ELL Environmental Holdings Limited — Proxy Solicitation & Information Statement 2014

Aug 15, 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: 598)

DISCLOSEABLE AND CONNECTED TRANSACTION

Independent Financial Adviser to the Independent Board Committee the Independent Shareholders

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A notice dated 11 July 2014 convening the EGM to be held at the Meeting Room, 13th Floor, Sinotrans Plaza A, A43, Xizhimen Beidajie, Haidian District, Beijing, the PRC (Post Code 100082) on 1 September 2014 at 10:00 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 not 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.

15 August 2014

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . .	13
LETTER FROM ASIAN CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26

• i -

DEFINITIONS

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

• “Acquisition”

the proposed acquisition of the Target Shares as contemplated under the Framework Acquisition Agreement

• “Asian Capital” or “Independent Financial Adviser”

• 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 Framework Acquisition Agreement and transactions contemplated thereunder

• “associates” the meaning ascribed thereto in the Listing Rules

• “Audited Completion Accounts”

• the audited accounts of the relevant Target Companies dated as of the relevant Completion Date prepared in accordance with the PRC GAAP (as the case may be) and adopted the accounting policies and methods consistent with the latest audited accounts of the relevant Target Companies, issued by an auditor appointed by the Company and SINOTRANS & CSC (or their relevant subsidiaries) in the event of disagreement between the relevant Purchaser and the relevant vendor on the net asset value attributable to the Target Shares

• “Business Day” any day (other than a Saturday, Sunday and a public holiday) on which commercial banks in Hong Kong and the PRC (as the case may be) are open for business

• “Company”

• 中國外運股份有限公司 (Sinotrans Limited), whose H shares are listed on the Stock Exchange

• “Completion Date” the completion date of the transfer of the equity interest in respect of each Target Company

• “Director(s)” director(s) of the Company

• “Domestic Shares” 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 to approve the Framework Acquisition Agreement and the transactions contemplated thereunder including the Acquisition

• 1 -

DEFINITIONS

“Framework Acquisition	a framework acquisition agreement dated 8 July 2014 entered into
Agreement”	between the Company and SINOTRANS & CSC in relation to the
	Acquisition
“Fujian Ningde”	福建寧德中外運有限公司(Fujian Ningde Sinotrans Company
	Limited*), a company established under the laws of the PRC
“Group”	the Company, its subsidiaries and its jointly controlled entities
“HK$”	Hong Kong dollars, lawful currency of Hong Kong Special
	Administrative Region of the PRC
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“H Shares”	overseas listed foreign invested share(s) of RMB1.00 each in the
	share capital of the Company
“Independent Board Committee”	the independent board committee constituted by Guo Minjie, Lu
	Zhengfei and Liu Junhai, all being independent non-executive
	Directors
“Independent Shareholders”	Shareholders other than SINOTRANS & CSC and its associates
“International Cargo”	國際集裝箱租賃有限公司(International Cargo Rental Company
	Limited*), a company established under the laws of the PRC
“Jiangsu Fuchang”	江蘇富昌中外運物流有限公司 (Jiangsu Fuchang Sinotrans
	Logistics Company Limited*), a company established under the
	laws of the PRC
“Jiangsu Jinmao”	江蘇金茂儲運有限公司 (Jiangsu Jinmao Storage Company
	Limited*), a company established under the laws of the PRC
“JV Targets”	Sinotrans Nissin and Sinotrans Yantai
“Latest Practicable Date”	13 August 2014, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained in this circular
“Listing Rules”	Rules Governing the Listing of Securities on the Stock Exchange of
	Hong Kong Limited
“MOFCOM”	Ministry of Commerce of the PRC
“NDRC”	National Development and Reform Commission

• 2 -

DEFINITIONS

“PRC” the People’s Republic of China (excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan) “PRC GAAP” the Enterprise Accounting System (企業會計制度) and Enterprise Accounting Principles (企業會計準則) promulgated by the Ministry of Finance of the PRC, as amended from time to time “RMB” Renminbi, lawful currency of the PRC “Share(s)” H Share(s) and Domestic Share(s) “Shareholder(s)” holder(s) of the Shares “Sinotrans Japan” 中國外運（日本）有限公司 (Sinotrans Japan Company Limited), a company established under the laws of Japan “Sinotrans Korea” 中國外運韓國船務有限公司 (Sinotrans Korea Shipping Company Limited), a company established under the laws of the Republic of Korea “Sinotrans Nissin” 中外運日新國際貨運有限公司 (Sinotrans-Nissin International Transportation Company Limited), a company established under the laws of the PRC “Sinotrans Wuzhou” 廣西梧州中外運倉碼有限公司 (Guangxi Wuzhou Sinotrans Storage Company Limited), a company established under the laws of the PRC “Sinotrans Yantai” 山東煙臺中外運報關有限公司 (Shandong Yantai Sinotrans Customs Company Limited*), a company established under the laws of the PRC “SINOTRANS & CSC” SINOTRANS & CSC Holding Corporation Limited, the controlling shareholder of the Company which holds approximately 55.35% of the issued share capital of the Company “SINOTRANS & CSC Group” SINOTRANS & CSC and its subsidiaries (excluding the Company and its subsidiaries)

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “SFO”

Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong)

“Target Companies” the Wholly-owned Targets, Sinotrans Wuzhou, the JV Targets and Zhonglian

• 3 -

	DEFINITIONS
“Target Shares”	interests held by the SINOTRANS & CSC Group in the Target
	Companies to be acquired by the Company under the Framework
	Acquisition Agreement
“Wholly-owned Targets”	Fujian Ningde, Wide Shine, International Cargo, Jiangsu Fuchang,
	Jiangsu Jinmao, Sinotrans Japan and Sinotrans Korea
“Wide Shine”	宏光發展有限公司Wide Shine Development Limited, a company
	incorporated in Hong Kong
“Zhonglian”	中聯理貨有限公司(Zhonglian Cargo Company Limited*), a
	company established under the laws of the PRC

* For the purpose of identification only

• 4 -

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: 598)

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: Guo Minjie Lu Zhengfei Liu Junhai

Principal Place of Business in Hong Kong: Units F & G, 20/F., MG Tower, 133 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong

15 August 2014

To the Shareholders

Dear Sir and Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

INTRODUCTION

On 8 July 2014, the Company entered into the Framework Acquisition Agreement with SINOTRANS & CSC under which the Company agreed to acquire from SINOTRANS & CSC or its subsidiaries the Target Shares at an aggregate consideration of RMB901,041,300 (equivalent to HK$1,133,998,640).

