Chinney Alliance Group Limited - Proxy Solicitation & Information Statement 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in 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.

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(Incorporated in Bermuda with limited liability) (Stock Code: 385)

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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Capitalised terms used in this cover shall have the same meanings as defined in this circular.

A letter from the Board is set out on pages 5 to 12 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on page 13 of this circular. A letter from KGI Capital Asia Limited, the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders, is set out on pages 14 to 24 of this circular.

A notice convening the SGM to be held at Full Moon Shanghai Restaurant, Macau Jockey Club, 3rd Floor, East Wing, Shun Tak Centre, 200 Connaught Road Central, Hong Kong on Monday, 7 November 2016 at 5:00 p.m., or in the event that a black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted in Hong Kong at 9:00 a.m. on that day, at the same time and place on the second Business Day after 7 November 2016 or any adjournment thereof, at which the Resolutions as stated in the aforesaid notice will be considered, is set out on pages 30 to 31 of this circular.

A form of proxy for use at the SGM or any adjournment thereof is enclosed with this circular. Whether or not you intend to attend the SGM in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event no later than 48 hours before the time fixed for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish.

for identification purpose only

21 October 2016

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . .	13
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER. . . . . . . . . . . . . . . . . . . . . . .	14
APPENDIX – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
NOTICE OF SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30

DEFINITIONS

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

“Architect”

Andrew Lee King Fun & Associates Architects Limited, the architect engaged by the Employer relating to the proposed development of the Land

“associate(s)”

has the meaning ascribed to it under the Listing Rules

“Board”

the board of Directors

“CAG Group”

the Company and its subsidiaries

“Chinney Investments”

Chinney Investments, Limited (建業實業有限公司), a company incorporated in Hong Kong with limited liability, the issued shares of which are listed on the Stock Exchange (Stock Code: 216) and is holding approximately 68.09% of the issued shares of Hon Kwok Land as at the Latest Practicable Date

“Chinney Investments Group”

Chinney Investments and its subsidiaries

“Chinney Kin Wing”

Chinney Kin Wing Holdings Limited (建業建榮控股有限公司* a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Stock Exchange (Stock Code: 1556)

“Chinney Kin Wing Group”

Chinney Kin Wing and its subsidiaries

“Companies”

Chinney Kin Wing, Chinney Investments, Hon Kwok Land and the Company

“Company”

Chinney Alliance Group Limited (建聯集團有限公司 *), a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on the Stock Exchange (Stock Code: 385), and is the holding company of Chinney Kin Wing

“Conditions Precedent to the Framework Agreement”

the conditions precedents set out under the paragraph “Conditions Precedent” of the Framework Agreement

“connected person(s)”

has the meaning ascribed to it under the Listing Rules

“Contract Documents”

the contract documents in respect of the Foundation Construction Works to be entered into between the Employer and the Contractor in accordance with and substantially in the same form and substance as annexed to the Framework Agreement

“Contract Sum”

a sum of Hong Kong Dollars Two Hundred and Ten Million (HK$210,000,000)

for identification purpose only

DEFINITIONS

“Contractor”

“controlling shareholder”

“Directors”

“Dr. James Sai-Wing Wong”

“Drawings”

“Employer”

“Foundation Construction Works”

Kin Wing Foundations Limited (建榮地基有限公司), a company incorporated under the laws of Hong Kong with limited liability, and an indirect wholly-owned subsidiary of Chinney Kin Wing and an indirect non wholly-owned subsidiary of the Company

has the meaning ascribed to it under the Listing Rules

the directors of the Company

Dr. James Sai-Wing Wong, the chairman and executive director of each of Chinney Investments, Hon Kwok Land and the Company

any drawings in relation to the Foundation Construction Works as contained in the Contract Documents

Gold Famous Development Limited (金譽發展有限公司), a company incorporated under the laws of Hong Kong with limited liability, and an indirect wholly-owned subsidiary of Hon Kwok Land and an indirect non wholly-owned subsidiary of Chinney Investments

includes, but not limited to, in relation to the Land:

(a) the construction of piling foundation, pipe piling, bored pile wall works to accord with the proposed engineer’s loading plans and schedule and all amendments by the proposed engineer’s design;
(b) the carrying out of all tests for the piling works as required in the Specifications;
(c) proof testing for piling system as required by the Architect or the Building Authority;
(d) the preparation of reports on subsoils, piling works, etc. all for submission to the Architect, and amendment of these as necessary to obtain approval from the Building Authority and any relevant governmental department;
(e) the maintenance and reinstatement of existing hoardings, covered walkways, fencings and gantries, etc. in accordance with the Drawings and the Specifications; and
(f) the taking of every precaution to protect adjacent structure from damage and making good any damage caused,

as more particularly set out in the Contract Documents

DEFINITIONS

“Framework Agreement” a framework agreement dated 20 September 2016 entered into between the Contractor and the Employer in relation to the Foundation Construction Works
“HK$” Hong Kong dollar(s), the lawful currency of Hong Kong “Hon Kwok Land” Hon Kwok Land Investment Company, Limited (漢國置業有限公司), a company incorporated in Hong Kong with limited liability and the issued shares of which are listed on the Stock Exchange (Stock Code: 160)
“Hon Kwok Land Group” Hon Kwok Land and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Board Committee” the committee of the Board consisting of all the independent nonexecutive Directors, namely Mr. Yuen-Tin Ng, Mr. Chi-Chiu Wu and Mr. Ronald James Blake, established to advise the Independent Shareholders in respect of the Transactions
“Independent Shareholders” Shareholders other than Dr. James Sai-Wing Wong together with his associates
“KGI Capital” or “Independent KGI Capital Asia Limited, a corporation licensed to carry out Financial Adviser” Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Company in respect of the Transactions
“Land” the parcel of land situated at and known as K.C.T.L. 495, Kin Chuen Street, Kwai Chung, New Territories, Hong Kong
“Latest Practicable Date” 18 October 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
“Laws” includes the Listing Rules, all laws, bye-laws, rules, regulations, guidelines, orders, judgments, decrees or rulings of any court, government, governmental or regulatory authority whether or not ejusdem generis with any of the foregoing and the “Law” shall be construed accordingly
“Letter of Acceptance” the letter of acceptance to be issued by the Architect to the Contractor confirming the engagement of the Contractor, which is substantially in the same form and substance as annexed to the Framework Agreement

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Long-Stop Date”	31 December 2016
“Model Code”	Model Code for Securities Transactions by Directors of Listed
	Issuers
“Parties”	the Contractor and the Employer, the parties to the Framework
	Agreement and a “Party” shall be construed accordingly
“PRC”	the People’s Republic of China, and for the purpose of this
	circular, excludes Hong Kong
“Proposed CT”	the proposed connected transaction contemplated under the
	Framework Agreement
“Quantity Surveyor”	Currie & Brown (China) Limited, a firm of chartered quantity
	surveyors engaged by the Employer and, to the best of the
	Directors’ knowledge, is independent from the Company and its
	associates
“Resolution(s)”	the proposed ordinary resolution(s) as referred to in the notice of
	SGM
“Share(s)”	ordinary share(s) of HK$0.10 in the share capital of the Company
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“SGM”	the special general meeting of the Company to be convened for
	the purpose of, among other things, seeking approval from the
	Independent Shareholders in respect of the Transactions
“Shareholder(s)”	holder(s) of the Shares
“Specifications”	the detailed specifications in relation to the Foundation
	Construction Works as contained in the Contract Documents
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“substantial shareholder”	has the meaning ascribed to it under the Listing Rules
“Transactions”	the Proposed CT and the transactions contemplated thereunder
“%”	per cent

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(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

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

Non-executive Directors:

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

Independent non-executive Directors:

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

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

21 October 2016

To the Shareholders

Dear Sir/Madam,

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

1. INTRODUCTION

Reference is made to the joint announcement of the Company, Chinney Kin Wing, Chinney Investments and Hon Kwok Land dated 20 September 2016 in respect of the Proposed CT.

