09:15 COSCO INTL HOLD<00517> - Announcement (6) The monthly management charges for the premises under each of the 1st Tenancy Agreement and 2nd Tenancy Agreement were determined based on existing rate of management charges which has been charged by the relevant management company. REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS 47th Floor of COSCO Tower, being the leased premises under the 1st Tenancy Agreement, is a property owned by the Group prior to the Disposal and has been used as the head office of the Group since 1997 and certain members within the Group are also located in the same premises. Unit 4802 of COSCO Tower, being the leased premises under the 2nd Tenancy Agreement, is also a property owned by the Group prior to the Disposal and has been used as the office of COSCO Ship Trading since 1997. Since both 47th Floor and Unit 4802 of COSCO Tower (collectively, the ``Premises'') will no longer be owned by the Group after Completion, the Group will have to lease back the Premises so that the Group and certain of its members including COSCO Ship Trading may continue to use the Premises without any disruptions to the operations of the Group. Since the terms of the Tenancy Agreements were determined after arm's length negotiations between the parties and the rent for the respective initial term of 3 years was determined with reference to an agreed market valuation of rentals based on the DTZ Valuation Report, the Directors consider it to be in the interest of the Company to enter into the Tenancy Agreements. The Directors are of the opinion that the Tenancy Agreements, if entered into, are (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms after arm's length negotiations between the parties; and (iii) on terms that are fair and reasonable and in the interests of the Company and its Shareholders as a whole. GENERAL As Tian Lee and Velu Exports, being the respective landlords under the 1st Tenancy Agreement and the 2nd Tenancy Agreement will, upon Completion, become indirect wholly-owned subsidiaries of COSCO Hong Kong, a substantial shareholder of the Company. Tian Lee and Velu Exports will therefore become connected persons of the Company under the Listing Rules and the entering into of the 1st Tenancy Agreement and the 2nd Tenancy Agreement constitutes continuing connected transactions for the Company under Rule 14A.14 of the Listing Rules. The principal activity of each of Tian Lee and Velu Exports is property holding. The Tenancy Agreements will constitute continuing connected transactions of the Company under Rule 14A.34 of the Listing Rules and details of the Tenancy Agreements will be subject to disclosure in an announcement and inclusion in the next published annual report and accounts of the Company under Rules 14A.45 to 14A.47 of the Listing Rules. As the Tenancy Agreements, on an annual aggregate basis, do not exceed 2.5% of each of the applicable percentage ratios under the Listing Rules, no shareholders' approval is required, but the Tenancy Agreements will only be entered into upon Completion after the Independent Shareholders have approved the Agreement at the SGM. Upon the exercise of the option to renew the lease term under each of the 1st Tenancy Agreement and the 2nd Tenancy Agreement by their respective tenants, the Company will comply with the relevant provisions in respect of continuing connected transactions in accordance with the Listing Rules. DEFINITIONS ``1st Tenancy Agreement'' a tenancy agreement to be entered into between Tian Lee and the Company on the Completion Date ``2nd Tenancy Agreement'' a tenancy agreement to be entered into between Velu Exports and COSCO Ship Trading on the Completion Date ``Agreement'' the agreement dated 30th May 2005 for the sale and purchase of the entire issued share capital of and loan to Modern Capital ``associate'' has the meaning ascribed to it under the Listing Rules ``Bank Loan'' means a term loan owing by the Company to Bank of China (Hong Kong) Limited under a facility agreement dated 28 August 1998 (as amended), the indebtedness under which amounts to HK$591,000,000 as at the date of the Agreement, and the Company's obligations thereunder are secured by, inter alia, mortgages on the Properties;