09:38 BEIJING AIRPORT<00694> - Announcement (3) those proposed to be undertaken by the Company. The approved project management costs are pegged to the range of 1.6% - 2.4% of the estimated investment amount for each work under the Project as prepared by the Company and approved by CAAC or its authorized institution, in compliance with the "Measures on Preparing the Budget Proposal of Civil Airports' Construction Projects" issued by CAAC on 10 May 2001. The Basic Fee will be funded by the internal resources of Company and payable in cash to Construction Corporation according to the following schedule: Amount Time of Payment 40% of the Basic Fee Upon the relevant authorities' approval of any particular work and the examination of the design for any particular work 50% of the Basic Fee Upon commencement of any particular work 10% of the Basic Fee Upon completion of inspection, auditing and delivery of any particular completed work (b) the Incentive Fee. The Incentive Fee shall be payable upon completion of each particular work under the Project if such work shall have been completed within the specified timeframe and delivered in accordance with the quality standard set out in the Project Agreement, and if the actual construction cost for such work is less than the budgeted construction cost. The Incentive Fee shall be equal to 50% of the difference between the actual construction cost and the budgeted construction cost. The Board confirms that the Company normally pays an amount equal to 50% of the above difference to any independent project managers for its projects. The Incentive Fee will be funded by the internal resources of Company and payable in cash to Construction Corporation according to the following schedule: Amount Time of Payment 95% of the Within 30 days after completion of inspection, auditing Incentive Fee and delivery of any particular completed work 5% of the Upon expiry of the 1-year warranty period of any Incentive Fee particular completed work D. MAXIMUM AGGREGATE ANNUAL VALUE The maximum aggregate annual value (comprising of the Basic Fee and Incentive Fee) which is estimated to be payable by the Company to Construction Corporation for each of the 3 financial years ended 31 December 2007 is RMB23,870,000 (HK$22,518,868), RMB21,750,000 (HK $20,518,868) and RMB10,420,000 (HK$9,830,189). There was no historical amount for Service Fees paid as no fees of the type were paid by the Company to Construction Corporation during the three preceding financial years of the Company. E. REASONS FOR AND BENEFITS OF THE PROJECT AGREEMENT Established in 1954, Construction Corporation is the only state-owned enterprise in PRC's infrastructure industry that is capable of providing civil airport construction services on a full service basis. It is qualified to provide premium services relating engineering design, engineering projects consultation, construction supervision, and contracting for civil airport projects. Construction Corporation has a well-proven track record, including but not limited to, conducting site selection, pre-feasibility study reports, feasibility study reports, overall layout planning, and design work for nearly 90 newly established and existing airports nationwide. It has also completed project supervision works for over 20 airports nationwide and accomplished project contracting assignments for more than 10 airports nationwide. It has substantial knowledge of the security measures which would be taken by the Company for construction works of the Project, ensuring that the construction works will not cause the suspension of flights. For the reasons stated above, the Directors consider that it is in the interests of the Company to enter into the Project Agreement. F. RELATIONSHIP BETWEEN THE COMPANY AND CONSTRUCTION CORPORATION Parent Company is the controlling shareholder of the Company holding approximately 65% of the issued share capital of the Company. Construction Corporation is a wholly-owned subsidiary of Parent Company. Therefore, Construction Corporation constitutes an associate of Parent Company and hence a connected person of the Company. Accordingly, the Transaction constitutes a continuing connected transaction of the Company under Rule 14A.14 of the Listing Rules. As each of the relevant percentage ratio(s) (other than the profits ratio) in respect of the Transaction is, on an annual basis, more than 0.1 % but less than 2.5%, the Transaction is only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47