11:53     CHINA EAST AIR<00670> - Announcement (11)                           

    Annual caps                                                               
                                                                              
    As mentioned above, the annual rentals payable by the Company to          
    CEA Holding, as provided for under the Property Leasing Agreement,        
    are fixed as an aggregate amount of approximately RMB55,400,000.          
    Such rentals are determined on the basis of the relevant property         
    valuation reports issued in April 2005 by the independent qualified       
    PRC property valuers as described above, and Chesterton Petty             
    Limited has confirmed that such rentals are no higher than prevailing     
    market rates. The rentals are subject to adjustments provided that the    
    adjustments shall not exceed the applicable inflation rates published     
    by the relevant local PRC authorities.                                    
                                                                              
    Based on the above circumstances and the expected significant             
    increase in number of properties being leased by the Company              
    following the Proposed Acquisition as contemplated under the              
    Property Leasing Agreement, coupled with the relevant current market      
    rentals for such properties, factoring in any anticipated possible        
    inflation, the total annual rentals payable by the Company to CEA         
    Holding under the Property Leasing Agreement are not expected to          
    exceed RMB60,000,000 for each of the three financial years ending         
    31st December, 2005, 2006 and 2007. Accordingly, this amount has          
    been set as the proposed annual cap for this Continuing Connected         
    Transaction in respect of each of the three financial years ending        
    31st December, 2005, 2006 and 2007.                                       
                                                                              
    Financial services                                                        
                                                                              
    Financial Services Agreement                                              
                                                                              
    The Finance Company is a non-bank finance company approved and            
    regulated by the relevant PRC regulatory authorities including the        
    People's Bank of China and the China Banking Regulatory                   
    Commission.                                                               
                                                                              
    On 12th May, 2005, the Company entered into a Financial Services          
    Agreement with the Finance Company, pursuant to which the Finance         
    Company will from time to time provide the Enlarged Group with a          
    range of financial services including (i) deposit services, (ii) loan     
    and financing services and (iii) other financial services such as the     
    provision of trust loans, financial guarantees and credit facilities      
    and credit references.                                                    
                                                                              
    Pursuant to the Financial Services Agreement, the Finance Company         
    shall deposit all moneys deposited by the Enlarged Group under the        
    agreement with commercial bank(s) in China, including, for example,       
    Industrial and Commercial Bank of China, China Construction Bank,         
    Bank of Agriculture and Bank of Communications. The Finance               
    Company has also undertaken under the Financial Services Agreement        
    that all outstanding loans it provides to members of the CEA Holding      
    Group will not at any time and from time to time exceed the               
    aggregate amount of its equity capital, surplus reserves and deposits     
    received from other parties.                                              
                                                                              
    Term                                                                      
                                                                              
    Subject to approval being obtained from the Independent Shareholders      
    at the AGM, the Financial Services Agreement will become effective        
    from 1st July, 2005 for a term of three years, subject to renewal.        
                                                                              
    Pricing                                                                   
                                                                              
    Under the Financial Services Agreement:                                   
                                                                              
    (i)     The Finance Company shall accept deposits from the Enlarged       
    Group at interest rates not lower, and thus no less favourable,           
    than the relevant standard rates set by the People's Bank of China        
    for similar deposits;                                                     
                                                                              
    (ii)    The Finance Company shall provide loan and financing services to  
    the Enlarged Group at interest rates not higher than the relevant         
    standard rates set by the People's Bank of China for similar              
    services; and                                                             
                                                                              
    (iii)   In respect of the provision of other financial services, the fees 
    and charges payable by the relevant member(s) of the Enlarged             
    Group to the Finance Company shall be determined by reference to          
    the applicable standard fees and charges as specified by the              
    People's Bank of China from time to time, and if no such standard         
    fees and/or charges have been specified by the People's Bank of           
    China for the particular services, such services shall be provided        
    by the Finance Company on terms no less favourable than terms             
    available from commercial banks in China. The fees and charges,           
    together with other details in respect of each specific transaction       
    for the particular services, will then be recorded in separate            
    implementation agreement(s) between the relevant member(s) of             
    the Enlarged Group and the Finance Company in the performance             
    of the Financial Services Agreement.