Liaoning Port Co., Ltd. — Proxy Solicitation & Information Statement 2009

Oct 15, 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Dalian Port (PDA) Company Limited, you should at once hand this circular to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities.

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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Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

(1) PROPOSED ISSUE OF A SHARES (2) MAJOR TRANSACTION AND CONNECTED TRANSACTION RELATING TO THE PROPOSED ACQUISITION OF CERTAIN OPERATIONS AND ASSETS FROM THE CONTROLLING SHAREHOLDER (3) CONTINUING CONNECTED TRANSACTIONS (4) PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION AND ADOPTION OF CERTAIN INTERNAL CORPORATE GOVERNANCE RULES (5) REVISION OF NON-COMPETITION AGREEMENT

Financial Adviser to Dalian Port (PDA) Company Limited

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

CIMB Securities (HK) Limited

A letter from the Board is set out on pages 7 to 53 of this circular.

A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 54 to 55 of this circular. A letter from CIMB Securities (HK) Limited, the independent financial adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 56 to 99 of this circular.

Notices convening the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting are set out in this circular.

Reply slips and proxy forms in respect of the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting are enclosed with this circular. Whether or not you are able to attend the meetings, you are requested to complete the accompanying reply slips and proxy forms in accordance with the instructions printed thereon as soon as practicable and in any event not later than 20 days and 24 hours, respectively, before the time designated for holding the meetings or any adjournment thereof. Completion and return of the proxy forms will not preclude you from attending and voting in person at the meetings or any adjournment thereof should you so wish.

• The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

15 October 2009

EXPECTED TIMETABLE

Latest time for lodging transfers of Shares in order to qualify for attending the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting . . . . . . . . 4:30 p.m. on Friday, 30 October 2009 Registers of Shareholders close (both days inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Saturday, 31 October 2009 to Monday, 30 November 2009 Last day for return of reply slips for the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting . . . . . . . . . . . . . . . Monday, 9 November 2009 Latest time for return of proxy forms for the EGM . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on Sunday, 29 November 2009 Latest time for return of proxy forms for the Domestic Shareholders Class Meeting . . . . . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on Sunday, 29 November 2009 Latest time for return of proxy forms for the H Shareholders Class Meeting . . . . . . . . . . . . . . . . . . . . . . . . 11:30 a.m. on Sunday, 29 November 2009 EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on Monday, 30 November 2009 Domestic Shareholders Class Meeting . . . . . . 11:00 a.m. on Monday, 30 November 2009 or if sooner then immediately after the conclusion of the EGM H Shareholders Class Meeting . . . . . . . . . . . . 11:30 a.m. on Monday, 30 November 2009 or if sooner then immediately after the conclusion of the EGM and the Domestic Shareholders Class Meeting

– i –

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Proposed Issue of A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Proposed Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Continuing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
Proposed Amendments to Articles of Association and
Adoption of Certain Internal Corporate Governance Rules . . . . . . . . . . .	50
Revision of Non-competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .	51
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	52
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	53
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . .	54
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . .	56
APPENDIX I – ACCOUNTANTS’ REPORT
ON THE TARGET ASSETS . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II – FINANCIAL INFORMATION ON THE GROUP . . . . . .	II-1
APPENDIX III – UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP . . . . .	III-1
APPENDIX IV – UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION ON THE TARGET ASSETS . . . . . . .	IV-1
APPENDIX V – PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . .	V-1
APPENDIX VI – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	VI-1
APPENDIX VII – REVISED ARTICLES OF ASSOCIATION . . . . . . . . . . . .	VII-1
APPENDIX VIII – PROPOSED RULES OF PROCEDURE
FOR SHAREHOLDERS’ MEETINGS . . . . . . . . . . . . . .	VIII-1
APPENDIX IX – PROPOSED RULES OF PROCEDURE
FOR BOARD MEETINGS . . . . . . . . . . . . . . . . . . . . . . .	IX-1
APPENDIX X – PROPOSED RULES OF PROCEDURE
FOR SUPERVISORY COMMITTEE MEETINGS . . . . .	X-1

– ii –

CONTENTS

				Page
APPENDIX XI	–	PROPOSED WORKING RULES
		FOR INDEPENDENT DIRECTORS . .	. . . . . . . . . . . . .	XI-1
APPENDIX XII	–	PROPOSED SYSTEM FOR THE
		MANAGEMENT OF PROVISION
		OF SECURITY TO THIRD PARTIES	. . . . . . . . . . . . .	XII-1
**APPENDIX XIII **	–	PROPOSED SYSTEM FOR THE
		MANAGEMENT OF FUNDS RAISED
		FROM THE CAPITAL MARKETS . . .	. . . . . . . . . . . . .	XIII-1
**APPENDIX XIV **	–	REPORT ON USE OF FUNDS RAISED
		IN THE COMPANY’S PREVIOUS FUND
		RAISING EXERCISES . . . . . . . . . . . .	. . . . . . . . . . . . .	XIV-1
NOTICE OF EGM . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	EGM-1
NOTICE OF DOMESTIC SHAREHOLDERS CLASS MEETING			. . . . . . . . . . . . .	DSM-1
NOTICE OF H SHAREHOLDERS CLASS MEETING . . . . . . . .			. . . . . . . . . . . . .	HSM-1

– iii –

DEFINITIONS

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

• “A Share(s)”

• the Domestic Share(s) which are proposed to be listed on the Shanghai Stock Exchange, comprising the Public A Share(s), the Consideration Share(s) and all the existing Domestic Share(s);

• “A Share Issue”

• the proposed issue of (i) not more than 1,200 million Public A Shares to Qualified Public A Share Investors; and (ii) not more than 1,200 million Consideration Shares to PDA in respect of the Initial Consideration for the Acquisition;

• “Acquisition” the proposed acquisition of the Target Assets by the Company from PDA;

• “Acquisition Agreement”

• the conditional agreement entered into between PDA and the Company on 30 September 2009 in relation to the Acquisition;

• “Articles” the articles of association of the Company from time to time;

• “associate”

• has the meaning ascribed to it under the Listing Rules;

• “average trading price”

• calculated by dividing the sum of daily total trading value by the sum of daily total trading volume;

• “Board”

• the board of Directors;

• “China Accounting Standards”

• the accounting standards generally accepted in the PRC;

• “Company”

• 大連港股份有限公司 (Dalian Port (PDA) Company Limited), a sino-foreign joint stock limited company incorporated in the PRC with H shares listed and traded on the main board of the Hong Kong Stock Exchange;

• “Completion Audit”

the audit to be conducted on the net asset value of the Target Assets pursuant to China Accounting Standards for the purpose of determining the Final Adjustment Amount;

– 1 –

DEFINITIONS

• “Completion Audit Date”

• “Completion Date”

• “connected person”

• “Consideration Shares”

• “controlling shareholder”

• “CSRC”

• “Dalian SASAC”

• “Director(s)”

• “DCM”

• “Domestic Share(s)”

• “Domestic Shareholder(s) "

• “Domestic Shareholders Class Meeting”

• “EGM”

• the last day of the calendar month immediately preceding the Effective Date;

• for accounting treatment purposes, the first day of the calendar month during which the Acquisition Agreement becomes effective;

• has the meaning ascribed to it by the Listing Rules;

• not more than 1,200 million Domestic Shares to be placed by the Company to PDA in respect of the Initial Consideration for the Acquisition;

• has the meaning ascribed to it under the Listing Rules;

• 中國證券監督管理委員會 (China Securities Regulatory Commission);

• 大連國有資產監督管理委員會 (the State-owned Assets Supervision and Administration Commission of Dalian);

• the director(s) of the Company;

• 大連港口建設管理有限公司 (Dalian Port Construction Management Company Limited);

• the ordinary share(s) issued by the Company, with a nominal value of RMB1.00 each, which are subscribed for or credited as fully paid in RMB;

• holder(s) of Domestic Share(s);

• the class meeting to be held by the Domestic Shareholders to consider and, if thought fit, approve, among other things, the A Share Issue;

an extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve, among other things, (i) the A Share Issue; (ii) the Acquisition; (iii) the continuing connected transactions and the relevant monetary caps; and (iv) the proposed amendments to the Articles of Association, all as described in this circular;

– 2 –

DEFINITIONS

• “Effective Date”

• “Enlarged Group”

• “Final Adjustment Amount”

• “Final Consideration”

• “Group”

• “H share(s)”

• “H Shareholder(s)”

• “H Shareholders Class Meeting”

• “Hong Kong Stock Exchange”

• “independent third party”

the date on which all the conditions of the Acquisition Agreement are satisfied and the Acquisition Agreement becomes effective;

the Group immediately following completion of the Acquisition;

• means an amount equal to the audited net asset value of the Target Assets as at the Completion Audit Date less the audited net asset value of the Target Assets as at 30 June 2009 (both as audited pursuant to the China Accounting Standards) and further deducting any amount by which (i) the depreciation, amortisation and other expenses in respect of the Target Assets for the period from 1 July 2009 to the Completion Audit Date calculated on the basis of their appraised value as at 30 June 2009 would exceed (ii) the corresponding amounts for the same period calculated on the basis of their audited net asset value as at such date;

• the final consideration for the Acquisition, which will be determined based on the formula set out in the paragraph headed “Proposed Acquisition – Acquisition Agreement – Consideration” in the section of “Letter from the Board” of this circular;

• the Company and its subsidiaries;

Foreign share(s) in the share capital of the Company, with a nominal value of RMB1.00 each, which are listed and traded on the Hong Kong Stock Exchange;

• holder(s) of H Shares;

• the class meeting to be held by the H Shareholders to consider and, if thought fit, approve, among other things, the A Share Issue;

The Stock Exchange of Hong Kong Limited;

a party which is independent of and not connected with any of the Directors, chief executives or substantial shareholders of the Company or any of its subsidiaries, or any of their respective associates for the purposes of the Listing Rules;

– 3 –

DEFINITIONS

• “Independent Board Committee”

• “Independent Shareholders”

• “Initial Consideration”

• “Internal Corporate Governance Rules”

• “Issue Price”

• “Latest Practicable Date”

• “Listing Rules”

• “Northeastern China”

• an independent committee of the Board comprising all of the independent non-executive directors of the Company, namely, Mr. Wang Zuwen, Mr. Zhang Xianzhi and Mr. NG Ming Wah, Charles;

• the Shareholders other than PDA and its associates and any Shareholder who is interested or involved in the Acquisition other than as a Shareholder of the Company;

• means the amount of RMB2,805 million, being the net asset value of the Target Assets as at 30 June 2009 as appraised by the PRC Domestic Valuer in its valuation report, which amount remains subject to approval by Dalian SASAC;

• (i) the rules of procedure for Shareholders’ general meetings, (ii) the rules of procedure for Board meetings; (iii) the rules of procedure for the meetings of the supervisory committee of the Company; (iv) the working rules for independent Directors; (v) the system for the management of provision of security to third parties; and (vi) the system for the management of funds raised from the capital markets;

• the issue price for the A Share Issue which will be determined by the Board on the basis of the results of the cumulative bidding price consultation and the prevailing conditions of the PRC securities market at the time when the A Share Issue takes place;

• 12 October 2009, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

• for the purpose of this circular only, Northeastern China refers to the three provinces in the northeastern region of China, namely, Heilongjiang, Jilin and Liaoning;

– 4 –

DEFINITIONS

• “NSSF Council”

• 全國社會保障基金理事會 (The National Social Security Fund Council of the PRC), an organization authorised by the State Council of the PRC to be responsible for the administration of the national social security fund;

• “PDA”

• 大連港集團有限公司 (Dalian Port Corporation Limited), the controlling shareholder of the Company and a limited liability company established in the PRC and wholly-owned by Dalian Municipal Government;

• “PDA Group” PDA and its subsidiaries (excluding members of the Group and, where the context so admits or requires, excluding entities included in the Target Assets);

• “PRC” or “China”

• the People’s Republic of China (for the purpose of this circular, excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan);

• “PRC Domestic Valuer”

• 中通誠資產評估有限公司 (China Tongcheng Assets Appraisal Co., Ltd.), which is qualified to undertake asset appraisals in the PRC;

• “Public A Share(s)”

• the ordinary share(s) to be subscribed for in RMB, which are proposed to be issued by the Company to Qualified Public A Share Investors;

• “Qualified Public A Share Investors”

• individual and institutional investors (including qualified foreign institutional investors) who have A share stock accounts at the Shanghai Stock Exchange, save for those prohibited by the PRC laws and regulations from doing so;

• “SFO”

• the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong, as amended, supplemented or otherwise modified from time to time;

• “Shanghai Stock Exchange”

• Shanghai Stock Exchange, a stock exchange located in Shanghai, the PRC, which is a membership institution directly governed by the CSRC;

• “Share(s)”

the Domestic Share(s) and the H Share(s);

– 5 –

DEFINITIONS

• “Shareholder(s)”

• “State”

• “subsidiary”

• “Superintendence Company”

• “Target Assets”

• “Trading Day”

• “HK$”

• “RMB”

• “%”

• the Domestic Shareholder(s) and/or the H Shareholder(s);

• the government authorities authorised to perform specified duties in the name of the PRC according to the PRC laws;

has the meaning ascribed to it by the Listing Rules;

• 大連港口建設監理諮詢有限公司 (Dalian Port Construction Supervision & Consultation Co., Ltd.);

• the assets and liabilities to be acquired by the Company from PDA pursuant to the Acquisition Agreement in respect of all of PDA’s business operating (i) ore terminal and related logistics services; (ii) general cargo terminal and related logistics services; (iii) bulk grain terminal and related logistics services; (iv) passenger and roll-on, roll-off terminal and related logistics services; and (v) certain ancillary port operations;

• a day on which the H Shares are traded on the Hong Kong Stock Exchange;

• Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region;

• Renminbi, the lawful currency of the PRC; and

• per cent.

– 6 –

LETTER FROM THE BOARD

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Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

Directors:

Executive Directors: Mr. Sun Hong (Chairman) Mr. Zhang Fengge Mr. Jiang Luning Ms. Su Chunhua

Non-executive Directors: Mr. Lu Jianmin Mr. Xu Jian

Registered Office: Xingang Commercial Building Dayao Bay Dalian Free Trade Zone PRC

Place of Business in PRC: No.1 Gangwan Street Zhongshan District Dalian, Liaoning PRC

Independent Non-executive Directors: Mr. Zhang Xianzhi Mr. Ng Ming Wah, Charles Mr. Wang Zuwen

15 October 2009

To the Shareholders,

Dear Sir or Madam,

(1) PROPOSED ISSUE OF A SHARES

(2) MAJOR TRANSACTION AND CONNECTED TRANSACTION RELATING TO THE PROPOSED ACQUISITION OF CERTAIN OPERATIONS AND ASSETS FROM THE CONTROLLING SHAREHOLDER

(3) CONTINUING CONNECTED TRANSACTIONS

(4) PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION AND ADOPTION OF CERTAIN INTERNAL CORPORATE GOVERNANCE RULES (5) REVISION OF NON-COMPETITION AGREEMENT

INTRODUCTION

As disclosed in an announcement (the “Announcement”) dated 30 September 2009, the Board of the Company has resolved to propose, subject to the approval by the

• The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

– 7 –

LETTER FROM THE BOARD

Shareholders and the relevant PRC authorities, to issue A Shares in the PRC in order to expand its financing platform, increase its share capital and establish a platform to facilitate the Company’s participation in the expected consolidation of port operations in the PRC. The A Share Issue will comprise (i) an initial public offer of not more than 1,200 million Public A Shares; and (ii) an issue of not more than 1,200 million Consideration Shares to PDA in respect of the Initial Consideration for the Acquisition. The Public A Shares, the Consideration Shares and all the existing Domestic Shares are proposed to be listed on the Shanghai Stock Exchange. Upon completion of the A Share Issue, the Company will become the first company in the PRC port operation industry with shares listed on stock exchanges in both Hong Kong and the PRC.

The Company has also entered into the conditional Acquisition Agreement to acquire the Target Assets from PDA, its controlling shareholder. Upon completion of the Acquisition, the business scope of the Company will be substantially expanded to cover the provision of terminal services for oil/liquefied chemicals, containers, automobile, ore, general cargo and bulk grain as well as passengers and roll-on, roll-off, in addition to certain port value-added services and ancillary port operations. The Company will operate all the major port operations at Dalian Port as an integrated port services operator, establishing a platform for its future participation in the consolidation of port resources in China.

Completion of the A Share Issue and the Acquisition are subject to the fulfillment of the same conditions except that completion of the Acquisition is further subject to completion of the issue of the Public A Shares.

PROPOSED ISSUE OF A SHARES

General

The Company intends to apply to the CSRC and other relevant regulatory authorities in the PRC for the issue of (i) not more than 1,200 million Public A Shares to Qualified Public A Share Investors; and (ii) not more than 1,200 million Consideration Shares to PDA in respect of the Initial Consideration for the Acquisition.

The Public A Shares, the Consideration Shares and all the existing Domestic Shares are proposed to be listed on the Shanghai Stock Exchange. The H Shares of the Company are listed on the main board of the Hong Kong Stock Exchange. It is expected that the investors of the Public A Shares will not include any connected person of the Company.

– 8 –

LETTER FROM THE BOARD

Structure of the A Share Issue

• Type of securities to be issued: A Shares Nominal value: RMB1.00 Listing stock exchange: Shanghai Stock Exchange Methods of issue: • Offering of the Public A Shares via a combination of placement through offline offering to investors with whom a market consultation on price will be conducted, public offering through online subscription at the Issue Price and other methods approved by the CSRC; and

• Placement of the Consideration Shares to PDA at the Issue Price.

Target Subscribers:

• Public A Shares: Qualified Public A Share Investors

• Consideration Shares: PDA

Method for determining the Issue Price:

The range for the Issue Price will be determined based on preliminary price consultation with selected potential investors. An offline cumulative bidding price consultation will then be conducted within such range. The Issue Price will be determined by the Board on the basis of the results of the cumulative bidding price consultation and the prevailing conditions of the PRC securities market at the time when the A Share Issue takes place. In any event, the Issue Price will not be less than 90% of the average trading price of the H Shares during the period of 20 Trading Days immediately prior to the publication of the preliminary prospectus for the A Share Issue.

The Issue Price and the amount to be raised from the A Share Issue cannot be ascertained as at the Latest Practicable Date.

– 9 –

LETTER FROM THE BOARD

Number of the A Shares to be issued:

• Not more than 1,200 million Public A Shares to Qualified Public A Share Investors; and

• Not more than 1,200 million Consideration Shares to PDA in respect of the Initial Consideration for the Acquisition. The number of the Consideration Shares will be determined pursuant to the following formula:

Number of Initial Consideration Consideration = Issue Price Shares

In the event that the number of the Consideration Shares determined pursuant to the above mentioned formula (i) is more than 1,200 million, only a total of 1,200 million Consideration Shares will be issued to PDA and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be paid by the Company to PDA in cash; or (ii) is equal to or less than 1,200 million, the number of the Consideration Shares determined pursuant to the above mentioned formula will be rounded down to the nearest multiple of 10,000 and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be contributed by PDA to the capital reserve of the Company.

Details of the Initial Consideration and the Final Consideration are set out below in the sub-section headed “Acquisition – Acquisition Agreement”.

The final number of the Public A Shares and the Consideration Shares shall be determined by the Board after the Issue Price is fixed, subject to authorisation by the Shareholders at the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting, respectively, and to approval from the relevant regulatory authorities.

– 10 –

LETTER FROM THE BOARD

Pursuant to the relevant PRC laws and regulations, a number of Public A Shares representing 10% of the total number of the A Shares to be issued to the public will be created by conversion from an equal number of the Domestic Shares currently held by PDA and other existing Domestic Shareholders (as the holders of the state-owned Domestic Shares). Such number of Public A Shares will be allocated to the NSSF Council for nil consideration. The final number of Public A Shares to be so created by conversion and allocated to the NSSF Council will be subject to the determination of the final number of A Shares to be issued pursuant to the A Share Issue, and confirmation by the relevant PRC state-owned assets supervision and administration authorities.

Rights attached to the A Shares:

Except as otherwise provided in the relevant laws, administrative regulations, departmental rules and other regulatory documents and the Articles, holders of the A Shares will be entitled to the same rights as the holders of existing Domestic Shares and H Shares in all respects.

The retained distributable profit of the Company as at 31 December 2009 will be distributed to the then existing Shareholders prior to completion of the A Share Issue pursuant to Shareholders’ resolution, if any, at the annual general meeting of the Company for 2009 which will be convened in 2010. The balance of such retained distributable profit after any such distribution and the profit accrued from 1 January 2010 till completion of the A Share Issue will be held by the Company for the benefit of all the Shareholders from time to time, including the new A Shareholders, following completion of the A Share Issue.

In the event that the A Share Issue is launched after 30 June 2010, a general meeting of the Shareholders may be convened to re-consider and, if thought fit, approve a new proposal for distribution of the retained distributable profit of the Company.

– 11 –

LETTER FROM THE BOARD

Use of Proceeds from the Issue of the Public A Shares

The proceeds from the issue of the Public A Shares are expected to be applied as follows:

• For oil/liquefied chemicals terminal and related logistics services

• (a) Construction of 10 oil storage tanks with a total capacity of 1,000,000 m[3] in the Xingang area of Dalian;

• (b) Construction of six oil storage tanks with a total capacity of 600,000 m[3] in the Xingang resort area of Dalian;

• (c) Construction of four oil storage tanks with a total capacity of 400,000 m[3] for the second phase of the Shatuozi oil storage tanks project in Dalian;

• (d) Construction of a liquefied natural gas project in Dalian;

• For container terminal and related logistics services

• (e) Increase in the registered capital of Dalian Port Container Terminal Co., Ltd. which operates the second phase of the Dayao Bay container terminals in Dalian;

• (f) Further investment in Dalian International Container Terminal Co., Ltd. which operates the third phase of the Dayao Bay container terminals in Dalian;

• (g) Purchase of two container vessels;

• For ore terminal and related logistics services

• (h) Construction of No. 4 stacking yard;

• (i) Purchase of a gantry;

• For general cargo terminal, passenger and roll-on, roll-off terminal and related logistics services

• (j) Construction of seven general cargo berths and four roll-on, roll-off berths at Dalian Bay;

• For automobile terminal and related logistics services

• (k) Purchase of two ro-ro ships each with a capacity of 2,000 cars;

• For the bulk grain terminal

• (l) Purchase of 300 bulk grain carriages;

– 12 –

LETTER FROM THE BOARD

• For comprehensive logistics services

• (m) Construction of inland logistics depots and centres;

• For port value-added services and ancillary port operations

• (n) Construction of the information systems;

• Others

• (o) Repayment of bank loans and of general working capital.

Prior to completion of the issue of the Public A Shares, the Company may fund the above mentioned projects by using its internal resources or by bank loans. Upon completion of the issue of the Public A Shares, the Company may, having complied with the relevant requirements of the regulatory authorities, apply the proceeds from the issue of the Public A Shares to repay the bank loans. In the event that the proceeds from the issue of the Public A Shares are not sufficient to finance the above mentioned projects, the Company will complete the investments through other means.

Shareholders’ Approval and Other Approvals

The A Share Issue is subject to approval by the Shareholders at each of the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting. The EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting will be convened to consider and, if thought fit, approve the A Share Issue. In addition, a proposal will be submitted to the Shareholders at the EGM to consider and, if thought fit, to authorise the Board, at its discretion, to determine and deal with matters relating to the A Share Issue (including but not limited to the specific timing of the issue, number of A Shares to be issued, target subscribers, methods of issue, issue price, and other matters relating to the A Share Issue and the listing of A Shares).

It should be noted that the A Share Issue, upon approval by Shareholders at each of the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting, is still subject to approvals by the CSRC and other relevant regulatory authorities, if necessary. In addition, the consent of the Shanghai Stock Exchange as to the listing of and dealings in the A Shares on the Shanghai Stock Exchange is required. The approval in respect of the A Share Issue by the Shareholders at each of the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting shall be valid and effective for a period of 12 months from the date when each of such approvals is obtained.

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LETTER FROM THE BOARD

Effects of the A Share Issue on the Company’s Shareholding Structure

Set out below is the shareholding structure of the Company as at the Latest Practicable Date and immediately upon completion of the A Share Issue:

• (A) assuming that (i) an aggregate of 1,200 million Public A Shares will be issued to Qualified Public A Share Investors; (ii) an aggregate of 1,200 million Consideration Shares will be issued to PDA; and (iii) an aggregate of 120 million Public A Shares will be created by conversion of an equal number of the Domestic Shares currently held by PDA and other existing Domestic Shareholders, and transferred to the NSSF Council

Domestic Shareholders: PDA Other Existing Domestic Shareholders Shareholders of Public A Shares NSSF Council Sub-total H Shareholders: H Shareholders Total	As at the Latest Practicable Date Number of Shares % 1,816,815,000 62.09 46,585,000 1.59 – – – – 1,863,400,000 63.68 1,062,600,000 36.32 2,926,000,000 100	Immediately upon completion of the A Share Issue Number of Shares % 2,899,815,000 54.45 43,585,000 0.82 1,200,000,000 22.53 120,000,000 2.25 4,263,400,000 80.05 1,062,600,000 19.95 5,326,000,000 100	Immediately upon completion of the A Share Issue Number of Shares % 2,899,815,000 54.45 43,585,000 0.82 1,200,000,000 22.53 120,000,000 2.25 4,263,400,000 80.05 1,062,600,000 19.95 5,326,000,000 100
			100

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LETTER FROM THE BOARD

• (B) assuming that (i) the Issue Price will be RMB2.78 per Share which is equivalent to HK$3.16 per Share, being the average trading price of the H Shares during the period of 20 Trading Days immediately prior to the Latest Practicable Date (the conversion of which is based on the middle rate between Hong Kong dollars and RMB as quoted by the People’s Bank of China on the date immediately prior to the Latest Practicable Date; (ii) an aggregate of 1,200 million Public A Shares will be issued at the Issue Price; (iii) an aggregate of 1,008,990,000 Consideration Shares will be issued to PDA; and (iv) an aggregate of 120 million Public A Shares will be created by conversion of an equal number of the Domestic Shares currently held by PDA and other existing Domestic Shareholders, and transferred to the NSSF Council

Domestic Shareholders: PDA Other Existing Domestic Shareholders New A Shareholders NSSF Council Sub-total H Shareholders: H Shareholders Total	As at the Latest Practicable Date Number of Shares % 1,816,815,000 62.09 46,585,000 1.59 – – – – 1,863,400,000 63.68 1,062,600,000 36.32 2,926,000,000 100	Immediately upon completion of the A Share Issue Number of Shares % 2,708,805,000 52.75 43,585,000 0.85 1,200,000,000 23.37 120,000,000 2.34 4,072,390,000 79.31 1,062,600,000 20.69 5,134,990,000 100	Immediately upon completion of the A Share Issue Number of Shares % 2,708,805,000 52.75 43,585,000 0.85 1,200,000,000 23.37 120,000,000 2.34 4,072,390,000 79.31 1,062,600,000 20.69 5,134,990,000 100
			100

The Board does not anticipate that the issue of A Shares will result in a change in control of the Group.

Reasons for and Benefits of the A Share Issue

The Directors believe the A Share Issue will benefit the Company and the Shareholders as a whole in the long term for the following reasons:

• (1) The A Share Issue will provide the Company with the access to the PRC domestic capital market, establishing a platform to facilitate the Company’s participation in the expected consolidation of port operations in the PRC;

• (2) The A Share Issue will enable the Company, as the first company in the port operation industry with shares listed on stock exchanges in both of Hong Kong and the PRC, to enjoy the flexibility of financing channels and resources provided by access to both Hong Kong and PRC capital markets; and

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LETTER FROM THE BOARD

• (3) The A Share Issue will provide the Company with funds required for its ongoing business development and help improve its competitiveness and return on Shareholders’ funds. The A Share Issue will also increase the share capital of the Company and the liquidity of the Domestic Shares, and reduce the gearing ratio of the Company and thereby enhance its capacity to raise funds in the capital market.

The expected benefits of the Acquisition are set out below under the sub-section headed “Reasons for and Benefits of the Acquisition”.

PROPOSED ACQUISITION

Historical Background and Information on PDA

Dalian Port has a long history of over 100 years and is well recognised as the largest port in Northeastern China. The core operations of PDA are all located at Dalian Port. The key milestones in PDA’s development are as follows:

• 1899 Dalian Port was founded.

• 1986 Dalian Port came under the dual leadership of the Dalian municipal government and the Ministry of Communications, with the Dalian municipal government being the major governing authority.

• 2003 PDA was established as part of the Port of Dalian Authority’s initiative to separate its government administrative and commercial functions. PDA is a wholly state-owned enterprise that provides a wide range of terminal services.

• 2005 The Company was established with PDA as its controlling shareholder. The Company is primarily engaged in the provision of oil/liquefied chemicals terminal and logistics services, containers terminal and logistics services and certain port value-added services in Dalian Port.

• 2006 The Company was listed on the Hong Kong Stock Exchange.

The principal port operations that continued to be operated by PDA and its subsidiaries (excluding the Group) are (i) ore terminal and related logistics services; (ii) general cargo terminal and related logistics services; (iii) bulk grain terminal and related logistics services; (iv) passenger and roll-on, roll-off terminal and related logistics services; (v) certain ancillary port operations.

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LETTER FROM THE BOARD

The current business structure of PDA is as follows:

==> picture [396 x 275] intentionally omitted <==

----- Start of picture text -----

PDA
The Company
Oil/Liquefied Chemicals Terminal and Related Logistics Non-Port Operations
Services
Ore Terminal and Related Logistics Services
Container Terminal and Related Logistics Services
General Cargo Terminal and Related Logistics Services
Automobile Terminal and Related Logistics Services
Bulk Grain Terminal and Related Logistics Services
Port Value-Added Services Passenger and Roll-on, Roll-off Cargo Terminal and
Related Logistics Services
Port Operations
Ancillary Port Operations
Port Operations
----- End of picture text -----

Acquisition Agreement

• (1) Date: 30 September 2009

• (2) Parties: (A) The Company (as purchaser); and

• (B) PDA (as vendor)

• (3) Target Assets

The Target Assets comprise the assets and liabilities to be acquired by the Company from PDA pursuant to the Acquisition Agreement in respect of all of PDA’s business operations of (i) ore terminal and related logistics services; (ii) general cargo terminal and related logistics services; (iii) bulk grain terminal and related logistics services; (iv) passenger and roll-on, roll-off terminal and related logistics services; and (v) ancillary port operations.

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LETTER FROM THE BOARD

(4) Consideration

As set out in the Acquisition Agreement, the Final Consideration for the Acquisition is based on the following formula:

Final Consideration = Initial Consideration + Final Adjustment Amount

where

Initial Consideration means the amount of RMB2,805 million, being the net asset value of the Target Assets as at 30 June 2009 as appraised by the PRC Domestic Valuer in its valuation report, which amount remains subject to approval by Dalian SASAC;

and

Final Adjustment Amount means an amount equal to the audited net asset value of the Target Assets as at the Completion Audit Date less the audited net asset value of the Target Assets as at 30 June 2009 (both as audited pursuant to the China Accounting Standards) and further deducting any amount by which (i) the depreciation, amortisation and other expenses in respect of the Target Assets for the period from 1 July 2009 to the Completion Audit Date calculated on the basis of their appraised value as at 30 June 2009 would exceed (ii) the corresponding amounts for the same period calculated on the basis of their audited net asset value as at such date.

The Initial Consideration has been arrived at based on arm’s length negotiations between the Company and PDA. Subject to the approval of the CSRC and the Shanghai Stock Exchange, the Company will settle the Initial Consideration by (i) direct placement to PDA of a number of Consideration Shares as determined pursuant to the formula set out above under the sub-section headed “Structure of the A Share Issue”; or (ii) immediate payment to PDA, in cash and without any deduction, of the proceeds from the placement of the Consideration Shares to PDA. PDA will receive the same number of Consideration Shares under either settlement method. The Completion Audit shall be conducted within three months from the Effective Date. The Final Adjustment Amount will be paid in cash within one month following the date of the report of the Completion Audit. The Company will issue a further announcement to inform the Shareholders of the Final Adjustment Amount and the Final Consideration payable under the Acquisition.

As at 30 June 2009, the combined net asset value of the Target Assets prepared under the International Financial Reporting Standards was approximately RMB2,517 million. The difference between the net asset value of the Target Assets as appraised by the PRC Domestic Valuer and such combined net asset value calculated under the International Financial Reporting Standards is due

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LETTER FROM THE BOARD

to the fact that the appraisal was conducted based on the cost replacement valuation method, taking into account the increase in the labour cost and materials purchase price for, and the market value of, the Target Assets as at 30 June 2009, whereas the combined net asset value prepared under the International Financial Reporting Standards was based on the historical cost, price and value of the Target Assets.

• (5) Conditions Precedent

The Acquisition Agreement will become effective on the date on which all of the following conditions are satisfied:

• (a) the decision making bodies of PDA and the Company granting approval of the Acquisition Agreement, including, in respect of the Company, the Independent Shareholders’ approval;

• (b) Dalian SASAC granting approval of the Acquisition Agreement;

• (c) the relevant PRC authorities, including the CSRC, granting approval in relation to the A Share Issue; and

• (d) the issue of the Public A Shares.

• (6) PDA’s Undertakings

PDA has given the following undertakings to the Company:

• (a) it shall endeavour to obtain all the necessary approvals from and complete all the necessary procedures with the relevant authorities in order to effect the transfer of its equity interests in the companies in the Target Assets to the Company within six months (the “ Time Limit ”) after the Effective Date. In the event that PDA fails to obtain any such approval or complete any such procedure in relation to any such equity interests, the Company is entitled to extend the Time Limit or request PDA to repurchase such equity interests at a price equal to their value as assessed by a qualified valuer and the interest accrued thereon; and

• (b) it shall allow the Company’s use of certain terminal and storage facilities which are not included in the Target Assets for nil consideration upon completion of the Acquisition. Such terminal and storage facilities comprise the berths and sites located in Dagang area of Dalian being used for the passenger and roll-on, roll-off and general cargo operations and the port facilities, warehouses and stacking yards located at Ganjingzi area.

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LETTER FROM THE BOARD

• (7) Completion and Completion Date

Save as otherwise provided under the PRC laws and regulations, all the rights and liabilities attached to the Target Assets will be deemed to be transferred to the Company on the Completion Date, which is, for accounting treatment purposes, the first day of the calendar month during which the Acquisition Agreement becomes effective.

Further Information of the Target Assets

The following chart sets out the operating entities included in the Target Assets:

==> picture [392 x 359] intentionally omitted <==

----- Start of picture text -----

Target Assets
General Cargo Terminal and Ancillary Port Operations Others
Related Logistics Services
Dalian Port General CargoTerminals Company [(1)] Dalian Port Power Supply Company [(1)] Other related assets and liabilities
Dalian Port Corporation Zhuanghe
Dalian Port Power Supply
100% Terminal Co., Ltd. 100% Company Limited
Dalian Changxing Island Port, Ltd. Dalian Port Construction
40% 75% Supervision & Consultation Co., Ltd.
Bulk Grain Terminal and Dalian Wanpeng Port Engineering
Related Logistics Services 40% Examination & Testing Co., Ltd.
Dalian Port Bulk Grain Terminals Dalian Portsoft Technology Co., Ltd.
Company [(1)] 49%
37.5% Dalian Golden Bay Grain LogisticsCo., Ltd. 100% Dalian Portsoft Network Co., Ltd.
Dalian Port Construction
Ore Terminal and Related 100% Management Co., Ltd.
Logistics Services
Dalian Port Telecommunication
45% Engineering Co., Ltd.
Dalian Port Ore Terminal
Company [(1)]
Dalian Ocean Shipping Tally Co.,
35% Ltd.
Passenger and Roll-on, Roll-off Terminal and
Related Logistics Services Dalian Port Railway Company [(1)]
Dalian Port Passenger Shandong Weihai Port Co., Ltd.
Transportation Company [(1)] 9.97%
China Shipping Gang Lian Co., Ltd.
30%
Dain Ferry Co., Ltd.
7.5%
----- End of picture text -----

Note:

(1) These are branch operations.

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LETTER FROM THE BOARD

(1) Ore Terminal and Related Logistics Services

Overview

PDA is engaged in the provision of loading, discharging and logistics services for ore (the “ Ore Terminal Operation ”) mainly through its branch company Dalian Port Ore Terminal Company (the “ Ore Terminal Company ”). The Ore Terminal Company has designated ore terminals equipped with advanced facilities, including (i) two berths capable of accommodating up to 300,000 tonne vessels and 150,000 tonne vessels, respectively, (ii) stacking yards with a total area of approximately 534,000 square metres and storage capacity of a total of approximately 5,160,000 tonnes; and (iii) two loading towers, each with a loading capacity of approximately 4,500 tonnes per hour. Major customers of the Ore Terminal Operation include major steel manufacturers in the north region of China and major ore suppliers in Brazil and Australia. Since 2006, the imported ore handled by the Ore Terminal Operation accounted for over 40% of the total volume imported by the ports in Liaoning province each year. The volume of imported ore handled by the Ore Terminal Operation during the first half of 2009 accounted for approximately 50% of the total imported ore handled by the ports in Liaoning province. The ore throughput of the Ore Terminal Operation for each of the three years ended 31 December 2006, 2007 and 2008, the six months ended 30 June 2008 and 2009, and the nine months ended 30 September 2009 was as follows:

					Unit:’000 tonnes	Unit:’000 tonnes
						Nine
						months
				Six months		ended
**Year **	ended 31 December			ended 30 June		30 September
2006	2007		2008	2008	2009	2009
7,436	11,410	13,438		6,420	12,477	21,059

Future Prospects

The Ore Terminal Operation is expected to benefit from the following factors:

• The long term stable economic growth and increase in fixed assets investments in China, which are expected to drive an increasing demand for steel products and imported ore.

• The implementation of the initiatives of the PRC government to revitalise the economy of Northeastern China and to develop the coastal economic zone of Liaoning province.

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LETTER FROM THE BOARD

• The advantageous location of Dalian Port in Northeastern China where a number of the PRC’s major steel manufacturers, including Angang Group and Bengang Group, are based and the stable relationships established by PDA with such steel manufacturers.

• The natural deep water advantage of Dalian Port coupled with its location at the entrance to Bohai Bay, which are expected to facilitate the Dalian Port’s development there of an ore transshipment business acting as a transshipment hub for the Bohai Bay area and northeast Asia. PDA has commenced cooperation with major steel manufacturers in the northern region of China and major ore suppliers in Brazil and Australia.

• The expected commencement of the operation of the “East Railway” in Northeastern China in the second half of 2011 which is expected to reduce the cost of transportation from Dalian Port and enhance the competitiveness of the Ore Terminal Operation.

(2) General Cargo Terminal and Related Logistics Services

Overview

PDA is engaged in the provision of loading, discharging and logistics services for steel, coal, timber, large equipment and cement mainly through Dalian Port General Cargo Terminals Company, Dalian Changxing Island Port, Ltd. and Dalian Port Zhuanghe Terminal Company Limited (the “ General Cargo Terminal Operation ). PDA operates a total of 33 berths with an annual handling capacity of approximately 21.9 million tonnes and stacking yards with a total area of approximately 1.4 million square metres, capable of handling various large and general cargos. The throughput of the General Cargo Terminal Operation for each of the three years ended 31 December 2006, 2007 and 2008, the six months ended 30 June 2008 and 2009, and the nine months ended 30 September 2009 was as follows:

Steel Coal Timber Equipment Packed grain Others Total	Year ended 31 December 2006 2007 2008 5,586 7,087 8,856 3,685 4,353 7,920 1,064 1,155 691 1,226 851 645 1,513 1,588 1,363 2,332 2,302 2,803 15,406 17,336 22,278	Unit:’000 tonnes Six months ended 30 June Nine months ended 30 September 2008 2009 2009 4,579 3,766 6,049 4,234 3,890 5,847 422 200 319 212 489 608 881 655 1,004 1,196 2,153 3,173 11,524 11,153 17,000	Unit:’000 tonnes Six months ended 30 June Nine months ended 30 September 2008 2009 2009 4,579 3,766 6,049 4,234 3,890 5,847 422 200 319 212 489 608 881 655 1,004 1,196 2,153 3,173 11,524 11,153 17,000
			17,000

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LETTER FROM THE BOARD

Future Prospects

The General Cargo Terminal Operation is expected to benefit from the following factors:

• An expected increase in demand for loading, discharging and logistics services for steel and coal at Dalian Port, driven by expected economic growth in China as well as in the northeastern region resulting from the PRC central government’s initiatives to revitalise the region.

• The strategic locations of PDA’s terminals at Changxing Island and Zhuanghe area as important development areas in the coastal economic zone of Liaoning province. In particular, according to the development plan which has been approved by the central PRC government in principle for development of the coastal economic zone of Liaoning province, the industrial park at Changxing Island will be developed into a major world class shipbuilding centre.

