Chinney Alliance Group Limited - Proxy Solicitation & Information Statement 2015

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 your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Chinney Alliance Group 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 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.

This circular is for information purposes only and is being provided to you solely for the purpose described on page 12 hereof. This circular does not constitute an offer to sell or the solicitation of an offer to buy securities in the United States or elsewhere. Securities may not be offered or sold in the United States absent registration under the U.S. Securities Act or an exemption from registration. The securities described herein have not been and will not be registered under the U.S. Securities Act.

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(Stock Code: 385)

MAJOR TRANSACTION

DEEMED DISPOSAL IN RELATION TO THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF CHINNEY KIN WING HOLDINGS LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

Financial Adviser to the Company

Independent Financial Adviser to the Independent Board Committee and the Shareholders

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A letter from the Board is set out on pages 11 to 40 of this circular. A letter from the Independent Board Committee containing its advice and recommendation to the Shareholders is set out on page 41 of this circular. A letter from the Independent Financial Adviser to the Independent Board Committee and the Shareholders is set out on pages 42 to 66 of this circular.

For identification purpose only

30 October 2015

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .	41
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	42
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . . .	I-1
APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	II-1

– i –

2015

EXPECTED TIMETABLE

The indicative times below refer to Hong Kong local time and may be subject to further changes. Further announcement(s) will be made as and when necessary. For further details in respect of the timetable for the Global Offering, please refer to the timetable as set out in the CKW Prospectus.

Despatch of BLUE Application Forms to

Qualifying Shareholders on or before . . . . . . . . . . . . . . . . . . . . . .Friday, 30 October 2015

Latest time for Qualifying Shareholders to

lodge BLUE Application Forms . . . . . . . . . . . . . . . . . . . . . . . .12:00 noon on Wednesday,

4 November 2015

Announcement of the final Offer Price and the results of applications in the Hong Kong

Public Offer and the Preferential Offer. . . . . . . . . . . . . . . . . .Tuesday, 10 November 2015

Dealings in the CKW Shares on

the Stock Exchange expected to

commence on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on Wednesday,

11 November 2015

– ii –

DEFINITIONS

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

“Application Form(s)”

WHITE , YELLOW , GREEN , BLUE and PINK application form(s), or where the context so requires, any one of them, to be used in relation to the Hong Kong Public Offer, the Preferential Offer or the Employee Preferential Offer

“associate(s)”
has the meaning ascribed to it under the Listing Rules
“Beneficial Shareholder(s)”
any beneficial owner(s) of Share(s) whose Share(s) is/are registered, as shown in the register of members of the Company, in the name of a registered Shareholder at 4:30 p.m. on the Record Date
“ BLUE Application Form(s)”
the application form(s) to be sent to the Qualifying Shareholders to subscribe for the Reserved Shares pursuant to the Preferential Offer
“Board” or “Board of Directors”
the board of Directors
“Business Day”

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

“Capitalisation Issue”
the issue of CKW Shares to be made upon capitalisation of certain sum standing to the credit of the share premium account of Chinney Kin Wing, details of which are set out in the CKW Prospectus
“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC
“Chinney Capital”

Chinney Capital Limited, a company incorporated in Hong Kong with limited liability on 15 December 1978, which is interested in approximately 3.29% of the issued shares in the Company as at the Latest Practicable Date and is indirectly wholly-owned by Dr. Wong

“Chinney Construction”

Chinney Construction Group Limited, a company incorporated in the British Virgin Islands with limited liability on 9 August 2007, which is an indirect whollyowned subsidiary of the Company

– 1 –

DEFINITIONS

“Chinney Investments”
Chinney Investments, Limited, a company incorporated in Hong Kong on 23 June 1959 with limited liability, whose shares are listed on the Main Board of the Stock Exchange (Stock Code: 0216) and Dr. Wong has an indirect interest in 63.12% and a direct interest in 0.09% of its issued shares
“Chinney Kin Wing” Chinney Kin Wing Holdings Limited, an exempted company with limited liability incorporated in Bermuda on 29 May 2015 and a direct wholly-owned subsidiary of the Company as at the Latest Practicable Date
“CKW Board” the board of directors of Chinney Kin Wing
“CKW Controlling Shareholder(s)”
the Company and Dr. Wong, or any one of them
“CKW Group”
Chinney Kin Wing and its subsidiaries following completion of the Reorganisation
“CKW Prospectus”
the prospectus issued by Chinney Kin Wing for the Global Offering dated 30 October 2015
“CKW Share(s)”
ordinary share(s) of HK$0.10 each in the share capital of Chinney Kin Wing
“Companies Act”
the Companies Act 1981 of Bermuda, as amended, supplemented or otherwise modified from time to time
“Company”
Chinney Alliance Group Limited, a company incorporated in Bermuda on 16 April 1993 with limited liability, whose shares are listed on the Main Board of the Stock Exchange (Stock Code: 0385) and a CKW Controlling Shareholder
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“Deed of Indemnity”
the deed of indemnity dated 20 October 2015 entered into between the Company and Chinney Kin Wing (for its own and as trustee for each of its subsidiaries), pursuant to which the Company has given certain tax and other indemnities in favour of Chinney Kin Wing (for itself and as trustee for each of its subsidiaries)

– 2 –

DEFINITIONS

“Deed of Non-competition”
the deed of non-competition dated 20 October 2015 entered into between the CKW Controlling Shareholders and Chinney Kin Wing pursuant to which the CKW Controlling Shareholders agreed not to, among other things, carry on, engage, participate or hold any right or interest in or be involved in any foundation business which is in competition with the CKW Group’s foundation business
“Director(s)” the director(s) of the Company
“DrilTech Geotechnical”
DrilTech Geotechnical Engineering Limited (formerly known as Good Win Resources Limited), a company incorporated in Hong Kong with limited liability on 13 February 1998, and an indirect wholly-owned subsidiary of Chinney Kin Wing
“DrilTech Ground”
DrilTech Ground Engineering Limited, a company incorporated in Hong Kong with limited liability on 12 November 1996, and an indirect wholly-owned subsidiary of Chinney Kin Wing
“DrilTech Macau”
DrilTech Ground Engineering (Macau) Limited, a private limited liability company by quotas incorporated in Macau on 1 June 2005, and an indirect wholly-owned subsidiary of Chinney Kin Wing
“Dr. Wong”
Dr. James Sai-Wing Wong, a controlling Shareholder, an executive Director and the chairman of the Board
“Eligible Employee(s)”

full-time employee(s) of either (i) the CKW Group (including full-time secondee to the CKW Group) or (ii) the Remaining Group and who: (a) is/are at least 18 years of age; (b) has/have Hong Kong address and is/are holder of Hong Kong Identity Card; (c) remain(s) as full-time employee of either the CKW Group (including a full-time secondee to the CKW Group (if applicable)) or the Remaining Group, and is/are not on probation, as at 20 October 2015; (d) has/have not tendered his/her/their resignation or been given notice of termination of employment for any reason other than redundancy or retirement on or before 20 October 2015; and (e) is/are neither, nor associate of, existing beneficial owner(s) of the CKW Share(s) or of share(s) of any of the subsidiaries of Chinney Kin Wing, excluding directors of Chinney Kin Wing or any of its subsidiaries

– 3 –

DEFINITIONS

“Employee Preferential Offer”
the preferential offer of the Employee Reserved Share(s) to the Eligible Employee(s) for subscription at the Offer Price on a preferential basis as to allocation only, as further described in the CKW Prospectus
“Employee Reserved Share(s)” the Offer Share(s) being offered pursuant to the Employee Preferential Offer and which are to be allocated out of the Hong Kong Offer Shares
“Enhancement Investments”
Enhancement Investments Limited, a company incorporated in the British Virgin Islands with limited liability on 10 July 2006, which is interested in approximately 40.89% of the issued shares in the Company as at the Latest Practicable Date and is directly wholly-owned by Dr. Wong
“Foundation Business” foundation business engaged by the CKW Group which includes piling construction and other ancillary services and drilling and site investigation
“Global Offering”
the Hong Kong Public Offer and the International Offer
“Group”
the Company and its subsidiaries before the Proposed Spin-off including the CKW Group
“HK eIPO White Form”
the application for Hong Kong Offer Shares to be issued in the applicant’s own name by submitting applications online through the designated website at www.hkeipo.hk

“HKSCC”

Hong Kong Securities Clearing Company Limited
“Hong Kong” or “HKSAR” or “HK”
the Hong Kong Special Administrative Region of the PRC
“Hong Kong dollars”, “HK$” or “cents”
Hong Kong dollars and cents, respectively, the lawful currency of Hong Kong
“Hong Kong Offer Shares”
the 38,250,000 new CKW Shares (subject to reallocation) initially being offered at the Offer Price by Chinney Kin Wing for subscription in the Hong Kong Public Offer
“Hong Kong Public Offer”
the issue and offer of the Hong Kong Offer Shares for subscription in Hong Kong at the Offer Price (plus a brokerage fee of 1%, Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.0027%) on and subject to the terms and conditions described in the CKW Prospectus and the Application Forms

– 4 –

DEFINITIONS

“Hong Kong Underwriters”
“Hong Kong Underwriting Agreement”
“Independent Board Committee”
“Independent Third Party(ies)”
“International Offer”
“International Offer Shares”
“International Underwriters”
“International Underwriting Agreement”
“KGI” or “Independent Financial Adviser”
the underwriters of the Hong Kong Public Offer
the conditional underwriting agreement dated 29 October 2015 relating to the Hong Kong Public Offer entered into by, among others, the Company, Chinney Kin Wing, the Sole Global Coordinator and the Hong Kong Underwriters
the independent board committee formed by the Company comprising all the independent non-executive Directors to advise the Shareholders on the Proposed Spin-off
individual(s) or company(ies) which is/are independent of and not connected with (within the meaning of the Listing Rules) any director, chief executive or substantial shareholder of the Company or any of its subsidiaries or any of their respective associates
the placing of the International Offer Shares at the Offer Price to professional, institutional and other investors, as further described in the CKW Prospectus
the 344,250,000 CKW Shares (subject to reallocation and the Over-allotment Option) initially being offered at the Offer Price by Chinney Kin Wing for subscription under the International Offer
the underwriters named in the International Underwriting Agreement
the conditional underwriting agreement expected to be entered into on or about the Price Determination Date by, among others, the Company, Chinney Kin Wing, the Sole Global Coordinator and the International Underwriters in respect of the International Offer
KGI Capital Asia Limited, a corporation licensed to carry out Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Shareholders in connection with the Proposed Spin-off

– 5 –

DEFINITIONS

“Kin Wing”

Kin Wing Chinney (BVI) Limited (formerly known as Pui Shan Holding Limited from 15 March 1994 to 28 June 1994 and Kin Wing-Chinney Holdings Limited from 29 June 1994 to 14 August 1997), a company incorporated in the British Virgin Islands with limited liability on 15 March 1994, and a direct wholly-owned subsidiary of Chinney Kin Wing

“Kin Wing Engineering” Kin Wing Engineering Company Limited (formerly known as Sheen Glory Limited), a company incorporated in Hong Kong with limited liability on 19 August 1993, and an indirect wholly-owned subsidiary of Chinney Kin Wing
“Kin Wing Foundations”
Kin Wing Foundations Limited, a company incorporated in Hong Kong with limited liability on 2 May 1995, and an indirect wholly-owned subsidiary of Chinney Kin Wing
“Kin Wing Machinery” Kin Wing Machinery & Transportation Limited, a company incorporated in Hong Kong with limited liability on 24 February 1994, and an indirect whollyowned subsidiary of Chinney Kin Wing
“Kinwing Macau” Kinwing Engineering (Macau) Company Limited, a private limited liability company by quotas incorporated in Macau on 1 June 2005, and an indirect wholly-owned subsidiary of Chinney Kin Wing
“Latest Practicable Date”
20 October 2015, being the latest practicable date for the purpose of ascertaining certain information contained in this circular prior to its publication
“Listing”
the listing of the CKW Shares on the Main Board of the Stock Exchange
“Listing Committee”
the listing committee of the Stock Exchange
“Listing Date”
the date on which dealings in the CKW Shares first commence on the Main Board of the Stock Exchange
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or otherwise modified from time to time
“Macau” or “Macao”
the Macau Special Administrative Region of the PRC

– 6 –

DEFINITIONS

“Main Board”

the stock exchange (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange

“Mr. Chan” Mr. Yuen-Keung Chan, an executive Director, the vicechairman of the Board and the Managing Director; also an executive director and the vice-chairman of the CKW Board
“Mr. Fung” Mr. Herman Man-Hei Fung, a non-executive Director; also an executive director and the chairman of the CKW Board
“Mr. So” Mr. Hin-Kwong So, an executive director and the general manager of Chinney Kin Wing
“Mr. Yu” Mr. Wing-Sang Yu, an executive director and the managing director of Chinney Kin Wing
“Multi-Investment”
Multi-Investment Group Limited, a company incorporated in the British Virgin Islands with limited liability on 11 September 1998, which is interested in approximately 29.10% of the issued shares in the Company as at the Latest Practicable Date and is an indirect wholly-owned subsidiary of Chinney Investments controlled by Dr. Wong
“New Public CKW Shareholder(s)”
the new public shareholder(s) of Chinney Kin Wing upon completion of the Listing and the Global Offering
“Non-Qualifying Shareholder(s)”
Shareholder(s) whose name(s) appeared in the register of members of the Company at 4:30 p.m. on the Record Date and whose address(es) as shown in such register is/are in any of the Specified Territories and any Shareholder(s) or Beneficial Shareholder(s) at that time who is/are otherwise known by the Company to be resident in any of the Specified Territories
“Offer Price”
the final price for each Offer Share (exclusive of brokerage fee, SFC transaction levy and the Stock Exchange trading fee) at which the Offer Shares are to be offered for subscription pursuant to the Global Offering

– 7 –

DEFINITIONS

“Offer Share(s)”
the Hong Kong Offer Share(s) and the International Offer Share(s) together, where relevant, with any additional CKW Share(s) issued pursuant to the exercise of the Over-allotment Option
“Over-allotment Option” the option expected to be granted by Chinney Kin Wing to the International Underwriters, exercisable by the Sole Global Coordinator on behalf of the International Underwriters pursuant to the International Underwriting Agreement
“ PINK Application Form(s)”
the application form(s) to be sent to Eligible Employee(s) to subscribe for the Employee Reserved Shares pursuant to the Employee Preferential Offer
“PN15” Practice Note 15 of the Listing Rules
“PN15 Submission”
the submission made by the Company to the Stock Exchange pursuant to PN15 on 29 April 2015
“PRC”
the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, Macau and Taiwan
“Preferential Entitlement”
the entitlement of the Qualifying Shareholder(s) to apply for the Reserved Shares under the Preferential Offer on an assured basis to be determined on the basis of their respective shareholdings in the Company as at 4:30 p.m. on the Record Date
“Preferential Offer”
the preferential offer of the Reserved Shares to the Qualifying Shareholders for subscription as Preferential Entitlement at the Offer Price on and subject to the terms and conditions stated in the CKW Prospectus and in the BLUE Application Form
“Price Determination Date”
the date, expected to be on or about 4 November 2015, on which the Offer Price is expected to be fixed for the purpose of the Global Offering or any later date as may be agreed between Chinney Kin Wing and the Sole Global Coordinator (for itself and on behalf of the Underwriters), but, in any event, no later than 9 November 2015
“Proposed Spin-off”
the proposed separate listing of the CKW Shares on the Main Board of the Stock Exchange, which is expected to be effected by way of the Global Offering including the Preferential Offer

– 8 –

DEFINITIONS

“Qualifying Shareholder(s)”
“Record Date”
“Remaining Group”
“Reorganisation”
“Reserved Share(s)”
“Retained Business”
“SFC” or “Securities Futures Commission”
“SFO” or “Securities and Futures Ordinance”
“Share(s)”
“Shareholder(s)”
Shareholder(s) whose names(s) appearing on the register of members of the Company at 4:30 p.m. on the Record Date, excluding the Non-Qualifying Shareholder(s) and directors of Chinney Kin Wing or any of its subsidiaries
27 October 2015, being the record date for ascertaining entitlements to the Preferential Offer
the Company and its subsidiaries after the Proposed Spin-off, which excludes the CKW Group
the corporate reorganisation of the Group in preparation for the Proposed Spin-off, pursuant to which Chinney Kin Wing has become the holding company of the CKW Group

the Offer Share(s) available in the Preferential Offer being offered by Chinney Kin Wing to Qualifying Shareholders pursuant to the Preferential Offer as Preferential Entitlement which are to be allocated out of the International Offer Shares

the principal activities engaged by the Remaining Group, including (i) importing, marketing and distribution of plastics and chemical products; (ii) provision of building services and electrical and mechanical installation and maintenance services such as air-conditioning, fire systems and electrical and extra-low voltage works; (iii) sales and installation of air-conditioning systems, digital energy optimisation systems, outdoor LED lighting systems and other buildings related electrical systems; (iv) provision of superstructure construction works; (v) distribution and installation of aviation systems and other hi-tech products; and (vi) other investment activities such as equity investments and investment in real estates
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) of HK$0.10 in the share capital of the Company
holder(s) of the Share(s)

– 9 –

DEFINITIONS

“Sole Global Coordinator” or “Stabilising Manager”
“Specified Territories”
“Stock Borrowing Agreement”
“Stock Exchange”
“subsidiary(ies)”
“substantial shareholder(s)”
“Underwriters”
“United States” or “U.S.” or “USA”
“U.S. Securities Act”
“ WHITE Application Form(s)”
“ YELLOW Application Form(s)”
“%”
Haitong International Securities Company Limited, a licensed corporation to conduct Type 1 (dealing in securities), Type 3 (leveraged foreign exchange trading) and Type 4 (advising on securities) regulated activities for the purpose of the SFO, being the sole global coordinator, the sole bookrunner and the stabilising manager of the Global Offering
in respect of the Preferential Offer, such territory or territories which Chinney Kin Wing and its directors consider it necessary or expedient to exclude from the Preferential Offer on account of the legal restrictions under the laws of the relevant jurisdiction or the requirements of the relevant regulatory body or stock exchange in that jurisdiction
the stock borrowing agreement expected to be entered into between the Company and the Stabilising Manager on or about the Price Determination Date
The Stock Exchange of Hong Kong Limited
has the meaning ascribed to it under the Listing Rules
has the meaning ascribed to it under the Listing Rules
the Hong Kong Underwriters and/or the International Underwriters
the United States of America
the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder
the application form(s) for use by the public who require(s) such Hong Kong Offer Shares to be issued in the applicant’s or applicants’ own name(s)
the application form(s) for use by the public who require(s) such Hong Kong Offer Shares to be deposited directly into CCASS

per cent

– 10 –

LETTER FROM THE BOARD

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(Stock Code: 385)

Executive Directors:

Dr. James Sai-Wing Wong (Chairman) Mr. Yuen-Keung Chan (Vice Chairman and Managing Director) Mr. James Sing-Wai Wong Mr. Philip Bing-Lun Lam

Non-executive Directors:

Mr. Herman Man-Hei Fung Ms. Wendy Kim-See Gan

Independent non-executive Directors:

Registered office:

Clarendon House Church Street Hamilton HM 11 Bermuda

Head Office and Principal Place of Business: 23rd Floor Wing On Centre 111 Connaught Road Central Hong Kong

Mr. Yuen-Tin Ng Mr. Chi-Chiu Wu Mr. Ronald James Blake

30 October 2015

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

DEEMED DISPOSAL IN RELATION TO THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF CHINNEY KIN WING HOLDINGS LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

INTRODUCTION

Reference is made to the announcements of the Company dated 22 May 2015, 29 June 2015, 18 August 2015, 6 October 2015, 9 October 2015, 27 October 2015 and 29 October 2015 respectively in respect of the Proposed Spin-off.

