10:17 TAI PING CARPET<00146> - Announcement (2) Prices The prices payable for the Products and Services will be those set out in the quotation sent by the relevant member of the Tai Ping Group to the relevant member of the HSH Group. Such prices will be determined by reference to the Tai Ping Group's standard prices for Products and Services, subject to such adjustments as may be agreed between the parties following arm's length negotiations. The Annual Limit The Company shall not be obliged to supply Products and Services ordered under the Supply of Products and Services Agreement if the fulfilment of such order would result in the annual consideration for Products and Services either equaling or exceeding HK$8,500,000. This annual limit of HK$8,500,000 is above the 2.5% de minimis level of the Company referred to in rule 14A.34(1) of the Listing Rules, but is below the 25% and HK$10 million de minimis level of the Company referred to in rule 14A.34(2) of the Listing Rules. CONSIDERATION The consideration payable for the Products and Services to be supplied pursuant to the Supply of Products and Services Agreement will be determined by reference to the Tai Ping Group's standard prices for such Products and Services. These prices are reviewed annually on the basis of various factors including the supply and demand for such Products and Services and the costs of providing such Products and Services. The amounts payable by HSH may well be adjusted and other terms of supply may be amended to reflect various factors such as the size of the order. All such adjustments and amendments will be agreed between the relevant members of the Tai Ping Group and the HSH Group following arm's length negotiation. The annual consideration for sales of goods and services from the Tai Ping Group to the HSH Group for the last seven financial years fluctuated significantly over that period ranging from a high of $14.3 million in the financial year ended 31st December 1998 to a low of $1.9 million in the financial year ended 31st December 2004 and with an average of $5.6 million per year. The annual consideration for such sales for the financial years ended 31st December 2002, 2003 and 2004 was approximately HK$3.4 million, HK$2.5 million and HK$1.9 million respectively. The annual consideration for such transactions is dependant upon the extent of HSH Group's renovation or new building projects in any one year and the number and value of transactions awarded to the Company in connection with such projects. The Company anticipates that the Tai Ping Group may be awarded more of such transactions by the HSH Group over the term of the Supply of Products and Services Agreement, if its bids continue to be successful. This view is based on the generally improved environment for the hospitality industry and, more importantly, the fact that the HSH Group is preparing to open a new hotel in Tokyo in the near future which may bring about substantial business to the Company during that period. RELATIONSHIP BETWEEN THE COMPANY AND HSH BTCL is a substantial shareholder of the Company holding approximately 56% of the issue share capital of the Company. BTCL is also interested in approximately 55% of the voting power of HSH. Accordingly, HSH and the other members of the HSH Group are considered connected persons of the Company for the purposes of the Listing Rules. James S Dickson Leach, the chairman of the Company, and Ian D Boyce, a non-executive director of the Company, also sit on the board of HSH. EXPIRY OF WAIVER AND APPLICATION OF THE LISTING RULES The Company was granted a waiver by the Stock Exchange on 30th October 2002 from strict compliance with the disclosure requirements under the Listing Rules in relation to connected transactions with the HSH Group subject to certain conditions. That waiver expired on 31st December 2004. On the 8th February 2005, the Company announced, in accordance with the requirements of Chapter 14A of the Listing Rules, that CITPCL, a subsidiary of the Company, had entered into an agreement to supply carpets and ancillary services to SCHCL, a member of the HSH Group, and that as a result of this agreement, the aggregate value of such connected transactions of the Company since 1st January 2005 would amount to approximately HK$1.3 million and thereby exceed the de minimis levels set out in rule 14A.33(3) of the Listing Rules. The Company entered into the Supply of Products and Services Agreement on 22nd March 2005. The Supply of Products and Services Agreement provides that the Company is not obliged to supply Products and Services ordered if the fulfilment of such an order would result in the annual consideration for Products and Services either equaling or exceeding HK$8,500,000. This limit is below the de minimis levels for the Company referred to in rule 14A.34 of the Listing Rules. Accordingly, the Company is not