• Continuation of initiatives of Dalian municipal government to develop the equipment manufacturing, shipbuilding and ocean engineering industries.

• The expected relocation of the berths and facilities from the Heizuizi area and Dagang area to Dalian Bay according to the urban planning of Dalian municipal government and the business development plan of PDA. It is expected that the Company will receive, through PDA, subsidies from Dalian municipal government for part of its relocation costs and construction costs of new berths and facilities at Dalian Bay.

• The more advanced facilities and geographical concentration provided by new berths and ancillary facilities which are currently under construction by PDA at Dalian Bay are expected to be completed in late 2010. As a result, the operating cost of the General Cargo Terminal Operation may be reduced and its efficiency may be enhanced.

(3) Bulk Grain Terminal and Related Logistics Services

Overview

PDA is engaged in the provision of loading, discharging and logistics services for bulk grain mainly through Dalian Port Bulk Grain Terminals Company and Dalian Golden Bay Grain Logistics Company Limited (the “ Bulk Grain Terminal Operation ”). PDA operates (i) a total of five berths with an annual handling capacity of approximately 7.2 million tonnes; and (ii) bulk grain barns with a total storage volume of approximately 1.1 million cubic metres, and has approximately 1,000 bulk grain carriages. Major customers of the Bulk Grain Terminal Operation include COFCO Corporation,

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LETTER FROM THE BOARD

Jilin Grain Group and China Grain Reserve Corporation which are major grain corporations in the PRC. The Bulk Grain Terminal Operation has established a complete logistics operation system covering the transportation of grain from the place of origin in the north to the markets in the south using its bulk grain carriers and terminal facilities. The Bulk Grain Terminal Operation is one of the largest bulk grain terminal operations in the PRC in terms of its storage and transportation capacities. In addition, the bulk grain barns of PDA have been designated as delivery barns for certain of the futures commodities traded on the Dalian Commodities Exchange. The throughput of the Bulk Grain Terminal Operation for each of the three years ended 31 December 2006, 2007 and 2008, the six months ended 30 June 2008 and 2009, and the nine months ended 30 September 2009 was as follows:

Corn Soy Bean Barley Wheat Others Total	Year ended 31 December 2006 2007 2008 3,400 3,980 3,535 189 158 351 536 52 21 281 306 37 3,644 2,519 2,741 8,050 7,015 6,685	Unit:’000 tonnes Six months ended 30 June Nine months ended 30 September 2008 2009 2009 1,913 1,358 2,396 152 486 540 6 145 215 2 71 71 1,565 1,361 2,098 3,638 3,421 5,320	Unit:’000 tonnes Six months ended 30 June Nine months ended 30 September 2008 2009 2009 1,913 1,358 2,396 152 486 540 6 145 215 2 71 71 1,565 1,361 2,098 3,638 3,421 5,320
			5,320

Future Prospects

The Bulk Grain Terminal Operation is expected to benefit from the following factors:

• Increasing demand for the transportation of grains from the northeastern region to the southern regions of China. The northeastern region is one of the most important and strategic grain production base of China with a stable growth in grain output in recent years. The “North-South Grain Transportation” policy of the PRC government is expected to continue for a period of time in the future and Dalian Port plays an important role as an important bulk grain transportation port in this region.

• The initiatives of the PRC central government to encourage the construction of bulk grain storage and transportation facilities and the change from packed grain transportation to bulk grain transportation.

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LETTER FROM THE BOARD

(4) Passenger and Roll-on, Roll-off Terminal and Related Logistics Services

PDA is engaged in the provision of passenger transportation and roll-on, roll-off terminal services mainly through Dalian Port Passenger Transportation Company (the “ Passenger and Roll-on, Roll-off Terminal Operation ”). The Passenger and Roll-on, Roll-off Terminal Operation has a leading position among the ports in China in terms of its handling capacity. Dalian Port Passenger Transportation Company operates seven designated passenger and roll-on, roll-off berths, two high speed boat berths, four domestic routes and one international route. The throughput of the Passenger and Roll-on, Roll-off Terminal Operation for each of the three years ended 31 December 2006, 2007 and 2008, the six months ended 30 June 2008 and 2009, and the nine months ended 30 September 2009 are as follows:

						Nine
						months
					Six months	ended
	Year ended 31 December			ended 30 June		30 September
	2006	2007	2008	2008	2009	2009
Passengers
(’000 persons)	3,804	4,336	3,774	1,752	1,525	2,732
Vehicles_(’000)_	306	432	486	223	266	397

Future Prospects

The Passenger and Roll-on, Roll-off Terminal Operation is expected to benefit from the following factors:

• The acquisition opportunities offered by the trend of consolidation of passenger and roll-on, roll-off terminal operations resulting from increasing competition. The Passenger and Roll-on, Roll-off Terminal Operation may take advantage of its leading position in the industry to participate in the consolidation of such operations at Dalian Port at a suitable time in order to expand its operation scale to become the hub for the passenger and roll-on, roll-off terminal operations in Bohai Bay.

• Strategic cooperation between PDA and major shipping companies in China. PDA has established a joint venture with China Shipping Group to jointly develop the passenger and roll-on, roll-off market in Bohai Bay and enhance their competitiveness in such market.

• Expected commencement of operation of the international cruise terminal in Dalian in 2012.

(5) Ancillary Port Operations

The ancillary port operations comprised in the Target Assets include port logistics, construction management and supervision services, information system and power supply. These are important supporting operations which are closely related to the terminal operations at Dalian Port.

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LETTER FROM THE BOARD

Among the above mentioned services and operations, the railway transportation operated by Dalian Port Railway Company (“ Railway Transportation Operation ”) is an important part of PDA’s comprehensive transportation and logistics system. Dalian Port Railway Company uses railways as its primary mode of transportation to provide transportation to and from Dalian Port. For the year ended 31 December 2008 and the nine months ended 30 September 2009, Dalian Port Railway Company handled a total of approximately 628,000 and 459,000 carriages and approximately 35.0 million and 25.4 million tonnes of cargo, respectively. In addition, the Railway Transportation Operation is important to the development of the “rail-to-sea” intermodal transportation system at Dalian Port. The “rail-to-sea” intermodal transportation, which has been proved to provide cost advantage, is expected to play an important role in facilitating the Group’s business development.

Business Operation Structure of PDA and the Enlarged Group

The future structure of the operations of PDA and the Enlarged Group upon completion of the Acquisition is set out below:

==> picture [392 x 348] intentionally omitted <==

----- Start of picture text -----

PDA
The Company
Non-Port Operations
Oil/Liquefied Chemicals Terminal and Related
Logistics Services
Containers Terminal and Related Logistics
Services
Ore Terminal and Related Logistics Services
General Cargo Terminal and Related Logistics
Services
Bulk Grain Terminal and Related Logistics
Services
Passenger and Roll-on, Roll-off Cargo Terminal
and Related Logistics Services
Automobile Terminal and Related Logistics
Services
Port Value-Added Services and Ancillary Port Operations
----- End of picture text -----

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LETTER FROM THE BOARD

Management Discussion and Analysis of the Target Assets

The following discussion should be read in conjunction with the accountants’ report and the unaudited pro forma combined financial information on the Target Assets, included in Appendix I and Appendix IV to this circular. The audited combined financial information on the Target Assets included in the accountants’ report was prepared in accordance with International Financial Reporting Standards. The unaudited pro forma combined financial information on the Target Assets was prepared on the basis set out in section (B) headed “Introduction” in Appendix IV to this circular.

It should be noted that the combined financial information on the Target Assets for each of the years ended 31 December 2006, 2007 and 2008 and the six months ended 30 June 2008 and 2009 includes the financial position, results and cash flows of the Target Assets proposed to be acquired from PDA as if the Target Assets had been a single reporting entity in existence since 1 January 2006.

For illustration purposes, rounding adjustments have been made to certain figures in this section.

(1) Summary of the operating results

• (a) Throughput by business segments

							Nine
							months
				Six months			ended
	Year ended 31 December			ended 30 June			30 September
	2006	2007	2008	2008		2009	2009
Ore Terminal Operation
(’000 tonnes)	7,436	11,410	13,438	6,420	12,477		21,059
General Cargo
Terminal Operation
(’000 tonnes)	15,406	17,336	22,278	11,524	11,153		17,000
Bulk Grain Terminal
Operation
(’000 tonnes)	8,050	7,015	6,685	3,638		3,421	5,320
Passenger and Roll-on,
Roll-off Terminal
Operation
– Passenger
(’000 persons)	3,804	4,336	3,774	1,752		1,525	2,732
– Vehicles_(’000)_	306	432	486	223		266	397

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LETTER FROM THE BOARD

• (b) Revenue breakdown by business segment (RMB’000)

		Year ended 31 December		Six months ended 30 June	Six months ended 30 June
	2006	2007	2008	2008	2009
	(audited)	(audited)	(audited)	(unaudited)	(audited)
Ore Terminal Operation	78,318	107,852	183,191	100,474	144,487
General Cargo Terminal
Operation	259,587	282,605	369,209	182,384	146,250
Bulk Grain Terminal
Operation	136,675	196,392	236,845	103,021	90,063
Passenger and Roll-on,
Roll-off Terminal
Operation	75,296	91,320	90,572	45,090	31,064
Ancillary Port Operations	338,794	370,065	395,109	157,743	161,078

(c) Cost of sales by business segment (RMB’000)

		Year ended 31 December		Six months ended 30 June	Six months ended 30 June
	2006	2007	2008	2008	2009
	(audited)	(audited)	(audited)	(unaudited)	(audited)
Ore Terminal Operation	84,077	113,923	154,301	74,669	88,013
General Cargo Terminal
Operation	236,553	306,749	377,687	165,787	149,198
Bulk Grain Terminal
Operation	119,016	147,670	165,187	76,791	74,105
Passenger and Roll-on,
Roll-off Terminal
Operation	35,787	41,012	42,895	19,799	19,857
Ancillary Port Operations	277,844	292,129	311,051	122,296	121,036

(d) Gross margin by business segment (RMB’000)

	Year	ended 31 December		Six months ended 30 June	Six months ended 30 June
	2006	2007	2008	2008	2009
	(audited)	(audited)	(audited)	(unaudited)	(audited)
Ore Terminal Operation	(5,759)	(6,071)	28,890	25,805	56,474
	(7.4%)	(5.6%)	15.8%	25.7%	39.1%
General Cargo	23,034	(24,144)	(8,478)	16,597	(2,948)
Terminal Operation	8.9%	(8.5%)	(2.3%)	9.1%	(2.0)%
Bulk Grain	17,659	48,722	71,658	26,230	15,958
Terminal Operation	12.9%	24.8%	30.3%	25.5%	17.7%
Passenger and Roll-on,
Roll-off	39,509	50,308	47,677	25,291	11,207
Terminal Operation	52.5%	55.1%	52.6%	56.1%	36.1%
Ancillary Port	60,950	77,936	84,058	35,447	40,042
Operations	18.0%	21.1%	21.3%	22.5%	24.9%

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(2) Operating results for the six months ended 30 June 2008 and 30 June 2009

For the six months ended 30 June 2009, the audited combined revenue of the Target Assets was approximately RMB612.4 million, representing a slight decrease of approximately 3.0% as compared to the same period in 2008. The audited combined gross profit was approximately RMB151.3 million, representing a decrease of approximately 5.6% as compared to the same period in 2008. The audited combined profit attributable to equity holders was approximately RMB60.8 million, representing a decrease of approximately 4.7% from approximately RMB63.8 million for the same period in 2008.

(a) Ore Terminal Operation

For the six months ended 30 June 2009, revenue from the Ore Terminal Operation was approximately RMB144.5 million, representing an increase of approximately 43.8% from approximately RMB100.5 million for the six months ended 30 June 2008, mainly attributable to (i) an increase in throughput for imported ore which has a higher unit handling fee as compared to domestic ore, mainly as a result of the RMB4 trillion economic stimulus plan of the PRC government, and (ii) an expansion of the markets served by the Ore Terminal Operation from Northeastern China to the northern area of China. The increase in revenue was partially offset by a decrease in overall unit handling fee.

Cost of sales for the Ore Terminal Operation increased by approximately 17.9% from approximately RMB74.7 million for the six months ended 30 June 2008 to approximately RMB88.0 million for the six months ended 30 June 2009, mainly due to an increase in cargo throughput. Gross margin was 39.1% for the six months ended 30 June 2009, representing an increase of 13.4 percentage points from 25.7% for the six months ended 30 June 2008. Apart from the benefits resulting from the economic stimulus plan of the PRC government, the significant increase in gross margin was also attributable to improved economies of scale.

(b) General Cargo Terminal Operation

For the six months ended 30 June 2009, the revenue from the General Cargo Terminal Operation was approximately RMB146.3 million, representing a decrease of approximately 19.8% from approximately RMB182.4 million for the six months ended 30 June 2008, mainly due to (i) a decrease in cargo throughput, in particular, the throughput of export steel products as a result of the global economic downturn; and (ii) a decrease in average handling fees due to the downward adjustment in unit handling fee for a major steel manufacturer client. The decrease in revenue was partially offset by an increase in domestic cargo throughput of other general cargoes.

Cost of sales for the General Cargo Terminal Operation decreased by approximately 10.0% from approximately RMB165.8 million for the six months ended 30 June 2008 to approximately RMB149.2 million for the six months ended 30 June 2009, mainly due to a decrease in cargo throughput. For the six months ended

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30 June 2009, the General Cargo Terminal Operation recorded a gross loss of approximately RMB2.9 million whereas it recorded a gross profit of approximately RMB16.6 million for the six months ended 30 June 2008. Gross margin for the six months ended 30 June 2009 was -2.0%, representing a decrease by 11.1 percentage points from 9.1% for the same period in 2008.

(c) Bulk Grain Terminal Operation

For the six months ended 30 June 2009, the revenue from the Bulk Grain Terminal Operation was approximately RMB90.1 million, representing a decrease of approximately 12.6% from approximately RMB103.0 million for the six months ended 30 June 2008, mainly due to (i) a decrease in revenue from future commodities storage and delivery services as a result of the global economic downturn; and (ii) a decrease in revenue from warehousing and transportation services as a result of a decrease in domestic corn throughput. The decrease in revenue was partially offset by an increase in the unit handling fee for corn.

Cost of sales for the Bulk Grain Terminal Operation decreased by approximately 3.5% from approximately RMB76.8 million for the six months ended 30 June 2008 to approximately RMB74.1 million for the six months ended 30 June 2009, mainly due to a decrease in cargo throughput. Gross margin was 17.7% for the six months ended 30 June 2009, representing a decrease of 7.8 percentage points from 25.5% for the six months ended 30 June 2008.

(d) Passenger and Roll-on, Roll-off Terminal Operation

For the six months ended 30 June 2009, the revenue from the Passenger and Roll-on, Roll-off Terminal Operation was approximately RMB31.1 million, representing a decrease of approximately 31.1% from approximately RMB45.1 million for the six months ended 30 June 2008, mainly due to the decrease in throughput and average fare rates as a result of the domestic economic downturn.

Cost of sales for the Passenger and Roll-on, Roll-off Terminal Operation was approximately RMB19.8 million for the six months ended 30 June 2008, nearly the same as approximately RMB19.9 million for the six months ended 30 June 2009. Gross margin was 36.1% for the six months ended 30 June 2009, representing a decrease of 20.0 percentage points from 56.1% for the six months ended 30 June 2008.

(e) Ancillary Port Operations

For the six months ended 30 June 2009, the revenue from the Ancillary Port Operations was approximately RMB161.1 million, representing an increase of approximately 2.1% from approximately RMB157.7 million for the six months ended 30 June 2008, mainly attributable to an increase in revenue from power supply, which was partially offset by a decrease in revenue from railway transportation operations.

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Cost of sales for the Ancillary Port Operations decreased by approximately 1.0% from approximately RMB122.3 million for the six months ended 30 June 2008 to approximately RMB121.0 million for the six months ended 30 June 2009. Gross margin was 24.9% for the six months ended 30 June 2009, representing an increase of 2.4 percentage point from 22.5% for the six months ended 30 June 2008.

(3) Operating results for the years ended 31 December 2008 and 2007

For the year ended 31 December 2008, the audited combined revenue of the Target Assets was approximately RMB1,361.1 million, representing an increase of approximately 20.9% from approximately RMB1,126.1 million for 2007. The audited combined gross profit was approximately RMB285.6 million, representing an increase of approximately 37.6% from approximately RMB207.5 million for 2007. The audited combined profit attributable to equity holders was approximately RMB68.8 million, representing an increase of approximately 188.1% from approximately RMB23.9 million for 2007.

(a) Ore Terminal Operation

For the year ended 31 December 2008, the revenue from the Ore Terminal Operation was approximately RMB183.2 million, representing an increase of approximately 69.9% from approximately RMB107.9 for 2007, mainly attributable to (i) the increase in cargo throughput as a result of the commencement of full operation of the transshipment berth which has provided an operational efficiency advantage to the overall operation; and (ii) an increase in unit handling fee for imported ore.

Cost of sales for the Ore Terminal Operation increased by approximately 35.4% from approximately RMB113.9 million in 2007 to approximately RMB154.3 million in 2008, mainly due to (i) an increase in cargo throughput; (ii) an increase in depreciation and amortisation expenses on the newly completed terminal facilities; and (iii) an increase in labour related expenses as a result of the implementation of the new Labour Contract Law in the PRC in 2008. Gross margin was 15.8% in 2008 whereas the Ore Terminal Operation recorded a gross margin of -5.6% in 2007.

(b) General Cargo Terminal Operation

For the year ended 31 December 2008, the revenue from the General Cargo Terminal Operation was approximately RMB369.2 million, representing an increase of approximately 30.6% from approximately RMB282.6 million for 2007, mainly attributable to the increase in both cargo throughput and average handling fees.

Cost of sales for the General Cargo Terminal Operation increased by approximately 23.1% from approximately RMB306.7 million in 2007 to approximately RMB377.7 million in 2008, mainly due to (i) an increase in cargo throughput; (ii) the additional depreciation and amortisation expenses on newly

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completed terminal facilities; and (iii) an increase in labour related expenses as a result of the implementation of the new Labour Contract Law in the PRC in 2008. The General Cargo Terminal Operation recorded a gross loss of approximately RMB8.5 million in 2008 and a gross loss of approximately RMB24.1 million in 2007. Gross margin was improved from -8.5% in 2007 to -2.3% in 2008.

(c) Bulk Grain Terminal Operation

For the year ended 31 December 2008, the revenue from the Bulk Grain Terminal Operation was approximately RMB236.8 million, representing an increase of approximately 20.6% from approximately RMB196.4 million for 2007, mainly attributable to (i) an increase in unit handling fee for corn; and (ii) an increase in revenue from future commodities storage and delivery services and warehousing and transportation logistics services.

Cost of sales for the Bulk Grain Terminal Operation increased by approximately 11.9% from approximately RMB147.7 million in 2007 to approximately RMB165.2 million in 2008, mainly due to (i) the additional depreciation and amortisation expenses on a newly acquired bulk grain vessel; and (ii) an increase in labour related expenses as a result of the implementation of the new Labour Contract Law in the PRC in 2008. Gross margin was 30.3% in 2008, increasing by 5.5 percentage points from 24.8% in 2007.

(d) Passenger and Roll-on, Roll-off Terminal Operation

For the year ended 31 December 2008, revenue from the Passenger and Roll-on, Roll-off Terminal Operation was approximately RMB90.6 million, nearly the same as approximately RMB91.3 million for 2007.

Cost of sales for the Passenger and Roll-on, Roll-off Terminal Operation increased by approximately 4.6% from approximately RMB41.0 million in 2007 to approximately RMB42.9 million in 2008. Gross margin was 52.6% in 2008, slightly decreased by 2.5 percentage points from 55.1% in 2007.

(e) Ancillary Port Operations

For the year ended 31 December 2008, revenue from the Ancillary Port Operation was approximately RMB395.1 million, representing an increase of approximately 6.8% from approximately RMB370.1 million in 2007, mainly attributable to the increased revenue from railway transportation operations and construction of information systems for new port facilities.

Cost of sales for the Ancillary Port Operations increased by approximately 6.5% from approximately RMB292.1 million in 2007 to approximately RMB311.1 million in 2008. Gross margin was 21.3% in 2008, nearly the same as 21.1% for 2007.

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(4) Operating results for the years ended 31 December 2007 and 31 December 2006

For the year ended 31 December 2007, the audited combined revenue of the Target Assets was approximately RMB1,126.1 million, representing an increase of approximately 18.4% from approximately RMB951.4 million in 2006. The audited combined gross profit was approximately RMB207.5, representing an increase of approximately 12.6% from approximately RMB184.4 for 2006. The audited combined profit attributable to equity holders was approximately RMB23.9, representing a decrease of approximately 38.2% from approximately RMB38.6 for 2006.

(a) Ore Terminal Operation

For the year ended 31 December 2007, revenue from the Ore Terminal Operation was approximately RMB107.9 million, representing an increase of approximately 37.7% from approximately RMB78.3 million for 2006, mainly attributable to an increase in both domestic and foreign trade cargo throughput.

Cost of sales for the Ore Terminal Operation increased by approximately 35.5% from approximately RMB84.1 million in 2006 to approximately RMB113.9 million in 2007, mainly due to an increase in cargo throughput and the increased repairing expense for certain terminal facilities. The Ore Terminal Operation recorded a gross loss of approximately RMB6.1 million in 2007 and a gross loss of approximately RMB5.8 million in 2006. Gross margin improved from -7.4% in 2006 to -5.6% in 2007.

(b) General Cargo Terminal Operation

For the year ended 31 December 2007, revenue from the General Cargo Terminal Operation was approximately RMB282.6 million, representing an increase of approximately 8.9% from approximately RMB259.6 million in 2006, mainly attributable to an increase in throughput of steel products. The increase in revenue was partially offset by a decrease in throughput as a result of the relocation of certain operations .

Cost of sales for the General Cargo Terminal Operation increased by approximately 29.7% from approximately RMB236.6 million in 2006 to approximately RMB306.7 million in 2007, mainly due to (i) an increase in throughput of steel products; and (ii) an increase in depreciation and amortisation expenses on newly completed terminal facilities. The General Cargo Terminal Operation recorded a gross loss of approximately RMB24.1 million in 2007, including a gross loss recorded by its newly commenced operation in the Zhuanghe area of Dalian. The General Cargo Terminal Operation recorded a gross profit of approximately RMB23.0 million in 2006. Gross margin decreased from 8.9% in 2006 to -8.5% in 2007.

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(c) Bulk Grain Terminal Operation

For the year ended 31 December 2007, the revenue from the Bulk Grain Terminal Operation was approximately RMB196.4 million, representing an increase of approximately 43.7% from approximately RMB136.7 million for 2006, mainly attributable to an increase in revenue from future commodities storage and delivery services and warehousing and transportation services.

Cost of sales for the Bulk Grain Terminal Operation increased by approximately 24.1% from approximately RMB119.0 million in 2006 to approximately RMB147.7 million in 2007, mainly due to additional depreciation and amortization expenses on newly completed barns. Gross margin was 24.8% in 2007, representing an increase of 11.9 percentage points from 12.9% in 2006, mainly attributable to the warehousing and transportation services which have a higher gross margin.

(d) Passenger and Roll-on, Roll-off Terminal Operation

For the year ended 31 December 2007, the revenue from the Passenger and Roll-on, Roll-off Terminal Operation was approximately RMB91.3 million, representing an increase of approximately 21.3% from approximately RMB 75.3 million for 2006, mainly attributable to an increase in throughput diverted from other terminals in the vicinity which suspended their operations as a result of being temporarily requisitioned by the government.

Cost of sales for the Passenger and Roll-on, Roll-off Terminal Operation increased by approximately 14.6% from approximately RMB35.8 million in 2006 to approximately RMB41.0 million in 2007, mainly due to (i) an increase in depreciation and amortisation expenses on the remodeled roll-on, roll-off bridge; and (ii) an increase in labour related expenses as a result of increased headcount and wages of employees. Gross margin was 55.1% in 2007, decreasing by 2.6 percentage points from 52.5% in 2006.

(e) Ancillary Port Operations

For the year ended 31 December 2007, the revenue from the Ancillary Port Operation was approximately RMB370.1 million, representing an increase of approximately 9.2% from approximately RMB338.8 million for 2006, mainly attributable to an increase in revenue from railway transportation operation and construction of port facilities.

Cost of sales for the Ancillary Port Operations increased by approximately 5.1% from approximately RMB277.8 million in 2006 to approximately RMB292.1 million in 2007. Gross margin was 21.1% in 2007, decreasing by 3.1 percentage points from 18.0% in 2006.

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(5) Liquidity and Financial Resources

As at 31 December 2008, the total cash and cash equivalents were approximately RMB224.8 million, compared to approximately RMB151.2 million and approximately RMB278.1 million as at 31 December 2007 and 2006 respectively. As at 30 June 2009, the total cash and cash equivalents were approximately RMB183.6 million.

As at 31 December 2008, the total borrowings (including non-current liabilities due to PDA) of the Target Assets were approximately RMB2,709.8 million, compared to approximately RMB2,352.4 million and approximately RMB159.6 million as at 31 December 2007 and 2006 respectively. As at 30 June 2009, the total borrowings were approximately RMB2,686.3 million.

For the year ended 31 December 2008, the contractual interest rate of bank borrowings ranged from 6.44% to 7.05% per annum, compared to the contractual interest rate of 6.12% to 6.64% per annum in 2007 and 6.12% per annum in 2006. For the six months ended 30 June 2009, the contractual interest rate of bank borrowings ranged from 4.78% to 6.71% per annum. For the three years ended 2006, 2007 and 2008 and the six months ended 30 June 2009, all bank borrowings of the members of the Target Assets were denominated in RMB, and the members of the Target Assets have not entered into derivative contracts or hedging transactions.

(6) Capital Structure

As at 31 December 2008, the total equity of the Target Assets was approximately RMB2,326.7 million. This represented an increase of approximately RMB83.4 million, or 3.7%, as compared to 31 December 2007. As at 31 December 2007, the total equity of the Target Assets was approximately RMB2,243.4 million. This represented an increase of approximately RMB22.5 million, or approximately 1.0%, as compared to 31 December 2006. As at 30 June 2009, the total equity of the Target Assets was RMB2,517.4 million.

As at 31 December 2008, the gearing ratio (as calculated by total borrowings (including non-current liabilities due to PDA) divided by total equity) of the Target Assets was approximately 116.5%, compared to 104.9% in 2007 and 7.2% in 2006. As at 30 June 2009, the gearing ratio (as calculated by total borrowings (including non-current liabilities due to PDA) divided by total equity) of the Target Assets was approximately 106.7%.

(7) Charges on Assets

As at 31 December 2006, 2007 and 2008 and 30 June 2009, the Target Assets had no charges against any asset.

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(8) Contingent Liabilities

As at 31 December 2006, 2007 and 2008 and 30 June 2009, the Target Assets did not have any material contingent liabilities or obligations.

(9) Future Investments

A portion of the proceeds from the proposed issue of Public A Shares will be applied towards the operations comprised in the Target Assets as follows:

• (a) Construction of stacking yard and purchase of a gantry, for the Ore Terminal Operation;

• (b) Construction of berths for the General Cargo Terminal Operation and the Passenger and Roll-on, Roll-off Terminal Operation; and

• (c) Purchase of bulk grain carriages for the Bulk Grain Terminal Operation.

(10) Disposal of Subsidiaries

In December 2007, the General Cargo Terminal Operation disposed of an 11% equity interest in a subsidiary, Dalian Changxing Island Port, Ltd., to an independent third party for a cash consideration of RMB46,200,000, and a gain of RMB680,000 was recognised. Upon completion of the disposal, the equity interest held by the General Cargo Terminal Operation was reduced from 51% to 40% and Dalian Changxing Island Port, Ltd. ceased to be a subsidiary of the General Cargo Terminal Operation and became an associate of the General Cargo Terminal Operation.

Unaudited Pro Forma Financial Information on the Target Assets

The Board, however, is of the view that the audited and unaudited revenue and profit of the Target Assets as set out above and in Appendix I to this circular do not reflect, and are not an appropriate yardstick for assessing, the actual operating capabilities and financial positions of the operations included in the Target Assets as if they were an independent entity. This is because such results were affected by inclusion of certain costs attributable to operational assets which will not be included in the Target Assets. The reason for their exclusion is that they are expected to be relocated pursuant to the urban planning of Dalian municipal government and the Company’s business development plan. The Directors believe that such costs will cease to be incurred by, and therefore will not affect the operational results of, the Target Assets following completion of the Acquisition.

Pro forma financial information on the Target Assets has been prepared for the year ended 31 December 2008 and the six months ended 30 June 2008 and 30 June 2009 in order to illustrate how the exclusion of such costs might have affected the operational results of the Target Assets.

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Pro forma financial information on the Target Assets which is prepared for illustrative purposes, together with the basis of such pro forma information, and the report issued by the Target Assets’ reporting accountants, are set out in Appendix IV to this circular. Selected historical and pro forma information is set out below:

	Year	ended		Six months	ended
	31 December 2008		30 June	2008	30 June	2009
	Historical	Adjusted	Historical	Adjusted	Historical	Adjusted
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
REVENUE	1,361,096	1,361,096	631,315	631,315	612,426	612,426
Gross profit	285,638	312,204	160,238	173,342	151,295	164,824
PROFIT FOR THE
YEAR/PERIOD	92,887	112,811	70,901	80,729	64,064	74,211
Attributable to:
– PDA	68,767	88,691	63,752	73,580	60,766	70,913
– Minority interests	24,120	24,120	7,149	7,149	3,298	3,298

Financial Effect of the Acquisition on the Group

Upon completion of the Acquisition, the financial results of the Target Assets will be combined into the consolidated financial statements of the Group from the Completion Date.

Set out in Appendix III to this circular is the unaudited pro forma financial information of the Enlarged Group based on (i) the unaudited condensed consolidated financial statements of the Group as at 30 June 2009 as set out in Appendix II to this circular; and (ii) the audited combined financial information of the Target Assets as at 30 June 2009 as set out in Appendix I to this circular.

Effects on assets and liabilities

As shown in the unaudited pro forma financial information of the Enlarged Group, the pro forma total assets and pro forma total liabilities of the Enlarged Group following completion of the Acquisition would amount to approximately RMB16,272.4 million and approximately RMB7,333.8 million, respectively, as compared to the total assets and total liabilities of the Group amounting to approximately RMB10,844.4 million and approximately RMB4,424.9 million respectively, as at 30 June 2009 before the Acquisition. This represents an increase of 50.1% in total assets and 65.7% in total liabilities from those set out in the unaudited condensed consolidated financial statements of the Group as at 30 June 2009.

Effects on earnings

The profit attributable to the equity holders of the Company for the year ended 31 December 2008 was approximately RMB779.6 million. The profit of the Target Assets attributable to PDA based on their audited combined financial information for the year ended 31 December 2008 was approximately RMB68.8 million. The Directors are of the

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view that, if the Enlarged Group had been formed as of 1 January 2008, the net profit of the Enlarged Group for the year ended 31 December 2008 would have been higher than the RMB779.6 million achieved by the Group for the same period.

Working Capital

The Directors are of the opinion that, after taking into account the internal resources and financial facilities of the Group and after due and careful enquiry, the Enlarged Group will have sufficient working capital for its normal business for the next twelve months from the date of this circular.

Indebtedness

At the close of business on 31 August 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the date of this circular, the Enlarged Group had the following borrowings:

Bank loans Other loans Medium-term notes Total	RMB’000 2,312,854 21,660 2,474,459
	4,808,973

The above bank and other borrowings were unsecured, and the effective interest rates for these bank and other borrowings ranged approximately from 4% to 6.72% per annum.

Save as disclosed above and apart from intra-group liabilities and normal trade payables, neither the Group nor the entities in the Target Assets had, as at 31 August 2009, any outstanding loan capital issued or agreed to be issued, bank overdrafts, other loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills), acceptance credits, debentures, mortgages, charges, guarantees or other material contingent liabilities. To the best of the knowledge of the Directors, having made all reasonable enquiries, there has been no material adverse change in the level of indebtedness of the Group since 31 August 2009.

Reasons for and Benefits of the Acquisition

The Directors believe that the Acquisition will bring the following advantages to the Company and the Shareholders as a whole:

• (1) To establish a solid integrated terminal operation platform for future participation in the expected consolidation of port resources in China

The Acquisition is an initiative by both the Company and PDA to consolidate the port operations at Dalian Port. Following completion of the Acquisition, the

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Enlarged Group will operate all the major port operations at Dalian Port as an integrated port services operator, which will establish a solid platform for its future participation in the consolidation of port resources in Liaoning Province and China.

(2) To generate business synergy and enhance competitiveness

The Directors believe that the Acquisition presents a unique opportunity for the Company to operate an integrated terminal business and expand its scale of operations and generate business synergy. Upon completion of the Acquisition, the business scope of the Group will be substantially expanded to cover the provision of terminal services for oil/liquefied chemicals, containers, automobile, ore, general cargo and bulk grain as well as passengers and roll-on, roll-off, in addition to certain port value-added services and ancillary port operations. The increased economies of scale will contribute to greater operating efficiency in terms of operating and maintenance costs. The Directors believe that the expansion in scale of operations will enhance the Group’s overall competitiveness in the PRC port operation industry.

(3) To enhance the Group’s capability to withstand economic fluctuations and diversify the associated risks

Different terminal operations are sensitive to different macro economic factors. In comparison with the containers terminal operations, the performance of dry bulk terminal operations is more closely related to domestic demand in China. In addition, different terminal operations have different industry cycles. The Directors believe that, with the expanded business scope, the Enlarged Group will enjoy an enhanced capability to withstand economic fluctuations and diversify the associated risks.

(4) To strengthen operational independence further

The Group currently relies on PDA for its supply of certain ancillary port operations. Following completion of the Acquisition, with a more comprehensive and integrated operation, the amount of ongoing connected transactions to be provided by PDA to the Enlarged Group will be reduced as a percentage of the total revenue of the Enlarged Group, which will further strengthen its operational independence from PDA.

Future Prospects of the Enlarged Group

The development of the port industry is closely related to the global economy and foreign trade. Globalisation enhances the role of ports in the integrated global transportation and logistics networks. The PRC has gradually developed into an important global manufacturing base, and robust international trade will continue to provide a conducive environment for port enterprises to grow their business. The proximity of Dalian Port to the markets in Northeastern China makes Dalian Port the natural choice to handle the increasing trade in imports and exports in that region. Furthermore, the implementation of the initiatives of the PRC central government to

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revitalise the economy of Northeastern China and to develop the coastal economic zone of Liaoning province is expected to provide a stronger hinterland economy for the business development of Dalian Port. Among such initiatives, the acceleration of consolidation of port resources in Liaoning province and the establishment of an international shipping center in Dalian Port would establish a foundation for the Enlarged Group’s further consolidation of port resources in Liaoning Province and the PRC. In addition, following completion of the Acquisition, the Enlarged Group will operate all the major port operations at Dalian Port as an integrated port services operator and will be able to benefit further from all the advantageous factors mentioned above. The Directors are of the view that the terms of the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Implications under the Listing Rules

PDA is the controlling shareholder of the Company, currently holding an interest of approximately 62.09% in the issued share capital of the Company. By virtue of the size of the Acquisition and the relationship of the parties thereto, the Acquisition constitutes a major transaction and connected transaction of the Company requiring the Independent Shareholders’ approval under the Listing Rules. The EGM will be convened to consider and, if thought fit, among other matters, approve the Acquisition. Pursuant to the Listing Rules, PDA and its associates will abstain from voting on the resolutions in relation to the Acquisition.

CONTINUING CONNECTED TRANSACTIONS

PDA, being the controlling shareholder of the Company, is a connected person of the Company. There are certain existing transactions previously entered into between the companies comprised in the Target Assets and PDA and/or its associates (other than the companies comprised in the Target Assets). As the Target Assets will become part of the Enlarged Group upon completion of the Acquisition, such existing transactions will become continuing connected transactions for the Enlarged Group.

In anticipation of the Acquisition and to regulate the continuing business relationship between the Enlarged Group and PDA and/or its associates, the Company and certain other members of the Enlarged Group have entered into various framework agreements with PDA in relation to provision of construction supervision services and construction management services, property lease, mutual supply of goods and services and terminal facilities design and construction services upon completion of the Acquisition. These agreements will come into effect upon completion of the Acquisition.

Each of these agreements is a framework agreement which provides the mechanism for the operation of the continuing connected transactions contemplated thereunder. It is envisaged that from time to time and as required, individual agreements may be required to be entered into between a member of the Enlarged Group and PDA or its associates (as appropriate) pursuant to such framework agreements. Such an agreement may only contain provisions which are in all material respects consistent with the binding principles, guidelines, terms and conditions contained in the relevant framework agreement pursuant to which such agreement is entered into.

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Continuing Connected Transactions Subject to Reporting and Announcement Requirements

1. Construction Supervision Services

Background

Superintendence Company is primarily engaged in construction-related supervision services. Upon completion of the Acquisition, it will become a non-wholly owned subsidiary of the Company. As Superintendence Company will continue to provide services to PDA and/or its associates after completion of the Acquisition, a framework agreement (the “ Construction Supervision Services Agreement ”) was entered into between Superintendence Company and PDA (for itself and on behalf of its relevant associates) on 30 September 2009 to regulate their relationship in this regard.

Major Terms and Conditions

The major terms of the Construction Supervision Services Agreement are as follows:

• The terms and conditions on which such services are to be provided will be no more favourable to PDA and/or its associates than those offered to independent third parties;

• The initial term of the Construction Supervision Services Agreement will commence from the Completion Date and will end on 31 December 2012. Upon expiration of the initial term, subject to compliance by the Company with applicable requirements under the Listing Rules, the Construction Supervision Services Agreement will be renewed automatically for a further term of three years. Unless otherwise agreed by the parties, each party may terminate the agreement on giving three months’ written notice;

• The construction supervision services will be priced in accordance with the following principles:

• (a) State price, being the price set by the PRC government (at central or local level) or its relevant departments by laws, regulations, determinations, orders or policies; and

• (b) where there is no State price, the market price, being the price at which the same or comparable services are provided to independent third parties in the same area in the ordinary course of business.

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2. Construction Management Services

Background

DCM is principally engaged in project management services, engineering services and consultancy services. Upon completion of the Acquisition, it will become a wholly owned subsidiary of the Company. As DCM will continue to provide such services to PDA and/or its associates after completion of the Acquisition, a framework agreement (the “ Construction Management Services Agreement ”) was entered into between DCM and PDA (for itself and on behalf of its relevant associates) on 30 September 2009.

Major Terms and Conditions

The major terms of the Construction Management Services Agreement are as follows:

• The terms and conditions on which such services are to be provided will be no more favourable to PDA and/or its associates than those offered to independent third parties;

• The initial term of the Construction Management Services Agreement will commence from the Completion Date and will end on 31 December 2012. Upon expiration of the initial term, subject to compliance by the Company with applicable requirements under the Listing Rules, the Construction Management Services Agreement will be renewed automatically for a further term of three years. Unless otherwise agreed by the parties, each party may terminate the agreement on giving three months’ written notice;

• The provision of the construction management services will be provided at prices determined in accordance with the following pricing principles:

• (a) State price, being the price set by the PRC government (at central or local level) or its relevant departments by laws, regulations, determinations, orders and policies; and

• (b) where there is no State price, the market price, being the price at which the same or comparable services are provided to independent third parties in the same area in the ordinary course of business.

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3. Property Lease

Background

Upon completion of the Acquisition, the Enlarged Group will lease certain land use rights and buildings from PDA and/or its relevant associates for certain business operations and offices. The Company entered into a framework agreement (the “ Properties Lease Agreement ”) on 30 September 2009 with PDA (for itself and on behalf of its relevant associates) regarding the terms and conditions for the lease of these lands and buildings.

Major Terms and Conditions

The major terms of the Properties Lease Agreement are as follows:

• The rental charged by PDA and/or its relevant associates will be set by or with reference to the market rate, being the rate at which the same or comparable land or buildings are leased from independent third parties in the same area in the ordinary course of business;

• The initial term of the Properties Lease Agreement will commence from the Completion Date and will end on 31 December 2012. Upon expiration of the initial term, subject to compliance by the Company with applicable requirements under the Listing Rules, the Properties Lease Agreement will be renewed automatically for a further term of three years. The Enlarged Group may terminate the agreement on giving three months’ written notice;

• The rental (exclusive of all taxes payable, which shall be paid to PDA or its relevant associates) shall be payable on a quarterly basis;

• If PDA and/or its associate propose to sell any property leased by the Enlarged Group to a third party, the Enlarged Group shall have a pre-emptive right to purchase such property under terms no less favourable to the Enlarged Group than those available to the third party.