On 29 April 2015, the Company submitted a spin-off proposal to the Stock Exchange pursuant to PN15 in relation to the Proposed Spin-off of Chinney Kin Wing. The Stock Exchange has granted approval on the PN15 Submission on 29 June 2015 and confirmed that the Company may proceed with the Proposed Spin-off.

For identification purpose only

– 11 –

LETTER FROM THE BOARD

The purpose of this circular is to provide the Shareholders with the following:–

(1) further information on (i) the background to, the reasons for, and the benefits and effects of, the Proposed Spin-off and such other information relating to the Proposed Spin-off as required by the Listing Rules; (ii) the Preferential Offer; and (iii) the Employee Preferential Offer. The Proposed Spin-off and the Global Offering, if implemented, will constitute a deemed disposal of equity interest in Chinney Kin Wing by the Company and a major transaction for the Company under Chapter 14 of the Listing Rules;
(2) the letter of advice from the Independent Board Committee containing its view as to whether the terms of the Proposed Spin-off are fair and reasonable and whether the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole; and
(3) the letter of advice from the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee and the Shareholders as to whether the terms of the Proposed Spin-off are fair and reasonable and whether the Proposed Spin-off is in the interests of the Company and Shareholders as a whole.

Shareholders and potential investors of the Company should note that the Proposed Spin-off is subject to, among other things, the granting of listing of, and permission to deal in, the CKW Shares on the Stock Exchange, and the Hong Kong Underwriting Agreement and the International Underwriting Agreement having been signed and becoming unconditional. Accordingly, the Proposed Spin-off may or may not proceed and the Shareholders and potential investors of the Company are reminded to exercise caution when dealing in or investing in the securities of the Company.

INFORMATION ON THE PROPOSED SPIN-OFF

The Proposed Spin-off

The Proposed Spin-off is expected to be implemented by way of the Global Offering which will consist of the Hong Kong Public Offer, the International Offer, the Preferential Offer and the Employee Preferential Offer, and a separate Listing of the CKW Shares on the Main Board of the Stock Exchange. Further information on the Preferential Offer and the Employee Preferential Offer is set out in the paragraphs headed “Preferential Offer” and “Employee Preferential Offer” below. The final structure of the Proposed Spin-off, including the size of the Global Offering and the exact apportionment between the Hong Kong Public Offer, the International Offer, the Preferential Offer and the Employee Preferential Offer will be decided by the Board and the CKW Board.

– 12 –

LETTER FROM THE BOARD

It is currently expected that Chinney Kin Wing will grant to the International Underwriters, exercisable by the Sole Global Coordinator on behalf of the International Underwriters, the Over-allotment Option to require Chinney Kin Wing to issue and allot additional CKW Shares representing up to 15% of the initial Offer Shares at the Offer Price under the International Offer to cover the over-allocations in the International Offer, if any.

The CKW Shares to be issued pursuant to the Global Offering will rank pari passu in all respects with all the CKW Shares then in issue. Based on the current structure of the Proposed Spin-off which is subject to finalisation, assuming that the Over-allotment Option is not exercised, immediately following completion of the Proposed Spin-off, the Company will continue to hold approximately 74.5% of all the CKW Shares in issue. If the Over-allotment Option is exercised in full, the Company’s direct shareholding in Chinney Kin Wing will be reduced to approximately 71.8%. In any of these events, Chinney Kin Wing will continue to be a direct non-wholly owned subsidiary of the Company upon completion of the Proposed Spin-off and the operating results of the CKW Group will continue to be consolidated into the consolidated financial statement of the Group.

On the basis of the above, immediately following completion of the Proposed Spin-off, Chinney Kin Wing will have a public float of not less than 25%, and will be able to comply with the minimum public float requirement under Rule 8.08 of the Listing Rules.

Separate listing of the CKW Shares

On 18 August 2015, Chinney Kin Wing submitted a listing application form (Form A1) to the Stock Exchange for an application for the listing of, and permission to deal in, the CKW Shares on the Main Board of the Stock Exchange. Members of the CKW Group will remain as non-wholly owned subsidiaries of the Company upon completion of the Proposed Spin-off.

The Company is required to comply with the requirements under PN15. The Directors confirm that the Company will comply with all requirements of the Listing Rules in respect of the Proposed Spin-off. The Listing of the CKW Shares on the Main Board of the Stock Exchange is conditional upon the fulfillment or waiver of conditions stated in the paragraph headed “Conditions of the Proposed Spin-off” below.

Subject to the Stock Exchange granting approval of the listing of, and permission to deal in, the CKW Shares on the Main Board of the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the CKW Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing Date or such other date as may be 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 the CCASS Operational Procedures in effect from time to time.

– 13 –

LETTER FROM THE BOARD

The Shares will continue to be listed on the Main Board of the Stock Exchange after completion of the Proposed Spin-off.

Shareholding effects of the Proposed Spin-off

Shareholding structure of the CKW Group prior to the Proposed Spin-off

Chinney Kin Wing was incorporated in Bermuda with limited liability on 29 May 2015 as an exempted company under the Companies Act and was a direct wholly-owned subsidiary of the Company as at the Latest Practicable Date.

Members of the Group have undergone the Reorganisation prior to the Proposed Spin-off, pursuant to which Chinney Kin Wing has become the holding company of the CKW Group.

– 14 –

LETTER FROM THE BOARD

The corporate structure of the CKW Group after completion of the Reorganisation but immediately prior to the Capitalisation Issue and the Global Offering is set out below:

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----- Start of picture text -----

Dr. Wong
100%
Lucky Year Finance Limited
100% 100% 0.09%
Chinney Holdings Limited
Chinney Development
Company Limited
63.12%
100% Chinney Investments(Stock Code: 0216)
100%
100% Newsworthy Resources
Limited
100%
Chinney Capital Enhancement Investments Multi-Investment Existing publicShareholders
3.29% 40.89% 29.10% 26.72%
The Company
100%
Chinney
Kin Wing
100%
Kin Wing
100% 100% 100% 100%
DrilTech
DrilTech Macau Kin Wing Kin Wing
Geotechnical Machinery Engineering
(Note 2)
100% 100% 100%
DrilTech KinwingMacau Kin Wing
Ground Foundations
(Note 1)
----- End of picture text -----

Notes:

Kinwing Macau is legally owned as to 99.9% by Kin Wing and 0.1% by Kin Wing Engineering. By a declaration of trust dated 1 June 2005, Kin Wing Engineering declared that it held one quota in Kinwing Macau on trust for Kin Wing. On 8 August 2015, Kin Wing Engineering has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in Kinwing Macau, and hence Kin Wing beneficially owns the entire registered capital of Kinwing Macau.
DrilTech Macau is legally owned as to 99.9% by Kin Wing and 0.1% by DrilTech Ground. By a declaration of trust dated 1 June 2005, DrilTech Ground declared that it held one quota in DrilTech Macau on trust for Kin Wing. On 8 August 2015, DrilTech Ground has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in DrilTech Macau, and hence Kin Wing beneficially owns the entire registered capital of DrilTech Macau.

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LETTER FROM THE BOARD

Shareholding structure of the CKW Group upon completion of the Proposed Spin-off

Based on the current structure of the Proposed Spin-off, the number of CKW Shares which will initially be available under the Global Offering is expected to represent approximately 25.5% of the total number of CKW Shares in issue immediately following completion of the Global Offering and the Capitalisation Issue (assuming that the Overallotment Option is not exercised), and the Company’s equity interest in Chinney Kin Wing will be reduced to approximately 74.5% (assuming that the Over-allotment Option is not exercised) or to approximately 71.8% (assuming that the Over-allotment Option is exercised in full) immediately following completion of the Global Offering and the Capitalisation Issue.

The corporate structure of the CKW Group after completion of the Reorganisation, and immediately after the Capitalisation Issue and the Global Offering (assuming that all Qualifying Shareholders (except Chinney Capital, Enhancement Investments and Multi-Investment) take up their respective Preferential Entitlements under the Preferential Offer in full, and without taking into account any CKW Shares which may be issued pursuant to the exercise of the Over-allotment Option) is set out below:

==> picture [390 x 432] intentionally omitted <==

----- Start of picture text -----

Dr. Wong
100%
Lucky Year Finance Limited
100% 100% 0.09%
Chinney Development Chinney Holdings Limited
Company Limited
63.12%
100% Chinney Investments
(Stock Code: 0216)
100% 100%
Newsworthy Resources
Limited
100%
Existing public Qualifying Other New Public
Chinney Capital Enhancement Investments Multi-Investment Shareholders Shareholders CKW Shareholders
3.29% 40.89% 29.10% 26.72%
2.295% 23.205%
The Company
74.50%
Chinney
Kin Wing
100%
Kin Wing
100% 100% 100% 100%
DrilTech
DrilTech Macau Kin Wing Kin Wing
Geotechnical (Note 2) Machinery Engineering
100% 100% 100%
DrilTech KinwingMacau Kin Wing
Ground Foundations
(Note 1)
----- End of picture text -----

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LETTER FROM THE BOARD

Notes:

Kinwing Macau is legally owned as to 99.9% by Kin Wing and 0.1% by Kin Wing Engineering. By a declaration of trust dated 1 June 2005, Kin Wing Engineering declared that it held one quota in Kinwing Macau on trust for Kin Wing. On 8 August 2015, Kin Wing Engineering has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in Kinwing Macau, and hence Kin Wing beneficially owns the entire registered capital of Kinwing Macau.
DrilTech Macau is legally owned as to 99.9% by Kin Wing and 0.1% by DrilTech Ground. By a declaration of trust dated 1 June 2005, DrilTech Ground declared that it held one quota in DrilTech Macau on trust for Kin Wing. On 8 August 2015, DrilTech Ground has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in DrilTech Macau, and hence Kin Wing beneficially owns the entire registered capital of DrilTech Macau.

INFORMATION ON THE REMAINING GROUP AND THE CKW GROUP

Business overview of the CKW Group

The CKW Group is engaged in a wide range of foundation works including (i) piling construction (such as bored piling, percussive H-piling, socketed H-piling, mini-piling and sheet piling) and other ancillary services (such as excavation and lateral support works, site formation and pile cap construction); and (ii) drilling and site investigation. The table below sets out a breakdown of the turnover by activity of the CKW Group for each of the three years ended 31 December 2014 and the four months ended 30 April 2015.

For the	year ended 31 December 2013 2014 HK$’000 % HK$’000 % 1,059,906 90.0 1,233,410 89.3 118,418 10.0 148,079 10.7 1,178,324 100.0 1,381,489 100.0	year ended 31 December 2013 2014 HK$’000 % HK$’000 % 1,059,906 90.0 1,233,410 89.3 118,418 10.0 148,079 10.7 1,178,324 100.0 1,381,489 100.0	For the four months ended 30 April 2015	For the four months ended 30 April 2015
2012 HK$’000 % 933,959 89.1 114,735 10.9 1,048,694 100.0	2013 HK$’000 % 1,059,906 90.0 118,418 10.0 1,178,324 100.0
HK$’000 933,959 114,735 1,048,694	HK$’000 1,059,906 118,418 1,178,324	HK$’000 1,233,410 148,079 1,381,489	HK$’000 550,712 49,113 599,825	% 91.8 8.2
				100.0

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LETTER FROM THE BOARD

Clear business delineation between the business of the Remaining Group and the CKW Group

The Remaining Group will, upon the Listing, principally engage in the Retained Business whilst the CKW Group will principally engage in the Foundation Business. The business and/or scope of services provided by each of the Retained Business and the Foundation Business differ significantly. The table below sets out the major differences between the Foundation Business of CKW Group and the Retained Business of the Remaining Group:

Foundation Business

Retained business

Engage in foundation piling business focusing on bored piling, percussive H-piling, socketed H-piling, minipiling and sheet piling, with specialisation in bored piling design and construction
Engage in drilling and site investigation business
Engage in importing, marketing and distribution of plastic and chemical productions
Engage in provision of building services and electrical and mechanical installation and maintenance services such as air-conditioning, fire systems and electrical and extra-low voltage works
Provide foundation related ancillary services such as excavation and • Engage in sales and installation of lateral support works, site formation, air-conditioning systems, digital and pile cap construction energy optimisation systems, outdoor LED lighting systems and other building related electrical systems
Engage in provision of superstructure construction works
Engage in distribution and installation of aviation systems and other hi-tech products
Engage in other investment activities such as equity investments and investments in real estates

As shown in the table above, there is clear business delineation between the respective services provided by the CKW Group and the Remaining Group as they are of different nature. In practice, their respective business operations are independent from each other.

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LETTER FROM THE BOARD

Members of the Remaining Group do not, and it is expected that they will not, engage in any business activities that compete or will compete with those of the CKW Group. To address potential conflicts of interests between the Remaining Group and the CKW Group, the Company and Dr. Wong have entered into the Deed of Non-competition in favour of Chinney Kin Wing (for itself and for the benefits of its subsidiaries), the details of which are set out in the paragraph headed “Non-competition undertaking” below.

Management independence

The Company and Chinney Kin Wing have boards of directors that function independently of each other. The following table sets out details of the directors of the Company and those of Chinney Kin Wing immediately upon Listing:

Name Dr. Wong Mr. Fung Mr. Chan James Sing-Wai Wong Philip Bing-Lun Lam Wendy Kim-See Gan Mr. Yu Mr. So Yuen-Tin Ng Chi-Chiu Wu	Position/Title in Chinney Kin Wing Nil Executive director; chairman Executive director; vice-chairman Nil Nil Nil Executive director; managing director Executive director Nil Nil	Position/Title in the Company
		Executive Director; chairman Non-executive Director Executive Director; vice-chairman; managing Director Executive Director Executive Director Non-executive Director Nil Nil Independent non-executive Director Independent non-executive Director

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LETTER FROM THE BOARD

Name Ronald James Blake Siu-Chee Kong Ivan Ti-Fan Pong Robert Che-Kwong Tsui	Position/Title in Chinney Kin Wing Nil Independent non-executive director Independent non-executive director Independent non-executive director	Position/Title in the Company
		Independent non-executive Director Nil Nil Nil

The following table sets out details of the senior management of the CKW Group immediately upon Listing:

Name Shui-Yung Tang Ka-Wah Chan Addy Sik-Fan Oi Hoi-Fan Lam Man-Fu Tang	Position/Title in the CKW Group Assistant general manager (production) of Kin Wing Engineering and Kin Wing Foundations Assistant general manager (project) of Kin Wing Engineering and Kin Wing Foundations Assistant general manager (contracts and design) of Kin Wing Engineering and Kin Wing Foundations Assistant general manager of DrilTech Ground and DrilTech Geotechnical Senior construction manager of Kin Wing Engineering and Kin Wing Foundations	Position/Title in the Remaining Group
		Nil Nil Nil Nil Nil

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LETTER FROM THE BOARD

Name Hon-Man Wai Eric Wing-Hung Yuen	Position/Title in the CKW Group Senior project manager of Kin Wing Engineering and Kin Wing Foundations Financial controller of the CKW Group	Position/Title in the Remaining Group
		Nil Nil

Despite the common directorship held by Mr. Chan and Mr. Fung, independence of management between the Remaining Group and the CKW Group will be maintained based on the matters set out below:

(a) Mr. Fung is a non-executive Director and is the chairman and an executive director of Chinney Kin Wing. As Mr. Fung’s role in the Company is non-executive, he is not involved in the day-to-day operations of the Remaining Group and will be able to focus on his executive role in the CKW Group in the area of strategic planning.
(b) Mr. Chan is the vice-chairman and managing Director of the Company and is the vice-chairman and an executive director of Chinney Kin Wing. Although there is an overlapping of his executive roles in the Company and Chinney Kin Wing, Mr. Chan’s duties in Chinney Kin Wing are mainly in relation to the strategic planning and overall corporate and business development of the CKW Group. Also, capitalising on Mr. Chan’s experience and network in the construction industry in Hong Kong, it is believed that both the Company and Chinney Kin Wing could be benefited from the role of Mr. Chan in each of them.
(c) Notwithstanding the above, Mr. Yu and Mr. So are independent of the Remaining Group. Mr. Yu and Mr. So will be in charge of the overall corporate management and business operations of the CKW Group. Mr. Yu, who was appointed as the managing director of Chinney Kin Wing, is also one of the founders of, and has more than 20 years of experience in, the Foundation Business.
(d) In addition, directors independent of the Company have been appointed to every major operating subsidiary of the CKW Group to oversee the day-to-day management of the relevant subsidiary.
(e) Further, the CKW Group has a team of experienced senior management independent of the Remaining Group assisting and supporting directors of members of the CKW Group in the day-to-day management of the Foundation Business.

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LETTER FROM THE BOARD

Further, in the event that any conflict of interest arises between the Remaining Group and the CKW Group, Mr. Fung and Mr. Chan will abstain from voting at the relevant meetings of the CKW Board and the meetings of the Board in respect of such matters of actual or potential conflict of interest. They will also comply with the respective bye-laws of the Company and Chinney Kin Wing, and any applicable laws and regulations (including but not limited to the Listing Rules). Also, Mr. Fung and Mr. Chan will not be involved in making decisions in connection with the on-going connected transactions (if any) between the CKW Group and the Remaining Group, and the remaining directors possess sufficient relevant industry experience to make decisions and monitor such transactions. In addition, the three independent non-executive directors of Chinney Kin Wing will provide checks and balances over the decision-making of the CKW Board on significant transactions, connected transactions and other transactions involving any actual or potential conflict of interests.

Chinney Kin Wing will adopt corporate governance measures to manage potential conflicts of directors’ interest after the Proposed Spin-off in accordance with the requirements of the Listing Rules. In addition, as part of the preparation for the Listing, the directors of Chinney Kin Wing have received training on their responsibilities as directors of a Hong Kong listed company, including on their fiduciary duties to act in the best interest of the CKW Group.