On 20 September 2016 (after trading hours), the Contractor and the Employer entered into the Framework Agreement, pursuant to which the Employer conditionally agreed to engage the Contractor, and the Contractor conditionally agreed to carry out the Foundation Construction Works on the Land for the Contract Sum of HK$210,000,000.

The purpose of this circular is to provide you with information in respect of, among other things, (a) further details of the Transactions; (b) a letter from the Independent Board Committee to the Independent Shareholders of the Company in respect of the Transactions; (c) a letter of advice from the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders in respect of the Transactions; (d) a notice convening the SGM; and (e) other information as required under the Listing Rules.

for identification purpose only

LETTER FROM THE BOARD

2. THE FRAMEWORK AGREEMENT

Date

20 September 2016 (after trading hours)

Contractor

Kin Wing Foundations Limited (建榮地基有限公司), a company incorporated under the laws of Hong Kong with limited liability, and an indirect wholly-owned subsidiary of Chinney Kin Wing, and an indirect non wholly-owned subsidiary of the Company.

Employer

Gold Famous Development Limited (金譽發展有限公司), a company incorporated under the laws of Hong Kong with limited liability, and an indirect wholly-owned subsidiary of Hon Kwok Land, and an indirect non wholly-owned subsidiary of Chinney Investments.

Foundation Construction Works

Pursuant to the Framework Agreement, the Employer conditionally engages the Contractor and the Contractor conditionally agrees to carry out the Foundation Construction Works on the Land for the Contract Sum on the terms and subject to the Conditions Precedent to the Framework Agreement and the terms and conditions to be finalised and contained in the Contract Documents. The period of the Foundation Construction Works is estimated to be approximately 550 calendar days.

Contract Sum and Terms of Payment

The Contract Sum is a sum of Hong Kong Dollars Two Hundred and Ten Million (HK$210,000,000).

Payment of the Contract Sum will follow common industry practice which is to be effected in stages based on the progress of the Foundation Construction Works properly executed by the Contractor and the materials and goods delivered, as certified by the Architect in the Architect’s certificates to be delivered to the Employer from time to time.

The Contract Sum was arrived at after arm’s length negotiations between the Contractor and the Employer by reference to the prevailing market rate. The Contractor offered a quotation to the Employer after considering the geological condition of the Land, the complexity and difficulty of the Foundation Construction Works, and estimated project costs (including mainly machinery usage costs, direct labour costs, subcontracting charges and construction material costs).

The Employer has engaged the Quantity Surveyor to carry out an examination on the quotation offered by the Contractor. During the course of the examination, the Quantity Surveyor selected another four foundation contractors in Hong Kong and sent to each of them the request for quotation of the works as required under the Foundation Construction Works. Two of these

LETTER FROM THE BOARD

foundation contractors replied to the Quantity Surveyor who then compared their quotations with that provided by the Contractor. The Employer, after reviewing the costs analysis prepared by the Quantity Surveyor, is satisfied that the Contract Sum is in line with the prevailing market rate.

In addition, the Quantity Surveyor has separately prepared an estimate on the value of the Foundation Construction Works based on the topography and geology of the Land and the construction techniques required by the Foundation Construction Works.

As disclosed in the circulars of Hon Kwok Land and Chinney Investments dated 21 October 2016, based on a report issued by the Quantity Surveyor regarding the analysis and comparison of the Contract Sum, the returned quotations from the other foundation contractors, and the separate cost estimate of the value of the Foundation Construction Works, the Quantity Surveyor is of the opinion that the Contract Sum represents a fair and reasonable consideration in respect of the Foundation Construction Works.

Conditions Precedent to the Framework Agreement

The engagement of the Contractor and the obligations of the Parties under the Framework Agreement are conditional upon:

(a) the passing by the independent shareholders of each of the Companies in their respective special general meetings or extraordinary general meetings (as the case may be) by way of poll of resolution(s) approving, amongst other things, the Transactions and authorising the execution, delivery and performance of all the transactions contemplated under the Framework Agreement and any agreement ancillary thereto;
(b) all requirements imposed by the Stock Exchange under the Listing Rules or otherwise in connection with all the transactions contemplated by the Framework Agreement having been fully complied with; and
(c) all waivers, consents, approvals or confirmations of the Stock Exchange which are required or appropriate or in relation thereto, and all relevant waivers, consents, approvals or confirmations required for the purposes of the Parties for the entry into and the implementation of the Framework Agreement having been obtained.

None of the conditions precedent to the Framework Agreement can be waived by the Contractor or the Employer.

The Parties shall use their reasonable endeavours to procure that the Conditions Precedent to the Framework Agreement shall be fulfilled by the Long-Stop Date.

If the Conditions Precedent to the Framework Agreement shall not have been fulfilled by the Long-Stop Date, or such other date as the Parties may agree in writing (time in either case being of the essence), then save in respect of any antecedent breach of the Framework Agreement, all rights and liabilities of the Parties shall cease and no Party shall have any claim against the other Party.

LETTER FROM THE BOARD

3. INFORMATION ON THE PARTIES, THE COMPANY AND CAG GROUP

The Contractor is a company incorporated in Hong Kong with limited liability and is principally engaged in foundation construction works and providing piling construction services to the private sector in Hong Kong.

The Employer is a company incorporated in Hong Kong with limited liability and is principally engaged in property development business in Hong Kong.

The Company is an investment holding company incorporated in Bermuda with limited liability.

CAG Group (excluding Chinney Kin Wing Group) is mainly engaged in (a) importing, marketing and distribution of plastics and chemical products; (b) provision of building related contracting services for both public and private sectors, including engineering contracting services in air-conditioning industry and provision of maintenance services; (c) provision of superstructure construction works; (d) distribution and installation of aviation systems and other hi-tech products; and (e) other investment activities such as equity investments and investment in real estates.

4. REASONS FOR AND BENEFITS OF THE TRANSACTIONS

One of the principal activities of Hon Kwok Land Group is property development and from time to time it engages contractors for construction works of its residential, commercial or hotel development projects. Over the last decade, Hon Kwok Land Group focuses in China real estate market and carries out property development business mainly in PRC. The Land has been acquired by Hon Kwok Land Group through government public tender in Hong Kong in 2015, and is planned to be developed for nonresidential use and be held by Hon Kwok Land Group for recurrent rental income.

CAG Group and Chinney Kin Wing Group have been engaging in superstructure construction works, foundation construction works, and electrical and mechanical installation and maintenance services in Hong Kong for many years. In particular, as disclosed in the prospectus of Chinney Kin Wing dated 30 October 2015, Chinney Kin Wing Group ranked the fourth in the piling construction industry in Hong Kong in terms of market share for the years ended 31 December 2012, 2013 and 2014 respectively.

