10:04 NWS HOLDINGS<00659> - Announcement (5) 5. ANNUAL CAPS UNDER THE CONDITIONAL WAIVER It is expected that the annual turnover of the Group for the year ending 30 June 2005 will decrease mainly due to the deconsolidation of NWS Transport Services Limited (formerly known as Merryhill Group Limited) from the accounts of the Company as a result of the share exchange which was completed on 9 March 2004 and the general adverse economic conditions in Hong Kong in recent years. Consequently, the transaction values of the E & M Engineering Services, the Facility Management Services, the Property Management Services and other services (including rental of properties and provision of the Management Services) under the Conditional Waiver are expected to exceed their respective annual caps (as a percentage of the expected turnover of the Group for the year ending 30 June 2005). Pursuant to the terms of the Conditional Waiver, the Company will have to comply with the reporting, announcement and independent shareholders' approval requirements with respect to those continuing connected transactions. 6. REQUIREMENTS OF THE LISTING RULES Master Services Agreement and the Annual Caps As NWD holds approximately 54% of the total issued share capital of the Company, it is a substantial shareholder of the Company and hence, a connected person of the Company. Accordingly, the transactions contemplated under the Master Services Agreement will constitute continuing connected transactions of the Company under Rule 14A.14 of the Listing Rule. As one or more of the relevant percentage ratios will exceed 2.5% on an annual basis, such transactions will be subject to the reporting, announcement and independent shareholders' approval requirements under Rules 14A.45 to 14A.48 of the Listing Rules. At the SGM, NWD and its associates shall abstain from voting on the resolution in connection with the Master Services Agreement and the Annual Caps. The vote taken at the SGM to seek approval of the Master Services Agreement and the Annual Caps will be taken by poll. In the event that any of the Annual Cap is exceeded or the Master Services Agreement is renewed or materially varied, the Company will re-comply with the reporting, announcement and independent shareholders' approval requirements pursuant to Rules 14A.45 to 14A.48 of the Listing Rules. Annual caps under the Conditional Waiver Pursuant to the terms of the Conditional Waiver, the Company will have to comply with the reporting, announcement and independent shareholders' approval requirements with respect to those categories of continuing connected transactions with transaction values which are expected to exceed their respective annual caps (as a percentage of the expected annual turnover of the Group for the year ending 30 June 2005). At the SGM, NWD and its associates shall abstain from voting on the resolution in connection with the approval of the new annual caps of the following categories of the existing continuing connected transactions. The vote taken at the SGM will be taken by poll. Categories of existing continuing connected transactions with transaction values which are expected to exceed their respective annual caps under the Conditional Waiver Annual Cap approved under the Conditional Waiver (expressed as a percentage of the Group's consolidated turnover of the relevant financial year) Aggregate contract amounts for the year ended 30 June 2002 Aggregate contract amounts for the year ended 30 June 2003 Aggregate contract amounts for the year ended 30 June 2004 Aggregate contract amounts for the six months ended 31 December 2004* New annual caps for the year ending 30 June 2005 (HK$'million) (HK$'million) (HK$'million) (HK$'million) (HK$'million) E & M Engineering Services 2.5% 165 96 233 112 304 Facility Management Services 0.1% 7 10 11 7 16 Property Management Services 0.35% 25 29 29 20 45 Rental of properties and provision of the Management Services 0.3% 35 36 29 13 31 *The aggregate contract amounts for the six months ended 31 December 2004 are based on the unaudited interim consolidated results of the Group for the six months ended 31 December 2004. The Company would like to remind the Shareholders that certain Operational Services are subject to seasonality, and accordingly, the unaudited interim results of the Group for the six months ended 31 December 2004 may not be indicative of the audited annual results of the Group for the year ending 30 June 2005.