The aggregate site area of the land to be leased by the Enlarged Group from PDA and/or its associates under the Properties Lease Agreement is approximately 2,339,877 square meters, out of which PDA and/or its associates have not obtained the land use right certificate in respect of a parcel of land with an aggregate site area of approximately 305,480 square meters. PDA has undertaken to the Company that it will, and will procure its relevant associates to (i) endeavour to obtain the land use right certificate for such land at their own expense; and (ii) indemnify the Enlarged Group against any loss, damage or claim arising from such title deficiency. PDA has further agreed that if PDA and/or its associates fail to obtain the land use right certificate for such land when the Properties Lease Agreement becomes effective,

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LETTER FROM THE BOARD

such land shall be provided for the use of the Enlarged Group for nil consideration, provided that the Enlarged Group shall bear the government taxes and duties imposed on such land.

Historical Figures and Proposed Annual Caps of the Continuing Connected Transactions Subject to Reporting and Announcement Requirements

The table below sets forth the historical transaction amounts of the transactions between the Enlarged Group (on the one part) and PDA and/or its relevant associates (on the other) for each of the three years ended 31 December 2006, 2007 and 2008 and six months ended 30 June 2009 and the proposed annual caps (taking into account the inclusion of the Target Assets) for the transactions contemplated under the Construction Supervision Services Agreement, the Construction Management Services Agreement and the Properties Lease Agreement for the three years ending 31 December 2010, 2011 and 2012:

					Actual
					expenditure/
					revenue
					for the
					six months
	Actual expenditure/revenue				ended	Proposed annual cap
	for the year ended 31		December		30 June	for the year ending 31 December
	2006	2007		2008	2009	2010	2011		2012
	(RMB)	(RMB)	(RMB)		(RMB)	(RMB)	(RMB)		(RMB)
Construction Supervision Services
(Notes (1) and (2))	7,280,400	0.00	4,212,900		2,513,820	11,000,000	13,000,000	14,000,000
Construction Management
Services_(Notes (1) and (2))_	0.00	3,882,000	4,450,000		58,960	16,000,000	16,000,000	14,500,000
Property Lease_(Note(3))_	1,184,164	17,718,542	17,529,063		11,238,688	23,863,000	25,248,000	26,770,000

Notes:

• (1) The proposed annual caps for the transactions under the Construction Supervision Services Agreement and the Construction Management Services Agreement, respectively, have been determined with reference to: (i) PDA’s construction projects expected to be carried out in the three years ending 31 December 2010, 2011 and 2012, including major construction projects relating to the expected land development in the north bank of Dayao Bay and Changxing Island of Dalian; (ii) the estimated relevant demand for construction supervision services and construction management services; and (iii) the expected inflation in the market prices for such services.

The increase in the estimated transaction amount for the year ending 31 December 2010 as compared to the historical transaction amount for the year ended 31 December 2008 is mainly due to the expected commencement of the construction of the above-mentioned major construction projects in 2010, for which Superintendence Company and DCM will provide supervision services and management services, respectively.

The increase in the annual caps from 2010 to 2012 is mainly due to the expected inflation in the market prices for such supervision services.

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LETTER FROM THE BOARD

• (2) The construction management services contemplated under the Construction Management Services Agreement mainly refer to provision of engineering and consultancy services throughout a project, including feasibility study, construction planning, preparation of operation manual, staff assignment planning and acceptance check. The supervision services contemplated under the Construction Supervision Services Agreement mainly refer to provision of construction process quality control, inspection and acceptance check in order to ensure the compliance of construction projects with stipulated quality standards. A supervision services provider is required to obtain a qualification certificate from the relevant government authority and shall assume responsibility for the quality of the construction projects under its supervision. As such, the Company considered the transactions under the abovementioned two agreements shall not be aggregated.

• (3) The proposed annual caps for the transactions under the Properties Lease Agreement have been determined with reference to the anticipated business growth and increase in market rentals. The increase in the estimated transaction amount for the year ending 31 December 2010 as compared to the historical transaction amount for the year ended 31 December 2008 is mainly due to the increase in demand for leased properties as a result of the expected expansion of the Ore Terminal Operation and oil terminal operation in 2010. The increase in the annual caps from 2010 to 2012 is mainly due to the expected inflation in the market rentals for such properties.

American Appraisal China Limited, an independent valuer, has confirmed that the rates under the Properties Lease Agreement are, or are less than, the prevailing market rates in the relevant part of the PRC and the terms of the agreement are fair and reasonable to the Enlarged Group.

Continuing Connected Transactions Subject to Reporting, Announcement and Independent Shareholders’ Approval Requirements

1. Mutual Supply of Goods and Services

Background

Upon completion of the Acquisition, PDA will retain certain assets and businesses and will continue to provide certain goods and ancillary services to the core businesses of the Enlarged Group. In addition, the Enlarged Group will also provide certain goods and services to PDA and/or its relevant associates on an arm’s length basis to support the businesses retained by PDA. On 30 September 2009, PDA (for itself and on behalf of its relevant subsidiaries) and the Company (for itself and on behalf of its relevant associates) entered into a framework agreement (the “ Mutual Supply Master Agreement ”) regarding the terms and conditions of the mutual supply of goods and services.

Major Terms and Conditions

The major terms of the Mutual Supply Master Agreement are as follows:

• Goods and services to be provided by PDA and/or its relevant associates to the Enlarged Group include:

• (a) Provision of supplies: diesel oil, equipments and other similar supplies; and

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LETTER FROM THE BOARD

• (b) Services: facilities and equipment maintenance, provision of utilities including water and heating, transportation (for employees’ commuting between home and work), landscaping, catering, medical check, printing and conference services and other related or similar services;

• Supplies and services to be provided by the Enlarged Group to PDA and/or its relevant associates include:

• (a) Provision of supplies: IT related equipment, spare parts, software and related maintenance and other related or similar supplies and services; and

• (b) Services: tugboat services, telecommunications and related engineering services, software development; network maintenance, security services, provision of utilities including electricity, steam and heat and other related or similar services;

• The terms and conditions on which the supplies and services are to be provided to the Enlarged Group will be no less favourable than those available from independent third parties; the terms and conditions on which the supplies and services are to be provided by the Enlarged Group will be no more favourable than those available to independent third parties;

• The initial term of the Mutual Supply Master Agreement will commence from the Completion Date and will end on 31 December 2012. Upon expiration of the initial term, subject to compliance by the Company with applicable requirements under the Listing Rules, the Mutual Supply Master Agreement will be renewed automatically for a further term of three years. Unless the Company or its relevant subsidiary is able to obtain the products or services to be provided by PDA and/or its associates from a third party at a reasonable price, PDA or its associates may not terminate the agreement without the Enlarged Group’s prior written consent; and

• The supplies and services will be provided at prices determined in accordance with the following pricing principles:

• (a) State price, being the price set by the PRC government (at central or local level) or its relevant departments by laws, regulations, determinations, orders and policies;

• (b) where there is no State price, the market price, being the price at which the same or comparable services are provided to independent third parties in the same area in the ordinary course of business; or

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LETTER FROM THE BOARD

• (c) where there is neither a State price nor a market price, in respect of the supplies and services to be provided by the Enlarged Group, the reasonable cost incurred in providing the goods or services plus an appropriate margin; or, in respect of the supplies and services to be provided by PDA and/or its associates, the reasonable cost incurred in providing such goods or services.

2. Terminal Facilities Design and Construction Services

Background

Following completion of the Acquisition, PDA and/or its relevant associates will continue to provide the Enlarged Group with terminal facilities design and construction services (including land filling, dredging, caisson precasting and construction of supporting facilities). On 30 September 2009, the Company (for itself and on behalf of its subsidiaries) entered into a framework agreement (the “ Terminal Facilities Design and Construction Services Agreement ”) with PDA (for itself and on behalf of its associates) regarding the terms and conditions for port facilities design and construction services.

Major Terms and Conditions

The main terms and conditions of the Terminal Facilities Design and Construction Services Agreement are as follows:

• The terms and conditions on which such services are to be provided will be no less favourable to the Enlarged Group than those available to independent third parties;

• The initial term of the Terminal Facilities Design and Construction Services Agreement will commence from the Completion Date and will end on 31 December 2012. Upon expiration of the initial term, subject to compliance by the Company with applicable requirements under the Listing Rules, the Terminal Facilities Design and Construction Services Agreement will be renewed automatically for a further term of three years. Unless the Company or its relevant subsidiary is able to obtain the services to be provided by PDA and/or its associates from a third party at a reasonable price, PDA and/or its associates may not terminate the agreement without the Enlarged Group’s prior written consent; and

• The provision of the terminal facilities design and construction services shall be priced in accordance with the following principles:

• (a) State price, being the price set by the PRC government (at central or local level) or its relevant departments by laws, regulations, determinations, orders or policies;

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LETTER FROM THE BOARD

• (b) where there is no State price, the market price, being the price at which the same or comparable services are provided to independent third parties in the same area in the ordinary course of business; or

• (c) where the project is subject to public bidding, the price determined through the bidding process.

Historical Figures and Proposed Annual Caps of the Continuing Connected Transactions Subject to Reporting, Announcement and Independent Shareholders’ Approval Requirements

The table below sets forth the historical transaction amounts of the transactions between the Enlarged Group (on the one part) and PDA and/or its relevant associates (on the other) for each of the three years ended 31 December 2006, 2007 and 2008 and six months ended 30 June 2009 and the proposed annual caps (taking into account the inclusion of the Target Assets) for the transactions contemplated under the Mutual Supply Master Agreement and the Terminal Facilities Design and Construction Services Agreement for the three years ending 31 December 2010, 2011 and 2012:

					Actual
					expenditure/
					revenue
					for the
					six months
	Actual expenditure/revenue				ended	Proposed annual cap
	for the year ended 31		December		30 June	for the year ending 31 December
	2006	2007		2008	2009	2010	2011		2012
	(RMB)	(RMB)	(RMB)		(RMB)	(RMB)	(RMB)		(RMB)
Mutual Provision of Supplies
and Services
– To be provided by the
Enlarged Group to PDA
and/or its associates
(Note (1))	12,545,031	23,503,534	30,560,228		16,543,567	49,840,000	44,561,000	43,403,000
– To be provided by PDA
and/or its associates to the
Enlarged Group_(Note (2))_	37,696,768	39,987,133	42,271,959		24,886,204	66,023,000	67,060,000	65,727,000
Terminal Facilities Design and
Construction Services_(Note (3))_	87,066,629	58,979,797	74,500,235		16,032,832	123,030,000	88,490,000	50,350,000

Notes:

• (1) The proposed annual caps for the transactions of supply of goods and services by the Enlarged Group to PDA and/or its associates under the Mutual Supply Master Agreement have been determined with reference to: (i) historical transaction amounts; (ii) the expected inflation in market prices; and (iii) the expected business growth of the Enlarged Group. The increase in the estimated transaction amount for the year ending 31 December 2010 as compared to the historical transaction amount for the year ended 31 December 2008 is mainly due to the anticipated commencement of construction of the surveillance and video conference facilities for PDA in 2010.

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LETTER FROM THE BOARD

• (2) The proposed annual caps for the transactions of supply of goods and services by PDA and/or its associates to the Enlarged Group under the Mutual Supply Master Agreement have been determined with reference to (i) historical transaction amounts; (ii) the expected inflation in market prices; and (iii) the Enlarged Group’s demand for comprehensive services. The increase in the estimated transaction amount for the year ending 31 December 2010 as compared to the historical transaction amount for the year ended 31 December 2008 is mainly due to the expected increase in the demand for utilities and labor services as a result of the anticipated commencement of operation of new port facilities, storage tanks and ancillary facilities, in particular, the construction under progress which are expected to commence operation in 2010.

• (3) The proposed annual caps for the transactions under the Terminal Facilities Design and Construction Services Agreement have been determined with reference to certain design and construction services to be provided by PDA and/or its associates in connection with the Enlarged Group’s proposed construction projects during the three years ending 31 December 2010, 2011 and 2012, and the expected inflation in the market price.

The increase in the estimated transaction amount for the year ending 31 December 2010 as compared to the historical transaction amount for the year ended 31 December 2008 is mainly due to the anticipated commencement of a number of major construction projects, including construction of storage facilities for the ore terminal and a number of new general cargo berths at Dalian Bay. The decrease in the estimated annual caps from 2010 to 2012 is mainly due to the expected decrease in demand as a result of completion of such projects.

Implications under the Listing Rules

PDA, being the controlling shareholder of the Company, is a connected person of the Company as defined in Chapter 14A of the Listing Rules. As such, the transactions contemplated under the Construction Supervision Services Agreement, Construction Management Services Agreement, Properties Lease Agreement, Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement constitute continuing connected transactions as defined under Chapter 14A of the Listing Rules.

By virtue of the size of the transactions under the Construction Supervision Services Agreement, the Construction Management Services Agreement and the Properties Lease Agreement, such transactions are only subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules.

The Directors, including the independent non-executive Directors, consider the transactions under the Construction Supervision Services Agreement, the Construction Management Services Agreement and the Properties Lease Agreement will be carried out in the ordinary and usual course of business of the Enlarged Group and on normal commercial terms, or on terms no less favourable to the Enlarged Group and no more favourable to the PDA than terms available from or to independent third parties, which are fair and reasonable and in the best interests of the Company and its Shareholders as a whole. The Directors, including the independent non-executive Directors, also consider that the proposed annual caps for each of the three years ending 31 December 2010, 2011 and 2012 for the relevant transactions are fair and reasonable.

By virtue of the size of the transactions under the Mutual Supply Master Agreement and the Terminal Facilities Design and Construction Services Agreement, such transactions are subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. For the purpose of

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LETTER FROM THE BOARD

obtaining the independent shareholders’ approval of such transactions and their respective caps for each of the three years ending 31 December 2010, 2011 and 2012, the Company will convene the EGM pursuant to the Listing Rules.

The Directors (excluding the independent non-executive Directors who will give their opinion based on the recommendation of the independent financial adviser to be appointed) consider that the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement, which have been entered into on terms that are no less favourable to the Enlarged Group and no more favourable to the PDA than terms available from or to independent third parties, are in the interests of the Enlarged Group and the Shareholders as a whole. The Directors (excluding the independent non-executive Directors, who will give their opinion based on the recommendation from the independent financial adviser to be appointed) also consider that the proposed annual caps for each of the three years ending 31 December 2010, 2011 and 2012 for such transactions are fair and reasonable.

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION AND ADOPTION OF CERTAIN INTERNAL CORPORATE GOVERNANCE RULES

To cater for the A Share Issue and to enhance corporate governance, the Company has proposed to make certain amendments to the Articles, including on proposals at Shareholders’ general meetings; procedures for appointment of Directors and supervisors of the Company; rights and obligations of Shareholders, Directors and the Company’s senior management; and the addition of a new chapter on independent Director(s), as well as other amendments in relation to the A Share Issue as required by the applicable PRC laws and regulations and the relevant rules of the Shanghai Stock Exchange.

Amendments to the Articles are subject to Shareholders’ approval, and special resolutions to consider and approve the amendments to the Articles will be proposed at the EGM. The proposed amendments to the Articles are subject to the obtaining of any required approval or endorsement from or registration with the relevant regulatory authorities, and shall come into effect upon approval by the CSRC and completion of the A Share Issue.

As a result of the aforesaid amendments to the Articles, the Company has proposed to adopt the Internal Corporate Governance Rules pursuant to the requirements of the applicable PRC laws and regulations and the relevant rules of the Shanghai Stock Exchange.

Adoption of the Internal Corporate Governance Rules are subject to Shareholders’ approval. Resolutions to consider and approve the adoption of the Internal Corporate Governance Rules will be proposed at the EGM. The proposed adoption of the Internal Corporate Governance Rules shall come into effect at the same time as the proposed amendments to the Articles come into effect.

The proposed revised Articles and the proposed Internal Corporate Governance Rules are set out in Appendices VII to XIII, respectively, to this circular.

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LETTER FROM THE BOARD

REVISION OF NON-COMPETITION AGREEMENT

On 23 March 2006, a non-competition agreement (the “ Original Non-competition Agreement ”) was entered into between PDA and the Company pursuant to which PDA provided, among other matters, certain non-competition undertakings in favour of the Company. The major terms of the Original Non-Competition Agreement were disclosed in the prospectus of the Company date 18 April 2006 (the “ Prospectus ”). In anticipation of the expanded business scope of the Enlarged Group upon completion of the Acquisition, PDA and the Company have entered into a revised non-competition agreement (the “ Revised Non-competition Agreement ”) which will come into effect upon completion of the Acquisition. The principal changes made to the terms of the Original Non-Competition Agreement by the Revised Non-Competition Agreement are as follows:

• (1) The Restricted Business (as defined in the Prospectus) shall be extended to all the operations of the Enlarged Group and all the references to the Reserved Business (as defined in the Prospectus) shall be removed.

• (2) Under the Original Non-Competition Agreement, PDA undertook to the Company that it would not, and would procure that its associates (except any members of the Group) would not, within the Territory (as defined in the Prospectus as “the PRC other than Dalian”) and during the Restricted Period (as defined in the Prospectus), directly or indirectly, either on its own account or in conjunction with or on behalf of any person, firm or company, among other things, carry on, participate or be interested or engaged in or acquire or hold (in each case whether as a shareholder, partner, agent or otherwise) the Restricted Business (the “ Territory Non-competition Undertaking ”). The Territory Non-competition Undertaking does not apply in certain circumstances, including that any opportunity to invest, participate, be engaged in and/or operate any Restricted Business within the Territory has first been offered or made available to the Company, and after review and approval by the Company’s independent non-executive Directors or shareholders as required under the relevant laws and regulations, such opportunity has either (i) been accepted in part by the Company and the balance being taken up by PDA or any of its associates (other than any member of the Group) or (ii) been declined by the Company, provided that the principal terms by which PDA (or any of its associates (except any members of the Group)) subsequently invests, participates, engages in or operates the Restricted Business are not more favourable than those disclosed to the Company. In March 2009, PDA acquired the Jinzhou Interest after the Company resolved not to take the opportunity to acquire the Jinzhou Port Interest pursuant to the Territory Non-competition Undertaking.

Furthermore, PDA also granted to the Company an option (the “ Option ”) to purchase any of the Restricted Business (as defined in the Prospectus) operated by PDA or any of its associates (other than any member of the Group) after the Company has declined the opportunity to operate such business itself.

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LETTER FROM THE BOARD

Under the Revised Non-competition Undertaking, the Option shall be extended to all the operations of the Enlarged Group and PDA’s interest in an aggregate of 303,552,641 shares of Jinzhou Port Company Limited (錦州港股份 有限公司), representing approximately 19.44% in its existing issued share capital (the “ Jinzhou Port Interests ”). Jinzhou Port Company Limited, a joint stock company listed on the Shanghai Stock Exchange, is principally engaged in the provision of terminal services for oil products, containers, coal and other general and bulk cargo.

• (3) In the event that PDA or its associates intends to dispose of any assets which may be suitable for use by terminal operations and related logistics services, such assets shall be first offered to the Company. PDA and/or its associates may only proceed with such disposal to any third party on terms not more favourable than those offered to the Company, following the rejection of such offer by the Company; and

• (4) “Dalian” as referred to in the definition of the Territory is further specified to comprise the Zhongshan District, Xigang District, Shahekou District, Ganjingzi District of Dalian, the Dalian Development Area and the Dalian Free Trade Zone.

GENERAL

Independent Board Committee

The Board has appointed the Independent Board Committee to consider and advise the Independent Shareholders as to whether (a) the terms of the Acquisition; and (b) the terms of the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement and the proposed annual caps for such transactions for each of the three years ending 31 December 2010, 2011 and 2012, are fair and reasonable and in the interests of the Company and its shareholders as a whole.

Independent Financial Adviser

CIMB Securities (HK) Limited has been appointed as the independent financial adviser to advise the Independent Board Committee as to whether (a) the terms of the Acquisition; and (b) the terms of the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement and the proposed annual caps for such transactions for each of the three years ending 31 December 2010, 2011 and 2012, are fair and reasonable and in the interests of the Company and its shareholders as a whole.

EGM, Domestic Shareholders Class Meeting and H Shareholders Class Meeting

The EGM will be convened to consider and, if thought fit, approve, among other things, (i) the A Share Issue; (ii) the Acquisition; (iii) the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement; and (iv) the proposed amendments to the Articles and adoption of the Internal Corporate Governance Rules. PDA and its associates will abstain from voting at the EGM in relation to certain resolutions mentioned above under (i), (ii) and (iii).

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LETTER FROM THE BOARD

The Domestic Shareholders Class Meeting and the H Shareholders Class Meeting will be convened to consider and, if thought fit, approve, among other things, the A Share Issue.

RECOMMENDATION

Based on the above mentioned reasons and benefits in relation to (i) the A Share Issue; (ii) the Acquisition; (iii) the Mutual Supply Master Agreement, the Terminal Facilities Design and Construction Services Agreement and the proposed annual caps for such transactions for each of the three years ending 31 December 2012; and (iv) the proposed amendments to the Articles and adoption of the Internal Corporate Governance Rules, the Directors recommend the Shareholders to vote in favour of the resolutions to approve such matters.

By Order of the Board DALIAN PORT (PDA) COMPANY LIMITED Sun Hong Chairman

– 53 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [92 x 41] intentionally omitted <==

==> picture [109 x 27] intentionally omitted <==

Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

15 October 2009

Independent Board Committee: Mr. Zhang Xianzhi Mr. Ng Ming Wah, Charles Mr. Wang Zuwen

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION AND CONNECTED TRANSACTION RELATING TO THE PROPOSED ACQUISITION OF CERTAIN OPERATIONS AND ASSETS FROM THE CONTROLLING SHAREHOLDER (2) CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 15 October 2009 of the Company (the “ Circular ”) of which this letter forms part. Terms defined in the Circular have the same meanings herein unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider whether (a) the terms of the Acquisition; and (b) the terms of the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement, the transactions (the “ Continuing Connected Transactions ”) contemplated thereunder and the proposed annual caps for such transactions for each of the three years ending 31 December 2010, 2011 and 2012, are fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Shareholders as a whole. CIMB Securities (HK) Limited has been appointed as the independent financial adviser (the “ Independent Financial Adviser ”) to advise the Independent Board Committee and the Independent Shareholders in this respect.

• The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Your attention is drawn to the “Letter from the Board” set out on pages 7 to 53 of the Circular which contains, inter alia, information about the Acquisition and the Continuing Connected Transactions, and the “Letter from the Independent Financial Adviser” set out on pages 56 to 99 of the Circular which contains its advice in respect of (a) the terms of the Acquisition; and (b) the terms of the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement and the proposed annual caps for such transactions for each of the three years ending 31 December 2010, 2011 and 2012.

As your Independent Board Committee, we have discussed with the management of the Company the reasons for entering into the Acquisition Agreement, the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement and the basis upon which their respective terms have been determined. We have also considered the key factors taken into account by the Independent Financial Adviser in arriving at its opinion regarding the terms of the said agreements as set out in the letter from the Independent Financial Adviser contained in the Circular, which we urge you to read carefully.

Having considered the advice given by the Independent Financial Adviser and the matters which it reported having considered in arriving at its advice, we consider that the terms of (a) the Acquisition Agreement; and (b) the terms of the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement, and the proposed annual caps for such transactions for each of the three years ending 31 December 2010, 2011 and 2012, are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. We also consider that the transactions contemplated under the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement are in the usual and ordinary course of business of the Company and on terms no less or more favourable to the Enlarged Group than terms available from or to independent third parties, and that the proposed respective annual caps for the Continuing Connected Transactions are fair and reasonable and in the interests of the Company and the Shareholders as a whole. We, therefore, recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM in respect of (a) the Acquisition; and (b) the Mutual Supply Master Agreement and Terminal Facilities Design and Construction Services Agreement, the Continuing Connected Transactions contemplated thereunder and the proposed annual caps for such transactions for each of the three years ending 31 December 2010, 2011 and 2012.

Yours faithfully, Independent Board Committee

Zhang Xianzhi

Independent non-executive director

Ng Ming Wah, Charles Independent non-executive director

Wang Zuwen

Independent non-executive director

– 55 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

CIMB Securities (HK) Limited

25/F., Central Tower 28 Queen’s Road Central Hong Kong

15 October 2009

To the Independent Board Committee and the Independent Shareholders of Dalian Port (PDA) Co. Ltd.

Dear Sirs,

MAJOR TRANSACTION AND CONNECTED TRANSACTION RELATING TO THE PROPOSED ACQUISITION OF CERTAIN OPERATIONS AND ASSETS FROM THE CONTROLLING SHAREHOLDER AND CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition and the Continuing Connected Transactions. Details of the terms of the Acquisition and the Continuing Connected Transactions are set out in the letter from the Board as contained in the circular of the Company to the Shareholders dated 15 October 2009 (the “Circular”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

On 30 September 2009, the Company and PDA entered into the Acquisition Agreement pursuant to which the Company conditionally agreed to issue not more than 1,200 million Consideration Shares to PDA in respect of the Initial Consideration for the proposed acquisition of the Target Assets from PDA. Given that PDA is the controlling shareholder of the Company, the Acquisition constitutes a connected transaction of the Company under the Listing Rules and is subject to the approval by the Independent Shareholders. In connection with the Acquisition and to regulate the continuing business relationship between the Enlarged Group and PDA Group, the Company and certain members of the Group entered into various agreements with PDA, which will come into effect upon completion of the Acquisition. Certain possible ongoing transactions contemplated under these agreements constitute non-exempt Continuing Connected Transactions of the Company under the Listing Rules and are subject to approval by the Independent Shareholders.

The Independent Board Committee comprising all of the independent non-executive Directors, namely Mr. Zhang Xianzhi, Mr. Wang Zuwen and Mr. Ng Ming Wah, Charles, has been formed to advise the Independent Shareholders in respect of the Acquisition and the non-exempt Continuing Connected Transactions.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF ADVICE

In formulating our recommendation, we have relied on the information and facts contained or referred to in the Circular as well as the representations made or provided by the Directors and senior management of the Company. The Directors have declared in a responsibility statement set out in Appendix VI to the Circular that they jointly and severally accept full responsibility for the accuracy of the information contained and representations made in the Circular. We have also assumed that the information and the Directors’ representations contained or referred to in the Circular were true and accurate at the time they were made and continue to be so up to the date of the EGM. We have no reason to doubt the truthfulness, accuracy and completeness of the information and representations provided to us by the Company. We have also been advised by the Directors and believe that no material facts have been omitted from the Circular.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained and the Directors’ representations made in the Circular and to provide a reasonable basis for our recommendation. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs or the prospects of the Company, the Target Assets, PDA or any of their respective subsidiaries or associates.

I. THE ACQUISITION

A. Background

1. The Proposed A Share Issue and the Acquisition

The Company was established in 2005 with PDA as its controlling shareholder and was listed on the Stock Exchange in 2006. It is primarily engaged in the provision of oil/liquefied chemicals terminal and logistics services, container terminal and logistics services and certain port value-added services in Dalian Port whereas the principal port operations of the PDA Group (excluding the Group) are dry bulk and general cargo terminal operations (including ore, general cargo and bulk grain terminal operations) and logistics services, passenger terminal and logistics services.

To expand its financing platform, increase its share capital and to establish a platform for it to participate in the consolidation of the port operations in the PRC, the Company proposes to issue A Shares in the PRC. The proposed A Shares Issue comprises the issue of not more than 1,200 million Public A Shares to the qualified public investors and the issue of not more than 1,200 million Consideration Shares to PDA as part or full settlement of the consideration for the Acquisition.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As stated in the Letter from the Board of the Circular (the “Letter from the Board”), the Acquisition, which involves the acquisition of the Target Assets from PDA at the Initial Consideration of RMB2,805 million, will enable the Company to expand its scale of operations and to become the platform to operate all the major port operations at Dalian Port as an integrated port services operator, establishing a platform for its future participation in the consolidation of the port resources in China. We are appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition and the Continuing Connected Transactions which will arise following completion of the Acquisition.

The Directors believe that the issue and the listing of the A Shares (which comprise the Consideration Shares and the Public A Shares) will establish a new financing platform for the Company which, as the first company in the port operation industry with shares listed on the stock exchanges of both Hong Kong and the PRC, will be able to enjoy the flexibility of financing channels and resources provided by access to both of the Hong Kong and the PRC capital markets.

2. The Group

The Group is principally engaged in four business segments, namely: the provision of oil/liquefied chemicals terminal and related logistics services (“Oil Terminal Operation”), the provision of container terminal and related logistics services (“Container Terminal Operation”), the provision of automobile terminal and related logistics services (“Automobile Terminal Operation”), and the provision of port value-added services (“Value-added Services Operation”).

Set out below is the audited financial results of the Group for the three years ended 31 December 2008 and the unaudited financial results of the Group for the six months ended 30 June 2009 and the previous comparative period:

				For the six months	For the six months
	For the year	ended 31	December	ended 30 June
	2006	2007	2008	2008	2009
	(restated)
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(audited)	(unaudited)	(unaudited)
Revenue	1,160,013	1,570,136	1,586,512	745,884	752,681
Profit before taxation	685,444	749,516	1,032,025	675,684	334,516
Profit attributable to
equity holders of the
Company	631,567	611,368	779,614	534,185	272,173

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the year ended 31 December 2007 (“FY2007”), the Group recorded a turnover of RMB1,570,136,000, representing an increase of 35.4% as compared with RMB1,160,013,000 for FY2006. The increase in turnover in FY2007 was mainly attributable to the increase in rental income from crude oil storage tanks and container berths, growth of the tugging business, increase in sales of land use rights as well as increase in freight and charter income from container vessels. The profit attributable to equity holders for FY2007 was RMB611,368,000, representing a decrease of 3.2% from RMB631,567,000 in FY2006. If the IPO Interest Income was deducted from the Group’s other income of 2006, the Company’s profit attributable to equity holders in 2007 would have increased by 16.9% over 2006.

For the year ended 31 December 2008 (“FY2008”), the Group recorded a turnover of RMB1,586,512,000, representing an increase of 1.0% as compared with RMB1,570,136,000 in FY2007. The revenue increase was mainly attributable to the increase in the Group’s Oil Terminal Operation business resulting from the increased handling volume of imported crude oil, the increase of tugging revenue, and the newly consolidated container logistics business. However, such increase was mostly offset by the reduction in income from sales of land use rights and leasing storage tanks and handling oil transshipment. The profit attributable to equity holders for FY2008 was RMB779,614,000, representing an increase of 27.5% from RMB611,368,000 in FY2007. The increase in profit attributable to equity holders in FY2008 was mainly due to an increase in other income of RMB395,357,000 arising from the disposal of fixed assets (including property, plant and equipment, as well as non-current assets held for sale). Excluding such increase in other income, the Company’s profit before tax in FY2008 would have decreased by 16.3% over 2007. The decrease in profit before tax in FY2008 was mainly attributable to the increase in selling and administrative expenses and impairment loss on available-for-sale investments.

For the six months ended 30 June 2009, the Group achieved solid growth for its Oil Terminal Operation business with an increase in turnover of approximately 9.4% compared with the same period in 2008. However, impacted by the decrease of foreign trade in the Northeastern China Provinces, the Group’s Container Terminal Operation business declined in the period. As a result, the Group only recorded a marginal increase in turnover of approximately 0.9% as compared with the previous corresponding period. The profit attributable to equity holders during the six months period ended 30 June 2009 was approximately RMB272,173,000, representing a decrease of approximately 49.0% as compared with the previous corresponding period, which was mainly due to the substantial decrease of gains on disposal of fixed assets and the global economic downturn in the first half of 2009. If the amount of approximately RMB250,010,000 attributed to the gains, net of income tax, on disposal of fixed assets (including property, plant and equipment, as well as non-current assets held for sale) were excluded in the first six months of 2008, the Company’s profit attributable to shareholders in the first six months of 2009 would have decreased by 4.2% from the first half of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. Such decrease was mainly due to the weakened performance of the Group’s associates and jointly controlled entities in its Container Terminal Operation amid the global economic downturn in the first half of 2009.

3. The Target Assets

Operations and assets to be acquired

The Target Assets comprise the assets and liabilities to be acquired by the Company from PDA pursuant to the Acquisition Agreement in respect of all of PDA’s business operating (i) ore terminal and related logistic services (“Ore Terminal Operation”); (ii) general cargo terminal and related logistics services (the “General Cargo Terminal Operation”); (iii) bulk grain terminal and related logistics services (the “Grain Terminal Operation”); (iv) passenger and roll-on, roll-off terminal and related logistics services (the “Passenger and Ro-Ro Terminal Operation”); and (v) certain ancillary port operations (the “Ancillary Port Operation”). The throughput for each of the three years ended 31 December 2008, the six months ended 30 June 2008 and 2009 and the nine months ended 30 September 2009 (the “Relevant Period”) and a brief description of each of the above segments are set out below.

Throughput by business segments

						Nine
						months
				Six months		ended
	Year ended 31 December			ended 30 June		30 September
	2006	2007	2008	2008	2009	2009
Ore Terminal Operation
(’000 tonnes)	7,436	11,410	13,438	6,420	12,477	21,059
General Cargo Terminal
Operation
(’000 tonnes)	15,406	17,336	22,278	11,524	11,153	17,000
Bulk Grain Terminal
Operation
(’000 tonnes)	8,050	7,015	6,685	3,638	3,421	5,320
Passenger and Ro-Ro
Terminal Operation
– Passenger
(’000 persons)	3,804	4,336	3,774	1,752	1,525	2,732
– Vehicles_(’000)_	306	432	486	223	266	397

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Brief description of the operations of the Target Assets

Ore Terminal Operation

The Ore Terminal Operation has designated ore terminals equipped with advance facilities, including (i) two berths capable of accommodating up to 300,000 tonnes vessels and 150,000 tonnes vessels, respectively; (ii) stacking yards with a total area of approximately 534,000 square meters and storage capacity of a total of approximately 5,160,000 tonnes; and (iii) two loading towers, each with a loading capacity of approximately 4,500 tonnes per hour. Since 2006, the imported ore handled by the Ore Terminal Operation accounted for over 40% of the total volume imported by the ports in Liaoning province each year. The ore throughput of the Ore Terminal Operation for the Relevant Period are as follows:

Unit: ’000 tonnes

					Nine months
			Six months ended		ended
**Year **	**ended 31 **	December	30 June		30 September
2006	2007	2008	2008	2009	2009
7,436	11,410	13,438	6,420	12,477	21,059

As stated in the Letter from the Board, the Directors expect the Ore Terminal Operation to benefit from, among other factors, the increasing demand for steel and imported ore driven by the long term stable economic growth and increase in fixed assets investments in China; the PRC government’s initiatives to develop Northeast China and the coastal economic zone of Liaoning province; the advantageous location of Dalian Port in Northeastern China where a number of the PRC’s major steel manufacturers are based; and the natural deep water advantage of Dalian Port coupled with its location at the entrance to Bohai Bay, which are expected to facilitate the Dalian Port’s development as a transshipment hub for the Bohai Bay area and northeast Asia.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

General Cargo Terminal Operation

The General Cargo Terminal Operation operates a total of 33 berths with an annual handling capacity of approximately 21.9 million tonnes and stacking yards with a total area of approximately 1.4 million square meters, capable of handling various large and general cargos. The throughput of the General Cargo Terminal Operation for the Relevant Period are as follows:

Unit: ’000 tonnes

Steel Coal Timber Equipment Packed grain Others Total	Year ended 31 December 2006 2007 2008 5,586 7,087 8,856 3,685 4,353 7,920 1,064 1,155 691 1,226 851 645 1,513 1,588 1,363 2,332 2,302 2,803 15,406 17,336 22,278	Six monthsended 30 June Nine months ended 30 September 2008 2009 2009 4,579 3,766 6,049 4,234 3,890 5,847 422 200 319 212 489 608 881 655 1,004 1,196 2,153 3,173 11,524 11,153 17,000	Six monthsended 30 June Nine months ended 30 September 2008 2009 2009 4,579 3,766 6,049 4,234 3,890 5,847 422 200 319 212 489 608 881 655 1,004 1,196 2,153 3,173 11,524 11,153 17,000
			17,000

As stated in the Letter from the Board, the Directors expect the General Cargo Terminal Operation to benefit from, among other factors, an expected increase in demand for loading, discharging and logistics services for steel and coal at Dalian Port, driven by expected economic growth in China as well as in the northeastern region resulting from the PRC central government’s initiatives to revitalise the region; the strategic locations of the Target Assets in the coastal economic zone of Liaoning province; and the expected relocation of the berths and facilities from the Heizuizi area and Dagang area to Dalian Bay according to the urban planning of Dalian municipal government and the business development plan of the Target Assets.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Bulk Grain Terminal Operation

The Bulk Grain Terminal Operation operates (i) a total of five berths with an annual handling capacity of approximately 7.2 million tonnes; (ii) bulk grain barns with a total storage volume of approximately 1.1 million cubic meters, and has approximately 1,000 bulk grain carriages. The throughput of the Bulk Grain Terminal Operation for the Relevant Period are as follows:

Unit: ’000 tonnes

Corn Soy Bean Barley Wheat Others Total	Year ended 31 December 2006 2007 2008 3,400 3,980 3,535 189 158 351 536 52 21 281 306 37 3,644 2,519 2,741 8,050 7,015 6,685	Six months ended 30 June Nine months ended 30 September 2008 2009 2009 1,913 1,358 2,396 152 486 540 6 145 215 2 71 71 1,565 1,361 2,098 3,638 3,421 5,320	Six months ended 30 June Nine months ended 30 September 2008 2009 2009 1,913 1,358 2,396 152 486 540 6 145 215 2 71 71 1,565 1,361 2,098 3,638 3,421 5,320
			5,320

As stated in the Letter from the Board, the Directors expect the Bulk Grain Terminal Operation to benefit from the increasing demand for the transportation of grains from the northeastern region to the southern regions of China as the northeastern region is one of the most important and strategic grain production base of China; and the initiatives of the PRC central government to encourage the construction of bulk grain storage and transportation facilities and the change from packed grain transportation to bulk grain transportation.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Passenger and Ro-Ro Terminal Operation

The Passenger and Ro-Ro Terminal Operation, which operates seven designated passenger and roll on, roll off berths, two high-speed boat berths, four domestic routes and one international route, has a leading position among the ports in China in terms of its handling capacity. The throughput of the Passenger and Ro-Ro Terminal Operation for the Relevant Record Period are as follows:

						Nine months
				Six months ended		ended
	Year ended	31 December		30 June		30 September
	2006	2007	2008	2008	2009	2009
Passenger
(’000 persons)	3,804	4,336	3,774	1,752	1,525	2,732
Vehicles_(’000)_	306	432	486	223	266	397

As stated in the Letter from the Board, the Directors expect the Passenger and Ro-Ro Terminal Operation to benefit from, among other factors, its leading position in the industry to participate in the industry consolidation trend at Dalian Port at a suitable time to become the hub for the passenger and roll-on, roll-off terminal operations in Bohai Bay; and the expected commencement of the operation of the international cruise terminal in Dalian in 2012.

Ancillary Port Operation

The Ancillary Port Operation comprised in the Target Assets includes port logistics, construction management and supervision services, information system and power supply. Among the said services, the railway transportation (the “Railway Transportation Operation”) is an important part of the Target Assets’ comprehensive transportation and logistics system. For the year ended 31 December 2008 and the nine months ended 30 September 2009, the Railway Transportation Operation handled approximately 628,000 and 459,000 carriages and approximately 35.0 million and 25.4 million tonnes of cargo, respectively.