The purpose of this circular is to provide you with information in respect of the Framework Acquisition Agreement and the transactions contemplated thereunder to enable you to make a decision on whether to vote for or against the relevant resolution at the forthcoming EGM.

• 5 -

LETTER FROM THE BOARD

FRAMEWORK ACQUISITION AGREEMENT

Date

8 July 2014

Parties to the Framework Acquisition Agreement

1. The Company as purchaser.

2. SINOTRANS & CSC as seller. SINOTRANS & CSC is the controlling Shareholder which holds approximately 55.35% of the issued share capital of the Company.

Target Shares

The Target Shares are interests held by the SINOTRANS & CSC Group in the Target Companies which have freight-forwarding, shipping agency, containers lease, warehousing storage and customs declaration operations in Beijing, the Shandong province, the Guangxi province, the Fujian province, the Jiangsu province, Hong Kong, Japan and South Korea.

The Target Shares comprise, specifically:–

• 100% equity interest in the Wholly-owned Targets, being (i) Fujian Ningde, which is principally engaged in freight forwarding, customs and inspection declaration; (ii) Wide Shine and International Cargo (45% equity interest of which is being held through Wide Shine), both are principally engaged in international container lease and related business; (iii) Jiangsu Fuchang, which is principally engaged in warehousing storage and comprehensive transportation yard; (iv) Jiangsu Jinmao, which is principally engaged in warehousing storage and freight forwarding; (v) Sinotrans Japan, which is principally engaged in shipping agent and multimode transportation; and (vi) Sinotrans Korea, which is principally engaged in shipping agent and freight forwarding;

• 70% equity interest in Sinotrans Wuzhou, which is principally engaged in loading and unloading, transit transport, warehousing storage, container consolidation and warehousing yard;

• 50% equity interest in the JV Targets, being (i) Sinotrans Nissin, a sino-foreign equity joint venture principally engaged in shipping and air freight forwarding, multimode transportation and road transportation; and (ii) Sinotrans Yantai, an equity joint venture (currently 50% owned by the Group) principally engaged in customs declaration and shipping transportation; and

• 32% equity interest in Zhonglian, which is principally engaged in packing, unpacking and tallying for international and domestic shipping cargos and containers and supervision of loading and unloading of containers.

• 6 -

LETTER FROM THE BOARD

Apart from (i) the equity interests held by SINOTRANS & CSC and its subsidiaries which are being sold under the Framework Acquisition Agreement to the Company and (ii) the remaining 50% equity interest in Sinotrans Yantai which is currently owned by the Group, the remaining equity interests in Sinotrans Wuzhou, Sinotrans Nissin and Zhonglian are held by independent third parties who are independent of the Company and its subsidiaries.

Consideration

The aggregate initial consideration for the Target Shares is RMB901,041,300 (equivalent to HK$1,133,998,640), payable in cash and subject to adjustment as described below. The Acquisition will proceed on an “all or nothing” basis in respect of the Target Companies and in agreeing to the consideration, the Company treated them as a package. The consideration was arrived at after arm’s length negotiation, having considered the net asset value attributable to the Target Shares, the price to earnings ratio of approximately 11.65 times (being the initial consideration for the Target Shares of RMB901,041,300 divided by the combined audited net profits after tax attributable to the holders of the Target Shares for the year ended 31 December 2013 of approximately RMB77,336,000), the financial performance of the Target Companies as a whole, the synergistic benefits that the Target Companies can bring in consolidating and expanding the Group’s business coverage, the current market situation and recent perceived prospects of the logistics industry. The Target Companies expand the Group's service offerings and geographical presence both within and outside China giving the Group broader coverage to service the needs of its customers and potential customers. Accordingly, the Acquisition will strengthen the domestic inter-regional, national and international business cooperation and improve the services capability of the Target Companies including, among other things, transportation yard, loading and unloading and container consolidation, and strengthen the Company’s overall marketing capabilities.

The consideration is to be paid (i) as to 20% within 5 Business Days following the signing of individual transfer agreements that are required to be signed to effect transfer of the relevant equity interest in respect of each Target Company; (ii) as to 60% within 5 Business Days following the Completion Date; and (iii) as to the remaining balance of the consideration within 30 Business Days following the Completion Date. The consideration will be funded by the internal resources of the Group.

In addition to the agreed consideration, on the principle that SINOTRANS & CSC is to bear the profits and losses attributable to the Target Shares from 31 December 2013 (being the reference date for the determination of the net asset value attributable to those Target Shares) and the Completion Date, the Company is required to pay to SINOTRANS & CSC or vice versa, on RMB basis by reference to the increase or (as the case may be) decrease of the net asset value (when disputed, the audited net asset value as stated in the Audited Completion Accounts) of the relevant Target Shares as at the Completion Date, when compared to their audited net asset value as of 31 December 2013, subject to a cap of RMB100,000,000 in aggregate for all the Target Shares which was determined according to the combined net profits attributable to the holders of the Target Shares of approximately RMB77,000,000 for the year ended 31 December 2013 taking into account the expected variations of the combined net profits for the period from after 31 December 2013 to the Completion Date.

• 7 -

LETTER FROM THE BOARD

Conditions Precedent

Completion of the transfer of all the Target Shares is conditional upon:

• (1) Independent Shareholders’ approval having been obtained in accordance with the Listing Rules in respect of the Acquisition contemplated under the Framework Acquisition Agreement and all other matters relating to it;

• (2) the waivers of the pre-emption rights of the other shareholders of the relevant Target Companies to acquire the relevant Target Shares and/or the consent of the other shareholders of the relevant Target Companies in accordance with the applicable laws having been obtained; and

• (3) all necessary third party approvals, filings, authorizations and/or consents from any government authorities in accordance with the applicable laws having been obtained.

As regards condition precedent (3), the main government authorities include the competent branches of MOFCOM and NDRC.

Each of the conditions precedent above can only be waived with the agreement of all the contracting parties. As at the Latest Practicable Date, condition precedent (2) has been satisfied, and the parties did not have any intention to waive conditions precedent (1) and (3).

If any of the conditions precedent set out above has not been fulfilled within 120 Business Days (or such longer period as may be agreed between the Company and SINOTRANS & CSC), the Acquisition will not proceed. SINOTRANS & CSC is required to refund to the Company any payments made in respect of the Target Shares together with interest at the date of 0.01% per diem thereon.

