SPECIAL DEAL AND NOTICE OF EGM

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in CIG Yangtze Ports PLC, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, licensed securities dealer 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. (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8233) SPECIAL DEAL AND NOTICE OF EGM Independent Financial Adviser to the SD Independent Board Committee and the SD Independent Shareholders A letter from the SD Independent Board Committee containing its recommendation to the SD Independent Shareholders is set out on page 12 of this circular. A letter from the Independent Financial Adviser containing its advice to the SD Independent Board Committee is set out on pages 13 to 23 of this circular. A notice convening the EGM to be held at Unit A, 29/F, Admiralty Centre I, 18 Harcourt Road, Admiralty, Hong Kong on Tuesday, 15 November 2011 at 10:30 a.m. is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited at Shops , 17th Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish but the authority of your proxy will be invalidated forthwith. * For identification purpose only 31 October 2011

2 CHARACTERISTICS OF GEM GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM. i

3 CONTENTS Page Characteristics of GEM... i Definitions... 1 Letter from the Board... 6 Letter from the SD Independent Board Committee Letter from Asian Capital Appendix I General Information Notice of EGM... EGM-1 ii

4 DEFINITIONS In this circular, the following expressions have the following meanings unless the context otherwise requires: acting in concert associates Board Business Day BVI Chow Holdings CIG China has the meaning ascribed thereto under the Takeovers Code has the meaning ascribed thereto under the GEM Listing Rules the board of Directors a day (other than Saturday, Sunday, public holiday and any day on which a typhoon signal 8 or above is hoisted or a black rainstorm warning is given in Hong Kong at any time during 9:00 a.m. to 5:00 p.m.) on which banks in Hong Kong are open for general banking business British Virgin Islands Chow Holdings Limited, a company incorporated in BVI with limited liability and is ultimately beneficially owned by Mr. Chow, being one of the Vendors under the S&P Agreement CIG China Holdings Limited, a company incorporated in the Cayman Islands with limited liability and is ultimately beneficially owned by Mr. Chow, being one of the Vendors under the S&P Agreement Company CIG Yangtze Ports PLC (stock code: 8233), a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM Completion Composite Document Connected Person(s) Directors completion of the sale and purchase of the Sale Shares in accordance with the terms and conditions of the S&P Agreement the composite offer and response document dated 21 October 2011 jointly issued by the Offeror and the Company in relation to the Offers has the meaning ascribed thereto under the GEM Listing Rules directors of the Company EGM extraordinary general meeting(s) to be convened by the Company to consider and, if thought fit, approve the Service Agreement by the SD Independent Shareholders Executive GEM the Executive Director of the Corporate Finance Division of the SFC or any of his delegates the Growth Enterprise Market of the Stock Exchange 1

5 DEFINITIONS GEM Listing Rules GF Securities Group Harbour Master Hong Kong Independent Financial Adviser or Asian Capital Independent Third Parties the Rules Governing the Listing of Securities on GEM GF Securities (Hong Kong) Brokerage Limited, a licensed corporation to carry out type 1 regulated activity under the SFO the Company and its subsidiaries Harbour Master Limited, a company incorporated in the BVI with limited liability, which is a wholly-owned subsidiary of The Yangtze Ventures II Limited which, in turn, is an indirect, non-wholly-owned subsidiary of SOCAM Development Limited (formerly known as Shui On Construction and Materials Limited) (Stock code: 983), being one of the Vendors under the S&P Agreement Hong Kong Special Administrative Region of the PRC Asian Capital (Corporate Finance) Limited, a licensed corporation to carry out Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO and the independent financial adviser appointed by the Company and approved by the SD Independent Board Committee to advise the SD Independent Board Committee on the Service Agreement the parties who, to the best of the Directors knowledge, information and belief and having made all reasonable enquiries, are independent of and not connected with any of the Director(s), chief executive(s) of the Company or substantial Shareholder(s) or any of the subsidiaries or their respective associate(s) Joint Announcements the announcements dated 30 September 2011, 3 October 2011 and 12 October 2011 respectively jointly issued by the Company and the Offeror in relation to, among others, the S&P Agreement, the Offers and the Service Agreement Latest Practicable Date Mr. Chow Mr. Yan 28 October 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular Mr. Chow Kwong Fai, Edward, an existing sole executive Director Mr. Yan Zhi, the ultimate beneficial owner of the Offeror 2