Financial performance

Historical financial performance

The historical combined financial information relating to the Target Assets for each of the three years ended 31 December 2008 and the six months ended 30 June 2008 and 2009 (the “Track Record Period”) as extracted from the Accountants’ Report of the Target Assets as set out in Appendix I to the Circular and the section headed “Management

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Discussion and Analysis of the Target Assets” in the Letter from the Board were as follows:–

REVENUE Ore Terminal Operation General Cargo Terminal Operation Bulk Grain Terminal Operation Passenger and Ro-Ro Terminal Operation Ancillary Port Operation Unallocated Total Revenue GROSS MARGIN Ore Terminal Operation Segment gross profit margin General Cargo Terminal Operation Segment gross profit margin Bulk Grain Terminal Operation Segment gross profit margin Passenger and Ro-Ro Terminal Operation Segment gross profit margin Ancillary Port Operation Segment gross profit margin Unallocated Total Gross Profit Gross profit margin PROFIT BEFORE TAX PROFIT FOR THE YEAR/PERIOD PROFIT ATTRIBUTABLE TO THE PARENT COMPANY	Historical results For the six-month 31-Dec 2006 2007 2008 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) 78,318 107,852 183,191 259,587 282,605 369,209 136,675 196,392 236,845 75,296 91,320 90,572 338,794 370,065 395,109 62,739 77,887 86,170 951,409 1,126,121 1,361,096	Historical results For the six-month 31-Dec 2006 2007 2008 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) 78,318 107,852 183,191 259,587 282,605 369,209 136,675 196,392 236,845 75,296 91,320 90,572 338,794 370,065 395,109 62,739 77,887 86,170 951,409 1,126,121 1,361,096	Historical results For the six-month 31-Dec 2006 2007 2008 RMB’000 RMB’000 RMB’000 (audited) (audited) (audited) 78,318 107,852 183,191 259,587 282,605 369,209 136,675 196,392 236,845 75,296 91,320 90,572 338,794 370,065 395,109 62,739 77,887 86,170 951,409 1,126,121 1,361,096	For the year ended periods ended 30-Jun 30-Jun 2008 2009 RMB’000 RMB’000 (unaudited) (audited) 100,474 144,487 182,384 146,250 103,021 90,063 45,090 31,064 157,743 161,078 42,603 39,484 631,315 612,426	For the year ended periods ended 30-Jun 30-Jun 2008 2009 RMB’000 RMB’000 (unaudited) (audited) 100,474 144,487 182,384 146,250 103,021 90,063 45,090 31,064 157,743 161,078 42,603 39,484 631,315 612,426
					612,426
	(5,759) –7.4% 23,034 8.9% 17,659 12.9% 39,509 52.5% 60,950 18.0% 48,965	(6,071) –5.6% (24,144) –8.5% 48,722 24.8% 50,308 55.1% 77,936 21.1% 60,766	28,890 15.8% (8,478) –2.3% 71,658 30.3% 47,677 52.6% 84,058 21.3% 61,833	25,805 25.7% 16,597 9.1% 26,230 25.5% 25,291 56.1% 35,447 22.5% 30,868	56,474 39.1% (2,948) –2.0% 15,958 17.7% 11,207 36.1% 40,042 24.9% 30,562
	184,358 19.4% 60,894 43,123 38,609	207,517 18.4% 52,790 37,466 23,873	285,638 21.0% 124,529 92,887 68,767	160,238 25.4% 94,124 70,901 63,752	151,295 24.7% 86,060 64,064
					60,766

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Turnover analysis

As illustrated above, the Target Assets recorded a compound annual growth rate (“CAGR”) of approximately 19.6% in its turnover for the three years ended 31 December 2008. While all the five business segments recorded increase in turnover during the period, the Ore Terminal Operation, the General Cargo Terminal Operation and the Bulk Grain Terminal Operation accounted for most of the increase in terms of value. The increase in turnover for the Ore Terminal Operation and the General Cargo Terminal Operation was mostly attributable to the increase in throughput volume handled by the Target Assets as set out in the section headed “Brief description of the operations of the Target Assets” above. For the Bulk Grain Terminal Operation, the volume handled by the Target Assets dropped from 8,050,000 tonnes in FY2006 to 6,685,000 tonnes in FY2008. However, turnover from the segment increased from approximately RMB136.7 million in FY2006 to approximately RMB236.8 million in FY2008. As advised by the management of the Company, the increase in turnover for this segment was mostly attributable to the increased revenue from future commodities storage and delivery services and warehousing and transportation logistics services. As advised by the Company, the future commodities storage and delivery services was approved by the municipal government in 2006, contributed minimal income in 2007 when it was at the start up stage, and developed to a more substantial scale which generated considerable income to the Bulk Grain Terminal Operation in 2008.

For the first half of 2009, only the Ore Terminal Operation and the Ancillary Port Operation recorded an increase in turnover as compared to the corresponding period in 2008. Based on our discussion with the management of the Company, the PRC export sector and the domestic economic activities of all sectors (including industrial, consumer, retail, finance and property) suffered a major downturn in the second half of 2008 following the outbreak of the financial crisis which led to a liquidity crunch and the worst global economic downturn since the 1930s. As a result, the business volume of all the business segments of the Target Assets (except the Ore Terminal Operation) recorded a decrease in the first half of 2009. The Ore Terminal Operation recorded a 44% growth in turnover in the first half of 2009 as compared to the corresponding period in 2008. Such increase was mainly due to (i) an increase in cargo throughput as benefited from the RMB4 trillion economic stimulus plan of the PRC government and the raising demand for import ores; and (ii) an expansion of the markets served by the Ore Terminal Operation from Northeastern China to the northern area of China. The turnover of the Ancillary Port Operation in the first half of 2009 recorded a margin increase of 2% as compared to the corresponding period in 2008.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Gross profit margin analysis

Ore Terminal Operation

The segment recorded a gross loss in FY2006 and FY2007. As business volume and operational efficiency improved after the completion and commencement of operation of the new transshipment berth in late 2007, the segment’s gross profit margin began to improve, increasing from approximately 15.8% for FY2008 to approximately 39.1% for the first half of 2009.

General Cargo Terminal Operation

The gross loss recorded in FY2007 was mostly due to (i) the additional depreciation and amortization expenses on the newly completed terminal facilities at Dalian Bay and (ii) the gross loss from operation at the Zhuanghe area of Dalian which commenced operation in 2007. Gross loss for FY2008 narrowed to about 2.3% as business volume increased. Gross loss for the first half of 2009 was about 2.0% as compared to a gross profit of 9.1% for the corresponding period in 2008, which was mainly due to substantial decrease in export of steel and the downward adjustment on pricing amid the weak global economy.

Bulk Grain Terminal Operation

Gross profit for the segment has been on an increasing trend throughout the three years ended 31 December 2008, increasing from approximately 12.9% in FY2006 to approximately 30.3% in FY2008. As business volume suffered a significant drop in the first half of 2009, gross profit margin for the period decreased to approximately 17.7%.

Passenger and Ro-Ro Terminal Operation

Gross profit margin for the segment has been stable at about 53-55% throughout the three years ended 31 December 2008. However, due to the decrease in overall throughput and average fare and freight rates as a result of the global economy downturn in the first half of 2009, gross profit margin deteriorated to approximately 36.1% in the period.

Ancillary Port Operation

Gross profit margin for the segment throughout the Track Record Period has been on a steadily increasing trend, improving from approximately 18.0% in FY2006 to approximately 24.9% for the first half of 2009.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Overall gross profit margin for the three year ended 31 December has remained stable at about 20-21%. However, the gross profit margin for the second half of 2008 dropped to approximately 17.2%. As advised by the management of the Company, the decrease was mainly due to the economic downturn which commenced in the second half of 2008 following the outbreak of the global financial crisis. The overall gross profit margin for the first half of 2009 improved to 24.7% owing to the RMB4 trillion economic stimulus plan of the PRC government which drove up the domestic demand for imported ores and the throughput of various types of cargoes from the picking up of the domestic economy.

Profit attributable to the parent company

Notwithstanding the increase in turnover and gross profit for the year, net profit in FY2007 decreased by approximately 13.1%, which was mainly attributable to (i) increase in salary related expenses due to change in welfare policy; (ii) headcount increase as a result of the set up of a new subsidiary; and (iii) increase in land use right tax from RMB3 per square meter to RMB6 per square meter. For FY2008, net profit attributable to PDA increased by approximately 188.1% to approximately RMB68.8 million, which was in line with the increase in gross profit. As a result of the drop in turnover, net profit for the first half of 2009 decreased by approximately 4.7% to RMB60.8 million.

A detail breakdown of the throughput, revenue, cost of sales and gross profit margin of the Target Assets by business segments and a detail discussion of the operating results of the Target Assets for the Track Record Period is set out in the section headed “Management Discussion and Analysis of the Target Assets” in the Letter from the Board.

Pro forma Financial Information

In the Track Record Period, rentals/depreciation expenses attributable to certain operational assets (the “Relevant Assets”) used by the Target Assets (the “Relevant Expenses”) were included in the historical combined financial information of the Targets Assets as set out in Appendix I to the Circular. As advised by the management of the Company, the Relevant Assets will not be included in the Target Assets due to their expected relocation pursuant to the urban planning of Dalian municipal government and the Company’s business development plan. Accordingly, upon completion of the Acquisition, such costs will cease to be incurred by the Target Assets.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

To provide further financial information on the Target Assets, the Company has prepared the unaudited pro forma combined financial information by assuming that the Relevant Expenses have not been incurred for the year ended 31 December 2008 and the six month ended 30 June 2008 and 2009. The unaudited pro forma combined financial information of the Target Assets, which has been reported on by Ernst & Young, is set out in Appendix IV to the Circular. In view of the fact that the Target Assets would not be required to pay for the Relevant Expenses upon completion of the Acquisition, we consider that the unaudited pro forma combined financial information to be more relevant for the purpose of analyzing the consideration for the Acquisition. Nevertheless, it should be noted that such unaudited pro forma combined financial information has been prepared for illustrative purpose only and is prepared on the basis as set out in Appendix IV to the Circular.

The unaudited pro forma combined financial information of the Target Assets for the year ended 31 December 2008 and each of the six-month period ended 30 June 2008 and 2009 as extracted from Appendix IV to the Circular is set out below.

	Unaudited pro forma	Unaudited pro forma	Unaudited pro forma	Unaudited pro forma	Unaudited pro forma
	**combined **		income statement
	For the
	year ended		**For the **	six-month
	31 December		**periods ended 30 **			June
	2008		2008			2009
	RMB’000		RMB’000		RMB’000
REVENUE	1,361,096		631,315			612,426
COST OF SALES	(1,048,892)		(457,973)		(447,602)
GROSS PROFIT	312,204		173,342			164,824
Gross profit margin	22.9%		27.5%			26.9%
PROFIT BEFORE TAX	151,095		107,228			99,589
PROFIT FOR THE
YEAR/PERIOD	112,811		80,729			74,211
PROFIT ATTRIBUTABLE
TO PDA	88,691		73,580			70,913

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. Factors considered

In arriving at our opinion in relation to the Acquisition, we have considered the following principal factors:

1. Industry overview of the port operation in Dalian

• i. Economic development in the Northeast China Provinces

The business activities of the Target Assets are related to terminals located in Dalian Port, which is in northeast China.

We have reviewed statistics listed in the China Statistical Yearbook 2008 compiled by National Bureau of Statistics of China and note that, for each of the three years ended 31 December 2007, Liaoning Province, Heilongjiang Province and Jilin Province (collectively referred to as the “Northeast China Provinces”) recorded a higher growth in the aggregate gross domestic product (“GDP”) as compared with that of the PRC. For instance, in 2007, the GDP of the Northeast China Provinces aggregated to approximately RMB2,337.3 billion, representing a year-on-year (“YoY”) growth of approximately 18.7%, while the country recorded a YoY growth of approximately 17.8%.

The Northeast China Provinces continued to outperform the country as a whole in terms of GDP growth rate in 2008. According to the statistics from the National Development and Reform Commission of the PRC (“NDRC”), in 2008, GDP of the Northeast China Provinces amounted to approximately RMB2,819.6 billion, accounting for 9.38% of the aggregate GDP of the PRC. The GDP growth rate of each of Liaoning Province, Jilin Province and Heiloagjiang Province as compared to the country growth rate for 2008 are summurized below:

		Excess over
		country’s
		GDP growth
	GDP growth	rate in 2008 of
	rate in 2008	9.0%
Liaoning Province	13.1%	4.1%
Jilin Province	16.0%	7.0%
Heilongjiang Province	11.8%	2.8%

For the first half of 2009, while the global economy continued to be hit by the global financial crisis, the economy of the Northeast China Provinces showed a strong recovering trend. In particular, Heilongjiang Province, Jilin Province and Liaoning Province recorded a growth rate

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of 8.9%, 11.7% and 11.5%, respectively, in their respective GDP, while that of the country was 7.1%.

Having considered the above and the supportive policies issued by the relevant PRC government in terms of the development of the Northeast China as elaborated below, we concur with the view of management of the Company that in the long term, the economy in the Northeast China will develop further.

• ii. General information relating to ports industry in the PRC

We understand from information published by the Ministry of Transport of the PRC, ports in the PRC are basically located in three main regions including the Bohai Rim Region, the Yangtze River Delta Region and the Pearl River Region. Major ports in the Bohai Rim Region include Dalian port, Tianjin port and Qingdao port, major ports in the Yangtze River Delta Region include Shanghai port and Ningbo port, and major ports in the Pearl River Region include Guangzhou port and Shenzhen port. Location of the major ports are set out below:

==> picture [415 x 304] intentionally omitted <==

We have reviewed information sourced from public domain in relation to major coastal ports, which recorded cargo throughputs over 60 million tones in 2008, in the PRC, details of which are set out below, and note that among the three major port hubs in the PRC, ports in the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Bohai Rim Region ranked the first in terms of both cargo throughput and foreign trade cargo throughput for the eight months ended 31 August 2009.

Ports in Aggregate cargo throughput (thousand tones) Bohai Rim Region 1,297,480 Yangtze Region 765,530 Pearl River Region (Note) 615,060 Total 2,678,070	Foreign trade cargo throughput (thousand tones) 48% 566,190 29% 364,470 23% 233,750 100% 1,164,410	49% 31% 20%
		100%

Source: Ministry of Transport of the PRC

Note: For illustrative purpose, Fuzhou, Quanzhou and Xiamen are grouped under the Pearl River Region.

We have also reviewed public information in relation to major coastal ports in the Bohai Rim Region, details of which are set out below, and note that among those coastal ports with cargo throughput exceeding 60 million tones in 2008, the port of Dalian is listed among ports which recorded growth in both cargo throughput and foreign trade cargo throughput for the eight months ended 31 August 2009 although the global economy activities were still uncertain during the period as a result of the global financial crisis.

		Increase/		Increase/
		(Decrease)		(Decrease)
	Aggregate	over the	Foreign	over the
	cargo	same period	trade cargo	same period
Port	throughput	last year (%)	throughput	last year (%)
	(thousand tones)		(thousand tones)
Dalian	179,180	12.4	64,580	13.7
Tangshan	110,800	49.1	68,710	81
Tianjin	250,900	4.1	129,850	1.7
Qingdao	210,280	5.0	145,510	6.0
Qinghuangdao	163,560	(9.7) 14,310		(30.4)
Rizhao	121,740	17.6	87,790	18.2
Yingkou	120,730	18.9	22,460	11.1
Huangyi	55,810	(1.6) 3,300		(74.3)
Yantan	84,480	6.9	29,680	2.6
Total	1,297,480		566,190

Source: Ministry of Transport of the PRC

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

iii. The port of Dalian

The port of Dalian is one of the south-to-north land-and-water transit connections and international trade ports in the PRC, covering a water area of over 310 square kilometres and a land area of 4.7 square kilometres. Since its operation, the port of Dalian has been developed into a large-scale comprehensive modern hub port with business relationship with ports of more than 160 countries and areas in the world. The throughput of the port of Dalian increased to approximately 250 million tones in 2008 from approximately 32 million tones in 1980.

In July 2009, the state council of the PRC approved in principle the Development Plan of Liaoning Coastal Economic Zone (“Liaoning Development Plan”), pursuant to which, great efforts will be exerted to develop the coastal economy zone in the north-eastern of the Liaoning province, the PRC, including, among others, Dalian, Dandong, Jinzhou, Yingkou, Panjing and Hulu Island, with an aim to stimulating the old industrial base in the Northeast China Provinces.

The Liaoning Development Plan targets to develop Dalian into an international shipping center and an international logistics centre serving northeast Asia, with the construction of the Dalian Dayao Bay Duty-Free Port Zone as the core centre, by 2020. The construction of the Dalian Dayao Bay Duty-Free Port Zone will focus on, among others, improving service functions of the port in shipping, logistics, processing and display, expanding businesses of, among others, port operation, storage for import/export goods, value-added processing service, entrepot trade and global procurement, and constructing docks for super-large container vessels. The Liaoning Development Plan also stipulates to consolidate the port resources and optimize allocation of coastal port resources in the region and to construct a port hub in the province which is centered on the port of Dalian.

We have also reviewed information sourced from public domain relating to major terminal operations comprised in the Target Assets, details of which are set out below.

– Ore terminal

As advised by management of the Company, the business of ore terminal is related to factors such as import of ore and development of industrial economy in the region.

Statistics compiled by the General Administration of Customs of the PRC shows that, for the eight months ended 31 August 2009, the PRC imported a total iron ore of 404.9 million tones, representing an increase of 32.0% as compared with that of the same period in 2008. In addition, the industrial economy in the northeast China showed a stable and recovering trend over the 2first half of 2009 with the industrial increase value of industrial

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

enterprises above designated size amounting to approximately RMB612.7 billion, representing a growth of 11.5% as compared with that of the same period of 2008 and a higher growth of 2.2 percentage points as compared with that of the first quarter of 2009.

In 2009, the PRC government issued the Several Opinions of the State Council on Implementation of Strategy to Revitalizing Old Industrial Bases (“Opinions”) in the Northeast China, which stipulates to strengthen the polar industries in the northeast China, in particular, stimulating manufacturing of heavy industrial products such as heavy casting and forging, nuclear power equipments, wind turbine generators, advanced vessels and ocean engineering facilities and large agricultural machineries. The Opinions also stipulate to drive the development of polar industries in the region, including, among others, promoting the development of Liaoning costal economic zone, Shenyang economic zone, Ha-Da-Qi industrial zone and Chang-Ji-Tu economic zone with an aim to establishing a first class modern industrial base of the PRC in the region.

– General cargo terminal

As advised by management of the Company, the business of general cargo terminal is related to factors such as economic activities in the region.

Public information shows that the economy in the Northeast China Provinces has improved with the implementation of the strategy of revitalizing the old industrial base in the northeast China. For the first half of 2009, the northeast China recorded a significant growth rate of over 40% in its total fixed asset investment, among which Heilongjiang Province, Jilin Province and Liaoning Province recorded a growth rate of 45%, 42.4% and 48.9%, respectively. Over the same period, the region also witnessed a rapid increase in local consumption demand with a growth rate of over 17% in the total retail consumption sales, among which Heilongjiang Province, Jilin Province and Liaoning Province recorded a growth rate of 18.9%, 18.4% and 17.5%, respectively.

Foreign capital poured into the northeast China with the economy development in the region. In 2008, the Northeast China Provinces absorbed foreign investment amounting to approximately US$17.6 billion, representing a YoY increase of approximately 29.9% and a higher growth of 14.3 percentage points as compared with that of the country and 22 percentage points as compared with that of the Yangtze River Delta area in the same year.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

–

Bulk grain terminal

As advised by management of the Company, the business of bulk grain terminal is related to factors such as grain production in the region.

The northeast China is the most vital commodity grain base in the PRC and plays an important role in the national grain security and the “north-to-south grain transportation”. The Northeast China Provinces has cultivated area of approximately 300 million mu, representing one sixth of the total cultivated area of the PRC. Statistics compiled by NDRC shows that, in 2008, the total grain yield of the Northeast China Provinces reached a new historical record of approximately 89.25 million tones, accounting for approximately 16.9% of the total grain yield in the PRC in the year.

In addition, the Planning for Revitalization of Northeast China issued by the PRC government in August 2007 stipulates that a state-level modern commodity grain base will be established in the northeast China to ensure a stable grain production and commodity grain supply by the region. In addition, enormous investment will be made to reform medium and low yield paddy field in the Northeast China Provinces with the purpose to achieve an increase of over 10 billion kilogram of grain production capacity in the Northeast China Provinces.

–

Passenger and roll on/off terminal

As advised by management of the Company, the business of passenger terminal is related to factors such as the economy development and the tourism industry in the region.

Statistics compiled by Ministry of Transport of the PRC shows that for the eight months ended 31 August 2009, the passenger throughput of the port of Dalian amounted to 4.14 million, representing a mild decrease of approximately 1.1% as compared with that of the same period in 2008, which we believe was mainly attributable to the slowing down of the economic activities as well as decreasing in frequency of travelling under the global economic crisis.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In addition, the Opinions encourage the development of the tourism industry in the northeast China by speeding up construction of the tourism infrastructure, developing tourism destinations with unique feature and attractiveness, and establishing a “Non-Obstacle Tourism District” in the northeast China.

Having considered the above, we concur with the view of management of the Company that the prospects of the port of Dalian are promising in the long term and the core business of the Target Assets will continue to benefit from the further economic and industrial development in the Northeast China Provinces.

2. Reasons for and benefits of the Acquisition

The operations of the Group and the Target Assets are in the port of Dalian, which is one of the major ports in the Northeast China Provinces. The Acquisition will lead to an integration of all the major port operations at Dalian Port which will be operated by the Enlarged Group.

As set out in the Letter from the Board, the Directors believe that the Acquisition will bring the following advantages to the Company:

1. The Acquisition will enable the Enlarged Group to operate all major port operations at Dalian Port as an integrated port services operator, which will establish a solid platform for its expected participation in the consolidation of port resources in the Liaoning province and China.

2. The Acquisition will provide a unique opportunity for the Company to expand its scale of operations and generate business synergy as well as achieve economies of scale.

3. Given the different industry cycles of the different terminal operations of the Target Assets and that of the Group, the Enlarged Group with an expanded business scope will be able to diversify the risk associated with the economic fluctuation and enhance its capability to withstand the economic fluctuation.

4. Following completion of the Acquisition, with a more comprehensive and integrated operation, the Enlarged Group will be able to strengthen its operational independence from PDA.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the principal business of the Group and the Target Assets, we consider that the Acquisition represents a major step forward for the Company to become a leading integrated terminal operator company in the Northeast China Provinces and to further expand the Group’s terminal business value chain and its scope of business and operations, which is in line with the Group’s long-term business strategy. Given this, we concur with the views of the Board that the Acquisition is in the interests of and beneficial to the Company and the Independent Shareholders as a whole.

3. Principal terms of the Acquisition

i. The Consideration

The Initial Consideration for the Acquisition of approximately RMB2,805 million, which equals to the net asset value of the Target Assets as at 30 June 2009 as appraised by the PRC Domestic Valuer (which amount remains to be subject to approval by Dalian SASAC). The Final Consideration for the Acquisition is subject to the Final Adjustment Amount which will be calculated based on the audited net asset value of the Target Assets as at the Completion Audit Date. The Final Adjustment Amount shall be settled in cash.

The Initial Consideration of RMB2,805 million will be settled by the issue of a number of Consideration Shares to PDA, which number will be determined pursuant to the following formula:

Number of Consideration Shares =	Initial Consideration
	Issue price for the A Share Issue

In the event that the number of Consideration Shares determined pursuant to the above formula (i) is more than 1,200 million, only a total of 1,200 million Consideration Shares will be issued to PDA and the remaining balance of the Initial Consideration will be paid by the Company in cash; or (ii) is equal to or less than 1,200 million, such number (rounded down to the nearest multiples of 10,000) will be issued to PDA.

In assessing the fairness of the Initial Consideration and given the business nature of the Target Assets, we consider it is most appropriate to make reference to price-to-earnings multiple (the “PER”). We have to the best of our knowledge, reviewed the PER and the price-to-book ratio (the “PBR”) of those companies listed on the Stock Exchange, the Shanghai Stock Exchange and the Shenzhen Stock Exchange whose principal business is engaged in the provision of terminal services and related logistics services similar to those of the Target Assets (the “Comparable Companies”) and compared those with the valuation

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

parameters implied under the Acquisition, details of which are as follows:

Name of the
Comparable
Company			Market	PER	PBR
(stock code)	Principal activities	capitalization		(times)	(times)
			(Note 1)	(Note 1)	(Note 1)
			HK$ million
China	Operates container and		61,456	21.06	1.94
Merchants	cargo terminals, port
Holdings	transportation and
International	airport cargo
Company	handling
Limited
(144.HK)
Cosco Pacific	Operates container		25,612	14.49	1.26
Limited	terminals, container
(1199.HK)	leasing, container
	manufacturing and
	related business
Dalian Port	Provides terminal and		9,041	15.65	1.25
(PDA) Co.	logistics services for
Ltd.	oil products and
(2880.HK)	liquefied chemicals,
	terminal logistics
	services for
	containers, and port
	value-added services
Tianjin Port	Operates container		5,236	N/A	1.45
Development	terminals and			(Note 2)
Holdings	provides container
Limited	handling operations,
(3382.HK)	stacking and
	warehousing services
	and non-containerized
	cargo services

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Name of the
Comparable
Company			Market	PER	PBR
(stock code)	Principal activities	capitalization		(times)	(times)
			(Note 1)	(Note 1)	(Note 1)
			HK$ million
Xiamen	Provides shipping port		3,871	13.02	0.91
International	services and loads,
Port Company	and unloads, and
Ltd (3378.HK)	stores shipping
	containers, loads and
	unloads general
	cargo and shipping
	agency, tallying,
	tugboat berthing and
	unberthing, and
	other port related
	services
Jiangsu	Operates port and		3,998	46.62	2.12
Lianyungang	other related services		(Note 3)
Port Co., Ltd.	including loading
(601008.CH)	and unloading,
	storage, port
	equipment rentals
	and maintenance
	services
Jinzhou Port	Operates the Jinzhou		9,049	48.81	2.46
Co., Ltd.	Port and provides		(Note 3)
(600190.CH)	loading, unloading,
	storage and other
	shipping related
	services
Rizhao Port	Operates Rizhao ports		11,110	29.15	2.86
Co., Ltd.	in Rizhao, Shandong,		(Note 3)
(600017.CH)	and handles,
	warehouses, and
	transports containers
	and bulk and general
	cargoes

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Name of the
Comparable
Company		Market	PER	PBR
(stock code)	Principal activities	capitalization	(times)	(times)
		(Note 1)	(Note 1)	(Note 1)
		HK$ million
Shanghai	Owns interests in	124,646	28.44	3.66
International	container and port	(Note 3)
Port (Group)	service companies
Co., Ltd
(600018.CH)
Shenzhen	Operates the Chiwan	8,906	16.34	3.18
Chiwan	Port in Shenzhen,	(Note 3)
Wharf	and handles,
Holdings Ltd.	warehouses, and
(000022.CH)	transports containers
	and bulk and general
	cargoes
Shenzhen	Provides freight	10,743	17.88	2.52
Yantian Port	loading and	(Note 3)
Holdings	unloading services,
Company Ltd.	transport freight by
(000088.CH)	truck, repairs
	shipping containers,
	and leases
	warehouse space
Tianjin Port	Operates the Tianjin	20,993	26.14	1.96
Holdings	Port and provides	(Note 3)
Co., Ltd.	related services,
(600717.CH)	including loading
	and unloading,
	storage and
	transportation
	services and acts as a
	transportation
	agency

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Name of the
Comparable
Company			Market	PER	PBR
(stock code)	Principal activities	capitalization		(times)	(times)
			(Note 1)	(Note 1)	(Note 1)
			HK$ million
Yingkou Port	Operates and manages		9,571	16.08	1.32
Liability	Yingkou Port in		(Note 3)
Co., Ltd.	Liaoning, providing
(600317.CH)	cargo loading and
	unloading, storage,
	and transportation
	services
Minimum				13.02	0.91
Maximum				48.81	3.66
Average for Comparable Companies				16.06	1.36
listed on the Hong Kong Stock Exchange
Average for Comparable Companies				28.68	2.51
listed on Shanghai or Shenzhen
Stock Exchange
Average for all Comparable Companies				24.47	2.07
The Acquisition	RMB2,805 million			32.62	1.15
				(Note 4)	(Note 5)

Source: Bloomberg

Notes :

1. Based on the last traded price per share of the Comparable Companies, their respective earnings and net asset values as quoted on Bloomberg on the Latest Practicable Date.

2. The company reported a loss for the 12 months ended 30 June 2009.

3. Calculated based on their respective market capitalization as quoted on Bloomberg on the Latest Practicable Date and converted based on the exchange rate of RMB1 = HK$1.1354.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. Based on the Initial Consideration of RMB2,805 million and the unaudited pro forma results of the Target Assets for the trailing 12 months (i.e. from 1 July 2008 to 30 June 2009) of approximately RMB86.0 million as derived from Appendix IV to the Circular.

2. Based on the Initial Consideration of RMB2,805 million and the audited equity attributable to the parent company of the Target Assets as at 30 June 2009 as set out in Appendix I to the Circular.

As illustrated above, the PER of all the Comparable Companies range from 13.02 times to 48.81 times, with an average of approximately 24.47 times. For the Comparable Companies listed on the Shanghai or Shenzhen Stock Exchange (the “A Share Comparable Companies”), the PER range from 16.08 times to 48.81 times, with an average of approximately 28.68 times. The implied PER under the Acquisition based on the trailing 12 months results of the Target Assets is 32.62, which is higher than the average PER of all the Comparable Companies but is comparable to the average PER of the A Share Comparable Companies. In assessing the PER for the Acquisition, we have also considered the following factors:

• (i) We have conducted a review of the financial performance of the Comparable Companies for the first half of 2009 and note that they recorded on average a decrease of approximately 16% and 40% respectively in turnover and net profit as compared to the first half of 2008. For the Target Assets, its result for the first half of 2009 was better than the market average with turnover and net profit decreasing marginally by approximately 3.0% and 3.6% respectively.

• (ii) According to Appendix IV, the Target Assets achieved an unaudited pro forma combined net profit of approximately RMB86.0 million for the trailing 12 months ended 30 June 2009, of which approximately RMB70.9 million was achieved in the more recent first half of 2009 as compared to approximately RMB15.1 million achieved in the second half of 2008. As advised by the management of the Company, the less than satisfactory result of the Target Assets in the second half of 2008 compared to the first half of 2009 is mainly due to the economic downturn following the outbreak of the global financial crisis in the second half of 2008. Given that the PER for the Acquisition of 32.62 times as set out above is calculated with reference to the result of the Target Assets for the trailing 12 months from 1 July 2008 to 30 June 2009, such PER for the Acquisition may not be able to fully reflect the robust rebound in performance of the Target Assets in 2009.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (iii) The Target Assets are complimentary to the Group’s existing operations, which not only fit into the Group’s long term development plan but may also lead to business synergies.

• (iv) As elaborated in the section headed “Industry overview of the port operation in Dalian” above, the Northeast China Provinces where the Target Assets operate recorded a GDP which was higher than the country’s average in the past few years. The region’s growth prospect continues to be promising given the PRC government’s favourable policy in developing the region.

• (v) The consideration for the Acquisition will be settled by the issue of A Shares (that is the Consideration Shares) to PDA by the Company, which shares together with the Public A Shares will be listed on the Shanghai Stock Exchange. Accordingly, we consider the average PER of the A Share Comparable Companies is more appropriate for the analyzing the PER for the Acquisition.

• (vi) The PBR of the Comparable Companies range from 0.91 times to 3.66 times, with an average of approximately 2.07 times. The implied PBR under the Acquisition is 1.15 times, which is significantly lower than the average PBR of the Comparable Companies of 2.07 times.

Given the better-than-market financial performance of the Target Assets in the first half of 2009, the strategic benefit of the Acquisition to the Group and the promising economic outlook of the Northeast China Provinces where the Target Assets operate and considering that the PER for the Acquisition of 32.62 times is comparable to the average PER of the A Share Comparable Companies and the lower than market average PBR for the Acquisition and the fact that the Initial Consideration for the Acquisition will be settled by the issue of the Consideration Shares at the Issue Price, we are of the view that the consideration for the Acquisition is reasonable.

Views

Having considered the above analyses, in particular the betterthan-market financial performance of the Target Assets in the first half of 2009 as compared to that of the Comparable Companies, and the basis on which the Initial Consideration and the Final Adjustment Amount is determined, we are of the view that the Initial Consideration as well as the Final Adjustment Amount are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• ii. Issue of the Consideration Shares and the Consideration Shares Issue Price

As mentioned above, the Initial Consideration of RMB2,805 million will be settled by the issue of the Consideration Shares subject to a maximum of 1,200 million Consideration Shares. Concurrent with the issue of the Consideration Shares, the Company will also issue up to 1,200 million Public A Shares. All the Consideration Shares and the Public A Shares will be listed on the Shanghai Stock Exchange.

The maximum number of Consideration Shares represents approximately 41.01% of the existing registered share capital of the Company; and approximately 22.53% of the registered share capital of the Company as enlarged by the issue of such Consideration Shares and the A Shares Issue (assuming the maximum number of Public A Shares are issued). As set out in the Letter from the Board, PDA’s shareholding interest in the Company will increase from approximately 62.09% before Completion to approximately 54.45% after the issuance of the Consideration Shares (assuming the maximum number of Consideration Shares are issued) and completion of the A Share Issue (assuming the maximum number of Public A Shares are issued).

As stated in the Letter from the Board, the Issue Price will be determined based on the results of a cumulative bidding price consultation and the prevailing conditions of the PRC securities at the time when the A Share Issue takes place and in any event, the Issue Price will not be less than 90% of the average trading price of the H Shares during the period of 20 Trading Days immediately prior to the publication of the preliminary prospectus for the A Share Issue.

In our opinion, in pricing the A Share Issue, it is common market practice to make reference to the Enlarged Group’s earnings per share (“EPS”) and the then trading PER of the A Share Comparable Companies. Given that the A Share Issue is expected to take place in 2010, the Issue Price will in fact be set with reference to the then historical results of both the Group and pro forma results of the Target Assets for the year ending 31 December 2009 (“FY2009”).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For illustration purpose, we set out in the chart below the EPS neutrality point (that is the point at which the issue of the Consideration Shares will have neutral impact on the Group’s EPS of RMB0.1769 (“June 09 Group EPS”) (based on the Group’s earnings for the trailing 12 months from 1 July 2008 to 30 June 2009 (the “Trailing 12 Months”) of approximately RMB517.6 million as reported on Bloomberg and 2,926 million Shares in issue as at the Latest Practicable Date), assuming different PER at which the Issue Price is set and different results of the Target Assets for FY2009 (“Target Assets 2009 Earnings”).

EPS neutrality analysis in relation to the Acquisition

==> picture [320 x 176] intentionally omitted <==

----- Start of picture text -----

Target Assets 2009
Earnings (RMB million)
160
140
EPS Enhancement
120
EPS Dilution
100
80
Issue Price (RMB)
0 3.10 3.54 4.14 4.96 6.20 (implied PER)
(17.53 times) (20.04 times) (23.38 times) (28.05 times) (35.06 times)
----- End of picture text -----

Notes:

1. The Target Assets achieved an unaudited pro forma combined net profit of approximately RMB86.0 million for the trailing 12 months ended 30 June 2009, of which approximately RMB70.9 million was achieved in the more recent first half of 2009 as compared to approximately RMB15.1 million achieved in the second half of 2008.

2. The above analysis does not take into account the impact on EPS arising from the issue of the Public A Shares.

As illustrated in the chart above and as an example, assuming that the Group’s earnings for FY2009 (the “Group 2009 Earnings”) remain the same as its results for the Trailing 12 Months and if the Issue Price will be set at RMB4.33 implying a PER of 24.47 times, being the average PER of all the Comparable Companies, when the earnings of the Target Assets for FY2009 achieve approximately RMB115 million, the Acquisition will achieve EPS neutrality.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The table below further sets out the impact on the EPS arising from the Acquisition assuming different level of the Target Assets 09 Earnings on the basis that the Issue Price is set at (i) the average PER of all Comparable Companies of 24.47 times; or (ii) the average PER of all A Share Comparable Companies of 28.68 times of the June 09 Group EPS.

Assuming an Issue Price of	Assuming an Issue Price of		Assuming an Issue Price of	Assuming an Issue Price of
RMB4.331, representing			RMB5.072, representing
a PER of 24.47 times of			a PER of 28.68 times of
the June 09 Group EPS3			the June 09 Group EPS3
	**Impact on **	EPS		**Impact on **	EPS
Target Assets	(dilution)/		Target Assets	(dilution)/
2009 Earnings	enhancement		2009 Earnings	enhancement
RMB			RMB
80,000,000		(5)%	80,000,000		(3)%
86,024,0004		(5)%	86,024,000		(2)%
100,000,000		(2)%	100,000,000		–
120,000,000		1%	120,000,000		4%
140,000,000		4%	140,000,000		7%
160,000,000		7%	160,000,000		10%

Notes:

1. Assuming an Issue Price of RMB4.33, a total of approximately 648.0 million Consideration Shares will be issued.

2. Assuming an Issue Price of RMB5.07, a total of approximately 552.9 million Consideration Shares will be issued.

3. Being the Group’s earnings for the Trailing 12 Months of approximately RMB517.6 million as reported on Bloomberg divided by 2,926 million Shares in issue as at the Latest Practicable Date.

4. Being the unaudited pro forma combined profit of the Target Assets attributable to PDA for the Trailing 12 Months as derived from Appendix IV.

We would like to emphasis that the Issue Price will only be determined at the time of the A Share Issue and cannot be ascertained as at the Latest Practicable Date and therefore the above analysis is solely for illustration purpose and does not represent our opinion on what the actual Issue Price will be. Nevertheless, in order to ascertain the maximum impact on EPS on the H Shareholders arising from the Acquisition, we have conducted our analysis on the basis that the maximum 1,200 million Consideration Shares are required to be issued. On such basis, the Issue Price will be RMB2.34, which translates into a EPS of the Enlarged Group for the Trailing 12 months (the “June 09 Enlarged Group EPS”) of approximately RMB0.1463, being the sum of the net profits of the Group of approximately RMB517.6 million (as

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

reported on Bloomberg) and the Target Assets of approximately RMB86.0 million (as derived from Appendix IV) for the Trailing 12 Months divided by the sum of the total number of Shares in issue as at the Latest Practicable Date of 2,926 million and the maximum number of 1,200 million Consideration Shares. As compared to the June 09 Group EPS, the June 09 Enlarged Group EPS decreases by approximately 17%. This scenario represents the maximum dilution to EPS arising from the Acquisition.

We consider that such maximum EPS dilution is acceptable given the strategic benefit to the Enlarged Group as an integrated port services operator after the Acquisition, the long term growth prospect of the Target Assets as elaborated in the section headed “Industry overview of the part operation in Dailian” above and the relative better-than-market financial performance of the Target Assets in the first half of 2009 after the financial crisis.

While we consider the maximum EPS dilution arising from the Acquisition as explained above is acceptable, we would like to draw Shareholders’ attention that, based on the basis of our analysis, such maximum dilution will only arise if the Issue Price is RMB2.34 or below. The implied PER for the Issue Price of RMB2.34 is approximately 13.23 times of the June 09 Group EPS, which is significantly below the average PER of all Comparable Companies of approximately 24.47 times and the average PER of all A Share Comparable Companies of approximately 28.68 times. As explained above, we consider in pricing the A Share Issue, it is common market practice to make reference to trading PER of the Comparable Companies. Accordingly, we believe it is likely that the Issue Price will be above RMB2.34 and hence the EPS dilution will be lower than 17%.

Views

Based on our discussion with the management of the Company, given the significant scale of the Target Assets, the Acquisition may not be beneficial to the Company if it is an all-cash deal financed by internal financial resources and/or bank borrowings since it will create an additional working capital and financial burden to the Company. As reported in its interim report for the six months ended 30 June 2009, the Group is in a net debt position as at 30 June 2009 with cash and bank balances of approximately RMB1,016 million and total bank borrowings of approximately RMB2,834 million. We also understand from the management of the Company that financing the Acquisition by way of rights issue or open offer may not be optimal given (i) the more significant dilution effect to the non participating Shareholders considering that the subscription price for a rights issue or open offer would normally be at a discount to the current trading price of the Shares; and (ii) the time involved in identifying an appropriate

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

underwriter(s) and agreeing a mutually acceptable rights issue or open offer subscription price. The management of the Company further consider that financing the Acquisition by placing of new Shares to independent investors is not preferred because such financing method would substantially increase the size of the placing on top of the Public A Share Issue, which might lead to pressure on the Share price. In addition, the management of the Company are of the view that financing the Acquisition by issue of the Consideration Shares demonstrates PDA’s confidence in the future prospects of the Enlarged Group, which is beneficial to the Company. Based on the above, we concur with the view of the management of the Company that financing the Acquisition by way of issue of Consideration Shares is appropriate.

Having considered that (i) the issue of the Consideration Shares to partly or fully satisfy the Initial Consideration will enable the Group to preserve the Group’s working capital for future business expansion as well as to increase the capital base of the Group; (ii) the issue price of the Consideration Shares will equal to the issue price for the Public A Shares which will be issued at not less than 90% of the average trading price of the H Shares during the period of 20 Trading Days prior to the publication of the preliminary prospectus for the A Share Issue and are issued to independent investors; (iii) the EPS maximum dilution arising from the Acquisition of approximately 17% is acceptable in view of the long term benefit and synergy to the Enlarged Group arising from the Acquisition and there is a fair chance of less dilution or possible enhancement to EPS given the current trading PER of the A Share Comparable Companies and the financial performance of the Target Assets; and (iv) the issue price of the Consideration Shares will be not less than the audited net asset value per Share as required under PRC laws and hence will not have any dilution effect on the net asset value per Share, we consider that the issue of the Consideration Shares is in the interests of the Company and the Independent Shareholders and that the basis for determining the Consideration Shares Issue Price is also fair and reasonable so far as the Company and the Independent Shareholders are concerned.

