ELL Environmental Holdings Limited - Proxy Solicitation & Information Statement 2014

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.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim 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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(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0598)

CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee the Independent Shareholders

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A notice convening the EGM to be held in the Meeting Room, 13th Floor, Sinotrans Plaza A, A43, Xizhimen Beidajie, Haidian District, Beijing, the PRC (Post Code 100082) on 24 December 2014 at 9:30 a.m. and a form of proxy for use at the EGM are available on the website of Sinotrans Limited and the website of The Stock Exchange of Hong Kong Limited.

If you do not intend to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to Hong Kong registered office of the Company at Units F&G, 20/F., MG Tower, 133 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong as soon as possible and in any event no later than twenty-four (24) hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment of it, if you so wish.

2 December, 2014

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . .	16
LETTER FROM ASIAN CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34

DEFINITIONS

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

“associates” the meaning ascribed to it under the Listing Rules “Asian Capital” Asian Capital (Corporate Finance) Limited, a corporation licensed under the SFO to carry out Type 1 (Dealing in Securities), Type 4 (Advising on Securities), Type 6 (Advising on Corporate Finance) and Type 9 (Asset Management) regulated activities, the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Nonexemption Continuing Connected Transactions subject to the New Caps “Board” the board of Directors of the Company “Company” 中國外運股份有限公司 (Sinotrans Limited), a joint stock company incorporated in the PRC with limited liability, the H shares of which are listed on The Stock Exchange of Hong Kong Limited “Connected Non Wholly-Owned 青島金運航空貨運代理有限公司 (Qingdao Jinyun Air Cargo Subsidiaries” Freight Forwarding Co. Ltd.), 青島聯通報關有限公司 (Qingdao Liantong Customs Co. Ltd.) and 山東中外運弘志物流有限公司 (Sinotrans Shandong Hongzhi Logistics Co. Ltd.*), each being a non wholly-owned subsidiary of the Company and a connected person of the Company “Controlling Shareholder” the meaning ascribed to it under the Listing Rules “Director(s)” the director(s) of the Company “Domestic Share(s)” domestic invested share(s) of RMB1.00 each in the share capital of the Company “EGM” the extraordinary general meeting of the Company to be convened pursuant to the notice of EGM dated 6 November 2014 to approve the Non-exempt Continuing Connected Transactions and New Caps “Group” the Company and its subsidiaries “H Share(s)” overseas listed foreign invested share(s) of RMB1.00 each in the share capital of the Company

DEFINITIONS

“Independent Board Committee”

a board committee comprising all the independent non-executive Directors of the Company constituted to advise to the Independent Shareholders in respect of the Non-exempt Continuing Connected Transaction subject to the New Caps

“Independent Shareholders” Shareholders other than SINOTRANS & CSC, the Connected Non Wholly-Owned Subsidiaries and their respective associates
“Latest Practicable Date”

27 November, 2014, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited

“Master Services Agreement (Qingdao Jinyun Air)”
the master services agreement dated 6 November 2014 between the Company and 青島金運航空貨運代理有限公司 (Qingdao Jinyun Air Cargo Freight Forwarding Co. Ltd.) in relation to the provision and receipt of transportation and logistics services between the Group and Qingdao Jinyun Air and its subsidiaries
“Master Services Agreement (Qingdao Liantong Customs)”

the master services agreement dated 6 November 2014 between the Company and 青島聯通報關有限公司 (Qingdao Liantong Customs Co. Ltd.*) in relation to the provision and receipt of transportation and logistics services between the Group and Qingdao Liantong Customs and its subsidiaries

“Master Services Agreement (Sinotrans Shandong Hongzhi)”

the master services agreement dated 6 November 2014 between the Company and Sinotrans Shandong Hongzhi Logistics Co. Ltd in relation to the provision and receipt of transportation and logistics services between the Group and Sinotrans Shandong Hongzhi and its subsidiaries

“Master Services Agreement (SINOTRANS & CSC)”

the master services agreement dated 6 November 2014 between the Company and SINOTRANS & CSC in relation to the provision and receipt of transportation and logistics services between the Group and SINOTRANS & CSC Group and its associates

“New Cap(s)”

the maximum value of the Non-exempt Continuing Connected Transactions for each of the three years ending 31 December 2017 as set out in this circular

DEFINITIONS

“Non-exempt Continuing Connected the continuing connected transactions contemplated under the Transactions” Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liaotong Customs) and the Master Services Agreement (Qingdao Jinyun Air) respectively
“percentage ratio(s)” the meaning ascribed to it in Chapter 14 of the Listing Rules
“PRC” the People’s Republic of China
“Qingdao Jinyun Air” 青島金運航空貨運代理有限公司 (Qingdao Jinyun Air Cargo Freight Forwarding Co. Ltd.*), which is held as to 75% by Sinotrans Shandong Company Limited (a wholly-owned subsidiary of the Company) and 25% by LAILON Enterprises Limited (a non wholly-owned subsidiary of SINOTRANS & CSC)
“Qingdao Liantong Customs” 青島聯通報關有限公司 (Qingdao Liantong Customs Co. Ltd.*), which is held as to 75% by Sinotrans Shandong Company Limited (a wholly-owned subsidiary of the Company) and 25% by LAILON Enterprises Limited (a non wholly-owned subsidiary of SINOTRANS & CSC)

“RMB” Renminbi, the lawful currency of the PRC

“Shareholder(s)” holder(s) of shares of the Company
“SINOTRANS & CSC” SINOTRANS & CSC Holding Corporation Limited, the controlling shareholder of the Company which directly and indirectly holds 55.35% of issued share capital of the Company, as at the Latest Practicable Date
“SINOTRANS & CSC Group” SINOTRANS & CSC and its subsidiaries (and for the purpose of this circular, excluding the Group)
“Sinotrans Shandong Hongzhi”
山東中外運弘志物流有限公司 (Sinotrans Shandong Hongzhi Logistics Co. Ltd*), which is held as to 75% by Sinotrans Shandong Company Limited (a wholly-owned subsidiary of the Company) and 25% by LAILON Enterprises Limited (a non wholly-owned subsidiary of SINOTRANS & CSC)
“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Subsidiary(ies)”

has the meaning ascribed to it under the Listing Rules

For the purpose of identification only
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LETTER FROM THE BOARD

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(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0598)

Executive Directors:

Zhao Huxiang Zhang Jianwei Tao Suyun Li Guanpeng

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

Non-executive Directors:

Wang Lin Yu Jianmin Jerry Hsu

Independent non-executive Directors:

Principal Place of Business in Hong Kong:

Units F & G, 20/F., MG Tower, 133 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong

Guo Minjie Lu Zhengfei Han Xiaojing Liu Junhai

2 December, 2014

To the Shareholders

Dear Sir and Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

The Group has certain business relationships with (a) SINOTRANS & CSC Group and its associates; and (b) certain Connected Non Wholly-Owned Subsidiaries of the Company, which constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules. Such business relationships have been taking place since the Company was listed on the Stock Exchange in the year 2003. The Directors expect such business relationships to continue and the Company entered into master services agreements for such continuing connected transactions on 6 November 2014.

LETTER FROM THE BOARD

The purpose of this circular is to provide you with information in respect of Non-exempt Continuing Connected Transactions contemplated under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) to enable you to make a decision on whether to vote for or against the relevant resolutions at the forthcoming EGM.

I. BACKGROUND

The Group is a leading integrated logistics service provider in China. Its principal businesses include freight forwarding, logistics, storage and terminal services, and other services including trucking transportation, shipping business and express services. The Group has certain business relationships with (a) SINOTRANS & CSC Group and its associates; and (b) certain Connected Non Wholly-Owned Subsidiaries, which constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Certain continuing connected transactions have been taking place since the Company was listed on the Stock Exchange in the year 2003. The connected transactions identified by the Company were disclosed or made subject to Shareholders’ approval, as required under the Listing Rules. The Directors intend that such business relationships will continue and the Company has entered into the fixed term agreements required under Rule 14A.52 of the Listing Rules for such continuing connected transactions. To the extent that the relevant continuing connected transactions constitute Non-exempt Continuing Connected Transactions, the Company will seek Independent Shareholders’ approval at the EGM subject to the relevant New Caps.

II. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS WHICH REQUIRE REPORTING, ANNUAL REVIEW, ANNOUNCEMENT AND INDEPENDENT SHAREHOLDERS’ APPROVAL

Set out below is a summary of the Non-Exempt Continuing Connected Transactions which require Independent Shareholders’ approval:

A. Transactions with SINOTRANS & CSC, its subsidiaries and their associates under the Master Services Agreement (SINOTRANS & CSC)

On 6 November 2014, the Company and SINOTRANS & CSC entered into the Master Services Agreement (SINOTRANS & CSC) in respect of the provision and receipt of the transportation and logistics services (including but not limited to freight forwarding services, shipping agency, storage and terminal services, trucking transportation, express services, shipping and container leasing) between members of the Group and SINOTRANS & CSC Group and its associates.

Services provided under the Master Services Agreement (SINOTRANS & CSC) will be at the market prices charged by independent third parties and on normal commercial terms. “Market prices” means the price at which the same or comparable type of services are provided by or to (as appropriate) independent third parties in the same area on normal commercial terms in the ordinary course of business. The mechanism by which the Group ensures that the services provided under the Master Services Agreements (SINOTRANS & CSC) are charged at market prices and the internal

LETTER FROM THE BOARD

control procedures for monitoring such connected transaction to ensure compliance with the Listing Rules are described in “IV. Basis Of Pricing Of The Transactions Contemplated Under The Master Services Agreements And Internal Control Procedures For Monitoring Connected Transactions”

The Master Services Agreement (SINOTRANS & CSC) is conditional upon the Company’s compliance with the relevant connected transaction requirements under the Listing Rules (which include, among other things, the approval of the Independent Shareholders at the EGM). The term of the Master Services Agreement (SINOTRANS & CSC) is for 3 years, commencing on 1 January 2015 and ending on 31 December 2017.