6 DEFINITIONS Offeror Offers Zall Infrastructure Investments Company Limited ( 卓爾基業投資有限公司 *), a company incorporated in BVI with limited liability and is ultimately beneficially owned by Mr. Yan the Share Offer and the Option Offer Offer Share(s) issued Share(s) and Shares which may be issued by the Company following the Latest Practicable Date, other than those already owned by the Offeror and parties acting in concert with it Optionholder(s) Option Offer PRC holder(s) of the Share Option(s) the offer made by GF Securities on behalf of the Offeror for the cancellation of the outstanding Share Options other than those already owned by or agreed to be acquired by the Offeror and its parties acting in concert pursuant to the Takeovers Code the People s Republic of China which, for the purpose of this circular, shall exclude Hong Kong, Macau Special Administrative Regions of PRC and Taiwan S&P Agreement the sale and purchase agreement dated 21 September 2011 entered into among the Offeror, the Vendors, the Vendors Guarantor and Mr. Yan in relation to the sale and purchase of thesaleshares Sale Shares SD Independent Board Committee 599,888,141 Shares acquired by the Offeror from the Vendors pursuant to the terms and conditions of the S&P Agreement the independent committee of the Board comprising five nonexecutive Directors, namely Mr. Lee Jor Hung, Dannis, Mr. Goh Pek Yang, Michael, Mr. Lee Kang Bor, Thomas, Dr. Wong Tin Yau, Kelvin and Mr. Fan Chun Wah, Andrew, established to give recommendation to the SD Independent Shareholders regarding the terms of the Service Agreement. Mr. Wong Yuet Leung, Frankie, the remaining non-executive Director, is a director of Harbour Master, one of the Vendors in the S&P Agreement. He will not serve as a member of the SD Independent Board Committee as his significant connection with Harbour Master and the Company within the 2 years prior to the commencement of the offer period for the Offers may reasonably likely affect the objectivity of his advice 3

7 DEFINITIONS SD Independent Shareholder(s) Service Agreement SFC SFO Share(s) Share Offer Share Option Shareholders other than (i) the Vendors, its associates and parties acting in concert with any of them; (ii) the Offeror, Mr. Yan and the parties acting in concert with any one of them; and (iii) any Shareholders who are involved in or interested in the Service Agreement or any transactions contemplated therein (including Mr. Chow) the service agreement to be entered into between Mr. Chow and the Company in relation to the appointment of Mr. Chow as a consultant of the Company, following Completion the Securities and Futures Commission the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) ordinary share(s) of HK$0.10 each in the issued share capital of the Company the unconditional mandatory offer made by GF Securities for and on behalf of the Offeror to acquire all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it) pursuant to the Takeovers Code option(s) to subscribe for Shares granted under the Share Option Scheme Share Option Scheme the share option scheme adopted by the Company on 2 September 2005 Shareholders Stock Exchange Takeovers Code Trading Day Unbeatable Vendors holders of the issued Shares The Stock Exchange of Hong Kong Limited the Hong Kong Code on Takeovers and Mergers a day on which securities can be freely traded on the Stock Exchange during whole of the normal trading hours of the Stock Exchange regardless of whether any trades actually occur Unbeatable Holdings Limited, a company incorporated in BVI with limited liability and is ultimately beneficially owned by Mr. Chow, being one of the Vendors under the S&P Agreement collectively, Chow Holdings, CIG China, Harbour Master and Unbeatable 4

8 DEFINITIONS Vendors Guarantor HK$ Mr. Chow Hong Kong dollars, the lawful currency of Hong Kong % per cent. * For identification purpose only 5

9 LETTER FROM THE BOARD (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8233) Executive Director: Mr. Chow Kwong Fai, Edward Non-executive Directors: Mr. Wong Yuet Leung, Frankie Mr. Lee Jor Hung, Dannis Mr. Goh Pek Yang, Michael Independent Non-executive Directors: Mr. Lee Kang Bor, Thomas Dr. Wong Tin Yau, Kelvin Mr. Fan Chun Wah, Andrew Registered Office: P.O. Box 309 GT Ugland House SouthChurchStreet George Town Grand Cayman Cayman Islands Head Office and Principal Place of Business in Hong Kong: 2909A Bank of America Tower 12 Harcourt Road Central Hong Kong 31 October 2011 To the Shareholders Dear Sir or Madam, SPECIAL DEAL AND NOTICE OF EGM INTRODUCTION Reference is made to the Joint Announcements dated 30 September 2011, 3 October 2011 and 12 October 2011 respectively and the Composite Document dated 21 October 2011 in relation to, among others, the S&P Agreement, the Offers and the Service Agreement. As all the conditions precedent to the S&P Agreement have been fulfilled or, where applicable, waived, Completion took place on 3 October The Offeror and parties acting in concert with it own in aggregate 13,548,000 Shares, representing approximately 1.15% of the then entire issued share capital of the Company immediately before Completion. Immediately following Completion, the Offeror and parties acting in concert with it own in aggregate 613,436,141 Shares, representing approximately 52.12% of the then entire issued share capital of the Company. * For identification purpose only 6