4. Possible financial effect of the Acquisition

4.1 Net asset value

The unaudited pro forma financial information of the Enlarged Group based on (i) the unaudited consolidated financial information of the Group as at 30 June 2009 as set out in Appendix II to this circular; and (ii) the audited combined financial information of the Target Assets as at 30 June 2009 as set out in Appendix I to this circular is set out in Appendix III to this circular.

As shown in Appendix III, the respective pro forma total assets, pro forma total liabilities and the net assets of the Enlarged Group

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

following completion of the Acquisition would amount to approximately RMB16,272.4 million, approximately RMB7,333.8 million and approximately RMB8,938.6 million as compared to the respective total assets, total liabilities and the net assets of the Group of approximately RMB10,844.4 million, approximately RMB4,424.9 million and approximately RMB6,419.5 million as at 30 June 2009 before the Acquisition, representing an increase of 50.1% in total assets, 65.7% in total liabilities and 39.2% in net assets from those set out in the unaudited condensed consolidated financial statements of the Group as at 30 June 2009.

4.2 Earnings

Upon completion of the Acquisition, the Company will own the Target Assets. The financial results of the Target Assets will henceforth be combined into the consolidated financial statements of the Group from the Completion Date.

4.3 Working capital

Given that the consideration for Acquisition will likely be mostly (if not fully) settled by issue of the Consideration Shares, the Directors do not expect the Acquisition to have any material impact on the Enlarged Group’s working capital immediately upon completion of the Acquisition. The Directors are further of the opinion that, after taking into account the internal resources and financial facilities of the Enlarged Group and after due and careful enquiry, the Enlarged Group will have sufficient working capital for its normal business for the next twelve months from the date of this circular. In addition, concurrently with the completion of the Acquisition, the Company will issue not more than 1,200 million A Shares to public investors pursuant to the issue of the Public A Shares. Hence, the Group’s working capital position will further improve upon completion of the Acquisition.

C. Recommendation

Having considered the principal factors and reasons referred to the above, in particular:

• the Acquisition is in the interests of the Company and the Shareholders as a whole since the Acquisition represents a major step forward for the Company to become a leading integrated terminal operator company in the Northeast China Provinces, which recorded a higher growth in GDP as compared with that of China as a whole in the past few years and has a positive economic outlook in view of the PRC government’s policy in developing the region, and to further expand the Group’s terminal business value chain and its scope of business and operations, which is in line with the Group’s long term business strategy;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• the PER implied by the Initial Consideration based on the pro forma trailing 12 months’ net profits of the Target Assets of 32.62 times, which is comparable to the average PER of the A Share Comparable Companies of 28.68 times, is reasonable after taking into account the better-than-market financial performance of the Target Assets in the first half of 2009, the strategic benefit of the Acquisition to the Group and the promising economic outlook of the Northeast China Provinces where the Target Assets operate;

• the PBR implied by the Initial Consideration of 1.15 times is lower than the average of those of the Comparable Companies;

• the issue of the Consideration Shares to partly or fully settle the Initial Consideration allows the Company to proceed with the Acquisition without exerting additional working capital and financial burden to the Company;

– the issue price of the Consideration Shares, which will be determined in accordance with PRC laws and regulations, will be not less than 90% of the average trading price of the H Shares during the period of 20 Trading Days prior to the publication of the preliminary prospectus for the A Share Issue and will equal to the issue price for the Public A Shares to be issued to independent investors; and

• based on our analysis, the maximum EPS dilution arising from the Acquisition of approximately 17% is acceptable in view of the long team benefit and synergy to the Enlarged Group arising from the Acquisition,

we are of the opinion that the terms of the Acquisition are in the interests of the Company and the Independent Shareholders as a whole and that the terms thereof including the issue of the Consideration Shares are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote for the ordinary resolution to be proposed at the EGM to approve the Acquisition.

II. NON EXEMPT CONTINUING CONNECTED TRANSACTIONS

A. Background and reasons

As stated in the Letter from the Board, upon completion of the Acquisition, PDA will retain certain assets and businesses and will continue to provide certain goods and ancillary services to the core businesses of the Enlarged Group. In addition, the Enlarged Group will also provide certain goods and services to PDA and/or its relevant associates on an arm’s length basis to support the businesses retained by PDA. On 30 September 2009, PDA (for itself and on behalf of its relevant subsidiaries) and the Company (for itself and on behalf of its relevant associates)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

entered into the Mutual Supply Master Agreement, which is a framework agreement regarding the terms and conditions of the mutual supply of goods and services. In addition, following the completion of the Acquisition, PDA and/or its relevant associates will continue to provide the Enlarged Group with terminal facilities design and construction services. On 30 September 2009, the Company (for itself and on behalf of its subsidiaries) entered into the Terminal Facilities Design and Construction Services Agreement with PDA (for itself and on behalf of its associates), which is a framework agreement regarding the terms and conditions for port facilities design and construction services. The Mutual Supply Master Agreement and the Terminal Facilities Design and Constructure Services Agreement will come into effect upon completion of the Acquisition.

Details of the aforesaid framework agreements and the continuing connected transactions contemplated thereunder are set out in the Letter from the Board.

By virtue of the size of the transactions under the Mutual Supply Master Agreement and the Terminal Facilities Design and Construction Services Agreement (collectively, the “Master Agreements”), such continuing connected transactions and their respective caps for each of the three years ending 31 December 2012 would be subject to reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As stated in the Letter from the Board, under the Mutual Supply Master Agreement, upon Completion, (i) PDA and/or its relevant associates will provide the Enlarged Group with (a) supplies including diesel oil, equipments and other similar supplies; and (b) services including facilities and equipments maintenance, provision of utilities including water and heating, transportation (for employees’ commuting between home and work), landscaping, catering, medical check, printing and conference services and other related or similar services; and (ii) the Enlarged Group will provide PDA and/or its relevant associates with (a) supplies including IT related equipment, spare parts, software and related maintenance and other related or similar supplies and services; and (b) services including tugboat services, telecommunications and related engineering services, software development, network maintenance, security services, provision of utilities including electricity, steam and heat and other related or similar services.

Under the Terminal Facilities Design and Construction Services Agreement, upon Completion, PDA and/or its relevant associates will provide the Enlarged Group with terminal facilities design and construction services (including land filling, dredging, caisson precasting and construction of electricity facility and other supporting facilities).

After taking into factors including (i) the nature of the relevant continuing connected transactions as stated above; and (ii) the principal business of the Target Assets, we are of the view that the entering into of the Mutual Supply Master Agreement and the Terminal Facilities Design and Construction Services Agreement between the Enlarged Group and the PDA Group falls within the ordinary and usual course of business of the Enlarged Group and is in the interests of the Group and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. Major terms of the Master Agreements

Common major terms of the Master Agreements

The initial term of each of the Master Agreements will commence from the Completion Date and will end on 31 December 2012. Upon expiration of the initial term, subject to compliance by the Company with applicable requirements under the Listing Rules, each of the Master Agreements will be renewed automatically for a further term of three years. Unless the Enlarged Group is able to obtain the products or services to be provided by PDA and/or its associates from a third party at a reasonable price, PDA and/or its associate may not terminate the Master Agreements without the Enlarged Group’s prior written consent.

We note that the Master Agreements are on non-exclusive basis and the parties are not prohibited to engage independent third parties for similar services and/or products as the relevant party thinks appropriate and/or if the terms are more favorable to the relevant party. Besides, as advised by the Company, in consideration of the long term good business relationship between the Enlarged Group and the PDA Group in terms of mutual provision and supply of products and/or services, the Mutual Supply Master Agreement stipulates that each party to the Mutual Supply Master Agreement is obliged to purchase products and/or services from the other party provided that the terms offered by the other party are no less favourable to the Enlarged Group and no more favourable to PDA than the terms offered by or to independent third parties.

We also note from the Master Agreements that each of the agreements is a framework agreement only which provides the mechanism for the operation of the continuing connected transactions contemplated thereunder. It is envisaged that from time to time and as required, individual execution agreements may be required to be entered into between the member of the Enlarged Group and PDA or its associates (as appropriate) pursuant to the each of the Master Agreements. An execution agreement should set out the specific products and services requested by the relevant party and the detailed technical and other specifications which are relevant to those products or services. An execution agreement may only contain provisions which are in all material respects consistent with the binding principles, guidelines, terms and conditions contained in the relevant Master Agreement pursuant to which such execution agreement is entered into.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pricing principles of the Master Agreements

1. Mutual Supply Master Agreement

As stated in the Mutual Supply Master Agreement, the continuing connected transactions contemplated thereunder will be conducted on normal commercial terms and conditions which shall not be less favorable to the Enlarged Group and no more favourable to PDA than those offered by or to independent third parties and priced in accordance with the following pricing principles:

• (a) State price, being the price set by the PRC government (at central or local level) or its relevant departments by laws, regulations, determinations, orders and policies;

• (b) where there is no State price, the market price, being the price at which the same or comparable services are provided to independent third parties in the same area in the ordinary course of business; or

• (c) where there is neither a State price nor a market price, in respect of the supplies and services to be provided by the Enlarged Group, the reasonable cost incurred in providing the goods or services plus an appropriate margin; or, in respect of the supplies and services to be provided by PDA and/or its associates, the reasonable cost incurred in providing such goods or services.

We have discussed with the Company in relation to the above pricing principles. We are also advised by the Company that as some of the services and/or supplies to be provided by the Enlarged Group to the PDA Group and vice versa under the Mutual Supply Master Agreement are of a comprehensive range and there are no comparable services/supplies of similar nature conducted between the Enlarged Group and independent third parties available for comparison purpose, it is reasonable to set the relevant services and/or supplies charges under the Mutual Supply Master Agreement by reference to the reasonable cost plus an appropriate margin (in the case of supplies and services to be provided by the Enlarged Group) or the reasonable coat (in the case of supplies and services to be provided by PDA and/or its associates), which will be determined by the parties on the basis of arm’s length negotiations, based on normal commercial terms and prevailing market prices, and is expected to reflect reasonable profits for the two parties in selling the subject matters under the agreement.

Having considered the above, in particular that the same pricing mechanism applies to products and/or services to be provided by the PDA Group to the Enlarged Group and vice versa, we concur with the view of the Company that such terms are fair and reasonable and on normal commercial terms.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the above, we are of the view that the pricing principle under the Mutual Supply Master Agreement is reasonable so far as the Independent Shareholders are concerned.

2. Terminal Facilities Design and Construction Services Agreement

As stated in the Terminal Facilities Design and Construction Services Agreement, the continuing connected transactions contemplated thereunder will be conducted on normal commercial terms and conditions which shall not be less favorable than those offered by independent third parties and priced in accordance with the following pricing principles:

• (a) State price, being the price set by the PRC government (at central or local level) or its relevant departments by laws, regulations, determinations, orders or policies;

• (b) where there is no State price, the market price, being the price at which the same or comparable services are provided to independent third parties in the same area in the ordinary course of business; or

• (c) where the project is subject to public bidding, the price determined through the bidding process.

As advised by the Company, as at the Latest Practicable Date, the services regulated by the Terminal Facilities Design and Construction Services Agreement are not subject to any PRC state prescribed price. However, the Company considers it prudent to provide pricing principle (a) in the agreement.

We have discussed with the Company in respect of the pricing practice of terminal facilities design and construction service in the PRC and are advised that charges by service providers depend on various factors including, among others, location, water depth and environment protection and accordingly, the Company considers it impracticable for it to obtain comparable quotations for comparison purpose. In view of the lack of government prescribed price for terminal facilities design and construction services and the impracticality of obtaining comparable market rates, we concur with the view of management of the Company that the “public bidding” pricing principle should be adopted.

We have also reviewed procedures regarding internal control over procurement and bid invitation of the Company and discussed with the Company in relation thereto. Based on our review of the procedures regarding internal control over procurement and bid invitation of the Company and discussion with the management of the Company, we concur with the view of the management that the Company has an orderly written procedures for execution and monitoring of the process of procurement through public bidding.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the above, we are of the view that the pricing principle under the Terminal Facilities Design and Construction Services Agreement is reasonable so far as the Independent Shareholders are concerned.

Our view

Having considered the above, we are of the view that the major terms, including the pricing terms, of the Master Agreements are normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole.

C. Proposed Caps

Set out below are the details of (i) the actual transaction amount of each of the categories of non-exempt Continuing Connected Transactions for each of the three years ended 31 December 2008 and the six months ended 30 June 2009; and (ii) the Proposed Caps for each of the three years ending 31 December 2012:

				Actual
				expenditure/
				revenue
				for the
				six months
	Actual expenditure/revenue			ended	Proposed annual cap
Category	for the year ended 31		December	30 June	for the year	ending 31 December
	2006	2007	2008	2009	2010	2011	2012
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Mutual Supply Master
Agreement:
Provision of supplies and
services by the Enlarged
Group to PDA and/or its
associates	12,545	23,504	30,560	16,544	49,840	44,561	43,403
Provision of supplies and
services by PDA and/or its
associates to the Enlarged
Group	37,697	39,987	42,272	24,886	66,023	67,060	65,727
Terminal Facilities Design and
Construction Services
Agreement:
Provision of terminal facilities
design and construction
services by PDA to the
Enlarged Group	87,067	58,980	74,500	16,033	123,030	88,490	50,350

As stated in the Letter from the Board, the Directors have determined the Proposed Caps of the non-exempt Continuing Connected Transactions for each of the three years ending 31 December 2012 based on the following factors:

• (a) references have been made to the historical amounts for each of the three years ended 31 December 2008 and the six months ended 30 June 2009 as well as the estimated transaction amounts for the year ending 31 December 2009;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (b) the expected inflation in market prices;

• (c) the expected business growth of the Enlarged Group; and

• (d) there will not be any material adverse changes to the state of the PRC economy, the level of prices of and demands for the Enlarged Group’s products, and the materials and services needed by the Enlarged Group for its business operations.

Besides, we are advised by the Company that the Company also takes into account the expected business/projects development of the Enlarged Group for the three years ending 31 December 2012 when determining the Proposed Caps.

Details of the basis of the determination and the analysis of the Proposed Caps are set out below:

1. Proposed cap for the continuing connected transactions in relation to provision of services and supplies by the Enlarged Group to the PDA and/or its associates contemplated under the Mutual Supply Master Agreement (“Provision of Services and Supplies by the Enlarged Group Cap”)

We note that the Provision of Services and Supplies by the Enlarged Group Cap for each of the three years ending 31 December 2012 represents a significant increase as compared with the historical transaction amounts for each of the three years ended 31 December 2008 and the six months ended 30 June 2009.

In assessing the reasonableness of the Provision of Services and Supplies by the Enlarged Group Cap, we have discussed with the management of the Company and understand that such increase is mainly attributable to the following factors: (i) the expected inflation in market prices; and (ii) the expected business growth of the Enlarged Group, particularly due to the anticipated commencement of construction of the surveillance and video conference facilities for PDA in 2010.

We have reviewed the details of the relevant cap calculation and consider the Group’s cap calculation is justifiable.

2. Proposed cap for the continuing connected transactions in relation to provision of services and supplies by PDA and/or its associates to the Enlarged Group contemplated under the Mutual Supply Master Agreement (“Provision of Services and Supplies by PDA Cap”)

We note that the Provision of Services and Supplies by PDA Cap for each of the three years ending 31 December 2012 represents a significant increase as compared with the historical transaction amounts for each of the three years ended 31 December 2008 and the six months ended 30 June 2009.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In assessing the reasonableness of the Provision of Services and Supplies by PDA Cap, we have discussed with the management of the Company and understand that such increase is mainly attributable to the following factors: (i) the expected inflation in market prices; (ii) the Enlarged Group’s demand for comprehensive services which is expected to increase mainly due to the anticipated commencement of the operation of new port facilities, storage tanks and ancillary facilities, in particular, the construction under progress which are expected to commence operations in 2010.

We have reviewed the details of the relevant cap calculation and consider the Group’s cap calculation is justifiable.

3. Proposed cap for the continuing connected transactions in relation to provision of services by PDA and/or its associates to the Enlarged Group contemplated under the Terminal Facilities Design and Construction Services Agreement (“Provision of Terminal Services Cap”)

We note that the Provision of Terminal Services Cap for the year ending 31 December 2010 represents a significant increase as compared with the historical transaction amounts for each of the three years ended 31 December 2008 and the six months ended 30 June 2009.

In assessing the reasonableness of the Provision of Terminal Services Cap, we have discussed with the management of the Company and understand that such increase is mainly attributable to the following factors: (i) the expected inflation in the market price; and (ii) the anticipated commencement of a number of major construction projects, including construction of storage facilities for the ore terminal and a number of new general cargo berths at Dalian Bay.

The annual caps for 2011 and 2012 is expected to decrease as compared to that for 2010 as a result of the completion of the above mentioned projects.

We have reviewed the details of the relevant cap calculation and consider the Group’s cap calculation is justifiable.

Our view

Having considered the above, we are of the view that the basis adopted by management of the Company in determining the Proposed Caps of the non-exempt Continuing Connected Transactions is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

However, Shareholders should note that the Proposed Caps relate to future events and do not represent a forecast of transaction amounts to be incurred as a result of each of the non-exempt Continuing Connected Transactions. Consequently, we express no opinion as to how closely the actual transaction amounts of each of the non-exempt Continuing Connected Transactions correspond with the Proposed Caps as discussed above.

D. Annual review of the non-exempt Continuing Connected Transactions

As required by the Listing Rules, for each financial year of the Company over the term of the Master Agreements, the non-exempt Continuing Connected Transactions will be subject to the annual review by the independent non-executive Directors and the Company’s auditors as required by Rules 14A.37 and 14A.38 of the Listing Rules, respectively. In particular, the independent non-executive Directors must confirm that the non-exempt Continuing Connected Transactions have been entered into:

• in the ordinary and usual course of business of the Company;

• either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than terms available to or from (as appropriate) independent third parties; and

• in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Furthermore, the Company’s auditors must provide a letter to the Board confirming that the non-exempt Continuing Connected Transactions:

• have received the approval of the Board;

• are in accordance with the pricing policies of the Company if the transactions involve provision of goods or services by the Company; and

• have been entered into in accordance with the relevant agreement governing the transactions.

Given the above, we are of the opinion that there exist sufficient procedures and arrangements in place to ensure that the non-exempt Continuing Connected Transactions will be conducted on terms pursuant to the Master Agreements.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

E. Recommendation

Having considered the principal factors and reasons referred to the above, in particular:

• the purpose of the non-exempt Continuing Connected Transactions is to regulate the ongoing business relationship between the Enlarged Group and PDA and/or its associates subsequent to the completion of the Acquisition;

• the pricing basis as provided under the agreements for the non-exempt Continuing Connected Transactions is fair and reasonable; and

• appropriate measures will be in place to govern the conduct of the non-exempt Continuing Connected Transactions,

we are of the opinion that the Continuing Connected Transactions are in the ordinary and usual course of business of the Enlarged Group, on normal commercial terms, fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote for the ordinary resolution to be proposed at the EGM to approve the non-exempt Continuing Connected Transactions and the related annual caps.

Yours faithfully, For and on behalf of CIMB Securities (HK) Limited Alex Lau Heidi Cheng Director Director Head of Corporate Finance

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APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

==> picture [49 x 41] intentionally omitted <==

18th Floor Two International Finance Center 8 Finance Street Central Hong Kong 15 October 2009

The Directors Dalian Port (PDA) Company Limited

Dear Sirs,

We set out below our report on the combined financial information of the business of Dalian Port Corporation Limited (“PDA”) operating its dry bulk and general cargo, passenger and roll-on, roll-off cargo terminals and other related ancillary operations (hereinafter referred to as the “Business”), including the combined income statements, the combined statements of comprehensive income, the combined statements of changes in equity and the combined statements of cash flows of the Business for each of the three years ended 31 December 2006, 2007, 2008 and the six-month period ended 30 June 2009 (the “Relevant Periods”) and the combined statements of financial position of the Business as at 31 December 2006, 2007 and 2008 and 30 June 2009, together with the notes thereto (the “Combined Financial Information”), and the six-month period ended 30 June 2008 (the “30 June 2008 Combined Financial Information”), prepared on the basis set out in note 2 of Section II below, for inclusion in the circular of Dalian Port (PDA) Company Limited (the “Company”) dated 15 October 2009 (the “Circular”) in connection with the Company’s proposed acquisition from PDA certain assets and liabilities comprising the Business, details of which are set out in the Letter from the Board of the Circular.

PDA is a state-owned enterprise established in the People’s Republic of China (the “PRC”) and also the parent and ultimate holding company of the Company.

On 30 September 2009, PDA and the Company entered into a conditional acquisition agreement (the “Conditional Acquisition Agreement”) in respect of the sale and purchase of certain assets and liabilities of PDA comprising the Business (the “Acquisition”). Particulars of these assets and liabilities, including branches, subsidiaries, jointly-controlled entity, associates and investments of PDA, proposed to be acquired by the Company (the “Target Assets”) are described in note 1 of Section II.

All entities in the Business have adopted 31 December as their financial year end date for statutory reporting and/or management reporting purposes. The financial statements and/or management accounts of these entities have been prepared in accordance with the relevant accounting principles and financial regulations applicable to them in the PRC (the “PRC GAAP”) by their respective directors and management. For the purpose of this report, the directors of PDA have prepared combined financial information of the Business for the Relevant Periods in accordance with the PRC GAAP (the “Underlying Combined Financial Information”). The preparation of the Underlying Combined Financial Information is the responsibility of the directors of PDA who

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APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

approved for its issue and has been audited by Reanda Certified Public Accountants Co., Ltd., certified public accountants registered in the PRC, in accordance with the relevant PRC auditing standards issued by China Institute of Certified Public Accountants.

Procedures performed in respect of the Combined Financial Information

The Combined Financial Information has been prepared from the Underlying Combined Financial Information with the basis set out in note 2 of Section II. For the purpose of this report, we have carried out an independent audit on the Combined Financial Information in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), and have carried out such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. Adjustments have been made, for the purpose of this report, as are considered necessary to adjust the Underlying Combined Financial Information to conform to the presentation and the accounting policies referred to in note 3.2 of Section II below for the Relevant Periods for the purpose of inclusion in the Circular.

The directors of PDA are responsible for the preparation and true and fair presentation of the Combined Financial Information in accordance with basis set out in note 2 of Section II and the directors of the Company are responsible for the content of the Circular in which this report is included. In preparing the Combined Financial Information, it is fundamental that appropriate accounting polices are selected and applied consistently, and that judgements and estimates made are prudent and reasonable. It is our responsibility to form an independent opinion based on our audit of the Combined Financial Information and to report our opinion thereon.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Combined Financial Information. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the Combined Financial Information, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and true and fair presentation of the Combined Financial Information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of PDA, as well as evaluating the overall presentation of the Combined Financial Information.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Procedures performed in respect of the 30 June 2008 Combined Financial Information

For the purpose of this report, we have also performed a review of the 30 June 2008 Combined Financial Information in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets and liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an opinion on the 30 June 2008 Combined Financial Information.

The directors of PDA are responsible for preparation and true and fair presentation of the 30 June 2008 Combined Financial Information in accordance with basis set out in note 2 of Section II and the directors of the Company are responsible for the contents of the Circular in which this report is included. In preparing the 30 June 2008 Combined Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently, that judgements and estimates made are prudent and reasonable. It is our responsibility to express, based on our review, a conclusion on the 30 June 2008 Combined Financial Information and to report our review conclusion solely to you.

Opinion in respect of the Combined Financial Information

In our opinion, for the purpose of this report, the Combined Financial Information gives a true and fair view of the state of affairs of the Business as at 31 December 2006, 2007 and 2008 and 30 June 2009 and of the combined results and cash flows of the Business for each of the Relevant Periods in accordance with the basis of presentation set out in note 2 of Section II below.

Review conclusion in respect of the 30 June 2008 Combined Financial Information

Based on our review which does not constitute an audit, for the purpose of this report, nothing has come to our attention that causes us to believe that the 30 June 2008 Combined Financial Information is not prepared, in all material respects, in accordance with the same basis adopted in respect of the Combined Financial Information.

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APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

I. COMBINED FINANCIAL INFORMATION

Combined income statements

Notes REVENUE 6 Cost of sales Gross profit Other revenue, income and gains 6 Administrative expenses Other operating expenses, net Finance costs 8 Share of profits and losses of: Jointly-controlled entity Associates PROFIT BEFORE TAX 7 Tax 10 PROFIT FOR THE YEAR/ PERIOD Attributable to: PDA Minority interests	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 951,409 1,126,121 1,361,096 631,315 612,426 (767,051) (918,604) (1,075,458) (471,077) (461,131	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 951,409 1,126,121 1,361,096 631,315 612,426 (767,051) (918,604) (1,075,458) (471,077) (461,131	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 951,409 1,126,121 1,361,096 631,315 612,426 (767,051) (918,604) (1,075,458) (471,077) (461,131	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 951,409 1,126,121 1,361,096 631,315 612,426 (767,051) (918,604) (1,075,458) (471,077) (461,131	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 951,409 1,126,121 1,361,096 631,315 612,426 (767,051) (918,604) (1,075,458) (471,077) (461,131
	184,358 7,106 (128,003) (5,842) – 3,247 28 60,894 (17,771)	207,517 8,300 (161,988) (3,008) – 1,939 30 52,790 (15,324)	285,638 7,236 (168,584) (2,985) – 5,243 (2,019) 124,529 (31,642)	160,238 3,136 (70,342) (1,477) – 2,434 135 94,124 (23,223)	151,295 7,006 (71,087 (1,824 – 1,921 (1,251
					86,060 (21,996
	43,123	37,466	92,887	70,901	64,064
	38,609 4,514	23,873 13,593	68,767 24,120	63,752 7,149	60,766 3,298
	43,123	37,466	92,887	70,901	64,064

– I-4 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Combined statements of comprehensive income

Profit for the year/period Other comprehensive income for the year/period Total comprehensive income for the year/period Attributable to: PDA Minority interests	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 43,123 37,466 92,887 – – – 43,123 37,466 92,887 38,609 23,873 68,767 4,514 13,593 24,120 43,123 37,466 92,887	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 70,901 64,064 – – 70,901 64,064 63,752 60,766 7,149 3,298 70,901 64,064	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 70,901 64,064 – – 70,901 64,064 63,752 60,766 7,149 3,298 70,901 64,064
			64,064
			60,766 3,298
			64,064

– I-5 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Combined statements of financial position

Notes NON-CURRENT ASSETS Property, plant and equipment 11 Intangible assets 12 Interest in a jointly-controlled entity 13 Interests in associates 14 Available-for-sale investments 15 Deferred tax assets 23 Total non-current assets CURRENT ASSETS Inventories 16 Trade and bills receivables 17 Prepayments, deposits and other receivables 18 Cash and cash equivalents 19 Total current assets CURRENT LIABILITIES Trade and bills payables 20 Other payables and accruals 21 Interest-bearing bank loans 22 Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank loans 22 Due to PDA 24 Deferred tax liabilities 23 Total non-current liabilities Net assets EQUITY Equity attributable to PDA Minority interests Total equity	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 2,047,026 4,251,478 4,456,163 15,297 19,758 24,792 4,469 3,907 6,864 372 165,913 235,120 14,025 14,205 14,250 – 1,458 1,928	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 2,047,026 4,251,478 4,456,163 15,297 19,758 24,792 4,469 3,907 6,864 372 165,913 235,120 14,025 14,205 14,250 – 1,458 1,928	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 2,047,026 4,251,478 4,456,163 15,297 19,758 24,792 4,469 3,907 6,864 372 165,913 235,120 14,025 14,205 14,250 – 1,458 1,928	As at 30 June 2009 RMB’000 4,521,756 38,282 8,785 233,834 14,250 1,607
	2,081,189 14,683 114,936 61,537 278,146 469,302 31,293 137,507 850 720 170,370 298,932 2,380,121 – 158,731 503 159,234	4,456,719 16,262 214,460 132,658 151,181 514,561 37,272 337,562 850 693 376,377 138,184 4,594,903 220,000 2,131,524 – 2,351,524	4,739,117 22,551 211,918 68,660 224,796 527,925 33,355 195,173 – 1,944 230,472 297,453 5,036,570 220,000 2,489,822 – 2,709,822	4,818,514
				25,554 325,631 73,089 183,551
				607,825
				17,959 204,151 100,000 450
				322,560
				285,265
				5,103,779
				1,720,000 866,333 –
				2,586,333
	2,220,887	2,243,379	2,326,748	2,517,446
	2,128,920 91,967	2,152,793 90,586	2,221,560 105,188	2,432,002 85,444
	2,220,887	2,243,379	2,326,748	2,517,446

– I-6 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Combined statements of changes in equity

At 1 January 2006 Profit for the year Dividend paid to minority shareholders Capital contribution from a minority shareholder At 31 December 2006 and 1 January 2007 Profit for the year Dividend paid to minority shareholders Capital contribution from minority shareholders Disposal of a subsidiary (note 26) At 31 December 2007 and 1 January 2008 Profit for the year Dividend paid to minority shareholders At 31 December 2008 and 1 January 2009 Profit for the period Dividend paid to minority shareholders Contribution from PDA, net At 30 June 2009 At 1 January 2008 (Unaudited) Profit for the period (Unaudited) Dividend paid to minority shareholders (Unaudited) At 30 June 2008 (Unaudited)	Equity attributable to PDA RMB’000 2,090,311 38,609 – –	Minority interests RMB’000 47,278 4,514 (985) 41,160	Total equity RMB’000 2,137,589 43,123 (985) 41,160 2,220,887 37,466 (4,707) 192,505 (202,772) 2,243,379 92,887 (9,518) 2,326,748 64,064 (23,042) 149,676 2,517,446 2,243,379 70,901 (9,518) 2,304,762
	2,128,920 23,873 – – – 2,152,793 68,767 – 2,221,560 60,766 – 149,676	91,967 13,593 (4,707) 192,505 (202,772) 90,586 24,120 (9,518) 105,188 3,298 (23,042) –	2,220,887 37,466 (4,707 192,505 (202,772
			2,243,379 92,887 (9,518
			2,326,748 64,064 (23,042 149,676
	2,432,002	85,444
	2,152,793 63,752 –	90,586 7,149 (9,518)	2,243,379 70,901 (9,518
	2,216,545	88,217

– I-7 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Combined statements of cash flows

Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Finance costs 8 Share of profits and losses of: Jointly-controlled entity Associates Dividend received from available-for-sale investments 6 Bank interest income 6 Depreciation 7 (Reversal of)/provision for impairment of trade and other receivables, net 7 Amortisation of intangible assets 7 Loss/(gain) on disposal of items of property, plant and equipment, net 7 Loss on disposal of intangible assets 7 Gain on disposal of a subsidiary 7 Increase in inventories Decrease/(increase) in trade and bills receivables Decrease/(increase) in prepayments, deposits and other receivables Increase/(decrease) in trade and bills payables Increase/(decrease) in other payables and accruals Increase in amount due to PDA Cash generated from operations Interest received Corporate income tax paid Net cash inflow from operating activities	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 60,894 52,790 124,529 30 6,925 15,170 (3,247) (1,939) (5,243) (28) (30) 2,019 (1,559) (4,214) (1,813) (2,109) (2,302) (1,949) 130,227 170,075 214,437 3,613 745 (1) 1,526 2,280 2,851 (2,175) 378 (1,140) – 52 – – (680) –	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 60,894 52,790 124,529 30 6,925 15,170 (3,247) (1,939) (5,243) (28) (30) 2,019 (1,559) (4,214) (1,813) (2,109) (2,302) (1,949) 130,227 170,075 214,437 3,613 745 (1) 1,526 2,280 2,851 (2,175) 378 (1,140) – 52 – – (680) –	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 60,894 52,790 124,529 30 6,925 15,170 (3,247) (1,939) (5,243) (28) (30) 2,019 (1,559) (4,214) (1,813) (2,109) (2,302) (1,949) 130,227 170,075 214,437 3,613 745 (1) 1,526 2,280 2,851 (2,175) 378 (1,140) – 52 – – (680) –	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 94,124 86,060 7,431 7,827 (2,434) (1,921) (135) 1,251 (1,768) (2,642) (400) (910) 105,846 109,556 47 (1,811) 1,328 1,737 323 644 – – – –	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 94,124 86,060 7,431 7,827 (2,434) (1,921) (135) 1,251 (1,768) (2,642) (400) (910) 105,846 109,556 47 (1,811) 1,328 1,737 323 644 – – – –
	187,172 (1,407) (36,439) (6,060) (906) (69,999) 45,949 118,310 2,109 (19,105) 101,314	224,080 (2,110) (100,101) (71,351) 5,979 283,853 31,315 371,665 2,302 (17,312) 356,655	348,860 (6,289) 2,160 64,381 (3,917) (142,389) 302,084 564,890 1,949 (30,861) 535,978	204,362 (8,774) (95,313) 28,433 (15,139) 33,669 192,486 339,724 400 (24,285) 315,839	199,791 (3,003) (112,688) (3,643) (15,396) (6,239) 171,197
					230,019 910 (23,169)
					207,760

– I-8 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Note CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property, plant and equipment Additions of intangible assets Investments in associates Purchases of available-for-sale investments Proceeds from disposal of items of property, plant and equipment Dividends income from a jointly-controlled entity Dividends income from associates Disposal of a subsidiary 26 Dividend received from available-for-sale investments Interest paid Decrease/(increase) in time deposits with original maturity more than three months when acquired Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bank loans Repayment of bank loans Dividends paid to minority shareholders Capital contributions from minority shareholders of subsidiaries Net cash inflow/(outflow) from financing activities	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 (16,574) (747,228) (364,758) (4,775) (6,796) (7,631) (40) – (71,430) – (180) (45) 7,495 9,586 2,736 – 2,501 2,286 14 16 204 – 18,034 – 1,559 4,214 1,813 (30) (6,925) (15,170) (10,000) 10,000 –	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 (16,574) (747,228) (364,758) (4,775) (6,796) (7,631) (40) – (71,430) – (180) (45) 7,495 9,586 2,736 – 2,501 2,286 14 16 204 – 18,034 – 1,559 4,214 1,813 (30) (6,925) (15,170) (10,000) 10,000 –	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 (16,574) (747,228) (364,758) (4,775) (6,796) (7,631) (40) – (71,430) – (180) (45) 7,495 9,586 2,736 – 2,501 2,286 14 16 204 – 18,034 – 1,559 4,214 1,813 (30) (6,925) (15,170) (10,000) 10,000 –	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) (158,727) (1,823,154) – (10) (71,430) – – – 21 2,351 – – 204 35 – – 1,768 2,642 (7,431) (7,827) – –	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) (158,727) (1,823,154) – (10) (71,430) – – – 21 2,351 – – 204 35 – – 1,768 2,642 (7,431) (7,827) – –
	(22,351) 850 – (985) 41,160 41,025	(716,778) 220,000 – (4,707) 27,865 243,158	(451,995) – (850) (9,518) – (10,368)	(235,595) – (850) (9,518) – (10,368)	(1,825,963)
					1,600,000 – (23,042) –
					1,576,958

– I-9 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Note NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year/period CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 19	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 119,988 (116,965) 73,615 148,158 268,146 151,181 268,146 151,181 224,796 268,146 151,181 224,796	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 69,876 (41,245) 151,181 224,796 221,057 183,551 221,057 183,551	Six-month period ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 69,876 (41,245) 151,181 224,796 221,057 183,551 221,057 183,551
			183,551
			183,551

– I-10 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

II. NOTES TO THE COMBINED FINANCIAL INFORMATION

1. PARTICULARS OF THE BUSINESS AND THE TARGET ASSETS

PDA is a limited liability company wholly-owned by the Dalian municipal government and was established in the PRC on 30 April 2003. Pursuant to the Conditional Acquisition Agreement of 30 September 2009 entered into between PDA and the Company, the following assets and liabilities of PDA comprising the Business are proposed to be acquired by the Company:

• (a) Certain assets and liabilities directly relating to the dry bulk and general cargo, passenger and roll-on, roll-off cargo terminals and other related ancillary operations of PDA and its following branches:

• Dalian Port Bulk Grain Terminals Company;

• Dalian Port General Cargo Terminals Company;

• Dalian Port Ore Terminal Company;

• Dalian Port Passenger Transportation Company;

• Dalian Port Railway Company; and

• Dalian Port Power Supply Company

• (b) The following subsidiaries, jointly-controlled entity, associates and available-for-sale investments of PDA relating to the dry bulk and general cargo, passenger and roll-on, roll-off cargo terminals and other related ancillary operations:

• Entire 100% equity interest in Dalian Port Power Supply Company Limited;

• Entire 100% equity interest in Dalian Port Corporation Zhuanghe Terminal Co., Ltd.;

• Entire 49% equity interest in Dalian Portsoft Technology Co., Ltd., including this company’s entire 100% equity interest in Dalian Portsoft Network Co., Ltd.;

• Entire 75% equity interest in Dalian Port Construction Supervision & Consultation Co., Ltd., including this company’s entire 40% equity interest in Dalian Wanpeng Port Engineering Examination & Testing Co., Ltd.;

• Entire 100% equity interest in Dalian Port Construction Management Co., Ltd.;

• Entire 45% equity interest in Dalian Port Telecommunication Engineering Co., Ltd.;

• Entire 37.5% equity interest in Dalian Golden Bay Grain Logistics Co., Ltd.;

• Entire 35% equity interest in Dalian Ocean Shipping Tally Co., Ltd.;

• Entire 40% equity interest in Dalian Changxing Island Port, Ltd.;

• Entire 30% equity interest in China Shipping Gang Lian Co., Ltd.;

• Entire 9.97% equity interest in Shandong Weihai Port Co., Ltd.; and

• Entire 7.5% equity interest in Dain Ferry Co., Ltd.

– I-11 –

APPENDIX I ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

The following assets and liabilities of PDA are not part of the Target Assets, and therefore outside the scope of the Acquisition.

• (a) Public facilities (e.g. breakwaters, bank protection, navigable pass, land, road, railroad, bridges, etc.) and other assets that are currently used by the Business but to be retained by PDA (including general cargo terminal buildings, passenger and roll-on, roll-off terminal buildings and certain storage facilities which are subject to redevelopment) that will be provided to the Company for continuous use in future operation of the Business.

• (b) Assets and liabilities relating to PDA’s other businesses or functions.

Particulars of the aforesaid subsidiaries, jointly-controlled entity and associates, which are all limited liability companies, are as follows:

	Place and date
Company name	of establishment	Paid-up capital			Percentage of equity attributable to the Business						Principal activities
					As at 31 December				As at 30 June
			2006		2007		2008		2009
			Direct	Indirect	Direct	Indirect	Direct	Indirect	Direct	Indirect
Subsidiaries:
Dalian Port Power Supply	PRC	RMB 10,412,359	100%	–	100%	–	100%	–	100%	–	Provision of power
Company Limited	1 January 1989										supply construction
大連港電力有限公司(a)											services
Dalian Port Corporation	PRC	RMB 30,000,000	100%	–	100%	–	100%	–	100%	–	Provision of cargo
Zhuanghe Terminal Co., Ltd.	18 October										handling, loading
大連港集團莊河碼頭	2006										and unloading
有限公司(b)											services
Dalian Portsoft Technology	PRC	RMB 10,000,000	49%	–	49%	–	49%	–	49%	–	Provision of
Co., Ltd.*	10 May 2004										information system
大連港隆科技有限公司(c)											and related
											computerised
											support services
Dalian Portsoft Network	PRC	RMB 5,000,000	–	–	–	49%	–	49%	–	49%	Provision of
Co., Ltd. *	6 August 2007										information system
大連港隆網絡技術有限公司(d)											and related
											computerised
											support services
Dalian Port Construction	PRC	RMB 5,000,000	75%	–	75%	–	75%	–	75%	–	Provision of terminal
Supervision & Consultation	1 February										supervisory
Co., Ltd.*	2005										services
大連港口建設監理咨詢
有限公司(e)
Dalian Port Construction	PRC	RMB 5,000,000	–	–	100%	–	100%	–	100%	–	Provision of terminal
Management Co., Ltd.*	29 January										operation
大連港口建設管理有限公司(f)	2007										management
											services
Dalian Port	PRC	RMB 10,000,000	45%	–	45%	–	45%	–	45%	–	Provision of
Telecommunication	28 November										telecommunication
Engineering Co., Ltd.*	2005										and
大連港通信工程有限公司(g)											air-conditioning
											construction
											services
Dalian Golden Bay Grain	PRC	RMB 97,330,000	50%	–	37.5%	–	37.5%	–	37.5%	–	Provision of cargo
Logistics Co., Ltd.*	23 September										storage and
大連金港灣糧食物流	2005										delivery services
有限公司(h)

– I-12 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

	Place and date
Company name	of establishment	Paid-up capital			Percentage of equity attributable to the Business						Principal activities
					As at 31 December				As at 30 June
			2006		2007		2008		2009
			Direct	Indirect	Direct	Indirect	Direct	Indirect	Direct	Indirect
Dalian Changxing Island Port,	PRC	RMB 420,000,000	51%	–	–	–	–	–	–	–	Provision of cargo
Ltd.*	18 October										handling, loading
大連長興島港口有限公司(i)	2006										and unloading
											services
Jointly-controlled entity:
Dalian Ocean Shipping Tally	PRC	RMB 3,089,200	35%	–	35%	–	35%	–	35%	–	Provision of shipping
Co., Ltd.*	5 December										tally services
大連外輪理貨有限公司(l)	2005
Associates:
Dalian Wanpeng Port	PRC	RMB 800,000	–	30%	–	30%	–	30%	–	30%	Provision of
Engineering Examination &	11 April 2003										construction
Testing Co., Ltd.*											surveying services
大連萬鵬港口工程檢測
有限公司(j)
Dalian Changxing Island Port,	PRC	RMB 420,000,000	–	–	40%	–	40%	–	40%	–	Provision of cargo
Ltd.*	18 October										handling, loading
大連長興島港口有限公司(i)	2006										and unloading
											services
China Shipping Gang Lian	PRC	RMB 237,500,837	–	–	–	–	30%	–	30%	–	Provision of shipping
Co., Ltd.	28 January										agency services
大連中海港連航運	2008
有限公司(k)

Note:

• The names of these companies referred to in this report represent management’s best effort to translate the Chinese names of those companies, as no English names have been registered.