Completion

Subject to the fulfillment of the conditions precedent under the Framework Acquisition Agreement, the transfer of the Target Shares will be effected by separate transfer agreements between the registered holders of those shares and the relevant members of the Group, and the effective date of the transfer of the Target Shares is the date on which the registrations of change of holders of the Target Shares are completed.

Termination

Either party may by notice in writing to the other terminate the Framework Acquisition Agreement upon (i) the occurrence of force majeure events or other developments beyond the control of the parties which renders it impossible to give effect to the purpose of the Framework Acquisition Agreement; or (ii) if any non-appealable governmental order, determination or other actions is made or taken to permanently restrict or prohibit in the share transfers contemplated under the Framework Acquisition Agreement. SINOTRANS & CSC is required to refund to the Company any payments made in respect of the Target Shares without interest in the case of termination under such circumstances.

• 8 -

LETTER FROM THE BOARD

INFORMATION ON THE GROUP AND SINOTRANS & CSC

The Group is a logistics services provider in the PRC, whose core businesses are freight forwarding and shipping agency, with complementary supporting businesses in storage and terminal services and other services (mainly trucking and express services).

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

INFORMATION ON THE TARGET COMPANIES

As at the date of this circular, the total investment costs of SINOTRANS & CSC and its subsidiaries attributable to the Target Shares were approximately RMB229,375,578. The following table sets out the audited net asset value of each of the Target Company as at 31 December 2013 and the audited net profits before and after taxation for the financial year ended 31 December 2012 (“FY 2012”) and the financial year ended 31 December 2013 (“FY 2013”) of each Target Company according to the PRC GAAP.

				Audited (Notes 1 and 2)	Audited (Notes 1 and 2)	Audited (Notes 1 and 2)
		Net asset	**Net **	Profits		**Net **	Profits
	Equity	value as at	**before **	taxation		**after **	taxation
	interests	31 Dec
	acquired	2013 (Note 4)	FY 2012	FY 2013		FY 2012	FY 2013
	(%)	RMB (’000)	RMB (’000)	_RMB _	(’000)	RMB (’000)	_RMB _	(’000)
Wholly-owned Targets:
Fujian Ningde*	100	6,540	381		472	236		378
Wide Shine*	100	392,354	37,155		42,056	37,143		42,045
International
Cargo (Note 5)	55	15,143	(274)		77	(274)		77
Jiangsu Fuchang*	100	64,978	3,115		3,115	1,250		1,949
Jiangsu Jinmao	100	40,090	(998)		297	(801)		286
Sinotrans Japan	100	19,665	20,807		17,784	11,002		10,054
Sinotrans Korea	100	27,255	4,755		3,726	3,288		2,752
Majority-owned target:
Sinotrans Wuzhou	70	77,390	10,628		12,159	7,857		8,956
JV Targets:
Sinotrans Nissin	50	52,243	11,778		15,169	8,608		11,034
Sinotrans Yantai (Note 3)	50	1,483	(38)		(46)	(38)		(46)
Other:
Zhonglian*	32	144,678	48,703		48,736	33,620		35,353

• 9 -

LETTER FROM THE BOARD

Notes:

1. There is no material difference between International Financial Reporting Standards and PRC GAAP financial information.

2. The financial information above in relation to those Target Companies that have subsidiaries is presented on a consolidated basis.

3. Sinotrans Yantai is currently owned as to 50% by a wholly-owned subsidiary of the Company.

4. The net asset value attributable to the Target Shares as at 31 December 2013 (calculated as the aggregate of the net asset value as at 31 December 2013 multiplied by the percentage equity interest being acquired in respect of the Target Shares stated in the table above) amounted to approximately RMB686,543,000.

5. The remaining 45% of International Cargo is currently owned by Wide Shine. Therefore, upon completion of the Acquisition, the Company will (as a result of direct and indirect holdings through Wide Shine) own 100% equity interest of International Cargo.

6. Consolidated

Upon completion of the Acquisition, (i) the Wholly-owned Targets, Sinotrans Wuzhou and Sinotrans Yantai (which will then become indirectly wholly-owned by the Company) will become direct or indirect subsidiaries of the Company and their results will be consolidated into the Group’s consolidated financial statements; (ii) Sinotrans Nissin will become a joint venture of the Company and its results will be accounted for as “share of profit/loss of joint ventures” in the Group’s consolidated financial statements; and (iii) Zhonglian will become an associate of the Company and its results will be accounted for as “share of profit/loss of associates” in the Group’s consolidated financial statements.

REASONS FOR AND BENEFITS OF THE ACQUISITION AND POSSIBLE FUTURE RESOURCES CONSOLIDATION

As the Company has stated in its annual reports, the Group has been negotiating with the SINOTRANS & CSC Group regarding asset and/or business reorganizations with a view to facilitating appropriate consolidation of the core business operations and related assets into the Group, to reduce potential competition between the Group and the rest of the SINOTRANS & CSC Group and to expand the business coverage of the Group. These negotiations have culminated in the announcement on 10 February 2014 of an entrusted management agreement by which the Company agreed, in return for fixed management fees, to manage certain subsidiaries of SINOTRANS & CSC in two phases for terms expiring on 31 December 2016. Further, on 25 March 2014, the Company announced the realization of its investments in loss making marine transportation business which has been approved by the Independent Shareholders and the status of completion of which is the subject of the Company’s announcement on 30 June 2014.

While the transactions contemplated under the Framework Acquisition Agreement are also the result of such reorganization negotiations, it furthers the Group’s stated strategy to deepen the consolidation of logistics resources and enhance its capability in integrated operations. In particular, the Company believes that the Acquisition can enable the Group to reinforce its leading market position in Northeast Asia by expanding its service network in Japan and South Korea and strengthen its market share in China’s coastal regions.

• 10 -

LETTER FROM THE BOARD

The board of Directors (including the independent non-executive Directors who have taken into account the advice from Asian Capital), are of the view that the terms of the Framework Acquisition Agreement are fair and reasonable and are on normal commercial terms, and that the Framework Acquisition Agreement is in the interest of the Company and its Shareholders as a whole.

As the platform for SINOTRANS & CSC’s logistics business, the Company will continue to engage SINOTRANS & CSC in discussions regarding appropriate assets and/or business reorganization opportunities, which may (or may not) culminate in future transactions.