The Directors (including the independent non-executive Directors who have taken into account the advice from Asian Capital) are of the view that the terms (including the New Caps) of the Master Services Agreements (SINOTRANS & CSC) are fair and reasonable so far as the Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

During 2012, 2013 and for the eight months ended 31 August 2014, the turnover/expenses of the Group attributable to each of the above transactions to SINOTRANS & CSC Group and its associates were as follows:

		Amount (RMB)
	2012	2013	2014
	(’000)	(’000)	(’000)
Provision of transportation and logistics
services	243,213	327,835	235,313*
Annual cap in respect of provision of
transportation and logistics services	1,487,000	2,101,000	2,877,000
Historical utilization rate	16.4%	15.6%	8.2%*
Receipt of transportation and logistics
services	471,236	411,941	248,302*
Annual cap in respect of receipt of
transportation and logistics services	2,072,000	2,861,000	3,865,000
Historical utilization rate	22.7%	14.4%	6.4%*

* These figures represent the transaction amount for the eight months ended 31 August 2014 and the utilization rates are calculated by measuring those transaction amounts against the annual cap.

In 2014, the Group disposed of its marine transportation business (“Disposed Marine Transportation Business”) (which was the subject of the Company’s announcement dated 25 March 2014) and acquired the equity interests of 11 logistics companies from SINOTRANS & CSC (which was the subject of the Company’s announcement dated 8 July 2014). Therefore, the transactions between the related companies of Disposal Marine Transportation Business and the Group that had previously been intra group transactions will become connected transactions. By the same token, the transactions between Sinotrans & CSC Group since the acquisition and those logistics companies acquired by the Group have become connected transactions of the Group since the acquisition. By

LETTER FROM THE BOARD

way of illustration, set out below is the unaudited transaction amount of services provided by/to the Disposed Marine Transportation Business (i) to/by the Group and (ii) to/by the SINOTRANS & CSC Group and its associates, based on unaudited management records:–

		Amount (RMB)
			For the six
			months
			ended 30
	2012	2013	June 2014
	(’000)	(’000)	(’000)
Provision of marine transportation services
to the Group	1,996,838	2,071,129	1,165,912
Receipt of marine transportation services
from the Group	1,200,923	1,069,802	643,931
Provision of marine transportation services
to the SINOTRANS & CSC Group and
its associates	5,177	11,410	13,757
Receipt of marine transportation services
from the SINOTRANS & CSC Group
and its associates	11,840	21,346	9,297

The Company proposes that the maximum amount for each of the following types of transactions (in respect of which Independent Shareholders’ approval is proposed to be sought at the EGM) for 2015, 2016 and 2017 be capped as follows:

		Amount (RMB)
	2015 Cap	2016 Cap	2017 Cap
	(’000)	(’000)	(’000)
	(Note 1)	(Note 1)	(Note 1)
Provision of transportation and logistics
services (Note 2 & 3)	2,350,000	3,020,000	3,889,000
Receipt of transportation and logistics
services (Notes 2 & 3)	3,510,000	4,563,000	5,932,000

Notes:

These figures represent the maximum value of transactions of the relevant type which the Group may undertake during the relevant financial years. The actual amount of transaction may be different. Taking into account the basis for the determination of the caps as detailed below, the Board (including the independent non-executive Directors who have taken into account the advice from Asian Capital) considers that the New Caps set out above are fair and reasonable.
The relevant caps have been determined by reference to:
(i) the historical value of the transactions in respect of the provision of transportation and logistics services by the Group to SINOTRANS & CSC Group and its associates;
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LETTER FROM THE BOARD

(ii) the historical value of the transactions in respect of the receipt of transportation and logistics services by the Group from SINOTRANS & CSC Group and its associates;
(iii) the historical growth of the Group’s turnover of approximately 8.5% for the year ended 31 December 2012 over the year ended 31 December 2011, approximately 0.6% for the year ended 31 December 2013 over the year ended 31 December 2012 (mainly due to replacement of the business tax with value-added tax by the government and decrease in freight rates of the container shipping market). The Company is expecting an increase in its turnover by 20% annually in the next three years, including about 10% growth in business volume and a further 10% growth due to increase in freight rates having regard to the economic prospects of the PRC and the overall condition of the transportation and logistics services industry;
(iv) an approximately 5% to 10% buffer for the inherent volatility of business and the market rates in the transportation and logistics services industry (which is affected by the volatility in oil price, the increase in demand for transportation and logistics services with the increase in export and import volume in the PRC) and perceived increase in demand for the Group’s services with continued economic growth of the PRC and on the implementation of the Group’s strategy to expand its domestic operations, overseas network, scope of services and newlydeveloped services and products;
(v) historical values of the transactions between the Disposed Marine Transportation Business and (i) the Group; and (ii) the SINOTRANS & CSC Group and its associates; and
(vi) since 1 July 2014, the management of non-listed logistics companies of SINOTRANS & CSC Group have been entrusted to the Group as disclosed in the Company’s announcement dated 10 February 2014. Before the entrustment arrangement, the Group had limited business dealings with those companies. Since July 2014, the Group has been promoting the business collaboration and strengthening integrated management of those businesses, and it is expected that there will be increased cooperation and business opportunities between the Group and the non-listed logistics companies of SINOTRANS & CSC Group. For the two years ended 31 December 2012 and 2013 the unaudited transaction value in respect of the provision and receipt of transportation and logistics services by the Group with these non listed logistics companies were as follows:

	2012	2013
	(RMB’000)	(RMB’000)
Provision of transportation and logistics services	133,243	191,242
Receipt of transportation and logistics services	197,396	191,192

Payment for the provision and receipt of the above transportation and logistics services will be made by cash in accordance with the standard terms of sale or provision of services of the provider from time to time.

B. Transactions with Connected Non Wholly-Owned Subsidiaries

The Group has also received and provided transportation and logistics services with three Connected Non Wholly-Owned Subsidiaries, namely Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air. Each of Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air is a non wholly-owned subsidiaries of the Company, owned as to 75% by Sinotrans Shandong Company Limited (a wholly-owned subsidiary of the Company) and 25% by LAILON Enterprises Limited (a non wholly-owned subsidiary of SINOTRANS & CSC) respectively.

LETTER FROM THE BOARD

Since LAILON Enterprises Limited, a non wholly-owned subsidiary of SINOTRANS & CSC (the controlling shareholder of the Company), holds more than 10% of total equity interest of Connected Non Wholly-Owned Subsidiaries, each of the Connected Non Wholly-Owned Subsidiaries is a connected person of the Company pursuant to Rule 14A.16 of the Listing Rules.

The Group intends to continue such business relationships with Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air. To comply with the requirements of the Listing Rules, on 6 November 2014, the Company entered into the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) with Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air respectively for the provision and receipt of the transportation and logistics services (including freight forwarding services, shipping agency, storage and terminal services, trucking transportation, express services, shipping and container leasing) between members of the Group and Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air and their subsidiaries and associates. The term of each of the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) is for a period of three years commencing on 1st January, 2015 and ending on 31st December, 2017. Services provided under the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) will be at the market price charged by independent third parties and on normal commercial terms.

The mechanism by which the Group ensures that the services provided under the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qindao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) are charged at market prices and the internal control procedures for monitoring such connected transaction to ensure compliance with the Listing Rules are described in “IV. Basis Of Pricing Of The Transactions Contemplated Under The Master Services Agreements And Internal Control Procedures For Monitoring Connected Transactions”.

The Directors (including the independent non-executive Directors who have taken into account the advice from Asian Capital) are of the view that the terms (including the New Caps) of the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) are fair and reasonable so far as the Shareholders are concerned and in the interest of the Company and the Shareholders as a whole.

The table below sets out the turnover/expenses of the Group attributable to the transactions with the Sinotrans Shandong Hongzhi, Qingdao Jinyun Air and Qingdao Liantong Customs and their subsidiaries and associates during 2012, 2013 and for the eight months ended 31st August, 2014 and the New Cap for the value of transportation and logistics services to be provided and received by the

LETTER FROM THE BOARD

Group (in respect of which Independent Shareholders’ approval is proposed to be sought at the EGM) with Sinotrans Shandong Hongzhi, Qingdao Jinyun Air and Qingdao Liantong Customs and their subsidiaries and associates for the years 2015, 2016 and 2017 respectively:

				Amount	(RMB)
		2012	2013	2014	2015	Cap	2016 Cap	2017 Cap
		(’000)	(’000)	(’000)	(’000)		(’000)	(’000)
					(Note 1)		(Note 1)	(Note 1)
Sinotrans	Provision of transportation
Shandong	and logistics services	46,247	69,008	43,704*	135,000		202,500	303,750
Hongzhi	Historical annual cap	240,000	360,000	540,000
	Historical utilization rate	19.3%	19.2%	8.1%*
	Receipt of transportation
	and logistics services	2,550	12,520	26,764*	150,000		225,000	337,500
	Historical annual cap	18,000	27,000	40,500
	Historical utilization rate	14.2%	46.4%	66.1%*
Qingdao Jinyun	Provision of transportation
Air	and logistics services	17,849	23,449	10,125*	30,000		45,000	67,500
	Historical annual cap	22,500	33,750	50,625
	Historical utilization rate	79.3%	69.5%	20.0%*
	Receipt of transportation
	and logistics services	1,085	2,735	2,307*	7,500		11,250	16,875
	Historical annual cap	4,500	6,750	10,125
	Historical utilization rate	24.1%	40.5%	22.8%*
Qingdao Liantong	Provision of transportation
Customs	and logistics services	166	0	60*	2,000		4,000	8,000
	Historical annual cap	48,000	57,600	69,120
	Historical utilization rate	0.35%	0%	0.09%*
	Receipt of transportation
	and logistics services	0.4	0	4.3*		200	400	800
	Historical annual cap	5,160	6,192	7,430.4
	Historical utilization rate	0.01%	0%	0.06%*

* These figures represent the transaction amount for the eight months ended 31 August 2014 and the utilization rates are calculated by measuring those transaction amounts against the annual cap.