• (a) The statutory accounts of this company for the years ended 31 December 2006 and 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計 師事務所有限公司), certified public accountants registered in the PRC. The statutory accounts of this company for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

• (b) No statutory accounts were issued for this company for the period ended 31 December 2006 as this company was set up at the end of 2006. The statutory accounts for the year ended 31 December 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計師事務所有限公司), certified public accountants registered in the PRC. The statutory accounts for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所 有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

• (c) The statutory accounts of this company for the years ended 31 December 2006 and 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計 師事務所有限公司), certified public accountants registered in the PRC. The statutory accounts for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited. The Business has a 49% equity interest in this company. According to the memorandum and articles of association of this company, another shareholder of this company, who has a 30% equity interest in it, is required to vote for PDA in the shareholders’ meeting that enables PDA to

– I-13 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

cast over 50% of the votes in its shareholders’ meetings throughout the Relevant Periods, accordingly, the directors of PDA consider that the Business has the power to govern its financial and operating policies. Therefore, this company has been accounted for as a subsidiary of the Business.

• (d) The statutory accounts of this company for the year ended 31 December 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計師事務所有限 公司), certified public accountants registered in the PRC. The statutory accounts of this company for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

• (e) The statutory accounts of this company for the years ended 31 December 2006 and 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計 師事務所有限公司), certified public accountants registered in the PRC. The statutory accounts of this company for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

• (f) The statutory accounts of this company for the year ended 31 December 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計師事務所有限 公司), certified public accountants registered in the PRC. The statutory accounts of this company for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

• (g) The statutory accounts of this company for the years ended 31 December 2006 and 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計 師事務所有限公司), certified public accountants registered in the PRC. The statutory accounts of this company for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited. The Business has a 45% equity interest in this company. According to the memorandum and articles of association of this company, another shareholder of this company, who has a 10% equity interest in it, is required to vote for PDA in the shareholders’ meeting that enables PDA to cast over 50% of the votes in its shareholders’ meetings throughout the Relevant Periods, accordingly, the directors of PDA consider that the Business has the power to govern its financial and operating policies. Therefore, this company has been accounted for as a subsidiary of the Business.

• (h) The statutory accounts of this company for the years ended 31 December 2006 and 2007 were audited by Liaoning Pan-China Certified Public Accountants Co., Ltd. (遼寧天健會計 師事務所有限公司), certified public accountants registered in the PRC. The statutory accounts of this company for the year ended 31 December 2008 were audited by HuaPu TianJian GaoShang Certified Public Accountants (華普天健高商會計師事務所), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited. In June 2007, this company increased its registered capital by a new shareholder that the equity interest held by PDA in this company was diluted from 50% to 37.5%. By virtue of an entrustment arrangement entered into between PDA and the other two shareholders, which have 25% and 37.5% equity interests in this company, respectively, agreed to vote for PDA in its shareholders’ meeting that enables PDA to cast over 50% of the votes in its shareholders’ meetings throughout the Relevant Periods, accordingly, the directors of PDA consider that the Business has the power to govern its financial and operating policies. Therefore, this company has been accounted for as a subsidiary of the Business during the Relevant Periods.

– I-14 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

• (i) The statutory accounts of this company for the years ended 31 December 2007 and 2008 were audited by Dalian Lianjun Certified Public Accountants Co., Ltd. (大連連俊會計師事 務所), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited. The Business disposed of 11% equity interest in this company to an independent third party in December 2007 and it ceased to be a subsidiary of the Business and became an associate of the Business upon the completion of the disposal in December 2007. Further details of the disposal of a subsidiary are set out in note 26.

• (j) As this company was not required by the local Administration For Industry and Commence and other local bureau for submission of its audited accounts for the years ended 31 December 2006 and 2007 according to the relevant rules and regulations, this company did not engage auditors to audit its statutory accounts for these years. The statutory accounts of this company for the year ended 31 December 2008 were audited by Dalian Hualian Certified Public Accountants Co., Ltd. (大連華連會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

• (k) The statutory accounts of this company for the year ended 31 December 2008 were audited by Vocation International Certified Public Accountants Co., Ltd. (天職國際會計師事務所有 限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

• (l) The statutory accounts of this company for the years ended 31 December 2006, 2007 and 2008 were audited by Deloitte Touche Tohmatsu Certified Public Accountants Co., Ltd. (德 勤華永會計師事務所有限公司), certified public accountants registered in the PRC. The management accounts of this company for the six-month periods ended 30 June 2008 and 2009 have not been audited.

2. BASIS OF PRESENTATION

The Target Assets comprising the Business are controlled by PDA (the “Controlling Shareholder”) throughout the Relevant Periods. Accordingly, the Combined Financial Information and the 30 June 2008 Combined Financial Information has been prepared under the merger basis of accounting and the Target Assets are combined using the existing book values from the Controlling Shareholder’s perspective.

The Combined Financial Information and the 30 June 2008 Combined Financial Information relating to the combined income statements, the combined statements of comprehensive income, the combined statements of changes in equity and the combined statements of cash flows of the Business for the Relevant Periods combined the results of operations of the Business as if it had been a single reporting entity throughout the Relevant Periods. The combined statements of financial position of the Business as at 31 December 2006, 2007 and 2008 and 30 June 2009 have been prepared to present the combined assets and liabilities of the Business as if it had been a single reporting entity in existence as at those dates.

Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the Combined Financial Information and the 30 June 2008 Combined Financial Information. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

The Combined Financial Information and the 30 June 2008 Combined Financial Information has been prepared in accordance with International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”), which comprise standards and interpretations approved by the IASB and the International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee that remain in effect.

The Combined Financial Information and the 30 June 2008 Combined Financial Information has been prepared under a historical cost convention and is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

– I-15 –

APPENDIX I ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

3.1 IMPACT OF ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Business has not applied the following new and revised IFRSs that have been issued but are not yet effective, in the Combined Financial Information and the 30 June 2008 Combined Financial Information:

IFRS 1 (Revised) First-time Adoption of IFRSs[1] IFRS 2 (Revised) Share-based Payment[4] IFRS 3 (Revised) Business Combinations[1] IAS 27 (Revised) Consolidated and Separate Financial Statements[1] IAS 39 Amendment Amendment to IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items[1] IFRIC-Int 9 and IAS 39 Amendments to IFRIC-Int 9 Reassessment of Embedded Derivatives Amendments and IAS 39 Financial Instruments: Recognition and Measurement – Embedded Derivatives[2] IFRIC-Int 17 Distribution of Non-cash Assets to Owners[1] IFRIC-Int 18 Transfers of Assets from Customers[3]

Apart from the above, the IASB has also issued Improvements to IFRSs in May 2009 which sets out amendments to a number of IFRSs primarily with a view to removing inconsistencies and clarifying wording. Improvements to IFRSs issued in May 2009 contains amendments to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, Appendix to IAS 18, IAS 36, IAS 38, IAS 39, IFRIC-Int 9 and IFRIC-Int 16. Except for the amendments to IFRS 2, IAS 38, IFRIC-Int 9 and IFRIC-Int 16 which are effective for annual periods beginning on or after 1 July 2009 and no transitional provisions for amendment to Appendix to IAS 18 has been specified, other amendments are effective for annual periods beginning on or after 1 January 2010 although there are separate transitional provisions for each standard.

1 Effective for annual periods beginning on or after 1 July 2009

2 Effective for annual periods ending on or after 30 June 2009

3 Effective for transfers of assets from customers received on or after 1 July 2009

4 Effective for annual periods beginning on or after 1 January 2010

The management of the Business is in the process of making an assessment of the impact of these new and revised IFRSs upon initial application. So far, it has concluded the adoption of the new and revised IFRSs are unlikely to have a significant impact on the results of operations and financial position of the Business.

3.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of combination/consolidation

The Combined Financial Information and the 30 June 2008 Combined Financial Information incorporates the financial information of the Target Assets comprising the Business as if they had been combined from the date when the combining entities first came under the control of PDA. The net assets of the combining entities are recognised at the carrying values. The combined income statements includes the results of each of the combining entities from the earliest date presented or since the date when the combining entities first came under the control of PDA, where this is a shorter period.

Save for the aforesaid, the purchase method of accounting is used to account for any acquisition of subsidiaries by the Business during the Relevant Periods.

The purchase method of accounting involves allocating the cost of the business combinations to the fair value of the identifiable assets acquired and liabilities and contingent liabilities incurred or assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate fair value of the assets given and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Under the purchase method of accounting, the results of subsidiaries are fully consolidated from the date of acquisition, being the date on which the Business obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Business, using consistent accounting policies.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

– I-16 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Minority interests represent the interests of outside shareholders not held by the Business in the results and net assets of the subsidiaries. An acquisition of minority interests is accounted for using the entity concept method whereby the difference between the consideration and the book value of the share of the net assets acquired is recognised as an equity transaction.

Subsidiaries

A subsidiary is an entity whose financial and operating policies the Business controls, directly or indirectly, so as to obtain benefits from its activities.

Joint ventures

A joint venture is an entity set up by contractual arrangement, whereby the Business and other parties undertake an economic activity. The joint venture operates as a separate entity in which the Business and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the joint venture parties, the duration of the joint venture and the basis on which the assets are to be realised upon its dissolution. The profits and losses from the joint venture’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture is treated as:

• (a) a subsidiary, if the Business has unilateral control, directly or indirectly, over the joint venture;

• (b) a jointly-controlled entity, if the Business does not have unilateral control, but has joint control, directly or indirectly, over the joint venture;

• (c) an associate, if the Business does not have unilateral or joint control, but holds, directly or indirectly, generally not less than 20% of the joint venture’s registered capital and is in a position to exercise significant influence over the joint venture; or

• (d) an equity investment accounted for in accordance with IAS 39, if the Business holds, directly or indirectly, less than 20% of the joint venture’s registered capital and has neither joint control of, nor is in a position to exercise significant influence over, the joint venture.

Jointly-controlled entities

A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties have unilateral control over the economic activity of the jointly-controlled entity.

The interest in a jointly-controlled entity of the Business is stated in the combined statement of financial position at the share of net assets of the Business under the equity method of accounting, less impairment losses. The share of the post-acquisiton results and reserves of the jointly-controlled entity of the Business is included in the combined income statement and equity attributable to PDA, respectively. Unrealised gains and losses resulting from transactions between the Business and its jointly-controlled entity are eliminated to the extent of the interest in a jointly-controlled entity of the Business, except where unrealised losses provide evidence of an impairment of the asset transferred.

Associates

An associate is an entity, not being a subsidiary or a jointly-controlled entity, in which the Business has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The interests in associates of the Business are stated in the combined statement of financial position at the share of net assets of the Business under the equity method of accounting, less any impairment losses. The share of the post-acquisition results and reserves of associates of the Business is included in the combined income statement and equity attributable to PDA, respectively. Unrealised gains and losses resulting from transactions between the Business and its associates are eliminated to the extent of the interests in the associates of the Business, except where unrealised losses provide evidence of an impairment of the asset transferred.

– I-17 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the combined income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Buildings	2.4% to 4%
Terminal facilities	1.9% to 4.8%
Terminal equipment	2.5% to 6.4%
Vessels and motor vehicles	5.3% to 12%
Other equipment	7.9% to 19.2%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at least at each reporting date.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the combined income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents buildings and other assets under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Intangible assets

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each reporting date.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the straight-line basis over their estimated useful lives of 10 years.

– I-18 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, deferred tax assets and financial assets), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the combined income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the combined income statement in the period in which it arises.

Related parties

A party is considered to be related to the Business if:

• (a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Business; (ii) has an interest in the Business that gives it significant influence over the Business; or (iii) has joint control over the Business;

• (b) the party is an associate;

• (c) the party is a jointly-controlled entity;

• (d) the party is a member of the key management personnel of the Business or PDA;

• (e) the party is a close member of the family of any individual referred to in (a) or (d);

• (f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or

• (g) the party is a post-employment benefit plan for the benefit of the employees of the Business, or of any entity that is a related party of the Business.

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Business is the lessor, assets leased by the Business under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the combined income statement on the straight-line basis over the lease terms. Where the Business is the lessee, rentals payable under the operating leases are charged to the combined income statement on the straight-line basis over the lease terms.

– I-19 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Investments and other financial assets

The financial assets of the Business in the scope of IAS 39 are classified as loans and receivables and available-for-sale investments as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The Business assesses whether a contract contains an embedded derivative when the Business first becomes a party to it and assesses whether an embedded derivative is required to be separated from the host when the analysis shows that the economic characteristics and risks of the embedded derivative is not closely related to those of the host contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

The Business determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the reporting date.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Business commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the combined income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Available-for-sale investments

Available-for-sale investments are non-derivative financial assets in listed and unlisted equity securities that are designated as available for sale or are not classified in the other category. After initial recognition, available-for-sale investments are measured at fair value, with gains or losses recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the combined income statement. Interest and dividends earned are reported as interest income and dividend income, respectively and are recognised in the combined income statement as “Other income” in accordance with the policies set out for “Revenue recognition” below. Losses arising from the impairment of such investments are recognised in the combined income statement as “Impairment losses on available-for-sale investments” and are transferred from the available-for-sale investment revaluation reserve.

When the fair value of unlisted equity securities cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such securities are stated at cost less any impairment losses.

Impairment of financial assets

The Business assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between

– I-20 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in the combined income statement. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Business.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognised in the combined income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor and significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor) that the Business will not be able to collect all of the amounts due under the original terms of an invoice. The carrying amount of the receivables is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

Assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

Available-for-sale investments

If an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the combined income statement, is transferred from equity to the combined income statement. A provision for impairment is made for an available-for-sale investment when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires judgement. In addition, the Business evaluates other factors, such as the share price volatility. Impairment losses on equity instruments classified as available for sale are not reversed through the combined income statement.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• the rights to receive cash flows from the asset have expired;

• the Business retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• the Business has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Business has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control

– I-21 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

of the asset, the asset is recognised to the extent of the continuing involvement of the Business in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Business could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the continuing involvement of Business is the amount of the transferred asset that the Business may repurchase, except in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, where the extent of the continuing involvement of the Business is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilities at amortised cost (including interest-bearing loans and borrowings)

Financial liabilities including trade and bills payables, other payables, due to PDA and interest-bearing loans and borrowings are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. The related interest expense is recognised within “Finance costs” in the combined income statement.

Gains and losses are recognised in the combined income statement when the liabilities are derecognised as well as through the amortisation process.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the combined income statement.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cash and cash equivalents

For the purpose of the combined statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the cash management of the Business.

For the purpose of the combined statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the combined income statement, or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

– I-22 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Deferred tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• where the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

• where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as in profit or loss on a systematic basis over the periods in which the Business recognises as expense the related costs for which the grant is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the combined income statement over the expected useful life of the relevant asset by equal annual instalments.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Business and when the revenue can be measured reliably, on the following bases:

• (a) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Business maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;

– I-23 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

• (b) from the rendering of services, when such services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided;

• (c) rental income, on a time proportion basis over the lease terms;

• (d) interest income, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset; and

• (e) dividend income, when the shareholders’ right to receive payment has been established.

Employee benefits

The Business contributes on a monthly basis to various defined contribution retirement benefit plans organised by relevant municipal and provincial governments in the PRC. The municipal and provincial governments undertake to assume the retirement benefit obligations payable to all existing and future retired employees under these plans and the Business has no further obligation for post-retirement benefits beyond the contributions made. Contributions to these plans are expensed as incurred.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. Where funds have been borrowed generally, and used for the purpose of obtaining qualifying assets, a capitalisation rate ranging between 6.11% and 7.05% has been applied to the expenditure on the individual assets.

Foreign currencies

The combined financial information is presented in RMB, which is the functional and presentation currency of the Business. Each entity in the Business determines its own functional currency, which is also RMB, and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the reporting date. All differences are taken to the combined income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Combined Financial Information and the 30 June 2008 Combined Financial Information requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

In the process of applying the accounting policies of the Business, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the combined financial information:

– I-24 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Operating lease commitments – the Business as lessee

The Business has entered into leases on certain land, terminal buildings and certain storage facilities for its operations during the Relevant Periods. The Business has determined, based on an evaluation of the terms and conditions of the arrangements, that the lessor retains all the significant risks and rewards of ownership of these assets which are leased out on operating leases.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Useful lives and impairment of property, plant and equipment

The management of the Business determines the estimated useful lives of its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions.

The impairment loss for property, plant and equipment, as well as construction in progress, is recognised for the amount by which the carrying amount exceeds its recoverable amount in accordance with the accounting policy stated in note 3.2. An asset’s recoverable amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell. The value in use was assessed on the estimated future cash flows discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The assessment of fair value less cost to sell is based on the best information available to reflect the amount that is obtainable at each of the financial position date, from the disposal of the asset in an arm’s length transaction between knowledgeable willing parties, after deducting the costs of disposal.

Impairment provision of trade and other receivables

The provision policy for doubtful debts of the Business is based on the ongoing evaluation of the collectability and aging analysis of the outstanding receivables and on the management’s judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including creditworthiness and the past collection history of each customer. If the financial conditions of the customers of the Business were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required.

5. SEGMENT INFORMATION

For management purposes, the Business is organised into operations based on their products and services and has five reportable segments as follows:

• (a) Bulk grains terminal and related logistics services – loading and unloading of grains and provision of related logistics services;

• (b) Ore terminal and related logistics services – loading and unloading of ore and provision of related logistics services;

• (c) General cargo terminal and related logistics services – loading and unloading of general cargo and provision of related logistics services;

• (d) Passenger and roll-on, roll-off terminal and related logistics services – passenger transportation and general cargo roll-on and roll-off and provision of related logistics services; and

– I-25 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

(e) Ancillary port operations – provision of transportation services, information technology services, power supply and construction services for terminal operations

The items of income and expenses and the assets attributable to the headquarter of the Business have not been allocated.

Management monitors the operating results of its operations separately for the purpose of making decisions about resource allocation and performance assessment. The reportable segments of the Business adopt accounting policies that are the same as those described in note 3.2.

These reportable segments are the basis on which the Business reports its segment information and no operating segments have been aggregated to form the above reportable segments.

Intersegment revenue is eliminated on combining the financial information of these operations. Intersegment sales and transactions are conducted in accordance with the terms mutually agreed between the parties.

Segment profit after tax represents the profit earned by each segment. This is the measure reported to the chief executive officer for the purposes of resource allocation and assessment of segment performance.

No further geographical segment information is presented as over 90% of the revenue of the Business is derived from customers based in the mainland of the PRC (“Mainland China”), and over 90% of the assets of the Business are located in Mainland China.

– I-26 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Segment information for the year ended 31 December 2006

Revenue Cost of sales Gross profit/(loss) Other revenue, income and gains Administrative expenses Other operating expenses, net Share of profits and losses of: Jointly-controlled entity Associates Profit/(loss) before tax Income tax Profit/(loss) after tax Total assets:* Segment assets Interest in a jointly- controlled entity Interests in associates Other financial information: Intersegment sales Impairment losses recognised/(reversed) in the combined income statement, net Depreciation and amortisation Capital expenditure_(note)_	Bulk grain terminal and related logistics services RMB’000 136,675 (119,016)	Ore terminal and related logistics services RMB’000 78,318 (84,077)	General cargo terminal and related logistics services RMB’000 259,587 (236,553)	Passenger and roll-on, roll-off terminal and related logistics services RMB’000 75,296 (35,787)	Ancillary port operations RMB’000 338,794 (277,844)	Unallocated RMB’000 62,739 (13,774)	Eliminations RMB’000 – –	Total RMB’000 951,409 (767,051
	17,659 13 (11,282) (201) – – 6,189 (2,185)	(5,759) 42 (13,234) (2,835) – – (21,786) 7,180	23,034 648 (21,909) (2,701) – – (928) 663	39,509 1,841 (9,399) 8 – – 31,959 (9,987)	60,950 3,241 (40,428) (363) 3,247 28 26,675 (7,413)	48,965 1,321 (31,751) 250 – – 18,785 (6,029)	– – – – – – – –	184,358 7,106 (128,003 (5,842 3,247 28
								60,894 (17,771
	4,004	(14,606)	(265)	21,972	19,262	12,756	–	43,123
	787,244 – –	852,655 – –	366,218 – –	66,367 – –	431,972 4,469 372	41,194 – –	– – –	2,545,650 4,469 372
	787,244 – 125 43,770 178,668	852,655 – 2,835 45,539 250	366,218 1,135 449 23,278 28,776	66,367 – (10) 2,655 20,933	436,813 32,100 214 13,594 11,862	41,194 – – 2,917 9,307	– (33,235) – – –	2,550,491
								– 3,613 131,753 249,796

• The amount represents revenue from sales to external customers.

Note: Capital expenditure consists of additions of property, plant and equipment, construction in progress and intangible assets.

– I-27 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Segment information for the year ended 31 December 2007

Revenue Cost of sales Gross profit/(loss) Other revenue, income and gains Administrative expenses Other operating expenses, net Share of profits and losses of: Jointly-controlled entity Associates Profit/(loss) before tax Income tax Profit/(loss) after tax Total assets:* Segment assets Interest in a jointly- controlled entity Interests in associates Other financial information: Intersegment sales Impairment losses recognised in the combined income statement, net Depreciation and amortisation Capital expenditure_(note)_	Bulk grain terminal and related logistics services RMB’000 196,392 (147,670)	Ore terminal and related logistics services RMB’000 107,852 (113,923)	General cargo terminal and related logistics services RMB’000 282,605 (306,749)	Passenger and roll-on, roll-off terminal and related logistics services RMB’000 91,320 (41,012)	Ancillary port operations RMB’000 370,065 (292,129)	Unallocated RMB’000 77,887 (17,121)	Eliminations RMB’000 – –	Total RMB’000 1,126,121 (918,604
	48,722 1,223 (14,106) (563) – – 35,276 (11,586)	(6,071) 19 (15,670) (227) – – (21,949) 7,348	(24,144) 699 (43,193) (734) – – (67,372) 22,526	50,308 2,108 (10,801) (640) – – 40,975 (12,818)	77,936 3,036 (47,490) (834) 1,939 30 34,617 (9,796)	60,766 1,215 (30,728) (10) – – 31,243 (10,998)	– – – – – – – –	207,517 8,300 (161,988 (3,008 1,939 30
								52,790 (15,324
	23,690	(14,601)	(44,846)	28,157	24,821	20,245	–	37,466
	956,523 – –	1,764,559 – –	1,321,633 – 165,528	95,336 – –	565,167 3,907 385	98,242 – –	– – –	4,801,460 3,907 165,913
	956,523 – 164 45,033 342,507	1,764,559 – 227 40,093 893,953	1,487,161 2,655 30 61,525 1,390,190	95,336 – 31 3,367 28,233	569,459 40,550 293 17,740 74,801	98,242 – – 4,597 46,176	– (43,205) – – –	4,971,280
								– 745 172,355 2,775,860

• The amount represents revenue from sales to external customers.

Note: Capital expenditure consists of additions of property, plant and equipment, construction in progress and intangible assets.

– I-28 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Segment information for the year ended 31 December 2008

Revenue Cost of sales Gross profit/(loss) Other revenue, income and gains Administrative expenses Other operating expenses, net Share of profits and losses of: Jointly-controlled entity Associates Profit/(loss) before tax Income tax Profit/(loss) after tax Total assets:* Segment assets Interest in a jointly- controlled entity Interests in associates Other financial information: Intersegment sales Impairment losses recognised/(reversed) in the combined income statement, net Depreciation and amortisation Capital expenditure_(note)_	Bulk grain terminal and related logistics services RMB’000 236,845 (165,187)	Ore terminal and related logistics services RMB’000 183,191 (154,301)	General cargo terminal and related logistics services RMB’000 369,209 (377,687)	Passenger and roll-on, roll-off terminal and related logistics services RMB’000 90,572 (42,895)	Ancillary port operations RMB’000 395,109 (311,051)	Unallocated RMB’000 86,170 (24,337)	Eliminations RMB’000 – –	Total RMB’000 1,361,096 (1,075,458
	71,658 336 (14,667) (77) – – 57,250 (14,600)	28,890 629 (19,241) – – – 10,278 (2,713)	(8,478) 1,084 (35,607) (2,634) – (5,542) (51,177) 10,861	47,677 2,361 (11,815) (53) – 3,493 41,663 (9,345)	84,058 2,430 (47,461) (144) 5,243 30 44,156 (10,011)	61,833 396 (39,793) (77) – – 22,359 (5,834)	– – – – – – – –	285,638 7,236 (168,584 (2,985 5,243 (2,019
								124,529 (31,642
	42,650	7,565	(40,316)	32,318	34,145	16,525	–	92,887
	1,117,093 – –	1,766,483 – –	1,311,214 – 159,986	91,762 – 74,743	500,792 6,864 391	237,714 – –	– – –	5,025,058 6,864 235,120
	1,117,093 – 316 55,742 204,755	1,766,483 – (566) 74,775 42,686	1,471,200 2,565 57 57,736 53,592	166,505 – (20) 5,152 3,420	508,047 42,862 212 17,426 20,098	237,714 – – 6,457 104,148	– (45,427) – – –	5,267,042
								– (1 217,288 428,699

• The amount represents revenue from sales to external customers.

Note: Capital expenditure consists of additions of property, plant and equipment, construction in progress and intangible assets.

– I-29 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Segment information for the six-month period ended 30 June 2008 (unaudited)

Revenue* Cost of sales Gross profit Other revenue, income and gains Administrative expenses Other operating expenses, net Share of profits and losses of: Jointly-controlled entity Associates Profit/(loss) before tax Income tax Profit/(loss) after tax Other financial information: Intersegment sales Impairment losses recognised in the combined income statement, net Depreciation and amortisation Capital expenditure_(note)_	Bulk grain terminal and related logistics services RMB’000 103,021 (76,791)	Ore terminal and related logistics services RMB’000 100,474 (74,669)	General cargo terminal and related logistics services RMB’000 182,384 (165,787)	Passenger and roll-on, roll-off terminal and related logistics services RMB’000 45,090 (19,799)	Ancillary port operations RMB’000 157,743 (122,296)	Unallocated RMB’000 42,603 (11,735)	Eliminations RMB’000 – –	Total RMB’000 631,315 (471,077)
	26,230 – (5,160) (12) – – 21,058 (5,552)	25,805 27 (8,579) – – – 17,253 (4,457)	16,597 64 (14,347) (1,399) – (2,365) (1,450) (776)	25,291 1,712 (4,210) – – 2,488 25,281 (5,501)	35,447 1,323 (21,032) (66) 2,434 12 18,118 (4,220)	30,868 10 (17,014) – – – 13,864 (2,717)	– – – – – – – –	160,238 3,136 (70,342) (1,477) 2,434 135
								94,124 (23,223)
	15,506 – – 26,942 124,594	12,796 – – 35,080 391	(2,226) 223 – 30,572 15,817	19,780 – – 2,559 600	13,898 20,641 47 8,861 2,675	11,147 – – 3,160 28,827	– (20,864) – – –	70,901
								– 47 107,174 172,904

• The amount represents revenue from sales to external customers.

Note: Capital expenditure consists of additions of property, plant and equipment, construction in progress and intangible assets.

– I-30 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Segment information for the six-month period ended 30 June 2009

Revenue Cost of sales Gross profit/(loss) Other revenue, income and gains Administrative expenses Other operating expenses, net Share of profits and losses of: Jointly-controlled entity Associates Profit/(loss) before tax Income tax Profit/(loss) after tax Total assets:* Segment assets Interest in a jointly- controlled entity Interests in associates Other financial information: Intersegment sales Impairment losses reversed in the combined income statement, net Depreciation and amortisation Capital expenditure_(note)_	Bulk grain terminal and related logistics services RMB’000 90,063 (74,105)	Ore terminal and related logistics services RMB’000 144,487 (88,013)	General cargo terminal and related logistics services RMB’000 146,250 (149,198)	Passenger and roll-on, roll-off terminal and related logistics services RMB’000 31,064 (19,857)	Ancillary port operations RMB’000 161,078 (121,036)	Unallocated RMB’000 39,484 (8,922)	Eliminations RMB’000 – –	Total RMB’000 612,426 (461,131
	15,958 1,398 (5,791) (1) – – 11,564 (2,891)	56,474 25 (8,380) – – – 48,119 (12,030)	(2,948) 64 (13,632) (1,064) – (968) (18,548) 4,395	11,207 1,118 (4,083) – – (297) 7,945 (1,799)	40,042 3,816 (20,648) (759) 1,921 14 24,386 (5,214)	30,562 585 (18,553) – – – 12,594 (4,457)	– – – – – – – –	151,295 7,006 (71,087 (1,824 1,921 (1,251
								86,060 (21,996
	8,673	36,089	(14,153)	6,146	19,172	8,137	–	64,064
	1,153,389 – –	1,799,871 – –	1,347,230 – 159,018	52,553 – 74,445	460,603 8,785 371	370,074 – –	– – –	5,183,720 8,785 233,834
	1,153,389 – (924) 29,410 54,507	1,799,871 – – 37,470 3,526	1,506,248 1,014 (106) 29,451 66,719	126,998 – (26) 2,221 401	469,759 24,993 (755) 9,199 7,976	370,074 – – 3,542 137,069	– (26,007) – – –	5,426,339
								– (1,811 111,293 270,198

• The amount represents revenue from sales to external customers.

Note: Capital expenditure consists of additions of property, plant and equipment, construction in progress and intangible assets.

– I-31 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

For the year ended 31 December 2006 and for the six-month period ended 30 June 2009, the Business had sales to a customer amounting to RMB116,324,000 and RMB69,024,000, respectively, which accounted for 10% or more of the revenue of the Business in these periods.

This customer is in the segments of general cargo terminal and related logistics services and ore terminal and related logistics services.

6. REVENUE, OTHER REVENUE, INCOME AND GAINS

Revenue, which is also the turnover of the Business, represents (i) the aggregate of the invoiced value of goods sold, after allowances for returned and trade discounts and (ii) the aggregate of the value of services provided.

An analysis of the other revenue, income and gains of the Business is as follows:

Revenue Sale of goods Rendering of services Other revenue, income and gains Gain on disposal of items of property, plant and equipment, net Dividend income from available-for-sale investments Bank interest income Government grants (note) Reversal of impairment of trade and other receivables, net Gain on disposal of a subsidiary Others	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 9,261 18,184 31,847 14,159 10,293 942,148 1,107,937 1,329,249 617,156 602,133 951,409 1,126,121 1,361,096 631,315 612,426	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 9,261 18,184 31,847 14,159 10,293 942,148 1,107,937 1,329,249 617,156 602,133 951,409 1,126,121 1,361,096 631,315 612,426	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 9,261 18,184 31,847 14,159 10,293 942,148 1,107,937 1,329,249 617,156 602,133 951,409 1,126,121 1,361,096 631,315 612,426	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 9,261 18,184 31,847 14,159 10,293 942,148 1,107,937 1,329,249 617,156 602,133 951,409 1,126,121 1,361,096 631,315 612,426	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 9,261 18,184 31,847 14,159 10,293 942,148 1,107,937 1,329,249 617,156 602,133 951,409 1,126,121 1,361,096 631,315 612,426
					612,426
	2,175 1,559 2,109 101 – – 1,162	– 4,214 2,302 465 – 680 639	1,140 1,813 1,949 2,271 1 – 62	– 1,768 400 955 – – 13	– 2,642 910 1,182 1,811 – 461
	7,106	8,300	7,236	3,136	7,006

Note: There are no unfulfilled conditions or contingencies relating to these grants.

– I-32 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

7. PROFIT BEFORE TAX

The profit before tax of the Business is arrived at after charging/(crediting):

Notes Cost of inventories sold Cost of services provided Depreciation 11 Amortisation of intangible assets 12 (Reversal of)/provision for impairment of trade and other receivables, net 17, 18 Loss/(gain) on disposal of items of property, plant and equipment, net Loss on disposal of intangible assets Gain on disposal of a subsidiary 26 Auditors’ remuneration Employee benefit expenses (including directors’ and supervisors’ remuneration – note 9): Wages and salaries Pension schemes contributions (defined contribution schemes)** Welfare and other expenses	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 5,957 12,940 26,385 12,741 9,530 761,094 905,664 1,049,073 458,336 451,601 130,227 170,075 214,437 105,846 109,556 1,526 2,280 2,851 1,328 1,737 3,613 745 (1) 47 (1,811) (2,175) 378 (1,140) 323 644 – 52 – – – – (680) – – – 7 7 9 – – 232,567 273,472 311,319 151,910 150,576 24,931 26,618 29,492 13,077 15,298 59,314 75,747 91,397 35,711 40,945 316,812 375,837 432,208 200,698 206,819	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 5,957 12,940 26,385 12,741 9,530 761,094 905,664 1,049,073 458,336 451,601 130,227 170,075 214,437 105,846 109,556 1,526 2,280 2,851 1,328 1,737 3,613 745 (1) 47 (1,811) (2,175) 378 (1,140) 323 644 – 52 – – – – (680) – – – 7 7 9 – – 232,567 273,472 311,319 151,910 150,576 24,931 26,618 29,492 13,077 15,298 59,314 75,747 91,397 35,711 40,945 316,812 375,837 432,208 200,698 206,819
		206,819

• The amortisation of intangible assets for the year/period are included in “Administrative expenses” on the face of the combined income statements.

• ** The provision for impairment of trade and other receivables is included in “Other operating expenses, net” on the face of the combined income statements.

• *** There were no forfeited contributions during the Relevant Periods. As at 31 December 2006, 2007 and 2008 and 30 June 2009, the Business had no forfeited contributions available to reduce its contributions to the pension schemes in future years.

– I-33 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

8. FINANCE COSTS

Interest on bank loans wholly repayable: Within five years Beyond five years Less: Interest capitalised	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 30 52 – – 7,827 – 6,873 15,170 7,431 – (30) (6,925) (15,170) (7,431) (7,827 – – – – –	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 30 52 – – 7,827 – 6,873 15,170 7,431 – (30) (6,925) (15,170) (7,431) (7,827 – – – – –
		–

9. DIRECTORS’ AND SUPERVISORS’ REMUNERATION AND FIVE HIGHEST PAID INDIVIDUALS

(a) Directors’ and supervisors’ remuneration

The aggregate amount of remuneration of the directors and supervisors of the Business during the Relevant Periods is as follows:

Fees Other emoluments: Salaries, allowances and benefits in kind Discretionary bonus Pension schemes contributions	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) – – – – –	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) – – – – –	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) – – – – –	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) – – – – –	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) – – – – –
	4,483 – 81	4,688 – 91	4,425 – 98	2,320 – 49	2,006 – 48
	4,564	4,779	4,523	2,369	2,054

– I-34 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

The remuneration of each of the directors and supervisors for the year ended 31 December 2006 is set out below:

Directors Yuan Fuxiu Sun Hong Zhu Baoxue Fu Bin Liu Wei Supervisors Wang Guiling Zhang Guofeng	Fees Salaries, allowances and benefits in kind Dis- cretionary bonus RMB’000 RMB’000 RMB’000 – 919 – – 919 – – 736 – – 736 – – 736 – – 213 – – 224 – – 4,483 –	Pension schemes contri- butions RMB’000 12 12 12 12 12 10 11 81	Total RMB’000 931 931 748 748 748 223 235
			4,564

The remuneration of each of the directors and supervisors for the year ended 31 December 2007 is set out below:

Directors Yuan Fuxiu Sun Hong Zhu Baoxue Fu Bin Liu Wei Supervisors Wang Guiling Zhang Guofeng	Fees Salaries, allowances and benefits in kind Dis- cretionary bonus RMB’000 RMB’000 RMB’000 – 943 – – 943 – – 757 – – 757 – – 757 – – 259 – – 272 – – 4,688 –	Pension schemes contri- butions RMB’000 13 13 13 13 13 13 13 91	Total RMB’000 956 956 770 770 770 272 285
			4,779

– I-35 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

The remuneration of each of the directors and supervisors for the year ended 31 December 2008 is set out below:

Directors Yuan Fuxiu Sun Hong Zhu Baoxue Fu Bin Liu Wei Xing Liangzhong Supervisors Wang Guiling Zhang Guofeng	Fees Salaries, allowances and benefits in kind Dis- cretionary bonus RMB’000 RMB’000 RMB’000 – 541 – – 929 – – 749 – – 749 – – 749 – – 150 – – 270 – – 288 – – 4,425 –	Pension schemes contri- butions RMB’000 8 15 15 15 15 – 15 15 98	Total RMB’000 549 944 764 764 764 150 285 303
			4,523

The remuneration of each of the directors and supervisors for the period ended 30 June 2008 is set out below (unaudited):

Directors Yuan Fuxiu Sun Hong Zhu Baoxue Fu Bin Liu Wei Supervisors Wang Guiling Zhang Guofeng	Fees Salaries, allowances and benefits in kind Dis- cretionary bonus RMB’000 RMB’000 RMB’000 – 463 – – 463 – – 373 – – 373 – – 373 – – 133 – – 142 – – 2,320 –	Pension schemes contri- butions RMB’000 7 7 7 7 7 7 7 49	Total RMB’000 470 470 380 380 380 140 149
			2,369

– I-36 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

The remuneration of each of the directors and supervisors for the period ended 30 June 2009 is set out below:

Directors Sun Hong Zhu Baoxue Fu Bin Liu Wei Xing Liangzhong Supervisors Wang Guiling Zhang Guofeng	Fees Salaries, allowances and benefits in kind Dis- cretionary bonus RMB’000 RMB’000 RMB’000 – 466 – – 376 – – 376 – – 376 – – 180 – – 116 – – 116 – – 2,006 –	Pension schemes contri- butions RMB’000 8 8 8 8 – 8 8 48	Total RMB’000 474 384 384 384 180 124 124
			2,054

(b) Five highest paid individuals

An analysis of the five highest paid individuals within the Business during the Relevant Periods is as follows:

Number of individuals

Directors and supervisors Non-director and non-supervisor employees	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 (Unaudited) 5 5 4 5 4 – – 1* – 1 5 5 5 5 5	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 (Unaudited) 5 5 4 5 4 – – 1* – 1 5 5 5 5 5
		5

• This employee was a director of the Business prior to 31 July 2008.

– I-37 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Details of the remuneration of the above non-director, non-supervisor and highest paid employees are as follows:

Salaries, allowances and benefits in kind Discretionary bonus Pension schemes contributions	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) – – 929 – 376 – – – – – – – 15 – 8 – – 944 – 384	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) – – 929 – 376 – – – – – – – 15 – 8 – – 944 – 384
		384

The number of non-director, non-supervisor and highest paid employees whose remuneration fell within the following band is as follows:

Number of individuals

							Six-month period
			**Years **	**ended **	31 December		ended 30 June
			2006		2007	2008	2008 2009
							(Unaudited)
Nil	to	HK$1,000,000	–		–	1	– 1

During the Relevant Periods, no directors, supervisors or the non-director and non-supervisor highest paid employees waived or agreed to waive any emoluments and no emoluments were paid by the Business to the directors, supervisors or the non-director and non-supervisor highest paid employees as an inducement to join or upon joining the Business or as compensation for loss of office.

