major subcontractors is unable to provide the required services to us and we are unable to obtain alternative providers on similar or more favourable terms, or if the costs for them to provide those required services increase substantially, our business, results of operations and profitability may be adversely affected.

For the E&M engineering works for major construction projects, we often formj oint ventures with other companies to tender for and carry out the E&M engineering works. There is no assurance that our existingj oint venture partners will continue to cooperate with us to continue to tender for and perform E&M engineering works for future projects, or on terms that are favourable or acceptable to us. If we are unable to cooperate with appropriatej oint venture partners, we may not have sufficient resources to participate in major construction projects, or if we are engaged in such projects as the sole contractor or a subcontractor, we will have to bear significant risks in relation to such projects.

We are not able to monitor the performance of our subcontractors or joint venture partners or their respective staff as directly and efficiently as with our own staff. If a subcontractor fails to provide services as required under a contract or aj oint venture partner fails to perform its responsibility as agreed, we may be required to procure other companies to perform these services on a delayed basis or at a higher price than anticipated, which could impact our profitability. If a subcontractor’s performance does not meet our standards or if aj oint venture partner’s performance does not meet the requirements which the relevant joint venture has agreed to, the quality of the project may be affected, which could harm our reputation and potentially expose us to litigation and damage claims. We may also need to undertake remedial works and therefore may increase our costs and adversely affect business and results of operations.

# . Responsibility for quality of services provided by third party service providers.

Under the terms of the contracts between our customers and us, we would not be relieved from any obligation or liability in respect of the performance of the third party service providers, and we would be responsible for the acts, defaults or neglects of them. We cannot assure you that the services rendered by any of our third party service providers will always be satisfactory or meet our customers’ quality and safety standards and timing requirement. If the performance of any third party service provider is not up to the standard required by our customers, we may need to replace such third party service provider or take other actions to remedy the situation, which could adversely affect the cost and progress of our projects and may have an adverse impact on our reputation and our ability to obtain new contracts.

# . We may incur potential liabilities arising from defaults of our third party service providers.

As the principal contractor, we may be liable to settle the outstanding wages of the employees of our third-party service providers, including self-employed ones, pursuant to the Employment Ordinance and liable to pay compensation to the injured employees of our third party service providers pursuant to the Employees’ Compensation Ordinance. Given the above, any defaults or neglects on the part of the third party service providers may also have an adverse impact on our profitability and financial conditions as we might be liable for any such defaults or neglects. Any of these factors could have a material adverse effect on our business, financial conditions and results of operations.

# . Potential competition with joint venture partners and subcontractors.

Small-scale third party service providers may expand their business operations by accumulating work experience, improving their financial strength and diversifying their scope of services over time. Such small-scale subcontractors may become sizable and achieve a market reputation in the future that may be comparable to us. Our joint venture partners, who may often be our direct competitors,