09:39 AUTOMATED SYS<00771> - Announcement (2) The basis for determining the prices of the Services and Products provided under the CSA Purchase Transactions, the CSA Sales Transactions, the CSC Purchase Transactions and the CSC Sales Transactions are as follows: (i) in respect of non-administrative functions and services, prices will be based on the costs and expenses incurred in connection with the provision of such functions or services plus a mark-up; (ii) in respect of IT services, prices will be determined by reference to the market price; and (iii) in respect of IT products and related services, the prices charged will be according to published prices and conditions similar to those offered to/by major customers/suppliers of the Group. The Board expects that for the year ending 31 March 2005, the aggregate annual value of the CSA Purchase Transactions will be approximately HK$5,941,000.00, the aggregate annual value of the CSA Sales Transactions will be approximately HK$1,720,000.00, the aggregate annual value of the CSC Purchase Transactions will be approximately HK$4,796,000.00 and the aggregate annual value of the CSC Sales Transactions will be approximately HK$3,542,000.00. As CSC is the holding company of CSA which in turn is the controlling shareholder of the Company, CSC, CSA and their respective associates are regarded as connected persons of the Company. Hence the Continuing Connected Transactions constitute connected transactions for the Company for the purposes of the Listing Rules. The applicable percentage ratios for each of the CSA Purchase Transactions, the CSA Sales Transactions, the CSC Purchase Transactions and the CSC Sales Transactions for the ten months ended 31 January 2005 are less than 2.5%. In accordance with Rule 14A.34 of the Listing Rules, the Continuing Connected Transactions are subject only to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Listing Rules. The Company will also comply with the requirements of annual review by independent non-executive Directors and auditors as set out in Rules 14A.37 to 14A.41 of the Listing Rules for the Continuing Connected Transactions for the relevant financial period. The Company intends to enter into the Master Agreements with each of CSA Group and CSC Group respectively for the purpose of governing (i) the CSA Purchase Transactions and the CSA Sales Transactions; and (ii) the CSC Purchase Transactions and the CSC Sales Transactions, respectively. The Company will closely monitor each such type of Continuing Connected Transactions to ensure that the applicable percentage ratios in relation to each of them are within the thresholds prescribed in Rule 14A.34 of the Listing Rules prior to signing of the Master Agreements. Given the large number of companies involved and the complexity of the transactions, the Company needs more time to reach agreement with CSA Group and CSC Group respectively on the terms of the Master Agreements. The Company is also currently working on the proposed caps for the Company's continuing connected transactions with CSA Group and CSC Group respectively for the years ending 31 March 2005, 2006 and 2007 and will make appropriate announcement as soon as practicable after the Master Agreements have been entered into. REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS Each of the Group and CSA Group has entered into and will enter into contracts with a wide spectrum of customers located in Hong Kong, the People's Republic of China and other countries in the Asia Pacific region. As different customers have their specific requirements and needs, and each of the Group and CSA Group has different resources, technical expertise and technological know-how, by entering into the CSA Purchase Transactions and the CSA Sales Transactions, the resources, technical expertise and technological know-how of the Group and CSA Group can be utilised on a sharing basis, which in turn ensure the provision of quality products and services to the customers.