ISP Holdings 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 a 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 Synergis Holdings Limited, you should at once hand this circular and the enclosed form of proxy to the purchaser or transferee, or to the bank, stockbroker, registered dealer in securities 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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SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 02340)

CONTINUING CONNECTED TRANSACTIONS WITH HSIN CHONG CONSTRUCTION GROUP LTD. AND

NOTICE OF SPECIAL GENERAL MEETING

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 6 to 30 of this circular and a letter from the Independent Board Committee is set out on page 31 of this circular. A letter from Veda Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders in respect of the Agreements and the transactions contemplated thereunder is set out on pages 32 to 60 of this circular.

A notice convening the SGM to be held at 2nd Floor, Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Wednesday, 25 February 2015 at 11:30 a.m. is set out on pages SGM-1 to SGM-3 of this circular. Whether or not you are able to attend the SGM, you are requested to complete and sign the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same with the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned thereof should you so wish.

2 February 2015

for identification purposes only

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Letter from Veda Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Appendix – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

‘‘2012 General Business Services the agreement entered into between HCCG and the Agreement’’ Company on 10 December 2009 (which was supplemented by the Supplemental Agreement dated 10 February 2011) and renewed on 27 September 2012 in connection with the provision of the General Business Services by the Group to the HCCG Group which will expire on 31 December 2015;
‘‘2012 Supporting Services Agreement’’
the agreement entered into between HCCG and the Company on 30 November 2012 in connection with the provision of the Supporting Services by the HCCG Group to the Group which expired on 31 December 2014;
‘‘2012 Tender Services Agreement’’ the agreement entered into between HCCG and the Company on 30 November 2012 in connection with the provision of the Tender Services by the HCCG Group to the Group which expired on 31 December 2014;
‘‘Agreements’’ the General Business Services Agreement, the Tender Services Agreement, the Supporting Services Agreement, the Specialist Works Sub-Contracting Agreement and the ISP Works Sub-Contracting Agreement;
‘‘Awarded Contracts’’ Selected Contracts tendered by the HCCG Group pursuant to the Tender Order and awarded to the Group;
‘‘Board’’ the board of directors of the Company;
‘‘Business Day’’
a day (other than a Saturday, Sunday or public holiday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours;
‘‘Cleaning Services’’ the cleaning services which may from time to time be provided by the Group to the HCCG Group;
‘‘Company’’
Synergis Holdings Limited, a company incorporated in Bermuda with limited liability whose shares are listed on the main board of the Stock Exchange;
‘‘connected person’’ has the same meaning ascribed to it under the Listing Rules;
‘‘Director(s)’’ the director(s) of the Company;
‘‘Dr. Wong’’
Dr. Wilfred Wong Ying Wai, the Chairman and Executive Director of the Company;
‘‘General Business Services’’ the Property and Facility Management Services, the Cleaning Services and the Miscellaneous Services which may from time to time be provided by the Group to the HCCG Group;

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DEFINITIONS

‘‘General Business Services the agreement entered into between HCCG and the Agreement’’ Company on 31 December 2014 in connection with the provision of the General Business Services by the Group to the HCCG Group;
‘‘General Business Services Annual the maximum aggregate annual value in respect of the Caps’’ General Business Services;
‘‘General Business Services the transactions contemplated under the General Transactions’’ Business Services Agreement;
‘‘Group’’ the Company and its subsidiaries from time to time; ‘‘HCCG’’ Hsin Chong Construction Group Ltd., a company incorporated in Bermuda with limited liability whose shares are listed on the main board of the Stock Exchange;
‘‘HCCG Group’’ HCCG and its subsidiaries from time to time, excludes any member of the Group;
‘‘HCCG Independent the HCCG Shareholders other than Dr. Wong and his Shareholders’’ associates;
‘‘HCCG Shareholder(s)’’ holder(s) of ordinary shares of HK$0.10 each of HCCG; ‘‘Hong Kong’’ Hong Kong Special Administrative Region of the PRC;
‘‘Independent Board Committee’’ an independent committee of the Board, comprising all of the four Independent Non-executive Directors, namely Mr. Stephen Ip Shu Kwan, Mr. Kan Fook Yee, Mr. Wong Tsan Kwong and Mr. David Yu Hon To, constituted to advise the Independent Shareholders as regards the terms of the Agreements;
‘‘Independent Shareholder(s)’’ the Shareholders other than HCCG, Dr. Wong and their respective associates;
‘‘ISP Business’’
the business activities undertaken by the ISP Division of the Group, which include the ISP Works;

‘‘ISP Division’’ the Interiors & Special Projects Division that conducts the ISP Business;

‘‘ISP Works’’

works which include (i) alteration and addition works and demolition works relating and incidental to such alteration and addition works; (ii) renovation and conservation works; (iii) fitting-out works for commercial projects; (iv) commercial, residential, retail and institutional special buildings projects; (v) maintenance work; and (vi) any construction work with an initial tendering submission amount of no more than HK$300 million (or such higher threshold as the Company and HCCG may from time to time agree);

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DEFINITIONS

‘‘ISP Works Annual Caps’’
‘‘ISP Works Sub-Contracting Agreement’’
‘‘ISP Works Transactions’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
‘‘Miscellaneous Services’’

‘‘PRC’’

‘‘Property and Facility Management Services’’
‘‘Selected Contracts’’
‘‘SFO’’
‘‘SGM’’
‘‘Shareholder(s)’’

the maximum aggregate annual value in respect of the ISP Works Transactions;

the agreement entered into between HCCG and the Company on 31 December 2014 in connection with the provision of the ISP Works by the Group to the HCCG Group;
the transactions contemplated under the ISP Works SubContracting Agreement;
30 January 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular;
the Rules Governing the Listing of Securities on the Stock Exchange;
include consultancy services, leasing services, security services, laundry services, repair and maintenance services, refurbishment services, copying services and other miscellaneous services which may from time to time be provided by the Group to the HCCG Group (but excluding the sharing of office administration services provided by the Group to the HCCG Group or vice versa on a cost recovery basis);
the People’s Republic of China and, for the purpose of this circular, excluding Hong Kong and Macau;
the property management and facility management services which may from time to time be provided by the Group to the HCCG Group for properties owned, leased or constructed by the HCCG Group, including administrative services provided by the Group in the course of providing such property management and facility management services;
potential contracts selected by the Group and provided to the HCCG Group for tender submission pursuant to the Tender Services Agreement;
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
the special general meeting of the Company to be held for the purpose of considering and, if thought fit, approving, among other matters, the Agreements and the transactions contemplated thereunder;
holder(s) of ordinary shares of HK$0.10 each of the Company;

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DEFINITIONS

‘‘Shares’’ ordinary share(s) of HK$0.10 each in the share capital of the Company;

‘‘Specialist Works’’

the construction, foundation, civil engineering and related works, the electrical and mechanical engineering and related works and the curtain wall, windows and related works which may from time to time be provided by the HCCG Group to the Group;

‘‘Specialist Works Annual Caps’’ the maximum aggregate annual value in respect of the Specials Works Transactions;
‘‘Specialist Works Sub-Contracting the agreement entered into between HCCG and the Agreement’’ Company on 31 December 2014 in connection with the provision of the Specialist Works by the HCCG Group to the Group;
‘‘Specialist Works Transactions’’ the transactions contemplated under the Specialist Works Sub-Contracting Agreement;
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;
‘‘subsidiary’’ has the same meaning ascribed to it under the Listing Rules;
‘‘substantial shareholder’’ has the same meaning ascribed to it under the Listing Rules;

‘‘Supplemental Agreement’’ the supplemental agreement dated 10 February 2011 entered into between HCCG and the Company pursuant to which the annual caps for the General Business Services years ending 31 December 2011 and 31 December 2012 were revised;

‘‘Supporting Services’’ the supporting services to be provided by the HCCG Group to the Group in relation to, among others, health, safety, quality, environmental, plant, surveying, site administration, building services and special projects;

‘‘Supporting Services Agreement’’

the agreement entered into between HCCG and the Company on 31 December 2014 in connection with the provision of the Supporting Services by the HCCG Group to the Group;

‘‘Supporting Services Annual the maximum aggregate annual value in respect of the Caps’’ Supporting Services;

‘‘Supporting Services the transactions contemplated under the Supporting Transactions’’ Services Agreement;

– 4 –

DEFINITIONS

‘‘Tender Order’’ an order for the arrangement to submit tender for the Selected Contracts, by the HCCG Group on behalf of Group, given by the Group to the HCCG Group in accordance with the terms of the Tender Services Agreement; ‘‘Tender Services’’ the service to submit tenders for the Selected Contracts by the HCCG Group and to sub-contract the Awarded Contracts by the HCCG Group to the Group in accordance with the terms of the TS Sub-Contracting Agreement;

‘‘Tender Services Agreement’’
the agreement entered into between HCCG and the Company on 31 December 2014 in connection with the provision of the Tender Services by the HCCG Group to the Group;
‘‘Tender Services Transactions’’
the transactions contemplated under the Tender Services Agreement;
‘‘Transactions’’
the General Business Services Transactions, the Tender Services Transactions, the Supporting Services Transactions, the Specialist Works Transactions and the ISP Works Transactions;
‘‘TS Sub-Contracting Agreement’’
any agreement to be entered into pursuant to the Tender Services Agreement from time to time, setting out the particulars and detailed terms and conditions for subcontracting the Awarded Contracts to the Group by the HCCG Group;
‘‘TS Sub-Contracting Annual Caps’’
the maximum aggregate annual value in respect of subcontracting the Awarded Contracts;
‘‘Veda Capital’’
Veda Capital Limited, a licensed corporation to carry out type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Agreements and the transactions contemplated thereunder;
‘‘HK$’’ Hong Kong dollar(s), the lawful currency of Hong Kong; and
‘‘%’’

per cent.

– 5 –

LETTER FROM THE BOARD

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SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 02340)

Executive Directors:

Dr. Wilfred Wong Ying Wai (Chairman) Dr. Fan Cheuk Hung (Managing Director)

Independent Non-executive Directors: Mr. Stephen Ip Shu Kwan Mr. Kan Fook Yee Mr. Wong Tsan Kwong Mr. David Yu Hon To

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

Principal Place of Business in Hong Kong: 10th Floor Hsin Chong Center 107-109 Wai Yip Street Kwun Tong Kowloon Hong Kong 2 February 2015

To the Shareholders and, for information only, the Optionholders,

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS WITH

HSIN CHONG CONSTRUCTION GROUP LTD. AND

NOTICE OF SPECIAL GENERAL MEETING

(A) INTRODUCTION

Reference is made to the joint announcement issued by the Company and HCCG dated 31 December 2014 in respect of the General Business Services Agreement, the Tender Services Agreement, the Supporting Services Agreement, the Specialist Works SubContracting Agreement and the ISP Works Sub-Contracting Agreement entered into between the Company and HCCG. This circular is to provide you with (i) the particulars of the Agreements and the transactions contemplated thereunder together with the respective annual caps; (ii) the letter from the Independent Board Committee with their view on the Agreements and the transactions contemplated thereunder; and (iii) the letter from Veda Capital with their advice on the Agreements and the transactions contemplated thereunder to the Independent Board Committee and the Independent Shareholders.

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LETTER FROM THE BOARD

(B) GENERAL BUSINESS SERVICES AGREEMENT

Reference is made to the joint announcement dated 27 September 2012 and the circular issued by the Company dated 26 October 2012 in connection with the 2012 General Business Services Agreement entered into between HCCG and the Company. Although the 2012 General Business Services Agreement is only due to expire on 31 December 2015, the parties have entered into the General Business Services Agreement on 31 December 2014 to revise the annual cap for the service fees for the financial year 2015 and set the annual caps for the financial years 2016 and 2017. The principal terms of the General Business Services Agreement are as follows:

Date: 31 December 2014

Parties: (1) HCCG (2) the Company

Type of services:

The HCCG Group may from time to time during the term of the General Business Services Agreement in the ordinary and usual course of business require the Group to provide the General Business Services.

Basis for the provision of services:

The relevant member(s) of the HCCG Group (or its/their agents, including property manager(s)）will enter into subsidiary agreement(s) with the relevant member(s) of the Group to appoint such relevant member(s) of the Group to provide the General Business Services under the General Business Services Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions including the payment terms upon which particular General Business Services shall be provided by the relevant member(s) of the Group to the relevant member(s) of the HCCG Group.

The terms of each subsidiary agreement must comply with the terms of the General Business Services Agreement and in particular, the General Business Services to be provided under any subsidiary agreement must comply with the following basis:

(i) on normal commercial terms (or (a) from HCCG’s perspective, on terms no less favourable to the HCCG Group than those made available from independent third parties; and (b) from the Company’s perspective, on terms no less favourable to the Group than those made available to independent third parties);
(ii) the prices for the General Business Services shall be determined on arm’s length negotiations by reference to the prevailing market prices and having regard to the estimated costs of provision of the relevant services;

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LETTER FROM THE BOARD

(iii) quotations from the Group and other independent third party service providers shall be obtained by the HCCG Group for the provision of the General Business Services by such parties;
(iv) the price and terms, historical working relationship, experience and the quality of services offered by the independent third party providers and the Group respectively shall be considered by the HCCG Group;
(v) the Group may be engaged on terms similar to those offered by the other service providers to the HCCG Group and which are no less favourable to the Group than those made available to independent third parties; and
(vi) the total value of General Business Services to be provided by the Group to the HCCG Group for any one financial year from 1 January to 31 December under the General Business Services Agreement shall not exceed the respective annual caps set out in the paragraph titled ‘‘General Business Services Annual Caps’’ below.

Condition:	The General Business Services Agreement is conditional
	on the approval by resolution of the Independent
	Shareholders in a general meeting to be convened for such
	purposes.
Term:	Subject to the fulfilment of the condition, the General
	Business Services Agreement shall be effective from 1
	January 2015 to 31 December 2017.
Termination of 2012	Upon the General Business Services Agreement becoming
General Business	effective, the parties have agreed that the 2012 General
Services Agreement:	Business Services Agreement shall terminate and have no
	further effect and neither party shall have any further
	obligations or liabilities towards the other nor any claims
	against the other in connection with the 2012 General
	Business Services Agreement.
	In the event that the General Business Services Agreement
	does not become effective, the 2012 General Business
	Services Agreement will remain in full force and binding
	on HCCG and the Company.

Pricing Basis

A majority of the General Business Services such as cleaning and refurbishment services are sub-contracted by the Group to outside contractors which are independent third parties. Depending on the scope of the job and the available resources of the Group, some services are performed by the Group’s internal workforce.

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LETTER FROM THE BOARD

In order to ensure the transactions under the General Business Services Agreement are under normal commercial terms and priced with reference to the prevailing market price of similar works on terms no less favourable to the Company than terms available to independent third party customers of the Company, the Company will adopt the following procedures when providing quotations to the HCCG Group:

(i) in determining the price for the General Business Services, the Group will obtain and review quotations from its pool of sub-contractors and compare them with the prices maintained in its in-house computer database obtained from sub-contractors for the Group’s previous jobs. Such information will assist the Group in conducting quantitative analysis between quotations obtained from sub-contractors. If the service is to be performed by the Group’s internal workforce, it will assess the time and cost involved by the staff in providing the services;
(ii) the price that the Group will charge the HCCG Group will be such sub-contracting costs and, for services provided by the Group’s staff, the labour costs incurred, plus a premium on the sub-contracting costs and the labour costs at a rate determined on a case by case basis. Factors that the Group will take into account when determining the premium include the nature, complexity, location and duration of the services to be provided, the capacity of the Group at the time the services are required, the margin for comparable services in the market and the time incurred by the management and commercial team of the Group and the operating expenses incurred in relation to the provision of the services;
(iii) the Group will also review and compare previous quotations submitted to both connected persons and independent third parties to ensure the quotation to be submitted to the HCCG Group is not more favourable than those submitted to independent third parties. For instance, the Group will consider the factors that were taken into account in setting the premium for previous quotations to ensure the premium that the Group will charge in the quotation to be submitted to the HCCG Group is in line with historic precedents for independent third parties;
(iv) in preparing and assessing the quotations, the Group will take into account factors including the technical requirements, quantity specifications, expected completion time, customer’s expectations and the possible risk factors associated with the project. The commercial team of the Company will examine the terms and conditions provided by the Group to ensure the same are in line with normal market practices and standard terms no less favourable to the Company than those available to independent third parties;
(v) a report, which sets out, among others, the proposed quotation to be offered by the Group to the HCCG Group and the prices of similar works offered by the Group to independent third parties, will be prepared by the commercial team and submitted to the head of the operation team for approval. Throughout the process, the Company will treat the HCCG Group and other independent third party customers equally, and the transactions will be negotiated on an arm’s length basis, with reference to the market information gathered; and
(vi) the directors and management of the Group will closely monitor the procedures in the preparation of the quotation, so as to ensure that the policies are strictly followed. The Independent Non-executive Directors will also review the transactions contemplated under the General Business Services Agreement every year pursuant to the requirements under the Listing Rules.

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LETTER FROM THE BOARD

General Business Services Annual Caps

The General Business Services comprise Property and Facility Management Services, Cleaning Services and Miscellaneous Services. Under the General Business Services Agreement, the expected annual caps for the service fees payable to the Group for the provision of the General Business Services by the Group to the HCCG Group for the three financial years ending 31 December 2015, 2016 and 2017 respectively are as follows:

Financial Year 1/1/2015 – 31/12/2015 1/1/2016 – 31/12/2016 1/1/2017 – 31/12/2017	Annual Cap HK$35 million HK$45 million HK$50 million

The General Business Services Annual Caps were arrived at by reference to (a) existing management fees paid for the properties managed by the Group and the expected increases in management fees; (b) expected demand for providing consultancy services, leasing services, Property and Facility Management Services to the HCCG Group’s property development project(s) in the PRC; (c) expected new and increasing demand for administrative services to be provided to properties managed by the Group which will increase the fees for administrative services comprised in the management fees charged by the Group; (d) engagement of the Group to provide Property and Facility Management Services to other construction projects of the HCCG Group in Hong Kong; and (e) the HCCG Group’s expected demand for cleaning services, assuming that the Group can successfully be awarded these cleaning works outsourced by the HCCG Group.