The management of Hon Kwok Land Group therefore considers that the engagement of the Contractor could capitalise on the experiences and expertises of CAG Group and Chinney Kin Wing Group in the Hong Kong construction industry, and could save resources in conducting market research for other possible alternatives in Hong Kong. The joint efforts of the Parties would provide more comprehensive and coordinated service in relation to the Foundation Construction Works in the common interest of the Parties and the Companies.

In addition, foundation construction is a highly technical industry and requires specialised expertises and capabilities. The management of Hon Kwok Land Group considers that it is beneficial and more cost effective to engage a capable, reliable and reputed foundation contractor whom it is familiar with. The Contractor is therefore an appropriate candidate given that (a) the market ranking of Chinney Kin Wing Group provides a solid proof of its capability and reliability; (b) same as the Employer, it is under the control of Dr. James Sai-Wing Wong who has the objective of achieving the well-being for all of the Companies; and (c) the long established relationship amongst the Companies will enhance work efficiency and effective communication.

LETTER FROM THE BOARD

Based on the reasons stated above, Hon Kwok Land Group will also consider engaging CAG Group for the superstructure construction works on the Land. However, since the relevant building plans have not yet been finalised, such engagement will only be considered in 2017. The Companies will comply with the relevant Listing Rules requirements should any agreements relating to the superstructure construction works be entered into between Hon Kwok Land Group and CAG Group.

The conditional engagement by the Employer and the conditional acceptance by the Contractor to carry out the Foundation Construction Works represent activities within the ordinary and usual course of business of each of Chinney Kin Wing Group, CAG Group, Chinney Investments Group and Hon Kwok Land Group.

The Contractor offered a quotation to the Employer based on the estimated project costs (including mainly machinery usage costs, direct labour costs, subcontracting charges and construction material costs). In preparing such quotation, the Contractor had followed an established set of internal guidelines and procedures and considered various factors when determining the appropriate pricing which would also apply to other foundation construction works of similar kind, including but not limited to (a) the size of the construction site; (b) the landscape and geological condition of the construction site; (c) the complexity and difficulty of the works to be performed; (d) the amount of resources required to be devoted into the project; (e) the estimated duration of the time of the works required to be performed; (f) the availability of the Contractor’s resources; (g) the need and estimated cost of subcontracting certain works to other parties; and (h) the overall estimated cost. The Contractor then concluded an average cost of each bored pile to be incurred with respect to the construction time required for the Foundation Construction Works and adopted such cost, among others, in determining the Contract Sum. The management of CAG Group therefore considers that the Contract Sum offered by the Contractor to the Employer was comparable to those offered to other independent third parties for similar Foundation Construction Works.

The Employer, on the other hand, has engaged the Quantity Surveyor to carry out an examination on the quotation offered by the Contractor and the Quantity Surveyor is of the opinion that the Contract Sum represents a fair and reasonable consideration in respect of the Foundation Construction Works provided. The Quantity Surveyor is one of the world’s leading cost management and quantity surveying consultancies which delivers cost management advice including but not limited to cost control, cost planning and contract advice. They have operations globally and have offices in the Americas, Asia Pacific, Europe, India and the Middle East. The officer responsible for the engagement by the Employer is a member of the Hong Kong Institute of Surveyors, member of the Royal Institution of Chartered Surveyors, Registered Professional Surveyor (Quantity Surveying) and Registered Cost Engineer (PRC) with over 50 years of experience in all types of quantity surveying services.

Accordingly, the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the Independent Financial Advisers) consider that the terms of the Framework Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders.

LETTER FROM THE BOARD

5. LISTING RULES IMPLICATIONS

As at the date of this circular, the Employer is an indirect wholly-owned subsidiary of Hon Kwok Land and an indirect non wholly-owned subsidiary of Chinney Investments, and the Contractor is an indirect wholly-owned subsidiary of Chinney Kin Wing and an indirect non wholly-owned subsidiary of the Company. Chinney Investments is interested in approximately 68.09% and 29.10% of the issued shares of Hon Kwok Land and the Company respectively, and the Company is in turn holding approximately 74.50% of the issued shares of Chinney Kin Wing. Dr. James Sai-Wing Wong is the chairman of Chinney Investments, Hon Kwok Land and the Company and is beneficially interested in (a) approximately 63.34% of the issued shares of Chinney Investments; (b) approximately 69.72% of the issued shares of Hon Kwok Land (including those interests held through Chinney Investments); (c) approximately 73.43% of the issued Shares (including those interests held through Chinney Investments); and (d) approximately 74.50% of the issued shares of Chinney Kin Wing (representing those interests held through the Company). Hence, Chinney Investments, Hon Kwok Land, the Company and Chinney Kin Wing are connected persons to one another within the meaning of the Listing Rules.

The relationships of Dr. James Sai-Wing Wong, the Parties and the Companies are set out in the structure chart below:

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Dr. James Sai-Wing Wong
44.33% 0.09% 63.25%
Chinney Alliance
Chinney Investments, Limited
Group Limited 29.10% (建業實業有限公司)
(建聯集團有限公司 [] )
(Hong Kong)
(Bermuda)
74.50% 68.09% 1.63%
Chinney Kin Wing Hon Kwok Land Investment
Holdings Limited Company, Limited
(建業建榮控股有限公司 [] ) (漢國置業有限公司)
(Bermuda) (Hong Kong)
100.00% 100.00%
Kin Wing Foundations Gold Famous Development
Limited Limited
(建榮地基有限公司) (金譽發展有限公司)
(Hong Kong) (Hong Kong)
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* for identification purpose only

Notes:

1. represents indirect shareholding interests 2. represents direct shareholding interests

3. The percentages are subject to rounding

LETTER FROM THE BOARD

Accordingly, the entering into of the Framework Agreement constitutes a connected transaction for the Company under the Listing Rules. As the applicable percentage ratio of the Proposed CT is more than 5% and the Contract Sum is more than HK$10 million, the Proposed CT constitutes non-exempt connected transaction under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Dr. James Sai-Wing Wong, being a Director and having a material interest in the Transactions, had abstained from voting on the Board resolutions passed on 20 September 2016 for approving the Transactions. Mr. James Sing-Wai Wong, being the son of Dr. James Sai-Wing Wong, had also abstained from voting on the said Board resolutions voluntarily for the purpose of good corporate governance. None of the other Directors has a material interest in the Transactions or was required to abstain from voting on such Board resolutions.

6. SGM

The SGM will be convened by the Company at Full Moon Shanghai Restaurant, Macau Jockey Club, 3rd Floor, East Wing, Shun Tak Centre, 200 Connaught Road Central, Hong Kong on Monday, 7 November 2016 at 5:00 p.m. at which Resolutions will be proposed to seek approval of, among other things, the Transactions. A notice convening the SGM is set out on pages 30 to 31 of this circular. Dr. James Sai-Wing Wong and his associates will be required to abstain from voting on the Resolutions. As at the Latest Practicable Date, Dr. James Sai-Wing Wong is currently indirectly holding 436,860,216 Shares, representing approximately 73.43% of the issued Shares. Save as aforementioned, to the best of the knowledge, information and belief of the Directors and having made all reasonable enquiry, no other Shareholder has a material interest in the Transactions and therefore no other Shareholder is required to abstain from voting at the SGM.

