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KAI TAK NEW CRUISE TERMINAL

Proposed Leasing Arrangements

Tourism Commission

Commerce and Economic Development Bureau

The Government of the

Hong Kong Special Administrative Region

31 August 2009

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Table of Contents

PageChapter 1: Kai Tak New Cruise Terminal

Introduction Location Conceptual Layout of the Cruise Terminal Construction Timetable Leasing Timetable Entry Requirement

4 4 5 7 7 8

Chapter 2: Basic Terms of the Tenancy

Length of the Tenancy Possession Commencement Dates of Operation Permitted Uses Rent Security Deposit Alienation and Subletting

9 9 10 12 14 15 16

Chapter 3: Operational Requirements

Berths Allocation Berthing Fees Permission, Registration, Consents Security Sanitation

17 19 19 20 20

Chapter 4: Scope and Standard of Services

Industry Engagement Promotion of Cruise Tourism Service Pledges on Operation and Management Disclosure

21 21 21 22

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Reporting to the Government Bookings of Berthing Slots after award of the tender and prior to commencement of the tenancy Break Clause

22 23

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Chapter 5: Other contractual arrangements

Maintenance of Facilities Utilities Supplies and Related Charges Insurance Facility Management Fitting-out works Machinery, Plants, Equipment, Furniture Termination

25 26 26 26 27 27 28

Annexes I Location of the Cruise Terminal Site

II Location of the First Berth and the Second

Berth

III The road network connecting the Cruise Terminal to Kowloon Bay

IV

Details of the Premises to be leased

V

Proposed Berth-Allocation Guidelines for the first berth

VI Schedule of Responsibilities of the landlord and the tenant

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Chapter 1 Kai Tak New Cruise Terminal 1.1 Introduction 1.1.1 Hong Kong offers a wide range of attractions to its visitors. Cruise industry is one of the tourism sectors which grows significantly in recent years. To capitalise the potential growth of the region, the Government is pressing ahead to develop Hong Kong as a leading regional cruise hub. 1.1.2 The Government has decided to finance the development of a new cruise terminal (Cruise Terminal) at the runway of the former Kai Tak airport and to lease it to an experienced cruise terminal operator to bring in market flexibility and innovation. 1.1.3 Our current thinking for the leasing arrangements is set out in this document. To ensure that our proposals can meet the needs of Hong Kong and the market, we would like to invite comments and feedback from market and industry players.

1.2 Location 1.2.1 The Cruise Terminal forms part of the Kai Tak Development (KTD) which spans over 320 hectares, covering the ex-airport site and its adjoining areas. KTD involves comprehensive development of the ex-airport site into an area of commercial, residential, recreational, sports, tourism and community uses together with supporting infrastructure. The developments in KTD will be implemented in phases and take some time to mature. 1.2.2 The Cruise Terminal site is situated at the end of the former runway tip, with an area of about 7.6 ha. In its immediate vicinity, there will be a Tourism Node for the development of a public transport interchange, hotels, retail and entertainment facilities and a Runway Park. Location of the Cruise Terminal site is shown on the plan at Annex I. The Cruise Terminal will have direct links to the Tourism Node and the Runway Park. To

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the north-west of the site, a hotel belt has been planned along the waterfront of the Runway Precinct.

1.2.3 The Government will provide a direct and convenient access road leading from the existing road network at Kowloon Bay via Cheung Yip Street to the Cruise Terminal as shown on the plan at Annex III. In addition, accessibility to the Cruise Terminal will be further enhanced from the proposed road network and major transport infrastructure to be implemented for KTD. These include the proposed key east-west road link, the proposed Central Kowloon Route (CKR) as well as the proposed new extension of the existing mass transit railway system–the Shatin-Central Link (SCL) which will pass through northern KTD with a station at Kai Tak City Centre. The current target is to commence the statutory processes for the respective proposals and to implement and complete the road networks in phases between 2013 and 2021 with CKR and SCL to be completed by 2016. 1.3 Conceptual Layout of the Cruise Terminal 1.3.1 The Cruise Terminal comprises a cruise terminal building and apron area. There will be 2 berths with a structure of 850 metres long providing about 800 metres of continuous alongside berth. The dimensions of each berth will have a length of about 400 metres and an apron width of 35 metres. These two berths can handle concurrent berthing of two mega cruise vessels 1 or 3 smaller cruise vessels. It is planned to accommodate and service vessels at least up to the following technical parameters: 1 Mega cruise vessels refer to those cruise vessels with displacement tonnage of over 50,000 tonnes

