09:27 CHINA MER HOLD<00144> - Announcement (3) caps in respect of the royalty fees to be paid by Hempel-Hai Hong to Hempel are HK$42,500,000, HK$45,000,000 and HK$48,000,000 for the years ending 31 December 2005, 31 December 2006 and 31 December 2007 respectively. Such annual caps are calculated with reference to historical figures, the sales of paints by Hempel-Hai Hong in 2004 and the Company's estimates of the sales of paint by Hempel-Hai Hong for the years ending 31 December 2005, 31 December 2006 and 31 December 2007 respectively. 3. Provision of Management Services by AMC Ming Wah Shipping and its subsidiaries entered into a number of vessel management agreements, commercial services agreements and corporate services agreements with AMC in 1994 (the `Ming Wah Vessel Management Agreements'), under which AMC agreed to provide, among other things, commercial, operational, ship repair and maintenance, insurance and accounting services to Ming Wah Bermuda. Ming Wah Bermuda is the intermediate holding company of Ming Wah Shipping, which is the holding company for the Group's shipping interests. AMC's provision of management services to the Group enables the Group to operate its shipping business without making expensive investments in management and operational infrastructure. As the China Merchants Group has an 80% interest in AMC, AMC is an associate of a controlling shareholder of the Company under the Listing Rules and hence a connected person of the Company as defined under the Listing Rules. AMC is a shipping management company. The management fees paid by Ming Wah Bermuda to AMC under the Ming Wah Vessel Management Agreements for the years ended 31 December 2002, 2003 and 2004 are as follows: Year Amount of management fees (HK$) 2002 11,355,000 2003 11,582,000 2004 (up to 18 October 2004) 9,836,000 (based on unaudited management accounts) The management fees are based on two components: a fixed amount for corporate services and vessel servicing and a variable amount based on a percentage of the value of each vessel's freight charter. The management fees were negotiated on an arms-length basis and the Directors, including the independent non-executive Directors, are of the view that the Ming Wah Vessel Management Agreements have been entered into on normal commercial terms and in the ordinary and usual course of business of the Company and that the Ming Wah Vessel Management Agreements are fair and reasonable and in the interests of the shareholders of the Company as a whole. As announced by the Company on 25 August 2004, Market Ocean Holdings Limited (a wholly-owned subsidiary of the Company), the Company, China Merchants Energy Transport Investment Company Limited and China Merchants Holdings (Hong Kong) Company Limited entered into a Sale and Purchase Agreement for the disposal by Market Ocean Holdings Limited of all of the issued shares in Ming Wah Bermuda. The transaction was approved by independent shareholders of the Company at an extraordinary general meeting held on 4 October 2004 and completion of the sale and purchase took place on 18 October 2004. Following completion, the provision of management services by AMC to Ming Wah Bermuda has ceased to be a continuing connected transaction of the Group. 4. Rental of Properties from Euroasia CMCS entered into an agreement (the `Euroasia Land Use Agreement') with Euroasia on 1 November 2001 for the use of certain properties owned by Euroasia in connection with the operation of the business of CMCS at Tsing Yi Terminal. Pursuant to a supplemental agreement entered into on 1 November 2004, the Euroasia Land Use Agreement has been amended to have a term of two years commencing on 1 November 2004. The rental payable by CMCS to Euroasia is approximately HK$20,285,000 per annum. For the purpose of Rule 14A.35(2) of the Listing Rules, the caps in respect of the rental to be paid by CMCS to Euroasia under the Euroasia Land Use Agreement are HK$20,285,000 for the year ending 31 December 2005 and HK$16,905,000 for the 10-month period ending 31 October 2006 (calculated on a pro rata basis from 1 January 2006 to 31 October 2006 when the Euroasia Land Use Agreement will expire) respectively. In addition to the rental, CMCS is also responsible for any additional government rates and land premium payable to the Hong Kong Government in respect of the properties. The rental payable by CMCS was negotiated on an arms-length basis based on the market value of the properties at the time of the commencement of the Euroasia Land Use Agreement. The Directors, including the independent non-executive Directors, are of the view that the Euroasia Land Use Agreement has been entered into on normal commercial terms and in the ordinary and usual course of business of the Company and that the Euroasia Land Use Agreement is fair and reasonable and in the interests of the shareholders of the Company as