Company Limited is deemed to be interested in the Shares through its interests in its subsidiary, namely NWS Holdings Limited.

• (10) Chow Tai Fook Enterprises Limited is deemed to be interested in the Shares through its interests in more than one-third of the issued share capital of New World Development Company Limited.

• (11) Chow Tai Fook (Holding) Limited is deemed to be interested in the Shares through its interests in its wholly owned subsidiary, namely Chow Tai Fook Enterprises Limited.

• (12) Chow Tai Fook Capital Limited is deemed to be interested in the Shares through its interests in its subsidiary, namely Chow Tai Fook (Holding) Limited.

• (13) Cheng Yu Tung Family (Holdings II) Limited is deemed to be interested in the Shares through its interests in more than one-third of the issued share capital of Chow Tai Fook Capital Limited.

• (14) Cheng Yu Tung Family (Holdings) Limited is deemed to be interested in the Shares through its interests in more than one-third of the issued share capital of Chow Tai Fook Capital Limited.

Save as disclosed below, as at the Latest Practicable Date, none of the Directors was a director or employee of a company which had an interest or a short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Name of company which had such discloseable Position within Name of Director interest or short position such company Zen Wei Peu, Derek Top Horizon Director Wai Kee (Zens) Director Wai Kee Vice Chairman and Executive Director Cheng Chi Pang, Leslie Wai Kee Non-executive Director

28

GENERAL INFORMATION

APPENDIX I

(B) Interests in other members of the Group

As at the Latest Practicable Date, so far as was known to any Director or chief executive of the Company and save as disclosed in this circular, the persons (other than a Director or chief executive of the Company or a member of the Group) who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group were as follows:

		Percentage of
Name of subsidiary	Name of shareholder	interest held
		(%)
Archibuild Limited	Cheng Lai Heung	26.66
	Lai Yiu Wah	13.34
Cheuk Wah Construction	Goldky Industries Limited	40
Engineering Limited
Eastar Construction Engineering	Fulight Engineering Limited	20
Limited
Huge Host Engineering Limited	Downer Mining (Asia) Limited	30
W K Aviation Engineering	Kencana Capital Ventures Sdn.	30
Company Limited	Bhd.
Yat Hing Decoration Works	Chan Kwok Kai	10
Limited	Lai Yiu Wah	20

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company are not aware of any other persons (other than a Director or chief executive of the Company) who had an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any options in respect of such capital.

29

GENERAL INFORMATION

APPENDIX I

3. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at Latest Practicable Date, none of the Directors and their respective associates had any interests in a business, which competed or was likely to compete, directly or indirectly, with the business of the Group.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group which was not determinable by the Group within one year without payment of compensation (other than statutory compensation).

Gateway Business Services Limited (a company ultimately wholly owned by Mr. David Howard Gem, a non-executive Director) entered into a consultancy service contract with Leader Construction Company Limited (a wholly owned subsidiary of the Company) for provision of consultancy services for a period of two years commencing on 1 June 2012, further details in relation to which are set out in the Company’s announcement dated 21 June 2012.

5. INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, the Independent Financial Adviser did not have any direct or indirect interest in any assets which had been, since 31 December 2012, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been, since 31 December 2012, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Group, or apart from any Transportation Service that may have been purchased from the Group by Wai Kee in which Mr. Zen holds shares as disclosed in section 2(I)(B) above, are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement which is significant in relation to the business of the Group.

30

GENERAL INFORMATION

APPENDIX I

6. MATERIAL ADVERSE CHANGES

Save for the impact on the Group’s results of the six months ended 30 June 2013 caused by the cost overrun on two government projects at Portion C4 of Central Wanchai Bypass and the Bus Interchange on Tuen Mun Road as disclosed in the announcement of interim results and the interim report published by the Company on 15 August 2013 and 12 September 2013 respectively, the Directors are of the opinion that there has not been any material adverse change in the financial or trading position of the Group since 31 December 2012, being the date to which the latest published audited accounts of the Group were made up.

7. EXPERT AND CONSENT

The following are the qualifications of the expert who has given opinions or advice which are contained in this circular:

Name

Qualification

Crosby

The Independent Financial Adviser is a corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

The Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of its letter as set out in this circular and references to its name in the form and context in which they appear respectively.

As at the Latest Practicable Date, the Independent Financial Adviser did not have any shareholding in any member of the Group nor have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

8. MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

31

GENERAL INFORMATION

APPENDIX I

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) at the principal place of business of the Company in Hong Kong from the date of this circular up to and including 14 March 2014:

• (a) the letter from the Independent Financial Adviser, the text of which is set out on pages 13 to 23 of this circular;

• (b) the letter from the Independent Board Committee, the text of which is set out on pages 11 to 12 of this circular;

• (c) the Framework Agreement; and

• (d) this circular.

32

NOTICE OF SPECIAL GENERAL MEETING

APPENDIX II

==> picture [146 x 49] intentionally omitted <==

BUILD KING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 00240)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Special General Meeting of Build King Holdings Limited (the “Company”) will be held at Units 601-605A, 6th Floor, Tower B, Manulife Financial Centre, 223 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Friday, 14 March 2014 at 10:00 a.m. to transact the following businesses:

ORDINARY RESOLUTION

“ THAT the terms of and the proposed caps in relation to the transactions under the framework agreement between Leader Marine Contractors Limited, a wholly-owned subsidiary of Build King Holdings Limited (the “Company”) and Grandeur Building Material (Holdings) Limited, a wholly-owned subsidiary of Wai Kee Holdings Limited dated 14 February 2014 (“Framework Agreement”) in respect of the continuing provision of transportation service for the period commencing from 1 March 2014 and ending on 31 December 2016 be and are hereby approved; and the directors of the Company be and are hereby authorised to do all such things and exercise all powers which they consider necessary, desirable or expedient in connection with the Framework Agreement and otherwise in connection with the implementation of the transactions contemplated thereunder including without limitation to the execution, amendment, supplement, delivery, waiver, submission and implementation of any further documents or agreements.”

By Order of the Board Chang Kam Chuen, Desmond Company Secretary

Hong Kong, 20 February 2014

33

NOTICE OF SPECIAL GENERAL MEETING

APPENDIX II

Registered Office: Principal Place of Business in Hong Kong: Clarendon House Units 601-605A, 6th Floor 2 Church Street Tower B, Manulife Financial Centre Hamilton HM 11 223 Wai Yip Street Bermuda Kwun Tong, Kowloon Hong Kong

Notes:

• l. Any member of the Company entitled to attend and vote at the meeting by the above notice shall be entitled to appoint another person as his/her proxy to attend and vote instead of such member. Votes may be given either personally or by proxy or by a duly authorized corporate representative. A member may appoint more than one proxy to attend on the same occasion. A proxy need not be a member of the Company.

• The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer or attorney duly authorised to sign the same.

• The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority shall be delivered to the Company’s branch share registrar, Tricor Progressive Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposed to vote and in default the instrument of proxy shall not be treated as valid.

• Delivery of an instrument appointing a proxy shall not preclude a member of the Company from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.

• In the case of joint holders of a share, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at any meeting personally or by proxy, that one of the said persons so present whose name stands first on the register in respect of such share shall alone be entitled to vote in respect thereof.

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