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Table 1 Description

At least up to

Gross Tonnage 220,000 tonnes

Displacement Tonnage 110,000 tonnes

Length overall 360 metres

Beam

47 metres

Draft

10 metres

Passenger and crew capacities 5,400 passengers and 1,200 crew

1.3.2 The cruise terminal building will mainly accommodate terminal operation facilities (such as baggage handling and screening area, check-in area, waiting and queuing area), ground transportation area (such as internal access road, bus staging and queuing area, vehicles drop off/pick up area), vehicles parking and loading/unloading spaces, terminal operator ’s office and ancillary commercial area. 1.3.3 Customs, immigration, health quarantine, and police control/clearance facilities will also be provided within the cruise terminal building to support the operation of the Cruise Terminal. Marine Department will install a radar in the building for the Vessel Traffic Service. Also, a separate accommodation for heliport users will be reserved for future heliport operator to facilitate the operation of cross-boundary heliport services at the adjoining heliport site to the south. 1.3.4 A landscaped deck or decks (“Landscaped Deck”) will be provided for passive public enjoyment of the waterfront. It will be connected with the waterfront promenade to the northwest of the site and the Runway Park to the east of the Cruise Terminal. The Government will operate and manage the Landscaped Deck.

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1.4 Construction Timetable 1.4.1 Our current target is to complete the first berth2 with the associated fender and anchor system on or before 31 May 2013. Upon completion, the first berth2 can accommodate mega cruise vessels. 1.4.2 We also target to complete the full-fledged cruise terminal building in 2014/2015. We are attempting to advance the completion of the cruise terminal building as far as practicable and the handover date(s) for the terminal operation facilities may be earlier than 2014/2015. 1.4.3 We aim to complete the second berth2 on or before 30 June 2014 where smaller vessels can be berthed. After relocation of the submarine gas mains by the Hong Kong and China Gas Company Limited and completion of the dredging works in 2015 the earliest, mega cruise vessels can berth in the second berth2. 1.5 Leasing Timetable 1.5.1 We intend to lease part of the Cruise Terminal to a cruise terminal operator who will be responsible for operating the berths, embarking and disembarking of cruise passengers, managing the cruise terminal including the ground transportation area and ancillary commercial area. Details of the premises to be leased are set out at Annex IV. 1.5.2 Our current thinking is to arrange a pre-qualification for selection of prequalified applicants. If the pre-qualification approach is to be adopted, we aim to conduct the exercise in 2010, invite tenders in 2011 and award the tender in 2011/12. This would allow the successful tenderer about one and a half years before the commencement date of operation for the first berth in mid-2013 to arrange necessary preparatory work and accept advance bookings for berthing slots.

2 The location of the first berth and second berth is shown on the plan at Annex II

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1.6 Entry Requirement 1.6.1 If the pre-qualification approach is to be adopted, we would look for a potential tenant to operate and manage the Cruise Terminal at world-class standard, catering for the different needs of the cruise operators, cruise passengers, travel agents, ground handling agents and other stakeholders of the industry. To this end, it is of paramount importance that the Cruise Terminal be operated by an experienced and competent operator. 1.6.2 We intend to prequalify cruise terminal operators who have the experience of handling cruise vessels (e.g. berthing cruise vessels, arranging the embarkation and disembarkation of cruise passengers, loading and unloading baggage, handling baggage claim, managing ground transportation, arranging security and safety measures, and providing for supplies and provisioning of cruise vessels). The experience should be demonstrated through the tenderers’ own experience and their management teams. Our current thinking is a tenderer should have a management team of at least 3 full-time members, each having 3 years’ accumulative experience in the cruise terminal operation from 2004 to 2009 (5 years).

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Chapter 2 Basic Terms of the Tenancy 2.1 Length of the Tenancy The proposed tenancy will have a fixed term of 8 years commencing from the date on which vacant possession of the first berth is delivered to the tenant. The tenancy will not be renewed or extended at the expiry of the fixed term. The Government will have an option to break the tenancy at the end of the fifth year. For details, please refer to paragraph 4.7. 2.2 Possession 2.2.1 We will hand over the premises to the tenant in phases. The current target handover dates for different parts of the premises are set out as below: Table 2

Premises Current Target Handover Dates

The first berth

31 May 2013

The second berth

30 June 2014

Terminal operation facilities, operator ’s office, ancillary commercial area, parking spaces, loading/unloading spaces, ground transportation area

2014/20153

2.2.2 The first berth and the second berth will be delivered to the tenant on 31 May 2013 and 30 June 2014 respectively. In the event that vacant possession of the first berth and the second 3 We are attempting to advance the completion of the cruise terminal building as far as practicable and handover date(s) for the terminal operation facilities may be earlier than 2014/2015.

