10:54 MEILAN AIRPORT<00357> - Announcement (3) Term: The catering service agreement is for a term of three years commencing from 1st January 2000 and 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 franchise fee. The parties have been in negotiations on and off with a view to come to an agreed charge rate for the annual franchise fee. It was noted that due to the restructuring of the airline companies in the PRC as abovementioned, the catering business has been adversely affected as those to the cargo center business. As a result, the profits generated by the catering business has substantially decreased in 2004. In light of the foregoing, it was finally agreed and rectified by an agreement dated 17th December 2004 between the Company and Hainan Food that the franchise fee for the year of 2004 was RMB2.0 per headcount multiplying the number of passengers retaining the relevant services, which was determined based on estimated profits of such catering services and a split of such profits equally between the Company and Hainan Food. The aggregate annual volume is around RMB2,100,000 for 2004. 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 less than 2.5%, 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. The above-mentioned transactions with the revised terms are conducted on normal commercial terms. Under Rule 14A.36 of the Listing Rules, compliance with the relevant reporting and disclosure requirement is necessary for the substantial change of the relevant terms of those transactions and since each of the relevant percentage ratio based on the changed terms is either less than 2.5% (as for the transaction with Hainan Food) or more than 2.5% but less than 25% and the annual consideration is less than HK$10,000,000 (as for the transaction with Yangzi Express), no independent shareholders' approval is required. IV. Non-exempt Continuing Connected Transactions Exempt From The Independent Shareholders' Approval Requirements For The Years of 2005-2007 Catering Service by Hainan Food Date of Agreement: 5 January 2005 Parties: The Company Hainan Food 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 RMB2.0 per headcount multiplying the number of passengers retaining the relevant services, which is determined based on estimated profits of such catering services and a split of such profits equally between the Company and Hainan Food. Term: The catering service agreement is for a term of three years commencing from 1st January 2005 and ending on 31 December 2007. Historical Figures The parties to the agreement above have been engaged in the relevant transaction over the years. The following table shows the total sums paid in respect of the transaction between the Group and the counter party in the past three years ended on 31 December 2004: Year ended 31 December 2002 2003 2004 ("RMB") Catering services by Hainan Food 4,380,000 4,380,000