Save for the aforesaid, none of the directors or senior management of Chinney Kin Wing holds any office in or is employed by the Remaining Group immediately upon Listing. On the basis of the current board composition of Chinney Kin Wing, it is believed that the CKW Board will operate and manage the Foundation Business independently of the Company. Each of the Remaining Group and the CKW Group will operate independently and in the interests of its shareholders as a whole.

Operational independence

Given the difference in the nature of the Retained Business and that of the Foundation Business, the operational departments including tendering, design, contracting, quantity surveying, project management, environmental, safety and machinery maintenance of the CKW Group are separate from those of the Remaining Group and are expected to continue to be operated separately and independently of the Remaining Group. The CKW Group has its own team of staff to carry out its own operations independently of the Remaining Group.

When preparing and submitting tender documents for a construction project, the CKW Group and the Remaining Group have been and will be working independently and separately. As a general practice in the construction industry, contracts for superstructure construction works, foundation piling or sub-structure construction works, and provision of building related contracting services are usually granted separately by the ultimate employers as the requirements of and the works involved in the respective types of contracts are distinctive and these types of works are carried out at different stages in a construction project and normally their relevant tenders would not be prepared at the same time. Thus, it is not necessary for the CKW Group and the Remaining Group to co-operate to submit tender proposals together in order to increase the chance of bidding successfully for a construction project.

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LETTER FROM THE BOARD

In spite of the above, the CKW Group and the Remaining Group had participated in different parts of the same construction project in the past, where the ultimate employer engaged the CKW Group to provide foundation or site investigation works and incidentally also engaged the Remaining Group to provide superstructure works or building related services, after considering their respective tender proposals. In these cases, there was no direct contractual relationship between the CKW Group and the Remaining Group as they entered into separate contracts with the ultimate employer.

There were four construction projects in which the CKW Group and the Remaining Group were engaged by the same ultimate employers separately for different segments of works in a construction project during the period from 1 January 2012 to 30 April 2015, from which the revenue recognised by the CKW Group was approximately HK$97.6 million, HK$178.2 million, HK$17.4 million and HK$8.6 million for the three years ended 31 December 2014 and the four months ended 30 April 2015 respectively.

Given that (1) the above projects were all tendered by the CKW Group and the Remaining Group separately and independently and were granted by the ultimate employers separately after independent tendering, selection and award process; and (2) the participation in those projects by the CKW Group and the Remaining Group was only incidental, the Directors consider that the CKW Group’s operational independence has not been affected.

There are also some other instances where the ultimate employer may require the superstructure main contractor to be responsible for the entire project, including foundation piling or sub-structure construction works. In such case, the Remaining Group as the main contractor normally invites various foundation or site investigation subcontractors including the CKW Group to submit tenders. As the ultimate employer also considers the choice of foundation or site investigation subcontractor when selecting the main contractor, the Remaining Group will select the foundation or site investigation subcontractor on a fair basis (mainly based on price) without giving any preferential treatment to the CKW Group.

For the situations mentioned in the paragraph above, there were two projects during the period from 1 January 2012 to 30 April 2015 where the Remaining Group was appointed as the main contractor for the superstructure works and subcontracted the foundation or site investigation works to the CKW Group. The Directors confirm that all of these subcontracts were awarded through open tendering process and the CKW Group won the tenders as it provided the most advantageous or lowest price tender. The aggregate contract sum and revenue contributed to the CKW Group from these two subcontracting contracts during the period from 1 January 2012 to 30 April 2015 amounted to approximately HK$0.7 million.

Subsequent to 30 April 2015 and up to the Latest Practicable Date, the Remaining Group has selected the CKW Group as a foundation subcontractor through an open tendering process for a site in Yau Yue Wan Village, Hong Kong with contract sum of approximately HK$35.8 million. For further details, please refer to the paragraph headed “Connected Transactions – One-Off Transaction” in the CKW Prospectus. Going forward, the Remaining Group may appoint the CKW Group as subcontractor for carrying out foundation works if the CKW Group provides the most advantageous or lowest price tender under the open tendering process.

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LETTER FROM THE BOARD

There was also one occasion in 2009 where the CKW Group appointed the Remaining Group as the subcontractor for the provision of certain site electrical installation work, which happened only once since then and up to the Latest Practicable Date and involved a relatively insignificant contract sum of HK$336,466. The price of such work was determined on arm-length’s negotiations between the parties with reference to prevailing market price.

The Directors consider that different construction groups in the industry adopt different business models depending on their management style. Some sizable construction companies have separate teams or different subsidiaries in conducting their business in different segments, such as superstructure works and foundation works. As superstructure construction and foundation piling or sub-structure construction have different licensing requirements and each of them involves unique expertise, the Directors consider that these two business segments should operate separately and independently.

Apart from the above, the Remaining Group and the CKW Group are currently engaged in and will continue to engage in certain transactions such as provision of administration services, purchase of consumables and parts of machinery and leasing of office space, which will constitute connected transactions of Chinney Kin Wing under Chapter 14A of the Listing Rules. The Directors consider that the amounts of these continuing connected transactions are immaterial and such transactions are not likely to impact the operational independence of the CKW Group. For further details, please refer to the section headed “Connected Transactions” in the CKW Prospectus.

The three independent non-executive directors of Chinney Kin Wing will provide checks and balances over the decision making of the CKW Board on significant transactions, connected transactions and other transactions involving any actual or potential conflict of interests.

Taking into account (i) the different licensing requirements and expertise required for the superstructure construction and foundation piling or sub-structure construction business; (ii) the separate management and working teams of the Remaining Group’s superstructure construction business and the CKW Group’s foundation piling or sub-structure construction business; and (iii) the separate and independent tendering and project management process of the Remaining Group’s superstructure construction business and the CKW Group’s foundation piling or sub-structure construction business, the Directors are of the view that the Remaining Group and the CKW Group operate independently from each other.

Financial Independence

As at 31 August 2015, the Remaining Group had banking facilities with an aggregate principal amount of approximately HK$1,834.4 million of which approximately HK$891.0 million were jointly used and guaranteed by certain members of the Remaining Group and the CKW Group. To facilitate the working capital and ensure the financial independence of the Remaining Group and the CKW Group, all jointly used banking facilities by the Remaining Group and the CKW Group will be segregated and each of them will obtain its own banking facilities before Listing.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, the Remaining Group and the CKW Group had signed relevant facility letters to obtain independent banking facilities of approximately HK$1,476.4 million and approximately HK$558.0 million respectively. Prior to Listing, the independent banking facilities of the CKW Group are still secured by, among others, corporate guarantees provided by the Company but such corporate guarantee is expected to be released and replaced by a corporate guarantee provided by Chinney Kin Wing upon Listing.

Save as disclosed in the paragraphs headed “Liquidity and Capital Resources” and “Indebtedness” under the section headed “Financial Information” in the CKW Prospectus, there are no other outstanding credit facilities or bank guarantees provided by the Remaining Group to the CKW Group.

As at 31 August 2015, certain members of the CKW Group provided to the Remaining Group unsecured and non-interest bearing loans with an aggregate principal amount of approximately HK$22.0 million. Such loans have been fully settled before Listing. Please refer to the paragraph headed “History and Corporate Structure – Our Reorganisation” in the CKW Prospectus for further details.

Having considered the above factors, the Directors consider that there is no financial dependence of the CKW Group on the Remaining Group, and vice versa, after Listing.

Administrative independence

While Chinney Kin Wing maintains its own staff for various administrative support functions, pursuant to an administrative service agreement entered into between Chinney Kin Wing and the Company and dated 20 October 2015, the CKW Group and the Remaining Group will provide certain administrative support services to each other.

The Company believes that the sharing of administrative support services between the CKW Group and the Remaining Group represents a cost effective arrangement which is in the mutual benefit of both the CKW Group and the Remaining Group. Such services will be shared at a fee to be calculated on a cost basis.

Save as disclosed above, the majority of the administration and daily operations of the Remaining Group and the CKW Group will be carried out by their respective teams of staff independently of and without any support from each other after the Proposed Spin-off.

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LETTER FROM THE BOARD

Non-competition undertaking

To ensure that there is a clear delineation between the business of the Remaining Group and that of the CKW Group, the CKW Controlling Shareholders and Chinney Kin Wing have entered into the Deed of Non-competition dated 20 October 2015. Pursuant to the Deed of Non-competition and subject to the exceptions set out below, each of the CKW Controlling Shareholders has unconditionally and irrevocably undertaken to Chinney Kin Wing (for itself and for the benefits of its subsidiaries) that, he/it will not, and will procure that his/its close associates (other than any members of the CKW Group) will not, during the Restricted Period (as defined below) directly or indirectly, either on his/its own account or in conjunction with or on behalf of any person, firm or company, among other things:

(a) carry on, engage, participate or hold (in each case whether as a shareholder, director, partner, agent, employee, or otherwise, and whether for profit, reward or otherwise) any right or interest in or be involved in any foundation business which is in competition with the CKW Group’s foundation business (the “ Restricted Business ”); and
(b) take any action which interferes with or disrupts or may interfere with or disrupt the Restricted Business including, but not limited to, solicitation of any of the then current customers, suppliers or employees of any member of the CKW Group,

provided that nothing in the Deed of Non-competition shall preclude any of the CKW Controlling Shareholders from:

(i) having any interest in any company engaged in any Restricted Business (the “ Subject Company ”) where: (i) the total number of shares held by the CKW Controlling Shareholders do not exceed 5% of the issued shares of the Subject Company which is or whose holding company is listed on any recognized exchange (as defined under the SFO); or (ii) any Restricted Business conducted or engaged in by the Subject Company (and assets relating thereto) accounts for not more than 5% of the Subject Company’s consolidated turnover or consolidated assets, as shown in the Subject Company’s latest audited accounts provided that (a) there is a holder (together where appropriate, with its close associates) with a larger shareholding in the Subject Company than the aggregate shareholding held by the CKW Controlling Shareholders and/or their respective close associates at all times and (b) the total number of the CKW Controlling Shareholders’ representatives on the board of directors of the Subject Company is not significantly disproportionate in relation to their shareholding in the Subject Company; and
(ii) pursuing any business opportunity which is in competition with the Restricted Business (each, “ Foundation Business Opportunity ”) after Chinney Kin Wing has confirmed in writing to the CKW Controlling Shareholders that it or any member of the CKW Group has declined such Foundation Business Opportunity.

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LETTER FROM THE BOARD

The obligation of the CKW Controlling Shareholders under the Deed of Non-competition will remain binding until the onset of the following event:

(a) the date on which the CKW Shares cease to be listed on the Stock Exchange; or
(b) in respect of a CKW Controlling Shareholder, the date on which that CKW Controlling Shareholder and/or his/its close associates collectively ceases to hold directly or indirectly 30% or more of the equity interest in Chinney Kin Wing; or
(c) in respect of a CKW Controlling Shareholder, the date on which that CKW Controlling Shareholder and/or his/its close associates, jointly and severally, ceases to be entitled to exercise or control the exercise of 30% or more in aggregate of the voting power at general meetings of Chinney Kin Wing,

whichever occurs first (the “ Restricted Period ”).

Corporate governance measures to avoid conflict of interests

In order to properly manage any potential or actual conflict of interest between the CKW Group and the Remaining Group in relation to the compliance and enforcement of the Deed of Non-competition, the following corporate governance measures will be taken:

(a) the independent non-executive directors of Chinney Kin Wing will review, on an annual basis, the compliance with and enforcement of the terms of the Deed of Non-competition by the CKW Controlling Shareholders;
(b) the CKW Controlling Shareholders shall provide all information necessary for the annual review by the independent non-executive directors of Chinney Kin Wing of the compliance with and enforcement of the Deed of Non-competition;
(c) the CKW Controlling Shareholders shall use their respective reasonable endeavours to procure that their respective close associates shall provide all relevant information of the CKW Controlling Shareholders and their respective close associates as necessary, subject to confidentiality restrictions owed by them to any third party, for the annual review by the independent non-executive directors of Chinney Kin Wing and professional advisers of Chinney Kin Wing with regard to the compliance with and enforcement of the Deed of Non-competition;
(d) Chinney Kin Wing will disclose decisions with basis on matters reviewed by its independent non-executive directors relating to the compliance with and enforcement of the undertakings of the CKW Controlling Shareholders under the Deed of Non-competition either through the annual or interim report of Chinney Kin Wing, or by way of announcements to the public;
(e) Chinney Kin Wing will disclose in the corporate governance report of its annual report on how the terms of the Deed of Non-competition have been complied with and enforced;

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LETTER FROM THE BOARD

(f) Chinney Kin Wing will disclose the annual statement on compliance with the Deed of Non-competition made by the CKW Controlling Shareholders in its subsequent annual reports;
(g) in the event that a Foundation Business Opportunity or otherwise is identified by the Remaining Group, it shall refer such Foundation Business Opportunity to the CKW Group and shall not pursue such Foundation Business Opportunity unless the independent non-executive directors of Chinney Kin Wing have resolved to decline such Foundation Business Opportunity on a case-by-case basis and have notified in writing of their decisions with relevant reasons;
(h) any transaction (if any) between (or proposed to be made between) the CKW Group and its connected persons will be required to comply with Chapter 14A of the Listing Rules, including, where applicable, the announcement, reporting, annual review and independent shareholders’ approval requirements and with those conditions imposed by the Stock Exchange for the granting of waiver from strict compliance with the relevant requirements under the Listing Rules; and
(i) in the event that there is conflict of interest in the operations of the CKW Group and the Remaining Group and its associates, and in respect of any proposed contracts or arrangements between the CKW Group and the Remaining Group and its associates, any director of Chinney Kin Wing, who is considered to be interested in a particular matter or the subject matter, shall disclose his/her interests to the CKW Board. Pursuant to the bye-laws of Chinney Kin Wing, should a director of Chinney Kin Wing or his close associate have any material interests in the matter (other than certain matters permitted under note 1 to Appendix 3 to the Listing Rules), he/she shall not vote on the resolutions of the CKW Board approving the same and shall not be counted in the quorum of the relevant board meeting.

Indemnities

The Company has entered into the Deed of Indemnity with Chinney Kin Wing (on its own behalf and as trustee for each of its subsidiaries) to provide indemnities in respect of, among other things, (a) all taxation falling on any member of the CKW Group resulting from, or relating to, or in consequence of or by reference to, any income, profits or gains earned, accrued or received (or deemed to be so earned, accrued or received) and/or assets acquired by any member of the CKW Group on or before the date on which the Global Offering becomes unconditional (the “ Effective Date ”); (b) any estate duty which is or becomes payable by any member of the CKW Group by virtue of section 35 or under the provisions of section 43 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) (or equivalent thereof under the laws of any jurisdiction outside Hong Kong) by reason of the death of any person and by reason of the assets of members of the CKW Group or any of them being deemed for the purpose of estate duty to be included in the property passing on his/her death by reason of that person making or having made a relevant transfer to members of the CKW Group or any of them on or before the Effective Date; and (c) all costs and expenses of any relocation of all or any part of the deport of the CKW Group from the parcel of land comprising 20 lots with an aggregate gross land area of approximately 180,000 sq.ft in Yuen Long, Hong Kong and all losses and damages which may be incurred or suffered by any member of the CKW Group as a result of any of the issues relating to such land as described in the CKW Prospectus.

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LETTER FROM THE BOARD

Underwriting agreements, lock up restrictions and Stock Borrowing Agreement

Underwriting agreements

The Company has entered into the Hong Kong Underwriting Agreement in relation to the Hong Kong Public Offer with Chinney Kin Wing, the Sole Global Coordinator and the Hong Kong Underwriters. The Company will also enter into the International Underwriting Agreement relating to the International Offer with Chinney Kin Wing, the Sole Global Coordinator and the International Underwriters. The Offer Shares will be underwritten by the Underwriters subject to the terms set out in the underwriting agreements. Further details about the underwriting arrangements are contained in the section headed “Underwriting” in the CKW Prospectus.

Lock-up

Pursuant to Rule 10.07(1) of the Listing Rules, each of the CKW Controlling Shareholders has undertaken to Chinney Kin Wing, the Stock Exchange and the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) and the Hong Kong Underwriters that he/it shall not and shall procure that the relevant registered holder shall not, without the prior written consent of the Stock Exchange, except pursuant to the Global Offering or the Capitalisation Issue or the Over-allotment Option or the Stock Borrowing Agreement:

(i) at any time during the period commencing on the date of the CKW Prospectus and ending on and including, the date which is six months from the Listing Date (the “ First Six-Month Period ”), dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the CKW Shares in respect of which he/it is shown in the CKW Prospectus to be the beneficial owner; or
(ii) at any time during the period of six months commencing on the date on which the period referred to in paragraph (i) above expires (the “ Second Six-Month Period ”), dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the CKW Shares referred to in paragraph (i) above if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, he/it would cease to be a CKW Controlling Shareholder.

The Company has entered into similar non-disposal arrangements with the Hong Kong Underwriters.

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LETTER FROM THE BOARD

Stock Borrowing Agreement

It is expected that the Company will enter into the Stock Borrowing Agreement with the Stabilising Manager under the Global Offering. Further details about the stock borrowing arrangements are set out in the paragraph headed “Structure of the Global Offering – Stock Borrowing Arrangement” in the CKW Prospectus.

Financial information of CKW Group

Set out below is certain selected financial information of the CKW Group based on its audited consolidated financial statements for each of the three years ended 31 December 2014 and the four months ended 30 April 2015:

Revenue Profit before tax Profit for the year/ period and total comprehensive income for the year/period	For the year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,048,694 1,178,324 1,381,489 42,449 66,547 115,528 33,386 58,821 98,590	For the year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 1,048,694 1,178,324 1,381,489 42,449 66,547 115,528 33,386 58,821 98,590	For the four months ended 30 April
	2012 HK$’000 1,048,694 42,449 33,386	2013 HK$’000 1,178,324 66,547 58,821	2015
			HK$’000 599,825 69,516 58,077

As at 30 April 2015, based on the audited financial statements of the CKW Group, the consolidated net assets value of the CKW Group was HK$281,599,000.

FINANCIAL IMPACT OF THE PROPOSED SPIN-OFF

The following estimates the financial impact of the Proposed Spin-off on the Group on the basis of the current structure of the Proposed Spin-off that Chinney Kin Wing will offer approximately 25.5% of the total number of CKW Shares in issue immediately following completion of the Global Offering and the Capitalisation Issue (assuming that the Overallotment Option is not exercised) and is for illustration purposes only.

The actual financial impact of the Proposed Spin-off on the Group is subject to the review by the Company’s auditors.

