09:49 COSCO INTL HOLD<00517> - Announcement (2) COSCO, True Smart and their respective associates will abstain from voting on the resolutions approving the Continuing Connected Transaction to be proposed at the SGM. Since April 2005, the total consideration for all such Continuing Connected Transaction that has taken place has exceeded the 0.1% threshold under Rule 14A.33(3) of the Listing Rules but not exceeded the 2.5% threshold under Rule 14A.34 of the Listing Rules. The Stock Exchange informed the Company that the Company may have breached Rule 14A.32 of the Listing Rules since April 2005 and reserves its right to take appropriate action against the Company and/or its directors on the matter. BACKGROUND Reference is made to the announcement of the Company dated 25th November 2003 and the circular of the Company dated 12th December 2003 containing details of the continuing connected transactions under the Previous Waiver. It was further announced in the announcement of the Company dated 24th February 2005 that the Stock Exchange has stated that the Previous Waiver has been revoked in all respects. In order to comply with the requirements under the Listing Rules, the Kansai Companies, both being subsidiaries of the Company, entered into written agreements in respect of certain existing continuing connected transactions with the Kansai Group and the COSCO Group and the Company makes this announcement in compliance with the disclosure requirements under the Listing Rules. CONTINUING CONNECTED TRANSACTIONS The Directors wish to announce that the Kansai Companies entered into the following Continuing Connected Transactions with the Kansai Group and the COSCO Group. The transactions will continue on an ongoing basis. I. Continuing connected transactions with the Kansai Group 1. Technology transfer contracts (a) On 19th January 1996, Japan Kansai entered into a technology transfer contract with Shanghai Kansai whereby Japan Kansai agreed to provide all necessary technology and know-how relating to the manufacture of container coatings, marine coatings and anti-corrosion coatings to Shanghai Kansai in return for fees to be paid by Shanghai Kansai. Such technology transfer contract shall remain in force during the subsistence of the equity joint venture contract of Shanghai Kansai which is due to expire in 2015. The fees to be paid by Shanghai Kansai consist of a one-off initial technology transfer fee and an annual technology usage fee. The annual technology usage fee for the years 2003 to 2007 and 2008 to 2015 shall respectively be charged at the rates of 0.75% and 0.5% of the net sales revenue of Shanghai Kansai. The Directors believe that such rate is at the lower-end of the prevailing rate in the market. (b) On 18th December 1991, Japan Kansai entered into a technology transfer contract with Tianjin Kansai whereby Japan Kansai agreed to provide all necessary technology and know-how relating to the manufacture of container coatings, marine coatings and anti-corrosion coatings to Tianjin Kansai in return for fees to be paid by Tianjin Kansai. Such technology transfer contract shall remain in force during the subsistence of the equity joint venture contract of Tianjin Kansai which is due to expire in 2007. The fees to be paid by Tianjin Kansai consist of a one-off initial technology transfer fee and an annual technology usage fee. The technology usage fee for the years 2003 to 2007 shall be charged at the rate of 0.5% of the net sales revenue of Tianjin Kansai. The Directors believe that such rate is at the lower-end of the prevailing rate in the market. In order to ensure that the Kansai Companies have the necessary technology to manufacture coatings throughout the term of the joint venture, the Kansai Companies entered into technology transfer contracts for terms of more than three years. Since Japan Kansai's technology and technical information is patented, it has been normal market practice for the Kansai Companies to enter into the technology transfer contracts for the whole duration of the term of the respective joint venture contracts. The Directors consider that the long duration of the technology transfer contracts are in the interests of the Company and the Shareholders as a whole because the current technology usage fee rate is in normal market condition and its longer term of contract is necessary for Kansai Companies to ensure its right to produce and sell the products by making use of the required technology during the whole term of joint venture contract. An independent financial adviser will be appointed to opine on the terms of the technology transfer contracts. Further announcements will be made in respect of the annual technology usage fees for the period from 2008 to 2015 for the technology transfer contract with Shanghai Kansai.