11:55 CHINA EAST AIR<00670> - Announcement (14) Annual caps Based on such historical figures, the expected expansion and developments of the Enlarged Group's business following the Proposed Acquisition, and the extent and volume of import/export agency services the Enlarged Group expects the Import & Export Company to provide, the total amounts of commissions and expenses payable by the Company to the Import & Export Company for its provision of such services for the three financial years ending 31st December, 2005, 2006 and 2007 are not expected to exceed RMB40,000,000, RMB55,000,000 and RMB55,000,000, respectively, taking into account the anticipated gradual and organic growth of the Enlarged Group's business over these years. Accordingly, these amounts have been set as the proposed annual caps for this Continuing Connected Transaction. Maintenance services Maintenance Services Agreement The Maintenance Company is a company located in Shanghai, which is principally engaged in the businesses of providing maintenance, repair and overhaul services in respect of aircraft and aviation equipment, and the manufacturing and sale of related equipment and materials. On 12th May, 2005, the Company entered into a Maintenance Services Agreement with the Maintenance Company, pursuant to which the Maintenance Company will from time to time provide the Enlarged Group with comprehensive services in relation to maintenance, repair and overhaul of aircraft and aviation equipment, and procurement of related equipment and materials required in the daily operations of the Enlarged Group. Term Subject to approval being obtained from the Independent Shareholders at the AGM, the Maintenance Services Agreement will become effective from 1st July, 2005 for a term of three years, subject to renewal. Pricing Under the Maintenances Services Agreement, in relation to the provision of maintenance and ancillary services, the service fees payable to the Maintenance Company for its services shall be based on prevailing market rates available from independent third-party service providers under comparable conditions. Such service fees shall be determined based on arm's length negotiations, and shall be no less favourable than those offered by the Maintenance Company to independent third parties. Such service fees are payable quarterly in arrears. The parties will perform an annual review of the then prevailing service fees before the 31st of December in each calendar year, and agree on any required adjustments to the service fees in respect of the next calendar year. In relation to procurement and supply of equipment and materials by the Maintenance Company, the purchase price payable by the Company in respect of each specific transaction, which will be documented in separate implementation agreement(s) when occurred, shall be no less favourable than that offered by the Maintenance Company to independent third parties. Reasons for and benefits of the transaction The Directors believe that it is in the best interest of the Enlarged Group to procure the required services and the supply of equipment and materials from the Maintenance Company considering that the Maintenance Company has special strengths that independent third-party service or other providers generally do not possess. Such strengths include the aviation industry expertise, knowledge and qualification of the Maintenance Company to meet the demand of certain types of work, its track record of quality and timely service available to the Group, and its convenient location, in the vicinity of certain local sites of the Enlarged Group, to offer quick services. Historical figures The historical figures of the total amounts paid by the Group to the Maintenance Company for each of the three financial years ended 31st December, 2002, 2003 and 2004 are approximately RMB12,903,000, RMB9,094,000 and RMB20,432,000, respectively.