ELL Environmental Holdings Limited — Proxy Solicitation & Information Statement 2004

Dec 20, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Sinotrans Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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SINOTRANS LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 0598)

DISCLOSEABLE TRANSACTION

20th December, 2004

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
THE FRAMEWORK AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
INFORMATION ON THE BUSINESS AND REASONS FOR THE TRANSACTIONS . .	5
INFORMATION ON THE GROUP AND UPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
APPENDIX — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7

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DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

• ‘‘Announcement’’ the announcement dated 2nd December, 2004 issued in the Company regarding the Framework Agreement entered into between Sinoair and UPS on 1st December, 2004

• ‘‘Beijing JV’’ UPS-Sinotrans International Express Co., Ltd., a sino-foreign joint venture whose registered capital is owned as to 50% by Sinoair and 50% by a wholly-owned member of the UPS Group

• ‘‘Business(es)’’ assets and operations in express delivery agency businesses conducted by Sinoair at all locations in the PRC, including associated customers, customer information, operations, customs brokerage/Express Handling Unit (EHU), customer service/Customer Service Centre (CSC) and a number of fixed assets

• ‘‘Company’’ Sinotrans Limited, a joint stock limited company incorporated in the People’s Republic of China with limited liability, the shares of which are listed on the Stock Exchange

• ‘‘Consideration’’ US$100 million (equivalent to approximately HK$780 million subject to adjustments)

• ‘‘Director(s)’’ director(s) of the Company

• ‘‘FrameworkAgreement’’ a framework agreement dated 1st December, 2004 entered into between Sinoair and UPS, pursuant to which Sinoair agreed to modify the basis of its business cooperation with UPS and transfer the Business and Interests to UPS

• ‘‘Group’’ the Company, its subsidiaries and its jointly controlled entities

‘‘Hong Kong’’	the Hong Kong Special Administrative Region of the PRC	the Hong Kong Special Administrative Region of the PRC	the Hong Kong Special Administrative Region of the PRC
‘‘HK$’’	Hong Kong dollars
‘‘Interests’’	Sinoair’s entire interests in Beijing JV,	representing	50%	of	its
	registered capital
‘‘Latest Practicable Date’’	15th December, 2004, being the latest practicable date		prior	to	the
	printing of this circular for ascertaining certain information contained
	herein
‘‘Listing Rules’’	The Rules Governing the Listing of Securities on the Stock Exchange
‘‘PRC’’	the People’s Republic of China
‘‘RMB’’	Renminbi
‘‘SFO’’	the Securities and Futures Ordinance (Cap.	571 of the Laws of		Hong
	Kong)

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DEFINITIONS

‘‘SSX Listing Rules’’	Rules of the Shanghai Stock Exchange on Listing of Stocks
‘‘Share(s)’’	ordinary share(s) of RMB1.00 each in the Company
‘‘Shareholder(s)’’	holder(s) of the Share(s)
‘‘Sinoair’’	Sinotrans Air Transportation Development Co., Ltd., which is a non
	wholly-owned subsidiary which is owned as to approximately 70.36%
	by the Company and whose A shares are listed on the Shanghai Stock
	Exchange
‘‘Sinoair Group’’	Sinoair and its subsidiaries
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘UPS’’	UPS Worldwide Forwarding, Inc.
‘‘UPS Group’’	UPS, its holding companies and its fellow subsidiaries
‘‘US$’’	United States of America dollars

For the purposes of this circular, unless otherwise indicated, the exchange rates of HK$7.80 = US$1.00 and HK$1.00 = RMB1.06 have been used for currency conversion, where applicable. This is for illustration purpose only and does not constitute a representation that any amounts in HK$, RMB or US$ have been, could have been, or may be converted, at these or such other rates.