There is a form of proxy for use at the SGM accompanying this circular. If you are not able to attend the SGM or any adjournment thereof, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event no later than 48 hours before the time fixed for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish.

In accordance with Rule 13.39(4) of the Listing Rules, all the resolutions proposed at the SGM will be voted on by way of poll except where the chairman of the SGM, in good faith, decide to allow a resolution which relates purely to procedural or administrative matter to be voted on by a show of hands. The chairman of the SGM will at the meeting demand, pursuant to bye-law 66(a) of the bye-laws of the Company, voting by way of poll on the Resolutions. On a poll, subject to any special rights or restrictions as to voting for the time being attached to any Shares by or in accordance with the bye-laws of the Company, every Shareholder present in person (or being a corporation, is present by a representative duly authorised), or by proxy shall have one vote for every fully paid Share of which he/she is the holder.

An announcement will be made by the Company following the conclusion of the SGM to inform the results of the SGM.

LETTER FROM THE BOARD

7. INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising the independent non-executive Directors (namely Mr. Yuen-Tin Ng, Mr. Chi-Chiu Wu and Mr. Ronald James Blake) has been established to advise the Independent Shareholders.

8. INDEPENDENT FINANCIAL ADVISER

KGI Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Transactions.

9. RECOMMENDATION

The Independent Board Committee having considered the advice of KGI Capital, considers that the Transactions are in the interests of the Company and the Shareholders as a whole and the terms of the Framework Agreement are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the Resolutions to be proposed at the SGM to approve the Transactions.

The Directors (including the independent non-executive Directors after taking into account the advice from KGI Capital) consider that the Framework Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Your attention is drawn to the letter from the Independent Board Committee set out on page 13 of this circular and the letter from KGI Capital set out on pages 14 to 24 of this circular which contains its advice and recommendation to the Independent Board Committee and the Independent Shareholders, and the principal factors and reasons having been taken into consideration by KGI Capital.

10. ADDITIONAL INFORMATION

Your attention is drawn to (i) the “Letter from the Independent Board Committee” set out on page 13 of this circular, which contains its recommendation to the Independent Shareholders; (ii) the “Letter from the Independent Financial Adviser” set out on pages 14 to 24 of this circular, which contains its advice and recommendation to the Independent Board Committee and the Independent Shareholders; and (iii) the additional information set out in the appendix to this circular.

Yours faithfully, For and on behalf of the Board

Yuen-Keung Chan

Vice Chairman and Managing Director

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in Bermuda with limited liability) (Stock Code: 385)

21 October 2016

To the Independent Shareholders

Dear Sir/Madam,

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

We refer to the circular issued by the Company to the Shareholders dated 21 October 2016 (the “Circular”), of which this letter forms part. Capitalised terms defined in the Circular have the same meanings when used herein unless the context otherwise requires.

We have been appointed by the Board as members of the Independent Board Committee to advise the Independent Shareholders on the terms of the Transactions. KGI Capital has been appointed as the Independent Financial Adviser to advise us and the Independent Shareholders in this respect.

We wish to draw your attention to the “Letter from the Board” set out on pages 5 to 12 of the Circular and the “Letter from the Independent Financial Adviser” to us and the Independent Shareholders set out on pages 14 to 24 of the Circular.

Having considered the terms of the Transactions, and taking into account the advice of KGI Capital, in particular the principal factors, reasons and advice as set out in their letter, we consider that the entering into of the Framework Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole, the terms of the Framework Agreement are on normal commercial terms and in the ordinary and usual course of business of the Company and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the Resolutions to be proposed at the SGM to approve the Transactions.

Yours faithfully,

For and on behalf of the Independent Board Committee

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

Independent Non-Executive Directors

for identification purpose only

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 Independent Shareholders of Chinney Alliance Group Limited, prepared for inclusion in this circular.

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

Tel: 2878 6888 Fax: 2970 0080

21 October 2016

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

Dear Sir/Madam,

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Transactions, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular of the Company dated 21 October 2016 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context of this letter otherwise requires.

With reference to the joint announcement of the Company, Chinney Kin Wing, Chinney Investments and Hon Kwok Land dated 20 September 2016 (the “ Joint Announcement ”), the Contractor and the Employer entered into the Framework Agreement, pursuant to which the Employer conditionally agreed to engage the Contractor, and the Contractor conditionally agreed to carry out the Foundation Construction Works on the Land for the Contract Sum of HK$210,000,000.

As stated in the Joint Announcement, the Employer is an indirect wholly-owned subsidiary of Hon Kwok Land and an indirect non wholly-owned subsidiary of Chinney Investments, and the Contractor is an indirect wholly-owned subsidiary of Chinney Kin Wing and an indirect non wholly-owned subsidiary of the Company. Chinney Investments is interested in approximately 68.09% and 29.10% of the issued shares of Hon Kwok Land and the Company respectively, and the Company is in turn holding approximately 74.50% of the issued shares of Chinney Kin Wing. Dr. James Sai-Wing Wong is the chairman of Chinney Investments, Hon Kwok Land and the Company and is beneficially interested in (a) approximately 63.34% of the issued shares of Chinney Investments; (b) approximately 69.72% of the

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

issued shares of Hon Kwok Land (including those interests held through Chinney Investments); (c) approximately 73.43% of the issued Shares (including those interests held through Chinney Investments); and (d) approximately 74.50% of the issued shares of Chinney Kin Wing (representing those interests held through the Company). Hence, Chinney Investments, Hon Kwok Land, the Company and Chinney Kin Wing are connected persons to one another within the meaning of the Listing Rules.

The entering into of the Framework Agreement constitutes a connected transaction for each of the Companies under the Listing Rules. As the applicable percentage ratio of the Proposed CT is more than 5% and the Contract Sum is more than HK$10 million, the Proposed CT constitutes non-exempt connected transaction under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising the independent non-executive Directors (namely Mr. Yuen-Tin Ng, Mr. Chi-Chiu Wu and Mr. Ronald James Blake), has been established to advise the Independent Shareholders as to (i) the fairness and reasonableness of the terms of the Framework Agreement; and (ii) whether the Framework Agreement and the transactions thereunder are in the interests of the Company and the Shareholders as a whole.

We, KGI Capital Asia Limited, have been appointed as the Independent Financial Adviser to give an independent opinion to the Independent Board Committee and the Independent Shareholders on matters in relation to the terms in respect of the Proposed CT and whether it is in the interests of the Company and the Shareholders as a whole.

BASIS OF OUR OPINION

In formulating our opinion, we have obtained and reviewed relevant information and documents provided by the Company, the Directors and the management of the Company in connection with the Proposed CT in relation to Foundation Construction Works and have discussed with the Directors and the management of the Company so as to assess the fairness and reasonableness of the terms of the Framework Agreement.

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 Company 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 Company 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 of the Framework Agreement. 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

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

businesses and affairs, financial position or the future prospects of the Company 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 date the Circular is dispatched.