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LETTER FROM THE BOARD

Notes:

These figures represent the maximum value of the transactions of the relevant type which the Group will undertake during the relevant financial years. The actual amount of transaction may be different. Taking into account the bases for the determination of the caps as detailed below, the Board (including the independent non-executive Directors who have taken into account the advice from Asian Capital) considers that the New Caps set out above are fair and reasonable.
As Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air are also three subsidiaries of the Company, the maximum transaction value have been determined with reference to (i) the historical values of the transactions with Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air and their subsidiaries and associates for the years ended 31 December 2012, 2013 and the eight months ended 31 August 2014; (ii) the historical growth of the Group’s turnover and the plans and requirements of the Group, after allowing an approximately 5% to 10% buffer for the inherent volatility of business and market rates in the transportation and logistics services industry; (iii) perceived increase in demand for the Group’s services generally with the continued economic growth of the PRC; (iv) the implementation of the Group’s strategy to expand its domestic operations and overseas network; (v) the expected expansion and growth of the business of Sinotrans Shandong Hongzhi; and (vi) the expected development and expansion of the business of Qingdao Jinyun Air and Qingdao Liantong Customs, due to increase in cooperation and transactions with other subsidiaries of the Company.

III. LISTING RULES COMPLIANCE IN RESPECT OF THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

The transactions contemplated under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) are for the purposes of calculating the applicable percentage ratios in accordance with the Listing Rules aggregated pursuant to Rule 14A.82 of the Listing Rules. As certain of the percentage ratios of the New Caps in respect of the above Non-exempt Continuing Connected Transactions on an annual basis in aggregate exceeds 5%, the above Non-exempt Continuing Connected Transactions and the relevant New Caps are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under the Chapter 14A of the Listing Rules. Independent Shareholders’ approval is proposed to be sought in respect of the above Non-exempt Continuing Connected Transactions.

IV. BASIS OF PRICING OF THE TRANSACTIONS CONTEMPLATED UNDER THE MASTER SERVICES AGREEMENTS AND INTERNAL CONTROL PROCEDURES FOR MONITORING CONNECTED TRANSACTIONS

Basis of pricing

Separate contracts in relation to each transaction will be entered into by the relevant parties. As the Group is a key market player in the transportation and logistics services in the PRC, during its ordinary course of business it will have gathered information on the market rates of various services offered by its competitors from time to time. For some standard services, various service providers may issue price lists from time to time. When entering into any particular transaction with a connected person, the relevant member of the Group would consider a number of factors including, among other things, the combination of services provided, the geographical coverage of services

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provided and the terms offered by the local competitors, with a view to ensuring that the terms offered to the Group those terms are at market prices as defined above. If a transaction involves customized combination of services for which the terms offered by service providers could substantially differ, the relevant member of the Group will in accordance with the Group’s internal control manual requirements obtain quotes and terms of services from at least two (2) independent third parties (to the extent such alternative service providers are available) and the connected person. The Company has established a business contracts review system in which the supervisory department will review the terms of services (including the price of services) and compare the same against those offered by independent third parties, to ensure that those terms are at market prices as defined above. The Directors consider that the procedures described above can ensure that the transactions will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its minority shareholders.

The payment terms of the transportation and logistics services provided and received vary depending on the content of the services required and would typically be settled in full upon completion of the delivery services, and may entail the payment of deposits of a size determined by the nature of services that are required to be provided.

Internal control procedures

To ensure the relevant terms provided by connected parties under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) are no less favorable than those available from independent third parties and the caps of the transactions under the above agreements are not exceeded, the Company's internal control system includes procedures specifically for monitoring continuing connected transactions which include the following steps:

(i) the entering into and monitoring of continuing connected transactions are to be conducted in accordance with the Company’s internal control manual;
(ii) the audit department of the Company will periodically review and inspect the continuing connected transactions under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air);
(iii) the finance department of the Company will collect statistics of the continuing connected transactions under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) to ensure the annual caps approved by the Independent Shareholders are not exceeded;
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LETTER FROM THE BOARD

(iv) the auditors of the Company reviews the statistics of the continuing connected transactions on an annual basis in compliance with the annual reporting and review requirements under the Listing Rules.

By implementing the above procedures, the Directors consider that the Company has established sufficient internal control measures to ensure the transactions under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

V. REASONS AND BENEFITS FOR THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Certain continuing connected transactions between the Group and the SINOTRANS & CSC Group and its associates and certain Connected Non Wholly-Owned Subsidiaries have been taking place since the Company became listed on the Stock Exchange in the year 2003 and are essential for the continued operation and growth of the business of the Group. Some of the transportation and logistics services required by the Group will enable the Group to provide end-to-end transportation and logistics services to customers covering locations in which the Group does not have operations. In addition, the Group is also able to provide services to those members of the SINOTRANS & CSC Group and their associates, who are not in the same line of business or who do not operate in the areas in which the Group has its core operations. Accordingly, the Directors consider that continuing connected transactions are in the interest of and are beneficial to the Group.

VI. GENERAL

SINOTRANS & CSC is mainly engaged in integrated logistics services and provides marine transportation services through its subsidiaries.

Sinotrans Shandong Hongzhi is mainly engaged in international container road-transportation business, international transportation agency business of sea, road, air freight forwarding for import and export cargo, import and export cargo transportation of NVOCC business and international express services.

Qingdao Jinyun Air mainly operates international transportation agency business of air freight forwarding for import and export cargo and consulting services for international trade.

Qingdao Liantong Customs is mainly engaged in customs declaration services for import and export cargo, transportation vehicles and goods, storage and transportation services, computer pre-recorded and other related services.

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LETTER FROM THE BOARD

VII. EXTRAORDINARY GENERAL MEETING

The notice convening the EGM to approve the Non-exempt Continuing Connected Transactions subject to the New Caps has been dispatched to the Shareholders on 6 November 2014. As each of SINOTRANS & CSC and Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air (three Connected Non Wholly-Owned Subsidiaries) is a party to the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) respectively, they, together with their respective associates, are required under the Listing Rules to abstain from voting on the single resolution to be proposed to approve all of the Non-exempt Continuing Connected Transactions subject to the New Caps at the EGM to be convened for this purpose. As at the Latest Practicable Date, SINOTRANS CSC and its associates is interested in 2,461,596,200 domestic shares and 88,000,000 H shares, representing a total of 55.35% of the issued share capital of the Company.

According to the requirements under Article 124 of the Company Law of the PRC, any director of a listed company who is affiliated with the enterprise involved in the matters discussed by the Board of Directors should not exercise his own, or represent other directors to exercise, voting right for such matters. As the Directors including Mr. Zhao Huxiang, Mr. Zhang Jianwei and Ms. Tao Suyun hold positions in the SINOTRANS & CSC, they have abstained from voting in respect of the board resolution(s) to approve the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) in accordance with the related regulations and laws. Save as disclosed above, no other Directors have a material interest in the continuing connected transactions contemplated under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air).

DIRECTORS’ RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee as set out on pages 16 to 17 contains its recommendation to the Independent Shareholders in respect of the ordinary resolutions set out in the notice of EGM to approve the Non-exempt Continuing Connected Transactions subject to the New Caps.

The advice of Asian Capital to the Independent Board Committee and the Independent Shareholders as to whether each of the Non-exempt Continuing Connected Transactions and the New Caps thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group, fair and reasonable and in the interests of the Company and the Shareholders as a whole is set out on pages 18 to 33 of this circular.

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LETTER FROM THE BOARD

GENERAL INFORMATION

Your attention is drawn to the additional information as set out in the Appendices to this circular.

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

Company Secretary

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee, which has been prepared for the purpose of incorporation into this circular, setting out its recommendation to the Independent Shareholders in respect of the terms of the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) and the transaction contemplated thereunder as set out in the Circular.

==> picture [233 x 108] intentionally omitted <==

(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 0598)

To the Independent Shareholders

Dear Sir and Madam,

CONTINUING CONNECTED TRANSACTIONS

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders of Sinotrans Limited (the “Company”) in respect of the resolutions to approve the Non-exempt Continuing Connected Transactions subject to the New Caps, details of which are set out in the “Letter from the Board” contained in the circular of the Company (the “Circular”) of which this letter forms part. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this letter.

Your attention is drawn to the “Letter from the Board”, the advice of Asian Capital in its capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of whether each of the Non-exempt Continuing Connected Transactions and the New Caps thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group, fair and reasonable and in the interests of the Company and the Shareholders as a whole, as set out in the “Letter from Asian Capital” as well as other additional information set out in other parts of the Circular.

Having taken into account the advice of, and the principal factors and reasons considered by Asian Capital in relation thereto as stated in its letter, we consider the terms of the Non-exempt Continuing Connected Transactions and the New Caps to be fair and reasonable, on normal commercial terms and in the ordinary and usual course of business of the Group and are in the interests of the Company and the

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM in respect of the Non-exempt Continuing Connected Transactions.

Yours faithfully,

The Independent Board Committee

Guo Minjie Lu Zhengfei Han Xiaojing Independent nonIndependent nonIndependent nonexecutive Director executive Director executive Director

Liu Junhai

Independent nonexecutive Director

Beijing, 2 December, 2014

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LETTER FROM ASIAN CAPITAL

The following is the text of a letter from Asian Capital (Corporate Finance) Limited to the Independent Shareholders and the Independent Board Committee prepared for the purpose of incorporation in this circular.

==> picture [185 x 52] intentionally omitted <==

Suite 601, Bank of America Tower 12 Harcourt Road Central, Hong Kong

To the Independent Board Committee and the Independent Shareholders of Sinotrans Limited

2 December 2014

Dear Sirs or Madam,

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee and the Independent Shareholders to advise whether each of the Non-exempt Continuing Connected Transactions and the New Caps thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Relevant details of the transactions are set out in the circular of the Company dated 2 December 2014 (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context indicates otherwise.

As set out in the Company’s announcement dated 6 November 2014, the Company entered into (i) the Master Services Agreement (SINOTRANS & CSC) with SINOTRANS & CSC, (ii) the Master Services Agreement (Sinotrans Shandong Hongzhi) with Sinotrans Shandong Hongzhi, (iii) the Master Services Agreement (Qingdao Liantong Customs) with Qingdao Liantong Customs and (iv) the Master Services Agreement (Qingdao Jinyun Air) with Qingdao Jinyun Air respectively on 6 November 2014 in respect of the provision and receipt of transportation and logistics services. Since (i) SINOTRANS & CSC is the controlling Shareholder holding 55.35% of the issued share capital of the Company as at the Latest Practicable Date and (ii) SINOTRANS & CSC held more than 10% of total equity interest in each of the Connected Non Wholly-Owned Subsidiaries as at the Latest Practicable Date, and thus are connected persons of the Company, the transactions contemplated under the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) (together known as the “ New Master Services Agreements ”) constitute continuing connected transactions of the Company under the Listing Rules.