LISTING RULES IMPLICATIONS

As SINOTRANS & CSC is the controlling Shareholder holding 55.35% of the issued Share capital of the Company as at the Latest Practicable Date, the entering into of the Framework Acquisition Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the results of at least one of the applicable percentage ratios (as defined under the Listing Rules) is more than 5% but less than 25%, the Acquisition also constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. The Acquisition is subject to Independent Shareholders’ approval by way of poll on which SINOTRANS & CSC and its associates will abstain from voting.

None of the Directors had any material interest in the transactions contemplated under the Framework Acquisition Agreement, therefore they are not required under the Listing Rules to abstain from voting on the Board resolutions approving the Framework Acquisition Agreement and the Acquisition. Nonetheless, as Mr. Zhao Huxiang, Mr. Zhang Jianwei and Ms. Tao Suyun are concurrently holding positions in SINOTRANS & CSC, they have abstained from voting in respect of the proposed resolution(s) to approve the Framework Acquisition Agreement in accordance with the relevant PRC laws and regulations.

In accordance with the Listing Rules, SINOTRANS & CSC and its associates will be required to abstain from voting at the forthcoming EGM in respect of the transactions contemplated under the Framework Acquisition Agreement. As at the Latest Practicable Date, SINOTRANS & CSC is interested in 2,461,596,200 Domestic Shares and 88,000,000 H Shares, representing approximately 55.35% of the existing total issued share capital of the Company.

The Company has set up the Independent Board Committee (comprising all the three independent non-executive Directors) and has appointed Asian Capital as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the transactions contemplated under the Acquisition and the Framework Acquisition Agreement.

DIRECTORS’ RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee as set out on page 13 of this circular which contains its recommendation to the Independent Shareholders in respect of the ordinary resolution set out in the notice of EGM dated 11 July 2014 to approve the transactions contemplated under the Framework Acquisition Agreement. The advice of Asian Capital to the Independent Board Committee and the Independent Shareholders as to whether the terms of the Framework Acquisition Agreement are fair

• 11 -

LETTER FROM THE BOARD

and reasonable and the transaction contemplated under the Framework Acquisition Agreement are in the interest of the Company and its Independent Shareholders as a whole is set out on pages 15 to 25 of this circular.

The Independent Board Committee, having taken into account the advice of Asian Capital, considers that although the Framework Acquisition Agreement is not in ordinary and usual course of business of the Group, the terms of the Framework Acquisition Agreement is on normal commercial terms and fair and reasonable and the transactions contemplated under the Framework Acquisition Agreement is in the interests of the Company and its Independent Shareholders as a whole.

The Board considers that although the Framework Acquisition Agreement is not in ordinary and usual course of business of the Group, the Framework Acquisition Agreement is on normal commercial terms and fair and reasonable and the transaction contemplated under the Framework Acquisition Agreement is in the interests of the Company and its Independent Shareholders as a whole. Accordingly, the Directors (including the members of the Independent Board Committee) recommend the Independent Shareholders to vote in favour of the resolution to be proposed as set out in the notice of the EGM dated 11 July 2014.

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

Beijing, 15 August 2014

In this circular, RMB are translated to HK$ for illustration purpose only at the rate of HK$1 = RMB0.79457.

• 12 -

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 Framework Acquisition Agreement and the transaction contemplated thereunder as set out in the Circular.

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(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 598)

To the Independent Shareholders

Dear Sir and Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

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 resolution to approve the transactions contemplated under the Framework Acquisition Agreement, 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 (i) the terms of the Framework Acquisition Agreement are on normal commercial terms, in the ordinary and usual course of business of the Group and fair and reasonable and (ii) the transaction contemplated under the Framework Acquisition Agreement are in the interests of the Company and its Independent 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 that although the Framework Acquisition Agreement is not in ordinary and usual course of business of the Group, the terms of the Framework Acquisition Agreement and the transaction contemplated thereunder to be on normal commercial terms, fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole.

• 13 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM in respect of the transactions contemplated under the Framework Acquisition Agreement.

Yours faithfully,

The Independent Board Committee

Guo Minjie

Independent non-executive Director

Lu Zhengfei Independent non-executive Director

Liu Junhai Independent non-executive Director

Beijing, 15 August 2014

• 14 -

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.

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

To the Independent Board Committee and the Independent Shareholders

15 August 2014

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTIONS

1. INTRODUCTION

We refer to our engagement as the Independent Financial Adviser by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Acquisition Agreement and the transactions contemplated thereunder. Details of the terms of the Framework Acquisition Agreement are set out in the letter from the Board (the “ Board Letter ”) contained in the circular of the Company dated 15 August 2014 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context herein otherwise requires.

As set out in the Company’s announcement dated 8 July 2014, the Company entered into the Framework Acquisition Agreement with SINOTRANS & CSC, under which the Company conditionally agreed to acquire the Target Shares from SINOTRANS & CSC or its subsidiaries at an aggregate initial consideration of RMB901,041,300 (equivalent to HK$1,133,998,640), payable in cash and subject to adjustments by reference to the increase or (as the case may be) decrease of the net asset value (when disputed, the audited net asset value as stated in the Audited Completion Accounts) of the relevant Target Shares as at the Completion Date, when compared to their audited net asset value as of 31 December 2013, subject to a cap of RMB100,000,000 in aggregate for all the Target Shares.

As SINOTRANS & CSC is the controlling Shareholder holding 55.35% of the issued Share capital of the Company as at the Latest Practicable Date, the entering into of the Framework Acquisition Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the results of at least one of the applicable percentage ratios (as defined under the Listing Rules) is more than 5% but

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less than 25%, the Acquisition also constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. The Acquisition is subject to Independent Shareholders’ approval by way of poll on which SINOTRANS & CSC and its associates will abstain from voting.

2. THE INDEPENDENT BOARD COMMITTEE

The Company has set up the Independent Board Committee comprising all the three independent nonexecutive Directors, namely Mr. Guo Minjie, Mr. Lu Zhengfei and Mr. Liu Junhai to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Acquisition Agreement and the transactions contemplated thereunder.

In our capacity as the Independent Financial Adviser, our role is to give independent advice to the Independent Board Committee and the Independent Shareholders as to whether the Framework Acquisition Agreement and the transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business, fair and reasonable so far as the Company and its Shareholders are concerned, and in the interests of the Company and its Shareholders as a whole.