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LETTER FROM THE BOARD

Net asset value

The unaudited consolidated net assets of the Group were approximately HK$1,005.1 million as at 30 June 2015. Based on (i) the number of Offer Shares, (ii) the current proposed structure of the Global Offering, and (iii) the audited consolidated net assets of the CKW Group as at 30 April 2015, the estimated minimum market capitalisation of Chinney Kin Wing (assuming that the Over-allotment Option is not exercised) will be approximately HK$750.0 million. The Board expects that the consolidated net assets of the Group will be increased as a result of the issue of the CKW Shares at an issue price above their attributable underlying combined net asset value (the “ Increase in Net Assets ”), based on the audited consolidated net assets of CKW Group as at 30 April 2015 of approximately HK$281.6 million, the net proceeds from the Global Offering and special dividend to be distributed by Chinney Kin Wing to the Company before Listing, and the consolidated cash balance of the Group will be increased by the net proceeds from the Global Offering.

In accordance with the Hong Kong Financial Reporting Standards, the Increase in Net Assets which constitutes changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, are accounted for within equity. Therefore, there will be no gain or loss arising from the deemed disposal by the Company of its interest in Chinney Kin Wing under the Global Offering to be recognised in the consolidated income statement of the Company given that Chinney Kin Wing will remain as a direct non-wholly owned subsidiary of the Company immediately upon completion of the Proposed Spin-off and the Global Offering.

Earnings

Following completion of the Proposed Spin-off, members of the CKW Group will continue to be non-wholly owned subsidiaries of the Company. The operating results of the CKW Group will therefore be consolidated into the financial statements of the Company.

Based on the audited consolidated financial statements of the Group for each of the two years ended 31 December 2014, the consolidated net profits before taxation of the Group were approximately HK$115.4 million and HK$165.7 million, respectively. For each of the two years ended 31 December 2014, the audited consolidated net profits after taxation of the Group were approximately HK$104.5 million and HK$142.3 million, respectively. Based on the unaudited consolidated financial statements of the Group for the six months ended 30 June 2015, the unaudited profit before and after taxation of the Group was HK$95.0 million and HK$77.4 million, respectively.

Assuming that no new CKW Shares will be issued before the Listing, following completion of the Proposed Spin-off, the proportion of the Group’s earnings contributed from the CKW Group is expected to be reduced as the Company’s interest in Chinney Kin Wing will be reduced from 100% to approximately 74.5% (assuming that the Over-allotment Option is not exercised) and Chinney Kin Wing will be regarded as a direct non-wholly owned subsidiary of the Company. Consequently, financial results of the CKW Group will be consolidated into the accounts of the Group and the profit attributable to non-controlling interests will increase.

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE PROPOSED SPIN-OFF

The Board believes that the Proposed Spin-off and the Listing will bring about the following benefits to both the Company and Chinney Kin Wing:

(i) as there are clear strategic and operational differences between the Foundation Business and the Retained Business, the Proposed Spin-off and the Listing will create Chinney Kin Wing as an investment opportunity for new investors and also unlock the shareholder value for the Shareholders by better identifying and establishing the stand-alone corporate value of the Foundation Business;
(ii) the Proposed Spin-off and the Listing will increase the operational and financial transparency of each of the Foundation Business and the Retained Business, through which investors would be able to appraise and assess the performance and potential of the Company and Chinney Kin Wing as separate entities rather than as a conglomerate. It allows both the Company and Chinney Kin Wing to target their respective investor bases more effectively, which in turn improves capital raising on a competitive basis and capital allocation to enhance growth within each company;
(iii) the Proposed Spin-off and the Listing will lead to a more direct alignment of the responsibilities and accountability of the management of both the Company and Chinney Kin Wing with their respective operating and financial performances. It leads to enhanced management focus, better resources allocation, more efficient decision-making process, and faster responsiveness to market changes, on the respective businesses of the Remaining Group and the CKW Group;
(iv) the Proposed Spin-off and the Listing will enable Chinney Kin Wing to directly and independently access both equity and debt capital markets, and will facilitate it in securing banking facilities, which in turn will increase the financing flexibility to achieve the business strategies of the CKW Group; and
(v) the separate listing status of Chinney Kin Wing will also enhance the CKW Group’s profile amongst its customers, suppliers and other business partners, as well as its ability to recruit, motivate and retain key management personnel. Chinney Kin Wing will enjoy greater flexibility in providing management incentives through adoption of equity based incentive program such as share option scheme, and making acquisitions by using its stock as acquisition currency.

In light of the above reasons, the Board (excluding the independent non-executive Director) believes that the Proposed Spin-off is in the interests of the Shareholders.

CONDITIONS OF THE PROPOSED SPIN-OFF

The Proposed Spin-off will be conditional upon, among other things:

(a) the Listing Committee of the Stock Exchange granting approval for listing of, and permission to deal in, the CKW Shares in issue and the Offer Shares to be issued pursuant to the Global Offering (including any CKW Shares to be issued upon the exercise of the Over-allotment Option) on the Main Board of the Stock Exchange;

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LETTER FROM THE BOARD

(b) the terms and structure of the Global Offering being agreed among the Company, Chinney Kin Wing and the Underwriters appointed under the Global Offering;
(c) the execution and delivery of the International Underwriting Agreement on or about the Price Determination Date; and
(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement and the obligations of the International Underwriters under the International Underwriting Agreement becoming unconditional and not having been terminated in accordance with the terms of the respective agreements.

PROPOSED USE OF NET PROCEEDS FROM THE GLOBAL OFFERING

Chinney Kin Wing estimates that the aggregate net proceeds from the Global Offering (after deducting underwriting fees and estimated expenses payable by Chinney Kin Wing in connection with the Global Offering, and assuming an Offer Price of HK$0.58 per Offer Share, being the mid-point of the indicative price range) will be approximately HK$185.8 million (assuming that the Over-allotment Option is not exercised).

Chinney Kin Wing currently intends to apply such net proceeds in the following manner:

(i) approximately 60.0% of the net proceeds for the acquisition in additional machinery and related storage and maintenance expenditures to expand the CKW Group’s capacity and enhance its project implementation capability;
(ii) approximately 20.0% of the net proceeds for the investment in human resources to increase the CKW Group’s productivity and capabilities;
(iii) approximately 10.0% of the net proceeds for enhancement of the CKW Group’s design capability and streamline the project implementation progress and also including expenditures in modifications of the CKW Group’s existing plant and machinery to increase efficiency; and
(iv) approximately 10.0% of the net proceeds will be used as general working capital of the CKW Group.

To the extent the net proceeds from the Global Offering are either more or less than expected, Chinney Kin Wing intends to apply the net proceeds to the above purposes on a pro-rata basis.

If the Over-allotment Option is exercised in full or in part, Chinney Kin Wing intends to apply the additional net proceeds from the exercise of the Over-allotment Option to the above purposes on a pro-rata basis.

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LETTER FROM THE BOARD

To the extent that the net proceeds of the Global Offering are not immediately used for the above purposes and to the extent permitted by the relevant laws and regulations, Chinney Kin Wing intends to deposit such net proceeds into interest-bearing bank accounts with licensed banks and/or financial institutions.

The above intended use of net proceeds from the Global Offering is indicative only and is subject to change. Further information on the application of the net proceeds from the Global Offering is set forth in the CKW Prospectus.

PREFERENTIAL OFFER

Shareholders are reminded that this circular is not intended to be and does not constitute an offer or any invitation to apply for their Preferential Entitlement under the Preferential Offer. Such offer or invitation is made through the CKW Prospectus and Shareholders should refer to the CKW Prospectus for details of the offer and the invitation to them under the Preferential Offer.

Basis of the Preferential Entitlement

In order to enable the Shareholders to participate in the Global Offering on a preferential basis as to allocation only, subject to the Stock Exchange granting conditional approval for the listing of, and permission to deal in, the CKW Shares on the Main Board of the Stock Exchange and the Proposed Spin-off becoming unconditional, Qualifying Shareholders are being invited to apply for an aggregate of 34,425,000 Reserved Shares in the Preferential Offer representing 10% and 9% of the Offer Shares available under the International Offer and Global Offering, respectively (assuming that the Over-allotment Option is not exercised) as Preferential Entitlement. The Reserved Shares will be offered out of the International Offer Shares under the International Offer and will not be subject to reallocation.

With a view to maximising the percentage of CKW Shares held by the public immediately after the Global Offering and to increase the number of Reserved Shares available for subscription by other Qualifying Shareholders, Dr. Wong, a controlling shareholder of the Company, has indicated to the Company and Chinney Kin Wing that he, and the companies controlled by him, will not take up any Reserved Shares to which he or the companies controlled by him would be entitled to apply for under the Preferential Offer. The Reserved Shares in which he or the companies controlled by him are entitled to apply for (representing approximately 73.3% of the expected number of Reserved Shares based on the number of Shares in issue as at the Latest Practicable Date) will be available for excess application by other Qualifying Shareholders under the Preferential Offer. In view of this, all of these excess Reserved Shares will be available for subscription by other Qualifying Shareholders. As such, the number of Reserved Shares that other Qualifying Shareholders can apply for, if they so choose, will be more than the basis of one Reserved Share for every integral multiple of 17 Shares held.

The Directors consider that the proportion of the Offer Shares which would be made available as Reserved Shares for subscription by the Qualifying Shareholders is a meaningful proportion and is comparable to other similar spin-off listing cases, and that due regard to the interest of the Company’s existing Shareholders under paragraph 3(f) of PN15 has been made and the percentage of the Offer Shares to be allocated for the Preferential Offer.

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LETTER FROM THE BOARD

The basis of the Preferential Entitlement is one Reserved Share for every integral multiple of 17 Shares held by Qualifying Shareholders as at 4:30 p.m. on the Record Date.

Qualifying Shareholders should note that Preferential Entitlement to Reserved Shares may not represent a number of a full board lot of 5,000 CKW Shares. Further, the Reserved Shares allocated to the Qualifying Shareholders will be rounded down to the closest whole number if required, and dealings in odd lots of the CKW Shares may be at a price below the prevailing market price for full board lots.

Preferential Entitlement of Qualifying Shareholders to Reserved Shares are not transferable and there will be no trading in nil-paid entitlements on the Stock Exchange.

Basis of allocation for applications for Reserved Shares

Qualifying Shareholders may apply for a number of Reserved Shares which is greater than, less than or equal to their Preferential Entitlement under the Preferential Offer. A valid application for a number of Reserved Shares which is less than or equal to a Qualifying Shareholder’s Preferential Entitlement under the Preferential Offer will be accepted in full, subject to the terms and conditions set out in the BLUE Application Form and assuming that the conditions of the Preferential Offer are satisfied.

Where a Qualifying Shareholder applies for a number of Reserved Shares which is greater than the Qualifying Shareholder’s Preferential Entitlement under the Preferential Offer, the relevant Preferential Entitlement will be satisfied in full (subject to the terms and conditions mentioned above) but the excess portion of such application will only be met to the extent that there are sufficient Available Reserved Shares (as defined below) resulting from other Qualifying Shareholders declining to take up some or all of their Preferential Entitlement by way of allocation by the Sole Global Coordinator on a fair and reasonable basis. Such allocation basis is consistent with the allocation basis commonly used in the case of oversubscriptions in public offers in Hong Kong, where a higher allocation percentage will be applied in respect of smaller applications of excess Reserved Shares, and thereafter at the discretion of the Sole Global Coordinator, to other investors in the International Offer.

Qualifying Shareholders who intend to apply for more than their Preferential Entitlement should either apply for a number which is one of the numbers set out in the table of numbers in the BLUE Application Form and make a payment of the corresponding amount, otherwise the applicant must calculate the correct amount of remittance payable on application for the number of Reserved Shares applied for by using the special formula set out in the BLUE Application Form.

To the extent that the excess applications for the Reserved Shares are:

(a) less than the Reserved Shares not taken up by the Qualifying Shareholders’ Preferential Entitlement (the “ Available Reserved Shares ”), the Available Reserved Shares will first be allocated to satisfy such excess applications for the Reserved Shares in full and thereafter will be allocated, at the discretion of the Sole Global Coordinator, to the International Offer;

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LETTER FROM THE BOARD

(b) equal to the Available Reserved Shares, the Available Reserved Shares will be allocated to satisfy such excess applications for the Reserved Shares in full; or
(c) more than the Available Reserved Shares, the Available Reserved Shares will be allocated on a fair and reasonable basis, which is consistent with the allocation basis commonly used in the case of over-subscriptions in public offers in Hong Kong, where a higher allocation percentage will be applied in respect of smaller applications of excess Reserved Shares. If there is an odd lot number of CKW Shares left after satisfying the excess applications, such number of odd lot CKW Shares will be reallocated, at the discretion of the Sole Global Coordinator, to the International Offer.

Save for the above, the Preferential Offer will not be subject to the clawback arrangement between the International Offer and the Hong Kong Public Offer.

Beneficial Shareholders (not being Non-Qualifying Shareholders) whose Shares are held by a nominee company should note that Chinney Kin Wing will regard the nominee company as a single Shareholder according to the register of members of the Company. Accordingly, such Beneficial Shareholders whose Shares are held by a nominee company should note that the arrangement under paragraph (c) above will not apply to them individually.

Applications by Qualifying Shareholders for Hong Kong Offer Shares

In addition to any application for Reserved Shares made on a BLUE Application Form, Qualifying Shareholders will be entitled to make one application for Hong Kong Offer Shares on WHITE or YELLOW Application Forms or by giving electronic application instructions to HKSCC via CCASS or through the HK eIPO White Form service. Qualifying Shareholders will receive no preference as to entitlement or allocation in respect of applications for Hong Kong Offer Shares made on WHITE or YELLOW Application Forms or by giving electronic application instructions to HKSCC or through the HK eIPO White Form service under the Hong Kong Public Offer. Qualifying Shareholders who are also Eligible Employees, may also apply for Employee Reserved Shares under the Employee Preferential Offer on PINK Application Forms.

Qualifying Shareholders and Non-Qualifying Shareholders

Only Shareholders whose names appeared on the register of members of the Company at 4:30 p.m. on the Record Date, excluding the Non-Qualifying Shareholders and directors of Chinney Kin Wing and any of its subsidiaries, are entitled to subscribe for the Reserved Shares under the Preferential Offer.

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LETTER FROM THE BOARD

Non-Qualifying Shareholders are those Shareholders with registered addresses in, or who are otherwise known by the Company to be residents of any of the Specified Territories. Accordingly, for the purposes of the Preferential Offer, the Non-Qualifying Shareholders are:

(a) Shareholders whose names appeared in the register of members of the Company at 4:30 p.m. on the Record Date and whose addresses as shown in such register are in any of the Specified Territories; and
(b) Shareholders or Beneficial Shareholders whose names appeared in the register of members of the Company at 4:30 p.m. on the Record Date who are otherwise known by the Company to be resident in any of the Specified Territories.

Distribution of the CKW Prospectus and the BLUE Application Forms

A BLUE Application Form, together with a printed copy of the CKW Prospectus, has been despatched to each Qualifying Shareholder at the address of such Qualifying Shareholder recorded on the register of members of the Company as at 4:30 p.m. on the Record Date.

Qualifying Shareholders may also obtain a printed copy of the CKW Prospectus during normal business hours from the Hong Kong branch share registrar of Chinney Kin Wing, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong or any of the designated branches of the receiving bank or the designated office of the Sole Global Coordinator as set out in the CKW Prospectus.

Distribution of the CKW Prospectus and/or the BLUE Application Form(s) into any jurisdiction other than Hong Kong may be restricted by law. Persons into whose possession the CKW Prospectus and/or the BLUE Application Form(s) come (including, without limitation, agents, custodians, nominees and trustees) should inform themselves of, and observe, any such restriction. Any failure to comply with such restriction may constitute a violation of the securities laws of any such jurisdiction. In particular, the CKW Prospectus should not be distributed, forwarded or transmitted in, into or from any of the Specified Territories with or without the BLUE Application Form(s), except to Qualifying Shareholders as specified in the CKW Prospectus.

Receipt of the CKW Prospectus and/or the BLUE Application Form(s) does not and will not constitute an offer in those jurisdictions in which it would be illegal to make an offer and, in those circumstances, the CKW Prospectus and/or the BLUE Application Form(s) must be treated as sent for information only and should not be copied or redistributed. Persons (including, without limitation, agents, custodians, nominees and trustees) who receive a copy of the CKW Prospectus and/or the BLUE Application Form(s) should not, in connection with the Preferential Offer, distribute or send the same in, into or from, any of the Specified Territories. If the BLUE Application Form is received by any person in any such territory, or by his/her/its agent or nominee, he/she/it should not apply for any Reserved Shares unless the Directors and the directors of Chinney Kin Wing determine that such actions would not violate applicable legal or regulatory requirements. Any person (including, without limitation, agents, custodians, nominees and trustees) who forwards the CKW Prospectus and/or the BLUE Application Form(s) in, into or from any Specified Territory (whether under a contractual or legal obligation or otherwise) should draw the recipient’s attention to the contents of this section.

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LETTER FROM THE BOARD

Application procedures

The procedures for application under and the terms and conditions of the Preferential Offer are set out in the CKW Prospectus and on the BLUE Application Forms.

EMPLOYEE PREFERENTIAL OFFER

Of the 38,250,000 Offer Shares initially being offered under the Hong Kong Public Offer, 3,825,000 Offer Shares (representing 10% and 1% of the total number of Offer Shares initially being offered under the Hong Kong Public Offer and the Global Offering (assuming that the Over-allotment Option is not exercised), respectively) will be offered as the Employee Reserved Shares for subscription by the Eligible Employees on a preferential basis, subject to the terms and conditions set out in the CKW Prospectus and the PINK Application Forms. The Employee Reserved Shares are being offered out of the Hong Kong Offer Shares.

LISTING RULES IMPLICATIONS

The Proposed Spin-off constitutes a deemed disposal of the interest in a subsidiary of the Company under Rule 14.29 of the Listing Rules. As the highest of the applicable percentage ratios in respect of the Proposed Spin-off exceeds 25% but is less than 75%, the Proposed Spin-off will constitute a major transaction of the Company under Chapter 14 of the Listing Rules. The Proposed Spin-off is therefore subject to, among other things, the approval of the Shareholders under paragraph 3(e)(1) of PN15 and Chapter 14 of the Listing Rules as and when necessary. Since no Shareholder would be required to abstain from voting if the Company were to convene a general meeting for the approval of the Proposed Spin-off, written Shareholders’ approval has been obtained in lieu of holding a general meeting pursuant to Rule 14.44 of the Listing Rules.

As at the Latest Practicable Date, Enhancement Investments, Multi-Investment and Chinney Capital, which were all controlled by Dr. Wong, were interested in 243,244,521, 173,093,695 and 19,602,000 Shares, representing approximately 40.89%, 29.10% and 3.29% of the issued share capital of the Company, respectively. Enhancement Investments and Chinney Capital were wholly-owned by Dr. Wong, directly or indirectly; and Multi-Investment was indirectly wholly-owned by Chinney Investments, which was in turn indirectly and directly owned as to approximately 63.12% and 0.09% by Dr. Wong respectively.