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LETTER FROM ASIAN CAPITAL

For the purposes of calculating the applicable percentage ratios in accordance with the Listing Rules, the continuing connected transactions with the SINOTRANS & CSC Group and its associates and the Connected Non Wholly-Owned Subsidiaries have been aggregated pursuant to Rule 14A.82 of the Listing Rules. As certain of the percentage ratios of the New Caps in respect of the Non-exempt Continuing Connected Transactions on an annual basis, in aggregate exceeds 5%, the Non-exempt Continuing Connected Transactions and the New Caps thereunder are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under the Chapter 14A of the Listing Rules.

As at the Latest Practical Date, SINOTRANS & CSC and its associates are interested in 2,461,596,200 domestic shares and 88,000,000 H shares, representing a total of approximately 55.35% of the issued share capital of the Company. Each of SINOTRANS & CSC and the Connected Non Wholly-Owned Subsidiaries is a party to the New Master Services Agreements, they, together with their respective associates are required under the Listing Rules to abstain from voting on the resolution to be proposed to approve the Non-exempt Continuing Connected Transactions and the New Caps thereunder at the EGM.

THE INDEPENDENT BOARD COMMITTEE

The Company has set up the Independent Board Committee comprising all the four independent nonexecutive Directors, namely Mr. Guo Minjie, Mr. Lu Zhengfei, Mr. Han Xiaojing and Mr. Liu Junhai to advise the Independent Shareholders as to whether each of the Non-exempt Continuing Connected Transactions and the New Caps thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group, fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Independent Board Committee will also advise the Independent Shareholders on how to vote at the EGM on the resolution in respect of the Non-exempt Continuing Connected Transactions and the New Caps thereunder, after taking into account the recommendations of the independent financial adviser.

BASIS OF OUR OPINION

In formulating our opinion and recommendation in relation to the Non-exempt Continuing Connected Transactions and the New Caps thereunder, we have reviewed, among other matters, information and documents including but not limited to (i) the letter from the Board contained in this Circular; (ii) the New Master Services Agreements and the New Caps thereunder; (iii) the announcement of the Company dated 6 November 2014; (iv) the audited consolidated financial statements of the Company for the years ended 31 December 2012 and 2013 and the unaudited consolidated management accounts of the Company for the nine months ended 30 September 2014 prepared in accordance with the International Financial Reporting Standards; (v) the historical and adjusted continuing connected transaction amounts between the Group and

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the SINOTRANS & CSC Group, and the historical continuing connected transaction amounts between the Group and each of the Connected Non Wholly-Owned Subsidiaries for the years ended 31 December 2012 and 2013 and the eight months ended 31 August 2014; and (vii) other relevant information and documents in relation to, among others, details of historical transactions and internal control.

We were appointed by the Company as the independent financial advisor to give independent advice on two previous connected transactions of the Company, namely the disposal of the Company’s marine transportation business and acquisition of equity interests of 11 logistics companies, details of which are set out in the announcement and circular of the Company dated 25 March 2014 and 22 April 2014 respectively regarding the aforesaid disposal and the announcement and circular dated 8 July 2014 and 15 August 2014 respectively regarding the aforesaid acquisition.

Save as disclosed above, we are not connected with the Company or any of its substantial Shareholders or any person acting or deemed to be acting in concert with any of them and accordingly, are considered eligible to give independent advice on the Non-exempt Continuing Connected Transactions and the New Caps thereunder. Apart from a normal professional fee payable to us in connection with this appointment, no arrangements exist whereby we will receive any fees or benefits from the Company or any of its substantial Shareholders or any person acting or deemed to be acting in concert with any of them.

In forming our opinion in relation to the Non-exempt Continuing Connected Transactions and the New Caps thereunder, we consider that we have reviewed sufficient relevant information and documents and have taken reasonable steps as specified under Rule 13.80 of the Hong Kong Listing Rules (including its notes) to reach an informed view and to make our recommendation on a reasonable basis. We relied on the information provided and statements and opinions made by the Company, its Directors, advisers and representatives, for which they take full responsibilities. We assumed that all relevant information and statements were true, accurate and complete at the time they were given or made and continue to be so as at the date of the Circular. We also assumed that all views, opinions and statements of intention provided by the Directors, advisers and representatives of the Company had been arrived at after due and careful enquiries. The Company confirmed that there were no other material facts not contained in the information provided to us the omission of which would make any statement or opinion contained in the Circular misleading.

We have no reason to suspect that any material fact or information has been omitted or withheld from the information or opinions provided to us by the Company, its Directors, advisers or representatives, or to doubt the truth, accuracy or completeness of the information and representations or reasonableness of the opinions provided to us by them. We have not, however, conducted any independent verification on the information provided to us by the Company, its Directors, advisers or representatives, nor have we conducted any independent investigation into the business and affairs or the prospects of the Group. We therefore do not guarantee the accuracy or completeness of any of such information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion to the Independent Board Committee and the Independent Shareholders in respect of the Non-exempt Continuing Connected Transactions and the New Caps contemplated thereunder, we have considered the following principal factors:

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1. Background of the Group

The Group is a leading integrated logistics service provider in China. Principal businesses of the Group include freight forwarding, logistics, storage and terminal services, and other services including trucking transportation, shipping business and express services.

2. Background of SINOTRANS & CSC and Connected Non Wholly-Owned Subsidiaries

SINOTRANS & CSC

SINOTRANS & CSC is the controlling shareholder of the Company, which directly and indirectly held 55.35% of issued share capital of the Company as at the Latest Practicable Date. SINOTRANS & CSC is mainly engaged in integrated logistics services and provides marine transportation services through its subsidiaries.

Sinotrans Shandong Hongzhi

Qingdao Jinyun Air

Qingdao Jinyun Air mainly operates international transportation agency business of air freight forwarding for import and export cargo and consulting services for international trade.

Qingdao Liantong Customs

3. Reasons for and benefits of the Non-exempt Continuing Connected Transactions

Certain continuing connected transactions between the Group and the SINOTRANS & CSC Group and its associates and certain Connected Non Wholly-Owned Subsidiaries have been taking place since the Company became listed on the Stock Exchange in the year 2003 and are essential for the continued operation and growth of the business of the Group. Some of the transportation and logistics services required by the Group will enable the Group to provide end-to-end transportation and logistics services to customers covering locations in which the Group does not have operations. In addition, the Group is also able to provide services to those members of the SINOTRANS & CSC Group and its associates, who are not in the same line of business or who do not operate in the areas in which the Group has its core operations. Accordingly, the Directors consider that continuing connected transactions are in the interest of and are beneficial to the Group.

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LETTER FROM ASIAN CAPITAL

After reviewing the published financial information of the Company and public information disclosed by the SINOTRANS & CSC Group, we concur with the view of the Directors that the entering into of the Non-exempt Continuing Connected Transactions is in the interests of and are beneficial to the Group.

4. Principal terms and pricing basis of the New Master Services Agreements

Pursuant to the New Master Services Agreements, the Group will provide and receive the transportation and logistics services (including but not limited to freight forwarding services, shipping agency, storage and terminal services, trucking transportation, express services, shipping and container leasing) to/from the SINOTRANS & CSC Group and its associates, Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air.

Services provided under the New Master Services Agreements will be at the market prices charged by independent third parties in the same area on normal commercial terms and in the ordinary course of business, which will be monitored by the Group’s internal control procedures. The Group will gather information on the market rates of various services offered by its competitors from time to time. For some standard services, various service providers may issue price lists from time to time. When entering into any particular transaction with a connected person, the relevant member of the Group will consider a number of factors including, among other things, the combination of services provided, the geographical coverage of services provided and the terms offered by the local competitors, with a view to ensuring that the terms offered to the Group are at market prices as defined above. If a transaction involves customized combination of services of which the terms offered by service providers could substantially differ, the relevant member of the Group will in accordance with the Group’s internal control manual requirements obtain quotes and terms of services from at least two independent third parties (to the extent such alternative service providers are available) and the connected person. The Company has established a business contracts review system in which the supervisory department will review the terms of services (including the price of services) and compare the same against those offered by independent third parties, to ensure that those terms are at market prices. Such transactions will be subject to internal audit and monitoring, as well as annual review by external auditors, details of which have been described in the letter from the Board.

We have reviewed the specific agreements and/or the pricing guidelines and other relevant information in respect of those continuing connected transactions for the period from 2012 to 2014 and noted that the pricing basis for each of the transactions, either in accordance with the then prevailing market prices or industry standards, was adopted in setting the consideration of the relevant transactions during the above period.

We are advised by the management of the Company that the reason why the payment terms and the size of deposits vary on separate individual contracts is due to the large scale of customized services provided or received by the Group with each customer, therefore payment terms on each contract is subject to alteration in respect of the nature of the services. We have reviewed the payment terms and other relevant

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information of a number of contracts provided by the Company in respect of those continuing connected transactions for the period from 2012 to 2014, and noted that the payment terms are reasonably and fairly determined.

In view of the above, we agree with the Board that the transactions have been conducted on normal commercial terms and not prejudicial to the interests of the Company and its minority shareholders.

5. Historical transaction amounts and basis of the New Caps

Master Services Agreement (SINOTRANS & CSC)

Set out below are the details of (i) the historical annual caps and the related growth rates for each of the three years ended/ending 31 December 2012, 2013 and 2014; (ii) actual transaction amounts and related utilization rates for each of the two years ended 31 December 2012 and 2013 and the eight months ended 31 August 2014 and (iii) the New Caps and the related growth rates for each of the three years ending 31 December 2015, 2016 and 2017 in connection with the provision and receipt of transportation and logistics services by the Group to and from the SINOTRANS & CSC Group.