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berth can be delivered to the tenant before these dates, we will inform the tenant of the revised handover date(s) by giving at least 6 months’ notice and the tenant will then be required to take up vacant possession of the berth on the revised handover date(s). 2.2.3 Our target is to hand over the terminal operation facilities, operator ’s office, ancillary commercial area, parking spaces, loading/unloading spaces and ground transportation area to the tenant in 2014/2015. We may hand over these premises in phases. The handover date(s) of these premises will not be specified in the tenancy agreement. We will inform the tenant of the handover date(s) by giving at least 6 months’ notice to the tenant and the tenant will then be required to take up vacant possession of these premises on the handover date(s). 2.2.4 Prior to handover of the premises to the tenant, the tenant may be allowed to enter into the premises for arranging necessary preparation works and familiarising himself with the equipment and machinery subject to the prior written approval of the Government. The tenant will not have exclusive possession of the premises during this preparation period. 2.3 Commencement Dates of Operation 2.3.1 We will impose target commencement dates of operation for the first berth, second berth, terminal operation facilities and ancillary commercial area in the tenancy. We expect the tenant to take all necessary actions to ensure that it is fully ready to operate the first berth, second berth, terminal operation facilities, operator ’s office and ancillary commercial area on the target commencement dates and throughout the term of tenancy. The commencement dates of operation for different parts of the premises are set out as below:

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Table 3

Premises Target Commencement Dates of Operation

The first berth

1 July 2013 or within 1

month from the handover date

The second berth

1 August 2014 or within 1 month from the handover

date

Terminal operation facilities, operator ’s office, parking spaces, loading/unloading spaces, ground transportation area

Within 1 month from the handover date

ancillary commercial area Within 6 months from the handover date

2.3.2 We intend to provide a rent free period from the handover date of the first berth to the date immediate before the commencement date of operation. However, the tenant is expected to pay and bear all outgoings and charges such as water and electricity consumption, etc. from the date on which vacant possession of the first berth is delivered to the tenant. 2.3.3 Prior to completion of the cruise terminal building, temporary supporting facilities (including essential road access, parking area, loading and unloading area) will be made available for the operation of the berth. The operation would be similar to those at container terminals and China Merchants Wharf at Kennedy Town, which the cruise industry has been using for cruise vessels unable to berth at Ocean Terminal due to their large sizes or conflict of schedules.

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2.4 Permitted Uses Cruise Terminal 2.4.1 The premises are primarily leased for the purposes of berthing of cruise vessels, embarkation and disembarkation of cruise passengers and crew, loading and unloading of cruise supplies and other uses ancillary to the operation, safety and security of the cruise terminal. 2.4.2 Installation of cruise refueling facilities within the premises is not allowed. Cruise vessel can be refueled through barge or refuel vessel when it is moored alongside the Cruise Terminal. Temporary Uses 2.4.3 To make the best use of the cruise terminal building when there is no cruise vessel, the proposed tenancy will allow flexibility to cater for potential temporary non-cruise related uses (such as exhibitions, conventions) within the terminal operation area with the prior written approval of the Government. The tenant is expected to ascertain at its own cost the feasibility of conducting temporary non-cruise related activities under prevailing legislation. Advertising Signs 2.4.4 The proposed tenancy will allow flexibility of exhibiting advertising signs within terminal operation facilities with the prior written approval of the Government. The Government will reserve the right to display notice, posters and banners in the interior of the cruise terminal building. 2.4.5 As the rooftop of the cruise terminal building will be developed into the Landscaped Deck for passive public enjoyment, we do not intend to allow erection or exhibition of advertising signs on the said rooftop by the tenant.

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Commercial Uses 2.4.6 We intend to allow the tenant to use the ancillary commercial area for retail shops, banks, restaurants and other purposes as may be approved by the Government at its sole discretion. In order to facilitate the cruise passengers and to enhance visitors' experience once they arrive, we consider that there is a need to set up a Hong Kong Tourism Board (HKTB) visitors information booth in the cruise terminal building. Hence, the tenant will be required to provide such booth with a gross floor area of 15m2. The tenant will be required to enter into a tenancy agreement with the HKTB at nominal rent of HK$1.00 per year. The provision of such booth is counted for ancillary commercial gross floor area of 5,600 m2. The fitting-out of such booth would be undertaken by the HKTB. Car Park

2.4.7 The tenant is expected to manage, operate and maintain at its own cost a car park to the satisfaction of the Government. All parking spaces provided within the car park shall be made available for parking of licensed motor vehicles in connection with the operation of the Cruise Terminal and ancillary commercial area. The parking spaces shall not be used for storage, display or exhibiting of motor vehicles for sale or otherwise. 2.4.8 In addition, we intend to require the tenant to manage, operate and maintain at its own cost the ground transportation area to the satisfaction of the Government. The tenant is expected to submit a traffic management plan to the Government for approval and implement necessary traffic management scheme to ensure proper and efficient operation of the ground transportation area. The ground transportation area shall be open to the cruise passengers, visitors and occupying departments at such time as approved by the Government. The spaces for pick up/drop off areas and queuing areas shall not be used for purposes of fee paying car parks and storage, display or exhibiting of motor vehicles for sales or otherwise.