The following table sets out (i) the actual service fees incurred pursuant to the 2012 General Business Services Agreement; (ii) the annual caps under the 2012 General Business Services Agreement; and (iii) the utilization rate:

Period 1/1/2013 – 31/12/2013 1/1/2014 – 31/12/2014	Amount incurred HK$11,939,000 HK$13,556,000 (Note 1)	Annual cap HK$22 million HK$25 million	Utilization rate
			54.27% 54.22% (Note 2)

Note 1: This amount is extracted from the Company’s management account and represents the fees up to 30 September 2014, being the latest practicable date to ascertain such information.

Note 2: This utilization rate is calculated based on the actual fees incurred up to 30 September 2014 only.

The annual caps under the 2012 General Business Services Agreement for the financial years ended 31 December 2013 and 31 December 2014 were not fully utilized as the progress of the property development projects of the HCCG Group in the PRC was not as fast as anticipated and as a result the General Business Services that were required to be provided by the Synergis Group to the HCCG Group were less than estimated. While the Company has considered the historical utilization rate when setting the annual caps under the General Business Services Agreement, it has put more emphasis on other factors including the potential increase in the costs for provision of the General Business Services (such as wages) as a result of inflation and the potential growth in the property development business of the HCCG Group in Hong Kong and the PRC as mentioned above.

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LETTER FROM THE BOARD

The expected annual cap for the financial year ending 31 December 2015 represents an increment of 40% over the existing annual cap of 2014, the expected annual cap for the financial year ending 31 December 2016 represents an increment of approximately 29% over the expected annual cap of 2015 and the expected annual cap for the financial year ending 31 December 2017 represents an increment of approximately 11% over the expected annual cap of 2016. The significant increase in the expected annual cap for 2015 is mainly due to the potential General Business Services which the HCCG Group may require from the Group in respect of:

(i) HCCG’s La Viva project in Shenyang, the residential sales launch of which will be synchronized with phased opening of the outlets and water park in the first half of 2015 according to the interim report 2014 of HCCG;
(ii) the acquisition completed by HCCG in January 2015 of a property development project with a gross site of approximately 1,925,056 m[2] located in Sanshui District of Foshan City in Guangdong Province, the PRC for property development over a number of years. As disclosed in the circular issued by HCCG dated 4 November 2014 in respect of the acquisition, the property has already completed a composite retail outlet and it is the present intention of the management of HCCG to commence further development, construction and marketing planning and to continue phased development of the property as soon as practicable following completion of the acquisition;
(iii) HCCG’s New Times Plaza project in Beijing, the office units sale launch of which took place in July 2014; and
(iv) the active expansion of the HCCG Group since 2011 from its strongly established based building construction and civil, mechanical and electrical installation as well as real estate and facility management services, to real estate development and property investments, to become a vertically integrated property developer and investor which was evidenced by the two acquisitions in 2011 and 2013 (namely the La Viva project in Shenyang and the New Times Plaza project in Beijing). The Group has secured contracts for the provision of General Business Services from the HCCG Group for both the La Viva project and the New Times Plaza project.

The increments of the expected annual caps for 2016 and 2017 are not as substantial as management has taken into account the capacity and resources of the Group assuming the Group is required to provide the maximum potential General Business Services to the HCCG Group in 2015.

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LETTER FROM THE BOARD

(C) TENDER SERVICES AGREEMENT

Reference is made to the joint announcement dated 10 September 2012 issued by the Company and HCCG and the circular issued by the Company dated 26 October 2012 in connection with, amongst others, the 2012 Tender Services Agreement and the 2012 Supporting Services Agreement which were entered into between the Company and HCCG and expired on 31 December 2014. The Tender Services Agreement and the Supporting Services Agreement were entered into between the parties on 31 December 2014 for a term of three years from 1 January 2015 to 31 December 2017.

As mentioned in the circular issued by the Company dated 26 October 2012, notwithstanding the entering into of the 2012 Tender Services Agreement, the HCCG Group may from time to time sub-contract any of its project(s) (the ‘‘Other Contracts’’) to any member of the Group as it considers appropriate on such terms to be negotiated on an arm’s length basis. The annual caps under the 2012 Tender Services Agreement cover the maximum aggregate annual value in respect of sub-contracting the Awarded Contracts and the Other Contracts as may be sub-contracted by the HCCG Group to the Group. To simplify the arrangements, the new Tender Services Agreement will only cover the Tender Services and the ISP Works Sub-Contracting Agreement was entered into between the parties to cover the other sub-contracting works by the HCCG Group to the Group. Details of the ISP Works Sub-Contracting Agreement are set out in the paragraph headed ‘‘(F) ISP Works Sub-Contracting Agreement’’ below.

Tender Services Agreement

The principal terms of the Tender Services Agreement are as follows:

Date: 31 December 2014

Parties: (1) HCCG (2) the Company

Type of services:

The HCCG Group agrees to provide the Tender Services pursuant to the Tender Order as may from time to time be given by the Group.

Basis for the provision of (i) within three (3) Business Days or such other day as services: the parties may agree after any Selected Contract has been awarded to the HCCG Group, HCCG agrees to procure any relevant member(s) of the HCCG Group to and the Company agrees to procure any relevant member(s) of the Group to enter into the TS SubContracting Agreement;

(ii) by entering into the TS Sub-Contracting Agreement, the HCCG Group agrees to fully sub-contract all rights and obligations under the Awarded Contracts to the Group; and

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LETTER FROM THE BOARD

(iii) the total value in respect of sub-contracting of Awarded Contracts for any one financial year from 1 January to 31 December under the Tender Services Agreement shall not exceed the respective annual caps set out in the paragraph titled ‘‘TS SubContracting Annual Caps’’ below.

Fees: No fee will be charged by the HCCG Group for the provision of the Tender Services as the involvement of the HCCG Group in the tender process is minimal. The Group will be performing substantially all of the work during the tender process which includes the identification, selection and assessment of potential contracts, preparation of tender documents and planning and pricing of the tender. The HCCG Group merely provides a platform for the submission of the tender and minimal cost will be incurred. The provision of the Tender Services was part of the arrangement pursuant to the acquisition of the ISP Division by the Company in 2012 and was intended to facilitate the smooth transition of the ISP Business from HCCG to the Company and to maintain the competitiveness of the ISP Division. Conditions: The Tender Services Agreement is conditional on the approval by (i) resolution of the HCCG Independent Shareholders in a general meeting to be convened for such purposes; and (ii) resolution of the Independent Shareholders in a general meeting to be convened for such purposes. Term: Subject to the fulfilment of the conditions, the Tender Services Agreement shall be effective from 1 January 2015 to 31 December 2017.

TS Sub-Contracting Annual Caps

The consideration for each TS Sub-Contracting Agreement shall be equivalent to the tendered amount under the relevant Awarded Contract. Under the Tender Services Agreement, the expected annual caps for the total value in respect of sub-contracting of Awarded Contracts for the three financial years ending 31 December 2015, 2016 and 2017 respectively are as follows:

Financial Year Annual Cap 1/1/2015 – 31/12/2015 HK$1,300 million 1/1/2016 – 31/12/2016 HK$1,300 million 1/1/2017 – 31/12/2017 HK$1,300 million

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LETTER FROM THE BOARD

The TS Sub-Contracting Annual Caps are made by reference to:

(i) the growth of the market under ISP Business in the three-year period from 1 January 2015 to 31 December 2017 estimated by the management, which is based on the positive outlook of the industry due to the intense demand from high end retail or hotels for renovation, alteration and addition, and revitalization works as well as the government’s initiatives for building maintenance and mandatory renovations which may lead to an increase in the projects available for the Group to undertake in the forthcoming years; and
(ii) the expected contracts that may be awarded in the three-year period from 1 January 2015 to 31 December 2017, with reference to the expected expansion and development of the business of the Group, which is estimated based on the outlook of the ISP Works market and management’s assessment on the tender opportunities for the coming years and which involve fitting-out, project/construction management jobs in Chinese Mainland and turnkey design and fitting-out jobs, addition and alternation works in Hong Kong.

Pursuant to the 2012 Tender Services Agreement, no value was incurred in respect of sub-contracting of Awarded Contracts by the HCCG Group to the Group. For the period between 1 December 2012 to 31 December 2014, although the HCCG Group has submitted tenders for contracts selected by the Group, such contracts were not awarded to the HCCG Group and therefore no contract was sub-contracted to the Group. Please refer to the paragraph headed ‘‘(F) ISP Works Sub-Contracting Agreement’’ below for the value incurred in respect of sub-contracting of the Other Contracts by the HCCG Group to the Group.

Subsequent to the acquisition of the ISP Division by the Company in 2012, the Group has obtained a Group B (on probation) qualification to carry out public works in the Building category. The Group is in the process of attaining a track record history in terms of number and value of jobs involved in order to obtain other qualifications to carry out the ISP Works. Although no Selected Contract was awarded to the HCCG Group in the past two years, given the reputation and track record of the HCCG Group, it will be in a better position to secure the Selected Contracts on behalf of the Group as and when these opportunities arise. The TS Sub-Contracting Annual Caps provide flexibilities for the Group to engage in business activities which is furtherance to its business and the utilization of the TS Sub-Contracting Annual Caps will depend on, amongst others, the projects being successfully tendered by the HCCG Group and awarded to the Group.

The Shareholders should note that the TS Sub-Contracting Annual Caps represent the best estimates by the Group based on the information currently available. The TS SubContracting Annual Caps have no direct relationship to, nor should be taken to have any direct bearing on, the financial or potential financial performance of the HCCG Group and the Group. The Group may or may not require the HCCG Group to provide any Tender Services in the future and if required, the HCCG Group may or may not be awarded with the Selected Contract. Accordingly, the Tender Services and/or the transactions contemplated thereunder may or may not sum up to the level of the respective TS Sub-Contracting Annual Caps.

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(D) SUPPORTING SERVICES AGREEMENT

The principal terms of the Supporting Services Agreement are as follows:

Date: 31 December 2014

Parties:

(1) HCCG (2) the Company

Type of services:

The HCCG Group may from time to time during the term of the Supporting Services Agreement in the ordinary and usual course of business provide the Supporting Services to the Group.

Basis for the provision of (i) HCCG agrees to procure any relevant member(s) of services: the HCCG Group and the Company agrees to procure any relevant member(s) of the Group to enter into subsidiary agreement(s) for the provision of any particular Supporting Services under the Supporting Services Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions upon which particular Supporting Services shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the Supporting Services Agreement; and
(ii) the total value of the Supporting Services to be provided by the HCCG Group to the Group for any one financial year from 1 January to 31 December under the Supporting Services Agreement shall not exceed the respective annual caps set out in the paragraph titled ‘‘Supporting Services Annual Caps’’ below.

Fees:

The parties agree that any and all Supporting Services shall be provided by the HCCG Group to the Group at a fee calculated based on the actual cost of the Supporting Services which consists mainly of the time costs of the relevant staff providing the Supporting Services. No premium will be charged by the HCCG Group as the Supporting Services will be provided to the Group in relation to the ISP Business as part of the arrangement pursuant to the acquisition of the ISP Division by the Company in 2012 to facilitate the smooth transition of the ISP Business from HCCG to the Company.

Conditions:

The Supporting Services Agreement is conditional on the approval by (i) resolution of the HCCG Independent Shareholders in a general meeting to be convened for such purposes; and (ii) resolution of the Independent Shareholders in a general meeting to be convened for such purposes.

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Term:

Subject to the fulfilment of the conditions, the Supporting Services Agreement shall be effective from 1 January 2015 to 31 December 2017.

Subject to the terms of the subsidiary agreement, the fees of the Supporting Services shall be charged to the Group by the HCCG Group monthly in arrears. While the Supporting Services Agreement does not specifically provide for payment terms, in practice, fees for the Supporting Services are payable in full within 60 days from the date of invoice.

Supporting Services Annual Caps

Under the Supporting Services Agreement, the expected annual caps for the service fees payable to the HCCG Group for the provision of Supporting Services by the HCCG Group to the Group for the three financial years ending 31 December 2015, 2016 and 2017 respectively are as follows:

Financial Year 1/1/2015 – 31/12/2015 1/1/2016 – 31/12/2016 1/1/2017 – 31/12/2017	Annual Cap HK$20 million HK$18 million HK$16 million

The Supporting Services Annual Caps are made by reference to the actual cost of the Supporting Services which comprise mainly of staff costs to be provided by the HCCG Group.

The following table sets out (i) the actual service fees incurred pursuant to the 2012 Supporting Services Agreement; (ii) the annual caps under the 2012 Supporting Services Agreement; and (iii) the utilization rate:

Period 1/12/2012 – 31/12/2012 1/1/2013 – 31/12/2013 1/1/2014 – 31/12/2014	Amount incurred HK$181,000 HK$15,492,000 HK$7,902,000 (Note 1)	Annual cap HK$9.2 million HK$40 million HK$30 million	Utilization rate
			1.97% 38.73% 26.34% (Note 2)

Note 1: This amount is extracted from the Company’s management account and represents the fees incurred up to 30 September 2014, being the latest practicable date to ascertain such information.

Note 2: This utilization rate is calculated based on the actual fees incurred up to 30 September 2014 only.

Since the acquisition of the ISP Division by the Group was completed on 30 November 2012, the utilization rate for the financial year ended 31 December 2012 was very low as the actual amount incurred was for the month of December only. The remaining annual caps under the 2012 Supporting Services Agreement were not fully utilized as the ISP Division of the Group was able to rely on its own resources to provide the supporting services due to the nature of the Supporting Services that were required during the corresponding period. For the ISP Businesses that the Group was engaged in during 2013 and 2014, the majority of the supporting services that the Group required were related to surveying and staff administration work and which the Group has sufficient staff to provide such services. Despite the historical deviations, the expected annual caps under the Supporting Services Agreement were set in view of the potential increase in the costs

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for provision of the Supporting Services (such as wages) as a result of inflation and the potential growth in the ISP Business of the Group. In the event that the Group obtains jobs which involve aspects of the ISP Business that require on site supporting services which are of a more labour intensive nature, the Group will require the HCCG Group to provide such Supporting Services as the Group will not have sufficient resources to do so. The expected annual caps provide the Group with the flexibility to capture ISP Business opportunities even though it may not be able to recruit additional skilled and supporting staff in a timely manner. Nevertheless, the expected annual caps were on a decreasing trend as the Group intends to further develop the capabilities of the ISP Division and recruit additional skilled and supporting staff so as to reduce its reliance on the HCCG Group.

(E) SPECIALIST WORKS SUB-CONTRACTING AGREEMENT

The Company expects that the Group may engage the HCCG Group as a subcontractor for provision of Specialist Works to the Group’s projects from time to time. In this connection, on 31 December 2014, the Company and HCCG entered into the Specialist Works Sub-Contracting Agreement. The principal terms of the Specialist Works SubContracting Agreement are as follows:

Date:

31 December 2014

Parties: (1) HCCG (2) the Company

Type of services:

The Group may from time to time during the term of the Specialist Works Sub-Contracting Agreement in the ordinary and usual course of business engage the HCCG Group as its subcontractor for provision of the Specialist Works to the Group’s projects.

Basis for the provision of services:

The Company agrees to procure any relevant member(s) of the Group and HCCG agrees to procure any relevant member(s) of the HCCG Group to enter into subsidiary agreement(s) for the provision of any particular Specialist Works under the Specialist Works Sub-Contracting Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions including the payment terms upon which particular Specialist Works shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the Specialist Works Sub-Contracting Agreement. In particular, any Specialist Works to be provided under any subsidiary agreement must comply with the following basis:

(i) on normal commercial terms (or (a) from HCCG’s perspective, on terms no less favourable to the HCCG Group than those made available to independent third parties; and (b) from the Company’s perspective, on terms no less favourable to the Group than those made available from independent third parties);

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(ii) the prices for the Specialist Works Transactions shall be determined on arm’s length negotiations by reference to the prevailing market prices and having regard to the estimated costs of provision of the relevant services;
(iii) the HCCG Group may tender for the Specialist Works in accordance with the tendering procedures of the Group from time to time and quotations from other independent third parties shall be obtained by the Group for the provision of the Specialist Works;
(iv) the price and terms, historical working relationship, experience and the quality of works offered by the independent third parties and the HCCG Group respectively shall be considered by the Group;
(v) the HCCG Group may be engaged on terms similar to those offered by the other providers to the Group and which are no less favourable to the Group than those made available from independent third parties; and
(vi) the total value of the Specialist Works Transactions to be provided by the HCCG Group to the Group for any one financial year from 1 January to 31 December under the Specialist Works SubContracting Agreement shall not exceed the respective annual caps set out in the paragraph titled ‘‘Specialist Works Annual Caps’’ below.
Conditions: The Specialist Works Sub-Contracting Agreement is conditional on the approval by (i) resolution of the HCCG Independent Shareholders in a general meeting to be convened for such purposes; and (ii) resolution of the Independent Shareholders in a general meeting to be convened for such purposes.
Term: Subject to the fulfilment of the conditions, the Specialist Works Sub-Contracting Agreement shall be effective from 1 January 2015 to 31 December 2017.

Specialist Works Annual Caps

Under the Specialist Works Sub-Contracting Agreement, the expected annual caps for the total value of the Specialist Works Transactions for the three financial years ending 31 December 2015, 2016 and 2017 respectively are as follows:

Financial Year 1/1/2015 – 31/12/2015 1/1/2016 – 31/12/2016 1/1/2017 – 31/12/2017	Annual Cap HK$600 million HK$600 million HK$600 million

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The Specialist Works Annual Caps are made by reference to:

(i) the growth of the market under the ISP Business in the three-year period from 1 January 2015 to 31 December 2017 estimated by the management, which is based on the positive outlook of the industry due to the intense demand from high end retail or hotels for renovation, alteration and addition, and revitalization works as well as the government’s initiatives for building maintenance and mandatory renovations which may lead to an increase in the projects available for the Group to undertake in the forthcoming years; and
(ii) the estimated total contract sum of new projects of the Group in the three-year period from 1 January 2015 to 31 December 2017, with reference to the expected expansion and development of the business of the Group, which is estimated based on the outlook of the ISP Works market and management’s assessment on the tender opportunities for the coming years and which involve specialist works such as mechanical & electrical and related works, foundation and curtain wall works, etc. which the Group may sub-contract to the HCCG Group.