	For	year ended/ending	year ended/ending
		31 December			For year	ending 31 December
	2012	2013		2014	2015	2016	2017
	(RMB’000)	(RMB’000)	(RMB’000)		(RMB’000)	(RMB’000)	(RMB’000)
Provision of transportation and
logistics services:
Historical annual cap/New Cap	1,487,000	2,101,000	2,877,000		2,350,000	3,020,000	3,889,000
Growth rate	14.1%	41.3%		36.9%	-18.3%	28.5%	28.8%
Actual transaction amount	243,213	327,835	235,313*
Historical utilization rate	16.4%	15.6%		8.2%*
Receipt of transportation and
logistics services:
Historical annual cap/New Cap	2,072,000	2,861,000	3,865,000		3,510,000	4,563,000	5,932,000
Growth rate	38.1%	38.1%		35.1%	-9.2%	30.0%	30.0%
Actual transaction amount	471,236	411,941	248,302*
Historical utilization rate	22.7%	14.4%		6.4%*

These figures represent the actual transaction amounts for the eight months ended 31 August 2014 and the utilization rates are calculated by measuring those transaction amounts against the annual cap.
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LETTER FROM ASIAN CAPITAL

As disclosed in the letter from the Board, the New Caps under the Master Services Agreement (SINOTRANS & CSC) for each of the three years ending 31 December 2015, 2016 and 2017 have been determined by reference to the following:

(i) the historical value of the transactions in respect of the provision of transportation and logistics services by the Group to the SINOTRANS & CSC Group and its associates;
(ii) the historical value of the transactions in respect of the receipt of transportation and logistics services by the Group from the SINOTRANS & CSC Group and its associates;
(iii) the historical growth of the Group’s turnover of approximately 8.5% for the year ended 31 December 2012 over the year ended 31 December 2011, approximately 0.6% for the year ended 31 December 2013 over the year ended 31 December 2012 (mainly due to replacement of the business tax with value-added tax by the government and decrease in freight rates of the container shipping market). The Company is expecting an increase in its turnover by 20% annually in the next three years, including about 10% growth in the business volume and a further 10% growth due to increase in freight rates having regard to the economic prospects of the PRC and the overall condition of the transportation and logistics services industry;
(iv) an approximately 5% to 10% buffer for the inherent volatility of business and the market rates in the transportation and logistics services industry (which is affected by the volatility in oil price, the increase in demand for transportation and logistics services with the increase in export and import volume in the PRC) and perceived increase in demand for the Group’s services with continuous economic growth in the PRC and on the implementation of the Group’s strategy to expand its domestic operations, overseas network, scope of services and newly-developed services and products;
(v) historical values of the transactions between the companies disposed of to the SINOTRANS & CSC Group, details of which are set out in the announcement and circular of the Company dated 25 March 2014 and 22 April 2014 respectively (“ Disposed Marine Transportation Business ”) and (i) the Group; and (ii) the SINOTRANS & CSC and its associates; and
(vi) since 1 July 2014, the management of non-listed logistics companies of the SINOTRANS & CSC Group (the “ Non-listed Companies ”) have been entrusted to the Group as disclosed in the Company’s announcement dated 10 February 2014 (the “ Entrustment Arrangement ”). Before the Entrustment Arrangement, the Group had limited business dealings with those companies. Since July 2014, the Group has been promoting the business collaboration and strengthening integrated management of those businesses, and it is expected that there will be increased cooperation and business opportunities between the Group and the non-listed logistics companies of the SINOTRANS & CSC Group.
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LETTER FROM ASIAN CAPITAL

To assess whether the New Caps under the Master Services Agreement (SINOTRANS & CSC) for each of the three years ending 31 December 2015, 2016 and 2017 are fairly and reasonably determined, we have considered the following points:

The adjusted historical transaction amounts after taking into account the effect of restructuring

As set out in the letter from the Board and with reference to the Group’s disposal of its marine transportation business to the SINOTRANS & CSC Group (the “ Disposal ”) and the acquisition of the equity interests of 11 logistics companies (“ Acquired Logistics Companies ”) from SINOTRANS & CSC (the “ Acquisition ”) during 2014, the transactions between the Disposed Marine Transportation Business and the Group (excluding the Disposed Marine Transportation Business) that had previously been intra group transactions have become connected transactions since the completion of the Disposal. By the same token, the transactions between the SINOTRANS & CSC Group (excluding the Acquired Logistics Companies) and the Acquired Logistics Companies have become connected transactions of the Group since the completion of the Acquisition. In the meantime, the previous connected transactions conducted between the SINOTRANS & CSC Group (excluding the Acquired Logistics Companies) and the Disposed Marine Transportation Business and previous connected transactions between the Group (excluding the Disposed Marine Transportation Business) and the Acquired Logistics Companies, are no longer connected transactions. As a result, the adjusted aggregate amounts of connected transactions between the Group and the SINOTRANS & CSC Group after taking into account of the restructuring effect are more appropriate for reference to determine the New Caps. By way of illustration, set out below are the adjusted transaction amounts and adjusted utilization rates for each of the two years ended 31 December 2012 and 2013 and the eight months ended 31 August 2014 in connection with the provision and receipt of transportation and logistics services by the Group to and from the SINOTRANS & CSC Group assuming the Disposal and the Acquisition were completed before 1 January 2012:

	For year	ended/ending 31	December
	2012	2013		2014
	(RMB’000)	(RMB’000)	(RMB’000)
Provision of transportation and
logistics services:
Historical annual cap	1,487,000	2,101,000	2,877,000
Adjusted transaction amount (Note 2)	1,439,987	1,376,594	972,513	(Note 1)
Adjusted utilization rate	96.8%	65.5%	33.8%	(Note 1)
Receipt of transportation and
logistics services:
Historical annual cap	2,072,000	2,861,000	3,865,000
Adjusted transaction amount (Note 2)	2,323,730	2,369,448	1,560,793	(Note 1)
Adjusted utilization rate	112.1%	82.8%	40.4%	(Note 1)

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Notes:

These figures represent the actual transaction amounts for the eight months ended 31 August 2014 and the utilization rates are calculated by measuring those transaction amounts against the annual cap.
As advised by the management of the Company, since the transaction amounts between the SINOTRANS & CSC Group (excluding the Disposed Marine Transportation Business) and the Acquired Logistics Companies before the Acquisition is not available to the Company, the adjustments made do not fully reflect the effect of the acquisition of the Acquired Logistics Companies.

As illustrated above, since the utilization rates in respect of provision and receipt of transportation and logistics services between the Group and the SINOTRANS & CSC were only 33.8% and 40.4% respectively by the end of 31 August 2014, the Directors suggest to adjust the New Caps in respect of the corresponding transactions for the year ending 31 December 2015 downward by approximately 18.3% and 9.2% respectively, and propose an annual growth rate of approximately 30% for the years ending 31 December 2016 and 2017. The Directors believe the downward adjustments were sufficient and the annual growth rates of the New Caps for the related connected transactions of approximately 30% is reasonable, considering potential growth of connected transactions in 2015 attributed by the following factors:

The Group’s historical turnover growth

According to the annual report of the Company for the year ended 31 December 2012, turnover of the Group was approximately RMB47,482.0 million for the year ended 31 December 2012, up by 8.5% from that in 2011. The increase of turnover was mainly attributable to the increase in the freight rates of container shipping market and rapid growth of specialized logistics business. According to the annual report of the Company for the year ended 31 December 2013, turnover of the Group for the year ended 31 December 2013 increased marginally by about 0.6% to approximately RMB47,768.9 million. The growth of turnover in 2013 did not meet the expectation because the government replaced the business tax with value-added tax and freight rates of the container shipping market decreased when compared to the previous year. According to the unaudited consolidated management accounts of the Company for the nine months ended 30 September 2014, the Group recorded turnover of approximately RMB34,224.5 million for the nine months ended 30 September 2014, representing a decrease of 7.2% as compared with the corresponding period in 2013, mainly due to the continuing effect of the replacement of business tax by value added tax.

We understand from the management of the Company that the connected transactions between the Group and the SINOTRANS & CSC Group will normally increase in the same pace with the turnover, which is expected to increase by 20% annually in the next three years, from which 10% growth is attributable to the increase in business volume and another 10% growth is attributable to the increase in freight rates considering the economic prospect of the PRC and the market situation of the transportation and logistics services industry.

We noted that the PRC had maintained a steady economic growth in the past few years. According to the official statistics published by the National Bureau of Statistics of China, (i) the gross domestic products of the PRC has been growing in the past few years and increased from approximately RMB40,151.3 billion in 2010 to approximately RMB56,884.5 billion in 2013,

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representing a compound annual growth rate of approximately 12.3%; (ii) volume of freight traffic in the PRC increased from approximately 32.4 billion tonnes in 2010 to approximately 41.0 billion tonnes in 2013, representing a compound annual growth rate of approximately 8.2%; and (iii) the total import and export trade of the PRC has increased from approximately RMB20,172.2 billion in 2010 to approximately RMB25,821.2 billion in 2013, representing a compound annual growth rate of approximately 8.6%. The Directors consider that the demand for the transportation and logistics services between the Group and the SINOTRANS & CSC Group is correlated to the PRC economy and the PRC’s total import and export trade.

Set out below is the chart of weekly China (Export) Containerized Freight Index (“ CCFI ”) to illustrate the movement of CCFI for the past six years since October 2008 till October 2014:

==> picture [394 x 218] intentionally omitted <==

Note: The CCFI data is gathered from http://simic.net.cn and http://www.eworldship.com.

According to the data shown above, CCFI, which was sponsored by the Ministry of Communications of the PRC and formulated by Shanghai Shipping Exchange indicating the general trends of freight rates for shipping routes from China to other international ports for container shipping market, averaged 1081.8 points in 2013, representing a decrease of 7.61% compared with that in 2012. In 2013, CCFI showed an overall downward trend.

In addition, during the year of 2014, the CCFI was 1,098.37 points in the beginning of 2014, and peaked on 14 February 2014 at 1,170.59 points, which was boosted by Chinese New Year, and then declined sharply to 1,050.42 points on 28 March 2014. The freight rates slowly rebounded in the second and third quarter of 2014 to 1,121.48 points on 5 September 2014, and witnessed a slack to 1,018.25 points on 31 October 2014. The above movements of the CCFI indicate that the shipping market is highly cyclical. In the first three quarters of 2014, CCFI also showed an overall downward trend.