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LETTER FROM THE BOARD

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SINOTRANS LIMITED

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

Executive Directors: Zhang Bin Zhang Jianwei Tao Suyun Li Jianzhang

Registered Office and Headquarters: Sinotrans Plaza A43, Xizhimen Beidajie Beijing People’s Republic of China 100044

Non-Executive Directors:

Yang Yuntao Liu Jinghua Jerry Hsu Ken Torok Lee Chong Kwee

Independent Non-Executive Directors: Koo Kou Hwa Sun Shuyi Lu Zhengfei

Principal Place of Business in Hong Kong: 21st Floor, Great Engle Centre 23 Harbour Road Wanchai Hong Kong

20th December, 2004

To the Shareholders

Dear Sir and Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

Reference is made to the Announcement dated 2nd December, 2004, in relation to the Framework Agreement entered into between Sinoair, a non-wholly owned subsidiary of the Company and UPS, pursuant to which Sinoair agreed to modify the basis of its business cooperation with UPS and to transfer the Business and Interests to UPS, at a consideration of US$100 million (equivalent to approximately HK$780 million).

The purpose of this circular is to provide you with further information in relation to terms of the Framework Agreement.

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LETTER FROM THE BOARD

THE FRAMEWORK AGREEMENT

Date of the Framework Agreement:

• 1st December, 2004

Parties to the Framework Agreement:

• (1) Sinoair, a non-wholly owned subsidiary of the Company

• (2) UPS

Business and Interests

Assets and operations in express delivery agency businesses conducted by Sinoair at all locations in the PRC, including associated customers, customer information, operations, customs brokerage/Express Handling Unit (EHU), customer service/Customer Service Centre (CSC) and a number of fixed assets. The fixed assets are mainly vehicles whose value are not included as part of the Consideration and are insignificant when compare to the Consideration of US$100 million. The amount of consideration for such assets will be determined when the particular Business is being transferred at which time UPS and Sinoair will agree if a valuation on the vehicles is required and how the costs of valuation will be shared.

Under the Framework Agreement, 50% interests in Beijing JV owned by Sinoair will also be transferred to UPS.

The Business will be transferred to UPS over a period of 3 years according to their locations in the PRC. The Interests will be transferred to UPS on or after 30th December, 2004. Subject to obtaining the requisite government approvals, the Company expects the transfer of Interests to be completed before 31st December, 2005 and that the transfer of the Business will be completed before 31st December, 2007.

Consideration

US$100 million (equivalent to approximately HK$780 million) subject to adjustments. In the event that the revenue of each individual locations in the PRC do not reach certain pre-agreed levels, the Consideration will be adjusted on an agreed basis.

The Consideration is payable in cash as to 40% on the thirtieth day following the date of signing of the Framework Agreement, 10% on 31st December, 2005 and as to the remaining 50% on 31st December, 2006 in each case subject to agreed closing conditions such as no breach of representations and warranties given under the Framework Agreement by Sinoair.

The Consideration was arrived at arms length negotiation by reference to the latest available financial figures of the Businesses.

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LETTER FROM THE BOARD

Non-competition

Under the Framework Agreement, the Business will be transferred to UPS in stages according to their locations over a period of 3 years. Sinoair has agreed under the Framework Agreement, not to or to procure its members not to, divert any customer of the Business and Beijing JV until the end of 2007 and shall assist UPS to achieve the same level of revenue as was earned by the relevant Business during the six month period immediately preceding the transfer of such Business to UPS.

In the event there is a shortfall in such level of revenue during the six month period immediately preceding the transfer of such Business, the part of the Consideration payable in that year will be adjusted downward on an agreed basis by an amount equal to 14.5% of the actual amount of the shortfall.

INFORMATION ON THE BUSINESS AND REASONS FOR THE TRANSACTIONS

Sinoair and UPS, together with members of the Sinoair Group and UPS Group, currently provide UPS branded international express package delivery services in the PRC through strategic partnerships. These international express package delivery services are provided through a network of Sinoair-owned and operated offices and through a network of, agents, sub-agents, and third party service providers. Sinoair and UPS also cooperate in the PRC through Beijing JV which is an express delivery services joint venture whose operations include air freight forwarding and express delivery in Beijing, PRC.

As the PRC has become a member of the World Trade Organisation, its promise to open competition in the international express delivery services is approaching. Even though the international express delivery business is growing tremendously, the Directors are of the view that the competition in the international express delivery agency business will become more intense and thereby increase the risk of being an agent. This is not consistent with the Company’s strategic development. The Directors consider that it is in the interests of the Company to focus on its core operations in which it has more competitive strengths than others.