10 LETTER FROM THE BOARD Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make a mandatory unconditional cash offer and GF Securities has, on behalf of the Offeror, made mandatory unconditional cash offers to acquire all the issued Shares and to cancel all the outstanding Share Options not already ownedoragreedtobeacquiredbytheofferorandpartiesactinginconcertwithit.detailsoftheterms of the Offers are set out in the Joint Announcements and the Composite Document. The Offeror and parties acting in concert with it own in aggregate 760,830,357 Shares, representing approximately 64.64% of the then entire issued share capital of the Company as at the Latest Practicable Date. Pursuant to the S&P Agreement, Mr. Chow, the existing sole executive Director, and Mr. Wong Yuet Leung, Frankie, an existing non-executive Director, will resign as Directors with effect on the earliest date on which such resignation may take effect under the Takeovers Code (being the closing date of the Offers). Following Completion and for the purpose of ensuring continuity of the Group s business, it is proposed that subject to compliance with the requirements under Rule 25 of the Takeovers Code with respect to special deal, Mr. Chow will enter into a separate service agreement with the Companyinrelationtohisappointment as a consultant of the Company with effect upon the resignation of Mr. Chow as an executive Director becoming effective. The purpose of this circular is to provide you with, among others, (i) details of the Service Agreement; (ii) a letter of recommendation from the SD Independent Board Committee to the SD Independent Shareholders on the Service Agreement; (iii) a letter of advice from the Independent Financial Adviser to the SD Independent Board Committee on the Service Agreement; and (iv) the notice of the EGM. SPECIAL DEAL Since Mr. Chow, the existing sole executive Director, will resign as a Director, for the purpose ensuring continuity of the Group s business, it is proposed that subject to compliance with the requirement under Rule 25 of the Takeovers Code with respect to special deal, Mr. Chow will enter into the Service Agreement with the Company in relation to his appointment as a consultant of the Company for a term of two years commencing from the date of the Service Agreement with a monthly fee of HK$150,000, which is the same as his current monthly salary as an executive Director, and an additional payment of HK$150,000 on each anniversary of his commencement of service as consultant under such the Service Agreement. The Service Agreement will be entered into between Mr. Chow and the Company after the SD Independent Shareholders approval having been obtained at the EGM. Principal terms of the Service Agreement Parties: (1) The Company (2) Mr. Chow 7

11 LETTER FROM THE BOARD Duties: Pursuant to the Service Agreement, Mr. Chow will be appointed as a consultant to the Company during the term of his employment: (i) (ii) (iii) (iv) (v) (vi) to provide active assistance and advice to the Board and cooperate fully with the Board with regard to all business activities and the development, expansion and diversification of its business as the Board may from time to time require; to provide strategic and other advice and active assistance with employee and independent contractor relations and issues surrounding the retention and/or termination of employees or independent contractors, which may include but not limited to making appropriate contact with such employees or independent contractors as the Board may from time to time require; to provide strategic and other advice and active assistance with the Group s relations with the relevant authorities and officers and issues surrounding renewal of applicable permits, licenses, approvals and authorisations and operations of the Group, which may include but not limited to making appropriate contact with such relevant authorities and officers as the Board may from time to time require; to perform to the best of his skill and ability such duties in connection with the Group as the Board may from time to time require; to discharge of his duties and exercise of his powers observing and complying with all resolutions, regulations and lawful directions and instructions from time to time made or given by the Board and faithfully and diligently serve the Group and use his best endeavours to promote and protect the business and interests thereof; to devote his efforts, attention, abilities and time to the business of the Group and use his best endeavours to assist in the maintenance and development of the business of the Group; (vii) not to be engaged or interested in or concerned with any business which is in any respect in competition with the business of the Group; (viii) to comply with, and exercise his best endeavours to procure the Company s compliance with, the GEM Listing Rules, the Takeovers Code and the Code on Share Repurchases, the memorandum and the articles of association of the Company, and all other applicable laws, rules, regulations, guidelines and practice notes which are binding on or applicable to the Group or Mr. Chow; (ix) to co-operate in any investigation conducted by the listing division and/or listing committee of the Stock Exchange or other regulatory authorities in connection with the Group s business and affairs, including but not limited to answering promptly and openly all questions addressed to him, providing promptly to the Stock Exchange and other regulatory authorities (in writing if so requested) all such information as the Stock Exchange and other regulatory authorities may require in relation thereto and attending before any meeting or hearing at which he is requested to appear; and 8