We have taken all reasonable steps pursuant to the Listing Rules including but not limited to the following:

(a) obtained all the information and documents relevant to an assessment of the fairness and reasonableness of the Proposed CT in relation to Foundation Construction Works, including but not limited to, the Joint Announcement, the Board Letter, the Framework Agreement entered into between the Contractor and the Employer, the Letter of Acceptance, the Contract Documents for Foundation Construction Works, the interim report of the Company for the six months ended 30 June 2016;
(b) reviewed the reasons and background of the Proposed CT in relation to Foundation Construction Works;
(c) reviewed the terms of the Framework Agreement, the pricing policies and the internal control of the Contractor; and
(d) reviewed the terms of other agreements the Contractor entered into with other independent third parties for works similar to Foundation Construction Works.

During the past two years, we have been engaged as the independent financial adviser to (i) the Company as stated in the Company’s circular dated 30 October 2015; (ii) Chinney Investments as stated in Chinney Investments’ circular dated 20 June 2016; and (iii) Hon Kwok Land as stated in Hon Kwok Land’s circular dated 20 June 2016. We have reviewed our independence and are satisfied with it that it is in compliance with the requirements as set out in the Listing Rules. In addition, apart from the aforementioned previous engagements, we do not have any relationship with the Company and/or its connected parties. We are of the view that these three previous engagements will not affect our independence and views to the Transactions.

As set out in the section headed “Appendix – 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 Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein 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 Framework Agreement. 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 – General Information – 9. 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.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinions and recommendations to the Independent Board Committee and the Independent Shareholders in respect of the Proposed CT in relation to Foundation Construction Works, we have considered the principal factors and reasons as set out below:

I. Information on the Parties, CAG Group and Chinney Kin Wing Group

The Employer is a company incorporated in Hong Kong with limited liability and is principally engaged in property development business in Hong Kong.

Chinney Kin Wing Group is engaged in a wide range of foundation works including (a) 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 (b) drilling and site investigation.

II. Reasons for and Benefits of the Entering into of the Transactions

As stated in the Board Letter, one of the principal activities of Hon Kwok Land Group is property development and from time to time it engages contractors for construction works of its residential, commercial or hotel development projects. Over the last decade, Hon Kwok Land Group focuses in China real estate market and carries out property development business mainly in PRC. The Land has been acquired by Hon Kwok Land Group through government public tender in Hong Kong in 2015, and is planned to be developed for non-residential use and be held by Hon Kwok Land Group for recurrent rental income.

As stated in the Board Letter, CAG Group and Chinney Kin Wing Group have been engaging in superstructure construction works, foundation construction works, and electrical and mechanical installation and maintenance services in Hong Kong for many years. In particular, Chinney Kin Wing Group ranked the fourth in the piling construction industry in Hong Kong in terms of market share for the years ended 31 December 2012, 2013 and 2014 respectively.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The management of Hon Kwok Land Group therefore considers that the engagement of the Contractor could capitalise on the experiences and expertise of CAG Group and Chinney Kin Wing Group in the Hong Kong construction industry, and could save resources in conducting market research for other possible alternatives in Hong Kong. The joint efforts of the Parties would provide more comprehensive and coordinated service in relation to the Foundation Construction Works in the common interest of the Parties and the Companies.

In addition, foundation construction is a highly technical industry and requires specialised expertise and capabilities. The management of Hon Kwok Land Group considers that it is beneficial and more cost effective to engage a capable, reliable and reputed foundation contractor whom it is familiar with. The Contractor is therefore an appropriate candidate given that (a) the market ranking of Chinney Kin Wing Group provides a solid proof of its capability and reliability; (b) same as the Employer, it is under the control of Dr. James Sai-Wing Wong who has the objective of achieving the well-being for all of the Companies; and (c) the long established relationship amongst the Companies will enhance work efficiency and effective communication.

As stated in the Board Letter, the Contractor conditionally agrees to carry out the Foundation Construction Works on the Land for the Contract Sum on the terms and subject to the Conditions Precedent to the Framework Agreement and the terms and conditions to be finalised and contained in the Contract Documents. The period of the Foundation Construction Works is estimated to be approximately 550 calendar days. We have obtained and reviewed the Framework Agreement from the management of Chinney Kin Wing Group and CAG Group. We agree with the management and are of the view that the conditional acceptance by the Contractor to carry out the Foundation Construction Works represent activities within the ordinary and usual course of business of each of Chinney Kin Wing Group and the CAG Group.

Moreover, as stated in the Board Letter, the Contract Sum offered by the Contractor to the Employer was comparable to those offered to other independent third parties for similar Foundation Construction Works. We have performed our independent analysis regarding this matter. For details, please refer to the section under “III. Terms of Framework Agreement” below. We therefore concur with the management and are of the view that the Contract Sum offered by the Contractor to the Employer is comparable to those offered to other independent third parties for similar Foundation Construction Works.

Accordingly, as confirmed by the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from us) that the terms of the Framework Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Having considered that (i) Chinney Kin Wing Group is one of the market leaders in the piling construction industry in Hong Kong in terms of market share for the years ended 31 December 2012, 2013 and 2014; (ii) the conditional acceptance by the Contractor to carry out the Foundation Construction Works represent activities within the ordinary and usual course of business of each of Chinney Kin Wing Group and CAG Group; (iii) the joint efforts of the Parties would provide more comprehensive and coordinated service in relation to the Foundation Construction Works in the common interests of the Parties and the Companies; (iv) the long established relationship amongst the Parties will enhance work

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

efficiency and effective communication; (v) the Contract Sum offered by the Contractor to the Employer was comparable to those offered to other independent third parties for similar Foundation Construction Works; and (vi) the terms of the Framework Agreement are on normal commercial terms, we concur with the Directors’ view that the entering into of the Framework Agreement regarding the Foundation Construction Works is in the interests of the Company and the Independent Shareholders as a whole.

III. Terms of the Framework Agreement

Pursuant to the Framework Agreement, the Employer conditionally agreed to engage the Contractor, and the Contractor conditionally agreed to carry out the Foundation Construction Works on the Land for the Contract Sums of HK$210,000,000.

THE FRAMEWORK AGREEMENT

Date: 20 September 2016

Parties: (a) Contractor

Kin Wing Foundations Limited, a company incorporated under the laws of Hong Kong with limited liability, and an indirect wholly-owned subsidiary of Chinney Kin Wing, and an indirect non wholly-owned subsidiary of CAG Group.

(b) Employer

Gold Famous Development Limited, a company incorporated under the laws of Hong Kong with limited liability, and an indirect wholly-owned subsidiary of Hon Kwok Land, and an indirect non wholly-owned subsidiary of Chinney Investments.

Foundation Construction Works

Contract Sum and terms of payment

The Contract Sum is a sum of Hong Kong Dollars Two Hundred and Ten Million (HK$210,000,000).

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As stated in the Board Letter, The Contractor offered a quotation to the Employer based on the estimated project costs (including mainly machinery usage costs, direct labour costs, subcontracting charges and construction material costs). In preparing such quotation, the Contractor had followed an established set of internal guidelines and procedures and considered various factors when determining the appropriate pricing which would also apply to other foundation construction works of similar kind, including but not limited to (a) the size of the construction site; (b) the landscape and geological condition of the construction site; (c) the complexity and difficulty of the works to be performed; (d) the amount of resources required to be devoted into the project; (e) the estimated duration of the time of the works required to be performed; (f) the availability of the Contractor’s resources; (g) the need and estimated cost of subcontracting certain works to other parties; and (h) the overall estimated cost. The Contractor then concluded an average cost of each bored pile to be incurred with respect to the construction time required for the Foundation Construction Works and adopted such cost, among others, in determining the Contract Sum. The management of CAG Group therefore considers that the Contract Sum offered by the Contractor to the Employer was comparable to those offered to other independent third parties for works similar to Foundation Construction Works.