Historically, the Group has sub-contracted curtain wall related works to the HCCG Group in 2014 which incurred a value of approximately HK$2.8 million. The curtain wall business was newly established by the Group in 2014. As such, the historical amount of Specialist Works sub-contracted by the Group to the HCCG Group was not substantial. With the urban high rise and large span of public buildings in Hong Kong and the Chinese Mainland, the development of building construction and auxiliary businesses is flourishing, including the curtain wall industry. The management believes the demand for building curtain wall will be robust amidst an environment with limited number of quality curtain wall contractors. As the ISP Division of the Group grows, the Group expects to obtain more projects which may involve Specialist Works and the expected annual caps reflect the maximum potential value of Specialist Works which the Group may sub-contract to the HCCG Group, having taken into account such potential growth as mentioned above. As at the Latest Practicable Date, the Company has identified potential projects which involve Specialist Works that the HCCG Group has the capability to provide for and which the Group may invite the HCCG Group to submit a tender in an amount of approximately HK$450 million. As at the Latest Practicable Date, the Group has submitted tender proposals to the employers in respect of some of these projects and are still in the selection process by the employers.

The Shareholders should note that the Specialist Works Annual Caps represent the best estimates by the HCCG Group and the Group. The Specialist Works Annual Caps have no direct relationship to, nor should be taken to have any direct bearing on, the financial or potential financial performance of the HCCG Group and the Group. The Group may or may not require the HCCG Group to provide any Specialist Works in the future.

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Pricing basis of the Specialist Works Transactions awarded by the Group to the HCCG Group

As a general principle, the prices and terms of the Specialist Works Transactions shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis and at prices and on terms no more favourable than those awarded to independent third party subcontractors of the Group.

All labour intensive portion of the Specialist Works to be performed by the HCCG Group will be sub-contracted to outside contractors. In determining the price for the Specialist Works Transactions, the HCCG Group will obtain quotations from its pool of subcontractors for the provision of relevant Specialist Works. The price that the HCCG Group will charge the Group will be such sub-contracting costs plus a premium at a rate determined on a case by case basis. Factors that the HCCG Group will take into account when determining the premium include the nature, complexity, location and duration of the Specialist Works to be provided, the capacity of the HCCG Group at the time the Specialist Works are required to be performed, the margin for comparable Specialist Works in the market, the background of the ultimate employer of the project and the time incurred by the management and operation team of the HCCG Group and the operating expenses incurred in relation to the performance of the Specialist Works.

The Group may sub-contract the Specialist Works to the HCCG Group at a premium instead of directly engaging the sub-contractors which will perform the Specialist Works because the HCCG Group may possess certain licence and qualifications which are required for the project and it also has the technical management expertise for the Specialist Works which the Group lacks. For instance, while the sub-contractors will be performing the labour intensive portion of the Specialist Works, the HCCG Group will be involved in the design, technical calculation, preparation of method statements and materials sourcing for the project. HCCG Group will be in the position to orchestrate teams of specialized resources to promptly and correctly execute the works in an efficient manner.

In order to ensure the transactions under the Specialist Works Sub-Contracting Agreement are under normal commercial terms and priced with reference to the prevailing market price of similar works on terms no less favourable to the Company than terms available from independent third parties to the Company, the Company will adopt the following policies:

(i) the Group will obtain quotations from a list of pre-approved contractors (which is subject to periodic review and update by the management to ensure contractors’ quality standards). If the price and terms offered by a member of the HCCG Group are equal to or better than those offered by independent contractors, the Group will probably award the contract to such member of the HCCG Group;
(ii) for projects which involve consideration of a substantial amount, the member of the HCCG Group will participate in a tender with all bidders (including independent third parties in the market), the winning bid of which will be the most competitive bid in accordance with the Group’s internal tender procedure(s);
(iii) the Group will carefully evaluate each of the quotations provided by its potential sub-contractors (including the HCCG Group) based on, including but not limited to, the tender amount, relevant experience, capability, historical relationships and track records;

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(iv) when assessing the price and terms offered by the HCCG Group, the Group will compare them with those provided by independent contractors during the ordinary course of business on normal commercial terms. The management shall consider several comparable quotations with independent third party for the same period when determining whether the price offered by the HCCG Group is market price;
(v) the commercial team of the Company will examine the terms and conditions provided by the HCCG Group to ensure the same are in line with normal market practices and standard terms no less favourable to the Company than those available from independent contractors;
(vi) a report, which sets out, among others, the proposed quotation for the Specialist Works to be offered to the Group by the HCCG Group and the market prices of similar works offered by independent contractors, will be reviewed by the project procurement officer and the price of the works to be offered to the Group will be approved by the tender award committee upon review and comparison with the market prices of similar works. Throughout the process, the Company will treat the HCCG Group and other independent contractors equally, and the transactions will be negotiated on an arm’s length basis, with reference to the market information gathered. In the event that the terms offered by the HCCG Group are no less favourable than those available from other independent contractors, the Company will engage the HCCG Group as its sub-contractor for the Specialist Works. However, if the Company can obtain more preferential terms from other independent contractors, it will not engage the HCCG Group; and
(vii) the directors and management of the Group will closely monitor the procedures from obtaining quotations to awarding a tender, so as to ensure that the policies are strictly followed. The Independent Non-executive Directors will also review the transactions contemplated under the Specialist Works Sub-Contracting Agreement every year pursuant to the requirements under the Listing Rules.

The Group’s internal tender procedures generally involve (i) selection of sub-contractors by the project manager; (ii) invitation to selected sub-contractors to submit tender for the relevant work by the quality surveying team; (iii) the tender opening committee will then arrange for the opening of the tender box and monitor the submission of tender documents by sub-contractors; (iv) the project procurement officer will go through the tender documents and prepare tender analysis and arrange interviews together with the quality surveying team; and (v) a tender report will be prepared and submitted to the tender award committee for final approval. The tender award committee comprises the commercial director and managing director of the ISP Division and/or the Managing Director of the Company, depending on the amount involved in the tender. The commercial director of the ISP Division possesses over 25 years of experience in the construction industry covering all quantity surveying and tendering processes. The managing director of the ISP Division possesses over 25 years of experience in project planning and monitoring, building construction and coordination, cost control, renovation and fitting-out works. The Managing Director of the Company, Dr. Fan Cheuk Hung, has over 30 years of experience in property and facility management. The tender committee reports to the board of Directors and members of the tender committee do not have any role in the HCCG Group.

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(F) ISP WORKS SUB-CONTRACTING AGREEMENT

The Company expects that the HCCG Group may engage the Group as a subcontractor for provision of ISP Works to the HCCG Group’s projects from time to time. In this connection, on 31 December 2014, HCCG and the Company entered into the ISP Works Sub-Contracting Agreement. As mentioned above, such sub-contracting arrangements were previously covered under the 2012 Tender Services Agreement. The principal terms of the ISP Works Sub-Contracting Agreement are as follows:

Date: 31 December 2014

Parties: (1) HCCG (2) the Company

Type of services:

The HCCG Group may from time to time during the term of the ISP Works Sub-Contracting Agreement in the ordinary and usual course of business engage the Group as its subcontractor for provision of the ISP Works to the HCCG Group’s projects.

Basis for the provision of services:

HCCG agrees to procure any relevant member(s) of the HCCG Group and the Company agrees to procure any relevant member(s) of the Group to enter into subsidiary agreement(s) for the provision of any particular ISP Works under the ISP Works Sub-Contracting Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions including the payment terms upon which particular ISP Works shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the ISP Works Sub-Contracting Agreement. In particular, any ISP Works to be provided under any subsidiary agreement must comply with the following basis:

(i) on normal commercial terms (or (a) from HCCG’s perspective, on terms no less favourable to the HCCG Group than those made available from independent third parties; and (b) from Company’s perspective, on terms no less favourable to the Group than those made available to independent third parties);
(ii) the prices for the ISP Works Transactions shall be determined on arm’s length negotiations by reference to the prevailing market prices and having regard to the estimated costs of provision of the relevant services;

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(iii) the Group may tender for the ISP Works in accordance with the tendering procedures of the HCCG Group from time to time and quotations from other independent third parties shall be obtained by the HCCG Group for the provision of the ISP Works;
(iv) the price and terms, historical working relationship, experience and the quality of services offered by the independent third parties and the Group respectively shall be considered by the HCCG Group;
(v) the Group may be engaged on terms similar to those offered by the other providers to the HCCG Group and which are no less favourable to the Group than those made available to independent third parties; and
(vi) the total value of the ISP Works to be provided by the Group to the HCCG Group for any one financial year from 1 January to 31 December under the ISP Works Sub-Contracting Agreement shall not exceed the respective annual caps set out in the paragraph titled ‘‘ISP Works Annual Caps’’ below.

Conditions: The ISP Works Sub-Contracting Agreement is conditional on the approval by (i) resolution of the HCCG Independent Shareholders in a general meeting to be convened for such purposes; and (ii) resolution of the Independent Shareholders in a general meeting to be convened for such purposes. Term: Subject to the fulfilment of the conditions, the ISP Works Sub-Contracting Agreement shall be effective from 1 January 2015 to 31 December 2017.

ISP Works Annual Caps

Under the ISP Works Sub-Contracting Agreement, the expected annual caps for the total value of the ISP Works Transactions for the three financial years ending 31 December 2015, 2016 and 2017 respectively are as follows:

Financial Year 1/1/2015 – 31/12/2015 1/1/2016 – 31/12/2016 1/1/2017 – 31/12/2017	Annual Cap HK$700 million HK$700 million HK$700 million

The ISP Works Annual Caps are made by reference to:

(i) the growth of the construction market in the three-year period from 1 January 2015 to 31 December 2017 estimated by the management, which is based on the positive outlook of the construction industry with growth in construction activities leading to an increase in the construction works which may involve works of ISP Business available for the HCCG Group to undertake in the forthcoming years; and

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(ii) the estimated total contact sum of new projects of the HCCG Group in the threeyear period from 1 January 2015 to 31 December 2017, with reference to the expected expansion and development of the business of the HCCG Group, which is estimated based on the outlook of the construction market and the management assessment on tender opportunities in the coming years and which involve residential development projects and fitting-out works which the HCCG Group may sub-contract to the Group.

The following table sets out (i) the actual total value incurred in respect of subcontracting of Other Contracts pursuant to the 2012 Tender Services Agreement; (ii) the annual caps under the 2012 Tender Services Agreement (which covered both Tender Services and ISP Works Transactions); and (iii) the utilization rate:

Period Amount incurred Annual cap (Note 2) 1/12/2012 – 31/12/2012 HK$2 million HK$1,000 million 1/1/2013 – 31/12/2013 HK$107 million HK$1,700 million 1/1/2014 – 31/12/2014 HK$157 million (Note 1) HK$2,000 million	Utilization rate
	0.2% 6.29% 7.85% (Note 3)

Note 1: This amount is extracted from the Company’s management account and represents the consideration up to 30 September 2014, being the Latest Practicable Date to ascertain such information.
Note 2: These annual caps cover the maximum aggregate annual value in respect of sub-contracting the Awarded Contracts (i.e. under the Tender Services) and the ISP Works as may be sub-contracted by the HCCG Group to the Group.
Note 3: This utilization rate is calculated based on the actual fees incurred up to 30 September 2014 only.

Since the acquisition of the ISP Division by the Group was completed on 30 November 2012, the utilization rate for the financial year ended 31 December 2012 was very low as the actual amount incurred was for the month of December only. The utilization rate of the remaining annual caps under the 2012 Tender Services Agreement were low as the annual caps were intended to cover both the Tender Services and the ISP Works but only the amount incurred in respect of the ISP Works were taken into account when calculating the utilization rates in the table above. Despite the historical deviations, expected annual caps under the ISP Works Sub-Contracting Agreement reflect the maximum potential value of ISP Works which the HCCG Group may sub-contract to the Group, having taken into account the potential growth of the construction business of HCCG as mentioned above. As at the Latest Practicable Date, HCCG has identified potential projects which involve ISP Works that the Group has the capability to provide for and which the HCCG Group may invite the Group to submit a tender in an amount of approximately HK$600 million.

The Shareholders should note that the ISP Works Annual Caps represent the best estimates by the Group and the HCCG Group. The ISP Works Annual Caps have no direct relationship to, nor should be taken to have any direct bearing on, the financial or potential financial performance of the HCCG Group and the Group. The HCCG Group may or may not require the Group to provide any ISP Works in the future.

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Pricing basis of the Group’s tenders submitted to the HCCG Group

As a general principle, the prices and terms of the ISP Works Transactions shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis and at prices and on terms no more favourable than those provided to the independent third party customers of the Group.

The Group will need to go through a tender or similar process before being selected and appointed as subcontractor of the HCCG Group except for isolated situations whereby the HCCG Group invites the Group to participate in a project at the beginning of its tendering process. These projects usually involve complex design and build jobs and very often, design ideas from the HCCG Group. Due to potential confidentiality issues and time constraint, it will be more suitable and efficient to involve the Group from the start of the tender process. For these projects, the Group will provide its quotation to the HCCG Group and the prices and terms of which will be determined in the same manner as for the situation whereby the Group will need to submit a tender.

Where a member of the Group participates in a tender with all bidders (including independent third parties in the market), the winning bid will be the most competitive bid in accordance with the tender procedure(s) of the member(s) of the HCCG Group taking into account requirements such as tender amount, relevant experience, capability, historical relationship and track records as set out in the bid invitation.

The prices and terms of the Group’s tenders submitted to the HCCG Group for the provision of ISP Works will be subject to a standard and systematic tender submission procedure maintained by the Group, which applies to tenders submitted to both connected persons and independent third parties, in order to ensure that the prices and terms of the proposed tenders submitted by the Group to the HCCG Group are no more favourable than those submitted to independent third parties.

The standard and systematic tender submission procedure mainly involve:

(i) receipt of tender invitation;
(ii) collection and vetting of tender documents;
(iii) initial assessment to proceed or not to proceed with the tender;
(iv) setting up of a team to handle the tender;
(v) tender planning to produce necessary information to precise pricing by the bid manager;

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(vi) tender pricing to build up precise and competitive tender cost for the works described in the tender documents by the commercial team. All labour intensive portion of the ISP Works are sub-contracted by the Group to outside contractors which are independent third parties. In determining the price for the ISP Works Transactions, the Group will obtain and review quotations from its pool of subcontractors and compare them with the prices maintained in its in-house computer database obtained from sub-contractors for the Group’s previous jobs. Such information will assist the Group in conducting quantitative analysis between quotations obtained from sub-contractors.

The price that the Group will charge the HCCG Group will be such sub-contracting costs plus a premium at a rate determined on a case by case basis. Factors that the Group will take into account when determining the premium include the nature, complexity, location and duration of the ISP Works to be provided, the capacity of the Group at the time the ISP Works are required to be performed, the margin for comparable ISP Works in the market, the background of the ultimate employer of the project and the time incurred by the management and commercial team of the Group and the operating expenses incurred in relation to the performance of the ISP Works.

The Group will also review and compare previous tender prices submitted to both connected persons and independent third parties to ensure the tender price to be submitted to the HCCG Group is not more favourable than those submitted to independent third parties. For instance, the Group will consider the factors that were taken into account in setting the premium for previous tenders to ensure the premium that the Group will charge in the tender price to be submitted to the HCCG Group is in line with historic precedents for independent third parties.

(vii) tender administration to prepare and finalise form of tender and compile tender submission by the commercial team. In preparing and assessing the tender documents, the Group will take into account factors including the technical requirements, quantity specifications, expected completion time, customer’s expectations and the possible risk factors associated with the project. The Group will then perform site inspection, formulate a tentative program and conduct quantitative costs analysis and risk assessment. The commercial team of the Company will examine the terms and conditions provided by the Group to ensure the same are in line with normal market practices and standard terms no less favourable to the Company than those available to independent third parties;
(viii) a report, which sets out, among others, the proposed quotation for the ISP Works to be offered by the Group to the HCCG Group and the prices of similar works offered by the Group to independent third parties, will be prepared by the commercial team and submitted to the tender committee for approval. Throughout the process, the Company will treat the HCCG Group and other independent third parties equally, and the transactions will be negotiated on an arm’s length basis, with reference to the market information gathered. The tender committee comprises the commercial director and managing director of the ISP Division and/or the Managing Director of the Company, depending on the amount involved in the tender. Please refer to the paragraph headed ‘‘Pricing basis of the Specialist Works Transactions awarded by the Group to the HCCG Group’’ under the section titled ‘‘(E) Specialist Works SubContracting Agreement’’ above for the qualifications of the members of the tender committee; and

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(ix) the directors and management of the Group will closely monitor the procedures in the preparation of the tender, so as to ensure that the pricing policies are strictly followed. The Independent Non-executive Directors will also review the transactions contemplated under the ISP Works Sub-Contracting Agreement every year pursuant to the requirements under the Listing Rules.

(G) REASONS FOR ENTERING INTO THE AGREEMENTS

The Company is an investment holding company. The principal activities of the Company’s subsidiaries are the provision of property management and facility management services, the ISP Business and related services in Hong Kong and Chinese Mainland.

HCCG is an investment holding company. The principal activities of HCCG’s subsidiaries are building construction, civil engineering, electrical and mechanical installation, interiors and special projects, property development and investment, and provision of property and facility management services. The provision of property and facility management services and interiors and special projects are undertaken by the Group.

General Business Services Transactions

The HCCG Group requires from time to time the Property and Facility Management Services, Cleaning Services and Miscellaneous Services for certain properties owned, leased or constructed by the HCCG Group in Hong Kong. The HCCG Group will also require the Group to provide consultancy services, leasing services and Property and Facility Management Services to the HCCG Group’s property development project(s) in the PRC in the coming years. Such services have been and will continue to be outsourced by the HCCG Group to external service providers. While the HCCG Group is not bound to engage the Group to provide the relevant services, the Group may from time to time secure contracts from the HCCG Group for the provision of such services. In order to ensure continuing compliance with the provisions relating to continuing connected transactions under Chapter 14A of the Listing Rules, HCCG entered into the General Business Services Agreement with the Company to regulate individually and specifically the provision of these services which is each expected to have an aggregate annual value falling within the reporting requirement under Chapter 14A of the Listing Rules.

Tender Services and Supporting Services Transactions

The Tender Services and the Supporting Services were both related to the ISP Business of the Company which it acquired from HCCG at the end of 2012 as part of a group reorganisation. The purposes of these transactions were to facilitate a smooth transition of the ISP Business from HCCG to the Company and to maintain the competitiveness of the ISP Division during tendering processes after the acquisition. It is the intention of the management of the ISP Division to further develop the capabilities of the ISP Division, its track record and related job references which are factors considered under competitive tenders, and reduce its reliance on the HCCG Group over time through the recruitment of additional skilled and supporting staff.