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2.5 Rent 2.5.1 We propose to charge rent based on a basic rent or a percentage of the tenant’s gross receipt of the premises, whichever is greater. Rent will be charged on monthly basis. Rental structure of the tenancy is summarised in Table 4. Table 4

Period Basic Rent

Turnover Rent

Rental Payable

From the commencement date of operation of the first berth to the date immediate before completion of dredging work for the second berth affected by the submarine gas mains

The First Basic Rent ($WWW)

($WWW) or ($YYY +

$ZZZ) whichever is

greater

From the completion date of dredging work for the second berth affected by the submarine gas mains to the expiry date of the tenancy

The Second Basic Rent ($XXX)

Percentage of gross receipt for cruise terminal operation ($YYY)

And

Percentage of gross receipt for general commercial uses ($ZZZ)

($XXX) or ($YYY + $

ZZZ) whichever is

greater

2.5.2 Two basic rents will be set to reflect different handling capacity of the Cruise Terminal before and after completion of dredging work for the second berth affected by the submarine gas mains. The first basic rent is made for the period from the commencement date of operation of the first berth to the date immediate before completion of dredging work for the second berth affected by the submarine gas mains. The commencement

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date of operation for the first berth will be taken as a rent effective date for the first basic rent. 2.5.3 The second basic rent is applicable for the period from the completion date of dredging work for the second berth affected by the submarine gas mains to the expiry date of the tenancy. The Government will issue an advance notice to the tenant confirming the completion date of the dredging work for the second berth affected by the submarine gas mains and the completion date specified in the said letter will be taken as a rent effective date for the second basic rent. 2.5.4 We will divide the gross receipt into cruise terminal operation and general commercial uses and the sharing ratios for these two portions will be set separately. The gross receipt for cruise terminal operation includes, but is not limited to, berthing fees, passenger fees, porter fees, the proceeds from the long-term contracts entered into with the cruise operators. The gross receipt for general commercial uses includes, but is not limited to, rent income and fees for advertising signs, temporary use of non-cruise related activities, car parking spaces and ancillary commercial area. The sharing ratios will be maintained throughout the whole tenancy period. 2.6 Security Deposit A security deposit of a fixed lump sum or 6 months’ basic rent, whichever is higher, in the form of cash or bank guarantee, and parent company guarantee are proposed to secure performance and observance of the tenancy agreement. The tenant is expected to provide the deposit after the award of the tender. After the expiry or sooner termination of the tenancy, the cash deposit or bank guarantee will be returned to the tenant without interest if all tenant’s obligations under the tenancy have been observed and complied with to the satisfaction of the Government.

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2.7 Alienation and Subletting 2.7.1 Since assessment of the tender will take into account the tenderer ’s competency and experience in operating cruise terminal, we expect that the successful tenderer will occupy, manage and operate the terminal facilities itself. We consider that the tenancy should be non-assignable and non-transferrable. Any transfer or disposal of the tenant’s share capital will be subject to the prior written approval of the Government. 2.7.2 When there is a change in the management team, we intend to require the tenant to notify the Government in writing and seek prior written approval of the Government. The Government shall have the option to terminate the tenancy if the change in management team is considered not acceptable and the tenant shall have no claim whatsoever against the Government in respect of such termination. 2.7.3 We intend to allow the tenant to sublet part or parts of the ancillary commercial area provided that it is let at full market rent, except the portion sublet to the HKTB at nominal rent as described in paragraph 2.4.6. The tenant will not be allowed to grant rent free period or concessionary rent periods or waive any rental payments under sub-leases without the prior written consent of the Government. Any further underletting of a sub-let part will not be allowed. 2.7.4 The tenant will be allowed to sublet the car parking spaces provided that it is used in connection with the cruise terminal operation and ancillary commercial area. Subletting of advertising signs will be subject to the prior written approval of the Government.