In order to assess the fairness and reasonableness of the Contract Sum and terms of payment of the Framework Agreement, we have obtained and reviewed (i) other agreements of similar quotation price range and work nature which the Contractor entered into with independent third parties; and (ii) pricing policies and internal control manual of the Contractor.

Out of the 7 agreements of similar quotation price range awarded to the Contractor to independent third parties from 1 January 2015 to 31 August 2016, we note that only 6 of them are of similar work nature to the Framework Agreement. Hence, we have obtained and reviewed the 6 agreements from the Contractor. We note from the 6 agreements that the Contractor has offered quotations based on the work to be performed for the projects. As per our discussion with the management of the Contractor, we understand that it is difficult to compare the contract sums, terms of payment and other terms under the agreement of each project directly as each project varies from each other in respect of (i) the size of the construction site; (ii) landscape and geological condition of the construction site; (iii) complexity and difficulty of work to be performed; and (iv) amount of resources to be devoted into the project.

Although this is the case, we understand that the average cost per bored pile per working days of construction of foundation works (the “ Rate(s) ”) can serve as an indicator to compare the Contract Sum among different projects. This Rate refers to the average cost of each bored pile incurred in respect of the construction time required. As confirmed by the management of the Contractor, the Rate is one of the commonly adopted indicators for the market to compare the rate across different projects of various conditions. In order to compare the 6 awarded agreements to the Framework Agreement (the “ Comparable Agreements ”), we have compiled the Rates and the estimated gross margin of the Comparable Agreements to the Framework Agreement in a table as illustrated below.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Job	The Rates	Estimated GM
	(approximately	(approximately)
	HK$’000)
Project 1	108	20.2%
Project 2	105	23.6%
Project 3	110	17.1%
Project 4	105	21.9%
Project 5	101	9.9%
Project 6	101	3.2%
Average	105	16.0%
Maximum	110	23.6%
Minimum	101	3.2%
Framework Agreement	102	15.2%

As the financial information of each project is considered highly confidential to the Contractor, we have illustrated the summary of the information on an anonymous basis to safeguard the interest of the Contractor. As illustrated in the table above, we note that the Rates of the Comparable Agreements range from approximately HK$101,000 per working day to approximately HK$110,000 per working day (the “ Rate Range ”) with an average of approximately HK$105,000 per working day (the “ Average Rate ”). The Rate under the Framework Agreement, being approximately HK$102,000 per working day, is slightly lower than the Average Rate, yet within the Rate Range. We therefore consider that the Rate of the Framework Agreement is comparable to the Rates of Comparable Agreements. Hence, we are satisfied and consider the Comparable Agreements can serve as comparable agreements to the Framework Agreement.

Moreover, as discussed with the Contractor, gross margin serves as a good benchmark to evaluate the profitability of each project. We concur with the Contractor and we have looked into the estimated gross margins of the Comparable Agreements and compare them with the estimated gross margin of the Framework Agreement (the “ Estimated GM ”). As illustrated in the table above, we note that the estimated gross margins of the Comparable Agreements range from approximately 3.2% to 23.6% (the “ Estimated GM Range ”) with an average of approximately 16.0% (the “ Average Estimated GM ”). The Estimated GM, being approximately 15.2%, is slightly lower than the Average Estimated GM, yet within the Estimated GM Range. We note that the Estimated GM Range is wide. As per our discussion with the management of the Contractor, we understand that the wide range of the Estimated GM Range was mainly due to (1) the landscape and geological condition of the construction sites; (2) the complexity and difficulty of the works to be performed; and (3) the amount and availability of resources required to be devoted into the project. In considering the impact of the aforementioned factors on each of the construction sites, the management of the Contractor will include a risk premium of various extent on top of the budgeted amount in deriving the contract sum of each of the contracts. Hence, we consider that the Estimated GM is comparable and acceptable to the estimated gross margins of the Comparable Agreements. And, as the Estimated GM, which implies the profitability of the Transaction, is comparable to the Comparable Agreements, we are of the view that the Contract Sum is comparable to the contract sums of Comparable Agreements.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Furthermore, we have interviewed and discussed with the Quantity Surveyor to understand from them as to their background, qualifications, experience, methodology and analysis on the Contract Sum of the Framework Agreement. As stated in the Board Letter, the Quantity Surveyor is one of the world’s leading cost management and quantity surveying consultancies which delivers cost management advice including but not limited to cost control, cost planning and contract advice. They have operations globally and have offices in the Americas, Asia Pacific, Europe, India and the Middle East. The officer responsible for the engagement by the Employer is a member of the Hong Kong Institute of Surveyors, member of the Royal Institution of Chartered Surveyors, Registered Professional Surveyor (Quantity Surveying) and Registered Cost Engineer (PRC) with over 50 years of experience in all types of quantity surveying services. As per our discussion with the Quantity Surveyor, we note that they are of the view that the Contract Sum is financially fair and reasonable when comparing to other market quotations as well as the estimations from them.

In addition, we note from the Board Letter and have discussed with the Contractor on the terms of the Framework Agreement. We understand that the terms of the Framework Agreement, particularly the terms of payment, follow the common industry practice which is to be effected in stages based on the progress of work executed.

We have obtained and reviewed the pricing policies of the Contractor. As per our discussion with the management of the Contractor, the Contractor has established a set of guidelines and procedures when determining the appropriate pricing for the foundation construction works of similar kind, including but not limited to (i) the size of the construction site; (ii) landscape and geological condition of the construction site; (iii) complexity and difficulty of work to be performed; and (iv) amount of resources to be devoted into the project; (v) the estimated duration of time of the works to be performed; (vi) the Contractor’s resources availability; (vii) the need and estimated cost of subcontracting certain works to other parties; and (viii) the overall estimated cost. As per our discussion with the Contractor, the quotations offered by the Contractor vary from projects but the Contractor would follow the general guidelines as set out in the pricing policies. In addition, we note that the Contractor has a set of internal control procedures which are set out in the control manual of the Contractor to ensure proper compliance with the pricing procedures. We have obtained and reviewed the internal control manual from the Contractor. We note that the Contractor has gone through proper approvals at stages, as illustrated and set out in the internal control manual, which is approved by the relevant management of the Contractor. We concur with the Contractor that proper measures and controls are in place to ensure the pricing policies are followed with proper approvals before the offering of quotations to potential employers, including but not limited to the Employer.

In light of the above, we therefore consider the Contract Sum and terms of payment offered by the Contractor to the Employer under the Framework Agreement are comparable to those offered to other independent third parties for similar Foundation Construction Works.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Conditions precedent to the Framework Agreement

The engagement of the Contractor and the obligations of the Parties under the Framework Agreement are conditional upon:

(i) the passing by the independent shareholders of each of the Companies in their respective special general meetings or extraordinary general meetings (as the case may be) by way of poll of resolution(s) approving, amongst other things, the Transactions and authorising the execution, delivery and performance of all the transactions contemplated under the Framework Agreement and any agreement ancillary thereto;
(ii) all requirements imposed by the Stock Exchange under the Listing Rules or otherwise in connection with all the transactions contemplated by the Framework Agreement having been fully complied with; and
(iii) all waivers, consents, approvals or confirmations of the Stock Exchange which are required or appropriate or in relation thereto, and all relevant waivers, consents, approvals or confirmations required for the purposes of the Parties for the entry into and the implementation of the Framework Agreement having been obtained.

