10:53     MEILAN AIRPORT<00357> - Announcement (2)                            

    those connected persons and their associates constitute connected         
    transactions for the Company under the Listing Rules and are subject to   
    reporting, announcement and Independent Shareholders' approval            
    requirements pursuant to Chapter 14A of the Listing Rules.                
                                                                              
    III.   Certain Connected Transactions For The Year of 2004                
                                                                              
    Under the Existing Waivers, there have been in existence the following    
    two connected transactions, the transactional terms of which have been    
    substantially changed in 2004:                                            
                                                                              
    (a)   Contractual management of cargo centre                              
                                                                              
    Date of                                                                   
      Agreement:   1 June 2002                                                
                                                                              
    Parties:   The Company                                                    
       Yangzi Express                                                         
                                                                              
    transportation business. Commencing from the date of the agreement, the   
    Company agreed to delegate the management and operation of the cargo      
    centre at Meilan Airport to Yangzi Express under a contractual            
    management arrangement for a fixed fee to be paid by Yangzi Express to    
    the Company.                                                              
                                                                              
    Price:   The annual management fee to be paid by Yangzi Express to the    
    Company was fixed at RMB18,000,000 per year which was determined based    
    on the estimation of the profits to be generated by the cargo center      
    operation.                                                                
                                                                              
    Term:   The contractual term was of one and half year ending on 31        
    December 2003.                                                            
                                                                              
    Following the expiration of the above-mentioned contract on the 31st      
    December 2003 and despite no further agreement recorded in writing, the   
    parties concerned thereof have been continually engaged in the            
    transaction through out the year of 2004 on the same terms and            
    conditions as those contained in the expired contract, except for the     
    annual management fee.                                                    
                                                                              
    The parties have been in negotiations on and off with a view to come to   
    an agreed charge rate for the annual management fee. It was noted that    
    due to the restructuring of the airline companies in the PRC conducted    
    from September 2003, certain airlines which were previously customers     
    using the cargo center service now are merged with one of the leading     
    airline group company and have retained their group members rather than   
    the Company to provide the cargo center service. As a result, the         
    profits generated by the cargo center operation has substantially         
    decreased in 2004. It was finally agreed and rectified between the        
    Company and Yangzi Express by an agreement dated 17th December 2004 that  
     the management fee for the year of 2004 was fixed at RMB9.9 million,     
    which was determined based on estimated profits of the cargo center       
    business.                                                                 
                                                                              
    The relevant Existing Waivers lapsed upon the expiration of the           
    contractual term of the transaction, therefore, compliance with the       
    relevant reporting, disclosure and approval requirement of the Listing    
    Rules is necessary for the transaction conducted in 2004. Since the       
    relevant percentage ratio is more than 2.5% but less than 25% and the     
    annual consideration is less than HK$10,000,000, no independent           
    shareholders' approval is required. The Company noted that pursuant to    
    the relevant provisions under the Listing Rules, announcement should      
    have been made upon agreement being reached on the aforesaid contractual  
     terms and the Company has failed to make the announcement in a timely    
    manner for compliance with the Listing Rules.                             
                                                                              
    (b)   Catering Service                                                    
                                                                              
    Date of                                                                   
      Agreement:   31 December 2000                                           
                                                                              
    Parties:   The Company                                                    
       Hainan Food                                                            
                                                                              
    catering service business and has been retained by the Company to         
    provide on-board catering services for certain airlines which do not      
    have airport base at Meilan Airport. The agreement sets out the terms     
    and conditions for the franchising of such services to Hainan Food.       
                                                                              
    Price:   Pursuant to the agreement, the rate for the franchise fee        
    payable by Hainan food to the Company is fixed at RMB4,380,000 based on   
    the estimation of the profits to be generated from the relevant catering  
     services.