11:21 TIANJIN DEV<00882> - Announcement (13) Tianjin Jinzheng Transportation Company is principally engaged in the construction, operations, management and collection of tolls on the Eastern Outer Ring Road. Tianjin Jinzheng Transportation Company has been granted by the Tianjin Government the exclusive right to operate, manage and maintain the Eastern Outer Ring Road in Tianjin for a 30-year term commencing from 25 October 1997 pursuant to the Administrative Rules. The PRC legal advisers to Coastal Rapid have advised that all obligations of Tianjin Jinzheng Transportation Company relating to the Income Receiving Right will be discharged upon completion of the Proposed Transfer. No consideration was required for the grant by the Tianjin Government of the exclusive operating rights. The Administrative Rules were promulgated by the Tianjin Government on 13 November 1997 to give effect to and to regulate the management of the Eastern Outer Ring Road by Tianjin Jinzheng Transportation Company. Under the Administrative Rules: (i) Tianjin Jinzheng Transportation Company is granted by the Tianjin Government the exclusive right to operate, manage and maintain the Eastern Outer Ring Road in Tianjin and entitled to receive from the Tianjin Government the Basic Operating Income as per the Income Receiving Right for the period from fourth quarter of 1997 to October 2027; and (ii) Tianjin Jinzheng Transportation Company shall be responsible for the road maintenance, road safety and road equipment of the Eastern Outer Ring Road. Pursuant to the Administrative Rules, for the year ended 31 December 1997, the Basic Operating Income received by Tianjin Jinzheng Transportation Company pursuant to the Administrative Rules amounted to RMB110 million (equivalent to approximately HK$103 million) which was calculated in accordance with a formula set before the Administrative Rules were introduced. The Administrative Rules provide that the Basic Operating Income will be increased by not less than 20% every five years and will increase annually at: (i) the same rate as the city road construction supplement charges or (ii) 2%, whichever is higher. For the year ended 31 December 2002, the Basic Operating Income received by Tianjin Jinzheng Transportation Company was RMB145 million (equivalent to approximately HK$137 million). In 1999, Tianjin Jinzheng Transportation Company was also granted by the Tianjin Government the right to construct toll stations and to collect tolls on the Eastern Outer Ring Road from vehicle users for a period of 28 years commencing from November 1999 to October 2027. On 30 May 2003, the Tianjin Government announced the implementation of new toll collection arrangements in Tianjin aimed at improving traffic efficiency in the municipality. The new arrangements came into effect on 1 June 2003 and the Toll Collection Office was established to centralise the collection of toll. Under the Eastern Outer Ring Road Toll Collection Agreement, Tianjin Jinzheng Transportation Company and the Toll Collection Office agreed to implement a centralised toll collection and payment system for the Eastern Outer Ring Road in return for a Toll Reimbursement payable by the Toll Collection Office. Tianjin Jinzheng Transportation Company would record the traffic flow through the two existing toll stations on the Eastern Outer Ring Road and submit a traffic flow report setting out the traffic volume and types of vehicles travelling on the Eastern Outer Ring Road to the Toll Collection Office every Tuesday and Friday. Upon receipt of such traffic flow reports, the Toll Collection Office would pay the Toll Reimbursement by cheque to Tianjin Jinzheng Transportation Company on the same day. The Toll Reimbursement is calculated in accordance with the following formula: Number of various types of vehicles travelling on the Eastern Outer Ring Road recorded by the two toll stations on the Eastern Outer Ring Road multiplied by the relevant toll rates multiplied by 40% The toll rates applicable to the Eastern Outer Ring Road prior to the implementation of the new toll collection arrangement are the same as the rates used to calculate the Toll Reimbursement received from the Toll Collection Office. The new toll collection arrangements did not affect Tianjin Jinzheng Transportation Company's exclusive operating right in respect of the Eastern Outer Ring Road pursuant to the Administrative Rules nor its toll collection right and toll collection permit. There has been no material impact on the cashflow of the Tianjin Development Group as a result of the implementation of the new toll arrangements.