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LETTER FROM ASIAN CAPITAL

We are advised by the management of the Company that a cycle for the shipping industry is usually three years. As illustrated by the chart above, the rising trend of CCFI in the past started in mid 2009 and the first quarter of 2012, which was approximately three years in between. The management of the Company expects that the shipping industry is to recover soon, and based on the management’s knowledge of the industry cycle, the management of the Company expects freight rates to increase in the near future.

In view of the trends shown above, the Directors consider, and we concur, that the transaction amounts of the transportation and logistics services between the Group and the SINOTRANS & CSC are expected to increase in the next three years, which is based on 20% annual growth in revenue of the Group in the next three years is fairly and reasonably expected.

The Entrustment Arrangement

As mentioned above, on 1 July 2014, the management of all Non-listed Companies of the SINOTRANS & CSC Group had the Entrustment Arrangement with the Group.

As advised by the management of the Company, before the Entrustment Arrangement, the Group had limited business dealings with the Non-listed Companies. Since July 2014, the Group has been promoting the business collaboration and strengthening integrated management of those businesses, and it is expected that there will be increased cooperation and business opportunities between the Group and the Non-listed Companies, and the connected transactions between those parties will grow in the next three years. We are advised by the management of the Company that the Entrustment Arrangement is expected to contribute 10% growth to the related transactions. Set out below are the transaction amounts and related growth rates for the two years ended 31 December 2012 and 2013 in connection with the provision and receipt of transportation and logistics services by the Group with the Non-listed Companies:

	2012	2013
	(RMB’000)	(RMB’000)
Provision of transportation and logistics services	133,243	191,242
Growth rate		43.5%
Receipt of transportation and logistics services	197,396	191,192
Growth rate		-3.1%

As illustrated by the figures above, the total connected transaction amounts in respect of provision and receipt of transportation and logistics services by the Group with the Non-listed Companies increased by approximately 43.5% and decreased by approximately 3.1% respectively for the year ended 31 December 2013 as compared with those for the year ended 31 December 2012. With increased cooperation and business opportunities between the Group and the Non-listed Companies since the commencement of the Entrustment Arrangement, whose effect is not shown in the amount of transactions for the years ended 31 December 2012 and 2013, the total connected transaction amounts are expected to grow in the coming few years. Therefore the Directors foresee, and we concur, that the 10% growth contributed by the Entrustment Arrangement in the next three years is fairly and reasonably expected.

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LETTER FROM ASIAN CAPITAL

Volatility of the transportation and logistics services industry

The Directors also allow an approximately 5% to 10% buffer for the inherent volatility of business in transportation and logistics services industry to derive the New Caps as they consider factors like the volatility in oil prices and other market conditions will affect the transaction amounts.

In consideration of the above, the Directors consider, and we concur, that the New Caps under the Master Services Agreement (SINOTRANS & CSC) for each of the three years ending 31 December 2015, 2016 and 2017 are fairly and reasonably determined.

(I) Master Services Agreement (Sinotrans Shandong Hongzhi), Master Services Agreement (Qingdao Liantong Customs) and Master Services Agreement (Qingdao Jinyun Air)

	For	year ended/ending	year ended/ending		For year ending	For year ending
		31 December				31 December
	2012	2013		2014	2015	2016	2017
	_(RMB’000) _	_(RMB’000) _	_(RMB’000) _		_(RMB’000) _	(RMB’000) (RMB’000)
Sinotrans Shandong Hongzhi
Provision of transportation
and logistics services
Historical annual cap/New Cap	240,000	360,000	540,000		135,000	202,500	303,750
Growth rate	-75.6%	50.0%		50.0%	-75.0%	50.0%	50.0%
Actual transaction amount	46,247	69,008		43,704*
Historical utilization rate	19.3%	19.2%		8.1%*
Receipt of transportation
and logistics services
Historical annual cap/New Cap	18,000	27,000		40,500	150,000	225,000	337,500
Growth rate	100.0%	50.0%		50.0%	270.4%	50.0%	50.0%
Actual transaction amount	2,550	12,520		26,764*
Historical utilization rate	14.2%	46.4%		66.1%*

(i) Sinotrans Shandong Hongzhi

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LETTER FROM ASIAN CAPITAL

		For	year ended/ending	year ended/ending	For year ending	For year ending
			31 December			31 December
		2012	2013	2014	2015	2016	2017
		_(RMB’000) _	_(RMB’000) _	_(RMB’000) _	_(RMB’000) _	(RMB’000) (RMB’000)
(ii)	Qingdao Jinyun Air
	Provision of transportation
	and logistics services
	Historical annual cap/New Cap	22,500	33,750	50,625	30,000	45,000	67,500
	Growth rate	-86.1%	50.0%	50.0%	-40.7%	50.0%	50.0%
	Actual transaction amount	17,849	23,449	10,125*
	Historical utilization rate	79.3%	69.5%	20.0%*
	Receipt of transportation
	and logistics services
	Historical annual cap/New Cap	4,500	6,750	10,125	7,500	11,250	16,875
	Growth rate	-75.7%	50.0%	50.0%	-25.9%	50.0%	50.0%
	Actual transaction amount	1,085	2,735	2,307*
	Historical utilization rate	24.1%	40.5%	22.8%*
(iii)	Qingdao Liantong Customs
	Provision of transportation
	and logistics services
	Historical annual cap/New Cap	48,000	57,600	69,120	2,000	4,000	8,000
	Growth rate	-38.9%	20.0%	20.0%	-97.1%	100.0%	100.0%
	Actual transaction amount	166	–	60*
	Historical utilization rate	0.35%	0.00%	0.09%*
	Receipt of transportation
	and logistics services
	Historical annual cap/New Cap	5,160	6,192	7,430.4	200	400	800
	Growth rate	-81.7%	20.0%	20.0%	-97.3%	100.0%	100.0%
	Actual transaction amount	0.4	–	4.3*
	Historical utilization rate	0.01%	0.00%	0.06%*

These figures represent the actual transaction amounts for the eight months ended 31 August 2014 and the utilization rates are calculated by measuring those transaction amounts against the annual cap.

Each of the New Caps for the transactions contemplated under the Master Services Agreement (Sinotrans Shandong Hongzhi), Master Services Agreement (Qingdao Liantong Customs) and Master Services Agreement (Qingdao Jinyun Air) have been determined by reference to the following:

(i) the historical values of the transactions with Sinotrans Shandong Hongzhi, Qingdao Liantong Customs and Qingdao Jinyun Air and their subsidiaries and associates for the years ended 31 December 2012 and 2013 and the eight months ended 31 August 2014;
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LETTER FROM ASIAN CAPITAL

(ii) the historical growth of the Group’s turnover and the plans and requirements of the Group, after allowing an approximately 5% to 10% buffer for the inherent volatility of business and market rates in the transportation and logistics services industry;
(iii) perceived increase in demand for the Group’s services generally with the continued economic growth of the PRC;
(iv) the implementation of the Group’s strategy to expand its domestic operations and overseas network;
(v) the expected expansion and growth of the business of Sinotrans Shandong Hongzhi; and
(vi) the expected development and expansion of the business of Qingdao Jinyun Air and Qingdao Liantong Customs, due to increase in cooperation and transactions with other subsidiaries of the Company.

To assess whether each of the New Caps under the Master Services Agreement (Sinotrans Shandong Hongzhi), Master Services Agreement (Qingdao Liantong Customs) and Master Services Agreement (Qingdao Jinyun Air) for each of the three years ending 31 December 2015, 2016 and 2017 are fairly and reasonably determined, we have considered the following points:

The historical transaction amounts and utilization rates

As set out in the table above, except for the receipt of transportation and logistics services by the Group from Sinotrans Shandong Hongzhi for the eight months ended 31 August 2014 and the provision of transportation and logistics services to Qingdao Jinyun Air in 2012 and 2013, the utilization rates on the historical annual caps in respect of the provision and receipt of transportation and logistics services between the Group and each of the Connected Non Wholly-Owned Subsidiaries (the “ Previous Transactions ”) for each of the two years ended 31 December 2012 and 2013 and for the eight months ended 30 August 2014 were maintained at low level (i.e. below 50%).

The management of the Company represented that the low utilization rates on the historical annual caps of the Previous Transactions from 2012 to 2014 were mainly attributable to the replacement of business tax with value-added tax which started to take effect in the PRC in 2012, the decrease of freight rates of the container shipping market over the past three years and the slowdown of the import and export market growth of the PRC in recent years.

The replacement of business tax with value-added tax started to take effect in the PRC in 2012. As advised by the Directors, value-added tax was added to freight rates which were tax free before the introduction of the value-added tax, resulting in many settlements of export transactions shifting from cost, insurance & freight (CIF) to free on board (FOB) to avoid paying extra tax, reducing the transportation and logistics services income between the Group and the Connected Non Wholly-Owned Subsidiaries significantly starting in 2012.

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LETTER FROM ASIAN CAPITAL

Taking into account of the historical transaction amounts, utilization rates for the Previous Transactions and the expected demand of services between the Group and the Connected Non Wholly-Owned Subsidiaries for the year ending 31 December 2015, the Directors adjust most of the New Caps for the Previous Transactions downward dramatically. Except for the New Caps for the receipt of transportation and logistics services by the Group from Sinotrans Shandong Hongzhi, most of the New Caps for the year ending 31 December 2015 are adjusted downward from the historical annual caps for the year ending 31 December 2014.

The development of Sinotrans Shandong Hongzhi and Qingdao Jinyun Air

In respect to the New Caps for the receipt of transportation and logistics services by the Group from Sinotrans Shandong Hongzhi for the year ending 31 December 2015, the Group has adjusted the New Caps upward by 270.4% to RMB150 million in consideration of the historical transaction amounts, the significant increase of utilization rates during 2012 to 2014 and the expected demand for the services. We are advised by the management of the Company that Sinotrans Shandong Hongzhi has recently commenced the rail freight business in the Shandong Province, and the Group will entrust Sinotrans Shandong Hongzhi to operate its rail freight forwarding business in Shandong Province, which is expected to increase the transactions of receipt of transportation and logistics services by the Group from Sinotrans Shandong Hongzhi significantly in the next three years.