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Chapter 3 Operational Requirements 3.1 Berths Allocation Advance booking system 3.1.1 We intend to specify an advance booking system whereby cruise operators can make bookings of berthing slots in advance. The tenancy period would be divided into a number of window periods. For each window period of say 1 to 1.5 year, there will be a 1-month application period of about 12 to 18 months in advance. For example, for the window period of July 2013 to December 2014, the berthing slots would be open for application in June 2012. The berthing slots would be assigned in July 2012. For the window period of January to December 2015, the berthing slots would be open for application in December 2013, while the berthing slots would be assigned in January 2014. For the unreserved berthing slots, they would be open for booking by cruise operators on a first-come-first-served basis. We expect the tenant to formulate the details and operate the advance booking system. Open-to-all principle 3.1.2 The Cruise Terminal is developed to serve the needs of the cruise industry as a whole. The tenant should not operate the Cruise Terminal in such a way to restrict the use of berths to any particular customer or customers exclusively. We therefore expect the tenant to adopt an open-to-all principle in the allocation of berthing slots of the Cruise Terminal in the application periods. 3.1.3 We propose a set of berth-allocation guidelines for the tenant, who is expected to develop detailed berthing slots allocation policies along the guidelines drawn up by the Government. The Government reserves the right to amend the detailed berthing slots allocation policies of the tenant to ensure that they comply with the guidelines. The berth-allocation guidelines will form part of the terms of the tenancy and it

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cannot be altered without the agreement of both parties. Non-compliance of the berth-allocation guidelines will constitute a breach of the tenancy agreement and the Government may exercise its right to forfeit the tenancy. The following proposed guidelines set out the priorities (in descending order) assigned to different cruise vessels, when they have conflicts in booking berthing slots. (i) Mega Cruise Vessels-Currently Hong Kong does not have

cruise terminal facility that can accommodate mega cruise vessels4. As a result, mega cruise vessels are now required to berth at container terminals or mid-stream. After completion, the Cruise Terminal would have the capacity to berth mega cruise vessels. We therefore consider it essential that, for operational reason, in allocating berthing slots, the tenant should assign priority to mega cruise vessels.

(ii) Homeport with itineraries/turnaround operation- These

vessels would enhance Hong Kong’s position as a leading regional cruise hub, and bring in higher economic benefits than port-of-call vessels.

(iii) Port-of-call cruise vessels. (iv) Other cruise vessels not falling within categories (i), (ii)

and (iii). (v) Within each category, vessels with higher frequency of calls

and greater volume of traffic would have higher priority in getting the berthing slots. A formula (frequency of calls x number of passengers) is proposed for determining the priority of the cruise vessels.

3.1.4 The proposed guidelines are illustrated in Annex V. 4 Mega cruise vessels refer to those cruise vessels with displacement tonnage of over 50,000 tonnes.

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Applicability of the proposed guidelines 3.1.5 Our current thinking is for the proposed guidelines to apply to the first berth of the Cruise Terminal throughout the tenancy period. When the second berth is fully operational i .e. capable to accommodate mega cruise vessels after relocation of the submarine gas mains, we intend to allow the tenant to enter into long-term contracts with cruise operators in the allocation of berthing slots of the second berth, subject to certain conditions set by the Government (e.g. homeport with itineraries/turnaround operation would have priority during peak season. (peak season to be determined by the Government)) 3.2 Berthing Fees 3.2.1 The Cruise Terminal will face local and regional competition. We consider it appropriate for the fees and charges to be set by market demand and supply. Therefore, we intend to leave it to the tenant to determine fees and charges having regard to the market situation. 3.2.2 Currently, before the commissioning of the first berth of the Cruise Terminal in 2013, the Government will assist cruise vessels to berth at alternative locations such as the container terminals in Kwai Tsing or China Merchants Wharf in Kennedy Town, when the cruise vessels cannot berth at Ocean Terminal due to size or conflicting schedule. We expect the commissioning of the first berth in mid-2013 would alleviate the shortage of berthing slots in Hong Kong, and the Government intends to facilitate such alternative berthing only when the cruise vessels cannot berth at cruise terminals. 3.3 Permission, Registration, Consents The tenant is expected to obtain at its own cost the necessary registration, permissions, consents, licenses and approvals for operation of the Cruise Terminal. The tenant shall make no claim for any kind whatsoever against the Government in the event of the tenant’s failure or inability for any reason to

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obtain or renew any such registration, permissions, consents, licences and approvals. 3.4 Security 3.4.1 The tenant will be required at its own cost to formulate a port facility security plan and implement it by providing sufficient security equipment and personnel to meet the safety and security requirements as stipulated in the International Ship and Port Facility Security Code. The tenant is also expected to fulfill the respective security and public safety requirements of various occupying government departments. The tenant should co-operate with the various occupying government departments in ensuring the security of the Cruise Terminal. 3.4.2 The tenant should note that legislation (including subsidiary legislation) may be enacted in the future to govern restricted area of the Cruise Terminal. 3.5 Sanitation 3.5.1 The Cruise Terminal will be subject to Prevention and Control of Disease Ordinance and its subsidiary legislations (Chapter 599 & 599A of the Laws of Hong Kong) governing sanitation, disease prevention and control of point of entry. The tenant will be required at its own cost to maintain the facilities used by travelers at the point of entry in a sanitary condition and free from sources of an infectious disease or contamination, including vectors and reservoirs. 3.5.2 The tenant shall fully cooperate with the Director of Health and give reasonable assistance as may be required by a health officer in the execution of the health officer's functions under the Ordinance and its subsidiary legislations.