Subsequent to the acquisition, the Group has obtained a Group B (on probation) qualification to carry out public works in the Building category. The Group is in the process of attaining a track record history in terms of number and value of jobs involved in order to obtain other qualifications to carry out the ISP Works. In the interim, the HCCG Group, given its reputation and track record, will be in a better position to secure the Selected Contracts on behalf of the Group. As for the Supporting Services, subsequent to the acquisition, the Group has established its own corporate services division covering the areas of human resources, accounting and information technology to support the growth of the ISP Business.

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LETTER FROM THE BOARD

Specialist Works Transactions

The Group may from time to time obtain projects which involve construction, civil engineering construction, electrical and mechanical engineering installation works. The HCCG Group with profound experience in these areas and solid financial standing has demonstrated itself as a reliable subcontractor to its customers. The maintenance of a strategic business relationship between the HCCG Group and the Group will not only allow the realization of synergies and economies of scale but also facilitate the expansion of the business of the HCCG Group and the Group.

ISP Works Transactions

The HCCG Group may from time to time obtain projects which involve ISP Works. The Group possesses the required qualifications and experience in the ISP Works with good quality standard. The engagement of the Group to provide the ISP Works will bring synergy effect to both HCCG and the Company, thereby facilitating the expansion of the business of the HCCG Group and the Group.

It is intended that the Transactions will be entered into in the ordinary and usual course of business of the HCCG Group and the Group. The Directors consider that the Transactions will be consistent with the commercial objectives of the HCCG Group and the Group.

(H) INTERNAL CONTROL MEASURES

To ensure the actual prices for the Transactions will be on normal commercial terms and on terms no less favourable to the Group that that available from or to independent third parties, the Company has adopted internal control mechanism for its daily operations, including:

(i) regular cross-checking between the subsidiaries and internal review by the commercial team and managers of the operation team of the Group to assess whether the Transactions have been conducted in accordance with the terms of the Agreements;
(ii) the finance department of the Group will regularly monitor the value involved under the various Transactions to ensure they do not exceed the relevant annual caps for the Transactions;
(iii) the Board will conduct quarterly review on the terms and compliance of the Transactions with the Agreements;
(iv) the audit committee of the Company will conduct independent review on the Transactions every six months, compare the Transactions with those with independent third parties and have the Company’s accountants reporting on the conditions of the Transactions, review the relevant agreements and review the letters issued by the accountants in respect of the Transactions;
(v) the Company’s external auditors will conduct an annual audit on the Company’s internal control measures, and an annual review on the Transaction under the Agreements pursuant to the requirements under the Listing Rules; and

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LETTER FROM THE BOARD

(vi) according to the Listing Rules, the Independent Non-executive Directors of the Company will conduct an annual review with respect to the Transactions throughout the preceding financial year and confirm whether the Transactions have been entered into in the ordinary and usual course of business of the Group, on normal commercial terms or better and according to the Agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole.

Given the various review measures on the Transactions from time to time as stated above, the Directors consider that the above internal control mechanism is effective to ensure that the Transactions under the Agreements will be conducted on normal commercial terms and not prejudicial to the interests of the Company and the Shareholders as a whole including the minority Shareholders.

(I) LISTING RULES IMPLICATIONS

HCCG is a substantial shareholder of the Company and is indirectly interested in 169,116,777 Shares, representing approximately 50.34% of the issued share capital of the Company. Therefore, HCCG is regarded as a connected person of the Company under the Listing Rules. Dr. Wong, an Executive Director and substantial Shareholder, is directly and indirectly interested in (i) 72,266,436 Shares, representing approximately 21.51% of the issued share capital of the Company and (ii) 1,492,858,789 shares in the issued share capital of HCCG, representing approximately 28.77% of the issued share capital of HCCG as at the Latest Practicable Date. Dr. Wong has abstained from voting on the board resolutions of the Company in approving the Transactions.

As the relevant percentage ratios (other than the profits ratio) for each of the Transactions is on an annual basis more than 5% and the annual consideration is more than HK$10,000,000 for the Company, the Transactions are subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules for the Company. (i) HCCG and its associate, which control or are entitled to exercise control over the voting right in respect of 169,116,777 Shares; and (ii) Dr. Wong and his associates who control or are entitled to exercise control over the voting right in respect of 72,266,436 Shares will abstain from voting on the resolutions to approve the Agreements and the transactions contemplated thereunder at the SGM.

For the period from 1 January 2015 to the date of the SGM when approval of the Independent Shareholders will be sought for the Agreements, the finance department of the Group has monitored and will monitor the value involved under the various Transactions to ensure they do not exceed the de-minimis exemption requirements under Chapter 14A of the Listing Rules. During such period, the operation team of the Group will inform the finance department of (i) any potential tender opportunities which it intends to require HCCG to submit tender; (ii) the extent of Supporting Services which it may require from the HCCG Group; (iii) any potential Specialist Works the Group intends to sub-contract to the HCCG Group; and (iv) any potential ISP Works which HCCG requests the Group to provide quotation. On each occasion, the finance department will assess whether the value of each potential Transaction, together with any relevant Transaction of the same category that has taken place during such period, will in aggregate exceed the de-minimis exemption requirements under the Listing Rules for that category.

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LETTER FROM THE BOARD

(J) SGM

Set out on pages SGM-1 to SGM-3 is a notice convening the SGM to be held at 2nd Floor, Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Wednesday, 25 February 2015 at 11:30 a.m. at which resolutions will be proposed to consider and, if thought fit, to approve the Agreements and the transactions contemplated thereunder.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete and sign the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same with the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish and in such event, the instrument appointing the proxy shall be deemed to have been revoked. Voting on the proposed resolutions at the SGM will be taken by poll.

(K) RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee to the Independent Shareholders set out on page 31 of this circular and the letter from Veda Capital on pages 32 to 60 of this circular which contains their advice to the Independent Board Committee and the Independent Shareholders regarding the terms of the Agreements and the transactions contemplated thereunder.

The Directors consider that the terms of the Agreements and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM to approve those matters. You are advised to read the letter from the Independent Board Committee and the letter from Veda Capital mentioned above before deciding how to vote on the resolutions relating to the Agreements to be proposed at the SGM.

Yours faithfully, For and on behalf of board of Synergis Holdings Limited Fan Cheuk Hung Managing Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter of recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Agreements and the transactions contemplated thereunder.

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SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 02340)

2 February 2015

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS WITH HSIN CHONG CONSTRUCTION GROUP LTD.

We refer to the circular of the Company dated 2 February 2015 (the ‘‘Circular’’), of which this letter forms part. Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed by the Board as members of the Independent Board Committee to advise you on the terms of the Agreements and the transactions contemplated thereunder. Veda Capital Limited has been appointed as the independent financial adviser to advise you and us in this regard. Details of their advice, together with the principal factors and reasons they have taken into consideration in giving such advice, are set out on pages 32 to 60 of the Circular. Your attention is also drawn to the ‘‘Letter from the Board’’ in the Circular and the additional information set out in the appendix thereto.

Having considered the terms of the Agreements and the transactions contemplated thereunder, and taking into account the advice of the Veda Capital, in particular the principal factors, reasons and recommendation as set out in their letter, we consider that the entering into of the Agreements is in the interests of the Group and the Shareholders as a whole, and the terms of the Agreements and the transactions contemplated thereunder, are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. We therefore recommend you to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Agreements and the transactions contemplated thereunder.

Yours faithfully, Independent Board Committee

Mr. Stephen Ip Shu Kwan Mr. Kan Fook Yee Mr. Wong Tsan Kwong Mr. David Yu Hon To Independent Non-executive Directors

for identification purposes only

– 31 –

LETTER FROM VEDA CAPITAL

The following is the full text of the letter from Veda Capital setting out the advice to the Independent Board Committee and the Independent Shareholders on the Agreements and the transactions contemplated thereunder together with the respective annual caps, which has been prepared for the purpose of inclusion in this circular.

==> picture [113 x 36] intentionally omitted <==

Ved aCaptia lLimtied Suite 3711, 37/F., Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong

2 February 2015

To the Independent Board Committee and the Independent Shareholders of Synergis Holdings Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS WITH HSIN CHONG CONSTRUCTION GROUP LTD.

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in connection with the Transactions (including the expected annual caps), details of which are set out in the Letter from the Board (the ‘‘Board Letter’’) contained in the circular to the Shareholders dated 2 February 2015 (the ‘‘Circular’’), of which this letter forms part. Terms used herein have the same meanings as defined elsewhere in the Circular unless the context require otherwise.

As set out in the Board Letter, the Company and HCCG on 31 December 2014 have entered into the Agreements, namely (i) the General Business Services Agreement; (ii) the Tender Services Agreement; (iii) the Supporting Services Agreement; (iv) the Specialist Works Sub-Contracting Agreement; and (v) the ISP Works Sub-Contracting Agreement. Further details in connection with the Agreements and the transactions contemplated thereunder together with the respective annual caps are included in the Board Letter and will be discussed in the sections below in this letter.

HCCG is a substantial shareholder of the Company and is indirectly interested in 169,116,777 Shares, representing approximately 50.34% of the issued share capital of the Company. Therefore, HCCG is regarded as a connected person of the Company under the Listing Rules. Dr. Wong, an executive Director and substantial Shareholder, is directly and indirectly interested in (i) 72,266,436 Shares, representing approximately 21.51% of the issued share capital of the Company and (ii) 1,492,858,789 shares in the issued share capital of HCCG, representing approximately 28.77% of the issued share capital of HCCG as at the Latest Practicable Date. Dr. Wong has abstained from voting on the board resolutions of the Company in approving the Transactions.

As the relevant percentage ratios (other than the profits ratio) for each of the Transactions is on an annual basis more than 5% and the annual consideration of each of the Transactions is more than HK$10,000,000 for the Company, the Transactions are subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules. HCCG, Dr. Wong and their respective associates will abstain from voting on the resolutions to approve the Agreements and the transactions contemplated thereunder at the SGM.

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LETTER FROM VEDA CAPITAL

The Independent Board Committee, comprising all of the independent non-executive Directors, namely, Mr. Stephen Ip Shu Kwan, Mr. Kan Fook Yee, Mr. Wong Tsan Kwong and Mr. David Yu Hon To, has been established to make a recommendation to the Independent Shareholders as to whether the entering into of the Agreements is in the interests of the Group and the Shareholders as a whole, and the terms of the Agreements and the transactions contemplated thereunder together with the respective annual caps, are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. We have been appointed to advise the Independent Board Committee and the Independent Shareholders in these regards.

As at the Latest Practicable Date, we were not aware of any relationships or interest between Veda Capital and the Company or any other parties that could be reasonably be regarded as hindrance to Veda Capital’s independence as defined under Rule 13.84 of the Listing Rules to act as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the undertaking and the transactions contemplated thereunder. We are not associated with the Company, its subsidiaries, its associates or their respective substantial shareholders or associates, and accordingly, are eligible to give independent advice and recommendations on the terms of the undertaking and the transactions contemplated thereunder. Apart from normal professional fees payable to us in connection with this appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, no arrangement exists whereby we will receive any fees from the Company, its subsidiaries, its associates or their respective substantial shareholders or associates.

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied upon accuracy of the information and representations contained in the Circular and information provided to us by the Company, the Directors and the management of the Company. We have assumed that all statements, information and representations made or referred to in the Circular and all information and representations which have been provided by the Company, the Directors and the management of the Company, for which they are solely and wholly responsible, were true at the time they were made and continue to be true as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due and careful enquiry and were based on honestly-held opinions.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries that, to the best of their knowledge and belief, there are no other facts the omission of which would make any statements in the Circular misleading. We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have not, however, conducted any independent in-depth investigation into the business affairs, financial position or future prospects of the Group, nor have we carried out any independent verification of the information provided by the Directors and management of the Company.

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LETTER FROM VEDA CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In giving our recommendation to the Independent Board Committee and the Independent Shareholders on the Agreements and the transactions contemplated thereunder together with the respective annual caps, we have taken into consideration the following principal factors and reasons:

I. Information of HCCG Group and the Group

HCCG is an investment holding company. The principal activities of HCCG’s subsidiaries are building construction, civil engineering, electrical and mechanical installation, interiors and special projects, property development and investment and provision of property and facility management services. The provision of property and facility management services and interiors and special projects are undertaken by the Group.

The Company is a non-wholly owned subsidiary of HCCG and is an investment holding company. The principal activities of the Company’s subsidiaries are the provision of property management and facility management services, the ISP Business and related services in Hong Kong and Chinese Mainland.

II. The General Business Services Transactions

A. Reasons for entering into the General Business Services Transactions

The 2012 General Business Services Agreement is due to expire on 31 December 2015. The parties have entered into the General Business Services Agreement on 31 December 2014 to revise the annual cap for the service fees for the financial year 2015 and set the annual caps for the financial years 2016 and 2017. Subsequently upon the General Business Services Agreement becoming effective, the parties have agreed that the 2012 General Services Agreement shall be terminated and have no further effect and neither party shall have any further obligations or liabilities towards the other nor any claims against the other in connection with the 2012 General Services Agreement.

Pursuant to the General Business Services Agreement, the HCCG Group may from time to time during the term of the General Business Services Agreement in the ordinary and usual course of business require the Group to provide General Business Services. Relevant member(s) of the HCCG Group (or its/their agents, including property manager(s))will enter into subsidiary agreement(s) with the relevant member(s) of the Group to provide the General Business Services under the General Business Services Agreement. The terms of each subsidiary agreement must comply with the terms as set out in the General Business Services Agreement.

As set out in the Board Letter, the HCCG Group requires from time to time the Property and Facility Management Services, Cleaning Services and Miscellaneous Services for certain properties owned, leased or constructed by the HCCG Group in Hong Kong. The HCCG Group will also require the Group to provide consultancy services, leasing services and Property and Facility Management Services to the HCCG Group’s property development projects in the PRC in the coming years. Such services have been and will continue to be outsourced by the HCCG Group to external service providers. While the HCCG Group is not bound to engage the Group to provide the relevant services, the Group may from time to time secure contracts from the HCCG Group for the provision of such services.

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LETTER FROM VEDA CAPITAL

We noted from the annual report of the Group for the year ended 31 December 2013 (the ‘‘AR2013’’), the Property and Facility Management segment of the Group has contributed approximately 38.93% to the total revenue of the Group for the year ended 31 December 2013 of approximately HK$1,680.1 million. Also noted from the AR2013, the property and facility management business of the Group has generated steady income, maintained a sizeable market position for the Group and wellpositioned to seize business opportunities in the Chinese Mainland riding on the rapid urbanization and increasing disposal income estimated under the PRC Government’s 12th five-year plan.

We also noted from the annual report of HCCG Group for the year ended 31 December 2013 (the ‘‘HC AR2013’’), the revenue of HCCG for the two years ended 31 December 2013 are, geographically, primarily received from Hong Kong, Macau and the PRC. As further noted from the HC AR2013, the HCCG Group will continue to build on property development venture in the PRC and continue to seek further opportunities, inter alia, the possible acquisition of lands in Foshan, Guangdong Province, in the future.

On 15 May 2014, HCCG announced a very substantial acquisition to acquire a property development project with a gross site area of approximately 1,925,056 m[2] located in Sanshui District of Foshan City in Guangdong Province, the PRC (the ‘‘Property’’) for property development over multiple years (the ‘‘Foshan Project’’) and such acquisition was completed on 8 January 2015 (the ‘‘HCCG Acquisition’’).

As noted from the interim report of HCCG Group for the six months ended 30 June 2014 (the ‘‘HC IR2014’’), HCCG’s construction division secured about HK$2.6 billion new orders during the six months period ended 30 June 2014, representing an 8% increase over that in the corresponding period.

Having considered that (i) the principal activities of the Group; (ii) the General Business Services Agreement will serve as a continuation of the 2012 General Business Services Agreement of businesses cooperation with the HCCG Group; (iii) the Property and Facility Management segment contributed a sizable portion of the Group’s revenue; (iv) the businesses of the HCCG Group allow the Group to seize business opportunities in the PRC and Macau for the reasons of expanding its portfolio; and (v) the business strategy of the HCCG Group to continue to build on the property development venture in the PRC and the expected increase in construction projects of HCCG Group e.g. the Foshan Project which will require the provision of consultancy services, leasing services and Property and Facility Management Services, we are in the view that the entering of the General Business Services Agreement is in the ordinary and usual course of business and in the interests of the Company and the Independent Shareholders as a whole.

B. Terms of the General Business Services Agreement and the General Business Services Annual Caps

(i) Terms of the General Business Services Agreement

As noted from the Board Letter, the HCCG Group may from time to time during the term of the General Business Services Agreement in the ordinary and usual course of business require the Group to provide the General Business Services.

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LETTER FROM VEDA CAPITAL

(a) on normal commercial terms and on terms no less favourable to the Group than those made available to independent third parties);
(b) the prices for the General Business Services shall be determined on arm’s length negotiations by reference to the prevailing market prices and having regard to the estimated costs of provision of the relevant services;
(c) quotations from the Group and other independent third party service providers shall be obtained by the HCCG Group for the provision of the General Business Services by such parties;
(d) the price and terms, historical working relationship, experience and the quality of services offered by the independent third party providers and the Group respectively shall be considered by the HCCG Group;
(e) the Group may be engaged on terms similar to those offered by the other service providers to HCCG Group and which are no less favorable to the Group than those made available to independent third parties; and
(f) the total value of General Business Services to be provided by the Group to the HCCG group for any one financial year from 1 January to 31 December under the General Business Services Agreement shall not exceed the respective annual caps.

Pricing Basis

As disclosed in the Board Letter, the Company will adopt its procedures (the ‘‘GBS Quotes Procedures’’) when providing quotations to the HCCG Group in order to ensure the transactions under the General Business Services Agreement are under normal commercial terms and priced with reference to the prevailing market price of similar works on terms no less favourable to the Company than terms available to independent third party customers of the Company.

We noted from the GBS Quotes Procedures that the price that the Group will charge the HCCG Group will be such sub-contracting costs and, for services provided by the Group’s staff, the labour costs incurred, plus a premium (the ‘‘GBS Premium’’) on the sub-contracting costs and the labour costs at a rate determined on a case by case basis. For the sub-contracting costs, we noted that the Group will obtain and review quotations from its pool of subcontractors and compare them with the prices maintained in its inhouse computer database obtained from sub-contractors for the Group’s previous jobs (‘‘Sub-contractors database’’).