12 LETTER FROM THE BOARD (x) to forthwith notify the Board upon occurrence of any circumstances which may render Mr. Chow unsuitable to act as a consultant of the Company. It is proposed that Mr. Chow shall perform his duties in any place in Hong Kong, the PRC or any part of the world which the Board may reasonably require for the proper performance and exercise of his duties under the Service Agreement. It is also proposed that Mr. Chow shall, if and so long as he is so required by the Company, carry out the duties of his office on behalf of any subsidiary for the time being of the Company. Mr. Chow shall at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business or affairs of the Company or the Group and provide such information and explanations as the Board may require in connection therewith. Mr. Chow shall not (except with the prior sanction of a resolution of the Board) be directly or indirectly engaged in or concerned with or interested in any other business which is in any respect in competition with or in opposition to any business for the time being carried on by any company in the Group, subject to certain de minimis threshold. Term of engagement: The term of engagement shall be two years commencing from the date of the Service Agreement. Fee and benefits: A fee of HK$150,000 per month payable in arrears at the end of each calendar month and an additional payment of HK$150,000 at the end of the first and second anniversary of his appointment hereunder. No variable remuneration is payable under the Service Agreement. Mr. Chow shall also be entitled to use an office car provided by the Company during the term of his engagement under the Service Agreement. In addition, a personal assistant or secretary shall be hired by the Company to assist Mr. Chow. Having regard to Mr. Chow s professional background, his experience in the infrastructure industry, in particular, port development, operation and management, and his knowledge in running a listed company (the Company in particular), his social, professional status and network, the Company considered the fee to be reasonable and acceptable. Termination: Termination of the Service Agreement by either the Company or Mr. Chow shall require either party giving not less than three calendar months prior notice in writing at the first anniversary of the initial term or at any time thereafter. Reasons for entering into the Service Agreement Pursuant to the S&P Agreement, Mr. Chow, and Mr. Wong Yuet Leung, Frankie, an existing nonexecutive Director, will resign as Directors and the Offeror currently intends to nominate Mr. Yan as a non-executive Director and Mr. Duan Yan ( Mr. Duan ) as an executive Director to the Board. 9

13 LETTER FROM THE BOARD The Board proposed to engage Mr. Chow, who is an existing non-executive Director and is experienced in the Company s operation, as a consultant to provide active assistance and advice to the Board and cooperate fully with the Board with regard to all business activities and the development, expansion and diversification of its business as the Board may from time to time for the purpose ensuring continuity of the Group s business. TAKEOVERS CODE IMPLICATIONS The Service Agreement constitutes a special deal for the Company under Rule 25 of the Takeovers Code and requires consent of the Executive. Such consent, if granted, will be subject to (i) an independent financial adviser publicly stating that in its opinion the terms of the Service Agreement are fair and reasonable; and (ii) the approval of the Service Agreement by the SD Independent Shareholders by way of poll at the EGM. Shareholders including (i) the Vendors, its associates and parties acting in concert with any of them; (ii) the Offeror, Mr. Yan and the parties acting in concert with any of them; and (iii) any Shareholders who are involved in or interested in the Service Agreement or any transactions contemplated therein (including Mr. Chow) shall abstain from voting on the proposed resolution approving the Service Agreement at the EGM. Mr. Chow has declared his interest in the Service Agreement and has abstained from voting on the resolution. The Company has applied to the Executive for consent under Rule 25 of the Takeovers Code in relation to the Service Agreement. Should any of the approval of the Service Agreement by the SD Independent Shareholders or the consent of the Executive to the Service Agreement be not forthcoming, the Company and Mr. Chow will not enter into the Service Agreement. GEM LISTING RULES IMPLICATIONS Given that Mr. Chow is a Director, he is a Connected Person of the Company and therefore the Service Agreement constitutes a continuing connected transaction of the Company under chapter 20 of the GEM Listing Rules. Pursuant to chapter 20 of the GEM Listing Rules, as the applicable percentage ratios on an annual basis represent less than 5%, the Service Agreement is subject to the reporting and announcement requirements. SD INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER The SD Independent Board Committee comprising five non-executive Directors, namely Mr. Lee Jor Hung, Dannis, Mr. Goh Pek Yang, Michael, Mr. Lee Kang Bor, Thomas, Dr. Wong Tin Yau, Kelvin and Mr. Fan Chun Wah, Andrew, has been formed to make recommendations to the SD Independent Shareholders in respect of voting on the resolution to approve the Service Agreement. Mr. Wong Yuet Leung, Frankie, the remaining non-executive Director, is a director of Harbour Master, one of the Vendors in the S&P Agreement. He will not serve as a member of the SD Independent Board Committee as his significant connection with Harbour Master and the Company within the 2 years prior to the commencement of the offer period for the Offers may reasonably likely affect the objectivity of his advice. Asian Capital have been appointed as the Independent Financial Adviser to advise the SD Independent Board Committee in respect of the terms of the Service Agreement. 10

14 LETTER FROM THE BOARD EGM The notice of the EGM is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited at Shops , 17th Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish but the authority of your proxy will be invalidated forthwith. The result of the voting at the EGM will be announced by the Company in accordance with the Takeovers Code. RECOMMENDATION The Board (except Mr. Chow and Mr. Wong Yuet Leung, Frankie who had abstained from voting) considers that the terms of the Service Agreement are on normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole. Your attention is drawn to (i) the letter from the SD Independent Board Committee which is set out on page 12 of this circular; and (ii) the letter of advice from the Independent Financial Adviser which is set out on pages 13 to 23 of this circular. ADDITIONAL INFORMATION Your attention is also drawn to Appendix I to this circular set out on pages 24 to 30. Yours faithfully, For and on behalf of CIG Yangtze Ports PLC Ivan Cheung Company Secretary 11