Apart from a normal professional fee payable to us in connection with this appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, no arrangements exist whereby we will receive any fees or benefits from the Company.

3. BASIS OF OUR OPINION

In formulating our opinion and recommendation in relation to the Framework Acquisition Agreement and the transactions contemplated, we have considered, among other matters, information and documents including but not limited to (i) the Board Letter; (ii) the Framework Acquisition Agreement; (iii) the announcement of the Company dated 8 July 2014; (iv) the audited annual reports of the Company for the years ended 31 December 2012 and 2013; (v) the audited financial statements of each of the Target Companies for the years ended 31 December 2012 and 2013 prepared in accordance with the Accounting Standards for Business Enterprises of the People’s Republic of China and issued by the independent auditor for the purpose of the Acquisition and submission to the State-owned Assets Supervision and Administration Commission of the State Council (the “ Special Audit Reports ”).

We have also 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

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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.

4. PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation in relation to the Framework Acquisition Agreement, details of which are set out in the Board Letter, we have taken into consideration the following principal factors and reasons:

Background of the Group

The Group is a logistics service provider in the PRC, whose core businesses are freight forwarding and shipping agency, with Complementary supporting businesses in storage and terminal services and other services (mainly trucking and express services).

The table below sets out the revenue from each segment of the Group after inter-segment elimination extracted from the annual reports of the Company for the years ended 31 December 2012 and 2013:

Freight forwarding Shipping agency Storage and terminal services Marine transportation (Note) Other services Total revenue Net profit ratio	For the year ended 31 December 2012 (audited) 2013 (audited) (RMB million) (%) (RMB million) (%) 39,449 83.1% 40,382 84.5% 1,018 2.1% 649 1.4% 1,898 4.0% 1,870 3.9% 3,809 8.0% 3,471 7.3% 1,308 2.8% 1,397 2.9% 47,482 100.0% 47,769 100.0% 1.9% 2.4%	For the year ended 31 December 2012 (audited) 2013 (audited) (RMB million) (%) (RMB million) (%) 39,449 83.1% 40,382 84.5% 1,018 2.1% 649 1.4% 1,898 4.0% 1,870 3.9% 3,809 8.0% 3,471 7.3% 1,308 2.8% 1,397 2.9% 47,482 100.0% 47,769 100.0% 1.9% 2.4%
		100.0%

Note: The disposal of the Group’s material marine transportation business has been completed by the end of July 2014, after which the marine transportation business will no longer be a reportable operating segment of the Group.

As illustrated above, the Group’s revenue for the year ended 31 December 2013 amounted to approximately RMB47.8 billion, representing an increase of approximately 0.6% from approximately RMB47.5 billion for the year ended 31 December 2012. As one of the core business segments of the Group, revenue from freight forwarding business increased by 2.6% from approximately RMB39.4 billion for the year ended 31 December 2012 to approximately RMB40.4 billion for the year ended 31 December 2013, mainly due to the increase in sea freight forwarding volume. Accordingly revenue

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contribution from the freight forwarding business to the Company increased from approximately 83.1% for the year ended 31 December 2012 to approximately 84.5% for the year ended 31 December 2013. In addition, the net profit ratio (being the profit for the year of the Group divided by the revenue of the Group after inter-segment elimination as extracted from the annual reports of the Company for the years ended 31 December 2012 and 2013) increase from approximately 1.9% for the year ended 31 December 2012 to approximately 2.4% for the year ended 31 December 2013.

Background of the Target Companies

The principal businesses of the Target Companies are freight-forwarding, shipping agency, containers lease, warehousing storage and customs declaration operations in Beijing, Shandong province, Guangxi province, Fujian province, Jiangsu province, Hong Kong, Japan and South Korea.

The following table sets out the combined financial position as at 31 December 2013 and combined financial performance for the years ended 31 December 2012 and 2013 of the Target Companies, which are extracted from the Special Audit Reports:

				**As at 31 **	December			**For **	the year ended 31 December	the year ended 31 December	the year ended 31 December
			2012			2013		2012		2013
									Net		Net
		Total	Total	Gearing	Total	Total	Gearing		profits		profits
		assets	liabilities	ratio*	assets	liabilities	ratio*	Revenue	after tax	Revenue	after tax
		RMB(’000)	RMB(’000)	%	RMB(’000)	RMB(’000)	%	RMB(’000)	RMB(’000)	RMB(’000)	RMB(’000)
Target	Companies	1,440,612	662,183	46.0	1,365,978	524,159	38.4	903,873	101,891	868,348	112,838

* being the total liabilities divided by the total assets.

As illustrated in the table above, the combined revenue of the Target Companies for the year ended 31 December 2013 was essentially flat compared with that for the year ended 31 December 2012, while the net profit of the Target Companies increased by approximately 10.7% from approximately RMB102 million for the year ended 31 December 2012 to approximately RMB113 million for the year ended 31 December 2013. Based on the discussion with the management of the Company, the net profit of the Target Companies has been improved by contribution of some companies which lowered the operating cost through higher efficiency and implemented stricter control on expenses. Accordingly, the net profit ratio increased from approximately 11.3% for the year ended 31 December 2012 to approximately 13.0% for the year ended 31 December 2013, both of which are significantly higher than the net profit ratio of the Group, which were approximately 1.9% and 2.4% for the year ended 31 December 2012 and 2013, respectively, as illustrated previously in the subsection headed Background of the Group. In addition, the gearing ratio of the Target Companies decreased from approximately 46.0% as at the end of 31 December 2012 to approximately 38.4% as at the end of 31 December 2013, which was significantly lower than that of the Group (which were approximately 56.5% and 55.1% as disclosed in its annual reports for the year ended 31 December 2012 and 2013, respectively). Further discussions regarding the financial effects of the Acquisition are set out in paragraphs headed “Financial effects of the Acquisition” below.

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LETTER FROM ASIAN CAPITAL

Reasons for and benefits of the Acquisition

Based on the discussions with the management of the Company, we understand that the Group with the position as an integrated logistics service platform of SINOTRANS & CSC has endeavoured to develop its integrated logistic business to enhance the profitability through business reorganisation within SINOTRANS & CSC Group. As set out in the Company’s circular dated 22 April 2014, as part of the business reorganisation, the Group has disposed of the loss making non-core business, i.e. material marine transportation business, so that the Group can focus its resources on further developing its profitable core integrated logistic services business.