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LETTER FROM VEDA CAPITAL

We have enquired with the management of the Company and are given to understand that there are numerous sub-contractors in the Sub-contractors database and the number of quotations from the sub-contractors that the Group reviewed depends on the nature of the General Business Services and thus varies from case by case. Normally, the Group reviews at least three quotations from the sub-contractors.

Concerning the GBS Premium, factors that the Group will take into account when determining the premium include the nature, complexity, location and duration of the services to be provided, the capacity of the Group at the time the services are required, the margin for comparable services in the market and the time incurred by the management and commercial team of the Group and the operating expenses incurred in relation to the provision of the services (the ‘‘Premium Rate Factors’’). Further details of the GBS Quotes Procedures are listed out under the section headed ‘‘(B) General Business Services Agreement’’ in the Board Letter.

We understand from the Company that it is difficult to find comparable quotations submitted to both connected persons and independent third parties to compare the pricing basis as different premium rates can be applied due to the variation of the types and natures of the General Business Services provided by the Group and the combination of the Premium Rate Factors for each of the cases. Therefore, we consider that it is commercially impractical to compare the quotations of the General Business Services project with each other while we understand that the Company will try to identify the comparable quotations that have previously submitted to independent third parties as a reference to check whether the quotation to the HCCG Group is not more favourable than those submitted to the independent third parties by comparing the factors considered and the GBS Premium. Nevertheless, we have endeavored to obtain two sets of sample quotations submitted to the HCCG Group and an independent third party in respect of the provision of similar General Business Services by the Group and we noted that the terms as set out in the sample quotations submitted to the HCCG Group are not more favourable than those submitted to the independent third parties.

Given the abovementioned and that (i) same GBS Quotes Procedures will be applied by the Company to the connected persons and independent third parties of the Company; (ii) the GBS Quotes Procedures will be monitored closely by the directors and management of the Group so as to ensure that the policies are strictly followed, with the presence of the GBS Premium; and (iii) the GBS Premium is determined after taken into account the Premium Rate Factors which are commercially justifiable and commonly considered, we are in the view that the pricing basis of the General Business Services are justifiable and fair and reasonable so far as the Independent Shareholders are concerned.

Having considered the abovementioned and the entering of the General Business Services Transactions will undergo a tendering process, we are of the view that the terms of the General Business Services Agreements are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM VEDA CAPITAL

(ii) General Business Services Annual Caps

As set out in the Board Letter, under the General Business Services Agreement, the expected annual caps for the service fees payable to the Group for the provision of the General Business Services by the Group to the HCCG Group for each of the three financial years ending 2015, 2016 and 2017 are HK$35 million, HK$45 million and HK$50 million respectively.

The expected annual caps for the General Business Services were arrived at by reference to (a) existing management fees paid for the properties managed by the Group and the expected increases in management fees; (b) expected demand for providing consultancy services, leasing services, Property and Facility Management Services to the HCCG Group’s property development project(s) in the PRC; (c) expected new and increasing demand for administrative services to be provided to properties managed by the Group which will increase the fees for administrative services comprised in the management fees charged by the Group; (d) engagement of the Group to provide Property and Facility Management Services to other construction projects of the HCCG Group in Hong Kong; and (e) the HCCG Group’s expected demand for cleaning services, assuming that the Group can successfully be awarded these cleaning works outsourced by the HCCG Group.

			Amount
Period			incurred	Annual cap	Utilization rate
1/1/2013	–	31/12/2013	HK$11,939,000	HK$22 million	54.27%
1/1/2014	–	31/12/2014	HK$13,556,000	HK$25 million	54.22%
			(Note 1)		(Note 2)

Note 1: This amount is extracted from the Company’s management account and represents the fees up to 30 September 2014, being the latest practicable date to ascertain such information.

Note 2: This utilization rate is calculated based on the actual fees incurred up to 30 September 2014 only.

As illustrated in the above table, the Group utilised approximately 54.27% of the annual cap for the financial year ended 31 December 2013 and approximately 54.22% (calculated based on the actual fees incurred up to 30 September 2014 only) of the annual cap for the financial year ended 31 December 2014. The revising of the annual cap of HK$35 million for the financial year ended 31 December 2015 will represent an increment of 40% than the existing annual cap of 2014 (the ‘‘2015 Cap Increment’’). Furthermore, the expected annual cap for the financial year ending 31 December 2016 and 2017 will represent increments of approximately 29% (the ‘‘2016 Cap Increment’’) and approximately 11% (the ‘‘2017 Cap Increment’’) respectively over the expected annual cap of 2015 and 2016.

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LETTER FROM VEDA CAPITAL

As set out in the Board Letter, the significant increase in the expected annual cap for 2015 is mainly due to the potential General Business Services which the HCCG Group may require from the Group in respect of (i) HCCG’s La Viva project in Shenyang (the ‘‘La Viva’’); (ii) the present intention of the management of HCCG to commence further development, construction and marketing planning and to continue phased development of the property in respect of the HCCG Acquisition in January 2015; (iii) HCCG’s New Times Plaza project in Beijing (the ‘‘New Times Plaza’’); and (iv) the active expansion of the HCCG Group since 2011 from its strongly established based building construction and civil, mechanical and electrical installation as well as real estate and facility management services, to real estate development and property investments, to become a vertically integrated property developer and investor which was evidenced by the two acquisitions in 2011 and 2013 (namely the La Viva and the New Times Plaza).

As disclosed in the HC IR2014, the La Viva is a mixed-use contemporary development consisting of residential, retail, entertainment, tourist attractions, international school, hotel and other meeting, incentive, conference and exhibition facilities. Phase 1 include (i) residential development comprises 16 high-rise residential towers and 22 low-rise residential towers, yielding a total saleable area of 340,000 m[2] ; and (ii) commercial development consists of outlets and a water park for a total gross floor area of approximately 170,000 m[2] . The sales launch of the residential development and the operation of the commercial development are aimed to start in the first half of 2015. In addition, further disclosed in the HC IR2014, the New Times Plaza is a commercial development with a gross floor area of 69,540 m[2] , comprising a 15storey above ground structure and a 3-storey basement, encompassing shopping mall, car park and a total of 168 small offices and home offices units.

We noted that the Group has secured contracts (the ‘‘Secured Contracts’’) for the provision of General Business Services from the HCCG Group for both the La Viva and the New Times Plaza. We have obtained from the Company and reviewed the information of the Secured Contracts, we noted that the estimated services fee payable to the Group for the provision of the General Business Services under the Secured Contracts for the year ending 31 December 2015 is approximately HK$14 million, represents approximately 40% of the expected annual cap for the financial year ended 31 December 2015. Also, as advised by the Company, the Group has secured contracts for the provision of General Business Services from the HCCG Group for the Foshan Project and that the relevant estimated services fee payable to the Group for the provision of the General Business Services for the year ending 31 December 2015 is approximately HK$0.8 million. As noted from the Board Letter, the management of HCCG intends to commence further planning and to continue phased development of the Property as soon as practicable.

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LETTER FROM VEDA CAPITAL

As advised by the management of the Company, apart from the historical annual caps and their respective utilization rates, the Company has put more emphasis on other factors including the potential increase in the costs for provision of the General Business Services (such as wages) as a result of inflation and the potential growth in the property development business of the HCCG Group in Hong Kong and the PRC as mentioned above when setting the annual caps under the General Business Services Agreement. Furthermore, the increments of the expected annual caps for 2016 and 2017 are not as substantial as management has taken into account the capacity and resources of the Group assuming the Group is required to provide the maximum potential General Business Services to the HCCG Group in 2015.

We concur with the view of the management of the Company that the number of projects of the HCCG Group in Hong Kong is expected to increase due to intensified construction activities from the booming construction industry in Hong Kong resulting from the intensified construction activities in Hong Kong, as a result of, among other factors, being the Hong Kong government’s efforts on the selling of empty lands. The number of projects of the HCCG Group in the PRC is expected to increase riding the HCCG Group’s strategies to build on property development venture in the PRC and acquire PRC-based projects. The anticipated projects of the HCCG Group in both Hong Kong and the PRC are expected to require the General Business Services. The demands for such services are expected to grow in the following two years ending 31 December 2017 and hence, the respective General Business Services Annual Caps as proposed above.

We have researched and noted from the Hong Kong Annual Digest of Statistics 2014 Report (the ‘‘2014 Report’’) published in November 2014 by the Census and Statistics Department (the ‘‘CSD’’) of the Government of the Hong Kong Special Administration Region (www.censtatd.gov.hk) that the producer price index of the real estate maintenance management; brokerage and agency services sector increased approximately 6.8% in 2012 and approximately 8.3% in 2013 as compared to, respectively, their previous year. According to a publication titled ‘‘Key statistics on business performance and operating characteristics of the building, construction and real estate sectors in 2013’’ released on 27 November 2014 by CSD, operating expenses and compensation of employees of the (including wages and salaries and payments in kind and employer’s social security expenditure) of the construction sector altogether amounted to approximately HK$273.4 billion in 2013, representing an increase of approximately 15.5% over 2012. Specifically, we have also compared the two publications titled ‘‘Average Daily Wages of Workers Engaged in Public Sector Construction Projects as Reported by Main Contractors’’ published in October 2013 and 2014 respectively, the averages daily wages for the general workers and laborers recorded in each of October 2013 and 2014 have increased by approximately 12.3% from approximately HK$733.3 to approximately HK$823.5 respectively.

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The 2014 Report has also indicated that the total gross value of construction works, in nominal terms, performed by main contractors is approximately HK $176.6 billion in 2013, increased by approximately 58.7% as compared to 2010 of approximately HK$111.3 billion and approximately 9.4% of approximately HK$161.4 billion as compared to 2012. Furthermore, we are aware of the recent land sale and supply efforts in Hong Kong. As stated in the 2014-15 Land Sale Programme (the ‘‘Programme’’) by the Development Bureau of Hong Kong (www.devb.gov.hk) on 27 February 2014, in the financial year 2013-14, 36 residential sites were/will be sold capable of producing about 13,700 flats, exceeding the financial year 2012-13 by about 5,500 flats and the financial year 2011-12 by 7,900 flats. The Programme, in the financial year 2014-15, comprises 34 residential sites, with 24 of the 34 resident sites being new sites, and is capable of providing about 15,500 flats and seven commercial/business sites and one hotel site.

We noted from the circular of HCCG dated 4 November 2014 in relation to the HCCG Acquisition that since 2011, the HCCG Group has been actively expanding its businesses to real estate development and property investments to become a vertically integrated property developer and investor. The Property has already completed a composite retail outlet and it is the present intention of the management of HCCG to commence further development, construction and marketing planning and to continue phased development of the Property as soon as practicable following completion of the HCCG Acquisition.

Based on our researches from the National Bureau of Statistics of China (the ‘‘Bureau Statistics’’) (www.data.stats.gov.cn), the total output value of construction（建築業總產值）is approximately RMB15,931.3 billion in 2013, defined as the gross output of construction products and services in money terms produced by construction enterprises during a given period of time, increased by approximately 65.9% as compared to 2010 of approximately RMB9,603.1 billion and approximately 16.1% as compared to 2012 of approximately RMB13,721.8 billion in 2013.

We are also concerned of the effects resulted from the policies and efforts of the government of the PRC in connection with the urbanization (the ‘‘Urbanization’’) such that we noted from the Bureau Statistics that the number of urban population, defined as population residing in cities and town, has been increasing and the number of rural population, defined as population other than the urban population, has been decreasing in the recent years. During the span of 2010 to 2013, the number of urban population has increased from approximately 669.8 million persons to approximately 731.1 million persons in 2013; whereas, the number of rural population has decreased from approximately 689.4 million to approximately 629.6 million in 2013.

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In view of (i) the Group utilised slightly more than half of the existing annual caps under the 2012 General Business Services Agreement for the two financial years ended 31 December 2014 and the deviations of which were not constrained by the capabilities of the Group but were rather due to the progress of the property development projects of the HCCG Group in the PRC; (ii) the expected increase in the operation costs of the General Business Services due to inflation i.e. such as wages; (iii) the positive prospects of the building and construction sectors in both Hong Kong and the PRC which may result in more construction/property development projects for the HCCG Group and in turn, require the General Business Services; (iv) the increasing number of flat supply through land sale in Hong Kong and the opposing trends of number of population in the urban and rural areas in the previous years in the PRC; and (v) the HCCG Acquisition, the Secured Contracts and the intention of the management of HCCG to commence further development and planning of Foshan Project as soon as practicable which increases the tendering opportunities for the General Business Services; (vi) the duration of the Secured Contracts covered three financial years ending 2017 and the duration of the General Business Contracts to be awarded are expected to be few years in general and the 2017 Cap Increment is less than the 2016 Cap Increment which is less than the 2015 Cap Increment; and (vii) contingency in concern with the expansion of the business of the HCCG Group, we consider the proposed General Business Services Annual Caps are fair and reasonable in the interests of the Company and the Independent Shareholders as a whole.

III. The Tender Services and Supporting Services Transactions

A. Reasons for entering into the Tender Services and Supporting Services Transactions

The 2012 Tender Services Agreement and the 2012 Supporting Services Agreement were due expired on 31 December 2014. In these regards, the parties entered into the Tender Services Agreement and Supporting Services Agreement on 31 December 2014 and renewed the terms for each of the Tender Services Agreement and Supporting Services Agreement for three years from 1 January 2015 to 31 December 2017.

Pursuant to the Tender Services Agreement, the HCCG Group agreed to provide the Tender Services pursuant to the Tender Order as may from time to time be given by the Group. Within three (3) Business Days or such other day as the parties may agree after any Selected Contract has been awarded to the HCCG Group, HCCG agreed to procure any relevant member(s) of the HCCG Group to and the Company agreed to procure any relevant member(s) of the Group to enter into the TS Sub-Contracting Agreement. Furthermore, by entering into the TS Sub-Contracting Agreement, HCCG Group agrees to fully sub-contract all rights and obligations under the Awarded Contracts to the Group.

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Whereas pursuant to the Supporting Services Agreement, the HCCG Group may from time to time during the term of the Supporting Services Agreement in the ordinary and usual course of business provide the Supporting Services to the Group. HCCG agreed to procure any relevant member(s) of the HCCG Group and the Company agreed to procure any relevant member(s) of the Group to enter into subsidiary agreement for the provision of any particular Supporting Services under the Supporting Services Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions upon which particular Supporting Services shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the Supporting Services Agreement.

As set out in the Board Letter, the Tender Services and the Supporting Services were both related to the ISP Business of the Company which it acquired from HCCG at the end of 2012. The purpose of these transactions was to facilitate a smooth transition of the ISP Business from HCCG to the Company and to maintain the competitiveness of the ISP Division during tendering processes after the acquisition. It is the intention of the management of the ISP Division to further develop the capabilities of the ISP Division, its track record and related job references which are factors to be considered under competitive tenders, and reduce its reliance on the HCCG Group over time through the recruitment of additional skilled and supporting staff.

As set out in the website of the HCCG Group, the HCCG Group, founded in 1939, is one of Asia’s longest standing construction groups, providing comprehensive construction, property and related services and is on the HKSAR approved list of contractors for public works (Group C – for contracts of any value) under, among others, the buildings and site formation while also successfully applied its proven expertise to Macau, Chinese Mainland and overseas regions. The HCCG Group has taken part in a wide range of construction projects in Hong Kong, including but not limited to, Grade-A commercial buildings, hotels and leisure projects, modern hospitals and university facilities. Furthermore, from its firm foundation in Hong Kong in 1939, 2014 marked the milestone of 75th anniversary of the HCCG Group. As at the date of the Tender Services Agreement and the Supporting Services Agreement, the market capitalizations of the HCCG Group is approximately HK $2,829.6 million, represented 5.3 times of the Group of approximately HK$530.7 million.

As specified in the HC AR2013, the HCCG Group’s repeated and expanded customer base, whether in the public, private, civil and specialists (hospital and data center inter alia) sectors reflected the work and services the HCCG Group have delivered. As of 31 December 2013, approximately 59% of HCCG Group’s client portfolio is made up from the government of Hong Kong and public institutions, the Hong Kong Housing Authority and the MTR. According to the HC AR2013, the HCCG Group’s construction business secured new contracts of value amount to approximately HK$10.2 billion and approximately HK$11.9 billion for the year ended 31 December 2013 and 2012 respectively.

As noted from the AR 2013, the ISP Business segment is the main revenue driver of the Group which contributed approximately 52.4% of total revenue of the Group for the year ended 31 December 2013.

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As mentioned in the circular issued by the Company dated 26 October 2012, notwithstanding the entering into of the 2012 Tender Services Agreement, the HCCG Group may from time to time sub-contract the Other Contracts to any member of the Group as it considers appropriate on such terms to be negotiated on an arm’s length basis. The 2012 Tender Services Agreement covered both the Tender Services and the services under the Other Contracts as may be sub-contracted by the HCCG Group to the Group. To simplify the arrangements, the new Tender Services Agreement will only cover the Tender Services and the ISP Works SubContracting Agreement was entered into between the parties to cover the other subcontracting works by the HCCG Group to the Group. Details of the ISP Works SubContracting Agreement are set out in the paragraph headed ‘‘V. The ISP Works SubContracting Agreement’’ below.

As further noted from the Board Letter, pursuant to the 2012 Tender Services Agreement, no value was incurred in respect of sub-contracting of Awarded Contracts by the HCCG Group to the Group while the value incurred in respect of sub-contracting of the Other Contracts by the HCCG Group to the Group has been set out in the paragraph headed ‘‘(F) ISP Works Sub-Contracting Agreement’’ in the Board Letter. For the period between 1 December 2012 to 31 December 2014, for the Tender Services, although the HCCG Group has submitted tenders for contracts selected by the Group, such contracts were not awarded to the HCCG Group and therefore no contract was sub-contracted to the Group.

Subsequent to the acquisition of the ISP Division by the Company in 2012, the Group has obtained a Group B (on probation) qualification to carry out public works in the Building category. The Group is in the process of attaining a track record history in terms of number and value of jobs involved in order to obtain other qualifications to carry out the ISP Works. Although no Selected Contract was awarded to the HCCG Group in the past two years, given the reputation and track record of the HCCG Group, it will be in a better position to secure the Selected Contracts on behalf of the Group as and when these opportunities arise. Given the abovementioned and whether the Selected Contracts be successfully awarded to the HCCG Group is out of the Company’s control, we consider that the Tender Services Agreement can provide flexibilities and one more platform for the Group to capturing tender opportunities.

