10:04 GUANGZHOU SHIP<00317> - Announcement (3) orders on hand and expected labour services need from the CSSC Group in relation to the Group's production requirements. Cap amount for 2006 is expected to increase by 15% per annum based on the Group's planned increase in production output for shipbuilding related services, due to the increase of the orders on hand and the productivity achievement. The table below summarizes the actual amounts of the Transactions as referred to in the Supplemental Agreement in 2004 and the revised cap amounts pursuant to the Supplemental Agreement. The pricing bases for the Transactions referred to in the Supplemental Agreement are the same as those set out in the Framework Agreement. There is no direct correlation between the 2004 historical figure and the projected annual caps below in respect of these Transactions as prices of the underlying steel products fluctuates with market demand and supply, which can be significant given the nature of the products (prices of steel and equipment for use on ships) and the scale of the Group's projects. Year end 31 December Main unaudited Original cap amounts Revised cap amounts Pricing basis for setting 2004 actual 2005 2006 2005 2006 basis revised cap Transactions (RMB million) (RMB million) (RMB million) (RMB million) (RMB million) I. Materials and services provided by the Group to the CSSC Group (1) Steel material and accessories 7.62 7.3 7.3 19.2 22.1 Market price Orders on hand and current steel price (2) Utilities 2.33 2.4 2.5 10.3 11.9 Cost plus Orders on hand management and current fee of 25% utilities prices (3) Labour services 11.28 - - 37.9 43.9 Not less than Orders on hand Note to third parties II. Materials and services provided by the CSSC Group to the Group (1) Steel, ship building 146.45 211.3 207.3 408.3 469.5 Market price Orders on hand accessories and and purchases ship equipment arising therefrom (2) Labour services 24.36 35.5 36.8 77.3 88.9 Cost plus Orders on hand management and costs fee of 10% arising therefrom Please note that amounts of Transactions in 2004 under the above categories except for I(3) were within their respective cap amounts imposed under the Frame work Agreement. Note: The category I(3) of Transactions was not included in the Framework Agreement at the time of its signing in Aril 2004. As for labour services provided by the Group to the CSSC Group, the above continuing connected transactions arose in 2004 as the Group began to provide labour services to the CSSC Group in relation to ship coating jobs and section welding. The total amount in respect of the above transactions in 2004 was RMB11.28 million, of which RMB9.9 million was related to ship coating labour work provided to Guangzhou Wen Chong Shipbuilding Company Limited, a subsidiary of CSSC, details of which were disclosed in a separate announcement on 29 December 2004 with a cap amount RMB10 million approved by the Board. The remained RMB1.38 million was labour service provided by the Group to the CSSC Group in relation to section welding services. The above connected transaction should have been subject to the reporting and announcement requirements under rule 14A.34. The delay disclosure of the above connected transaction by the Company has breached the Hong Kong Listing Rules 14A.34. The above transaction will be included in the 2004 annual report to be published. Charges for Labour services provided by the Group to CSSC Group are calculated by reference to market rates quoted by third party for the provision of similar services. This was due to the fact that, prior to the Framework Agreement, the Group mainly provided ship coating services to companies within the Group only. The above connected transactions enable the Group to extend its ship coating services to third parties and thereby created new customer base.