None of the conditions precedent to the Framework Agreement can be waived by the Contractor or the Employer.

The Parties shall use their reasonable endeavours to procure that the Conditions Precedent to the Framework Agreement shall be fulfilled by the Long-Stop Date. As at the Latest Practicable Date, the Contractor confirmed that none of the conditions precedent to the Framework Agreement are fulfilled.

As stated in the Board Letter, the terms of the Framework Agreement (including the Contract Sum) were arrived at by the Contractor and the Employer after arm’s length negotiations. We have also reviewed the terms of the Comparable Agreements that the Contactor engaged with independent third parties and are not aware of any terms which are uncommon to normal market practices. Accordingly, we concur with the Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from us) that the terms of the Framework Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

OPINION

Having taken into consideration of the above principal factors and reasons, in particular:

the entering into the Framework Agreement falls within the principal scope of business of the Company;

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the terms of the Framework Agreement are on normal commercial terms and are in the ordinary and usual course of business of the Company; and
the Contract Sum and terms of payment under the Framework Agreement offered by the Contractor to the Employer are comparable to those offered to other independent third parties for works similar to Foundation Construction Works,

we consider that the Proposed CT in relation to the Foundation Construction Works is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

Having considered that the above, we consider that the entering into of the Framework Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole, the terms of the Framework Agreement are on normal commercial terms and in the ordinary and usual course of business of the Company and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the Resolutions to be proposed at the SGM to approve the Transactions.

Yours faithfully, For and on behalf of KGI Capital Asia Limited Ringo Kwan Wesley Chan Head of Investment Banking Senior Vice President

Note: Mr. Ringo Kwan has been a responsible officer of Type 6 (advising on corporate finance) regulated activities under the SFO since 2005. Mr. Wesley Chan has been a responsible officer of Type 6 (advising on corporate finance) regulated activities under the SFO since 2008. Both Mr. Kwan and Mr. Chan have participated in and completed various advisory transactions in respect of connected transactions of listed companies in Hong Kong.

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

Directors’ interests and short positions in the shares, underlying shares and debentures

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), that 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 they were taken or deemed to have under such provisions of the SFO), or that were required, pursuant to Section 352 of the SFO, to be entered into the register referred to therein, or that were required, pursuant to the Model Code to be notified to the Company and the Stock Exchange, were as follows:

			Percentage of
	Capacity and	Number of ordinary	the Company’s
Name of director	nature of interest	Shares held	issued Shares
Dr. James Sai-Wing Wong	Interest through controlled	436,860,216	73.43%
	corporations	(Note)

Note: Amongst the 436,860,216 Shares, 243,244,521 Shares are held by Enhancement Investments Limited; 20,522,000 Shares are held by Chinney Capital Limited; and 173,093,695 Shares are held by MultiInvestment Group Limited, all of which Dr. James Sai-Wing Wong is a director and has beneficial interests in.

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or the chief executives of the Company had any interests or short positions 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 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 they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered into the register referred to therein, or which were required, pursuant to the Model Code to be notified to the Company and the Stock Exchange.

GENERAL INFORMATION

APPENDIX

Substantial Shareholders’ and other persons’ interests and short positions in Shares and underlying Shares

As at the Latest Practicable Date and so far as is known to the Directors, the following persons had or were deemed or taken to have interests or short positions in the Shares and underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

			Number of	Percentage of
		Capacity and	ordinary	the Company’s
Name	Notes	nature of interest	Shares held	issued Shares
Dr. James Sai-Wing Wong	1, 2, 3	Interest through	436,860,216	73.43%
		controlled corporations
Lucky Year Finance Limited	1	Interest through	173,093,695	29.10%
		a controlled corporation
Chinney Holdings Limited	1	Interest through	173,093,695	29.10%
		a controlled corporation
Chinney Investments	1	Interest through	173,093,695	29.10%
		a controlled corporation
Newsworthy Resources Limited	1	Interest through	173,093,695	29.10%
		a controlled corporation
Multi-Investment Group Limited	1	Beneficial owner	173,093,695	29.10%
Enhancement Investments Limited	2	Beneficial owner	243,244,521	40.89%

Notes:

1. Dr. James Sai-Wing Wong, Lucky Year Finance Limited, Chinney Holdings Limited, Chinney Investments, Newsworthy Resources Limited and Multi-Investment Group Limited are deemed to be interested in the same parcel of the 173,093,695 Shares by virtue of Section 316 of the SFO;

2. Enhancement Investments Limited is beneficially wholly owned by Dr. James Sai-Wing Wong; and

3. 20,522,000 Shares are held by Chinney Capital Limited, which is beneficially wholly owned by Dr. James Sai-Wing Wong.

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

GENERAL INFORMATION

APPENDIX

3. DIRECTORS’ INTERESTS IN ASSETS AND CONTRACTS

The Company paid a management fee of HK$7,500,000 to Chinney Investments for general services provided for the year ended 31 December 2015. An amount of HK$1,500,000 was also accrued for the management fee to Chinney Investments for general services provided for the six months ended 30 June 2016. Dr. James Sai-Wing Wong, a director of the Company, is also a director of and has beneficial interests in Chinney Investments. Mr. Herman Man-Hei Fung and Mr. James Sing-Wai Wong are common directors of the Company and Chinney Investments.

Save as disclosed as aforesaid and the Framework Agreement, none of the Directors:

(a) had any material direct or indirect interest in any assets which had been, since 31 December 2015, being the date to which the latest audited accounts of CAG Group were made up, acquired or disposed of by or leased to any member of CAG Group or were proposed to be acquired or disposed of by or leased to, any member of CAG Group as at the Latest Practicable Date.
(b) was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which was significant in relation to the business of CAG Group taken as a whole.

4. COMPETING INTERESTS OF DIRECTORS AND ASSOCIATES

As at the Latest Practicable Date, none of the Directors or their associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of CAG Group.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of CAG Group (excluding contracts expiring or terminable by any member of CAG Group within one year without payment of compensation, other than statutory compensation).

6. NO MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position or outlook of CAG Group since 31 December 2015 (being the date to which the latest published audited accounts of CAG Group were made up).

GENERAL INFORMATION

APPENDIX

7. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinion or advice which are contained in this circular:

Name

Qualification

KGI Capital

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

(a) As at the Latest Practicable Date, KGI Capital did not have any shareholding in any member of CAG Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of CAG Group.
(b) KGI Capital has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of its letter or references to its name in the form and context in which they are included.
(c) KGI Capital did not have any direct or indirect interest in any assets which have been, since 31 December 2015 (being the date to which the latest published audited financial statements of CAG Group were made up), acquired or disposed of by or leased to any member of CAG Group, or were proposed to be acquired or disposed of by or leased to any member of CAG Group.