Enhancement Investments, Multi-Investment and Chinney Capital, which constitute a closely allied group of Shareholders holding an aggregate of approximately 435,940,216 Shares representing approximately 73.28% of the issued share capital of the Company as at the Latest Practicable Date, have given a written approval to the Company in respect of the Proposed Spin-off. Accordingly, no general meeting of the Company will be convened for the purposes of approving the Proposed Spin-off.

Shareholders and potential investors of the Company should note that there is no assurance that the approval of the Listing Committee of the Stock Exchange for the Listing will be granted.

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LETTER FROM THE BOARD

The Listing and the final structure of the Proposed Spin-off are subject to, among other things, the approval of the Stock Exchange, market conditions and other considerations. Accordingly, Shareholders and potential investors of the Company should be aware that there is no assurance that the Proposed Spin-off and the Listing will take place and, if so, when they may take place. Shareholders and potential investors of the Company should exercise caution when dealing in or investing in the securities of the Company.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee formed by all the independent non-executive Directors, namely Mr. Yuen-Tin Ng, Mr. Chi-Chiu Wu, Mr. Ronald James Blake, has been established to advise the Shareholders as to whether the terms of the Proposed Spin-off are fair and reasonable and whether the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole, taking into account the recommendation of the Independent Financial Adviser.

KGI has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Shareholders as to whether the terms of the Proposed Spin-off are fair and reasonable and whether the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole.

RECOMMENDATIONS

The Directors (excluding the independent non-executive Directors) are of the view that the terms of the Proposed Spin-off are fair and reasonable so far as the Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

KGI considers that the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole and the terms thereof are fair and reasonable so far as the Company and the Shareholders are concerned. Accordingly, KGI recommends the Independent Board Committee to advise the Shareholders to vote in favour of the relevant resolution if there were a general meeting of the Company held to consider to approve the Proposed Spin-off. The letter from the Independent Financial Adviser containing its advice in relation to the Proposed Spin-off, together with the factors and reasons it has considered in arriving at its opinion, is set out on pages 42 to 66 of this circular.

The Independent Board Committee, having taken into account the advice of KGI, considers that the terms of the Proposed Spin-off are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends that the Shareholders vote in favour of the relevant resolution if there were a general meeting of the Company held to consider and, if thought fit, to approve the Proposed Spin-off.

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LETTER FROM THE BOARD

GENERAL

The timetable for the Global Offering, including the Preferential Offer, is set out in the CKW Prospectus.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the proposed subscribers for the CKW Shares under the Global Offering (and their respective ultimate beneficial owners) will be Independent Third Parties, except that all Qualifying Shareholders (including connected persons of the Company who are Qualifying Shareholders) will be entitled to participate in the Preferential Offer.

ADDITIONAL INFORMATION

This circular is being distributed to the Shareholders. This circular does not constitute an offer or invitation to subscribe for or purchase any securities nor is it calculated to invite any such offer or invitation. Neither this circular nor anything contained herein shall form the basis of any contract or commitment whatsoever.

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

By Order of the Board James Sai-Wing Wong Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [327 x 44] intentionally omitted <==

(Stock Code: 385)

30 October 2015

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

DEEMED DISPOSAL IN RELATION TO THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF CHINNEY KIN WING HOLDINGS LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

We refer to the circular issued by the Company to its Shareholders dated 30 October 2015 (“ Circular ”) of which this letter forms part. Capitalised terms defined in the Circular have the same meanings when used in this letter unless the context otherwise requires.

Under the Listing Rules, the Proposed Spin-off constitutes a major transaction and a deemed disposal of subsidiary by the Company under Rule 14.29 and pursuant to PN15, is subject to the approval of the Shareholders.

We have been appointed by the Board to consider the terms of the Proposed Spin-off and to advise the Shareholders as to whether, in our opinion, the terms of the Proposed Spin-off are fair and reasonable and in the interests of the Company and its Shareholders as a whole. KGI has been appointed as the Independent Financial Adviser to advise us and the Shareholders in this respect.

We wish to draw your attention to the letter from the Board and the letter from the Independent Financial Adviser as set out in the Circular. Having considered the principal factors and reasons considered by, and the advice of, KGI as set out in its letter of advice, we consider that the terms of the Proposed Spin-off are fair and reasonable and are in the interests of the Company and its Shareholders as a whole. Accordingly, we recommend that you vote in favour of the relevant resolution if there were a general meeting of the Company held to consider and, if thought fit, to approve the Proposed Spin-off.

Mr. Yuen-Tin Ng

Yours faithfully, Independent Board Committee Mr. Chi-Chiu Wu Mr. Ronald James Blake

Independent Non-executive Directors

* For identification purpose only

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the text of the letter of advice from KGI Capital Asia Limited, the independent financial adviser to the Independent Board Committee and the Shareholders of Chinney Alliance Group Limited, prepared for inclusion in this circular.

==> picture [182 x 34] intentionally omitted <==

41/F, Central Plaza 18 Harbour Road Wanchai, Hong Kong

Tel: 2878 6888 Fax: 2970 0080

30 October 2015

To the Independent Board Committee and the Shareholders Chinney Alliance Group Limited

Dear Sirs and Madams,

MAJOR TRANSACTION

DEEMED DISPOSAL IN RELATION TO THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF CHINNEY KIN WING HOLDINGS LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Shareholders in relation to the terms of the Proposed Spin-off. Details of which are set out in the “Letter from the Board” (the “ Letter ”) contained in the circular to the Shareholders dated 30 October 2015 (the “ Circular ”), of which this letter forms part. Unless the context requires otherwise, terms used in this letter shall have the same meanings as given to them under the definitions section of the Circular.

The Proposed Spin-off is expected to be implemented by way of the Global Offering which will consist of the Hong Kong Public Offer, the International Offer, the Preferential Offer and the Employee Preferential Offer, and a separate Listing of the CKW Shares on the Main Board. Further information on the Preferential Offer and the Employee Preferential Offer is set out in the paragraphs headed “Preferential Offer” and “Employee Preferential Offer” in the Letter. The final structure of the Proposed Spin-off, including the size of the Global Offering and the exact apportionment between the Hong Kong Public Offer, the International Offer, the Preferential Offer and the Employee Preferential Offer, will be decided by the Board and the CKW Board.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Under the Listing Rules, the Proposed Spin-off constitutes a major transaction under Chapter 14 of the Listing Rules and a deemed disposal of subsidiary by the Company under Rule 14.29 and pursuant to PN15, is subject to the approval of the Shareholders. Since no Shareholder would be required to abstain from voting if the Company were to convene a general meeting for the approval of the Proposed Spin-off, written Shareholders’ approval has been obtained in lieu of holding a general meeting pursuant to Rule 14.44 of the Listing Rules. As advised by the Company, Enhancement Investments, Multi-Investment and Chinney Capital, all controlled by Dr. Wong, holding an aggregate of approximately 435,940,216 Shares representing approximately 73.28% of the issued share capital of the Company as at the Latest Practicable Date, have given a written approval to the Company in respect of the Proposed Spin-off. Accordingly, no general meeting of the Company will be convened for the purpose of approving the Proposed Spin-off.

Under the current proposed structure of the Proposed Spin-off, it is expected that the Qualifying Shareholders will be invited to participate in the Preferential Offer relating to the subscription of the Reserved Shares. It should be noted that it is not within our terms of reference to advise the Qualifying Shareholders as to whether or not to participate in the Preferential Offer. In this regard, the Qualifying Shareholders are recommended to consult their own professional advisers and refer to the information contained in the Circular and the CKW Prospectus. We have not considered the tax consequences of the Proposed Spin-off, including the Preferential Offer, on Shareholders since these are particular to their individual circumstances. Shareholders who are subject to overseas taxation on securities dealing should consider their own tax positions with regard to the Proposed Spin-off and, if in doubt, should consult their own professional advisers.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising all three independent non-executive Directors, namely Mr. Yuen-Tin Ng, Mr. Chi-Chiu Wu and Mr. Ronald James Blake, has been established to advise the Shareholders as to whether the terms of the Proposed Spin-off are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

We, KGI Capital Asia Limited, have been appointed to advise the Independent Board Committee and the Shareholders as to whether or not the terms of the Proposed Spin-off are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our opinion, we have obtained and reviewed relevant information and documents provided by the Company, its Directors and management of the Company in connection with the transactions and discussed with the management of the Company so as to assess the fairness and reasonableness of the terms of the Proposed Spin-off. Relevant information and documents included, among other things, the annual reports of the Company for the year ended 31 December 2013 (the “2013 Annual Report”) and 2014 (the “2014 Annual Report”), the interim report of the Company for the six months ended 30 June 2015 (the “2015 Interim Report”), the application proof of prospectus (1st submission) updated on the website of the Stock Exchange on 19th August, 2015 (the “Application Proof Prospectus”). We have also relied on the information, facts and representations contained or referred to in the Circular and have assumed that the information, facts and representations provided, and the opinions expressed to us are true, accurate and complete in all material aspects at the time they were made and will remain true, accurate and complete up to the Latest Practicable Date. We have also assumed that all statements of beliefs and opinions made by the Company and/or the Directors and/or the management of the Group (including the Group and the Remaining Group) in the Circular were reasonably made after due enquiry and the expectations and intentions made by the Company and/or the Directors and/or the management of the Group (including the Group and the Remaining Group) will be met or carried out as the case may be. We have also sought and received confirmation from the Company that no material facts have been omitted from the information supplied and the opinions expressed. We believe that we have reviewed sufficient information to enable us to reach an informed view, to justify our reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion regarding the terms Proposed Spin-off. We have not, however, carried out any independent verification of the information and representations provided to us by the management of the Company and the Directors nor have we conducted any form of independent investigation into the businesses and affairs, financial position or the future prospects of the Company, the Group, Chinney Kin Wing, the CKW Group or their respective subsidiaries or associated companies. We have also assumed that all statement of intention of the Company, its Directors and management of the Company as set out in the Circular will be capable of being implemented. We have assumed that all information and representations made or referred to in the Circular and provided to us by the Company, its Directors and management of the Company, for which they were solely and wholly responsible, were true, complete and accurate at the time they were made and shall continue to be true, complete and accurate at the Listing Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the section headed “Appendix II – General Information – 1. Responsibility Statement” of the Circular, the Directors collectively and individually accept full responsibility for the Circular, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquires, 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 therein or the Circular misleading.

Our opinion is necessarily based upon the financial, economic, market, regulatory and other conditions as they existed on, and the facts, information, representations and opinions made available to us as of, the Latest Practicable Date. Our opinion does not in any manner address the Company’s own decision to proceed with the Proposed Spin-off. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion expressed herein, which may come or be brought to our attention after the Latest Practicable Date. Except for its inclusion in the Circular and for inspection purpose as set out in the section headed “Appendix II – General Information – 8. Documents Available for Inspection” of the Circular, this letter is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purpose, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and the Shareholders in relation to the Proposed Spin-off, we have taken the following principal factors and reasons into consideration:

I. Businesses of the Group and CKW Group

(a) Business of the Group

The principal activities of the Group are (i) trading of plastics and chemical products, (ii) building related contracting services, (iii) foundation piling and ground investigation, (iv) building construction, and (v) other businesses including the holding of properties for the Group’s own use and the distribution of aviation system and other hi-tech products. As stated in the Letter and confirmed by the Directors, the Remaining Group after the Proposed Spin-off will not engage in Foundation Business of the CKW Group.

(b) Business of CKW Group

As at the Latest Practicable Date, the CKW Group is engaged in a wide range of foundation works including (i) piling construction (such as bored piling, percussive H-piling, socketed H-piling, mini-piling and sheet piling) and other ancillary services (such as excavation and lateral support works, site formation and pile cap construction); and (ii) drilling and site investigation.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

II. Reasons for and benefits of the Proposed Spin-off

We have inquired with the Directors and management of the Company and have been advised that the Proposed Spin-off and the Listing will bring about the following benefits to both the Company and Chinney Kin Wing, which are in line with the reasons for and benefits of the Proposed Spin-off as stated in the Letter:

(i) in view of the clear strategic and operational differences between the Foundation Business and the Retained Business, the Proposed Spin-off and the Listing will explore new investors for Chinney Kin Wing as a new investment opportunity for new investors and also unlock the shareholder value for the Shareholders by better identifying and establishing the stand-alone corporate value of the Foundation Business;
(ii) to improve the operational and financial transparency of each of the Foundation Business and the Retained Business so as to allow the investors to appraise and assess the performance and potential of the Company and Chinney Kin Wing as separate entities rather than as a conglomerate. As such, both the Company and Chinney Kin Wing can target their respective investor base more effectively in order to improve capital raising on a competitive basis and capital allocation to enhance growth within each company;
(iii) to enhance direct alignment of the responsibilities and accountability of the management of both the Company and Chinney Kin Wing with their respective operating and financial performances so as to improve management focus, better resources allocation, more efficient decision-making process, and faster responsiveness to market changes, on the respective businesses of the Remaining Group and the CKW Group;
(iv) to let Chinney Kin Wing gain access to both equity and debt capital markets so as to increase its financing flexibility to achieve the business strategies of the CKW Group; and
(v) to enhance the CKW Group’s profile amongst its customers, suppliers and other business partners, as well as its ability to recruit, motivate and retain key management personnel as a result of the Listing. For instance, Chinney Kin Wing will enjoy greater flexibility in providing management incentives through adoption of equity based incentive program such as share option scheme, and making acquisitions by using its stock as acquisition currency.

Having considered the aforementioned reasons for the Proposed Spin-off and the benefits to both the Company and the Chinney Kin Wing and in particular that the Proposed Spin-off will (i) enhance growth within each company; (ii) unlock the shareholder value for the Shareholders by identifying and establishing the stand-alone corporate value of the Foundation Business; (iii) allow both the Company and Chinney Kin Wing to target their respective

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

investor base more effectively as separate entities so as to improve capital raising on a competitive basis and capital allocation to enhance growth within each company; and (iv) enhance direct alignment of the responsibilities and accountability of the management of both the Company and the Chinney Kin Wing which in turn will enhance management focus, better resources allocation, more efficient decision-making process, and faster responsiveness to market changes on the respective business of the Remaining Group and the CKW Group, we concur with the view of the Directors (excluding the independent non-executive Director) that the Proposed Spin-off is in the interests of the Group and the Shareholders as a whole.

III. Proposed use of net proceeds from the Global Offering

As set out in the Letter, the directors of Chinney Kin Wing estimate that the aggregate net proceeds from the Global Offering (after deducting underwriting fees and estimated expenses payable by Chinney Kin Wing in connection with the Global Offering) will be approximately HK$185.8 million (assuming that the Over-allotment Option is not exercised). The directors of Chinney Kin Wing currently intend to apply such net proceeds in the following manner:

(i) approximately 60.0% of the net proceeds for the acquisition in additional machinery and related storage and maintenance expenditures to expand the CKW Group’s capacity and enhance its project implementation capability;
(ii) approximately 20.0% of the net proceeds for the investment in human resources to increase the CKW Group’s productivity and capabilities;
(iii) approximately 10.0% of the net proceeds for enhancement of the CKW Group’s design capability and streamline the project implementation progress and also including expenditures in modifications of the CKW Group’s existing plant and machinery to increase efficiency; and
(iv) approximately 10.0% of the net proceeds will be used as general working capital of the CKW Group.

We further note that to the extent the net proceeds from the Global Offering are either more or less than expected, Chinney Kin Wing intends to apply the net proceeds to the above purposes on a pro-rata basis. If the Over-allotment Option is exercised in full or in part, Chinney Kin Wing intends to apply the additional net proceeds from the exercise of the Over-allotment Option to the above purposes on a pro-rata basis. To the extent that the net proceeds of the Global Offering are not immediately used for the above purposes and to the extent permitted by the relevant laws and regulations, Chinney Kin Wing intends to deposit such net proceeds into interest-bearing bank accounts with licensed banks and/or financial institutions.

However, the Shareholders should note that the above intended use of net proceeds from the Global Offering is indicative only and is subject to change. Further information on the application of the net proceeds from the Global Offering is set forth in the CKW Prospectus.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IV. Structure of the Proposed Spin-off

The Company intends to effect the Proposed Spin-off by way of the Global Offering which will comprise the Hong Kong Public Offer, the International Offer, the Preferential Offer and the Employee Preferential Offer, and a separate Listing of the CKW Shares on the Main Board. As set out in the Letter, Chinney Kin Wing will grant to the International Underwriters, exercisable by the Sole Global Coordinator on behalf of the International Underwriters, the Over-allotment Option to require Chinney Kin Wing to issue and allot additional CKW Shares representing up to 15% of the initial Offer Shares at the Offer Price to cover the over-allocations in the International Offer, if any. Furthermore, Qualifying Shareholders are being invited to apply for an aggregate of 34,425,000 Reserved Shares in the Preferential Offer representing 10% and 9% of the Offer Shares available under the International Offer and Global Offering, respectively (assuming that the Over-allotment Option is not exercised) as Preferential Entitlement. The Reserved Shares will be offered out of the International Offer Shares under the International Offer and will not be subject to reallocation. However, as Dr. Wong, a controlling shareholder of the Company, has indicated to the Company and Chinney Kin Wing that he, and the companies controlled by him, will not take up any Reserved Shares to which he or the companies controlled by him would be entitled to apply for under the Preferential Offer. The Reserved Shares in which he or the companies controlled by him are entitled to apply for (representing approximately 73.3% of the expected number of Reserved Shares based on the number of Shares in issue as at the Latest Practicable Date) will be available for excess application by other Qualifying Shareholders under the Preferential Offer. In view of this, all of these excess Reserved Shares will be available for subscription by other Qualifying Shareholders. As such, the number of Reserved Shares that other Qualifying Shareholders can apply for, if they so choose, will be more than the basis of one Reserved Share for every integral multiple of 17 Shares held.

