09:42 SHOUGANG INT'L<00697> - Announcement (2) Price: The basis of determining the prices for the Continuing Connected Transactions will be in accordance with: (1) state-quoted price, if the pricing of such a transaction is governed by the pricing policies of the PRC; (2) a direct comparable market price, if the transaction is not governed by the pricing policies of the PRC and a direct comparable market price is available; or (3) by agreement between the parties based on reasonable principle, if the transaction is not governed by the pricing policies of the PRC and no direct comparable market price can be taken as a reference. Condition: The Master Agreement is subject to approval by the Independent Shareholders of the Company. The Continuing Connected Transactions were disclosed in the circular of the Company dated 17 May 2002 and were approved by the then independent shareholders at the extraordinary general meeting held on 3 June 2002. A waiver from strict compliance with the disclosure and independent shareholders' approval requirements of the Listing Rules for the three financial years ended 31 December 2004 had been granted by the Stock Exchange to the Company on 2 July 2002. For each of the three financial years ended 31 December 2002, 2003 and 2004, the transaction amounts in relation to each item of the Continuing Connected Transactions were as follows: Type of Continuing Connected Transactions From 4 Nov 2002 (date of incorporation) to 31 Dec 2002 From 1 Jan 2003 to 31 Dec 2003 From 1 Jan 2004 to 31 Dec 2004 Amount Amount Amount* RMB' million HK$' million RMB' million HK$' million RMB' million HK$' million Purchases 25.1 23.7 262.1 247.3 269.4 254.1 Sales 38.7 36.5 398.5 375.9 405.1 382.2 * The transaction amounts for the financial year 2004 are preliminary and unaudited figures. The Directors propose that the cap amounts of the Continuing Connected Transactions under the Master Agreement for each of the three financial years ending 31 December 2007 will not exceed: (i) HK$300 million for the Purchases; and (ii) HK$450 million for the Sales The cap amounts are determined with reference to the historical figures of the transaction amounts, the anticipated business growth of BSFPCL and the increase in the prices of coal and electricity in the next three years and the exchange rate of HK$1.00 = RMB1.06. The anticipated business growth is mainly due to improvement and innovation of technology in electricity supply which may result in an increase in the supply of electricity. REASONS FOR THE CONTINUING CONNECTED TRANSACTIONS The Directors consider that the Continuing Connected Transactions are of the type that are entered into in the ordinary and usual course of business of BSFPCL and on a frequent and regular basis. Therefore, the Directors consider that it would be: (i) impracticable to negotiate for numerous agreements with individual associates of Shougang Corporation for the Continuing Connected Transactions; and (ii) too costly and impractical to make regular disclosure of each of the relevant transactions and obtain the prior approval from the Independent Shareholders, as required by the Listing Rules. Hence, the Directors are of the view that the Master Agreement will be beneficial to the Shareholders and the Group as a whole.