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Chapter 4 Scope and Standard of Services 4.1 Industry Engagement We expect the tenant to be able to serve market needs, and be responsive to the changing market situation. We consider it necessary for the tenant to establish a platform to engage the cruise market proactively. To this end, we suggest requiring the tenant to set up a Market Consultation Forum to engage the cruise industry stakeholders. The tenant will be required to propose the membership, frequency of meetings, and topics to be discussed at the Forum and seek approval from the Government. The Government reserves all rights to make any amendments to the proposal made by the tenant. 4.2 Promotion of Cruise Tourism As an important stakeholder of the cruise industry in Hong Kong, the tenant is expected to contribute by assisting the HKTB in promoting cruise tourism in Hong Kong and the region. This would also in turn help its own business of berthing cruise vessels. More specifically we suggest requiring the tenant at its own cost to take part in at least one overseas promotional visit and participate in at least one international/regional cruise market conferences as specified by the HKTB. The tenant should also facilitate the HKTB to conduct hospitality activities within the Cruise Terminal for the arrival of cruise passengers. 4.3 Service Pledges on Operation and Management 4.3.1 The tenant is expected to operate and manage the Cruise Terminal at a world-class standard, and be responsive to changing needs. When the tenancy is invited for tenders, we intend to require the prospective tenderers to propose service pledges on operation and management of the Cruise Terminal. Examples include the time required to handle baggage at kerbside, load baggage onto vessels, place gangways, claim baggage and load passenger coaches. The service pledges proposed by the successful tenderer will form part of the

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tenancy agreement and cannot be amended except with the prior written consent of the Government. 4.3.2 We intend to require the tenant to appoint an independent consultant approved by the Government to verify whether the service pledges have been met, through regular and random check. The consultant shall prepare a report on compliance with the service pledges on a bi-annual basis. If the tenant fails to meet the services pledges, the Government will serve notice to the tenant requiring him to remedy the failure within a prescribed timeframe. If the tenant fails to comply with the default notice, it is a non-performance of the tenancy. 4.4 Disclosure We believe an open and transparent operation of the Cruise Terminal could facilitate the industry to monitor the services and performance of the tenant. We intend to specify the types, frequency and means of information to be made public by the tenant. The information to be disclosed to the public may include general statistics (e.g. berth utilisation rates, vessel calls and passenger throughput), detailed arrangements for allocating berthing slots, record of accidents, standard fee schedule, changes in management team members and the compliance of service pledges on operation and management. 4.5 Reporting to the Government 4.5.1 The Government will monitor the performance of the tenant closely to ensure that it meets market needs. We intend to require the tenant to submit an Annual Operation Report to the Government, which may include topics such as compliance with the service pledges on operation and management, security and transportation management reports, and information on maintenance scheduling. We also expect the tenant to report to the Government promptly if there is any service disruption.

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4.5.2 For the purposes of enforcing the tenancy agreement and monitoring the services of the terminal, the Government will reserve the power to enter and inspect the Cruise Terminal whenever necessary, and require the tenant to provide any information about the operation and management of the terminal, including financial information, to the Government. 4.6 Bookings of berthing slots after award of the tender

and prior to commencement of the tenancy 4.6.1 The Government intends to award the tender in 2011/2012 so as to enable the tenant to accept advance bookings of the berthing slots about one and a half years before the operation date of the first berth on 1 July 2013. Hence, after award of the tender, the tenant is expected to set up a website within a prescribed timeframe to facilitate bookings of the berthing slots for the first berth and disclose the booking results. We also expect the tenant to embark on marketing and promotion of the Cruise Terminal and disseminate updated information of the Cruise Terminal to the cruise vessel operators or shipping agents. 4.6.2 All receipts generated from the advance bookings prior to the commencement date of the tenancy will be taken into account in calculating the tenant’s gross receipt upon commencement of the tenancy. The Government will reserve all rights to inspect the accounts for the period before the commencement of the tenancy. 4.7 Break Clause We intend to put in a break clause which allows the Government to review the performance of the tenant and terminate the tenancy at the end of the fifth year if the performance of the tenant is not satisfactory upon review. We intend to conduct a review on tenant’s performance by the end of the third year and a half and the overall performance of the tenant (such as compliance with service pledges, maintenance condition, compliance with security requirements, industry

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engagement, promotion of cruise tourism) will be taken into account in the review. In exercising this break clause, we intend to inform the tenant by giving an advance notice of 18 months before the end of the fifth year.