The CKW Shares to be issued pursuant to the Global Offering will rank pari passu in all respects with all the CKW Shares then in issue. Based on the current structure of the Proposed Spin-off which is subject to finalization, assuming that the Over-allotment Option is not exercised, immediately following completion of the Proposed Spin-off, the Company will continue to hold approximately 74.5% of all the CKW Shares in issue. If the Over-allotment Option is exercised in full, the Company’s direct shareholding in Chinney Kin Wing will be reduced to approximately 71.8%. In any of these events, Chinney Kin Wing will continue to be a direct non-wholly owned subsidiary of the Company upon completion of the Proposed Spin-off and the operating results of the CKW Group will continue to be consolidated into the consolidated financial statements of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the corporate structure of the CKW Group after completion of the Reorganisation but immediately prior to the Capitalisation Issue and the Global Offering:

==> picture [396 x 435] intentionally omitted <==

----- Start of picture text -----

Dr. Wong
100%
Lucky Year Finance Limited 0.09%
100%
100%
Chinney Holdings Limited
Chinney Development
Company Limited 63.12%
100%
Chinney Investments
(Stock Code: 0216)
100%
100%
Newsworthy Resources Limited
100%
Chinney Capital Enhancement Investments Multi-Investment Existing public Shareholders
3.29% 40.89% 29.10% 26.72%
The Company
100%
Chinney Kin Wing
100%
Kin Wing
100% 100% 100% 100%
DrilTech
DrilTech Kin Wing Kin Wing
Geotechnical Macau Machinery Engineering
( Note 2 )
100% 100% 100%
DrilTech Ground Kinwing Macau Kin Wing
( Note 1 ) Foundations
----- End of picture text -----

Notes:

Kinwing Macau is legally owned as to 99.9% by Kin Wing and 0.1% by Kin Wing Engineering. By a declaration of trust dated 1 June 2005, Kin Wing Engineering declared that it held one quota in Kinwing Macau on trust for Kin Wing. On 8 August 2015, Kin Wing Engineering has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in Kinwing Macau, and hence Kin Wing beneficially owns the entire registered capital of Kinwing Macau.
DrilTech Macau is legally owned as to 99.9% by Kin Wing and 0.1% by DrilTech Ground. By a declaration of trust dated 1 June 2005, DrilTech Ground declared that it held one quota in the DrilTech Macau on trust for Kin Wing. On 8 August 2015, DrilTech Ground has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in DrilTech Macau, and hence Kin Wing beneficially owns the entire registered capital of DrilTech Macau.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the corporate structure of the CKW Group after completion of the Reorganisation, and immediately after the Capitalisation Issue and the Global Offering (assuming that all Qualifying Shareholders (except Chinney Capital, Enhancement Investments and Multi-Investment) take up their respective Preferential Entitlements under the Preferential Offer in full, and without taking into account any CKW Shares which may be issued pursuant to the exercise of the Over-allotment Option):

==> picture [395 x 372] intentionally omitted <==

----- Start of picture text -----

Dr. Wong
100%
Lucky Year Finance Limited 0.09%
100%
100%
Chinney Holdings Limited
Chinney Development
Company Limited 100% 63.12%
Chinney Investments
(Stock Code: 0216)
100%
100%
Newsworthy Resources Limited
100%
Other New Public CKW
Chinney Capital Enhancement Investments Multi-Investment Existing public Shareholders Shareholders
3.29% 40.89% 29.10% 26.72% 23.205%
The Company Qualifying Shareholders
74.50%
2.295%
Chinney Kin Wing
100%
Kin Wing
100% 100% 100% 100%
DrilTech
DrilTech Macau Kin Wing Kin Wing
Geotechnical ( Note 2 ) Machinery Engineering
100% 100% 100%
DrilTech Ground Kinwing Macau Kin Wing
( Note 1 ) Foundations
----- End of picture text -----

Notes :

Kinwing Macau is legally owned as to 99.9% by Kin Wing and 0.1% by Kin Wing Engineering. By a declaration of trust dated 1 June 2005, Kin Wing Engineering declared that it held one quota in Kinwing Macau on trust for Kin Wing. On 8 August 2015, Kin Wing Engineering has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in Kinwing Macau, and hence Kin Wing beneficially owns the entire registered capital of Kinwing Macau.
DrilTech Macau is legally owned as to 99.9% by Kin Wing and 0.1% by DrilTech Ground. By a declaration of trust dated 1 June 2005, DrilTech Ground declared that it held one quota in the DrilTech Macau on trust for Kin Wing. On 8 August 2015, DrilTech Ground has granted an irrevocable power of attorney in favour of Kin Wing granting Kin Wing all powers relating to its social rights and its quota in DrilTech Macau, and hence Kin Wing beneficially owns the entire registered capital of DrilTech Macau.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

a. Business delineation between the business of the Remaining Group and the CKW Group

As stated in the Letter, the Remaining Group will, upon the Listing, principally engage in the Retained Business whilst the CKW Group will principally engage in the Foundation Business. The business and/or scope of services provided by each of the Retained Business and the Foundation Business differ significantly. We have discussed with the Directors and management of the Company and have been confirmed that, after the Proposed Spin-off, all the existing Foundation Business under the Group, before the Listing, will be principally engaged by the CKW Group which mainly include foundation piling business, drilling and site investigation business and the provision of foundation related ancillary services. The Remaining Group will be principally engaged in the Retained Business which include importing, marketing and distribution of plastic and chemical productions, provision of building services and electrical and mechanical installation and maintenance services, sales and installation of air-conditioning system and other building related electrical systems, provision of superstructure construction works, distribution and installation of aviation systems and other hi-tech products and other investment activities. Having considered the above business description of the Foundation Business and the Retained Business, we concur with the view of the Directors that there is a clear business delineation of between the respective services provided by the CKW Group and the Remaining Group as they are of different nature.

Non-competition undertaking

As stated in the Letter, in order to ensure that there is a clear delineation between the business of the Remaining Group and that of the CKW Group, the CKW Controlling Shareholders and Chinney Kin Wing have entered into the Deed of Non-competition dated 20 October 2015 pursuant to which each of the CKW Controlling Shareholders has unconditionally and irrevocably undertaken to Chinney Kin Wing (for itself and for the benefits of its subsidiaries) that he/it will not, during the Restricted Period (as defined below) directly or indirectly, either on his/its own account or in conjunction with or on behalf of any person, firm or company, among other things:

(a) carry on, engage, participate or hold (in each case whether as a shareholder, director, partner, agent, employee, or otherwise, and whether for profit, reward, or otherwise) any right or interest in or be involved in any foundation business which is in competition with the CKW Group’s Foundation Business (the “ Restricted Business ”); and
(b) take any action which interferes with or disrupts or may interfere with or disrupt the Restricted Business including, but not limited to, solicitation of any of the then current customers, suppliers or employees of any members of the CKW Group.

Further details of the Deed of Non-competition are set out in the Letter. We have reviewed the Deed of Non-competition as set out in the Letter and the Application Proof Prospectus and note that the terms are acceptable to avoid the CKW Controlling Shareholders to compete with the business of CKW Group after Listing which can further enhance business delineation between the Remaining Group and the CKW Group after the Listing.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Corporate governance measures to further avoid conflict of interests and enforcement of the Deed of Non-competition

As stated in the Letter, a number of corporate governance measures will be implemented so as to avoid conflict of interests between the Remaining Group and the CKW Group in relation to the compliance and enforcement of the Deed of Non-competition. As confirmed by the Directors and the management of the Company, the following major measures will be adopted:

(i) the compliance with and enforcement of the terms of the Deed of Non-competition by the CKW Controlling Shareholders will be reviewed by the independent non-executive directors of Chinney Kin Wing on an annual basis and the CKW and the CKW Controlling Shareholders shall provide all information and shall use their respective reasonable endeavors to procure their respective close associates to provide all information necessary for the annual review by the independent non-executive directors of Chinney Kin Wing;
(ii) Chinney Kin Wing will disclose (a) decisions with basis on matters reviewed by its independent non-executive directors relating to the compliance with and enforcement of the undertakings of the CKW Controlling Shareholders under the Deed of Non-competition either through the annual or interim report of Chinney Kin Wing, or by way of announcements to the public; (b) in the corporate governance report of its annual report on how the terms of the Deed of Non-competition have been complied with and enforced; and (c) the annual statement on compliance with the Deed of Non-competition made by the CKW Controlling Shareholders in its subsequent annual reports;
(iii) in the event that a business opportunity which is in competition with the Foundation Business or otherwise (the “Foundation Business Opportunity”) is identified by the Remaining Group, it shall refer such Foundation Business Opportunity to the CKW Group and shall not pursue such Foundation Business Opportunity unless the independent non-executive directors of Chinney Kin Wing have resolved to decline such Foundation Business Opportunity on a case-by-case basis and have notified in writing of their decisions with relevant reasons;
(iv) any transaction (if any) between (or proposed to be made between) the CKW Group and connected persons will be required to comply with Chapter 14A of the Listing Rules, including, where applicable, the announcement reporting, annual review and independent shareholders’ approval requirements and with those conditions imposed by the Stock Exchange for the granting of waiver from strict compliance with the relevant requirements under the Listing Rules; and
(v) in the event that there is conflict of interest in the operations of the CKW Group and the Remaining Group and its associates, and in respect of any proposed contracts or arrangements between the CKW Group and the Remaining Group and its associates,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

any director of Chinney Kin Wing, who is considered to be interested in a particular matter or the subject matter, shall disclose his interests to the CKW Board. Pursuant to the by-laws of Chinney Kin Wing, should a director of Chinney Kin Wing or his close associate have any material interests in the matter (other than certain matters permitted under note 1 to Appendix 3 to the Listing Rules), he shall not vote on the resolutions of the CKW Board approving the same and shall not be counted in the quorum of the relevant board meeting.

We notice that the above major measures, in particular, those annual requirements under Chapter 14A of the Listing Rules in relation to connected transactions, if properly implemented, should be able to monitor the compliance and enforcement of the Deed of Non-competition.

b. Independence of directorship and management of the Remaining Group and the CKW Group

As set out in the Letter, we note that there will be no overlapping in senior management between the Remaining Group and the CKW Group. However, there will be two common directorships in the Company and Chinney Kin Wing. Mr. Fung will be the executive director and chairman of Chinney Kin Wing and the non-executive Director in the Company while Mr. Chan will be the executive director and vice chairman of Chinney Kin Wing and the managing Director and vice chairman of the Company. As stated in the Letter, independence of management between the Remaining Group and the CKW Group will be maintained based on the matters as set out below:

(a) As Mr. Fung’s role in the Company is non-executive, he is not involved in the day-to-day operations of the Remaining Group and will be able to focus on his executive role in the CKW Group in the area of strategic planning.
(b) Mr. Chan is the managing Director and vice chairman of the Company and is the executive director and vice-chairman of Chinney Kin Wing. Although there is an overlapping of his executive roles in the Company and Chinney Kin Wing, Mr. Chan’s duties in Chinney Kin Wing are mainly in relation to the strategic planning and overall corporate and business development of the CKW Group. Also, capitalising on Mr. Chan’s experience and network in the construction industry in Hong Kong, it is believed that both the Company and Chinney Kin Wing could be benefited from the role of Mr. Chan in each of them.
(c) Notwithstanding the above, Mr. Yu and Mr. So are independent of the Remaining Group. Mr. Yu and Mr. So will be in charge of the overall corporate management and business operations of the CKW Group. Mr. Yu, who was appointed as the managing director of Chinney Kin Wing, is also one of the founders of, and has more than 20 years of experience in, the Foundation Business.
(d) In addition, directors independent of the Company have been appointed to every major operating subsidiary of the CKW Group to oversee the day-to-day management of the relevant subsidiary.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(e) Further, the CKW Group also has a team of experienced senior management independent of the Remaining Group assisting and supporting directors of members of the CKW Group in the day-to-day management of the Foundation Business.

We have noted from the Letter and further discussed with the Directors and management of the Company in the event that any conflict of interest arises between the Remaining Group and the CKW Group, Mr. Fung and Mr. Chan will abstain from voting at the relevant meetings of the CKW Board and the meetings of the Board in respect of such matters of actual or potential conflict of interest. They will also comply with the respective bye-laws of the Company and Chinney Kin Wing, and any applicable laws and regulations (including but not limited to the Listing Rules). Also, Mr. Fung and Mr. Chan will not be involved in making decisions in connection with the on-going connected transactions (if any) between the CKW Group and the Remaining Group, and the remaining directors possess sufficient relevant industry experience to make decisions and monitor such transactions. In addition, the three independent non-executive directors of Chinney Kin Wing will also provide checks and balances over the decision-making of the CKW Board on significant transactions, connected transactions and other transactions involving any actual or potential conflict of interests.

Having considered (i) the aforementioned measures, (ii) the independence of senior management of the CKW Group from the Remaining Group as well as (iii) the corporate governance measures to be adopted after the Proposed Spin-off, we concur with the view of the Directors that each of the Remaining Group and the CKW Group will operate independently and in the interests of its respective shareholders as a whole.

c. Operation independence

As set out in the Letter, given the difference in the nature of the Retained Business and that of the Foundation Business, the operational departments including tendering, design, contracting, quantity surveying, project management, environmental, safety and machinery maintenance of the CKW Group are separate from those of the Remaining Group and are expected to continue to be operated separately and independently of the Remaining Group. The CKW Group has its own team of staff to carry out its own operations independent of the Remaining Group. When preparing and submitting tender documents with different licensing requirements and expertise for a construction project, the CKW Group and the Remaining Group have been and will be working independently and separately. Thus, it is not necessary for the CKW Group and the Remaining Group to co-operate to submit tender proposals together.

As set out in the Letter, we note that there were four construction projects in which the CKW Group and the Remaining Group were engaged by the same ultimate employers separately for different segments of works in a construction project during the period from 1 January 2012 to 30 April 2015, from which the revenue recognised by the CKW Group were approximately HK$97.6 million, HK$178.2 million, HK$17.4 million and HK$8.6 million for the three years ended 31 December 2014 and the four months ended 30 April 2015 respectively. We have compared these figures with the revenues recorded under the CKW Group for the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

three years ended 31 December 2014 and the four months ended 30 April 2015 under the Application Proof Prospectus and noted that they accounted for approximately 9.3%, 15.1%, 1.3% and 1.4% respectively. As confirmed by the Directors, (i) the above projects were all tendered by the CKW Group and the Remaining Group separately and independently and were granted by the ultimate employers separately after independent tendering, selection and award process; and (ii) the participation in those projects by the CKW Group and the Remaining Group was only incidental and thus the Directors consider that the CKW Group’s operational independence has not been affected.

We also note from the Letter that there were two projects during the period from 1 January 2012 to 30 April 2015 where the Remaining Group was appointed as the main contractor for the superstructure works and subcontracted the foundation or site investigation works to the CKW Group. As confirmed by the Directors, all of these subcontracts were awarded through open tendering process and the CKW Group had provided the most advantageous or lowest price tender. The aggregate contract sum and revenue contributed to the CKW Group from these two sub-contracting contracts during the period from 1 January 2012 to 30 April 2015 amounted to approximately HK$0.7 million. Subsequent to 30 April 2015 and up to the Latest Practicable Date, the Remaining Group has selected the CKW Group as a foundation subcontractor through an open tendering process for a site in Yau Yue Wan Village, Hong Kong with contract sum of approximately HK$35.8 million. We have discussed with the Directors and are confirmed that the Remaining Group may appoint the CKW Group as subcontractor for carrying out foundation works after the Proposed Spin-off only if the CKW Group can provide the most advantageous or lowest price tender under the open tendering process.

In a nutshell, as confirmed by the Directors, for cases which the ultimate employer of some constructions works may require the Remaining Group or the CKW Group, as the main contractor, to invite various subcontractors, the selection of subcontractors would be (i) with consideration of the opinion from or finally determined by the ultimate employer; (ii) through open tendering process so as to ensure that the selection of the subcontractors is on a fair basis (mainly based on price) without giving any preferential treatment to the Remaining Group or the CKW Group; and (iii) whether the respective prices provided by the Remaining Group or the CKW Group are the most advantageous or lowest price tender under the open tendering process.

We also note from the Letter and confirmed by the Directors that although the Remaining Group and the CKW Group are currently engaged in and will continue to engage in certain transactions, such as provision of administration services, purchase of consumables and parts of machinery and leasing of office space which may and/or will constitute connected transactions of Chinney Kin Wing under Chapter 14A of the Listing Rules, and such transactions are not likely to impact the operational independence of the CKW Group. As confirmed by the Directors, these transactions are entered into in the ordinary and usual course of the business of the Company and on normal commercial terms and are fair and reasonable and the interests of the Company and the Company will follow all the disclosure requirements under the Chapter 14A of the Listing Rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered that (i) the difference in nature of Remained Business and the Foundation Business with different licensing requirements and expertise, (ii) the selection criteria in particular the independent open tendering process in cases there are sub-contraction works between the Company, the Remaining Group and the CKW Group, and (iii) the checks and balances over the decision making of the CKW Board by the three independent non-executive directors of Chinney Kin Wing on significant transactions, connected transactions and other transactions involving any actual or potential conflict of interests, we concur with the view of the Directors that the aforesaid transactions are not likely to impact the operational independence of the CKW Group and the Remaining Group and the CKW Group operate independently from each other.

d. Financial independence

As set out in the Letter, we note that, as at the Latest Practicable Date, (i) the Remaining Group had banking facilities with an aggregate principal amount of approximately HK$1,834.4 million of which approximately HK$891.0 million were jointly used and guaranteed by certain members of the Remaining Group and the CKW Group. As confirmed by the Directors, all jointly used banking facilities by the Remaining Group and the CKW Group will be segregated and each of them will obtain its own banking facilities before the Listing; (ii) the Remaining Group and the CKW Group had signed relevant facility letters to obtain independent banking facilities of approximately HK$1,476.4 million and approximately HK$558.0 million respectively. Prior to the Listing, the independent banking facilities of the CKW Group are still secured by, among others, a corporate guarantee provided by the Company but such corporate guarantee is expected to be released and replaced by a corporate guarantee provided by Chinney Kin Wing upon the Listing; and (iii) certain members of the CKW Group have provided to the Remaining Group unsecured and non-interest bearing loans with principal sums of approximately HK$22.0 million. Such loans have been fully settled on or before the Listing. Coupling with the net proceeds received from the Global Offering upon the Listing, we concur with the view of the Directors that there is no financial dependence of CKW Group on the Remaining Group, and vice versa after the Listing if all the aforesaid arrangements are properly in place.

e. Administrative independence

As set out in the Letter, pursuant to an administrative service agreement entered into between Chinney Kin Wing and the Company dated 20 October 2015, the CKW Group and the Remaining Group have agreed to provide certain administrative support services to each other. The Company believes that the sharing of administrative support services between the CKW Group and the Remaining Group represents a cost effective arrangement which is in the mutual benefit of both the CKW Group and the Remaining Group and such services will be shared at a fee to be calculated on a cost basis. As discussed and confirmed by the Directors, we concur that the majority of the administrative and daily operations of the Remaining Group and the CKW Group will be carried out by their respective team of staff independently of and without any support from each other after the Proposed Spin-off.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

V. Indemnities

As mentioned in the Letter, the Company has entered into the Deed of Indemnity with Chinney Kin Wing (on its own behalf and as trustee for each of its subsidiaries) to provide indemnities in respect of, among other things, (a) taxation falling on any member of CKW Group resulting from, or relating to, or in consequence of or by reference to, any income, profits or gains earned, accrued or received and/or assets acquired by any member of the CKW Group on or before the date of which the Global Offering becomes unconditional (the “ Effective Date ”); (b) any estate duty which is or becomes payable by any member of the CKW Group by virtue of section 35 or under the provision of section 43 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) (or equivalent thereof under the laws of any jurisdiction outside Hong Kong) by reason of the death of any person and by reason of the assets of members of the CKW Group or any of them being deemed for the purpose of estate duty to be included in the property passing on his/her death by reason of that person making or having made a relevant transfer to members of the CKW Group or any of them on or before the Effective Date; and (c) all costs and expenses of any relocation of all or any part of the deport of the CKW Group from the parcel of land comprising 20 lots with an aggregate gross land area of approximately 180,000 sq.ft in Yuen Long, Hong Kong and all losses and damages which may be incurred or suffered by any member of the CKW Group as a result of any of the issues relating to such land as described in the CKW Prospectus.