Having also considered that (i) the Tender Services Agreement and the Supporting Services Agreement will be served as continuations of the 2012 Tender Services Agreement and the 2012 Supporting Services Agreement respectively, on businesses cooperation with the HCCG Group; (ii) the Group intends to further develop the capabilities of the ISP Division and build up its own supporting services and in the meantime, as transition, the Group is provided a platform to tender the Selected Contracts under HCCG Group’s name and licenses free of charge under the Tender Services Agreement and can utilize the Supporting Services charged at actual cost under the Supporting Services Agreement; (iii) the background and reputation (for factors such as the market sizes and client bases) of the HCCG Group as a property tender and sub-contractor; (iv) the ISP Business segment contributed a sizable portion of the Group’s revenue; (v) the HCCG Group agrees to fully sub-contract all rights and obligations under the Awarded Contracts to the Group upon entering of the TS Sub-Contracting Agreement; and (vi) it is the Company’s decision to decide whether or not it requires the HCCG Group to provide any Tender Services, we are in the view that the entering of each of the Tender Services Agreement and the Supporting Services Agreement is in the ordinary and usual course of business and in the interests of the Company and the Independent Shareholders as a whole.

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B. Terms of the Tender Services Agreement and the TS Sub-Contracting Annual Caps
(i) Terms of the Tender Services Agreement

As noted from the Board Letter, the HCCG Group agrees to provide the Tender Services pursuant to the Tender Order as may from time to time be given by the Group.

As further noted from the Board Letter, the bases for the provision of services are as follows:

(a) within three (3) Business Days or such other day as the parties may agree after any Selected Contract has been awarded to the HCCG Group, HCCG agrees to procure any relevant member(s) of the HCCG Group to and the Company agrees to procure any relevant member(s) of the Group to enter into the TS Sub-Contracting Agreement;
(b) by entering into the TS Sub-Contracting Agreement, the HCCG Group agrees to fully sub-contract all rights and obligations under the Awarded Contracts to the Group; and
(c) the total value in respect of sub-contracting of Awarded Contracts for any one financial year from 1 January to 31 December under the Tender Services Agreement shall not exceed the respective annual caps.

Pursuant to the terms of the Tender Services Agreement, no fees will be charged by HCCG Group to the Group for the provision of the Tender Services. The Group will be performing substantially all of the work during the tender process which includes the identification, selection and assessment of potential contracts, preparation of tender documents and planning and pricing of the tender; whereas, the involvement of the HCCG Group in the tender process is minimal as the HCCG Group merely provides a platform for the submission of the tender and minimal cost will be incurred. The provision of the Tender Services was part of the arrangement pursuant to the acquisition in 2012 and was intended to facilitate the smooth transition of the ISP Business from HCCG to the Company and to maintain the competitiveness of the ISP Division.

Given that (i) the Group will be sub-contracted the Awarded Contracts from the HCCG Group without any additional fee which is in line with the common market practice of sub-contracting; (ii) the HCCG Group agrees to fully subcontract all rights and obligations under the Awarded Contracts to the Group; and (iii) no fees will be charged by the HCCG Group to the Group as the involvement of the HCCG Group in the tender process is minimal, we are of the view that terms of the Tender Services Agreement are fair and reasonable and in the interest of the Company and the Independent Shareholders as a whole.

(ii) TS Sub-Contracting Annual Caps

As set out in the Board Letter, under the Tender Services Agreement, the expected annual caps for the total value in respect of sub-contracting of Awarded Contracts for each of the three financial years ending 31 December 2015, 2016 and 2017 will be HK$1,300 million.

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The TS Sub-Contracting Annual Caps are made by reference to (i) the growth of the market under ISP Business in the three-year period from 1 January 2015 to 31 December 2017 estimated by the management, which is based on the positive outlook of the industry due to the intense demand from high end retail or hotels for renovation, alteration and addition, and revitalization works as well as the government’s initiatives for building maintenance and mandatory renovations which may lead to an increase in the projects available for the Group to undertake in the forthcoming years; and (ii) the expected contracts that may be awarded in the three-year period from 1 January 2015 to 31 December 2017, with reference to the expected expansion and development of the business of the Group, which is estimated based on the outlook of the ISP Works market and management’s assessment on the tender opportunities for the coming years and which involve fitting-out, project/construction management jobs in Chinese Mainland and turnkey design and fitting-out jobs, addition and alternation works in Hong Kong.

As discussed with the management of the Company, we noted the potential contracts in relation to the Tender Services Agreement for the three years ending 31 December 2015, 2016 and 2017, which are the contracts that the Group may eager to tender, assessed and estimated by the management of the Group (the ‘‘Management Estimation’’) with reference to the business norm in previous years and the Foshan Project as mentioned under the section headed ‘‘B. Terms of the General Business Services Agreement and the General ’’ Business Services Annual Caps . Given the nature of the tendering, the Group can only submit tender when the tendering opportunities become materialized and open for tender, which has not yet happened as at the Latest Practicable Date, we are of the view that the potential contracts estimated by the Management Estimation are justifiable. In the year 2015, the estimated aggregate amount of tender opportunities under the potential contracts is approximately HK$950.0 million, representing approximately 73.1% of the expected annual cap for the year ending 31 December 2015 of the Group. In each of the financial years ending 31 December 2016 and 2017, the estimated aggregate amount of tender opportunities under the potential contracts is approximately HK$900.0 million and approximately HK$1,000.0 million respectively. With reference to the potential expansion and development of the business of the Group, the TS Sub-Contracting Annual Caps provide flexibilities for the ISP Division to bid for tenders at any time, should opportunities arise.

Having considered the abovementioned, we are of the view that the TS Sub-Contracting Annual Caps are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

C. Terms of the Supporting Services Agreement and the Supporting Services Annual Caps

(i) Terms of the Supporting Services Agreement

The HCCG Group may from time to time during the term of the Supporting Services Agreement in the ordinary and usual course of business provide the Supporting Services to the Group.

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As further noted from the Board Letter, the bases for the provision of services are as follows:

(a) HCCG agrees to procure any relevant member(s) of the HCCG Group and the Company agrees to procure any relevant member(s) of the Group to enter into subsidiary agreement(s) for the provision of any particular Supporting Services under the Supporting Services Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions upon which particular Supporting Services shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the Supporting Services Agreement; and
(b) the total value of the Supporting Services to be provided by the HCCG Group to the Group for any one financial year from 1 January to 31 December under the Supporting Services Agreement shall not exceed the respective annual caps.

Pursuant to the Supporting Services Agreement, the parties agree that any and all Supporting Services shall be provided by the HCCG Group to the Group at a fee calculated based on the actual cost of the Supporting Services which consists mainly of the time costs of the relevant staff providing the Supporting Services. No premium will be charged by the HCCG Group as the Supporting Services will be provided to the Group in relation to the ISP Business as part of the arrangement pursuant to the acquisition in 2012 to facilitate the smooth transaction of the ISP Business from HCCG to the Company.

We have reviewed the existing level of the Supporting Services and noted that most of the Supporting Services are charged on actual time costs basis while others are the actual rental and reimbursement expenses.

We have enquired with the management of the Company and also noted from the relevant accounting records of the Company that the fees for the Supporting Services are settled within 60 days from the date of invoice.

Given that the fee of the Supporting Services is calculated based on the actual cost of the Supporting Services and the payment terms of 60 days from the date of invoice is in line with the practice of the previous transactions under the 2012 Supporting Services Agreement, we are of the view that the terms of the Supporting Services Agreement are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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(ii) Supporting Services Annual Caps

As set out in the Board Letter, under the Supporting Services Agreement, the expected annual caps for the services fees payable to the HCCG Group for the provision of Supporting Services by the HCCG Group to the Group for each of the three financial years ending 31 December 2015, 2016 and 2017 are respectively, HK$20 million, HK$18 million and HK$16 million.

The Supporting Services Annual Caps are made by reference to the actual cost of the Supporting Services which comprise mainly of staff costs to be provided by the HCCG Group.

	Amount
Period	incurred	Annual cap	Utilization rate
1/12/2012 – 31/12/2012	HK$181,000	HK$9.2 million	1.97%
1/1/2013 – 31/12/2013	HK$15,492,000	HK$40 million	38.73%
1/1/2014 – 31/12/2014	HK$7,902,000	HK$30 million	26.34%
	(Note 1)		(Note 2)

Note 1: This amount is extracted from the Company’s management account and represents the fees up to 30 September 2014, being the latest practicable date to ascertain such information.

Note 2: This utilization rate is calculated based on the actual fees incurred up to 30 September 2014 only.

As mentioned in the Board Letter, since the acquisition of the ISP Division by the Group was completed on 30 November 2012, the utilization rate for the financial year ended 31 December 2012 was very low as the actual amount incurred was for the month of December only. Thereupon, the Group was able to rely on its own resources to provide the supporting services due to the nature of the Supporting Services that were required during the corresponding period. For the ISP Businesses that the Group was engaged in during 2013 and 2014, the majority of the supporting services that the Group required were related to surveying and staff administration work and which the Group has sufficient staff to provide such services. For the nine months ended 30 September 2014, sum of the costs of the Supporting Services amounted to approximately HK$7.9 million and the estimated annualize sum of the costs is approximately HK$10.3 million for the year ended 31 December 2014 (the ‘‘2014 Service Sums’’). Based on (i) the previously mentioned anticipations of the increasing operating costs of building and construction materials and wages; (ii) external factors such as the increases in gross domestic products and inflation of the general market prices of goods; and (iii) further factoring in the possible expansion of the business of the Group, which is also expected to result in more projects for the Group, the Group budgeted a total sum of the costs of approximately HK$17.0 million for the year ending 31 December 2015 (the ‘‘2015 Service Sums’’). In the event that the Group obtains jobs

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which involve aspects of the ISP Business that require on site supporting services which are of a more labour intensive nature, the Group will require the HCCG Group to provide such Supporting Services as the Group will not have sufficient resources to do so. The expected annual caps provided by the Group with the flexibility to capture ISP Business opportunities even though it may not be able to recruit additional skilled and supporting staff in a timely manner.

We are also given to understand from the Company that the Group is intended to gradually redeploy the Supporting Services that are currently provided by the HCCG Group as the business of the Group develops in order to be less dependent on the HCCG Group. As a result, despite of the increasing operation expenses as mentioned in the previous paragraph, the expected Supporting Services Annual Caps for the two financial years ended 31 December 2016 and 2017 are expected to decrease by a margin of HK$2.0 million per year.

Having understanding the above calculations and estimations by the Group in relation to the sum of costs of the Supporting Services and in view of (i) the anticipation of increasing in operation expenses for buildings and constructions business; (ii) the 2015 Service Sums is approximately based on existing sum of costs (i.e. 2014 Service Sums); and (iii) the fact that the Group has intended to gradually redeploy the currently outsourced Supporting Services and the according decreases in the Supporting Services Annual Caps for the financial years ended 31 December 2016 and 2017, we considered the Supporting Services Annual Caps are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

IV. The Specialist Works Sub-Contracting Agreement

A. Reasons for entering into the Specialist Works Sub- Contracting Agreement

The parties have entered into the Specialist Works Sub-Contracting Agreement on 31 December 2014 for a term of three years from 1 January 2015 to 31 December 2017 as the Company expects that the Group may from time to time during the term of the Specialist Works Sub-Contracting Agreement in the ordinary and usual course of business engage the HCCG Group as its subcontractor for provision of the Specialist Works to the Group’s projects.

Pursuant to the Specialist Works Sub-Contracting Agreement, the parties have agreed that the Company may procure any relevant member(s) of the Group and HCCG may procure any relevant member(s) of the HCCG Group to enter into subsidiary agreement for the provision of any particular Specialist Works under the Specialist Works Sub-Contracting Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions upon which particular Specialist Works shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the Specialist Works Sub-Contracting Agreement.

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As set out in the Board Letter, the Group may from time to time obtain projects which involve construction, civil engineering construction, electrical and mechanical engineering installation works. The HCCG Group with profound experience in these areas and solid financial standing has demonstrated itself as a reliable subcontractor to its customers. The maintenance of a strategic business relationship between the Group and the HCCG Group will not only allow the realization of synergies and economies of scale but also facilitate the expansion of the businesses of the Group and the HCCG Group.

In addition to the construction business of the HCCG Group as describe in the previous section under the heading ‘‘III. The Tender Services and the Supporting Services Transactions’’ in this letter, each of the Civil Engineering division and the Electrical and Mechanical Engineering division of the HCCG Group also returned positive results to the HCCG Group. In regard of the Civil Engineering division, the HCCG Group has new orders of HK$0.7 billion for the financial year ended 31 December 2013 and is currently managing up to six MTR projects. Meanwhile, in regards of the Electrical and Mechanical Engineering division, the HCCG Group was honored to have the chance to participate in the Urban Renewal Projects situated at Castle Peak Road, Hing Wah Street and Un Chau Street in Sham Shui Po and it has new orders of HK$1.2 billion which represented more than double the figures of the previous year of HK$0.5 billion. According to the HC AR2013, the construction, civil engineering, electrical and mechanical engineering segments of the HCCG Group have in aggregated contributed approximately HK$7,612.4 million for the year ended 31 December 2013, representing approximately 83.2% to the total revenue of the HCCG Group for the year ended 31 December 2013 of approximately HK$9,147.8 million.

As noted from the IR 2014, the number of new contracts awarded to the Group for the six months ended 30 June 2014 has already exceeded the number of new contracts awarded to the Group for the year ended 31 December 2013 by approximately 34%. In addition, as advised by the management of the Company, there are several potential renovation/construction opportunities, which the Group intends to tender and in the Company’s preliminary estimations, with aggregated contract sum ranges from approximately HK$540 million to approximately HK$600 million. If the potential contracts to be successfully awarded to the Group, Specialist Works will be required and the HCCG Group may tender for the Specialist Works in accordance with the tendering procedures of the Group. As further advised by the management of Company, the Group will tender various contracts from time to time in future.

Having considered (i) the principal business of the HCCG Group and the background and reputation (for factors such as the market sizes and client bases) of the HCCG Group as a sub-contractor as set out in the previous section under the heading ‘‘III. The Tender Services and the Supporting Services Transactions’’; (ii) the HCCG Group’s profound experience in the construction, civil engineering, electrical and mechanical engineering areas; (iii) it is the Company’s decision to decide whether or not it requires the HCCG Group to provide any Specialist Works; and (iv) the needs of Specialist Works by the Group given the expected increase in number of contracts might be awarded and the potential contracts, we are in the view that the entering of the Specialist Works Sub-Contracting Agreement is in the ordinary and usual course of business and in the interests of the Company and the Independent Shareholders as a whole.

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B. Terms of the Specialist Works Sub-Contracting Agreement and the Specialist Works Annual Caps
(i) Terms of the Specialist Works Sub-Contracting Agreement

As noted from the Board Letter, the Company agrees to procure any relevant member(s) of the Group and HCCG agrees to procure any relevant member(s) of the HCCG Group to enter into subsidiary agreement(s) for the provision of any particular Specialist Works under the Specialist Works Sub-Contracting Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions including the payment terms upon which particular Specialist Works shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the Specialist Works Sub-Contracting Agreement. In particular, any Specialist Works to be provided under any subsidiary agreement must comply with the following basis:

(a) on normal commercial terms and on terms no less favourable to the Group than those made available from independent third parties;
(b) the prices for the Specialist Works Transactions shall be determined on arm’s length negotiations by reference to the prevailing market prices and having regard to the estimated costs of provision of the relevant services;
(c) the HCCG Group may tender for the Specialist Works in accordance with the tendering procedures of the Group from time to time and quotations from other independent third parties shall be obtained by the Group for the provision of the Specialist Works;
(d) the price and terms, historical working relationship, experience and the quality of works offered by the independent third parties and the HCCG Group respectively shall be considered by the Group;
(e) the HCCG Group may be engaged on terms similar to those offered by the other providers to the Group and which are no less favourable to the Group than those made available from independent third parties; and
(f) the total value of the Specialist Works Transactions to be provided by the HCCG Group to the Group for any one financial year from 1 January to 31 December under the Specialist Works Sub-Contracting Agreement shall not exceed the respective Specialist Works Annual Caps.

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Pricing basis

As noted from the Board Letter, as a general principle, the prices and terms of the Specialist Works Transactions shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis and at prices and on terms no more favourable than those awarded to independent third party subcontractors of the Group.

All labour intensive portions of the Specialist Works to be performed by the HCCG Group will be sub-contracted to outside contractors. Moreover, in determining the price for the Specialist Works Transactions, the HCCG Group will obtain quotations from its pool of sub-contractors for the provision of relevant Specialist Works. The price that the HCCG Group will charge the Group will be such sub-contracting costs plus a premium at a rate determined on a case by case basis. Factors that the HCCG Group will take into account are set out under the sub-section headed ‘‘Pricing basis of the Specialist Works Transactions awarded by the Group to the HCCG Group’’ in the Board Letter.

The Group may sub-contract the Specialist Works to the HCCG Group at a premium instead of directly engaging the sub-contractors which will perform the Specialist Works because the HCCG Group may possess certain license and qualifications which are required for the project and it also has the technical management expertise for the Specialist Works which the Group lacks. For instance, while the sub-contractors will be performing the labour intensive portion of the Specialist Works, the HCCG Group will be involved in the design, technical calculation, preparation of method statements and materials sourcing for the project. HCCG Group will be in the position to orchestrate teams of specialized resources to promptly and correctly execute the works in an efficient manner.

As set out in the Board Letter, the Company will adopt its procedures (the ‘‘SW Quotes Procedures’’) in order to ensure the transactions under the Specialist Works Sub-Contracting Agreement are under normal commercial terms and priced with reference to the prevailing market price of similar works on terms no less favourable to the Company than terms available to independent third party customers of the Company.

We noted from the SW Quotes Procedures that the Group will carefully evaluate each of the quotation provided by its potential sub-contractors (including the HCCG Group) and throughout the process, the Company will treat the HCCG Group and other independent contractors equally and compare the price and terms offered by the HCCG Group with those provided by independent contractors during the ordinary course of business on normal commercial terms. The directors and management of the Group will closely monitor the procedures from obtaining quotations to awarding a tender, so as to ensure that the policies are strictly followed. Further details of the SW Quotes Procedures and the Group’s internal tender procedures (the ‘‘Internal Tender Procedures’’) are listed out under the sub-section headed ‘‘Pricing basis of the Specialist Works Transactions awarded by the Group to the HCCG Group’’ in the Board Letter.

