09:28 CHINA MER HOLD<00144> - Announcement (5) 2004 3,024,000 (based on unaudited management accounts) For the purpose of Rule 14A.35(2) of the Listing Rules, the cap in respect of the rental to be paid by CMCS to CMGW for the leasing of vessels under the CMGW Ship Leasing Agreements for the 10-month period from 1 January 2005 to 31 October 2005 is HK$2,584,000. The above cap is calculated based on historical figures and the rental set out in the CMGW Ship Leasing Agreements. 7. Rental of Properties and Fixed Assets from CMSHC SCMPS entered into an agreement (the `CMSHC Leasing Agreement') with CMSHC on 1 November 2004 in relation to the lease by SCMPS from CMSHC of certain properties and fixed assets for the operation of the Shekou Port in Shenzhen. The CMSHC Leasing Agreement is for a term of fourteen months commencing on 1 November 2004 and ending on 31 December 2005. As CMSHC is 46.42% owned by CMG through CMSKIZ, CMSHC is an associate of CMG as defined under the Listing Rules and therefore a connected person of the Company as defined under the Listing Rules. SCMPS was acquired by the Group in April 2002. The rental paid by SCMPS to CMSHC for the years ended 31 December 2002, 2003 and 2004 are as follows: Year Amount of expenses (HK$) 2002 10,001,000 2003 11,307,000 2004 10,009,000 (based on unaudited management accounts) The rental paid by SCMPS were negotiated on an arms-length basis based on the market value of the properties and depreciation charges of the fixed assets and the Directors, including the independent non-executive Directors, are of the view that the CMSHC Leasing Agreement has been entered into on normal commercial terms and in the ordinary and usual course of business of the Company and that the CMSHC Leasing Agreement is fair and reasonable and in the interests of the shareholders of the Company as a whole. For the purpose of Rule 14A.35(2) of the Listing Rules, the annual cap in respect of the rental to be paid by SCMPS to CMSHC under the CMSHC Leasing Agreement is HK$14,950,000 for the year ending 31 December 2005. Such annual cap is calculated based on historical figures, the rental incurred by SCMPS in 2004 and the Company's estimates of the properties and fixed assets to be leased from CMSHC for the year 31 December 2005. 8. Rental of Warehouse and provision of other services from Hoi Tung Hempel-Hai Hong entered into an agreement (the `Combined Services Agreement') with Hoi Tung on 1 November 2004 for the rental of warehouse space from Hoi Tung and the provision of cargo management and paint shipping services by Hoi Tung. The Combined Services Agreement is for a term of one year commencing on 1 November 2004. As Hoi Tung is a wholly-owned subsidiary of CMG, it is a connected person of the Company as defined under the Listing Rules. The principal business of Hoi Tung is the provision of import and export services of marine products. Hoi Tung has been providing the warehouse space and services to Hempel-Hai Hong since 1991. The rental and service charges paid by Hempel-Hai Hong to Hoi Tung for the years ended 31 December 2002, 2003 and 2004 are as follows: Year Services Charges (HK$) 2002 4,526,000 2003 4,598,000 2004 4,618,000 (based on unaudited management accounts) The charges paid by Hempel-Hai Hong were negotiated on an arms-length basis based on market rates. The Directors, including the independent non-executive Directors, are of the view that the Combined Services Agreement has been entered into on normal commercial terms and in the ordinary and usual course of business of the Company and that the Combined Services Agreement is fair and reasonable and in the interests of the shareholders of the Company as a whole. The cap in respect of the service charges to be paid by Hempel-Hai Hong to Hoi Tung under the Combined Services Agreement is