As set out in the above table, the transaction amounts in relation of receipt of transportation and logistics services by the Group from Sinotrans Shandong Hongzhi for the eight months ended 31 August 2014 was approximately RMB26.8 million, representing a utilization rate of approximately 66.1% of the annual cap for the year ending 31 December 2014, while the related amount of transactions for the year ended 31 December 2013 was only approximately RMB12.5 million. We are advised by the Directors that the expected related transaction amounts for the year ending 31 December 2014 is RMB40 million, which will almost fully utilize the annual cap in 2014. In view of the rapid growth rate of the connected transactions in respect of the receipt of transportation and logistics services by the Group from Sinotrans Shandong Hongzhi, we are of the view that the adjustment in relation to the New Caps for the receipt of transportation and logistics services by the Group from Shandong Hongzhi for the year ending 31 December 2015 is fairly and reasonably determined.

As shown in the above table, the expected growth rates of the New Caps for the transactions with Sinotrans Shandong Hongzhi and Qingdao Jinyun Air for each of the two years ending 31 December 2016 and 2017 are 50%. We are advised by the management of the Company that such growth rates set out above are mainly contributed by: (i) the business development of Sinotrans Shandong Hongzhi and Qingdao Jinyun Air, which is expected to boost business volume of the corresponding companies annually by 30% in the near future; (ii) the internal integration of Sinotrans Shandong Company Limited, which is expected to strengthen the business relationship and enhance the growth of the connected transactions between Sinotrans Shandong Company Limited and the two Connected Non Wholly-Owned Subsidiaries set out above; and (iii) an approximately 5% to 10% buffer for the inherent volatility of business and market rates in the transportation and logistics services industry.

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LETTER FROM ASIAN CAPITAL

The restructuring of Qingdao Liantong Customs

We also note that the expected growth rates of the New Caps for the transactions with Qingdao Liantong Customs for each of the two years ending 31 December 2016 and 2017 are 100%. We understand from the Directors that such rapid growth rate of the New Caps for the transactions with Qingdao Liantong Customs is mainly because most of the transactions between the Group and Qingdao Liantong Customs in the next three years arise from the business restructuring and reorganization of Qingdao Liantong Customs, which are expected to be completed in the near future, subject to the business plan of the shareholders of Qingdao Liantong Customs. During the process, connected transactions between the Group and Qingdao Liantong Customs are expected to increase by a large scale in the next three years. Therefore the growth rate of the transactions between the Group and Qingdao Liantong Customs is expected to be relatively large due to a small base of transaction amounts with Qingdao Liantong Customs from 2012 to 2014.

Having considered the above, we concur with the Directors’ view that the New Caps for the transactions contemplated under the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) for each of the three years ending 31 December 2015, 2016 and 2017 are fairly and reasonably determined.

RECOMMENDATION

Taking into consideration of the above, we are of the view that each of the Non-exempt Continuing Connected Transactions and the New Caps thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM to approve the Non-exempt Continuing Connected Transactions and the New Caps thereunder.

Yours faithfully, For and on behalf of

Asian Capital (Corporate Finance) Limited Larry CHAN

Executive Director

33 -

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular 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 in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (“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.

Saved as disclosed in note 2 of the sections headed “II. Interests of Shareholders discloseable pursuant to the SFO” and “III. Directors’ Interests in competing business” below, as at the Latest Practicable Date, none of the Directors or a proposed Directors is a director or employee of a company which has an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

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 and based on the Company’s register required to be maintained pursuant to section 336 of the SFO, 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 XV of the SFO or who were, directly or indirectly, interested in 10 per cent or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group are as follows:

34 -

GENERAL INFORMATION

APPENDIX

(a) Interests in the Shares

			Percentage of	Percentage of
			the Company’s	the Company’s
	Corporate		Total Issued	Issued H Share
Name	Interests	Class of Shares	Share Capital	Capital
SINOTRANS & CSC	2,461,596,200(L)	Domestic Shares	53.44%	—
Holdings Co., Ltd.,	88,000,000(L)	H Shares	1.91%	4.10%
(Note 2)
Deutsche Post AG (Note 3)	237,468,000(L)	H Shares	5.16％	11.07%

*Note 1: (L) – Long Position
Note 2: Zhao Huxiang, Zhang Jianwei, and Tao Suyun are employee or directors of SINOTRANS & CSC which is the controlling Shareholder. The 88,000,000 H Shares are held by Sinotrans (Hong Kong) Holdings Ltd., a wholly-owned subsidiary of SINOTRANS & CSC.
Note 3: This includes 201,852,000 Shares held by Deutsche Post Beteiligungen GmBH (“Deutsche GmBH”) and 35,616,000 H Shares held by DHL Supply Chain (Hong Kong) Limited. Deutsche GmBH and DHL Supply Chain (Hong Kong) Limited are both 100% held by Deutsche Post AG.

(b) Substantial Shareholders of other members of the Group

As at the Latest Practicable Date, save as disclosed below and 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.

Name of entitles holding 10% or Interest in more interest in a member of the relevant Name of subsidiary of the Group company Company 蘇州物流中心有限公司 49% 中國外運蘇州物流中心有限公司 Suzhou Logistics Center Co., Ltd Sinotrans Suzhou Logistics Center Co., Ltd 香�金發船務有限公司 33% 上海華發國際貨運有限公司 (Golden Shipping Co., Ltd) (Shanghai Huafa International Transportation Co., Ltd.)

35 -

GENERAL INFORMATION

APPENDIX

Name of entitles holding 10% or Interest in more interest in a member of the relevant Name of subsidiary of the Group company Company 上海化學工業區奉賢分區發展有限 16% 上海中外運化工國際物流有限公司公司 (Sinotrans Shanghai Chemical (Shanghai Chemical Industrial International Logistics Co. Ltd.) Park Fengxian Sub-zone Development Co., Ltd) 金發實業（香�）有限公司 10% 上海中外運化工國際物流有限公司 (Golden Fortune Enterprising (Sinotrans Shanghai Chemical (HK) Company Limited) International Logistics Co. Ltd.) 上海森華貨運經�有限公司 10% 華發騰飛國際貨運有限公司 (Shanghai Shumhua Freight (Huafa Tanefei International Forwarding Operation Company Transportation Company Limited) Limited) 日本通運株式會社 49% 上海通運國際物流有限公司 (Nippon Express Co., Ltd.) (Shanghai Express International

49% 上海通運國際物流有限公司 (Shanghai Express International Co., Ltd.) 40% 上海華星國際集裝箱貨運有限公司 (Shanghai Huasing International Container Freight Transportation Co., Ltd.)

新加坡太平船務有限公司

(Pacific International Lines (Pte) Ltd.)

45% 寧波太平國際貿易聯運有限公司 (Ningbo Taiping International Trade Transportation Company Limited)
27% 寧波保稅區太平倉儲有限公司 (Ningbo Free Trade Zone Taiping Warehouse Co., Ltd.)

蘇州高新技術產業股份有限公司

(Suzhou New District New & Hi-Tech Industrial Co., Ltd.)

40% 中外運高新物流（蘇州）有限公司 (Sinotrans Gaoxin Logistics (Suzhou) Ltd.)

蘇州高新區經濟發展集團總公司

(Suzhou New District Economy Development (Group) Corporation)

25% 蘇州新區報關有限公司
(Suzhou New District Customs Broker Co., Ltd.)
36 -

GENERAL INFORMATION

APPENDIX

Name of entitles holding 10% or more interest in a member of the Group

寧波新世紀國際投資有限公司

以星綜合航運有限公司

(Zim Integrated Shipping Services Ltd.)

阿聯船務代理（香�）有限公司

(Alian Shipping Agency (Hong Kong) Company Limited)

Interest in

relevant Name of subsidiary of the company Company

24.5% 寧波大�新世紀貨櫃有限公司
49% 上海運星國際船務代理有限公司 (Shanghai Yunsheng International Shipping Agency Company Limited)
49% 上海中外運阿聯船舶代理有限公司 (Sinotrans Shanghai Alian Shipping Agency Company Limited)
49% 寧波中外運阿聯船舶代理有限公司 (Sinotrans Ningbo Alian Shipping Agency Company Limited)

寧波泛洋國際貨運代理有限公司職工持股會

(Ningbo Transocean International Forwarding Agency Ningbo Co. Ltd.)

寧波船務代理有限公司職工持股會

(China Marine Shipping Agency Ningbo Co. Ltd. Employee Shareholding Society)

寧波外運國際貨運代理有限公司職工持股會

(Sinotrans Ningbo International Freight Forward Agency Co., Ltd. Employee Shareholding Society)

寧波外運國際集裝箱貨運有限公司職工持股會

(Sinotrans Ningbo International Container Transportation Company Limited Employee Shareholding Society)

40% 寧波泛洋國際貨運代理有限公司 (Ningbo Transocean International Forwarding Agency Company Limited)
40% 寧波船務代理有限公司 (China Marine Shipping Agency Ningbo Co., Ltd.)
40% 寧波外運國際貨運代理有限公司 (Sinotrans Ningbo International Freight Forwarding Agency Co., Ltd.)

40% 寧波外運國際集裝箱貨運有限公司 (Sinotrans Ningbo International Container Transportation Company Limited)

37 -

GENERAL INFORMATION

APPENDIX

Name of entitles holding 10% or Interest in more interest in a member of the relevant Group company

relevant Name of subsidiary of the company Company

廣東省食品進出口集團公司 20% 佛山中外運倉碼有限公司 (Guangdong Foodstuffs Imp & (Sinotrans Foshan Company Exp (Group) Corporation) Limited)

廣東省南海食品進出口有限公司 (Guangdong Nanhai Foodstuffs Company Limited)

25% 佛山中外運倉碼有限公司 (Sinotrans Foshan Warehousing & Terminal Company Limited)

中山市岐江工業發展有限公司

(Zhongshan Qijiang Industry Development Co., Ltd.)

40.546% 中山中外運倉碼有限公司 (Sinotrans Zhongshan Warehousing & Terminal Corp., Ltd.)

東莞市石龍鎮工業總公司

(Dongguan Shilong Town Industry Co., Ltd.)

20% 東莞中外運物流有限公司

(Sinotrans Dongguan Logistics Co., Ltd.)

香�遠升有限公司

(Lailon Enterprises Ltd.)