10. TAX

Current – PRC corporate income tax (“CIT”) Deferred (note 23) Total tax charge for the year/period	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 18,372 17,285 32,112 23,931 21,675 (601) (1,961) (470) (708) 321 17,771 15,324 31,642 23,223 21,996	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 18,372 17,285 32,112 23,931 21,675 (601) (1,961) (470) (708) 321 17,771 15,324 31,642 23,223 21,996
		21,996

– I-38 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

A reconciliation of the tax expense applicable to profit before tax using the statutory tax rate to the tax expense at the effective tax rate for each of the Relevant Periods is as follows:

Profit before tax Tax at the statutory income tax rate of 33% for the years ended 31 December 2006 and 2007; 25% for the year ended 31 December 2008, six-month periods ended 30 June 2008 and 2009 Income not subject to tax Profits and losses attributable to a jointly-controlled entity and associates Effect of tax concession for certain subsidiaries* Expenses not deductible for tax Effect on opening deferred tax due to a decrease in tax rates Tax losses not recognised Tax charge at the effective rate of the Business	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 60,894 52,790 124,529 94,124 86,060	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 60,894 52,790 124,529 94,124 86,060	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 60,894 52,790 124,529 94,124 86,060	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 60,894 52,790 124,529 94,124 86,060	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 60,894 52,790 124,529 94,124 86,060
	20,095 (778) (1,081) (643) 20 – 158	17,421 (1,300) (650) (4,298) 128 465 3,558	31,133 (888) (806) – 1,246 – 957	23,531 (618) (642) – 725 – 227	21,515 (927) (168) – 597 – 979
	17,771	15,324	31,642	23,223	21,996

• Pursuant to the relevant laws and regulations in the PRC, Dalian Golden Bay Grain Logistics Co., Ltd. was exempted from PRC income tax for one year in the first profitable year of 2006 and this company was entitled to a 50% relief from PRC income tax for the following year at reduced tax rate of 16.5% in 2007. After the expiry of the tax relief period, this company is subject to an income tax rate of 25% in 2008 and thereafter.

Hong Kong profits tax

No Hong Kong profits tax has been provided because the Business did not generate any assessable profits in Hong Kong during the Relevant Periods.

PRC corporate income tax

The PRC corporate income tax in respect of operations in the PRC has been calculated at the applicable tax rate on the estimated assessable profits for each of the Relevant Periods, based on the existing legislation, interpretations and practices in respect thereof.

The share of tax attributable to the jointly-controlled entity amounting to RMB1,567,000, RMB1,166,000, RMB1,797,000, RMB937,000 (unaudited) and RMB682,000 for each of the three years ended 31 December 2006, 2007 and 2008 and each of the six-month periods 30 June 2008 and 2009, respectively, are included in “share of profits and losses of jointly-controlled entity” on the face of the combined income statements.

The share of tax attributable to associates amounting to RMB15,000, RMB14,000, RMB1,176,000, RMB6,000 (unaudited) and RMB4,000 for each of the three years ended 31 December 2006, 2007, 2008 and each of the six-month periods ended 30 June 2008 and 2009, respectively, are included in “Share of profits and losses of associates” on the face of the combined income statements.

– I-39 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

11. PROPERTY, PLANT AND EQUIPMENT

At 1 January 2006, net of accumulated depreciation Additions_(note) Transfers Disposals(note) Depreciation At 31 December 2006 and 1 January 2007, net of accumulated depreciation Additions(note) Transfers Disposals(note) Disposal of a subsidiary (note 26) Depreciation At 31 December 2007 and 1 January 2008, net of accumulated depreciation Additions(note) Transfers Transfers to intangible assets (note 12) Disposals(note) Depreciation At 31 December 2008 and 1 January 2009, net of accumulated depreciation Additions(note) Disposals(note)_ Depreciation At 30 June 2009, net of accumulated depreciation	Buildings RMB’000 243,523 8,382 (463) (6,606) (10,142)	Terminal facilities RMB’000 778,691 2,409 4,705 (35,594) (23,407)	Terminal equipment RMB’000 686,090 37,771 23 (15,622) (60,358)	Vessels and motor vehicles RMB’000 190,297 171,383 (124) (177) (17,526)	Other equipment Construction in progress RMB’000 RMB’000 94,616 – 22,808 2,268 (3,892) (249) (2,986) – (18,794) –	Other equipment Construction in progress RMB’000 RMB’000 94,616 – 22,808 2,268 (3,892) (249) (2,986) – (18,794) –	Total RMB’000 1,993,217 245,021 – (60,985) (130,227)
	234,694 243,912 – (5,246) – (14,418) 458,942 46,464 1,923 – (516) (17,726) 489,087 89,640 (29,551) (8,663)	726,804 910,695 9,568 (46,788) – (31,094) 1,569,185 69,220 737 – (61) (43,092) 1,595,989 18,725 (30,968) (22,475)	647,904 1,136,721 10,619 (60,353) (13,054) (82,742) 1,639,095 53,626 9,831 – (48) (104,636) 1,597,868 9,627 (3,573) (53,063)	343,853 47,360 – (33,719) (788) (23,474) 333,232 19,978 551 – (243) (25,964) 327,554 2,228 (17) (13,395)	91,752 88,049 2,842 (4,216) (408) (18,347) 159,672 13,467 2,453 – (824) (23,019) 151,749 9,729 (15,713) (11,960)	2,019 506,967 (23,029) – (394,605) – 91,352 218,313 (15,495) (254) – – 293,916 125,022 – –	2,047,026 2,933,704 – (150,322) (408,855) (170,075)
							4,251,478 421,068 – (254) (1,692) (214,437)
							4,456,163 254,971 (79,822) (109,556)
	540,513	1,561,271	1,550,859	316,370	133,805	418,938	4,521,756

– I-40 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

At 1 January 2006 Cost Accumulated depreciation Net carrying amount At 31 December 2006 and 1 January 2007 Cost Accumulated depreciation Net carrying amount At 31 December 2007 and 1 January 2008 Cost Accumulated depreciation Net carrying amount At 31 December 2008 and 1 January 2009 Cost Accumulated depreciation Net carrying amount At 30 June 2009 Cost Accumulated depreciation Net carrying amount	Buildings RMB’000 298,598 (55,075) 243,523	Terminal facilities RMB’000 949,342 (170,651) 778,691	Terminal equipment RMB’000 1,159,474 (473,384) 686,090	Vessels and motor vehicles RMB’000 258,324 (68,027) 190,297	Other equipment Construction in progress RMB’000 RMB’000 190,297 – (95,681) – 94,616 –	Other equipment Construction in progress RMB’000 RMB’000 190,297 – (95,681) – 94,616 –	Total RMB’000 2,856,035 (862,818
							1,993,217
	296,439 (61,745)	895,311 (168,507)	1,163,383 (515,479)	423,676 (79,823)	185,577 (93,825)	2,019 –	2,966,405 (919,379
	234,694	726,804	647,904	343,853	91,752	2,019	2,047,026
	531,712 (72,770)	1,748,360 (179,175)	2,225,388 (586,293)	432,087 (98,855)	265,337 (105,665)	91,352 –	5,294,236 (1,042,758
	458,942	1,569,185	1,639,095	333,232	159,672	91,352	4,251,478
	579,261 (90,174)	1,818,201 (222,212)	2,287,366 (689,498)	450,088 (122,534)	274,046 (122,297)	293,916 –	5,702,878 (1,246,715
	489,087	1,595,989	1,597,868	327,554	151,749	293,916	4,456,163
	623,181 (82,668)	1,786,330 (225,059)	2,291,422 (740,563)	451,898 (135,528)	259,775 (125,970)	418,938 –	5,831,544 (1,309,788
	540,513	1,561,271	1,550,859	316,370	133,805	418,938	4,521,756

Note:

During the Relevant Periods, the transfers of property, plant and equipment from and to PDA as included in the above additions and disposals, respectively, are as follows:

Transfers of property, plant and equipment from PDA as included in additions Transfers of property, plant and equipment to PDA as included in disposals Net transfer of property, plant and equipment from/(to) PDA	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 168,447 2,342,115 56,310 (55,665) (140,358) (96) 112,782 2,201,757 56,214	As at 30 June 2009 RMB’000 8,142 (76,827
		(68,685

– I-41 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

12. INTANGIBLE ASSETS

Cost at 1 January 2006, net of accumulated amortisation Additions Amortisation provided during the year At 31 December 2006 At 31 December 2006: Cost Accumulated amortisation Net carrying amount Cost at 1 January 2007, net of accumulated amortisation Additions Amortisation provided during the year Disposal of a subsidiary (note 26) Disposals At 31 December 2007 At 31 December 2007: Cost Accumulated amortisation Net carrying amount Cost at 1 January 2008, net of accumulated amortisation Additions Transfers from property, plant and equipment (note 11) Amortisation provided during the year At 31 December 2008 At 31 December 2008: Cost Accumulated amortisation Net carrying amount Cost at 1 January 2009, net of accumulated amortisation Additions Amortisation provided during the period At 30 June 2009 At 30 June 2009: Cost Accumulated amortisation Net carrying amount	Computer software RMB’000 12,048 4,775 (1,526
	15,297
	20,201 (4,904
	15,297
	15,297 6,796 (2,280 (3 (52
	19,758
	26,876 (7,118
	19,758
	19,758 7,631 254 (2,851
	24,792
	34,759 (9,967
	24,792
	24,792 15,227 (1,737
	38,282
	49,985 (11,703
	38,282

– I-42 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

13. INTEREST IN A JOINTLY-CONTROLLED ENTITY

								As at
				**As **	**at **	31 December		30 June
				2006		2007	2008	2009
				RMB’000		RMB’000	RMB’000	RMB’000
Share	of	net	assets	4,469		3,907	6,864	8,785

The following table illustrates the financial information of the jointly-controlled entity of the Business extracted from its audited financial statements or management accounts:

				Six-month
				period ended
	**Year **	ended 31 December		30 June
	2006	2007	2008	2009
	RMB’000	RMB’000	RMB’000	RMB’000
Assets	18,560	18,565	25,417	30,363
Liabilities	5,791	7,402	5,805	5,263
Revenue	34,983	39,468	50,263	21,584
Net profit	9,277	5,540	14,979	5,489

14. INTERESTS IN ASSOCIATES

								As at
				**As **	**at **	31 December		30 June
				2006		2007	2008	2009
				RMB’000		RMB’000	RMB’000	RMB’000
Share	of	net	assets	372		165,913	235,120	233,834

The following table illustrates the summarised combined financial information of the associates of the Business extracted from their audited financial statements or management accounts:

				Six-month
				period ended
	**Year **	ended 31 December		30 June
	2006	2007	2008	2009
	RMB’000	RMB’000	RMB’000	RMB’000
Assets	1,085	438,659	995,089	1,208,520
Liabilities	154	23,879	345,005	561,895
Revenue	1,462	1,341	27,562	21,499
Net loss	(227)	(6,094)	(2,135)	(3,375)

– I-43 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

15. AVAILABLE-FOR-SALE INVESTMENTS

									As at
					**As **	**at **	31 December		30 June
					2006		2007	2008	2009
					RMB’000		RMB’000	RMB’000	RMB’000
Unlisted	equity	investments,	at	cost	14,025		14,205	14,250	14,250

The unlisted equity investments are equity investments in companies established in the PRC. They are measured at cost less impairment at each reporting date because the range of reasonable fair value estimates is so significant that the management of the Business is of the opinion that their fair values cannot be measured reliably. The Business does not intend to dispose of them in the near future.

16. INVENTORIES

								As at
				**As **	**at **	31 December		30 June
				2006		2007	2008	2009
				RMB’000		RMB’000	RMB’000	RMB’000
Spare	parts	and	consumables	14,683		16,262	22,551	25,554

17. TRADE AND BILLS RECEIVABLES

Trade receivables Bills receivable Less: Impairment provision	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 116,504 160,790 150,668 4,941 60,763 68,745 (6,509) (7,093) (7,495) 114,936 214,460 211,918	As at 30 June 2009 RMB’000 302,651 29,450 (6,470
		325,631

The Business has a policy of allowing an average credit period of 90 days to its trade customers. The Business seeks to maintain strict control over its outstanding receivables and closely monitors them to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the trade receivables of the Business relate to a large number of diversified customers, there is no significant concentration of credit risk.

Trade receivables are unsecured and non-interest-bearing. The carrying amounts of trade receivables and bills receivable approximate to their fair values.

An aged analysis of the trade receivables of the Business as at the respective reporting dates, net of provisions, is as follows:

Within three months Four to six months Seven to twelve months Over one year	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 79,458 57,273 71,770 7,149 46,078 16,620 6,246 49,248 53,684 17,142 1,098 1,099 109,995 153,697 143,173	As at 30 June 2009 RMB’000 189,280 70,168 35,524 1,209
		296,181

– I-44 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Movements in the provision for impairment of trade receivables of the Business are as follows:

Note At beginning of year/period Impairment losses recognised 7 Amount written off as uncollectible Impairment losses reversed 7 At end of year/period	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 3,487 6,509 7,093 2,972 608 709 50 7 20 – (31) (327) 6,509 7,093 7,495	Six-month period ended 30 June 2009 RMB’000 7,495 546 – (1,571)
		6,470

Included in the provision for impairment of trade receivables of the Business are individually impaired trade receivables with carrying amounts of RMB64,838,000, RMB78,107,000, RMB49,322,000 and RMB55,306,000 as at 31 December 2006, 2007 and 2008 and 30 June 2009, respectively. The individually impaired trade receivables related to customers that were in financial difficulty and only a portion of the receivables is expected to be recovered. The Business does not hold any collateral or other credit enhancements over these balances.

The aged analysis of trade receivables of the Business that are neither individually nor collectively considered to be impaired are as follows:

Neither past due nor impaired Past due but not impaired Less than six months Seven to twelve months Over one year	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 80,696 58,404 73,151 7,216 46,377 16,620 6,629 48,916 53,402 15,454 – – 109,995 153,697 143,173	As at 30 June 2009 RMB’000 190,739 70,210 35,232 –
		296,181

Receivables that were neither past due nor impaired relate to a large number of diversified customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Business. Based on past experience, the management of the Business believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered recoverable. The Business does not hold any collateral over these balances.

– I-45 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

18. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Prepayments and deposits Other receivables Less: Impairment provision	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 873 55,438 28,327 61,944 78,561 41,259 (1,280) (1,341) (926) 61,537 132,658 68,660	As at 30 June 2009 RMB’000 34,621 38,635 (167)
		73,089

The above impairment was made for receivables and the movements are as follows:

Note At beginning of year/period Impairment losses recognised 7 Amount written off as uncollectible Impairment losses reversed 7 At end of year/period	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 646 1,280 1,341 679 318 503 (7) (107) (32) (38) (150) (886) 1,280 1,341 926	Six-month period ended 30 June 2009 RMB’000 926 144 27 (930)
		167

19. CASH AND CASH EQUIVALENTS

Cash and bank balances Time deposits Cash and cash equivalents in the combined statements of financial position Less: Time deposits with original maturity more than three months when acquired Cash and cash equivalents in the combined statements of cash flows	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 268,146 151,181 224,796 10,000 – –	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 268,146 151,181 224,796 10,000 – –	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 268,146 151,181 224,796 10,000 – –	As at 30 June 2009 RMB’000 183,551 –
	278,146 (10,000)	151,181 –	224,796 –	183,551 –
	268,146	151,181	224,796	183,551

– I-46 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

As at 31 December 2006, 2007 and 2008 and 30 June 2009, the cash and bank balances and time deposits of the Business were denominated in RMB.

The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Business is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term time deposits are made for varying periods of between one day and six months depending on the immediate cash requirements of the Business, and earn interest at the respective short-term time deposit rates. The bank balances and time deposits are deposited with creditworthy banks with no recent history of default.

20. TRADE AND BILLS PAYABLES

Trade payables Bills payable	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 31,293 36,172 33,355 – 1,100 – 31,293 37,272 33,355	As at 30 June 2009 RMB’000 17,959 –
		17,959

The trade payables are non-interest-bearing. The average credit period for trade purchases is 60 days to 90 days.

An aged analysis of the trade payables of the Business as at the respective reporting dates is as follows:

Within three months Four to six months Seven to twelve months Over one year	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 9,291 11,794 15,138 764 11,770 2 20,575 9,406 14,478 663 3,202 3,737 31,293 36,172 33,355	As at 30 June 2009 RMB’000 4,870 164 9,915 3,010
		17,959

– I-47 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

21. OTHER PAYABLES AND ACCRUALS

Receipt in advance Deposits received Other payables	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 13,942 17,813 12,892 3,911 2,452 2,151 119,654 317,297 180,130 137,507 337,562 195,173	As at 30 June 2009 RMB’000 24,542 5,534 174,075
		204,151

22. INTEREST-BEARING BANK LOANS

Contractual interest rate Maturity As at 31 December 2006 Contractual interest rate Maturity As at 31 December 2007 Contractual interest rate Maturity As at 31 December 2008 Contractual interest rate (%) RMB’000 (%) RMB’000 (%) RMB’000 (%) Current Bank loans – unsecured 6.12 2007 850 6.12 2008 850 – 4.78 Non-current Bank loans – unsecured – 6.64 2014 220,000 6.44-7.05 2014 220,000 4.86-6.71 850 220,850 220,000 As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 Analysed into: Bank loans repayable: Within one year or on demand 850 850 – In the second year – – – In the third to fifth years, inclusive – – – Beyond five years – 220,000 220,000 850 220,850 220,000	Maturity As at 30 June 2009 RMB’000 2010 100,000 2014 1,720,000 1,820,000 As at 30 June 2009 RMB’000 100,000 – 1,720,000 –	As at 30 June 2009 RMB’000 100,000 1,720,000
		1,820,000
	1,820,000

The interest-bearing bank loans of the Business during the Relevant Periods are denominated in RMB.

The management of the Business estimates the fair value of the bank loans by discounting their future cash flows at the market rate. The management of the Business considers that the carrying amounts of the current borrowings and non-current borrowings of the Business approximate to their fair values at each reporting date.

– I-48 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

23. DEFERRED TAX

The following are the major deferred tax assets/(liabilities) recognised and their movements during the Relevant Periods:

Pre-operating expenses Provision for impairment of assets Others RMB’000 RMB’000 RMB’000 At 1 January 2006 482 1,363 (2,949) Credited/(charged) to the combined income statement for the year (note 10) (161) 1,170 (408) At 31 December 2006 and 1 January 2007 321 2,533 (3,357) Credited/(charged) to the combined income statement for the year (note 10) (199) (440) 2,600 At 31 December 2007 and 1 January 2008 122 2,093 (757) Credited/(charged) to the combined income statement for the year (note 10) (122) (165) 757 At 31 December 2008 and 1 January 2009 – 1,928 – Credited/(charged) to the combined income statement for the period (note 10) – (321) – At 30 June 2009 – 1,607 – As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 Net deferred tax assets recognised in the combined statements of financial position – 1,458 1,928 Net deferred tax liabilities recognised in the combined statements of financial position (503) – – (503) 1,458 1,928	Pre-operating expenses Provision for impairment of assets Others RMB’000 RMB’000 RMB’000 At 1 January 2006 482 1,363 (2,949) Credited/(charged) to the combined income statement for the year (note 10) (161) 1,170 (408) At 31 December 2006 and 1 January 2007 321 2,533 (3,357) Credited/(charged) to the combined income statement for the year (note 10) (199) (440) 2,600 At 31 December 2007 and 1 January 2008 122 2,093 (757) Credited/(charged) to the combined income statement for the year (note 10) (122) (165) 757 At 31 December 2008 and 1 January 2009 – 1,928 – Credited/(charged) to the combined income statement for the period (note 10) – (321) – At 30 June 2009 – 1,607 – As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 Net deferred tax assets recognised in the combined statements of financial position – 1,458 1,928 Net deferred tax liabilities recognised in the combined statements of financial position (503) – – (503) 1,458 1,928	Pre-operating expenses Provision for impairment of assets Others RMB’000 RMB’000 RMB’000 At 1 January 2006 482 1,363 (2,949) Credited/(charged) to the combined income statement for the year (note 10) (161) 1,170 (408) At 31 December 2006 and 1 January 2007 321 2,533 (3,357) Credited/(charged) to the combined income statement for the year (note 10) (199) (440) 2,600 At 31 December 2007 and 1 January 2008 122 2,093 (757) Credited/(charged) to the combined income statement for the year (note 10) (122) (165) 757 At 31 December 2008 and 1 January 2009 – 1,928 – Credited/(charged) to the combined income statement for the period (note 10) – (321) – At 30 June 2009 – 1,607 – As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 Net deferred tax assets recognised in the combined statements of financial position – 1,458 1,928 Net deferred tax liabilities recognised in the combined statements of financial position (503) – – (503) 1,458 1,928	Others RMB’000 (2,949) (408)	Total RMB’000 (1,104) 601
	321 (199) 122 (122) – –	2,533 (440) 2,093 (165) 1,928 (321)	(3,357) 2,600 (757) 757 – –	(503) 1,961
				1,458 470
				1,928 (321)
	– 1,607 – As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 – 1,458 1,928 (503) – – (503) 1,458 1,928			1,607
				As at 30 June 2009 RMB’000 1,607 –
				1,607

24. DUE TO PDA

As at 30 June 2009, the amounts due to PDA are unsecured and interest-free, and are not repayable before 1 January 2011.

– I-49 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

The nature of the amounts due to PDA are analysed as follows:

Payables for transfers of property, plant and equipment (note 11) Port construction fee payables to PDA	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 116,509 2,057,987 2,375,010 42,222 73,537 114,812 158,731 2,131,524 2,489,822	As at 30 June 2009 RMB’000 730,000 136,333
		866,333

25. MAJOR NON-CASH TRANSACTIONS

During the year ended 31 December 2007, the non-cash capital contributions made by the minority shareholder of a subsidiary were in the form of assets of RMB164,640,000.

26. DISPOSAL OF A SUBSIDIARY

In December 2007, the Business disposed of 11% equity interest in a then subsidiary, Dalian Changxing Island Port, Ltd., to an independent third party for a cash consideration of RMB46,200,000 and a gain of RMB680,000 was recognised. Upon completion of the disposal, the equity interest held by the Business was reduced from 51% to 40% and Dalian Changxing Island Port, Ltd. ceased to be a subsidiary of the Business and became an associate of the Business.

Notes Net assets disposed of: Property, plant and equipment 11 Intangible assets 12 Cash and cash equivalents Prepayments, deposits and other receivables Inventories Other payables and accruals Minority interests Reclassification to interests in associates Gain on disposal of a subsidiary 7 Satisfied by: Cash	2007 RMB’000 408,855 3 28,166 62 531 (23,798) (202,772)
	211,047 (165,527)
	45,520 680
	46,200
	46,200

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of a subsidiary is as follows:

Cash consideration Cash and cash equivalents disposed of Net cash inflow of cash and cash equivalents in respect of the disposal of a subsidiary	46,200 (28,166)
	18,034

– I-50 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

27. COMMITMENTS

The Business had the following commitments for capital expenditure at each of the reporting dates during the Relevant Periods:

Contracted, but not provided for: Property, plant and equipment Authorised, but not contracted for: Property, plant and equipment	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 230,086 170,931 95,226 – – –	As at 30 June 2009 RMB’000 320,241
		3,132,834

28. RELATED PARTY TRANSACTIONS AND BALANCES

(a) Significant related party transactions

During the Relevant Periods, the Business had the following significant transactions with related parties:

Sales of goods – PDA – Associates – Subsidiaries of PDA Fees for rendering of construction and related supervisory services, information system consulting services, and other services – PDA – Associates – Subsidiaries of PDA Amounts received/receivable in respect of leasing buildings and optical fibre – PDA – Associates	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 5,172 7,659 9,060 4,656 7,802 606 391 1,145 – 90 2,061 1,162 1,775 914 427 7,839 9,212 11,980 5,570 8,319	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 5,172 7,659 9,060 4,656 7,802 606 391 1,145 – 90 2,061 1,162 1,775 914 427 7,839 9,212 11,980 5,570 8,319	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 5,172 7,659 9,060 4,656 7,802 606 391 1,145 – 90 2,061 1,162 1,775 914 427 7,839 9,212 11,980 5,570 8,319	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 5,172 7,659 9,060 4,656 7,802 606 391 1,145 – 90 2,061 1,162 1,775 914 427 7,839 9,212 11,980 5,570 8,319	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 5,172 7,659 9,060 4,656 7,802 606 391 1,145 – 90 2,061 1,162 1,775 914 427 7,839 9,212 11,980 5,570 8,319
					8,319
	80,869 558 36,631	43,027 9,565 33,705	49,563 4,482 46,780	16,767 1,983 16,409	10,306 659 14,574
	118,058	86,297	100,825	35,159	25,539
	1,010 –	980 180	1,645 363	822 92	622 90
	1,010	1,160	2,008	914	712

– I-51 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Purchases of medical, printing and other services – PDA – Subsidiaries of PDA Amounts paid/payable in respect of using land and buildings – PDA – Subsidiaries of PDA	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 1,359 2,205 2,916 1,087 1,015 310 308 711 240 200 1,669 2,513 3,627 1,327 1,215 16,800 34,112 40,706 20,353 21,118 107 472 511 271 244 16,907 34,584 41,217 20,624 21,362	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 1,359 2,205 2,916 1,087 1,015 310 308 711 240 200 1,669 2,513 3,627 1,327 1,215 16,800 34,112 40,706 20,353 21,118 107 472 511 271 244 16,907 34,584 41,217 20,624 21,362
		1,215
		21,118 244
		21,362

The above transactions were conducted in accordance with terms mutually agreed between the parties.

Apart from the above, during the Relevant Periods, certain property, plant and equipment were transferred from and to PDA at their carrying values. Further details of which are set out in note 11.

– I-52 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

(b) Outstanding balances with related parties

Notes Trade receivables – PDA 1 – Subsidiaries of PDA 1 Other receivables – PDA 1 – Associates – Subsidiaries of PDA 1 Other payables – PDA 1 – Subsidiaries of PDA 1 Due to PDA 2	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 – 85 – 2,881 1,307 4,022 2,881 1,392 4,022 26,038 19,276 11,384 – – 109 9,206 15,275 4,795 35,244 34,551 16,288	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 – 85 – 2,881 1,307 4,022 2,881 1,392 4,022 26,038 19,276 11,384 – – 109 9,206 15,275 4,795 35,244 34,551 16,288	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 – 85 – 2,881 1,307 4,022 2,881 1,392 4,022 26,038 19,276 11,384 – – 109 9,206 15,275 4,795 35,244 34,551 16,288	As at 30 June 2009 RMB’000 – 7,981
				7,981
				859 109 4,260
				5,228
	365 396	40,573 152	1,230 154	26,948 154
	761 158,731	40,725 2,131,524	1,384 2,489,822	27,102
				866,333

Notes:

(1) These balances are unsecured, non-interest-bearing and have no fixed terms of repayment.

• (2) Please refer to note 24 for details.

– I-53 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

(c) Compensation of key management personnel of the Business

Short term employee benefits Pension schemes contributions Total compensation paid to key management personnel	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) 4,483 4,688 4,425 2,320 2,006 81 91 98 49 48 4,564 4,779 4,523 2,369 2,054	Year ended 31 December Six-month period ended 30 June 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) 4,483 4,688 4,425 2,320 2,006 81 91 98 49 48 4,564 4,779 4,523 2,369 2,054
		2,054

Further details of directors’ and supervisors’ emoluments are set out in note 9.

29. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at each of the financial position dates are as follows:

As at 31 December 2006

Financial assets

Available-for-sale investments Trade and bills receivables Financial assets included in prepayments, deposits and other receivables Cash and cash equivalents	Loans and receivables RMB’000 – 114,936 60,664 278,146 453,746	Available- for-sale investments RMB’000 14,025 – – – 14,025	Total RMB’000 14,025 114,936 60,664 278,146
			467,771

Financial liabilities

Trade and bills payables Financial liabilities included in other payables and accruals Interest-bearing bank loan Due to PDA	Financial liabilities at amortised cost RMB’000 31,293 119,654 850 158,731
	310,528

– I-54 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

As at 31 December 2007

Financial assets

Available-for-sale investments Trade and bills receivables Financial assets included in prepayments, deposits and other receivables Cash and cash equivalents Financial liabilities	Loans and receivables RMB’000 – 214,460 77,220 151,181 442,861	Available- for-sale investments RMB’000 14,205 – – – 14,205	Total RMB’000 14,205 214,460 77,220 151,181
			457,066

Trade and bills payables Financial liabilities included in other payables and accruals Interest-bearing bank loans Due to PDA	Financial liabilities at amortised cost RMB’000 37,272 317,297 220,850 2,131,524
	2,706,943

As at 31 December 2008

Financial assets

Available-for-sale investments Trade and bills receivables Financial assets included in prepayments, deposits and other receivables Cash and cash equivalents	Loans and receivables RMB’000 – 211,918 40,333 224,796 477,047	Available- for-sale investments RMB’000 14,250 – – – 14,250	Total RMB’000 14,250 211,918 40,333 224,796
			491,297

– I-55 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Financial liabilities

Trade and bills payables Financial liabilities included in other payables and accruals Interest-bearing bank loan Due to PDA	Financial liabilities at amortised cost RMB’000 33,355 180,130 220,000 2,489,822
	2,923,307

As at 30 June 2009

Financial assets

Available-for-sale investments Trade and bills receivables Financial assets included in prepayments, deposits and other receivables Cash and cash equivalents	Loans and receivables RMB’000 – 325,631 38,468 183,551 547,650	Available- for-sale investments RMB’000 14,250 – – – 14,250	Total RMB’000 14,250 325,631 38,468 183,551
			561,900

Financial liabilities

Trade and bills payables Financial liabilities included in other payables and accruals Interest-bearing bank loans Due to PDA	Financial liabilities at amortised cost RMB’000 17,959 174,075 1,820,000 866,333
	2,878,367

– I-56 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

30. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The principal financial instruments of the Business comprise interest-bearing bank loans, cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the operations of the Business. The Business has various other financial assets and liabilities such as trade and other receivables and trade and other payables, which arise directly from its operations.

The carrying amounts of the financial instruments of the Business approximated to their fair values as at each of the reporting dates. Fair value estimates are made at a specific point in time and are based on relevant market information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The main risks arising from the financial instruments of the Business are interest rate risk, foreign currency risk, credit risk and liquidity risk. As the exposure of the Business to these risks is kept to a minimum, the Business has not used any derivatives and other instruments for hedging purposes. The Business does not hold or issue derivative financial instruments for trading purposes. The management of the Business reviews and agrees policies for managing each of these risks and they are summarised below.

Interest rate risk

Interest rate risk means the risk of the fluctuation in the fair value of future cash flows of financial instruments which arise from changes in interest rates. Floating interest rate instruments will result in the Business facing the risk of changes in market interest rate, and fixed interest rate instruments will result in the Business facing fair value interest rate risk.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the profit before tax of the Business (through the impact on floating rate borrowings) and the equity of the Business.

	Increase/	Increase/
	(decrease)	(decrease)	Increase/
	in basis	in profit	(decrease)
	points	before tax	in equity
		RMB’000	RMB’000
Six-month period ended 30 June 2009	100	(18,200)	(13,650)
Year ended 31 December 2008	100	(2,200)	(1,650)
Year ended 31 December 2007	100	(2,209)	(1,480)
Year ended 31 December 2006	100	(9)	(6)
Six-month period ended 30 June 2009	(100)	18,200	13,650
Year ended 31 December 2008	(100)	2,200	1,650
Year ended 31 December 2007	(100)	2,209	1,480
Year ended 31 December 2006	(100)	9	6

– I-57 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

Foreign currency risk

The Business is being operated in the PRC and most of the transactions are conducted in RMB. Most of the assets and liabilities of the Business are denominated in RMB. Fluctuations of the exchange rates of RMB against foreign currencies do not have significant effects on the results of the Business. The Business has not hedged its foreign exchange rate risk.

Credit risk

The Business trades only with recognised and creditworthy third parties. It is the policy of the Business that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis and the exposure of the Business to bad debts is not significant.

The credit risk of the other financial assets of the Business, which comprise cash and cash equivalents, available-for-sale investments and other receivables arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

Since the Business trades only with recognised and creditworthy third parties, there is no requirement for collateral.

Liquidity risk

Management of the Business aims to maintain sufficient cash and cash equivalents and have available funding through an adequate amount of committed credit facilities to meet its commitments.

The maturity profile of the financial liabilities of the Business as at the reporting date, based on the contractual undiscounted payments, is as follows:

Trade and bills payables Other payables Interest-bearing bank loan Due to PDA Trade and bills payables Other payables Interest-bearing bank loans Due to PDA	Within 1 year RMB’000 31,293 119,654 850 – 151,797 Within 1 year RMB’000 37,272 317,297 850 – 355,419	As at 31 December 2006 1 to 2 years 3 to 5 years More than 5 years RMB’000 RMB’000 RMB’000 – – – – – – – – – – 158,731 – – 158,731 – As at 31 December 2007 1 to 2 years 3 to 5 years More than 5 years RMB’000 RMB’000 RMB’000 – – – – – – – – 220,000 – 2,131,524 – – 2,131,524 220,000	Total RMB’000 31,293 119,654 850 158,731
			310,528
			Total RMB’000 37,272 317,297 220,850 2,131,524
			2,706,943

– I-58 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

As at 31 December 2008

Trade and bills payables Other payables Interest-bearing bank loan Due to PDA	Within 1 year RMB’000 33,355 180,130 – – 213,485	1 to 2 years RMB’000 – – – – –	3 to 5 years RMB’000 – – – 2,489,822 2,489,822	More than 5 years RMB’000 – – 220,000 – 220,000	Total RMB’000 33,355 180,130 220,000 2,489,822
					2,923,307

Trade and bills payables Other payables Interest-bearing bank loans Due to PDA	Within 1 year RMB’000 17,959 174,075 100,000 – 292,034	As at 30 June 2009 1 to 2 years 3 to 5 years More than 5 years RMB’000 RMB’000 RMB’000 – – – – – – – 1,720,000 – 866,333 – – 866,333 1,720,000 –	Total RMB’000 17,959 174,075 1,820,000 866,333
			2,878,367

Capital management

The primary objectives of the capital management of the Business are to safeguard the ability of the Business to continue as going concern and to maintain healthy capital ratios in order to support its business and maximise owners’ value.

The Business manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Business may adjust its equity. No changes were made in the objectives, policies or processes for managing capital during the Relevant Periods.

The Business monitors capital using a net borrowings to equity ratio, which is net borrowings divided by total equity. Net borrowings include interest-bearing bank loans less cash and cash equivalents and restricted cash.

At the end of each of the Relevant Periods, the strategy of the Business was to maintain the net borrowings to equity ratio at a healthy capital level in order to support its businesses. The principal strategies adopted by the Business include, without limitation, reviewing future cash flow requirements and the ability to meet debt repayment schedules when they fall due,

– I-59 –

APPENDIX I

ACCOUNTANTS’ REPORT ON THE TARGET ASSETS

maintaining a reasonable level of available banking facilities and adjusting investment plans and financing plans, if necessary, to ensure that the Business has a reasonable level of capital to support its business. The net borrowings to equity ratios at the end of each of the Relevant Periods were as follows:

Interest-bearing bank loans Less: Cash and cash equivalents Net borrowings Equity Net borrowings to equity ratio	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 850 220,850 220,000 (278,146) (151,181) (224,796) (277,296) 69,669 (4,796) 2,220,887 2,243,379 2,326,748 (12%) 3% –	As at 30 June 2009 RMB’000 1,820,000 (183,551)
		1,636,449
		2,517,446
		65%

III. SUBSEQUENT EVENTS

Save as disclosed elsewhere in the Combined Financial Information, no other significant event took place subsequent to 30 June 2009.

IV. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Business have been prepared by the management of the Business in respect of any period subsequent to 30 June 2009.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

– I-60 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

(A) FINANCIAL SUMMARY

Set out below is a summary of the results, assets and liabilities of the Group for each of the years ended 31 December 2006, 2007 and 2008 (“Three-year Summary”) and for each of the six-month periods ended 30 June 2008 and 2009 (“Interim Summary”), as extracted from the relevant consolidated financial statements of the Group prepared in accordance with IFRS.

The Three-year Summary is extracted from the audited consolidated financial statements of the Group for each of the three years ended 31 December 2006, 2007 and 2008. An unqualified opinion has been issued in respect of the consolidated financial statements of the Group for each of the three years ended 31 December 2006, 2007 and 2008.

The Interim Summary is extracted from the unaudited interim report of the Company for the six months ended 30 June 2009.