8. MISCELLANEOUS

(a) 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.
(b) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

GENERAL INFORMATION

APPENDIX

9. 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 from the date of this circular up to and including the date of the SGM:

(a) the Framework Agreement;
(b) the memorandum of association and bye-laws of the Company;
(c) the letter from the Board, the text of which is set out on pages 5 to 12 of this circular;
(d) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 13 of this circular;
(e) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 14 and 24 of this circular;
(f) the written consent as referred to under the section headed “Qualification and Consent of Expert” in this appendix; and
(g) this circular.

NOTICE OF SGM

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(Incorporated in Bermuda with limited liability)

(Stock Code: 385)

NOTICE IS HEREBY GIVEN that a special general meeting of Chinney Alliance Group Limited (the “Company”) will be held at Full Moon Shanghai Restaurant, Macau Jockey Club, 3rd Floor, East Wing, Shun Tak Centre, 200 Connaught Road Central, Hong Kong on 7 November 2016, Monday at 5:00 p.m. or in the event that a black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted in Hong Kong at 9:00 a.m. on that day, at the same time and place on the second Business Day (as defined in Note (1) below) after 7 November 2016 or any adjournment (the “SGM”) for the purpose of considering and, if thought fit, passing the following resolutions as ordinary Resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT :

(a) the framework agreement dated 20 September 2016 (the “Framework Agreement”) entered into between Kin Wing Foundations Limited (建榮地基有限公司) (the “Contractor”) and Gold Famous Development Limited (金譽發展有限公司) (the “Employer”) in relation to the foundation construction works (the “Foundation Construction Works”) in relation to the parcel of land situated at and known as K.C.T.L. 495, Kin Chuen Street, Kwai Chung, New Territories, Hong Kong, as more particularly set out in the contract documents in respect of the Foundation Construction Works to be entered into between the Employer and the Contractor in accordance with and substantially in the same form and substance as annexed to the Framework Agreement, and a copy of the Framework Agreement marked “A” is tabled before the meeting and signed for identification purpose by the Chairman of the meeting, as more particularly described in the circular to the shareholders of the Company (the “Shareholders”) dated 21 October 2016 of which this notice forms part, be approved, ratified and confirmed; and
(b) the directors of the Company (the “Directors”) be and are hereby authorised to exercise all the powers of the Company and take all steps as might in their absolute discretion consider necessary, desirable or expedient to give effect to or in connection with the Framework Agreement including, without limitation to:
(i) the execution, amendment, supplement, delivery, submission and implementation of any further documents or agreements with any other parties in connection with or incidental to the Framework Agreement; and
(ii) the taking of all necessary actions to implement the transactions contemplated under the Framework Agreement.”

By Order of the Board Yun-Sang Lo Company Secretary

Hong Kong, 21 October 2016

for identification purpose only

NOTICE OF SGM

Notes:

(1) Business Day means any day (excluding Saturday) on which no black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted in Hong Kong at 9:00 a.m. on that day and on which banks in Hong Kong are generally open for business. If a black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted in Hong Kong at 9:00 a.m. on 7 November 2016, the SGM will not be held on that day but will be held at the same time and place on the second Business Day after 7 November 2016 or any adjournment thereof.
(2) A member entitled to attend and vote at the SGM is entitled to appoint another person as his proxy to attend and, on a poll, vote instead of him/her. A member who is the holder of two or more ordinary share(s) of HK$0.10 each in the share capital of the Company (the “Shares(s)”) may appoint more than one proxy to attend and vote on his/her behalf. A proxy need not be a member of the Company.
(3) In order to be valid, the proxy form completed in accordance with the instructions set out therein, together with the power of attorney or other authority, if any, under which it is signed, or a certified copy of such power of attorney, must be deposited at the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event no later than 48 hours before the time fixed for the SGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the SGM should you so wish.
(4) In the case of joint holders of any Share, any one of such joint holders may vote at the SGM, either in person or by proxy, in respect of such Share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at the meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint registered holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the joint holding.
(5) In accordance with Rule 13.39(4) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“Listing Rules”), all the resolutions proposed at the SGM will be voted on by way of poll except where the chairman of the SGM, in good faith, decide to allow a resolution which relates purely to procedural or administrative matter to be voted on by a show of hands. The chairman of the SGM will at the meeting demand, pursuant to bye-law 66(a) of the bye-laws of the Company, voting by way of poll on the Resolutions. On a poll, subject to any special rights or restrictions as to voting for the time being attached to any Shares by or in accordance with the bye-laws of the Company, every Shareholder present in person (or being a corporation, is present by a representative duly authorised), or by proxy shall have one vote for every fully paid Share of which he/she is the holder. An announcement will be made by the Company following the conclusion of the SGM to inform the results of the SGM.
(6) At the date hereof, the board of Directors comprises nine Directors, of which four are executive Directors, namely Dr. James Sai-Wing Wong, Mr. Yuen-Keung Chan, Mr. James Sing-Wai Wong and Mr. Philip Bing-Lun Lam; and two are non-executive Directors, namely Mr. Herman Man-Hei Fung and Ms. Wendy Kim-See Gan; and three are independent nonexecutive Directors, namely Mr. Yuen-Tin Ng, Mr. Chi-Chiu Wu and Mr. Ronald James Blake.

AI assistant

Chinney Alliance Group Limited — Proxy Solicitation & Information Statement 2016

49180_rns_2016-10-20_04de1b2e-d875-4fe3-8a62-1a08d771ff67.pdf

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

1. INTRODUCTION

2. THE FRAMEWORK AGREEMENT

Date

Contractor

Employer

Foundation Construction Works

Contract Sum and Terms of Payment

Conditions Precedent to the Framework Agreement

3. INFORMATION ON THE PARTIES, THE COMPANY AND CAG GROUP

4. REASONS FOR AND BENEFITS OF THE TRANSACTIONS

5. LISTING RULES IMPLICATIONS

6. SGM

7. INDEPENDENT BOARD COMMITTEE

8. INDEPENDENT FINANCIAL ADVISER

9. RECOMMENDATION

10. ADDITIONAL INFORMATION

Yuen-Keung Chan

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

CONNECTED TRANSACTION IN RELATION TO FOUNDATION CONSTRUCTION WORKS

INTRODUCTION

THE INDEPENDENT BOARD COMMITTEE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Information on the Parties, CAG Group and Chinney Kin Wing Group

II. Reasons for and Benefits of the Entering into of the Transactions

III. Terms of the Framework Agreement

THE FRAMEWORK AGREEMENT

Foundation Construction Works

Contract Sum and terms of payment

Conditions precedent to the Framework Agreement

OPINION

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Directors’ interests and short positions in the shares, underlying shares and debentures

Substantial Shareholders’ and other persons’ interests and short positions in Shares and underlying Shares

3. DIRECTORS’ INTERESTS IN ASSETS AND CONTRACTS

4. COMPETING INTERESTS OF DIRECTORS AND ASSOCIATES

5. DIRECTORS’ SERVICE CONTRACTS

6. NO MATERIAL ADVERSE CHANGE

7. QUALIFICATION AND CONSENT OF EXPERT

Name

Qualification

8. MISCELLANEOUS

9. DOCUMENTS AVAILABLE FOR INSPECTION

(Incorporated in Bermuda with limited liability)

ORDINARY RESOLUTIONS

“ THAT :

NOTICE OF SGM

Notes:

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Chinney Alliance Group Limited Proxy Solicitation & Information Statement 2016