As set out in the Board Letter, the transactions contemplated under the Framework Acquisition Agreement are the result of the negotiations between the Company and SINOTRANS & CSC Group regarding asset and/or business reorganizations with a view to facilitating appropriate consolidation of the core business operations and related assets into the Group, to reduce potential competition between the Group and the rest of the SINOTRANS & CSC Group and to expand the business coverage of the Group. The entering into of the Framework Acquisition Agreement furthers the Group’s stated strategy to deepen the consolidation of logistics resources and enhance its capability in integrated operations. In particular, the management of the Company believes that the Acquisition can enable the Group to reinforce its leading market position in Northeast Asia by expanding its service network in Japan and South Korea and strengthen its market share in China’s coastal regions.

Brief industry overview

According to the analysis report of development prospect and investment forecast on China Logistics Industry (2013-2017) by China’s Economic Future (中經未來), the “12th Five-year Plan Outline for National Economic and Social Development” (國民經濟和社會發展十二五規劃綱要) explicitly proposes to develop a modern logistics industry through accelerating the development of socialized, specialized and informational modern logistics service system, developing third-party logistics, integrating and utilizing current logistics resources, strengthening the construction of logistics infrastructure to improve logistics efficiency and reduce logistics cost, promoting the development of logistics in key fields such as agricultural products, bulky minerals, major industrial products and so on, optimizing the regional development of the logistics industry, supporting the development of logistics concentrated zones such as logistics parks etc., and promoting modern logistics management to enhance the intellectualization and standardization levels of logistics. The “12th Five-year Plan for the Development of Service Industry” (服務業發展「十二五」規劃) (the “ Plan ”) clearly proposed to energetically develop third-party logistics. According to the Plan, by 2015, the added value of service industry shall account for 47.5% of Gross Domestic Product, which is 4% higher than that in 2010, becoming the industry with the highest proportion in the three industries and the added value of Chinese logistics industry is expected to be RMB5.4 trillion by 2017.

The Logistics Prosperous Index (LPI) is a monthly index published by the China Federation of Logistics and Purchasing (CFLP). It is a weighted index calculated by five major sub-indices, namely the total sales volume index, new order index, employment index, inventory turnover index and equipment utilization index. The index is used to measure the outlook for the logistics industry with

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LETTER FROM ASIAN CAPITAL

50% as the benchmark. According to CFLP, an index above 50% indicates economic expansion of logistics activity and below 50% indicates recession. Set out below is the LPI from July 2013 to June 2014.

==> picture [344 x 92] intentionally omitted <==

As shown in the table above, the average LPI during the period from July 2013 to June 2014 is approximately 53.63%, remaining above 50%, which implies that the logistic industry is still at the economic expansion stage.

Consideration

Pursuant to the Framework Acquisition Agreement, the aggregate initial consideration for the Target Shares is RMB901,041,300 (equivalent to HK$1,133,998,640), payable in cash and subject to adjustment as described below. According to the Board Letter, the Acquisition will proceed on an “all or nothing” basis in respect of the Target Companies and in agreeing to the consideration, the Company treated them as a package. The consideration was arrived at after arm’s length negotiation, having considered the net asset value attributable to the Target Shares, the price to earnings ratio of approximately 11.65 times (being the initial consideration for the Target Shares of RMB901,041,300 divided by the combined audited net profits after tax attributable to the holders of the Target Shares for the year ended 31 December 2013 of approximately RMB77,336,000), the financial performance of the Target Companies as a whole, the synergistic benefits that the Target Companies can bring in consolidating and expanding the Group’s business coverage, the current market situation and recent perceived prospects of the logistics industry. The Target Companies expand the Group's service offerings and geographical presence both within and outside China giving the Group broader coverage to service the needs of its customers and potential customers. Accordingly, the Acquisition will strengthen the domestic inter-regional, national and international business cooperation and improve the services capability of the Target Companies including, among other things, transportation yard, loading and unloading and container consolidation, and strengthen the Company’s overall marketing capabilities.

The consideration is to be paid (i) as to 20% within 5 Business Days following the signing of individual transfer agreements that are required to be signed to effect transfer of the relevant equity interest in respect of each Target Company; (ii) as to 60% within 5 Business Days following the Completion Date; and (iii) as to the remaining balance of the consideration within 30 Business Days following the Completion Date. The consideration will be funded by the internal resources of the Group.

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LETTER FROM ASIAN CAPITAL

The initial consideration of RMB901,041,300 represents a historic price-earnings ratio (“ PER ”) and a historical price-book ratio (“ PBR ”) of approximately 11.65 times and approximately 1.32 times, respectively, being the initial consideration for the Target Shares of RMB901,041,300, divided by the combined audited net profits after tax attributable to the holders of the Target Shares for the year ended 31 December 2013 of approximately RMB77,336,000 and the combined audited net assets attributable to the holders of the Target Shares of RMB680,639,000 as at 31 December 2013 respectively.

In assessing the fairness and reasonableness of the initial consideration, we have conducted ratio analysis set out below and have identified, to the best of our knowledge, eight companies (including the Company) listed on the Stock Exchanges, whose principal operations are comparable to those of the Target Companies, being freight forwarding and shipping agency, containers lease, warehousing storage and customers declaration operations (the “ Comparables ”).

The followings are the details of the Comparables including the stock code, place of listing, principal businesses, principal business locations, the PER and the PBR of the Comparables based on their respective market capitalisation determined according to the share prices of those Comparables as at 8 July 2014 (being the date of the Framework Acquisition Agreement) and the financial information of those Comparables enclosed in their latest published annual reports on their websites, respectively:

Name of the	Stock		Principal business
company	code	Principal businesses	locations	PER	PBR	ROE
				(times)	(times)	(%)
Kerry Logistics	636	logistics, freight and warehouse leasing and	mainly in PRC,	11.57	1.58	13.66
Network Ltd.		operations services	Hong Kong,
			Taiwan and South
			& Southeast Asia
Gamma Logistics	8310	integrated logistics freight services; provision of	mainly in Hong	29.48	4.45*	15.08*
Corporation		fuel cards; tractors repairs and maintenance	Kong and PRC
		services and insurance agency services
Tianjin Binhai Teda	8348	logistics and supply chain solutions services and	mainly in PRC	2.78*	0.17*	6.23*
Logistics (Group)		trading and related logistics services in the
Corporation		PRC
Limited
Chu Kong Shipping	560	management and other related services to high-	mainly in PRC and	8.53	0.78	9.14
Development Co.,		speed waterway passenger transportation in	Hong Kong
Ltd		Guangdong, Hong Kong and Macau; the
		operation and management of river trade cargo
		terminals in the Mainland China and Hong
		Kong; cargo transportation, warehousing and
		storage business