15 LETTER FROM THE SD INDEPENDENT BOARD COMMITTEE To the SD Independent Shareholders Dear Sir or Madam, (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8233) SPECIAL DEAL 31 October 2011 We have been appointed to form the SD Independent Board Committee to advise you, as an SD Independent Shareholder, in connection with the Service Agreement, details of which have been set out in the letter from the Board contained in the circular to the Shareholders dated 31 October 2011 (the Circular ), of which this letter forms part. Terms defined in the Circular have the same meanings when used herein unless the context otherwise requires. Having considered the terms of the Service Agreement and the advice and recommendation of Asian Capital as the independent financial adviser in relation to the Service Agreement as set out in the Circular, we are of the opinion that the Service Agreement and the respective terms are fair and reasonable so far as the Company and the SD Independent Shareholders are concerned. We therefore recommend the SD Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the Service Agreement. Yours faithfully, For and on behalf of SD Independent Board Committee of CIG Yangtze Ports PLC Mr. Lee Jor Hung, Dannis Non-executive Director Mr. Goh Pek Yang, Michael Non-executive Director Mr. Lee Kang Bor, Thomas Dr. Wong Tin Yau, Kelvin Mr. Fan Chun Wah, Andrew Independent Non-executive Independent Non-executive Independent Non-executive Director Director Director * For identification purpose only 12

16 LETTER FROM ASIAN CAPITAL The following is the text of a letter of advice from the Independent Financial Adviser, which has been prepared for the purpose of incorporation into this circular in respect of the Service Agreement. Suite 1006, Bank of America Tower 12 Harcourt Road, Central Hong Kong To: The SD Independent Board Committee of CIG Yangtze Ports PLC Dear Sirs, INTRODUCTION SPECIAL DEAL IN RESPECT OF THE SERVICE AGREEMENT TO BE ENTERED INTO BETWEEN CIG YANGTZE PORTS PLC AND MR. CHOW KWONG FAI, EDWARD 31 October 2011 We refer to our engagement as the independent financial adviser to advise the SD Independent Board Committee of CIG Yangtze Ports PLC as to whether the terms of the Service Agreement are fair and reasonable and the SD Independent Shareholders as to the voting on the Service Agreement. The Company dispatched to the Shareholders a circular dated 31 October 2011 (the Circular ), of which this letter forms a part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise. We are independent of, and are not connected with, the Company, the Offeror and any parties acting in concert with any of them and accordingly, we are considered eligible to give independent advice to the SD Independent Board Committee and the SD Independent Shareholders for the purpose of Rule 2.1 of the Takeovers Code. Our appointment has been approved by the SD Independent Board Committee. We will receive a fee from the Company for our role as the independent financial adviser to the SD Independent Board Committee in relation to the Service Agreement. Apart from this normal professional fee payable to us in connection with this appointment and a related appointment in respect of the Offers, no arrangements exist whereby we will receive any fees or benefits from the Company, the Offeror or any parties acting in concert with any of them. BACKGROUND On 30 September 2011, the Offeror and the Company jointly announced, among other things, that pursuant to the S&P Agreement, the Vendors conditionally agreed to sell and the Offeror conditionally agreed to acquire an aggregate of 599,888,141 Shares, representing approximately 50.97% of the entire issued share capital of the Company as at 30 September 2011, the date of the joint announcement in relation to, among others, the S&P Agreement, the Offers and the Service Agreement. The aggregate 13

17 LETTER FROM ASIAN CAPITAL consideration for the Sale Shares was HK$215,959, (equivalent to HK$0.36 per Sale Share). Immediately before Completion, the Offeror was interested in 13,548,000 Shares, representing approximately 1.15% of the then entire issued share capital of the Company. As a result of the acquisition of the Sale Shares, immediately following Completion, the Offeror was interested in a total of 613,436,141 Shares, representing approximately 52.12% of the then entire issued share capital of the Company. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make the Share Offer to acquire all the Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it. In addition, the Offeror is also obliged to extend the Option Offer to cancel all the Share Options not already owned by the Offeror and parties acting in concert with it in accordance with Rule 13 of the Takeovers Code. Pursuant to the S&P Agreement, Mr. Chow, the existing sole executive Director, and Mr. Wong Yuet Leung, Frankie, an existing non-executive Director, will resign as Directors with effect on the earliest date on which such resignation may take effect under the Takeovers Code (being the closing date of the Offers). Since Mr. Chow will resign as a Director, for the purpose of ensuring continuity of the Group s business, it has been proposed that subject to compliance with the requirements under Rule 25 of the Takeovers Code with respect to special deal, Mr. Chow will enter into the Service Agreement in relation to his appointment as a consultant of the Company for a term of two years with effect upon the resignation of Mr. Chow as an executive Director becoming effective. The Service Agreement constitutes a special deal for the Company under Rule 25 of the Takeovers Code and requires consent of the Executive. Such consent, if granted, will be subject to (i) an independent financial adviser publicly stating that in its opinions, the terms of the Service Agreement are fair and reasonable; and (ii) the approval of the Service Agreement by the SD Independent Shareholders by way of poll at the EGM. Shareholders including (i) the Vendors, their associates and parties acting in concert with any of them; (ii) the Offeror, Mr. Yan and the parties acting in concert with any of them; and (iii) any Shareholders who are involved in or interested in the Service Agreement or any transactions contemplated therein (including Mr. Chow) shall abstain from voting on the proposed resolution approving the Service Agreement at the EGM. The Company has applied to the Executive for a consent under Rule 25 of the Takeovers Code in relation to the Service Agreement. Should any of the approval of the Service Agreement by the SD Independent Shareholders or the consent of the Executive to the Service Agreement be not forthcoming, the Company and Mr. Chow will not enter into the Service Agreement, but the Offers will still proceed. Given Mr. Chow is an executive Director, he is a Connected Person of the Company and therefore the Service Agreement constitutes a continuing connected transaction of the Company under Chapter 20 of the GEM Listing Rules. As the applicable percentage ratios as defined in Chapter 20 of the GEM Listing Rules are less than 5% on an annual basis, the Service Agreement is only subject to the reporting and announcement requirements. 14