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Chapter 5 Other Contractual Obligations 5.1 Maintenance of Facilities 5.1.1 We intend to require the tenant to maintain and repair the non-structural parts of the premises. The tenant is expected to keep and maintain at its own cost the premises in good repair and condition to the satisfaction of the Government. In the event of default in complying with the maintenance obligation on the part of the tenant, the Government may carry out the required maintenance and repair and recover the cost (including supervisory and overhead charges) from the tenant. 5.1.2 The Government will take up the maintenance and repair of (i) external/structural parts of the premises; (ii) electrical and mechanical equipment/appliances (such as gangway) provided by the Government; (iii) dredging zones associated with the Cruise Terminal; and (iv) fender and anchor system. The tenant shall permit the Government, his authorised agents, contractors or other persons authorised by the Government at all times and free of cost the right to enter into the premises to carry out inspection, repair and maintenance works provided that steps shall be taken to ensure that the least interference with the tenant’s normal operation of the premises will be caused. If required by the Government, the berths shall be closed to facilitate the Government or his authorised agents, contractors or other persons authorised by the Government to carry out inspection, repair and maintenance works. The Government will schedule its maintenance works and carry out at the timeframe agreed with the tenant. 5.1.3 The tenant shall not be entitled to make any claim against the Government, his authorised agents, contractors or other persons authorized by the Government in respect of any disruption, suspension of services or closure of premises resulting from any fault of equipment/appliances and any inspection, repair and maintenance works being carried out at the premises by the Government, his authorised agents, contractors or other persons authorised by the Government.

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5.2 Utilities Supplies and Related Charges 5.2.1 The tenant is expected to make arrangement for the supply of electricity, gas, water, data and telephone lines and to pay all charges in connection with the utilities supplied to the areas under its management. If separate meters are not installed, the tenant shall share the charges with the other users of the Cruise Terminal. We will subscribe the services from Kai Tak District Cooling System for providing centralised air conditioning to the Cruise Terminal. The tenant will have to pay the associated service charges. 5.2.2 In addition, the tenant is required to pay rates, taxes, duties whatsoever to be assessed, imposed, levied or charged upon the premises or upon the tenant. 5.3 Insurance The tenant is responsible for any loss of or damage to the assets provided by the Government. The tenant will be required at its own cost to procure and maintain adequate insurance (including but not limited to public liability, property damage, loss of or damage to machinery and equipment provided by the Government, employee’s compensation and loss of rent) to cover all types of insurable events which are considered to be “usual” in accordance with the standard of cruise terminal operation. 5.4 Facility Management The cruise terminal building will be occupied by various government departments and the tenant. We intend to appoint a private property management company to (i) take care of the management issues of the common facilities such as air conditioning system, burglar system; (ii) co-ordinate maintenance of common facilities; and (iii) monitor the compliance with the tenancy agreement. The tenant will be required to share the associated management fee.

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5.5 Fitting-out works 5.5.1 When the terminal operation facilities are handed over to the tenant, basic fitting-out works will be provided to facilitate early operation of the Cruise Terminal. As regards the ancillary commercial area and operator ’s office, we consider it more appropriate for the tenant to design and fit out these areas to suit its own needs and will deliver these premises in a “bare shell” condition. 5.5.2 Prior to the carrying out of fitting-out works or alteration and addition works within the premises, the tenant will be required at its own cost to prepare and submit fitting-out or alteration and addition plans to the Government for approval. No fitting-out works or alteration and addition works shall be allowed to commence on the premises unless and until all such plans have been approved by the Government. The tenant is expected to fit out the premises in a good proper and workmanlike manner using good quality materials at its own cost. 5.6 Machinery, Plants, Equipment, Furniture 5.6.1 When the terminal operation facilities are handed over to the tenant, the Government will transfer some furniture, equipment, plants and machinery such as gangways, travelators and shipping schedule indicator system to the tenant for operation. The tenant will be required at its own cost to provide personnel to operate these equipment, plants and machinery to the satisfaction of the Government. The tenant is expected to make proper and careful use of the Government assets and is responsible for any loss of or damage to the assets. 5.6.2 The Government is not responsible for procuring all machinery, plants, equipment, instruments, tools and furniture for cruise terminal operation. The tenant will be required to provide at its own cost all necessary machinery, plants, instruments, tools, furniture and equipment such as forklift for

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proper and efficient operation of the Cruise Terminal and the tenant can retain these assets at the expiry of the tenancy. 5.7 Termination 5.7.1 The Government shall be entitled to re-enter upon the premises at any time if: (a) there is any breach, non-performance or non-observance

of any of the terms and conditions of the tenancy on the part of the tenant; or

(b) the tenant shall become bankrupt or being a company

shall enter into any liquidation whether compulsory or voluntary or shall enter into any composition with its creditors