VI. Underwriting agreements, lock-up restriction and Stock Borrowing Agreement

In line with other spin-off precedents in Hong Kong and as confirmed by Directors, the Company will enter into the Stock Borrowing Agreement as well as the Hong Kong Underwriting Agreement in relation to the Hong Kong Public Offer with Chinney Kin Wing, the Sole Global Coordinator and the Hong Kong Underwriters. The Company will also enter into the International Underwriting Agreement relating to the International Offer with Chinney Kin Wing, the Sole Global Coordinator and the International Underwriters. Each of the CKW Controlling Shareholders will be subject to the related lock-up restrictions pursuant to Rule 10.07(1) of the Listing Rules and has entered into similar non-disposal arrangements with the Hong Kong Underwriters.

VII. Preferential Offerings and Preferential Entitlements

According to PN15 of the Listing Rules, in the case of a separate listing, the Company is required to give due regard to the interests of its Shareholders by providing them with a preferential entitlement to the CKW shares. In this case, Qualifying Shareholders are being invited to apply for an aggregate of 34,425,000 Reserved Shares in the Preferential Offer, representing 10% and 9% of the Offer Shares available under the International Offer and Global Offering, respectively as Preferential Entitlement (assuming that the Over-allotment Option is not exercised), on the basis of the Preferential Entitlement of one Reserved Share for every integral multiple of 17 Shares held by Qualifying Shareholders as at 4:30 p.m. on the Record Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In order to find out whether the proportion of the Offer Shares which would be made available as Reserved Shares for subscription by the Qualifying Shareholders is a meaningful proportion and is comparable to other similar spin-off listing cases, we have, to the best of our effort, identified and reviewed the following spin-off listing cases (excluding companies that were spun-off and listed by way of introduction) with preferential entitlements completed by Hong Kong listed companies since 1 January 2011 up to the Latest Practicable Date. Detailed information of the 13 spin-off and listing cases are set out as follows:

				Preferential
				entitlement
				as a
				percentage of
		Number of	Number of	number of
		reserved	offer	shares/share	Market
	Company name	shares/share	shares/share	stapled units	capitalisation
Prospectus date	(Stock code)	stapled units	stapled units	offered	(Note 1)
					(HK$ million)
21 June 2011	Newton Resources	40,000,000	1,000,000,000	4.0%	7,000
	Limited (1231.HK)
30 June 2011	1010 Printing Group	12,531,836	125,000,000	10.0%	350
	Limited (1127.HK)
16 November 2011	HKT Trust and HKT	616,007,000	2,053,354,000	30.0%	29,068
	Limited (6823.HK)	(Note 2)		(Note 2)
30 December 2011	Allied Cement	16,500,000	165,000,000	10.0%	660
	Holdings Limited
	(1312.HK)
28 June 2012	Qualipak	8,625,999	14,375,999	60.0%	229
	International
	Holdings Limited
	(1332.HK)
16 May 2013	Langham Hospitality	42,608,000	852,174,000	5.0%	9,300
	Investments and
	Langham
	Hospitality
	Investment Limited
	(1270.HK)
28 November 2013	Excel Development	5,000,000	50,000,000	10.0%	200
	(Holdings) Limited
	(1372.HK)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Preferential
				entitlement
				as a
				percentage of
		Number of	Number of	number of
		reserved	offer	shares/share	Market
	Company name	shares/share	shares/share	stapled units	capitalisation
Prospectus date	(Stock code)	stapled units	stapled units	offered	(Note 1)
					(HK$ million)
06 December 2013	Kerry Logistic	722,136,614	216,071,500	N/A	14,585
	Network Limited	(Note 3)		(Note 3)
	(636.HK)
16 January 2014	HK Electric	533,565,500	4,426,900,000	12.1%	48,157
	Investments and
	HK Electric
	Investments
	Limited (2638.HK)
17 June 2014	China New City	47,352,700	468,000,000	10.1%	3,969
	Commercial
	Development
	Limited (1321.HK)
31 December 2014	SiS Mobile Holdings	14,188,160	44,800,000	31.7%	131
	Limited (1362.HK)
17 June 2014	Color Life Services	25,000,000	250,000,000	10.0%	3,300
	Group Co.,
	Limited (1778.HK)
19 June 2014	Jinmao (China)	80,000,000	600,000,000	13.3%	10,700
	Investments
	Holdings Limited
	(6139.HK)
Minimum: Maximum: Mean: Median:				4.0% 60.0% 17.2% 10.1%	131 48,157 9,819 3,969
Chinney Kin Wing				9.0%	750

Source of information: Extracted from the relevant announcements, circulars and prospectuses of the respective companies

Notes:

(1) Market capitalisation of the comparable companies extracted from their respective listing documents were based on their minimum offer prices and assuming over-allotment option has not been exercised (if any).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(2) Up to a total of 616,007,000 share stapled units (representing approximately 30% of the share stapled units initially available under the global offering of the share stapled units) offered by HKT Trust and HKT Limited under the preferential offering of which (i) 207,780,000 share stapled units (representing approximately 10% of the share stapled units initially available under the global offering of the share stapled units) offered to the qualifying shareholders of PCCW Limited as preferential entitlement, and (ii) up to an additional 408,227,000 share stapled units (representing approximately 20% of the share stapled units initially available under the global offering of the share stapled units) made available to qualifying shareholders of PCCW Limited who applied for more than their preferential entitlement to satisfy their application for the excess reserved share stapled units.
(3) As set out in the listing document of Kerry Logistic Network Limited, the parent company of Kerry Logistic Network declared a conditional dividend to qualifying shareholders and the distribution is satisfied wholly by way of a distribution in specie to the qualifying shareholders of an aggregate of 722,136,614 shares, which is different with other spin-off cases and the Proposed Spin-off of Chinney Kin Wing as our case.

From the above comparison table with information of spin-off and listing cases on the Mainboard of the Stock Exchange with preferential entitlement completed since 1 January 2011 up to the Latest Practicable Date (“ Comparable Spin-offs ”), we note the percentage of shares/share stapled units initially issued as preferential entitlement to Qualifying Shareholders to the number of shares/share stabled units issued in the Global Offering ranges from approximately 4% to 60%, whilst the average and median are 17.2% and 10.1% respectively. Given the information provided by the Letter, Qualifying Shareholders are being invited to apply for an aggregate of 34,425,000 Reserved Shares under the Preferential Offer, representing 9% of the Offer Shares available under the Global Offering (assuming that the Over-allotment Option is not exercised). We note that the percentage of the Preferential Entitlement is within the range of the preferential entitlements related to the Comparable Spin-offs from approximately 4% to 60%. Furthermore, the percentage of the Preferential Entitlement is close to the median of the preferential entitlements related to the Comparable Spin-offs which is approximately 10.1%. Thus, on this basis, we are of the view that the proportion of the Offer Shares which would be issued as Reserved Shares for subscription by the Qualifying Shareholders is in line with Comparable Spin-offs and is a meaningful proportion.

Qualifying Shareholders should note that Preferential Entitlement of Reserved Shares may not represent a number of a full board lot of CKW Shares. Further, the Reserved Shares allocated to the Qualifying Shareholders will be rounded down to the closest whole number if required, and dealings in odd lots of the CKW Shares may be at a price below the prevailing market price for full board lots.

Qualifying Shareholders may apply for a number of Reserved Shares which is greater than, less than or equal to their Preferential Entitlement under the Preferential Offer. The valid application for a number of Reserved Shares which is less than or equal to their Preferential Entitlement under the Preferential Offer will be satisfied in full. Where a Qualifying Shareholders applies for a number of Reserved Shares which is greater than the Qualifying Shareholder’s Preferential Entitlement under the Preferential Offer, the relevant Preferential Entitlement will be satisfied in full but the excess portion of such application will only be met to the extent that there are sufficient available Reserved Shares resulting from other Qualifying Shareholders declining to take up some or all of their Preferential Entitlement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

VIII. Employee Preferential Offer

As set out in the Letter, of the 38,250,000 shares as the Offer Shares initially being offered under the Hong Kong Public Offer, 3,825,000 Offer Share (representing 10% and 1% of the total number of Offer Shares initially being offered under the Hong Kong Public Offer and the Global Offering (assuming that the Over-allotment Option is not exercised) will be offered as the Employee Reserved Shares for subscription by the Eligible Employees on a preferential basis and being offered out of Hong Kong Offer Shares. We have reviewed the spin-off cases completed from 1 January 2011 up to the Latest Practicable Date and identified that, to the best of our effort, there were two spin-off cases with employee preferential offer which the details are summarized as below:

				Number of
				employee
				reserved
				shares as a
				percentage of
		Number of		number of
		employee		shares/share
	Company name	reserved	Number of	stapled units	Market
Prospectus date	(Stock code)	shares	offer shares	offered	capitalisation
					(HK$ million)
30 December 2011	Allied Cement	1,485,000	165,000,000	0.9%	660
	Holdings Limited
	(1312.HK)
31 December 2014	SiS Mobile Holdings	448,000	44,800,000	1.0%	131
	Limited
	(1362.HK)
Mean:				1.0%	395
Chinney Kin Wing				1.0%	750

Source of information: Extracted from the relevant announcements, circulars and prospectuses of the respective companies

We note that the terms and the allocation basis of the Employee Preferential Offer of the Proposed Spin-off are similar to the cases listed in the above table.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IX. Financial impact of the Proposed Spin-off on the Group

As set out in the Letter, based on (i) the number of Offer Shares, and (ii) current proposed structure of the Proposed Spin-off, the Company will continue to hold, immediately following completion of the Proposed Spin-off, approximately 74.5% of all the CKW Shares in issue (assuming that no Over-allotment Option is exercised) and approximately 71.8% of all the CKW Shares in issue (assuming that Over-allotment Option is fully exercised). Thus, following completion of the Proposed Spin-off, contribution from the Chinney Kin Wing towards both the Company’s consolidated net asset value and earnings attributable to the Shareholders after taking into account non-controlling interest will reduce as the Company’s shareholding interest in Chinney Kin Wing will decrease from 100% to 74.5% or 71.8% after completion of the Global Offering. Consequently, financial results of the CKW Group will be consolidated into the accounts of the Group and the profit attributable to non-controlling interests will increase.

(a) Effect on net asset value

As noted from the Letter, the estimated minimum market capitalisation of Chinney Kin Wing (assuming the Over-allotment Option is not exercised), will be approximately HK$750 million. It is expected by the Directors that the consolidated net assets of the Group will be increased as a result of the issue of the CKW Shares at an issue price above their attributable underlying combined net asset value (the “Increase in Net Assets”) and the consolidated cash balances of the Group will be increased by the net proceeds from the Global Offering and the special dividends to be distributed by Chinney Kin Wing to the Company before the Listing. Assuming all other factors remaining unchanged, it is expected that there will be a positive effect on the net asset value to the Group after the Proposed Spin-off and the Global Offering. However, in accordance with the Hong Kong Financial Reporting Standards, the Increase in Net Assets which constitutes changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control, is accounted for within equity. Therefore, there will be no gain or loss arising from the deemed disposal by the Company of its interest in Chinney Kin Wing under the Global Offering to be recognised in the consolidated income statement of profit or loss of the Company given that Chinney Kin Wing will remain as a direct non-wholly owned subsidiary of the Company immediately upon completion of the Proposed Spin-off and the Global Offering.

Shareholders should note that the Increase in Net Assets is discussed based on various facts and assumptions which are the audited consolidated net assets of CKW Group as at 30 April 2015, the net proceeds from the Global Offering and special dividend to be distributed by Chinney Kin Wing to the Company before the Listing. Accordingly, the actual changes to the consolidated net asset value of the Group upon completion of the Proposed Spin-off, which is calculated by reference to the financial position of Chinney Kin Wing at the time of completion of the Global Offering, may be different from the Increase in Net Assets as discussed in the Letter.

(b) Effect on earnings

The effect of the Proposed Spin-off on the future earnings of the Group will depend on, among other things, the return generated from the proceeds raised from the Global Offering as well as the growth of the business operations of the CKW Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the 2013 Annual Report and the 2014 Annual Report, the consolidated net profits before taxation of the Group for each of the two years ended 31 December 2014 were approximately HK$115.4 million and HK$165.7 million respectively. For each of the two years ended 31 December 2014, the audited consolidated net profits after taxation of the Group were approximately HK$104.5 million and HK$142.3 million respectively. Based on the unaudited consolidated financial statements of the Group for the six months ended 30 June 2015, the unaudited profit before and after taxation of the Group were HK$95.0 million and HK$77.4 million, respectively.

(c) Effect on working capital

According to the 2015 Interim Report, the cash and cash equivalents of the Group (excluding pledged deposits) for the six months ended 30 June 2015 amounted to approximately HK$535.7 million as at 30 June 2015. Cash proceeds will be raised by the CKW Group from the Global Offering. As the CKW Group will remain as one of the subsidiaries of the Group after the Listing and there will be special dividend to be distributed by Chinney Kin Wing to the Company after the Listing, assuming all other factors remaining unchanged, it is expected that the Proposed Spin-off will have a positive impact on the working capital position of the Group.

X. Valuation of the CKW Group

CKW Group is principally engaged in a wide range of foundation works including piling construction, provision of foundation related ancillary services and drilling and site investigation business. We use profit-to-earnings (“PE”) in analyzing the valuation of companies engaged in above business for our comparison purpose.

As set out in the Letter, the audited consolidated net profit of the CKW Group for the year ended 31 December 2014 is approximately HK$98.6 million.

Based on (i) the estimated minimum market capitalisation of Chinney Kin Wing of approximately HK$750 million and (ii) the audited net profit of approximately HK$98.6 million for the year ended 31 December 2014, the estimated PE of CKW Group is 7.6x (the “CKW PE”). Shareholders should note that the exact historical PE of the CKW Group will vary depending on, among others, the final offer price and the final number of shares offering under the Global Offering.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In order to assess the fairness and reasonableness of the valuation of the CKW Group as represented by the minimum market capitalisation of Chinney Kin Wing given in the Letter, we have selected, to the best of our effort, listed companies which:

(i) are solely engaged in foundation works in Hong Kong;
(ii) have their shares listed on the Stock Exchange of Hong Kong;
(iii) have their market capitalisation of under HK$3,000 million as at 7 October 2015, being the last trading day of the calendar month immediately preceding the Latest Practicable Date.

We consider the selection and identification of comparable companies listed below on the basis as set above is a reasonable approach and believe the comparable companies are fair, representative and exhaustive samples. However, Shareholders should note that our comparisons with the comparable companies are only for general reference purpose given that some aspects such as the business model and financial performance of the comparables may not be exactly the same with that of the Chinney Kin Wing. In addition, the market capitalisation of listed companies largely depends on the stock price performance which may fluctuate due to economic environment changes and company activities.

The table illustrates the comparison of the historical PE of the comparable companies:

		Market	Historical
Stock code	Company name	Capitalisation	PE
		(HK$ million)
687.HK	Tysan Holdings Limited	2,868.9	5.7x
2277.HK	Chun Sing Engineering Holdings	1,308.1	19.9x
	Limited
3822.HK	Sam Woo Construction Group Limited	1,285.2	5.9x
1499.HK	LEAP Holdings Group Limited	1,121.1	27.0x
2221.HK	New Concepts Holdings LTD	1,072.0	20.1x
1240.HK	CNQC International Holdings Limited	786.0	5.0x
1718.HK	Wan Kei Group Holdings Limited	680.0	10.9x
1246.HK	Ngai Shun Holdings Limited	547.8	6.0x
High: Low: Mean: Median:		2.686.9 547.8 1,208.6 1,096.6	27.0x 5.0x 12.6x 8.5x
Chinney Kin	Wing		7.6x

Source: The Stock Exchange, annual reports of related comparables, as at 7 October 2015.

– 64 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As illustrated in the above table with valuation information of comparable companies, we note the historical PEs of the comparable companies range from 5.0x to 27.0x, with the mean and the median being approximately 12.6x and 8.5x respectively.

As indicated earlier, the estimated historical CKW PE is approximately 7.6x based on estimated minimum market capitalisation as mentioned in the Letter and audited consolidated net profit for the year ended 31 December 2014. We note that the historical CKW PE of approximately 7.6x is within the range of the historical PEs of the comparable companies, from 5.0x to 27.0x respectively. The CKW PE is slightly lower than the mean and median PE of comparable companies at approximately 12.6x and 8.5x respectively. We further identify four comparable companies from the above table with market capitalisation closer to that of the Chinney Kin Wing which is approximately HK$750 million. The PE ratio of these four comparable companies range from 5.0x to 20.1x with the mean and median of 10.5x and 8.5x respectively. The PE of CKW Group of approximately 7.6x is within the range and is closer to the mean. In view of the above, we consider the historical CKW PE is in line with the general valuation of companies engaged in foundation works and the minimum market capitalisation of the CKW Group estimated by the Board (excluding the independent non-executive Director) is acceptable.

XI. Conditions of the Proposed Spin-off

As stated in the Letter, the Proposed Spin-off will be conditional upon, among other things:

(a) the Listing Committee of the Stock Exchange granting approval for listing of, and permission to deal in, the CKW Shares in issue and the Offer Shares to be issued pursuant to the Global Offering (including any CKW Shares to be issued upon the exercise of the Over-allotment Option) on the Main Board of the Stock Exchange;
(b) the terms and structure of the Global Offering being agreed among the Company, Chinney Kin Wing and the Underwriters appointed under the Global Offering;
(c) the execution and delivery of the International Underwriting Agreement on or about the Price Determination Date; and
(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement and the obligations of the International Underwriters under the International Underwriting Agreement becoming unconditional and not having been terminated in accordance with the terms of the respective agreements.

If any of these and other applicable conditions are not fulfilled or waived, if applicable, prior to the dates and times to be specified, the Proposed Spin-off will not proceed and an announcement will be published by the Company as soon as practicable thereafter. We have been advised by the Directors that, even the other outstanding conditions are fulfilled, the Proposed Spin-off and the Global Offering may not proceed if the Board then considers that

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

proceeding with the Proposed Spin-off and the Global Offering would not be in the interests of the Company and Shareholders as a whole after considering the relevant factors, among others, the then prevailing stock market conditions and the demand for the CKW Shares under the Global Offering. Shareholders and public investors should note that there is no assurance that the Proposed Spin-off and the Listing will take place and, if so, when they may take place. Shareholders and potential investors of the Company should exercise caution when dealing in or investing in the securities of the Company.