18 LETTER FROM ASIAN CAPITAL BASIS AND ASSUMPTIONS OF OUR OPINION In formulating our opinion, we have relied on the information and facts supplied to us by the Company, the Board and/or the management of the Group. We have assumed that all the information, facts, opinions, intention and representations suppliedtousorreferredtointhejointannouncements, the Composite Document and the Circular are true, complete and accurate in all material respects at the time they were supplied to us and continue to be true and accurate as at the date of the Circular and we have relied on the same in formulating our advice and recommendation. We have also assumed that all statements of belief, opinions, intention and representations made by the Directors in the Joint Announcements, the Composite Document and the Circular were reasonably made after due enquiries and consideration. We note that the Directors have confirmed that they accept full responsibility for the contents of the Joint Announcements, the Composite Document and the Circular (other than information relating to the Offeror) and have made all reasonable enquiries that no material facts have been omitted from the information supplied to us. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy or completeness of the facts and information as set out in the Joint Announcements, the Composite Document and the Circular and of the information and representations supplied to us by the Company, the Board and/or the management of the Group. Furthermore, we have no reason to doubt the reasonableness of the opinions and representations expressed by the Company, the Board and/or the management of the Company which have been supplied to us. In line with normal practice, we have not, however, conducted any independent verification of the facts and information supplied to us, nor have we conducted any independent investigation into the business and affairs, financial conditions and future prospects of the Group. We nevertheless consider that we have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our opinion regarding the Service Agreement. The SD Independent Board Committee comprising five non-executive Directors, namely Mr. Lee Jor Hung, Dannis, Mr. Goh Pek Yang, Michael, Mr. Lee Kang Bor, Thomas, Dr. Wong Tin Yau, Kelvin and Mr. Fan Chun Wah, Andrew, has been established to advise the SD Independent Shareholders in respect of the Service Agreement, in particular, as to whether the terms of the Service Agreement are, or are not, fair and reasonable and as to the voting on the Service Agreement. Mr. Wong Yuet Leung, Frankie, the remaining non-executive Director, is a director of Harbour Master, one of the Vendors in the S&P Agreement, and he will not serve as a member of the SD Independent Board Committee as his significant connection with Harbour Master and the Company within the two years prior to the commencement of the offer period for the Offers may reasonably likely affect the objectivity of his advice. 15

19 LETTER FROM ASIAN CAPITAL PRINCIPAL FACTORS AND REASONS CONSIDERED In formulating our opinion with regard to the Service Agreement, we have taken into consideration the following principal factors and reasons: 1. Terms of the Existing Service Agreement Duties Pursuant to the existing service agreement between the Company and Mr. Chow dated 2 September 2005 (the Existing Service Agreement ), Mr. Chow, as an executive Director, shall use his best endeavours to carry out his duties during the term of his appointment as follows: (i) (ii) (iii) (iv) (v) (vi) to protect, promote and act in the best interests of the Group; to devote his time and efforts diligently to the interests and affairs of the CompanyinthedischargeofhisdutiesinrelationtotheCompanyandtheGroup generally; to comply with all lawful directions and instructions from time to time made by the Board according to the best of his skills and ability and comply with all resolutions and regulations from time to time passed or made by the Board; in pursuance of his duties hereunder, to perform such services for the Group and (without further remuneration unless otherwise agreed) accept such offices in the Group as the Board may from time to time reasonably require and act as a Director of the Group and of each of its subsidiaries; to perform such duties and exercise such powers faithfully and diligently as are consistent with his office in relation to the Company and the Group; to give promptly to the Board (in writing if so requested) all such information as the Board may reasonably require in relation to his duties and the Business in so far as such information is or ought to be within his knowledge and provide such explanations as the Board may require in connection therewith; (vii) to carry out his duties and exercise his powers jointly with any other director or executive as shall from time to time be appointed by the Board to act jointly with him and the Board may at any time require Mr. Chow to cease performing or exercising any of his duties or powers under this Agreement without assigning any reason therefor; (viii) to comply with the minimum standard of good practice concerning the general management responsibilities of the Board as set out in the GEM Listing Rules; (ix) to work on the normal office hours of the Group (9:00 a.m. to 5:00 p.m., Monday through Friday and 9:00 a.m. to 12:30 p.m. on Saturday) and may be required to work outside these normal hours without additional pay; and 16