25% 青島聯通報關有限公司
(Qingdao Liantong Customs Broker Co., Ltd.)
25% 山東中外運弘志物流有限公司 (Sinotrans Shandong Hongzhi Logistics Co. Ltd.)
25% 青島金運航空貨運代理有限公司 (Qingdao Jinyun Air Cargo Freight Forwarding Co. Ltd.)

日本東海運株式會社

(Azuma Shipping Co., Ltd.)

30% 青島遠東儲運有限公司 (Qingdao Sinotrans-Azuma Logistics Co., Ltd.)

福州市國有資產經�公司

(Fuzhou City State-owned Assets Management Company)

30% 福州中外運大裕保稅倉儲有限公司 (Fuzhou Davu Bonded Storage Company Limited)

SIMME TRANSIT INTERNATIONAL

25% 吉布提運輸有限公司 Djibouti Transit & Transport SARL
38 -

GENERAL INFORMATION

APPENDIX

Name of entitles holding 10% or	Interest in
more interest in a member of the	relevant	Name of subsidiary of the
Group	company	Company
MAMBUK TRADING AND	24%	吉布提運輸有限公司
LOGISTICS PRIVATE		Djibouti Transit & Transport
LIMITED		SARL
老撾榮興國際進出口有限公司	40%	中國外運榮興（老撾）物流有限公司
Lao Rong Xing International		Sinotrans Rong Xing (Lao)
Import& Export Co., Ltd		Logistics Co., Ltd
韓進海運株式會社	49%	上海星瀚船務代理有限公司
(Hanjin Shipping Company		(Shanghai Shenhan Shipping
Limited)		Agency Company Limited)
成�高新投資集團有限公司	45.71%	成�保稅物流投資有限公司
(Chengdu New District		(Chengdu Bonded Logistics
Investment Group Corporation)		Investment Company Limited)
武漢東湖綜合保稅區建設投資有限	40%	武漢東湖綜保區保稅物流有限公司
公司		Wuhan Dast Lake
Wuhan Eastlake Free Trade Zone		Comprehensive Bonded Area
Construction Investment Co. Ltd		Bonded Logistics Co. Ltd
瀘州市興瀘投資集團有限公司	40%	中外運瀘州�保稅物流有限公司
LUZHOU XINGLU		SINOTRANS LUZHOU PORT
INVESTMENT GROUP CO.		BONDED LOGISTICS CO.
LTD		LTD.
普菲斯億達（香�）集團有限公司	40%	中外運普菲斯億達（香�）集團有限
PREFERRED（Hongkong）Group		公司
Co., Ltd.		Sinotrans PREFERRED
		（Hongkong）Group Co., Ltd.
上海外高橋物流中心有限公司	20%	中外運外高橋上海（國際）物流有限
Shanghai Waigaoqiao Logistics		公司
Center Co., Ltd.		Sinotrans Waigaoqiao Shanghai
		(International) Logistics Co., Ltd.

Save as disclosed above, the Directors are not aware that there is any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the

39 -

GENERAL INFORMATION

APPENDIX

SFO, or who is, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at a general meeting of any other member of the Group.

As at the Latest Practicable Date:

(i) none of the Directors had any direct or indirect interests in any assets which have since 31 December 2013 (being the date to which the latest published audited consolidated financial statements of the Group were made up) been acquired or disposed of by or leased to any members of the Group, or are proposed to be acquired or disposed of by or leased to any members of the Group;
(ii) none of the Directors was materially interested in any contracts or arrangements entered into by any members of the Group subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group.

III. Directors’ interests in competing business

Jerry Hsu (a non-executive Director) is considered to have interests in other business apart from the Group’s business, which competes or is 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. He is a representative nominated by DHL Worldwide Express BV, the strategic investor of the Company (the “Strategic Investor”).

DHL Worldwide Express BV 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. While, for the purposes of the Listing Rules, Jerry Hsu 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 Investor, being a major international company in the transportation and logistics industry), the Company has been and continues to carry on its business, management and operation independently of and at arms length from, those businesses and through its joint venture and cooperation arrangements with the Strategic Investor.

Zhao Huxiang, Zhang Jianwei and Tao Suyun are directors or employee of Sinotrans & CSC which is the controlling shareholder of the Company. Certain subsidiaries of Sinotrans & CSC Group engage in the Group’s “core businesses” (namely freight forwarding and shipping agency operations) in certain “core strategic regions” of the Group in the PRC which have only nominal operations which are the same as or similar to the “core businesses” of the Group. Details of the competition between Sinotrans & CSC Group and the Group and the non-competition agreement entered into between Sinotrans & CSC Group and the Company on 14 January 2003 are referred to in the section headed “Relationship with Sinotrans & CSC Group” in the prospectus of the Company dated 29th January 2003.

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.

40 -

GENERAL INFORMATION

APPENDIX

3. DIRECTORS’ 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 any member of the Group (excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation)).

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2013, being the date to which the latest published audited consolidated financial statements of the Group were made up.

5. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which is significant in relation to the business of the Group.

6. EXPERT

The following is the qualification of Asian Capital, which has given its opinion or advice which is contained in this circular:

Name

Qualification

Asian Capital

a corporation licensed to carry out Type 1 (Dealing in Securities), Type 4 (Advising on Securities), Type 6 (Advising on Corporate Finance) and Type 9 (Asset Management) regulated activities under the SFO

As at the Latest Practicable Date, Asian Capital did not have:

(a) any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2013, being the date to which the latest published audited consolidated financial statements of the Group were made up; and
(b) any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Asian Capital has given and has not withdrawn its consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which they respectively appear.

41 -

GENERAL INFORMATION

APPENDIX

7. MISCELLANEOUS

(a) The secretary of the Company is Gao Wei. He is a senior fellow of both of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators (FCIS, FCS). Mr. Gao is the council member and vice president of the Hong Kong Institute of Chartered Secretaries and he is also the vice chairman of the Professional Development Committee thereof.
(b) The registered office and headquarters of the Company is situated at A43, Xizhimen Beidajie, Beijing, the People’s Republic of China (Post Code 100082). The principal place of business of the Company in Hong Kong is situated at Units F & G, 20/F., MG Tower, 133 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong.
(c) The share registrars of the Company is Computershare Hong Kong Investor Services Limited at Rooms 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

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

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the Master Services Agreement (SINOTRANS & CSC), the Master Services Agreement (Sinotrans Shandong Hongzhi), the Master Services Agreement (Qingdao Liantong Customs) and the Master Services Agreement (Qingdao Jinyun Air) will be available for inspection during normal business hours on any weekday (except public holidays) at the office of Reed Smith Richards Butler at 20th Floor, Alexandra House, 18 Chater Road, Central, Hong Kong from the date of this circular, for a period of 14 days.

42 -

AI assistant

ELL Environmental Holdings Limited — Proxy Solicitation & Information Statement 2014

49895_rns_2014-12-02_8e465b4c-384d-41ca-aa13-81f39f465e5e.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

CONTINUING CONNECTED TRANSACTIONS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

I. BACKGROUND

II. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS WHICH REQUIRE REPORTING, ANNUAL REVIEW, ANNOUNCEMENT AND INDEPENDENT SHAREHOLDERS’ APPROVAL

A. Transactions with SINOTRANS & CSC, its subsidiaries and their associates under the Master Services Agreement (SINOTRANS & CSC)

LETTER FROM THE BOARD

LETTER FROM THE BOARD

B. Transactions with Connected Non Wholly-Owned Subsidiaries

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

III. LISTING RULES COMPLIANCE IN RESPECT OF THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

IV. BASIS OF PRICING OF THE TRANSACTIONS CONTEMPLATED UNDER THE MASTER SERVICES AGREEMENTS AND INTERNAL CONTROL PROCEDURES FOR MONITORING CONNECTED TRANSACTIONS

Basis of pricing

LETTER FROM THE BOARD

Internal control procedures

LETTER FROM THE BOARD

V. REASONS AND BENEFITS FOR THE NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

VI. GENERAL

LETTER FROM THE BOARD

VII. EXTRAORDINARY GENERAL MEETING

DIRECTORS’ RECOMMENDATION

GENERAL INFORMATION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Yours faithfully,

The Independent Board Committee

Liu Junhai

LETTER FROM ASIAN CAPITAL

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM ASIAN CAPITAL

THE INDEPENDENT BOARD COMMITTEE

BASIS OF OUR OPINION

LETTER FROM ASIAN CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of the Group

2. Background of SINOTRANS & CSC and Connected Non Wholly-Owned Subsidiaries

SINOTRANS & CSC

Sinotrans Shandong Hongzhi

Qingdao Jinyun Air

Qingdao Liantong Customs

3. Reasons for and benefits of the Non-exempt Continuing Connected Transactions

4. Principal terms and pricing basis of the New Master Services Agreements

5. Historical transaction amounts and basis of the New Caps

Master Services Agreement (SINOTRANS & CSC)

LETTER FROM ASIAN CAPITAL

The adjusted historical transaction amounts after taking into account the effect of restructuring

LETTER FROM ASIAN CAPITAL

The Group’s historical turnover growth

LETTER FROM ASIAN CAPITAL

LETTER FROM ASIAN CAPITAL

The Entrustment Arrangement

Volatility of the transportation and logistics services industry

(I) Master Services Agreement (Sinotrans Shandong Hongzhi), Master Services Agreement (Qingdao Liantong Customs) and Master Services Agreement (Qingdao Jinyun Air)

LETTER FROM ASIAN CAPITAL

The historical transaction amounts and utilization rates

LETTER FROM ASIAN CAPITAL

The development of Sinotrans Shandong Hongzhi and Qingdao Jinyun Air

LETTER FROM ASIAN CAPITAL

The restructuring of Qingdao Liantong Customs

RECOMMENDATION

Asian Capital (Corporate Finance) Limited Larry CHAN

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

I. Interests of Directors

II. Interests of Shareholders discloseable pursuant to the SFO

(a) Interests in the Shares

(b) Substantial Shareholders of other members of the Group

ELL Environmental Holdings Limited Proxy Solicitation & Information Statement 2014

寧波泛洋國際貨運代理有限公司職工持股會

寧波外運國際貨運代理有限公司職工持股會

寧波外運國際集裝箱貨運有限公司職工持股會