5.7.2 Upon termination or expiry of the tenancy, the tenant is expected to deliver up to the Government the premises and government assets in good repair, clean and serviceable condition. The Government is entitled to recover the costs from the tenant for repairing and maintaining premises and assets not in good repair, clean and serviceable condition. 5.7.3 Prior to the expiry of the tenancy, the prospective bidders shall be allowed to enter into the premises to view the premises and Government assets. Also, joint inspection with the tenant, the Government and new tenant will be made to ascertain the condition of the premises and assets and the tenant will be required to make good any deficiencies to the satisfaction of the Government. If so required by the Government, the tenant shall remove at its own cost the fixtures and fitting works, and return the premises to its original condition as at the date of possession of the premises. Tourism Commission 31August 2009

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Annex I

DSD TGGFG

C

CRuise

c Cc fhafjdjfCrui CRUIS

TerCruise D C

c

Fdfafre a e c Ccc d

fffffffffffffff

RR

c RR c

Cruise Terminal

30

Annex II

31

Annex III

32

Annex IV

Premises to be Leased

Terminal Operation Facilities #

Gross Floor Area (m2)

Baggage handling areas

9,000

Passenger waiting and queuing (including security screening & VIP lounge)

9,523

Passenger check-in/ticketing

4,000

Terminal operator’s office (including security control room, admin office, staff rest room/changing room)

1,000

Concourse

5,805

Commercial Area

Gross Floor Area (m2)

Ancillary commercial area

5,600

Apron Area

35 metres(width)

850 metres (long)

# Those lift cores, escalators cores and staircases which are essential for the security operation of the Cruise Terminal will form part of the premises and will be under the management of the tenant.

33

Annex IV Premises to be Leased

Parking Spaces

Number

Cruise Passengers (i) Private Vehicles

95

Cruise Terminal Operation (i) Private Vehicles (ii) Light Goods Vehicles

6

4

Ancillary Commercial Area (i) Private Vehicles (ii) Light Goods Vehicles (iii) Motor Cycles

19

3

5

Loading/Unloading Spaces

Number

Cruise Terminal Operation (i) Container Vehicles (ii) Light Goods Vehicles (iii)Pick-up/drop off space (Private vehicles)

1

5

1

Ancillary Commercial Area Light Goods Vehicles

4

34

Annex IV

Premises to be Leased

Ground Transportation Area

Drop off/ Pick up, Lay-bys and Queuing Area

Number

Single-deck Buses Queuing space Pick up/drop off area Double-deck Buses Lay-bys

30 40

2

Taxis Queuing Space Pick-up Space Drop-off Space

36 18 15

Private Vehicles Pick-up Space Drop-off Space

15 15

Internal Access Road and Circulation Area

35

Annex V

Proposed Berth-Allocation Guidelines for the first berth

Mega cruise vessel

YES (Higher priority)

NO

Port of call (Second priority)

Higher frequency of Calls and Greater Volume of Traffic

(Higher priority)

Lower frequency of Calls and Smaller Volume of Traffic

Higher frequency of Calls and Greater Volume of Traffic

(Higher priority)

Lower frequency of Calls and Smaller Volume of Traffic

Others

Homeport with itinerary/turnaround

operation (First priority)

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Annex VI

Schedule of Responsibilities of the Tenant and Landlord

Categories Items Tenant Landlord

Rent

Utilities Charges, Air Conditioning Charges, Rates, Taxes, Duties

Payments

Facility Management

Fee

Berth-Allocation

Guidelines

Detailed berthing slot allocation policies

Berthing Fees

Security

Sanitation

Operational Requirements

Compliance with Other Requirements Relating

to Operation of the Cruise Terminal

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Categories Items Tenant Landlord

Non-Structural Maintenance and repair

of the Premises

Structural Maintenance

and repair of the Premises

Electrical and

Mechanical Equipment and Appliances provided by the

Landlord

Electrical and

Mechanical Equipment and Appliances

provided by the Tenant

Maintenance

Dredging Zones and

Fender System

Industry Engagement

Promotion of Cruise

Tourism

Scope and Standard of

Services

Service Pledges

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Categories Items Tenant Landlord

Ancillary Commercial Area and operator ’s

office

Fitting-out Works

Terminal Operation Facilities, Apron and

Ground Transportation Area

Equipment

and Appliances

e.g.Gangways,

Travelators, Shipping Schedule Indicator

System

Cash Deposit or Bank Guarantee and Parent Company Guarantee

Sureties and Security

Insurance