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Name of the	Stock		Principal business
company	code	Principal businesses	locations	PER	PBR	ROE
				(times)	(times)	(%)
SITC International	1308	the provision of marine transportation services,	mainly in PRC,	9.68	1.46	15.12
Holdings		freight forwarding services for marine	Korea and Japan
Company Limited		transportation, depot and warehouse services
		and related business
Orient Overseas	316	container transport and logistics include global	mainly in Asia	66.27*	0.70	1.05
(International)		containerised shipping services in major trade
Limited		lanes, and integrated services over the
		management and control of effective storage
		and flow of goods
COSCO	517	shipping services and general trading	mainly in PRC and	19.42	0.63	3.23
International			Hong Kong
Holdings Limited
The Company	598	freight forwarding and shipping agency,	mainly in PRC and	20.32	1.57	7.73
		complemented by supporting businesses in	Hong Kong
		storage and terminal services, marine
		transportation and other services
Average				21.01	1.42	8.91
Average (if extremities	marked	with “*” are excluded)		16.50	1.12	8.32
Maximum				66.27	4.45	15.12
Minimum				2.78	0.17	1.05
Target Shares				11.65	1.32	11.36

The Comparables have been selected after taking into account, among others, their principal businesses, principal business locations and scale of operations in terms of the sizes of revenue and profit. To our best knowledge and efforts, we consider that the Comparables represent a full and exhaustive list based on the above mentioned selection criteria. In the process of selecting the Comparables, we would not be able to identify one particular listed company with principal businesses comprising all those of the Target Companies. Alternatively, we selected those listed companies with similar scope of businesses to the Target Companies, even though those listed companies may focus only on a particular business scope of the Target Companies, in order to reach a more relevant comparison. Based on the abovementioned rationale, we are of the view that the selected Comparables are fair and representative samples.

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As shown in the above table, the PER of the Comparables which we have found range from approximately 2.78 times to approximately 66.27 times, with an average of approximately 21.01 times or 16.50 times if extremities are excluded. The PBR of the Comparables which we have found range from 0.17 times to 4.45 times, with an average of approximately 1.42 times or 1.12 times if extremities are excluded. Accordingly, the implied PER of the Target Shares falls within the range of the PER of the Comparables, and is lower than the average of the PER of the Comparables (whether the extremities are excluded or not). The implied PBR of the Target Shares also falls within the range of the PBR of the Comparables and is lower than the average of the PBR of the Comparables. Although the PBR of the Target Shares is higher than the average PBR of the Comparables if the extremities are excluded, considering return on equity (“ ROE ”) of the Target Companies, which is approximately 11.36% and much higher than the average ROE of the Comparables, which is 8.32%, if the ROE of the Comparables with extreme PBR are excluded, we consider that the implied PER and PBR of the Target Shares represented by the initial consideration are acceptable. Considering the financial performance of the Target Companies as a whole, the Group’s strategy and synergistic benefits, the current prospective situation of the industry and the results of the ratio analysis above, although the consideration is higher than the net asset value attributable to the Target Shares, we are of the view that the initial consideration is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

In addition to the agreed initial consideration, on the principle that SINOTRANS & CSC is to bear the profits and losses attributable to the Target Shares from 31 December 2013 (being the reference date for the determination of the net asset value attributable to the Target Shares) to the Completion Date, the Company is required to pay to SINOTRANS & CSC or vice versa, on RMB basis by reference to the increase or (as the case may be) decrease of the net asset value (when disputed, the audited net asset value as stated in the Audited Completion Accounts) of the relevant Target Shares as at the Completion Date, when compared to their audited net asset value as of 31 December 2013, subject to a cap of RMB100,000,000 in aggregate for all the Target Shares.

According to the Board Letter, the cap of RMB100,000,000 was determined according to the combined net profits attributable to the holders of the Target Shares of approximate RMB77,000,000 for the year ended 31 December 2013 with consideration of the expected varies of the combined net profits for the period from after 31 December 2013 to the Completion Date. We are of the view that the cap of RMB100,000,000 is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Financial effects of the Acquisition

Upon completion of the Acquisition, the Wholly-owned Targets, Sinotrans Wuzhou and Sinotrans Yantai (which will then become indirectly wholly-owned by the Company) will become direct or indirect subsidiaries of the Company and their results will be consolidated into the Group’s consolidated financial statements. As Sinotrans Nissin and Zhonglian will not become subsidiaries of the Company on Completion Date, their results will not as a result be consolidated in the Group’s consolidated financial statements.

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Net asset value

Upon completion of the Acquisition, as Sinotrans Nissin and Zhonglian will not become subsidiaries of the Company, the net asset value of the Target Companies (other than Sinotrans Nissin and Zhonglian) of approximately RMB614 million will be consolidated into the Group, and the consideration paid for Sinotrans Nissin and Zhonglian will be recorded as “investment in joint ventures” and “investment in associates” respectively in the books of the Group. The Directors estimate that the net asset value of the Group would be decreased by approximately RMB144 million, representing approximately 1.07% of the net assets of the Group as at 31 December 2013, upon completion of the Acquisition and no goodwill will be recorded in the Group’s account.

Earnings

Upon completion of the Acquisition, the Target Companies (other than Sinotrans Nissin and Zhonglian) will become wholly owned subsidiaries of the Company and their respective results will be consolidated into the accounts of the Group. The financial results of Sinotrans Nissin and Zhonglian will be accounted for using equity method. For the year ended 31 December 2013, the Target Companies (other than Sinotrans Nissin and Zhonglian) recorded a combined net profit attributable to equity holders of the respective company of approximately RMB66 million and the profits from Sinotrans Nissin and Zhonglian calculated using equity method would be approximately RMB14 million, which collectively representing approximately 9.5% of the consolidated net profit attributable to equity holders of the Company for the year ended 31 December 2013.

Working capital

According to the Board Letter, the Acquisition will be financed by the internal resources of the Group. As at 31 December 2013, the Group has cash and cash equivalents of approximately RMB5,276 million, and the initial consideration accounted for approximately 17% of such cash and cash equivalents. Given the Group’s strong cash position, the management of the Company considered, and we have no reason to doubt the basis of their view, that the Group will have sufficient financial resources to fund the initial consideration without affecting the normal operations of the Group.