RECOMMENDATION

Having considered the principal factors and reasons as set out above and in particular, since the Chinney Kin Wing will remain as a direct non-wholly owned subsidiaries of the Company after the Proposed Spin-off and the Listing whereas the Qualifying Shareholders will be granted CKW Shares under the Preferential Entitlement, and both the Company and the Qualifying Shareholders will continue to share any growth in the business and wider investor base of the CKW Group in future after the Listing, we are of the view that the terms of the Proposed Spin-off are fair and reasonable so far as the Company and the Shareholders are concerned, and that the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole. As stated in the Letter, Enhancement Investments, Multi-Investment and Chinney Capital, all controlled by, Dr. Wong, holding an aggregate of approximately 435,940,216 Shares representing approximately 73.28% of the issued share capital of the Company, have given a written approval to the Company in respect of the Proposed Spin-off and thus no Shareholders’ meeting will be convened to consider the Proposed Spin-off. Accordingly, we recommend the Independent Board of Committee to advise the Shareholders to vote in favour of the relevant resolution if there were a general meeting of the Company held to consider to approve the Proposed Spin-off.

Yours faithfully, For and on behalf of KGI Capital Asia Limited

Ringo Kwan Wesley Chan

Head of Investment Banking Senior Vice President

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. INDEBTEDNESS

At the close of business on 31 August 2015, being the latest practicable date prior to the printing of this circular and for the purpose of this indebtedness statement, the Group had outstanding (i) secured bank borrowings of approximately HK$3.9 million which were secured by certain land and buildings of the Group and a corporate guarantee provided by the Company; and (ii) unsecured bank borrowings of (a) bank loans of approximately HK$15 million; (b) unsecured bank overdrafts of approximately HK$6.2 million; and (c) trust receipt loans of approximately HK$205.6 million, which were secured by corporate guarantees provided by the Company and certain subsidiaries.

In addition, the Group has provided corporate guarantees and indemnities to certain banks and a financial institution for an aggregate amount of approximately HK$419.3 million for the issue of performance bonds in its ordinary course of business.

Save as disclosed above and apart from intra-group liabilities, the Group did not, as of the close of business on 31 August 2015, have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptance, debentures, mortgages, charges, finance lease commitments, guarantees or other material contingent liabilities.

2. WORKING CAPITAL

After taking into account the present internal financial resources, net proceeds from the Listing, as well as the available banking facilities, and in the absence of unforeseen circumstances, the Directors, after due and careful enquiry, are of the opinion that the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

3. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Following the completion of the Proposed Spin-off, the Remaining Group will continue to engage in the Retained Business with main focus on provision of building services and electrical and mechanical installation and maintenance services, building construction business, trading of plastic and chemical products, distribution and installation of aviation systems and other hi-tech products and other investment activities such as equity investments and investments in real estate while the CKW Group will operate the Foundation Business aiming for opportunities to expand its scope of services and compete for sizeable foundation projects.

The Group recorded a revenue of approximately HK$2,170 million for the six months ended 30 June 2015 (2014: HK$1,760 million). The profit for the period was approximately HK$77.4 million (2014: HK$30.4 million).

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Business Review and Prospects

Trading of plastics and chemicals products

The plastic trading division, which consists of Jacobson van den Berg (Hong Kong) Limited and other companies, contributed a revenue of approximately HK$275 million for the six months ended 30 June 2015 (2014: HK$264 million) with an operating profit of approximately HK$4.6 million for the six months ended 30 June 2015 (2014: HK$2.4 million). While the revenue increased slightly in the said period, the operating profit improved even better which was mainly attributable to higher rebate from suppliers for attainment of sales target in said period and net exchange gain from translation of the division’s Renminbi assets was recorded in said period versus a net loss in 2014. Although there were signs of recovery in external market in the period under review, the division faced keen competition from peers. The manufacturers in the PRC, which were the principal customers of the division, also faced the problem of sluggish demand and over capacity. With the PRC market slowing down, the operating margin will be further squeezed. The division continues to explore new products and services to broaden the lines of business and to enhance earnings.

Building related contracting services

Shun Cheong Investments Limited and its subsidiaries contributed a revenue of approximately HK$503 million for the six months ended 30 June 2015 (2014: HK$375 million) and an operating profit of approximately HK$15.0 million for the six months ended 30 June 2015 (2014: HK$2.4 million). The improvement was mainly attributable to more projects awarded and commenced. The division acquired a trading of building services equipment business during the period under review for vertical diversification of business to achieve better cost efficiency. The division’s clients include property developers, government departments and public sector in Hong Kong and hotel and resorts in Macau. Although the tendering of four public housing projects is postponed by the Hong Kong Housing Authority due to the recent lead-in-water incident, the division has satisfactory contracts on hand with an aggregate sum of approximately HK$2,170 million as at 30 June 2015. Subsequent to the period end, the division was awarded approximately HK$483 million worth of contracts.

Foundation piling and ground investigation

The principal subsidiaries of the division include Kin Wing Engineering, Kin Wing Foundations and DrilTech Ground. The revenue was approximately HK$871 million for the six months ended 30 June 2015 (2014: HK$679 million) and operating profit was approximately HK$81.9 million for the six months ended 30 June 2015 (2014: HK$38.5 million). The increase in revenue of the division was mainly attributable to projects with larger contract sum awarded during the period. With better profit margin, the division’s profitability improved further. The division’s projects are mainly from the private sector.

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Building construction

The division consists of Chinney Construction Company, Limited and Chinney Builders Company Limited which operate in Hong Kong and Chinney Timwill Construction (Macau) Company Limited which operates in Macau. During the period, the division recorded a revenue of approximately HK$514 million for the six months ended 30 June 2015 (2014: HK$439 million) with an operating profit of HK$6.0 million for the six months ended 30 June 2015 (2014: HK$7.4 million). Since the new projects undertaken in the said period were still in early stage of construction, profits of these projects were not yet recognised in respect of works done in accordance with the accounting policies adopted and the profit of the division was thus lower than that of last year. The division’s client base included schools, institutions, property developers, hospitality and non-profit organisations in Hong Kong and Macau. As at 30 June 2015, the division had outstanding contracts on hand of approximately HK$1,752 million. Subsequent to the period end, the division was awarded approximately HK$39 million worth of contracts.

Other businesses

Other businesses include the holding of properties for the Group’s own use and the distribution of aviation system and other hi-tech products engaged by Chinney Alliance Engineering Limited (“ CAE ”). CAE recorded a revenue of approximately HK$8 million for the six months ended 30 June 2015 (2014: HK$4 million) and an operating loss of approximately HK$1.0 million for the six months ended 30 June 2015 (2014: loss of HK$2.8 million). The testing of the new air traffic management system of the Hong Kong airport resumed after the end of the reporting period and CAE would record revenue from this and related projects upon completion of the testing stage.

The properties holding recorded a loss of approximately HK$0.6 million for the six months ended 30 June 2015 which was mainly due to depreciation charges.

The Group’s share of the profits and losses of associates reported net losses of approximately HK$0.5 million for the six months ended 30 June 2015. As reported in the 2014 annual report published by the Company, Jiangxi Kaitong New Materials Company Limited decided to close the factory and returned the land to local government with compensation. The Group’s investment in a real estate property in Hangzhou, the PRC, which is held for rental income, managed to reduce its loss with improved occupancy rate.

Outlook

The announcement of the U.S. Manufacturing Purchasing Manager Index dropped unexpectedly in August 2015 to 52.9, the lowest since October 2013 as output, new orders and employment all grew at a slower pace. In the Eurozone, the resignation of the Greece Prime Minister would bring uncertainty to the Euro debt crisis if new leader was elected and the policies would change. The PRC government intends to shift growth away from the export-dominated model that operated more than a decade with double-digit growth rates and

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

to achieve the next stage of economic development through more sustainable, domestic-led growth, encouraging urbanisation, and increasing the role of markets. However, the shift could not be achieved in short term and there are signs to indicate the slowdown of the PRC economy with interest rates cut repeatedly and global commodity prices dropped continuously. The tension in the northeast Asia region brings further uncertainty to the global political and economic environment. All these reflected in the falling of major stock markets over the world. It is therefore expected the US Federal Reserve might delay the interest rate rise so as not to worsen the world economy.

In Hong Kong, the Gross Domestic Product of the second quarter of 2015 improved slightly to 2.8% in real term over a year from 2.4% of first quarter, which was contributed by strong private consumption on the back of favourable job and income prospects. While the recent devaluation of Renminbi would ease the costs of living in Hong Kong and costs of production in the PRC, the Hong Kong retail market would be affected by conservative spending of visitors. Traditional manufacturing based countries like the PRC are still relying on the recovery of external markets to support their production capacity and this would achieve when the economy shifts more to domestic oriented consumption. The Group’s plastic trading business would continue to face a tough year. Although the Group’s three construction related divisions have satisfactory contracts on hand and would be benefited from the drop in commodity prices for awarded contracts, they are all cautious in the determination tender prices to maintain competitive pricing and profitability.

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GENERAL INFORMATION

APPENDIX II

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 Group. 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

(a) Disclosure of interest of Directors

As at the Latest Practicable Date, the interests and short positions of the Director or chief executive of the Company in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of the SFO); or (ii) pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“ Model Code ”) set out in Appendix 10 to the Listing Rules adopted by the Company, to be notified to the Company and the Stock Exchange, were as follows:

Long positions in ordinary Shares of the Company:

					Percentage of
				Total number of	the issued shares
	Personal	Family	Corporate	issued ordinary	capital of the
Name of Director	interests	interests	interests	Shares held	Company
Dr. Wong	–	–	435,940,216	435,940,216	73.28%
			(Note)

Note: Among these Shares, 19,602,000 Shares are held by Chinney Capital, 173,093,695 Shares are held by Multi-Investment, and 243,244,521 Shares are held by Enhancement Investments, all of which Dr. Wong is a director of and has beneficial interests in.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executives of the Company had any interest and short position in the Shares, underlying Shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of SFO) which (i) 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 and short positions which he is taken or deemed to have under such provisions of SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein; or (iii) were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX II

(b) Information about the Company’s management

The following table shows each of the Directors who is a director or employee of a company which had an interest or short position in the Shares and 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 (the “ Relevant Company ”) as at the Latest Practicable Date:

		Position of the
		Director in the
Name of Director	Relevant Company	Relevant Company
Dr. Wong	Chinney Investments	Director
	Multi-Investment
	Enhancement Investments
	Lucky Year Finance Limited
	Newsworthy Resources
	Limited
	Chinney Holdings Limited
Mr. James Sing-Wai Wong	Chinney Investments	Director
	Chinney Holdings Limited
	Lucky Year Finance Limited
Mr. Fung	Chinney Investments	Director
	Chinney Holdings Limited
	Lucky Year Finance Limited
	Multi-Investment
	Newsworthy Resources
	Limited

(c) Directors’ service contracts

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any of its subsidiaries other than contracts expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation).

(d) Interest in contracts and arrangements

As at the Latest Practicable Date, none of the Directors had material interest in any contract or arrangement subsisting in which was significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX II

(e) Interest in competing business

As at the Latest Practicable Date, none of the Directors or their respective close associates had any interest in a business, which competes or may compete, whether directly or indirectly, with the business of the Group.

(f) Interest in assets

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any asset which has since 31 December 2014, being the date to which the latest published audited financial statements of the Group were made up, been 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.

3. LITIGATION

As at the Latest Practicable Date, none of the Company or any of its subsidiaries is engaged in any litigation, arbitration or claim of material importance, and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened by or against the Group.

4. EXPERT AND CONSENT

The following is the qualification of the expert who has given, or agreed to the inclusion of, its opinion or advice in this circular:–

Name Qualification KGI Capital Asia Limited a corporation licensed to carry out Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) of the regulated activities under the SFO, being the Independent Financial Adviser to the Independent Board Committee and the Shareholders in connection with the Proposed Spin-off

KGI has confirmed that as at the Latest Practicable Date, it did not have any beneficial shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group nor did it have any direct or indirect interests in any assets which have since 31 December 2014 (being the date to which the latest published audited consolidated financial statements of the Company were made up) been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

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GENERAL INFORMATION

APPENDIX II

KGI has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its opinion prepared for the purpose of incorporation in this circular, and the references to its name and opinion in the form and context in which they respectively appear.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest published audited consolidated accounts of the Group have been made up.

6. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, were entered into by members of the Group within two years preceding the Latest Practicable Date and are or may be material:

(i) the share purchase agreement entered into among Chinney Construction (as vendor), Chinney Kin Wing (as purchaser) and the Company (as guarantor) on 15 October 2015 pursuant to which Chinney Kin Wing acquired the entire issued share capital of Kin Wing held by Chinney Construction at a consideration of HK$1,622;
(ii) the deed of assignment and novation of loan entered into between Kin Wing, Chinney Construction, the Company and DrilTech Geotechnical on 15 October 2015 pursuant to which (i) DrilTech Geotechnical assigned all its rights, title, interests and benefits of and in the loan of HK$6,000,000 granted to the Company (the “ DT Loan ”) to Kin Wing absolutely; and (ii) Chinney Construction assumed all of the Company’s obligations and liabilities to repay DrilTech Geotechnical under the DT Loan, each in consideration of an amount equal to the DT Loan;
(iii) the deed of assignment and novation of loan entered into between Kin Wing, Chinney Construction, the Company and Kin Wing Foundations on 15 October 2015 pursuant to which (i) Kin Wing Foundations assigned all its rights, title, interests and benefits of and in the loan of HK$14,962,000 granted to the Company (the “ KWF Loan ”) to Kin Wing absolutely; and (ii) Chinney Construction assumed all of the Company’s obligations and liabilities to repay Kin Wing Foundations under the KWF Loan, each in consideration of an amount equal to the KWF Loan;

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GENERAL INFORMATION

APPENDIX II

(iv) the deed of assignment and novation entered into between Kin Wing, Chinney Construction, the Company and Kin Wing Engineering on 15 October 2015 pursuant to which (i) Kin Wing Engineering assigned all its rights, title, interests and benefits of and in the loan of HK$1,000,000 granted to the Company (the “ KWE Loan ”) to Kin Wing absolutely; and (ii) Chinney Construction assumed all of the Company’s obligations and liabilities to repay Kin Wing Engineering under the KWE Loan, each in consideration of an amount equal to the KWE Loan;
(v) the Deed of Non-competition;
(vi) the Deed of Indemnity; and
(vii) the Hong Kong Underwriting Agreement.

7. GENERAL

(i) The secretary of the Company is Mr. Yun-Sang Lo, a fellow member of the Association of Chartered Certified Accountants and a member of the Hong Kong Institute of Certified Public Accountants;
(ii) The registered office of the Company is Clarendon House, Church Street, Hamilton HM 11, Bermuda;
(iii) The head office and principal place of business of the Company is 23rd Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong;
(iv) The Company’s branch share registrar in Hong Kong is Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong; and
(v) In the event of inconsistency, the English text shall prevail over the Chinese text.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company at 23rd Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong up to and including 13 November 2015:

(i) this circular;
(ii) the memorandum of association and bye-laws of the Company;
(iii) the annual reports of the Company for the two financial years ended 31 December 2013 and 31 December 2014;
(iv) the interim report of the Company for the six months ended 30 June 2015;

– II-5 –

GENERAL INFORMATION

APPENDIX II

(v) the letter of recommendation from the Independent Board Committee, the text of which is set out on page 41 of this circular;
(vi) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Shareholders, the text of which is set out on pages 42 to 66 of this circular;
(vii) the written consent as referred to under the section headed “4. Expert and Consent” in this appendix; and
(viii)the material contracts referred to under the section headed “6. Material Contracts” in this appendix.

– II-6 –

AI assistant

Chinney Alliance Group Limited — Proxy Solicitation & Information Statement 2015

49180_rns_2015-10-30_216b4fd5-062e-47d7-9cfe-ad4a21fd4b18.pdf

MAJOR TRANSACTION

DEEMED DISPOSAL IN RELATION TO THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF CHINNEY KIN WING HOLDINGS LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

Financial Adviser to the Company

Independent Financial Adviser to the Independent Board Committee and the Shareholders

CONTENTS

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

“HKSCC”

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 385)

Executive Directors:

Non-executive Directors:

Independent non-executive Directors:

Registered office:

To the Shareholders

MAJOR TRANSACTION

DEEMED DISPOSAL IN RELATION TO THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF CHINNEY KIN WING HOLDINGS LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

INTRODUCTION

INFORMATION ON THE PROPOSED SPIN-OFF

The Proposed Spin-off

LETTER FROM THE BOARD

Separate listing of the CKW Shares

Shareholding effects of the Proposed Spin-off

Shareholding structure of the CKW Group prior to the Proposed Spin-off

Shareholding structure of the CKW Group upon completion of the Proposed Spin-off

INFORMATION ON THE REMAINING GROUP AND THE CKW GROUP

Business overview of the CKW Group

Clear business delineation between the business of the Remaining Group and the CKW Group

Foundation Business

Retained business

LETTER FROM THE BOARD

Management independence

LETTER FROM THE BOARD

Operational independence

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Financial Independence

LETTER FROM THE BOARD

Administrative independence

Non-competition undertaking

Corporate governance measures to avoid conflict of interests

Indemnities

Underwriting agreements, lock up restrictions and Stock Borrowing Agreement

Underwriting agreements

Lock-up

Stock Borrowing Agreement

Financial information of CKW Group

FINANCIAL IMPACT OF THE PROPOSED SPIN-OFF

Net asset value

Earnings

REASONS FOR AND BENEFITS OF THE PROPOSED SPIN-OFF

CONDITIONS OF THE PROPOSED SPIN-OFF

PROPOSED USE OF NET PROCEEDS FROM THE GLOBAL OFFERING

PREFERENTIAL OFFER

Basis of the Preferential Entitlement

The basis of the Preferential Entitlement is one Reserved Share for every integral multiple of 17 Shares held by Qualifying Shareholders as at 4:30 p.m. on the Record Date.

Preferential Entitlement of Qualifying Shareholders to Reserved Shares are not transferable and there will be no trading in nil-paid entitlements on the Stock Exchange.

Basis of allocation for applications for Reserved Shares

Applications by Qualifying Shareholders for Hong Kong Offer Shares

Qualifying Shareholders and Non-Qualifying Shareholders

Distribution of the CKW Prospectus and the BLUE Application Forms

Application procedures

EMPLOYEE PREFERENTIAL OFFER

LISTING RULES IMPLICATIONS

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

RECOMMENDATIONS

GENERAL

ADDITIONAL INFORMATION

To the Shareholders

Chinney Alliance Group Limited Proxy Solicitation & Information Statement 2015