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LETTER FROM VEDA CAPITAL

Furthermore, subsequent to the assessment of the Internal Tender Procedures, the tender award committee is responsible for the approval and award of the tender. The tender award committee comprises the commercial director and managing director of the ISP Division and/or the Managing Director of the Company, depending on the amount involved in the tender, will report to the Board and is independent from HCCG. As disclosed in the Board Letter, the commercial director of the ISP Division possess over 25 years of experience in the construction industry covering all quantity surveying and tendering process. The managing director of the ISP Division possesses over 25 years of experience in project planning and monitoring, building construction and coordination, cost control, renovation and fitting-out works. The Managing Director of the Company, Dr. Fan Cheuk Hung, has over 30 years of experience in property and facility management. The tender award committee will report to the board of Directors and is independent from HCCG.

We noted from the AR2013 that, Mr. Terence Leung Siu Cheong, BSc, MHKIE, MCIOB, MHKICM, ACIArb, R.P.E., the managing director of the ISP Division is a member of the Hong Kong Institution of Engineers and a registered professional engineer. He is currently responsible for the business development and project monitoring of all addition and alteration works, renovation works, fitting-out works, conservation and revitalization works, and special projects of the Group.

We have also reviewed the information provided by the Company in respect of the biography of Mr. Yu Chi Wing, the commercial director of the ISP Division. His experience covers all quantity surveying and tendering processes. After the quantity surveying practices and during the years working in tendering, he has participated in preparation of different kinds of tenders, including but not limited to, residential developments, hospital, offices, public housing, shopping complex, parks, schools, factory compound, renovation works, and revitalization works, in which some of these successful tender sums are over billion.

We are given to understand from the management of the Company that the Internal Tender Procedures are to be applied the same to all sub-contractors including the HCCG Group as well as other independent third parties and that the procedures are in line with the general tendering practices.

We noted from the Board Letter that the Group has sub-contracted curtain wall related works to the HCCG Group in 2014 which incurred a value of approximately HK$2.8 million. We have obtained and reviewed the tender information in respect of sub-contracting the curtain wall business from the Group. We noted that each of the interested sub-contractors (including the HCCG Group and other independent third parties) has submitted its respective bids information, among other things, their price quotations, to the Company. A tender report containing information of the quotations from the three lowest bids comparing with the budget of the business was conducted and the sub-contractor who offered the best terms for the curtain wall business to the Company was selected and suggested to be awarded by the project manager of the Company. Such decision was then reviewed by a senior quantity surveyor of the Company and ultimately approved by either the project director or procurement director of the Group depending on the amount of the tender.

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LETTER FROM VEDA CAPITAL

Having considered the abovementioned, we are of the view that the pricing basis of the Special Works Transactions, through the internal tendering procedures of the Group, are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned.

In view of (i) the prices and terms of the Specialist Works Transactions will be negotiated on arm’s length basis by reference to the prevailing market prices; (ii) the Special Works Transactions will undergo a tendering process that the HCCG Group will only be awarded should the offer by any members of the HCCG Group are better than others and the SW Quotes Procedures will be monitored closely by the directors and management of the Group from obtaining quotations to awarding a tender; (iii) a tender award committee is responsible for the approval and award of a tender among the sub-contractors; and (iv) the experience and qualification of the tender award committee, we are of the view that terms of the Specialist Works Sub-Contracting Agreement are fair and reasonable and in the interest of the Company and the Independent Shareholders as a whole.

(ii) Specialist Works Annual Caps

As set out in the Board Letter, under the Specialist Works Sub-Contracting Agreement, the expected annual caps for the total value of the Specialist Works Transactions for each of the three financial years ending 31 December 2015, 2016 and 2017 will be HK$600 million.

The Specialist Works Annual Caps are made by reference to (i) the growth of the market under the ISP Business in the three-year period from 1 January 2015 to 31 December 2017 estimated by the management, which is based on the positive outlook of the industry due to the intense demand from high end retail or hotels for renovation, alteration and addition, and revitalization works as well as the government’s initiatives for building maintenance and mandatory renovations which may lead to an increase in the projects available for the Group to undertake in the forthcoming years; and (ii) the estimated total contract sum of new projects of the Group in the three-year period from 1 January 2015 to 31 December 2017, with reference to the expected expansion and development of the business of the Group, which is estimated based on the outlook of the ISP Works market and management’s assessment on the tender opportunities for the coming years and which involve specialist works such as mechanical & electrical and related works, foundation and curtain wall works, etc. which the Group may sub-contract to the HCCG Group.

Historically, the Group has sub-contracted curtain wall related works to the HCCG Group in 2014 which incurred a value of approximately HK$2.8 million. The curtain wall business was newly established by the Company in 2014. As the ISP Division of the Group grows, the Group expects to obtain more projects which may involve Specialist Works and the expected annual caps reflected the maximum potential value of Specialist Works which the Group may sub-contract to the HCCG Group, having taken into account such potential growth as previously mentioned.

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LETTER FROM VEDA CAPITAL

According to the information provided by the Company, we noted that the estimated aggregate amount of the tender opportunities under the potential contracts of the Group is approximately HK$450 million for the year ending 31 December 2015. Having taken into account of the budgeted expenses for the Specialist Works determined with reference to the experience of the management of the Company on the amount and costs of the construction works needed in previous contracts similar to the potential projects and the growth of the business of the Group and/or performances of the HCCG Group as a subcontractor, member(s) of the Group may further enter into other subsidiary agreement(s) with the member(s) of the HCCG Group for the provision of any particular Specialist Works under the Specialist Works SubContracting Agreement, the Specialist Works Annual Cap for the financial year ended 31 December 2015 is projected to be approximately HK$600 million (the ‘‘2015 SW Cap’’). Yet, as the Board has not aware of other immediate potential projects and given that the 2015 SW Cap has included a buffer of HK$25 million, the Board projected the same annual caps for the two financial years ended 31 December 2016 and 2017 of HK$600 million.

In view of the above described, we considered the proposed Specialist Works Annual Caps are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

V. The ISP Works Sub-Contracting Agreement

A. Reasons for entering into the Specialist Works Sub- Contracting Agreement

The parties have further entered into the ISP Works Sub-Contracting Agreement on 31 December 2014 for a term of three years from 1 January 2015 to 31 December 2017 as HCCG expects that the HCCG Group may from time to time during the term of the ISP Works Sub-Contracting Agreement in the ordinary and usual course of business engage the Group as its subcontractor for provision of the ISP Works to the HCCG Group’s project.

Pursuant to the ISP Works Sub-Contracting Agreement, the parties have agreed that HCCG may procure any relevant member(s) of the HCCG Group and the Company may procure any relevant member(s) of the Group to enter into subsidiary agreement for the provision of any particular ISP Works under the ISP Works SubContracting Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions upon which particular ISP Works shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the ISP Works Sub-Contracting Agreement.

As set out in the Board Letter, the HCCG Group may from time to time obtain projects which involve ISP Works. The Group possesses the required qualifications and experience in the ISP Works with good quality standard. The engagement of the Group to provide the ISP Works will bring synergy effect to both the Company and HCCG, thereby facilitating the expansion of the businesses of the Group and the HCCG Group.

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LETTER FROM VEDA CAPITAL

We noted from the AR2013, over 2013, the ISP Division obtained over 23 new contracts from an expanding portfolio of new and repeat clients. The ISP Business of the Company brings in continuous business opportunities, expands its geographic base from Hong Kong to Macau and has successfully secured its first retail fit-out project in a reputable resort and casino in Macau. Further noted from the AR2013, for the year ended 31 December 2013, the Group reported a new record of consolidated revenue with substantial contributions from the ISP Business of the Company in its first full year of operation of approximately HK$881.1 million which represented approximately 52.4% of the total revenue of the Group of HK$1,680.1 million for the year ended 31 December 2013. For the six months ended 30 June 2014, as set out in the IR 2014, the ISP Business of the Company has recorded revenue of approximately HK$523.5 million, representing an increase of approximately 70.0% as compared to the revenue for the six months ended 30 June 2013 of approximately HK$308.0 million.

Having considered, (i) the ISP Business of the Company contributed a sizable portion of the Group’s revenue; (ii) the extraordinary financial performances of the ISP Business of the Company; (iii) the Group possess the required qualifications and experience in the ISP Works; (iv) the intention of the Group to further develop the ISP Business; and (v) cooperation with the HCCG Group is expected to provide synergy effect to the business of the Company and further expand clients portfolio of the Group and enhance the development of the ISP Business of the Company, we are in the view that the entering of the ISP Works Sub-Contracting Agreement is in the ordinary and usual course of business and in the interests of the Company and the Independent Shareholders as a whole.

B. Terms of the ISP Works Sub-contracting Agreement and the ISP Works Transactions Annual Caps

(i) Terms of the ISP Works Sub-Contracting Agreement

As noted from the Board Letter, the HCCG Group may from time to time during the term of the ISP Works Sub-Contracting Agreement in the ordinary and usual course of business engage the Group as its subcontractor for provision of the ISP Works to the HCCG Group’s projects.

As further noted from the Board Letter, HCCG agrees to procure any relevant member(s) of the HCCG Group and the Company agrees to procure any relevant member(s) of the Group to enter into subsidiary agreement(s) for the provision of any particular ISP Works under the ISP Works Sub-Contracting Agreement. Each subsidiary agreement shall set out the particulars and the terms and conditions including the payment terms upon which particular ISP Works shall be provided as determined by the parties to the subsidiary agreement, given that the terms of each subsidiary agreement must comply with the terms of the ISP Works Sub-Contracting Agreement. In particular, any ISP Works to be provided under any subsidiary agreement must comply with the following basis:

(a) on normal commercial terms and on terms no less favourable to the Group than those made available to independent third parties;

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LETTER FROM VEDA CAPITAL

(b) the prices for the ISP Works Transactions shall be determined on arm’s length negotiations by reference to the prevailing market prices and having regard to the estimated costs of provision of the relevant services;
(c) the Group may tender for the ISP Works in accordance with the tendering procedures of the HCCG Group from time to time and quotations from other independent third parties shall be obtained by the HCCG Group for the provision of the ISP Works;
(d) the price and terms, historical working relationship, experience and the quality of works offered by the independent third parties and the Group respectively shall be considered by the HCCG Group;
(e) the Group may be engaged on terms similar to those offered by the other providers to the HCCG Group and which are no less favorable to the Group than those made available to independent third parties; and
(f) the total value of the ISP Works Transactions to be provided by the Group to the HCCG Group for any one financial year from 1 January to 31 December under the ISP Works Sub-Contracting Agreement shall not exceed the respective ISP Works Annual Caps.

Pricing basis

As noted from the Board Letter, as a general principle, the prices and terms of the ISP Works Transactions shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm’s length basis and at prices and on terms no more favourable than those provided to the independent third party customers of the Group.

The Group will need to go through a tender or similar process before being selected and appointed as subcontractor of the HCCG Group except for isolated situations whereby the HCCG Group invites the Group to participate in a project at the beginning of its tendering process. These projects usually involve complex design and build jobs and due to time constraint will be more efficient to involve the Group from the start of the tender process. For these projects, the Group will provide its quotation to the HCCG Group and the prices and terms of which will be determined in the same manner as for the situation whereby the Group will need to submit a tender.

Where a member of the Group participates in a tender with all bidders (including independent third parties in the market), the winning bid will be the most competitive bid in accordance with the tender procedure(s) of the member(s) of the HCCG Group taking into account of the requirements such as tender amount, relevant experience, capability, historical relationship and track records as set out in the bid invitation.

As disclosed in the Board Letter, the prices and terms of the Group’s tenders submitted to the HCCG Group for the provision of the ISP Works will be subject to a standard and systematic tender submission procedure (the ‘‘Tender Submission Procedures’’) maintained by the Group, which applies to tenders submitted to both connected persons and independent third parties, in order to ensure that the prices and terms of the proposed tenders submitted by the Group to the HCCG Group are no more favourable than those submitted to the independent third parties.

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LETTER FROM VEDA CAPITAL

All labour intensive portions of the ISP Works are sub-contracted by the Group to outside contractors which are independent third parties. In determining the price for the ISP Works Transactions, the Group will obtain and review quotations from its pool of subcontractors and compare them with the prices maintained in its in-house computer database obtained from subcontractors for the Group’s previous jobs (‘‘ISP Sub-contractors database’’).

We noted from the Tender Submission Procedures that the price that the Group will charge the HCCG Group will be such sub-contracting costs and plus a premium (the ‘‘ISP Premium’’) determined on a case by case basis. Further details of the Tender Submission Procedures are listed out under the sub-section headed ‘‘Pricing basis of the Group’s tenders submitted to the HCCG Group’’ in the Board Letter.

We have enquired with the management of the Company and are given to understand that there are numerous sub-contractors in the ISP Sub-contractors database and the number of quotations from the sub-contractors that the Group reviewed depends on the nature of the ISP Works and thus varies from case by case. Normally, the Group reviews at least three quotations from the sub-contractors.

Concerning the ISP Premium, factors that the Group will take into account when determining the premium include the nature, complexity, location and duration of the ISP Works to be provided, the capacity of the Group at the time the ISP Works are required to be performed, the margin for comparable ISP Works in the market, the background of the ultimate employer of the project and the time incurred by the management and commercial team of the Group and the operating expenses incurred in relation to the performance of the ISP Works (the ‘‘ISP Premium Rate Factors’’).

We understand from the Company that it is difficult to find comparable tenders submitted to both connected persons and independent third parties to compare the tender prices as different premium rates can be applied and due to the variation of the types, natures and complexity of the ISP Works provided by the Group and the combination of the ISP Premium Rate Factors for each of the cases. Therefore, we consider that it is commercially impractical to compare the tender prices of the ISP Works projects with each other while we understand that the Company will try to identify the comparable tenders that have previously submitted to independent third parties as a reference to check whether the tender to the HCCG Group is not more favourable than those submitted to the independent third parties by comparing the factors considered and the ISP Premium. Nevertheless, we have endeavored to obtain one set of sample tenders submitted to the HCCG Group and an independent third party and we noted that the terms and conditions as set out in the sample tenders submitted to the HCCG Group are not more favourable than those submitted to the independent third parties.

Given that abovementioned and that (i) same Tender Submission Procedures will be applied by the Company to the connected persons and independent third parties of the Company; (ii) such procedures will be monitored closely by the directors and management of the Group so as to ensure that the policies are strictly followed, with the presence of the ISP Premium; and (iii) the ISP Premium is determined after taken into account the ISP Premium Rate Factors which are commercially justifiable and commonly considered, we are in the view that the pricing basis of the ISP Works are justifiable and fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM VEDA CAPITAL

Having considered the above Tender Submission Procedures and due to the fact that the Group will have to undergo the HCCG Group’s standard and systematic tender submission procedure which applies to tenders of both connected persons and independent third parties in order to be awarded the HCCG Group’s projects with the presence of ISP Premium based on the ISP Premium Rate Factors which are generally adopted by the Group for all the quotations of ISP Works to the HCCG Group and the quotations of similar services to the independent third parties, we are of the view that terms of the ISP Works Sub-Contracting Agreement are in normal commercial terms, fair and reasonable and in the interest of the Company and the Independent Shareholders as a whole.

(ii) ISP Works Transactions Annual Caps

As set out in the Board Letter, under the ISP Works Sub-Contracting Agreement, the expected annual caps for the total value of the ISP Works Transactions for each of the three financial years ending 31 December 2015, 2016 and 2017 will be HK$700 million.

The ISP Works Transactions Annual Caps are made by reference to (i) the growth of the construction market in the three-year period from 1 January 2015 to 31 December 2017 estimated by the management, which is based on the positive outlook of the construction industry with growth in construction activities leading to an increase in the construction works which may involve works of ISP Business available for the HCCG Group to undertake in the forthcoming years; and (ii) the estimated total contact sum of new projects of the Group in the three-year period from 1 January 2015 to 31 December 2017, with reference to the expected expansion and development of the business of the HCCG Group, which is estimated based on the outlook of the construction market and the management assessment on tender opportunities in the coming years and which involve residential development projects and fitting-out works which the HCCG Group may subcontract to the Group.

The following table sets out (i) the actual total value incurred pursuant in respect of sub-contracting of Other Contracts pursuant to the 2012 Tender Services Agreement; (ii) the annual caps under the 2012 Tender Services Agreement (which covered both Tender Services and ISP Works Transactions); and (iii) the utilization rate:

				Annual cap
Period			Amount incurred	(Note 2)	Utilization rate
1/1/2012	–	31/12/2012	HK$2 million	HK$1,000 million	0.2%
1/1/2013	–	31/12/2013	HK$107 million	HK$1,700 million	6.29%
1/1/2014	–	31/12/2014	HK$157 million	HK$2,000 million	7.85%
			(Note 1)		(Note 3)

Note 1: This amount is extracted from the Company’s management account and represents the fees up to 30 September 2014, being the latest practicable date to ascertain such information.

Note 2: These annual caps cover the maximum aggregate annual value in respect of subcontracting the Awarded Contracts (i.e. under the Tender Services) and the ISP Works as may be sub-contracted by the HCCG Group to the Group.

Note 3: This utilization rate is calculated based on the actual fees incurred up to 30 September 2014 only.

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LETTER FROM VEDA CAPITAL

Since the acquisition of the ISP Division of the Group was completed on 30 November 2012, the utilization rate for the financial year ended 31 December 2012 was very low as the actual amount incurred was for the month of December only. The utilization rate of the remaining annual caps under the 2012 Tender Services Agreement were low as the annual caps were intended to cover both the Tender Services and the ISP Works but only the amount incurred in respect of the ISP Works were taken into account when calculating the utilization rates in the table above. Despite the historical deviations, the expected annual caps under the ISP Works which the HCCG Group may subcontract to the Group, having taken into account the potential growth of the construction business of HCCG as mentioned previously.