20 LETTER FROM ASIAN CAPITAL (x) to carry out his duties in Hong Kong or in such other parts of the world as the Board may reasonably request or as the interests, needs, business and opportunities of the Group may reasonably require or be deemed advisable by the Board. Remuneration Pursuant to the Existing Service Agreement, Mr. Chow shall receive, during the term of the appointment: (i) (ii) (iii) For the first twelve months during the term of the appointment, an aggregate salary at the annual rate of HK$1,200,000 (including any sum payable to Mr. Chow as director s fees and remuneration from any company in the Group) payable by 12 equal monthly installments of HK$100,000 (or a pro rata amount for an incomplete month) each such installment being payable on the last day of each calendar month. Such salary shall be reviewed and determined from time to time by the audit committee of the Company; for the twelve months thereafter during the term of the appointment, an aggregate salary at the annual rate of HK$1,800,000 (including any sum payable to Mr. Chow as director s fees and remuneration from any company in the Group) payable by 12 equal monthly installments of HK$150,000 (or a pro rata amount for an incomplete month) each such installment being payable on the last day of each calendar month. Such salary shall be reviewed and determined from time to time by the audit committee of the Company; and A discretionary year-end bonus, (the upper limit of which is not capped), in such amount (if any) as may be determined by the audit committee of the Company; such bonus (if any) being parable as soon as practicable after publication of the audited consolidated or combined accounts of the Group for the relevant financial year. Termination Termination of the Existing Service Agreement by either the Company or Mr. Chow shall require the other party giving not less than six calendar months prior notice in writing at any time during the term of Mr. Chow s appointment as an executive Director. 2. Mr. Chow new role in the Company and his duties under the Service Agreement The Board proposes to engage Mr. Chow as a consultant to provide active assistance and advice to the Board and cooperate fully with the Board with regard to all business activities and the development, expansion and diversification of its business as the Board may undertake from time to time, for the purpose of ensuring continuity of the Group s business. 17

21 LETTER FROM ASIAN CAPITAL For the duration of the Service Agreement, Mr. Chow shall, as a consultant to the Company: (i) to provide active assistance and advice to the Board and cooperate fully with the Board with regard to all business activities and the development, expansion and diversification of its business as the Board may from time to time require; (ii) to provide strategic and other advice and active assistance with employee and independent contractor relations and issues surrounding the retention and/or termination of employees or independent contractors, which may include but not limited to making appropriate contact with such employees or independent contractors as the Board may from time to time require; (iii) (iv) (v) (vi) to provide strategic and other advice and active assistance with the Group s relations with the relevant authorities and officers and issues surrounding renewal of applicable permits, licenses, approvals and authorisations and operations of the Group, which may include but not limited to making appropriate contact with such relevant authorities and officers as the Board may from time to time require; to perform to the best of his skill and ability such duties in connection with the Group as the Board may from time to time require; to discharge of his duties and in the exercise of his powers observing and complying with all resolutions, regulations and lawful directions and instructions from time to time made or given by the Board and faithfully and diligently serve the Group and use his best endeavours to promote and protect the business and interests thereof; to devote his efforts, attention, abilities and time to the business of the Group and use his best endeavours to assist in the maintenance and development of the business of the Group; (vii) not to be engaged or interested in or concerned with any business which is in any respect in competition with the business of the Group; (viii) to comply with, and exercise his best endeavours to procure the Company s compliance with, the GEM Listing Rules, the Takeovers Code and the Code on Share Repurchases, the memorandum and the articles of association of the Company, and all other applicable laws, rules, regulations, guidelines and practice notes which are binding on or applicable to the Group or Mr. Chow; (ix) to co-operate in any investigation conducted by the listing division and/or listing committee of the Stock Exchange or other regulatory authorities in connection with the Group s business and affairs, including but not limited to answering promptly and openly all questions addressed to him, providing promptly to the Stock Exchange and other regulatory authorities (in writing if so requested) all such information as the Stock Exchange and other regulatory authorities may require in relation thereto and attending before any meeting or hearing at which he is requested to appear; and 18