The unaudited total revenue of Sinoair attributable to the Business prepared under PRC GAAP for the three financial years ended 31st December, 2003 were approximately RMB175 million (equivalent to approximately HK$165 million), RMB273 million (equivalent to approximately HK$258 million) and RMB350 million (equivalent to approximately HK$330 million), representing approximately 11.9%, 12.3% and 11.67% respectively of the total turnover of Sinoair for the corresponding period. The unaudited net profit before tax of Sinoair attributable to the Business prepared under PRC GAAP for the two financial years ended 31st December, 2003 were approximately RMB89,360,000 and RMB134,990,000 (equivalent to approximately HK$84,302,000 and HK$127,349,000) and unaudited net profit after tax were RMB65,950,000 and RMB96,780,000 (equivalent to approximately HK$62,217,000 and HK$91,302,000). The unaudited net asset value of Sinoair prepared under PRC GAAP as at 30th June, 2004 were approximately RMB2,201,463,000 (equivalent to approximately HK$2,076,852,000).

Based on the audited financial statements of Beijing JV prepared under PRC GAAP for the two financial years ended 31st December, 2003, the profit before tax amounted to approximately RMB3,664,151 and RMB6,030,729 respectively (equivalent to approximately HK$3,424,440 and HK$5,689,367) and profit after tax for the year 2002 and 2003 amounted to approximately RMB2,330,509 and RMB4,009,554 respectively (equivalent to approximately HK$2,178,046 and HK$3,782,598). The audited net asset value as at 31st December, 2002 and 2003 were approximately RMB11,022,722 and RMB15,032,276 respectively (equivalent to approximately HK$10,301,609 and

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LETTER FROM THE BOARD

HK$14,181,392). The unaudited net assets value as at 30th June, 2004 was approximately RMB17,700,000 (equivalent to approximately HK$16,698,113). Beijing JV is at present accounted in the Company’s financial statements using the equity accounting method.

The Company estimates that on completion of transfer of the Business and Interests in each of 2005, 2006 and 2007, the Company will recognise a net gain of approximately RMB$17,000,000 (equivalent to approximately HK$16,038,000) in its financial statements.

The proceeds arising from the Consideration payable each year during 2005, 2006 and 2007 will be used as to approximately 70% for operations in air cargo transportation, domestic express and as to 30% for general working capital purpose.

The Company is operating part of the Businesses. Sinoair will secure the appropriate agreements for the transfer of those parts of the Business with the Company. As the Company is a connected person of Sinoair under the SSX Listing Rules, Sinoair will seek the requisite approvals in compliance with the SSX Listing Rules. Sinoair estimates that about 15% to 25% of the Consideration will be attributable to such part of the Businesses. Further announcement will be made in respect of any such further agreement which Sinoair may enter into with the Company in respect of transfer of such part of the Business.

INFORMATION ON THE GROUP AND UPS

The Group is a provider of logistics services in the PRC. It is principally engaged in the business of the provision of freight forwarding, express services and shipping agency services. The Group also provides other support services to its customers including storage and terminal services, trucking and marine transportation services, with an aim to providing its customers with fully integrated and diverse logistics services.

UPS is a leading provider of integrated logistics services, with expertise in freight forwarding, express package delivery services shipping agency, storage and terminal services and traveling and related transportation services. To the best of the knowledge, information and belief of the Directors having made all reasonable enquiry, each of UPS and its ultimate beneficial owner is third party independent of and not connected with the Company, its directors, its substantial shareholder and their respective associates (as such term is defined in the Listing Rules).

The Directors are of the view that the terms of the Framework Agreement are fair and reasonable and that the Framework Agreement is in the interest of the Company and its Shareholders as a whole.

Yours faithfully, By order of the Board of Sinotrans Limited Gao Wei Secretary

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts not contained in this circular, the omission of which would make any statement contained herein misleading.