Based on the aforementioned financial effects of the Acquisition on the Company, in particular, the positive impact on the earnings of the Company with immaterial decrease in the net assets of the Company, we are of the opinion that the Acquisition as a whole is in the interests of the Company and its Shareholders.

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5. RECOMMENDATIONS

Having taken into account the principal factors and reasons which include (i) background of and reasons for the Acquisition; (ii) the recent perceived prospects of the logistics industry; (iii) the consideration and the ratio analysis; and (iv) financial effects of the Acquisition on the Group, we are of the view that, although the entering into of the Framework Acquisition Agreement is not in the ordinary and usual course of business of the Group, the Framework Acquisition Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Company and its Shareholders are concerned, and in the interests of the Company and its Shareholders as a whole. Accordingly, we would recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Acquisition and we recommend the Independent Shareholders to vote in favour of the resolution in this regard.

Yours faithfully, For and on behalf of Asian Capital (Corporate Finance) Limited Larry CHAN

Executive Director

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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 SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

II. Interests of Shareholders discloseable pursuant to the SFO

As at the Latest Practicable Date, so far as is known to the Directors or supervisor of the Company and based on the Company’s register required to be maintained pursuant to section 336 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), 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:

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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
	(Note 1)
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	237,468,000(L)	H Shares	5.16％	11.07%
(Note 3)
HSBC Global Asset	125,300,000(L)	H Shares	2.72%	5.84%
Management (Hong
Kong) Limited

• 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 Beteilgungen GmBH (“Deutsche GmBH”) and 35,616,000 H Shares held by DHL Supply Chain (Hong Kong) Limited. Deutsche GmBH and DHL EXEL 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 Interest in 10% or more interest in a relevant Name of subsidiary member of the Group company of the 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., Sinotrans Suzhou Logistics Ltd 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.)

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GENERAL INFORMATION

APPENDIX

Name of entitles holding Interest in 10% or more interest in a relevant Name of subsidiary member of the Group company of the Company 上海化學工業區奉賢分區發展有 16% 上海中外運化工國際物流有限 限公司 公司 (Shanghai Chemical Industrial (Sinotrans Shanghai Chemical Park Fengxian Sub-zone International Logistics Co. Ltd.) 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 (Golden Fortune Enterprising 公司 (HK) Company Limited) (Sinotrans Shanghai Chemical 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 Transportation Company 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 Co., Ltd.)

新加坡太平船務有限公司 (Pacific International Lines (Pte) 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.) 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.)

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GENERAL INFORMATION

APPENDIX

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

蘇州高新區經濟發展集團總公司

(Suzhou New District Economy Development (Group) Corporation)

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 company of the Company

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

• 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)

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.)

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GENERAL INFORMATION

APPENDIX

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

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)

廣東省食品進出口集團公司 (Guangdong Foodstuffs Imp & Exp (Group) Corporation)

廣東省南海食品進出口有限公司

(Guangdong Nanhai Foodstuffs Company Limited)

中山市岐江工業發展有限公司 (Zhongshan Qijiang Industry Development Co., Ltd.)

東莞市石龍鎮工業總公司 (Dongguan Shilong Town Industry Co., Ltd.)

香�遠升有限公司

(Lailon Enterprises Ltd.)

Interest in

relevant Name of subsidiary company of the Company

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)

20% 佛山中外運倉碼有限公司 (Sinotrans Foshan Company Limited)

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

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

20% 東莞中外運物流有限公司 (Sinotrans Dongguan Logistics Co., 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.)

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APPENDIX

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

Interest in

relevant Name of subsidiary company of the Company

• 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.)

福州市國有資產經�公司

(Fuzhou City State-owned Assets Management Company)

SIMME TRANSIT INTERNATIONAL

MAMBUK TRADING AND LOGISTICS PRIVATE LIMITED

老撾榮興國際進出口有限公司 Lao Rong Xing International Import& Export Co., Ltd

韓進海運株式會社

(Hanjin Shipping Company Limited)

• 成�高新投資集團有限公司 (Chengdu New District Investment Group Corporation)

武漢東湖綜合保稅區建設投資 有限公司

Wuhan Eastlake Free Trade Zone Construction Investment Co. Ltd

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

• 30% 福州中外運大裕保稅倉儲有限公 司

• (Fuzhou Davu Bonded Storage Company Limited)

• 25% 吉布提運輸有限公司

Djibouti Transit & Transport SARL

• 24% 吉布提運輸有限公司 Djibouti Transit & Transport SARL

• 40% 中國外運榮興（老撾）物流有限 公司 Sinotrans Rong Xing (Lao) Logistics Co., Ltd

• 49% 上海星瀚船務代理有限公司 (Shanghai Shenhan Shipping Agency Company Limited)

• 45.71% 成�保稅物流投資有限公司 (Chengdu Bonded Logistics Investment Company Limited)

• 40% 武漢東湖綜保區保稅物流有限 公司

Wuhan Dast Lake Comprehensive Bonded Area Bonded Logistics Co. Ltd

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GENERAL INFORMATION

APPENDIX

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

Interest in

relevant Name of subsidiary company of the Company

瀘州市興瀘投資集團有限公司 LUZHOU XINGLU INVESTMENT GROUP CO. LTD

• 40% 中外運瀘州�保稅物流有限公司 SINOTRANS LUZHOU PORT BONDED LOGISTICS CO. LTD.

普菲斯億達（香�）集團有限公司 PREFERRED (Hongkong) Group Co., Ltd.

• 40% 中外運普菲斯億達（上海）物流有 限公司 Sinotrans PREFERRED (Shanghai) Logistics Co., Ltd.

上海外高橋物流中心有限公司 Shanghai Waigaoqiao Logistics Center Co., Ltd.

• 20% 中外運外高橋上海（國際）物流有 限公司 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 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.

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APPENDIX

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. 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.

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

The Directors are 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.

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APPENDIX

5. 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.

6. 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 headquarter of the Company is situated at A43, Xizhimen Beidajie, Beijing, the PRC (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 registrar 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.

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GENERAL INFORMATION

APPENDIX

7 . DOCUMENTS AVAILABLE FOR INSPECTION

Copy of the Framework Acquisition Agreement 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.

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