22 LETTER FROM ASIAN CAPITAL (x) to forthwith notify the Board upon occurrence of any circumstances which may render Mr. Chow unsuitable to act as a consultant of the Company. It is proposed that Mr. Chow shall perform his duties in any place in Hong Kong, the PRC or any part of the world which the Board may reasonably require for the proper performance and exercise of his duties under the Service Agreement. It is also proposed that Mr. Chow shall, if and so long as he is so required by the Company, carry out the duties of his office on behalf of any subsidiary for the time being of the Company. Mr. Chow shall at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business or affairs of the Company or the Group and provide such information and explanations as the Board may require in connection therewith. Furthermore, both the Existing Service Agreement and the Service Agreement contain similar restrictive covenant clauses that Mr. Chow shall not (except with the prior sanction of a resolution of the Board) be directly or indirectly engaged in or concerned with or interested in any other business which is in any respect in competition with or in opposition to any business for the time being carried on by any company in the Group, subject to certain de minimis threshold. We note from the Service Agreement that Mr. Chow s role is a consultant and can therefore be reactive to the requests of the Board from time to time, as compared with the role as an executive Director where he might have to play anactivemanagementroleinthecompany. 3. Background of Mr. Chow The following is an extract from the annual report of the Company for the year ended 31 December 2010 in relation to the background of Mr. Chow: Mr. Chow Kwong Fai, Edward ( 周光暉 ), JP, BA, FCA, FCPA, FHKIoD, aged 58, is the founder of the Group, the Chairman of the Company and a chartered accountant. Mr. Chow has extensive knowledge and experience in infrastructure development in China and Thailand, including the planning and managing of a mass transit system project in Bangkok. He is a past president of the Hong Kong Institute of Certified Public Accountants, a past chairman of the Professional Accountants in Business Committee of the International Federation of Accountants and a past deputy chairman of the Hong Kong Institute of Directors. Currently, he serves as an expert advisor of the Accounting Standards Committee of the Ministry of Finance, the PRC, a core member of the OECD/World Bank Asian Corporate Governance Roundtable, a council member of the Institute of Chartered Accountants in England and Wales and a vice chairman of the Business and Professionals Federation of Hong Kong. He is also a member of The Ninth Chinese People s Political Consultative Conference of Zhejiang Province and an Election Committee member of Hong Kong. In business, Mr. Chow serves as an independent director and chairman of the audit committee of COSCO Pacific Limited, a Hang Seng Index company and an independent director and chairman of the connected transactions committee of China Merchants Bank Co., Ltd., which is listed on the stock exchanges of Hong Kong and Shanghai. On 1 July 2008, Mr. Chow was appointed a Justice of Peace by the Chief Executive of Hong Kong. Mr. Chow was also an awardee of the Directors of the Year Award 2010 in the non-executive director of listed companies (SEHK Hang Seng Index Constituents) category, awarded by the Hong Kong Institute of Directors. 19

23 LETTER FROM ASIAN CAPITAL Having considered the background, knowledge and expertise of Mr. Chow, and in particular, as the founder of the Group who has been managing the business since 1997, and to ensure continuity, we concur with the view of the Board that the retention of Mr. Chow as a consultant of the Company under the Service Agreement is reasonable, and is in the interests of the Company and the Shareholders as a whole. We have been informed by the Board and the Offeror that in view of Mr. Chow s continuing involvement in the Company since its listing and the background, knowledge and expertise of Mr. Chow, there is no other suitable candidate available. 4. Performance of the Group under Mr. Chow s management for the past three years Pursuant to published information, financial performance of the Group for the three years ended 31 December 2010 vis-a-vis Mr. Chow s remunerationisasfollows: HK$ 000 HK$ 000 HK$ 000 Loss attributable to the Shareholders (2,930) (6,004) (10,516) Remuneration of Mr. Chow* 1,350 1,450 2,091 * During the period, share based payment and pension contribution to Mr. Chow were insignificant. We consider that the same monthly remuneration as a consultant is generous compared to his pre-existing role as an executive Director. However, we note that Mr. Chow had been remunerated at a reducing rate over the recent years due to the subdue financial performance of the Group. We have been informed by the Board that due to subdue financial performance of the Group, Mr. Chow s remunerations in 2009 and 2010 had in fact reduced despite the reducing magnitude of the losses recorded by the Group in recent years as shown in the table above and the fact that Mr. Chow should have received HK$1,800,000 in accordance with the terms of the Existing Service Agreement. We note that in view of the improvement of the Group s financial performance since 2009, Mr. Chow s remuneration has been restored to HK$150,000 per month since January 2011 in accordance with the terms of the Existing Service Agreement. Furthermore, we note that such annual remuneration provided under the Existing Service Agreement has not been adjusted since Remuneration and benefits of Mr. Chow under the Service Agreement Pursuant to the Service Agreement, Mr. Chow shall receive a monthly fee of HK$150,000 payable in arrears at the end of each calendar month and an additional payment of HK$150,000 at the end of the first and the second anniversary of his appointment hereunder. The monthly fee of HK$150,000 is the same as the current monthly salary received by Mr. Chow since 1 January 2011 which is also the same as the monthly fee provided in the Existing Service Agreement and as noted above, such remuneration provided under the Existing Service Agreement has not been adjusted since No variable remuneration is payable under the Service Agreement and Mr. Chow will no longer entitle to any mandatory pension fund contribution by the Company. 20