2. DISCLOSURE OF INTERESTS

I. Interests of Directors

As at the Latest Practicable Date, so far as the Directors or supervisor of the Company are aware, none of the Directors or supervisor of the Company has interests and short positions of in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

II. Interests of Shareholders discloseable pursuant to the SFO

As at the Latest Practicable Date, so far as is known to the Directors or supervisor of the Company, the following persons (other than a Director or supervisor of the Company) had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part VX of the SFO:

(a) Interests in the Shares

				% of the	% of the
				Company’s	Company’s	% of the
	Number of	Shares held		issued total	total issued	Company’s
	(Class of Shares)			domestic	H share	total issued
Name of Shareholders	Long position	Short position	Nature of Interests	share capital	capital	share capital
China National Foreign	2,461,596,200		Corporate Interests	100		57.93
Trade Transportation	(Domestic
(Group)	Shares)
Deutsche Bank	219,453,000		Corporate Interests		12.28	5.16
Aktiengesellschaft	(H Shares)
Deutsche Post	201,852,000		Corporate Interests		11.30	4.75
Beteiligungen	(H Shares)
Holding GmbH
UPS Air Couriers of	124,657,000		Corporate Interests		6.97	2.93
America Limited	(H Shares)
Oppenheimerfunds, Inc	92,079,000		Corporate Interests		5.15	2.17
	(H Shares)
J.P. Morgan Chase	90,154,000		Corporate Interests		5.04	2.12
& Co	(H Shares)
		52,459,000			2.93	1.23
		(H Shares) (Note)

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GENERAL INFORMATION

APPENDIX

Note: Lending Pool

• (b) Substantial Shareholders of other members of the Group

As at the Latest Practicable Date, so far as is known to the Directors or supervisor of the Company, no person (not being a Director or supervisor of the Company) was interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the other members of the Group.

III. Directors’ interests in competing business

Three of the non-executive Directors, namely Mr. Jerry Hsu, Ken Torok and Lee Chong Kwee are considered to have interests in other business apart from the Group’s business, which competes or likely to compete, either directly or indirectly with the Group’s business as at the Latest Practicable Date, within the meaning of the Listing Rules. They are all representatives nominated by the Strategic Investors of the Company (namely DHL Worldwide Express BV (‘‘DHL’’), UPS Inc. (‘‘UPS’’) and Exel plc. (‘‘Exel’’) (collectively, the ‘‘Strategic Investors’’).

DHL is a member of the Deutsche Post World Net Group whose business operations are global mail, express delivery, logistics and financial services serving both in Europe and around the world.

UPS is a package delivery company and a provider of specialized transportation and logistics services worldwide.

Exel is a UK listed, FTSE 100 company, which provides supply chain management solutions to its customers around the world. Exel’s range of logistics solutions encompasses the whole supply chain from design and consulting through freight forwarding, warehousing and distribution services to integrated information management and e-commerce support.

While, for the purposes of the Listing Rules, each of Mr. Jerry Hsu, Ken Torok and Lee Chong Kwee is considered to have interests (by way of minority equity interests or stock options or directorships) in competing businesses (i.e. those of the Strategic Investors, each being a major international company in the transportation and logistics industry), the Company has been and continues to carry on its business independently of and at arms length from, those businesses and through its joint venture and cooperation arrangements with those Strategic Investors.

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors or supervisor of the Company, no other Directors or any of their respective associates had any interests in a business, which competes or may compete with the business of the Group.

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or proposed Directors had entered into or proposed to enter into any service contract with the Company which will not expire or may not be terminated by the Company within a year without payment of any compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX

4. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims of material importance and, so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against any member of the Group.

5. MISCELLANEOUS

• (a) The secretary of the Company is Gao Wei. While Mr. Gao does not have the qualifications specified in Rule 8.17(2) of the Listing Rules, in connection with the listing of the Shares of the Company in 2003, the Stock Exchange has confirmed by its letter dated 28th January, 2003 of Mr. Gao appointment as company secretary of the Company under Rule 8.17(3) of the Listing Rules, by reference to the Company’s submissions on his academic qualifications and relevant experience to discharge the functions of secretary of the Company.

• (b) Given that the operations of the Company are based in the PRC, it has difficulties in finding a suitable candidate who could act as the qualified accountant of the Company as required under rule 3.24 of the Listing Rules. As at the Latest Practicable Date, the Company is still in the process of looking for a suitable candidate to that position.

• (c) The registered office and headquarters of the Company is situated at A43, Xizhimen Beidajie, Beijing, People’s Republic of China, 100044. The principal place of business of the Company in Hong Kong is situated at 21st Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong.

• (d) The share registrars of the Company is Computershare Hong Kong Investor Services Limited at Room 1901–5, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (e) In any event of inconsistency, the English language text of this circular shall prevail over the Chinese language text.

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