As discussed with the management of the Company, as at the Latest Practicable Date, HCCG has identified potential projects which involve ISP Works that the Group has the capability to provide for and which the HCCG Group may invite the Group to submit a tender is estimated to be in an amount of approximately HK$600 million during the financial year ending 31 December 2015. Having taken into account of the budgeted prices for the ISP Works determined with reference to the experience of the management of the Company on the previous contracts similar to the potential projects and the expected growth of the business of the Group, the ISP Works Annual Cap for the financial year ended 31 December 2015 is projected to be approximately HK$700.0 million. As further advised by the management of the Company, the Board has not aware of other immediate potential contracts and the Board therefore projected the same annual caps for the two financial years ended 31 December 2016 and 2017 of HK$700.0 million.

In view of the above-mentioned, we considered the ISP Works Annual Caps are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

VI. Recommendation

Having considered the above-mentioned principal factors and reasons, we consider (i) the terms of the Agreements and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Agreements and the transactions contemplated thereunder are in the interests of the Company and the Independent Shareholders as a whole. We would therefore recommend the Independent Shareholders and advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolutions to approve the Agreements and the transactions contemplated thereunder to be proposed at the SGM.

Yours faithfully, For and on behalf of Veda Capital Limited Julisa Fong Managing Director

Note: Ms. Julisa Fong is a licensed person under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 18 years of experience in investment banking and corporate finance.

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APPENDIX

GENERAL INFORMATION

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

(a) Directors’ and chief executive’s interests and short positions in the Shares, underlying Shares and debentures of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and 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) which were required to be (i) 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 the Directors and the chief executive of the Company were taken or deemed to have under such provisions of the SFO); or (ii) entered into the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’) contained in Appendix 10 of the Listing Rules were as follows:

(i) Interests in Shares and underlying Shares of the Company

					Approximate
					percentage of
					interest in
					the issued
					ordinary
			Number of		share capital
		Number of	underlying		of the
Name of Directors	Capacity	Shares held	Shares held	Total	Company
			(Note 1)		(Note 2)
Wilfred Wong Ying Wai	Beneficial Owner	14,420,000	3,200,000	17,620,000	5.24%
	Interests of controlled	57,846,436	–	57,846,436	17.22%
	corporation	(Note 3)
Fan Cheuk Hung	Beneficial Owner	7,616,000	3,000,000	10,616,000	3.16%
Stephen Ip Shu Kwan	Beneficial Owner	–	900,000	900,000	0.27%
Kan Fook Yee	Beneficial Owner	–	900,000	900,000	0.27%
Wong Tsan Kwong	Beneficial Owner	–	900,000	900,000	0.27%
David Yu Hon To	Beneficial Owner	–	900,000	900,000	0.27%

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APPENDIX

GENERAL INFORMATION

Notes:

The interest in the underlying Shares held by the Directors represented share options granted pursuant to the old share option scheme adopted by the Company on 19 September 2003 (terminated by an ordinary resolution passed at the annual general meeting of the Company on 17 June 2013) and a new share option scheme adopted by the Company on 17 June 2013. Details of outstanding share options held as at the Latest Practicable Date are set out as follows:

	Number of
	outstanding share
	options held as
	at the Latest	Exercise price
Name of Directors	Practicable Date	per Share	Exercisable period
		(HK$)	(dd/mm/yyyy)
Wilfred Wong Ying Wai	400,000	0.820	25/09/2010-24/09/2015
	400,000	0.820	25/09/2011-24/09/2015
	400,000	0.820	25/09/2012-24/09/2015
	400,000	0.820	25/09/2013-24/09/2015
	400,000	0.820	25/09/2014-24/09/2015
	240,000	0.952	27/05/2014-27/05/2019
	240,000	0.952	27/05/2015-27/05/2019
	240,000	0.952	27/05/2016-27/05/2019
	240,000	0.952	27/05/2017-27/05/2019
	240,000	0.952	27/05/2018-27/05/2019
Fan Cheuk Hung	300,000	0.820	25/09/2010-24/09/2015
	300,000	0.820	25/09/2011-24/09/2015
	300,000	0.820	25/09/2012-24/09/2015
	300,000	0.820	25/09/2013-24/09/2015
	300,000	0.820	25/09/2014-24/09/2015
	500,000	0.760	01/09/2012-31/08/2015
	500,000	0.760	01/09/2013-31/08/2015
	500,000	0.760	01/09/2014-31/08/2015
Stephen Ip Shu Kwan	600,000	0.850	16/10/2013-15/10/2018
	100,000	0.952	27/05/2014-27/05/2017
	100,000	0.952	27/05/2015-27/05/2017
	100,000	0.952	27/05/2016-27/05/2017
Kan Fook Yee	600,000	0.850	16/10/2013-15/10/2018
	100,000	0.952	27/05/2014-27/05/2017
	100,000	0.952	27/05/2015-27/05/2017
	100,000	0.952	27/05/2016-27/05/2017
Wong Tsan Kwong	600,000	0.850	16/10/2013-15/10/2018
	100,000	0.952	27/05/2014-27/05/2017
	100,000	0.952	27/05/2015-27/05/2017
	100,000	0.952	27/05/2016-27/05/2017
David Yu Hon To	600,000	0.850	16/10/2013-15/10/2018
	100,000	0.952	27/05/2014-27/05/2017
	100,000	0.952	27/05/2015-27/05/2017
	100,000	0.952	27/05/2016-27/05/2017

There were 335,950,000 Shares in issue as at the Latest Practicable Date.
These Shares are held by Summit View Holdings Limited (‘‘Summit View’’) which is owned as to 50% by Dr. Wong and 50% by Ms. Ma Kwing, Pony (‘‘Ms. Ma’’). As such, Summit View is deemed to be controlled corporation of Dr. Wong and Ms. Ma under the SFO.

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APPENDIX

GENERAL INFORMATION

(ii) Interests in shares and underlying shares of the Company’s associated corporations

As at the Latest Practicable Date, the interests of the Directors in ordinary shares and underlying shares of HCCG were as follow:

					Approximate
					percentage of
		Number of			shareholding
		ordinary	Number of		in the issued
		shares of	share options		share capital
Name of Director	Capacity	HCCG held	outstanding	Total	of HCCG
					(Note 2)
Wilfred Wong Ying Wai	Beneficial owner	26,000,000	5,000,000	31,000,000	0.60%
	Interests of controlled	1,466,858,789	–	1,466,858,789	28.27%
	corporation	(Note 1)

Details of share options held in HCCG:

	Number of	Exercise price
	share options	per share of
Name of Director	held	HCCG	Exercisable period
		(HK$)	(dd/mm/yyyy)
Wilfred Wong	2,500,000	2.13	01/01/2009-22/05/2018
Ying Wai	2,500,000	2.13	01/01/2010-22/05/2018

Notes:

These shares in HCCG are held as to 475,816,993 shares by Neo Summit Limited (‘‘NSL’’) and as to 991,041,796 shares by Summit View. NSL is owned by (a) Pinnacle State Real Estate Limited as to 28.89%; (b) Summit View as to 13.33%; (c) Jones Capital Investments Limited as to 28.89%; and (d) Becl World Holding Ltd as to 28.89%. Pinnacle State Real Estate Limited is indirectly wholly-owned by Dr. Wong. Summit View is owned as to 50% by Dr. Wong and 50% by Ms. Ma. Jones Capital Investments Limited is wholly-owned by Ms. Ma. As such, NSL and Summit View are deemed to be controlled corporations of Dr. Wong under the SFO.
There were 5,188,576,651 ordinary shares of HCCG in issue as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company was interested 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 (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which the Directors or the chief executive of the Company were taken or deemed to have under such provisions of the SFO); or (ii) entered into the register maintained by the Company under section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code.

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APPENDIX

GENERAL INFORMATION

(b) Interests and short position of Shareholders (of which a Director or a proposed Director is a director or employee) in the Shares, underlying Shares and debentures of the Company

As at the Latest Practicable Date, the interests and short position of a company (of which a Director or a proposed Director is a director or employee) in the Shares, underlying Shares or debentures of the Company 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, were as follows:

(i) Interests in Shares

				Approximate
				percentage of
				interest in the
		Capacity of		issued share
	Name of	Director in	Number of	capital of the
Name of Director	Shareholder	Shareholder	Shares held	Company
Wilfred Wong Ying Wai	Summit View	Director	57,846,436	17.22%

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or a proposed Director is a director or employee of a company which had, or was deemed to have, an interest or short position in the Shares or 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.

3. COMPETING INTERESTS

None of the Directors and the directors of the Purchaser and their respective close associates were interested in any business apart from the Group’s business which competed or was likely to compete, either directly or indirectly, with the business of the Group as at the Latest Practicable Date.

4. MATERIAL INTERESTS IN CONTRACT OR ARRANGEMENT

None of the Directors was materially interested in any contracts or arrangement entered into by any member of the Group which is subsisting at the Latest Practicable Date and which is significant in relation to the business of the Group.

None of the Directors has any direct or indirect interest in any assets which have been, since 31 December 2013, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by, or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

5. 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 of the Group since 31 December 2013, being the date to which the latest published audited financial statements of the Group were made up.

– 64 –

APPENDIX

GENERAL INFORMATION

6. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has entered, or is proposing to enter, into any service contract with any member of the Group which is not expiring or may not be terminated by the any member of the Group within a year without payment of any compensation (other than statutory compensation).

7. EXPERT

The following are the qualifications of the expert who has given its opinion, letter or advice contained in this circular:

Name Qualification

Veda Capital Limited a corporation licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO

As at the Latest Practicable Date, Veda Capital did not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Veda Capital has given and has not withdrawn its written consent to the issue of this circular, with the inclusion therein of their letter or the references to its name in the form and context in which it appears.

As at the Latest Practicable Date, Veda Capital has confirmed that it did not have any direct or indirect interest in any assets which have 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 since 31 December 2013, being the date to which the latest published audited financial statements of the Group were made up.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours of the Company at 10th Floor, Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong from the date of this circular up to and including the date of the SGM:

(a) the General Business Services Agreement;
(b) the Tender Services Agreement;
(c) the Supporting Services Agreement;
(d) the Specialist Works Sub-Contracting Agreement;
(e) the ISP Works Sub-Contracting Agreement;
(f) the 2012 General Business Service Agreement and the Supplemental Agreement;
(g) the 2012 Supporting Services Agreement; and
(h) the 2012 Tender Services Agreement.

– 65 –

NOTICE OF SGM

==> picture [193 x 48] intentionally omitted <==

SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 02340)

NOTICE IS HEREBY GIVEN THAT the special general meeting (the ‘‘Meeting’’) of Synergis Holdings Limited (the ‘‘Company’’) will be held at 2nd Floor, Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Wednesday, 25 February 2015 at 11:30 a.m. for the purposes of considering and, if thought fit, passing, with or without amendments, the following resolutions. Unless otherwise indicated, capitalized terms used in this notice and the following resolutions shall have the same meanings as those defined in the circular of the Company dated 2 February 2015 of which this notice convening the Meeting forms part.

ORDINARY RESOLUTIONS

‘‘THAT
(a) the General Business Services Agreement dated 31 December 2014 entered into between the Company and HCCG (a copy of which has been produced to the Meeting marked ‘‘A’’ and signed by the chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder including the General Business Services Annual Caps for the period with effect from 1 January 2015 and ending on 31 December 2017 be and are hereby approved, confirmed and ratified; and
(b) the Directors be and are hereby authorised for and on behalf of the Company to do all such acts and take all steps which they may consider necessary, desirable or expedient to implement and/or give effect to the transactions contemplated under the General Business Services Agreement.’’
‘‘THAT
(a) the Tender Services Agreement dated 31 December 2014 entered into between the Company and HCCG (a copy of which has been produced to the Meeting marked ‘‘B’’ and signed by the chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder including the TS Sub-Contracting Annual Caps for the period with effect from 1 January 2015 and ending on 31 December 2017 be and are hereby approved, confirmed and ratified; and
(b) the Directors be and are hereby authorised for and on behalf of the Company to do all such acts and take all steps which they may consider necessary, desirable or expedient to implement and/or give effect to the transactions contemplated under the Tender Services Agreement.’’

for identification purposes only

SGM – 1

NOTICE OF SGM

‘‘THAT
(a) the Supporting Services Agreement dated 31 December 2014 entered into between the Company and HCCG (a copy of which has been produced to the Meeting marked ‘‘C’’ and signed by the chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder including the Supporting Services Annual Caps for the period with effect from 1 January 2015 and ending on 31 December 2017 be and are hereby approved, confirmed and ratified; and
(b) the Directors be and are hereby authorised for and on behalf of the Company to do all such acts and take all steps which they may consider necessary, desirable or expedient to implement and/or give effect to the transactions contemplated under the Supporting Services Agreement.’’
‘‘THAT
(a) the Specialist Works Sub-Contracting Agreement dated 31 December 2014 entered into between the Company and HCCG (a copy of which has been produced to the Meeting marked ‘‘D’’ and signed by the chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder including the Specialist Works Annual Caps for the period with effect from 1 January 2015 and ending on 31 December 2017 be and are hereby approved, confirmed and ratified; and
(b) the Directors be and are hereby authorised for and on behalf of the Company to do all such acts and take all steps which they may consider necessary, desirable or expedient to implement and/or give effect to the transactions contemplated under the Specialist Works Sub-Contracting Agreement.’’
‘‘THAT
(a) the ISP Works Sub-Contracting Agreement dated 31 December 2014 entered into between the Company and HCCG (a copy of which has been produced to the Meeting marked ‘‘E’’ and signed by the chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder including the ISP Works Annual Caps for the period with effect from 1 January 2015 and ending on 31 December 2017 be and are hereby approved, confirmed and ratified; and
(b) the Directors be and are hereby authorised for and on behalf of the Company to do all such acts and take all steps which they may consider necessary, desirable or expedient to implement and/or give effect to the transactions contemplated under the ISP Works Sub-Contracting Agreement.’’

By order of the Board of Synergis Holdings Limited Fan Cheuk Hung Managing Director

Hong Kong, 2 February 2015

SGM – 2

NOTICE OF SGM

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

Principal place of business in Hong Kong: 10th Floor Hsin Chong Center 107-109 Wai Yip Street Kwun Tong, Kowloon Hong Kong

Notes:

The resolutions to be considered at the special general meeting will be determined by poll. On voting by poll, each member shall have one vote for each share held in the Company.
Any member of the Company entitled to attend and vote at the special general meeting shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him. A proxy need not be a member of the Company.
Where there are joint holders of any share, any one of such persons may vote at the special general meeting either personally or by proxy or by attorney, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at the meeting personally or by proxy or by attorney, then that one of the said persons so present whose name stands first on the register in respect of such share shall alone be entitled to vote in respect thereof.
The instrument appointing a proxy or an attorney and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of that power of attorney or other authority, shall be deposited at the office of the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not less than 48 hours before the time for holding the special general meeting or any adjourned meeting thereof. Delivery of an instrument appointing a proxy or a power of attorney shall not preclude a member of the Company from attending and voting in person at the special general meeting or any adjourned meeting, and in such event, the instrument appointing a proxy or power of attorney shall be deemed to be revoked.
As at the date of this notice, the Executive Directors of the Company are Dr. Wilfred Wong Ying Wai (Chairman) and Dr. Fan Cheuk Hung (Managing Director); and the Independent Non-executive Directors are Mr. Stephen Ip Shu Kwan, Mr. Kan Fook Yee, Mr. Wong Tsan Kwong and Mr. David Yu Hon To.

SGM – 3

AI assistant

ISP Holdings Limited — Proxy Solicitation & Information Statement 2015

50536_rns_2015-02-02_0f08470a-c7ef-4239-b0f5-e987101b70e2.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司[*]

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司[*]

(Stock Code: 02340)

CONTINUING CONNECTED TRANSACTIONS WITH

HSIN CHONG CONSTRUCTION GROUP LTD. AND

NOTICE OF SPECIAL GENERAL MEETING

(A) INTRODUCTION

LETTER FROM THE BOARD

(B) GENERAL BUSINESS SERVICES AGREEMENT

LETTER FROM THE BOARD

Pricing Basis

LETTER FROM THE BOARD

General Business Services Annual Caps

LETTER FROM THE BOARD

(C) TENDER SERVICES AGREEMENT

Tender Services Agreement

LETTER FROM THE BOARD

TS Sub-Contracting Annual Caps

LETTER FROM THE BOARD

(D) SUPPORTING SERVICES AGREEMENT

LETTER FROM THE BOARD

Supporting Services Annual Caps

LETTER FROM THE BOARD

(E) SPECIALIST WORKS SUB-CONTRACTING AGREEMENT

LETTER FROM THE BOARD

Specialist Works Annual Caps

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(F) ISP WORKS SUB-CONTRACTING AGREEMENT

ISP Works Annual Caps

Pricing basis of the Group’s tenders submitted to the HCCG Group

LETTER FROM THE BOARD

(G) REASONS FOR ENTERING INTO THE AGREEMENTS

General Business Services Transactions

Tender Services and Supporting Services Transactions

Specialist Works Transactions

ISP Works Transactions

(H) INTERNAL CONTROL MEASURES

LETTER FROM THE BOARD

(I) LISTING RULES IMPLICATIONS

(J) SGM

(K) RECOMMENDATIONS

SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司[*]

CONTINUING CONNECTED TRANSACTIONS WITH HSIN CHONG CONSTRUCTION GROUP LTD.

CONTINUING CONNECTED TRANSACTIONS WITH HSIN CHONG CONSTRUCTION GROUP LTD.

INTRODUCTION

LETTER FROM VEDA CAPITAL

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Information of HCCG Group and the Group

II. The General Business Services Transactions

LETTER FROM VEDA CAPITAL

B. Terms of the General Business Services Agreement and the General Business Services Annual Caps

Pricing Basis

LETTER FROM VEDA CAPITAL

(ii) General Business Services Annual Caps

LETTER FROM VEDA CAPITAL

LETTER FROM VEDA CAPITAL

LETTER FROM VEDA CAPITAL

III. The Tender Services and Supporting Services Transactions

A. Reasons for entering into the Tender Services and Supporting Services Transactions

LETTER FROM VEDA CAPITAL

(ii) TS Sub-Contracting Annual Caps

LETTER FROM VEDA CAPITAL

(i) Terms of the Supporting Services Agreement

LETTER FROM VEDA CAPITAL

(ii) Supporting Services Annual Caps

IV. The Specialist Works Sub-Contracting Agreement

A. Reasons for entering into the Specialist Works Sub- Contracting Agreement

ISP Holdings Limited Proxy Solicitation & Information Statement 2015