CONSOLIDATED INCOME STATEMENT

Revenue Cost of sales and services Gross profit Other income Selling and administrative expenses Change in fair value of derivative financial liabilities Impairment loss on available-for-sale investment Share of profits and losses of associates Share of profits and losses of jointly controlled entities Finance costs Profit before tax Income tax Profit for the year/period Attributable to: Equity holders of the Company Minority interests Dividend Earnings per share attributable to ordinary equity holders of the Company-Basic (RMB)	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 (Restated) 1,160,013 1,570,136 1,586,512 (575,455) (873,280) (887,911)	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 (Restated) 1,160,013 1,570,136 1,586,512 (575,455) (873,280) (887,911)	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 (Restated) 1,160,013 1,570,136 1,586,512 (575,455) (873,280) (887,911)	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (Unaudited) (Unaudited 745,884 752,681 (351,938) (379,603	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (Unaudited) (Unaudited 745,884 752,681 (351,938) (379,603
	584,558 162,148 (138,381) – – 1,227 192,414 (116,522) 685,444 (40,282)	696,856 56,867 (111,781) (2,911) – 992 167,306 (57,813) 749,516 (119,134)	698,601 452,224 (160,306) (6,123) (53,001) 8,925 179,466 (87,761) 1,032,025 (209,321)	393,946 299,060 (70,766) (8,894) – 12,566 103,632 (53,860) 675,684 (99,244)	373,078 14,864 (71,555 2,250 – (12,195 59,959 (31,885
					334,516 (64,141
	645,162	630,382	822,704	576,440	270,375
	631,567 13,595	611,368 19,014	779,614 43,090	534,185 42,255	272,173 (1,798
	645,162 – 0.24	630,382 175,560 0.21	822,704 234,080 0.27	576,440 – 0.18	270,375
					–
					0.09

– II-1 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CONSOLIDATED BALANCE SHEET

NON-CURRENT ASSETS Property, plant and equipment Prepaid lease payments Investment properties Intangible assets Goodwill Interests in jointly controlled entities Interests in associates Available-for-sale financial assets Deferred tax assets Amounts due from a jointly controlled entity Amounts due from associates CURRENT ASSETS Properties held for sale Inventories Trade and other receivables Prepaid lease payments Amounts due from jointly controlled entities Amounts due from associates Amounts due from related companies Amount due from fellow subsidiaries Amount due from Dalian Port Corporation Limited (“PDA”) Cash and bank balances Non-current assets held for sale	As 2006 RMB’000 (Restated) 5,118,217 182,428 850,058 48,951 – 702,654 131,373 54,076 79,142 – –	at 31 December 2007 2008 RMB’000 RMB’000 4,407,725 5,444,571 292,437 290,700 907,684 877,498 48,738 133,415 – 16,035 718,398 893,697 717,545 951,265 160,559 118,642 70,501 55,158 – 3,588 – 64,000	at 31 December 2007 2008 RMB’000 RMB’000 4,407,725 5,444,571 292,437 290,700 907,684 877,498 48,738 133,415 – 16,035 718,398 893,697 717,545 951,265 160,559 118,642 70,501 55,158 – 3,588 – 64,000	As at 30 June 2009 RMB’000 (Unaudited) 5,605,102 287,434 852,597 128,095 16,035 951,761 1,186,823 141,353 59,346 – 66,645 9,295,191 9,987 9,383 354,235 6,495 9,802 136,930 – 1,491 5,002 1,015,932 1,549,257 – 1,549,257
	7,166,899 211,411 23,086 306,384 4,591 78,167 22,736 80 3 1,932 1,412,634 2,061,024 104,200 2,165,224	7,323,587 84,207 24,931 381,825 6,411 58,040 74,455 80 2,679 37 532,154 1,164,819 1,036,293 2,201,112	8,848,569 9,655 7,699 487,398 6,480 30,318 122,091 – 351 5,175 670,011 1,339,178 – 1,339,178	9,295,191
				9,987 9,383 354,235 6,495 9,802 136,930 – 1,491 5,002 1,015,932
				1,549,257
				–
				1,549,257

– II-2 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CURRENT LIABILITIES Trade and other payables Amounts due to jointly controlled entities Amounts due to associates Amounts due to related companies Amounts due to fellow subsidiaries Amounts due to PDA Amount due to a minority shareholder Tax payable Bank borrowings – due within one year Government grants NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank and other borrowings – due after one year Government grants Derivative financial liabilities Loan from PDA Long-term payables NET ASSETS EQUITY Issued capital Reserves Equity attributable to equity holders of the Company Minority interests Total equity	As 2006 RMB’000 490,645 1,093 4,708 93,706 6,382 8,808 22,618 29,184 446,098 104,200	at 31 December 2007 2008 RMB’000 RMB’000 375,855 446,871 1,561 3,587 4,761 2,594 96,683 88,789 4,891 2,892 16,547 31,634 22,059 – 48,052 82,086 698,060 196,733 38,020 38,380	at 31 December 2007 2008 RMB’000 RMB’000 375,855 446,871 1,561 3,587 4,761 2,594 96,683 88,789 4,891 2,892 16,547 31,634 22,059 – 48,052 82,086 698,060 196,733 38,020 38,380	As at 30 June 2009 RMB’000 732,341 19,971 3,688 52,007 2,683 17,499 – 11,130 50,000 38,380
	1,207,442 957,782 8,124,681 1,961,684 629,698 – – – 2,591,382	1,306,489 894,623 8,218,210 1,529,900 748,522 2,911 – – 2,281,333	893,566 445,612 9,294,181 1,235,000 711,178 9,034 788,377 – 2,743,589	927,699
				621,558 9,916,749 2,783,512 691,181 6,784 – 15,725
				3,497,202
	5,533,299	5,936,877	6,550,592	6,419,547
	2,926,000 2,434,049 5,360,049 173,250	2,926,000 2,850,425 5,776,425 160,452	2,926,000 3,434,846 6,360,846 189,746	2,926,000 3,445,632
				6,371,632 47,915
	5,533,299	5,936,877	6,550,592	6,419,547

– II-3 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

(B) AUDITED FINANCIAL STATEMENTS

Set out below are the audited consolidated financial statements of the Group as extracted from the annual report of the Company for the year ended 31 December 2008.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008

Notes Revenue Cost of sales and services Gross profit Other income 8 Selling and administrative expenses Changes in fair value of derivative financial liabilities Impairment loss on available-for-sale investments Share of results of jointly controlled entities Share of results of associates Finance costs 9 Profit before tax Income tax expense 10 Profit for the year 11 Attributable to: Equity holders of the Company Minority interests Dividend 13 Earnings per share – basic (RMB) 14	2008 RMB’000 1,586,512 (887,911)	2007 RMB’000 1,570,136 (873,280) 696,856 56,867 (111,781) (2,911) – 167,306 992 (57,813) 749,516 (119,134) 630,382 611,368 19,014 630,382 175,560 0.21
	698,601 452,224 (160,306) (6,123) (53,001) 179,466 8,925 (87,761) 1,032,025 (209,321)	696,856 56,867 (111,781 (2,911 – 167,306 992 (57,813
		749,516 (119,134
	822,704
	779,614 43,090	611,368 19,014
	822,704 234,080 0.27

– II-4 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CONSOLIDATED BALANCE SHEET

At 31 December 2008

Notes Non-current assets Property, plant and equipment 15 Prepaid lease payments 16 Investment properties 17 Intangible assets 18 Goodwill 19 Interests in jointly controlled entities 20 Interests in associates 21 Available-for-sale investments 22 Deferred tax assets 23 Amount due from a jointly controlled entity 26 Amount due from an associate 27 Current assets Properties held for sale 24 Inventories – finished goods, at cost Trade and other receivables 25 Prepaid lease payments 16 Amounts due from jointly controlled entities 26 Amounts due from associates 27 Amounts due from related companies 28 Amount due from a fellow subsidiary 29 Advance to Dalian Port Corporation Limited (“PDA”) 30 Bank balances and cash 31 Non-current assets held for sale 32 Current liabilities Trade and other payables 33 Amounts due to jointly controlled entities 26 Amounts due to associates 27 Amounts due to related companies 28 Amounts due to fellow subsidiaries 29 Advance from PDA 30 Amount due to a minority shareholder 34 Tax liabilities Bank borrowings – due within one year 35 Government grants 36 Net current assets Total assets less current liabilities	2008 RMB’000 5,444,571 290,700 877,498 133,415 16,035 893,697 951,265 118,642 55,158 3,588 64,000	2007 RMB’000 4,407,725 292,437 907,684 48,738 – 718,398 717,545 160,559 70,501 – –
	8,848,569 9,655 7,699 487,398 6,480 30,318 122,091 – 351 5,175 670,011 1,339,178 – 1,339,178 446,871 3,587 2,594 88,789 2,892 31,634 – 82,086 196,733 38,380 893,566 445,612 9,294,181	7,323,587
		84,207 24,931 381,825 6,411 58,040 74,455 80 2,679 37 532,154
		1,164,819 1,036,293
		2,201,112
		375,855 1,561 4,761 96,683 4,891 16,547 22,059 48,052 698,060 38,020
		1,306,489
		894,623
		8,218,210

– II-5 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Notes Non-current liabilities Bank borrowings – due after one year 35 Government grants 36 Derivative financial liabilities 37 Loan from PDA 38 Net assets Capital and reserves Paid-in capital 39 Share premium and reserves Equity attributable to equity holders of the Company Minority interests Total equity	2008 RMB’000 1,235,000 711,178 9,034 788,377 2,743,589 6,550,592 2,926,000 3,434,846 6,360,846 189,746 6,550,592	2007 RMB’000 1,529,900 748,522 2,911 –
		2,281,333
		5,936,877
		2,926,000 2,850,425
		5,776,425 160,452
		5,936,877

– II-6 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008

At 1 January 2007 Loss on fair value changes of available-for-sale investment Exchange difference arising on translation of foreign operations Net expense recognised directly in equity Profit for the year Total recognised income and expense for the year Adjustment arising from utilisation of deemed contribution Overprovision of expenses relating to issue of new H shares in prior year Acquisition of additional interests in subsidiaries Transfer Dividend paid Proposed final dividend Appropriations At 31 December 2007 and 1 January 2008 Loss on fair value changes of available-for-sale investments Exchange difference arising on translation of foreign operations Net expense recognised directly in equity Impairment loss on available-for-sale investments Profit for the year Total recognised income and expense for the year Contribution by minority shareholders Acquisition of subsidiaries Fair value adjustment on acquisition of additional equity interest of subsidiaries Transfer Dividend paid Proposed final dividend Appropriations At 31 December 2008	Attributable to equity holders of the Company
	Paid-in capital Share premium Capital reserve Statutory surplus reserve fund Enterprise development fund Discretionary reserve fund Special reserve Other reserve Revaluation reserve Translation reserve Dividend reserve Retained earnings/ shareholders’ contribution Total Minority interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note a) (Note b) (Note c) (Note d) (Note e) 2,926,000 1,441,549 866,025 128,477 8,443 1,069 15,666 (614,756) – – 175,560 412,016 5,360,049 173,250 5,533,299 – – – – – – – – (14,555) – – – (14,555) – (14,555) – – – – – – – – – (6,754) – – (6,754) – (6,754) – – – – – – – – (14,555) (6,754) – – (21,309) – (21,309) – – – – – – – – – – – 611,368 611,368 19,014 630,382 – – – – – – – – (14,555) (6,754) – 611,368 590,059 19,014 609,073 – – – – – – – – – – – (17,515) (17,515) – (17,515) – 19,392 – – – – – – – – – – 19,392 – 19,392 – – – – – – – – – – – – – (6,873) (6,873) – – – – (8,129) (920) – 30,806 – – – (21,757) – – – – – – – – – – – – – (175,560) – (175,560) (24,939) (200,499) – – – – – – – – – – 234,080 (234,080) – – – – – – 90,650 101 67 – – – – – (90,818) – – – 2,926,000 1,460,941 866,025 219,127 415 216 15,666 (583,950) (14,555) (6,754) 234,080 659,214 5,776,425 160,452 5,936,877 – – – – – – – – (38,446) – – – (38,446) – (38,446) – – – – – – – – – (3,699) – – (3,699) – (3,699) – – – – – – – – (38,446) (3,699) – – (42,145) – (42,145) – – – – – – – – 53,001 – – – 53,001 – 53,001 – – – – – – – – – – – 779,614 779,614 43,090 822,704 – – – – – – – – 14,555 (3,699) – 779,614 790,470 43,090 833,560 – – – – – – – – – – – – – 1,185 1,185 – – – – – – – – – – – – – 9,787 9,787 – – – – – – – 28,544 – – – – 28,544 16,673 45,217 – – – – – – – 75,161 – – – (75,674) (513) (51) (564) – – – – – – – – – – (234,080) – (234,080) (41,390) (275,470) – – – – – – – – – – 263,340 (263,340) – – – – – – 72,862 – – – – – – – (72,862) – – –
	2,926,000 1,460,941 866,025 291,989 415 216 15,666 (480,245) – (10,453) 263,340 1,026,952 6,360,846 189,746 6,550,592

– II-7 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Notes:

• (a) According to the Articles of Association, the Company and certain subsidiaries are required to transfer 10% of the profit after tax (as determined under the People’s Republic of China (the “PRC”) accounting standards) to the statutory surplus reserve fund until the fund balance reaches 50% of the registered capital. The transfer to this fund must be made before distributing dividends to shareholders. The fund can be used to make up for previous years’ losses, expand the existing operations or convert into additional capital of the Company and subsidiaries.

• (b) Pursuant to regulations in the PRC, certain subsidiaries are required to transfer 5% to 10% of the profit after tax (as determined under the PRC accounting standards) to the enterprise development fund. The fund can only be used for the enterprise development and is not available for distribution to shareholders.

• (c) According to the Articles of Association, the Company and certain subsidiaries can transfer the profit after tax to the discretionary reserve fund on a discretionary basis.

• (d) Special reserve arose from the measurement of the non-interest bearing advance from PDA in prior year at fair value, in accordance with its accounting policies adopted for initial recognition of financial instruments.

• (e) Other reserve represents the reversal of the revaluation surplus arising from the capital contribution by PDA to Dalian Container Terminal Co., Ltd (“DCT”) and the group reorganisation in prior year and the difference between the fair values and the carrying values of the underlying assets and liabilities attributable to the acquisition of additional interest of subsidiaries amounting to RMB28,544,000. Other reserve in relation to the reversal of the revaluation surplus would be released to retained earnings upon the depreciation of those capital assets.

– II-8 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2008

Operating activities Profit before tax Adjustments for: Bank interest income Changes in fair value of derivative financial liabilities Changes in fair value of financial assets classified as held for trading Depreciation and amortisation Government grants released to consolidated income statement to offset depreciation Finance costs Gain from acquisition of interest of associates (Gain) loss on disposal of investment properties Gain on disposal of non-current assets held for sale Gain on disposal of prepaid lease payments Gain on disposal of property, plant and equipment Gain on disposal of properties held for sale Government grants released to consolidated income statement Impairment of available-for-sale investments Net interest income from derivative financial liabilities Loss on disposal of intangible assets Release of prepaid lease payments to consolidated income statement Share of results of associates Share of results of jointly controlled entities Operating cash flows before movements in working capital Increase in properties held for sale Decrease (increase) in inventories (Increase) decrease in trade and other receivables Decrease (increase) in amounts due from jointly controlled entities (Increase) decrease in amounts due from associates Decrease (increase) in amounts due from related companies (Increase) decrease in advance to PDA Decrease in trade and other payables Increase in amounts due to jointly controlled entities (Decrease) increase in amounts due to associates (Decrease) increase in amounts due to related companies Release of government grant to consolidated income statement (Decrease) increase in advance from PDA Proceeds from disposal of financial assets classified as held for trading Cash generated from operations Interest received Income tax paid Net cash generated from operating activities	2008 RMB’000 1,032,025 (14,380) 6,123 – 217,898 (38,380) 87,761 (1,570) (13,543) (120,515) (136,595) (140,606) (17,213) (16,060) 53,001 (2,342) 155 6,907 (8,925) (179,466)	2007 RMB’000 (restated) 749,516 (18,566) 2,911 (4,981) 178,677 (23,360) 57,813 – 253 – (1,831) (6,869) (20,692) (220) – (1,749) 1 4,911 (992) (167,306) 747,516 124,581 (1,845) 236,914 (4,873) 12,281 (2,676) 1,895 (229,485) 468 53 1,486 23,360 7,739 6,945 924,359 18,566 (109,140) 833,785
	714,275 (4,924) 18,368 (3,498) 2,722 (1,636) 2,408 (290) (19,204) 2,026 (2,167) (5,069) 38,380 (15,586) – 725,805 13,803 (178,115) 561,493	747,516 124,581 (1,845 236,914 (4,873 12,281 (2,676 1,895 (229,485 468 53 1,486 23,360 7,739 6,945
		924,359 18,566 (109,140
		833,785

– II-9 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Note Investing activities Purchase of property, plant and equipment Acquisition of associates Acquisition of jointly controlled entities Advance to associates Acquisition of subsidiaries 40 Loan to a jointly controlled entity Purchase of intangible assets Proceeds from disposal of non-current assets held for sale Proceeds from disposal of property, plant and equipment Dividend received from jointly controlled entities Proceed from disposal of prepaid lease payments Proceed from disposal of investment properties Repayment of loan from jointly controlled entities Dividend received from associates Net interest received from derivative financial liabilities Acquisition of available-for-sale investments Addition of prepaid lease payments Acquisition of additional interest in subsidiaries Purchase of investment properties Proceed from disposal of intangible assets Net cash generated from (used in) investing activities Financing activities Repayment of bank loans Dividend paid Interest paid Dividend paid to minority shareholders Repayment to a minority shareholder Loan from PDA New bank loans raised Government grant received Contribution from minority shareholder Expenses refunded in connection with issue of new H shares in prior year Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December, represented by bank balances and cash	2008 RMB’000 (1,165,365) (206,818) (177,000) (110,000) (73,757) (3,588) (938) 1,183,734 236,576 165,101 124,817 21,257 25,000 8,947 2,342 – – – – –	2007 RMB’000 (776,457) (494,569) (6,686) (64,000) – – (2,018) – 31,356 176,631 2,331 46,311 25,000 6,185 1,749 (122,155) (82,255) (6,873) (650) 40 (1,266,060) (1,150,885) (175,560) (122,072) (8,902) – – 970,504 19,318 – 19,392 (448,205) (880,480) 1,412,634 532,154
	30,308 (978,961) (234,080) (121,609) (51,494) (22,059) 787,670 147,733 17,456 1,400 – (453,944) 137,857 532,154	(1,266,060
		(1,150,885 (175,560 (122,072 (8,902 – – 970,504 19,318 – 19,392
		(448,205
		(880,480 1,412,634
	670,011

– II-10 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2008

1. GENERAL

The Company was established in the PRC as a joint stock limited company on 16 November 2005 and it has been registered in Hong Kong as a non-Hong Kong company under Part XI of the Hong Kong Companies Ordinance. The H shares of the Company have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “SEHK”) with effect from 28 April 2006.

The Company’s parent and ultimate holding company is PDA, which is a state-owned enterprise established on 30 April 2003, under the laws of the PRC. The addresses of the registered office and principal place of business of the Company are disclosed in the annual report.

The consolidated financial statements are presented in Renminbi (“RMB”), which is also the functional currency of the Company.

The Group is engaged in oil/liquefied chemicals terminal and logistics services, container terminal and logistics services, automobile terminal and logistics services and port value-added services.

2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

In the current year, the Group has applied the following amendments and interpretations (“new IFRSs”) issued by the International Accounting Standards Board (the “IASB”) and the International Financial Reporting Interpretations Committee (the “IFRIC”) of the IASB which are or have become effective.

IAS 39 & IFRS 7 (Amendments) Reclassification of Financial Assets IFRIC-Int 11 HKFRS 2: Group and Treasury Share Transactions IFRIC-Int 12 Service Concession Arrangements IFRIC-Int 14 HKAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

The adoption of the new IFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

The Group has early applied IFRS 8 “Operating Segments” in advance of its effective date, with effect from 1 January 2008. Amounts reported for prior year have been restated on the new basis. Details are set out in note 7.

– II-11 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

IFRSs (Amendments) Improvements to IFRSs[1] IAS 1 (Revised) Presentation of Financial Statements[2] IAS 23 (Revised) Borrowing Costs[2] IAS 27 (Revised) Consolidated and Separate Financial Statements[3] IAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation[2] IAS 39 (Amendment) Eligible hedged Items[3] IFRS 1 & IAS 27 (Amendments) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate[2] IFRS 2 (Amendment) Share-based Payment: Vesting Conditions and Cancellations[2] IFRS 3 (Revised) Business Combinations[3] IFRS 7 (Amendment) Improvement Disclosures about Financial Instruments[2] IFRIC – Int 9 & IAS 39 Embedded Derivatives[4] (Amendments) IFRIC – Int 13 Customer Loyalty Programmes[5] IFRIC – Int 15 Agreements for the Construction of Real Estate[2] IFRIC – Int 16 Hedges of a Net Investment in a Foreign Operation[6] IFRIC – Int 17 Distribution of Non-cash Assets to Owners[3] IFRIC – Int 18 Transfers of Assets from Customers[7]

1 Effective for annual periods beginning on or after 1 January 2009 except the amendments to IFRS 5 effective for annual periods beginning on or after 1 July 2009

2 Effective for annual periods beginning on or after 1 January 2009

3 Effective for annual periods beginning on or after 1 July 2009

4 Effective for annual periods ending on or after 30 June 2009

5 Effective for annual periods beginning on or after 1 July 2008

6 Effective for annual periods beginning on or after 1 October 2008

7 Effective for transfers on or after 1 July 2009

The directors of the Company anticipate that the application of these new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group except for the adoption of IFRS 3 (Revised) Business Combinations and IAS 27 (Revised) Consolidation and Separate Financial Statements. IFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. IAS 27 (Revised) will affect the accounting treatment on changes in a parent’s ownership interest in a subsidiary.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values, as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the SEHK and by the Hong Kong Companies Ordinance.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

– II-12 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations

The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations”, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Goodwill

Goodwill arising on an acquisition of a business represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant business at the date of acquisition. Such goodwill is carried at cost less any accumulated impairment losses.

Capitalised goodwill arising on an acquisition of a business is presented separately in the consolidated balance sheet.

For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

On subsequent disposal of the relevant cash-generating unit, the attributable amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

– II-13 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes (other than construction in progress) are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment other than construction in progress over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method, at the following rates per annum.

Buildings	2% to 4%
Terminal facilities	2% to 6%
Terminal equipment	5% to 10%
Vessels and motor vehicles	5% to 14%
Other equipment	9% to 19%

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognised impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

Prepaid lease payments

Payments for obtaining land use rights are accounted for as prepaid lease payments and are charged to the income statement on a straight-line basis over the relevant lease terms. Land use rights which is to be charged to the income statement in the next twelve months or less is classified as current assets.

During the construction period, the amortisation charge provided for the prepaid lease payments is included as part of costs of buildings under construction. Buildings under construction are carried at cost, less any identified impairment losses. Depreciation of buildings commences when they are available for use.

Gains or losses from derecognition of a prepaid lease payment (calculated as the difference between the net disposal proceeds and the carrying amount of the items) is included in the consolidated income statement in the year in which the item is derecognised.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost of investment properties using the straight-line method.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the year in which the item is derecognised.

– II-14 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Intangible assets

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives.

Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities.

The results and assets and liabilities of jointly controlled entities are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in jointly controlled entities are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the jointly controlled entities, less any identified impairment loss. When the Group’s share of losses of a jointly controlled entity equals to or exceeds its interest in that jointly controlled entity (which includes any long-term interests that, in substance, form part of the Group’s net investment in the jointly controlled entity), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

When a group entity transacts with a jointly controlled entity of the Group, profits or losses are eliminated to the extent of the Group’s interest in the jointly controlled entity.

Interests in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associates, less any identified impairment loss. When the Group’s share of losses of an associate equals to or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

– II-15 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value. When a development property is sold in advance of completion, profit is only recognised upon completion of the development. Deposits and instalments received from purchasers prior to this stage are included in current liabilities.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Non-current assets held for sale

Non-current assets (and disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the assets (or disposal group) are available for immediate sale in its present condition.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of the assets (‘disposal groups’) previous carrying amount and fair value less costs to sell.

Government grants

Government grants are recognised as income over the periods necessary to match them with the related costs. Grants related to depreciable assets are presented as deferred income and are released to income over the useful lives of the assets. Grants related to expense items are recognised in the same period as those expenses are charged in the consolidated income statement and are reported separately as ‘other income’.

Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill above)

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

– II-16 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Financial assets

The Group’s financial assets are classified into loans and receivables and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Interest income is recognised on an effective interest basis.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including trade and other receivables, amounts due from jointly controlled entities, associates, related companies and a fellow subsidiary, advance to PDA and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments.

At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss (see accounting policy on impairment of financial assets below).

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition (see accounting policy on impairment of financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted.

For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

– II-17 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

For certain categories of financial asset, such as trade and other receivables, etc, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio beyond the average credit period of 90 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, amounts due from jointly controlled entities, associates, related companies and a fellow subsidiary and advance to PDA, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When trade and other receivables, amounts due from jointly controlled entities, associates, related companies and a fellow subsidiary and advance to PDA, are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in equity.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s financial liabilities are classified into other financial liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities (including trade and other payables, amounts due to jointly controlled entities, associates, related companies, fellow subsidiaries and a minority shareholder, advance from PDA and bank borrowings) are subsequently measured at amortised cost, using the effective interest method.

– II-18 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes.

Revenue from oil/liquefied chemicals terminal logistics services and container terminal logistics services, automobile terminal logistics services and port value-added services are recognised when the respective services are rendered.

Rental income is recognised on a straight-line basis over the term of the relevant leases.

Revenue from sale of completed properties is recognised upon execution of the sale agreements, when the significant risks and rewards of ownership of the properties are transferred to buyers.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Dividend income from investments is recognised when shareholders’ rights to receive payment have been established.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

– II-19 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

The Group as lessee

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Leasehold land and building

The land and building elements of a lease of land and building are considered separately for the purpose of lease classification. To the extent the allocation of the lease payments can be made reliably, leasehold interests in land are accounted for as operating leases.

Retirement benefit costs

Payments to state-managed retirement benefit schemes are charged as an expense when employees have rendered service entitling them to the contributions.

– II-20 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into Renminbi at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

The key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next twelve months are disclosed below.

Useful lives and impairment assessment of property, plant and equipment

The Group’s management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated lives or recognise impairment losses as appropriate.

Useful lives and impairment assessment of intangible assets

Intangible assets with finite useful lives are stated at cost less accumulated amortisation and identified impairment losses. As at 31 December 2008, the carrying amount of intangible assets is approximately RMB133,415,000 (2007: RMB48,738,000). The estimation of their useful lives impacts the level of annual amortisation expense recorded. The estimated useful life and dates that the Group places the intangible assets into use reflects the directors’ best estimate of the periods that the Group intends to derive future economic benefits from the use of the Group’s assets. Intangible assets are evaluated for possible impairment on a specific asset basis or in groups of similar assets, as applicable. The process requires management estimate of future cash flows generated by each assets or group of assets. For any instance where this evaluation process indicates impairment, the appropriate assets’ carrying values are written down to their recoverable amount and the amount of the write-down is charged against the results of operations.

Fair value of derivatives financial instruments

As described in note 6c, for derivative financial instruments, assumptions are made based on quoted market rates adjusted for specific features of the instrument. The estimation of fair value of derivative financial instruments is valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates. The carrying amount of the derivative financial liabilities is RMB9,034,000 (2007: RMB2,911,000).

– II-21 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

5. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes bank borrowings disclosed in note 35, loan from PDA in note 38 and equity attributable to equity holders of the Company, comprising paid-in capital, share premium and reserves. The directors of the Company review the capital structure periodically. As a part of this review, the directors of the Company assess the annual budget prepared by various departments taking into account of the future expansion and the provision of funding. Based on the proposed annual budget, the directors of the Company consider the cost of capital and the risks associated with each class of capital. The directors of the Company also balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

6. FINANCIAL INSTRUMENTS

6a. Categories of financial instruments

	2008	2007
	RMB’000	RMB’000
Financial assets
Loans and receivables at amortised cost
(including cash and cash equivalents)	1,382,932	1,049,270
Available-for-sale investments	118,642	160,559
Financial liabilities
Liabilities at amortised cost	2,796,477	2,750,317
Derivative financial instruments	9,034	2,911

6b. Financial risk management objectives and policies

The Group’s major financial instruments include trade and other receivables, amounts due from/to PDA, jointly controlled entities, associates, related companies, fellow subsidiaries and a minority shareholder, bank balances, trade and other payables, bank borrowings and loan from PDA. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (interest rate risk and other price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

(i) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to fixed-rate loan from PDA (see note 38 for details of the loan) and cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank deposits and bank borrowings (see note 35 for details of the bank borrowings) which carry prevailing market interest rates. The Group does not have an interest rate hedging policy. However, the management monitors interest rate exposure closely.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of Benchmark Borrowing Rate of The People’s Bank of China and Hong Kong Interbank Offered Rate arising from the Group’s RMB and Hong Kong Dollars denominated borrowings.

– II-22 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the balance sheet date. For variable-rate bank borrowings, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 27 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

At the respective balance sheet dates, if interest rates had been increased/decreased by 27 basis points and all other variables were held constant, the Group’s profit would decrease/increase by approximately RMB1,817,000 and RMB2,825,000 for the years ended 31 December 2008 and 2007, respectively.

(ii) Other price risk

The Group is exposed to equity price risk on its listed available-for-sale investments. Management of the Group has closely monitored the price risk and will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to equity price risks at the balance sheet date.

If the prices of the listed available-for-sale investments had been 5% lower/higher, the Group’s investment revaluation reserve would decrease/increase by approximately RMB2,924,000 as a result of the changes in fair value of the listed available-for-sale investments for the year ended 31 December 2007.

If the prices of the listed available-for-sale investments had been 5% lower, the Group’s profit would decrease by approximately RMB828,000 as a result of the changes in fair value of the listed available-for-sale investments for the year ended 31 December 2008.

If the prices of the listed available-for-sale investments had been 5% higher, the Group’s investment revaluation reserve would increase by approximately RMB828,000 as a result of the changes in fair value of the listed available-for-sale investments for the year ended 31 December 2008.

Credit risk

As at 31 December 2008, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet and the amount of contingent liabilities in relation to the financial guarantees provided by the Group as disclosed in note 41.

In order to minimise the credit risk, management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The two largest customers accounted for a total of 28% and 27% of the Group’s total sales for the year ended 31 December 2008 and 2007 respectively. The failure of any of these customers to make required payments could have a substantial negative impact on the Group’s profits. The Group manages this risk by applying a limit on the credit to these customers.

– II-23 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Other than the balances listed below, the Group does not have any other significant concentration of credit risk.

	2008	2007
	RMB’000	RMB’000
Other receivables
– Dalian Municipal Bureau of Finance (Note 1)	172,596	172,596
– Dalian Petrochemical Co., Ltd. (Note 2)	74,872	–

Notes:

• (1) The amount represents receivable in respect of compensation for terminal relocation. As the debtor is a government organization, the directors of the Company consider that the credit risk is low.

• (2) The amount represents receivable in respect of disposal of oil tanks and prepaid lease payments. As the Group has implemented necessary policies and follow up actions to ensure the credit quality of the debtor, the directors of the Company consider that the credit risk is low.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. Management monitors the utilisation of bank borrowings and loan from PDA and ensures compliance with loan covenants.

The Group relies on bank borrowings and loan from PDA as a significant source of liquidity. As at 31 December 2008 and 2007, the Group has total available unutilised overdraft and short-term bank loan facilities of approximately RMB2,500,000,000 and RMB2,690,000,000, respectively.

The following table details the Group’s remaining contractual maturity for its financial liabilities. For non-derivative financial liabilities, the table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

– II-24 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Liquidity and interest risk tables

Weighted average interest rate % 2008 Non-derivative financial liabilities Trade and other payables – Amounts due to jointly controlled entities – Amounts due to associates – Amounts due to related companies – Amounts due to fellow subsidiaries – Advance from PDA – Bank borrowings – floating rate 6.40 Loan from PDA – fixed rate 5.47 2007 Non-derivative financial liabilities Trade and other payables – Amounts due to jointly controlled entities – Amounts due to associates – Amounts due to related companies – Amounts due to fellow subsidiaries – Advance from PDA – Amount due to a minority shareholder – Bank borrowings – floating rate 5.53	Less than 1 month RMB’000 111,515 2,022 12 66 – 344 15,057 – 129,016	1-3 months RMB’000 57,988 1,545 145 1,132 38 554 43,350 – 104,752	3 months to 1 year RMB’000 277,368 20 2,437 87,591 2,854 30,736 242,981 30,507 674,494	1-5 years RMB’000 – – – – – – 1,071,151 168,713 1,239,864	Over 5 years Total undiscounted cash flows RMB’000 RMB’000 – 446,871 – 3,587 – 2,594 – 88,789 – 2,892 – 31,634 532,877 1,905,416 968,530 1,167,750 1,501,407 3,649,533	Over 5 years Total undiscounted cash flows RMB’000 RMB’000 – 446,871 – 3,587 – 2,594 – 88,789 – 2,892 – 31,634 532,877 1,905,416 968,530 1,167,750 1,501,407 3,649,533	Carrying amount at 31 December RMB’000 446,871 3,587 2,594 88,789 2,892 31,634 1,431,733 788,377
							2,796,477
	131,562 1,386 4,456 24,597 170 13,707 – 68,197	15,531 107 – 44 38 1,834 – 136,395	228,762 68 305 72,042 4,683 1,006 22,059 613,777	– – – – – – – 1,051,621	– – – – – – – 790,500	375,855 1,561 4,761 96,683 4,891 16,547 22,059 2,660,490	375,855 1,561 4,761 96,683 4,891 16,547 22,059 2,227,960
	244,075	153,949	942,702	1,051,621	790,500	3,182,847	2,750,317

6c. Fair value

The fair value of financial assets and financial liabilities are determined as follows:

• the fair value of financial assets (excluding derivative instruments) with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices; and

• the fair value of other financial assets and financial liabilities (including derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions as input.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

– II-25 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

7. SEGMENT INFORMATION

The Group has adopted IFRS 8 “Operating Segments” in advance of its effective date, with effect from 1 January 2008. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (IAS 14 “Segment Reporting”) required an entity to identify two sets of segments (business and geographical) using a risks and rewards approach, with the entity’s “system of internal financial reporting to key management personnel” serving only as the starting point for the identification of such segments. As a result, following the adoption of IFRS 8, the identification of the Group’s reportable segments has changed.

In prior years, segment information reported externally was analysed based on components of the business that are exposed to similar risks and that generate similar rates of return. However, information reported to Chief Executive Officer for the purposes of resources allocation and assessment of performance is more specifically focused on the operating divisions for different products and services.

The Group’s reportable segments under IFRS 8 are therefore oil/liquefied chemicals terminal and logistics services, container terminal and logistics services, automobile terminal and logistics services and port value-added service. These divisions are the basis on which the Group reports its segment information and no operating segments under IAS 14 have been aggregated.

Principal activities are as follows:

Oil/liquefied	–	Loading and discharging, storage and transhipment of oil
chemicalsterminal and		products and liquefied chemicals and port management
logistics services		services;
Container terminal and	–	Loading and discharging, storage and transhipment of
logistics services		containers, leasing of terminals and related facilities and
		various container logistics services and sales of
		properties;
Automobile terminal and	–	Loading and discharging of automobile and related
logistics services		logistics services;
Port value-added services	–	Tallying, tugging and information technology services.

– II-26 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Segment information about the Group’s operations is presented below.

INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

Revenue Cost of sales and services Gross profit Other income Interest income Selling and administrative expenses Changes in fair value of derivative financial liabilities Impairment loss on available-for-sale investments Share of results of jointly controlled entities Share of results of associates Finance costs Profit (loss) before tax Income tax (expense) credit Profit (loss) for the year	Oil/liquefied chemicals terminal and logistics services RMB’000 670,025 (292,185)	Container terminal and logistics services RMB’000 572,798 (410,110)	Automobile terminal and logistics services RMB’000 – –	Port value-added services RMB’000 338,573 (185,012)	Unallocated RMB’000 5,116 (604)	Total RMB’000 1,586,512 (887,911)
	377,840 211,386 661 (35,573) – – 20,031 1,875 – 576,220 (125,787)	162,688 222,166 9,062 (78,843) – – 146,579 16,938 (57,240) 421,350 (63,044)	– – – (47) – – 41 (10,330) – (10,336) –	153,561 1,820 499 (22,620) – – 12,815 442 (307) 146,210 (32,595)	4,512 2,471 4,159 (23,223) (6,123) (53,001) – – (30,214) (101,419) 12,105	698,601 437,843 14,381 (160,306) (6,123) (53,001) 179,466 8,925 (87,761)
						1,032,025 (209,321)
	450,433	358,306	(10,336)	113,615	(89,314)	822,704

Segment profit after tax represents the profit earned by each segment. This is the measure reported to Chief Executive Officer for the purposes of resources allocation and assessment of segment performance.

BALANCE SHEET

AT 31 DECEMBER 2008

Assets Segment assets Interests in jointly controlled entities Interests in associates Consolidated total assets Liabilities Segment liabilities	Oil/liquefied chemicals terminal and logistics services RMB’000 4,363,778 220,440 18,060 4,602,278 920,982	Container terminal and logistics services RMB’000 2,519,434 646,401 848,850 4,014,685 1,251,239	Automobile terminal and logistics services RMB’000 173,560 4,078 80,365 258,003 –	Port value-added services RMB’000 830,522 22,778 3,990 857,290 25,396	Unallocated RMB’000 455,491 – – 455,491 1,439,538	Total RMB’000 8,342,785 893,697 951,265
						10,187,747
						3,637,155

– II-27 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

OTHER INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2008

	Oil/liquefied
	chemicals	Container	Automobile
	terminal and	terminal and	terminal and	Port
	logistics	logistics	logistics	value-added
	services	services	services	services	Unallocated	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Capital additions	672,244	357,884	173,559	49,195	1,064	1,253,946
Depreciation and amortisation	137,089	44,924	–	34,675	1,210	217,898
Government grant related to
depreciation	(37,603)	(777)	–	–	–	(38,380)
Release of prepaid lease payments
to consolidated income statement	3,488	3,419	–	–	–	6,907
Loss on disposal of intangible assets	–	155	–	–	–	155
Gain on disposal of non-current
assets held for sale	–	(120,515)	–	–	–	(120,515)
Gain on disposal of prepaid lease
payments	(136,595)	–	–	–	–	(136,595)
Gain on disposal of property, plant
and equipment	(74,649)	(65,246)	–	(711)	–	(140,606)
Gain on disposal of properties held
for sale	–	(17,213)	–	–	–	(17,213)
Gain on disposal of investment
properties	–	(13,543)	–	–	–	(13,543)
Inter-segment sales	(116)	(654)	–	(4,542)	–	(5,312)

Inter-segment sales are charged at prevailing market prices.

INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2007 (Restated)

Revenue Cost of sales and services Gross profit Other (expense) income Interest income Selling and administrative expenses Changes in fair value of derivative financial liabilities Share of results of jointly controlled entities Share of results of associates Finance costs Profit (loss) before tax Income tax (expense) credit Profit (loss) for the year	Oil/liquefied chemicals terminal and logistics services RMB’000 673,707 (276,250)	Container terminal and logistics services RMB’000 643,084 (480,462)	Automobile terminal and logistics services RMB’000 – –	Port value-added services RMB’000 252,090 (116,498)	Unallocated RMB’000 1,255 (70)	Total RMB’000 1,570,136 (873,280)
	397,457 (2,466) 547 (29,738) – 20,785 – – 386,585 (52,661)	162,622 32,755 9,171 (38,709) – 137,546 582 (26,053) 277,914 (54,786)	– – – – – (203) (2,506) – (2,709) –	135,592 1,113 79 (17,467) – 9,178 2,916 (9) 131,402 (18,894)	1,185 6,899 8,769 (25,867) (2,911) – – (31,751) (43,676) 7,207	696,856 38,301 18,566 (111,781) (2,911) 167,306 992 (57,813)
						749,516 (119,134)
	333,924	223,128	(2,709)	112,508	(36,469)	630,382

– II-28 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

BALANCE SHEET

AT 31 DECEMBER 2007 (Restated)

Assets Segment assets Interests in jointly controlled entities Interests in associates Consolidated total assets Liabilities Segment liabilities	Oil/liquefied chemicals terminal and logistics services RMB’000 3,623,891 129,063 20,289 3,773,243 998,000	Container terminal and logistics services RMB’000 3,492,162 578,088 600,777 4,671,027 1,026,421	Automobile terminal and logistics services RMB’000 – 4,037 85,996 90,033 –	Port value-added services RMB’000 629,602 7,210 10,483 647,295 8,525	Unallocated RMB’000 343,101 – – 343,101 1,564,876	Total RMB’000 8,088,756 718,398 717,545
						9,524,699
						3,587,822

OTHER INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2007 (Restated)

	Oil/liquefied
	chemicals	Container	Automobile
	terminal and	terminal and	terminal and	Port
	logistics	logistics	logistics	value-added
	services	services	services	services	Unallocated	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Capital additions	839,969	243,839	–	123,354	899	1,208,061
Depreciation and amortisation	112,482	41,285	–	23,486	1,424	178,677
Government grant related to
depreciation	(23,360)	–	–	–	–	(23,360)
Release of prepaid lease payments
to consolidated income statement	2,228	2,683	–	–	–	4,911
Loss (gain) on disposal of property,
plant and equipment	2,158	(11,204)	–	2,177	–	(6,869)
Loss on disposal of intangible assets	–	–	–	1	–	1
Gain on disposal of prepaid lease
payment	(1,831)	–	–	–	–	(1,831)
Gain on disposal of properties held
for sale	–	(20,692)	–	–	–	(20,692)
Loss on disposal of investment
properties	–	253	–	–	–	253
Inter-segment sales	(69)	(475)	–	(2,302)	–	(2,846)

– II-29 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Revenue from major produces and services

The Group’s revenue from major products and services were as follows:

Loading services Logistics services Leasing services Storage services Sales of properties held for sale Port management services Information technology services Others	2008 RMB’000 404,997 395,446 209,201 190,923 47,287 82,919 69,886 185,853 1,586,512	2007 RMB’000 320,937 310,587 252,751 193,716 238,777 80,120 37,543 135,705
		1,570,136

The Group’s sales to customers which accounted for 10% or more of its sales are as follows:

Customer A Customer B	2008 RMB’000 255,120 195,312 450,432	2007 RMB’000 250,016 180,698
		430,714

Both customers are in the segment of oil/liquefied chemicals terminal and logistics services.

Geographical segments

All the group’s operations, and all its customers, are located in PRC. Accordingly, no geographical segment analysis of segment result, assets and cost incurred to acquire segment assets are presented.

8. OTHER INCOME

Gain on disposal of property, plant and equipment – oil storage tanks – vessels – others Gain on disposal of prepaid lease payments Gain on disposal of non-current assets held for sale Gain on disposal of properties held for sale (note 24) Government grants Bank interest income Changes in fair value of financial assets classified as held for trading Others	2008 RMB’000 74,731 63,437 2,438	2007 RMB’000 – – 6,869
	140,606 136,595 120,515 17,213 16,060 14,380 – 6,855	6,869 1,831 – 20,692 220 18,566 4,981 3,708
	452,224	56,867

– II-30 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

9. FINANCE COSTS

Interest on bank borrowings Interest on loan from PDA Less: amount capitalised and included in the cost of property, plant and equipment	2008 RMB’000 119,895 31,380 (63,514) 87,761	2007 RMB’000 123,112 – (65,299)
		57,813

The weighted average capitalisation rate is 7.1% per annum calculated on the general borrowing pool (2007: 6.3% per annum).

10. INCOME TAX EXPENSE

The charge comprises: Current tax: Charge for the year Under(over)provision in prior years Deferred tax (note 23)	2008 RMB’000 210,312 289	2007 RMB’000 128,759 (751)
	210,601 (1,280)	128,008 (8,874)
	209,321	119,134

On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the PRC. On 6 December 2007, the State Council of the PRC issued Implementation Regulations of the New Law. The New Law and Implementation Regulations will change the tax rate from 16.5% to 25% for the Company and from 33% to 25% for the subsidiaries from 1 January 2008 except for specific concessions set out below. The deferred tax balance has been adjusted to reflect the tax rates that are expected to apply to the respective periods when the asset is realised or the liability is settled (adjusted as appropriate).

The income tax rate of major subsidiaries of the Group is as follows:

• (1) Dalian Port Logistic Technology Co., Ltd (“PLT”) is a software enterprise located in Dalian high-tech industrial development park, pursuant to Cai Shui [2008] No. 1 “Circular of the Ministry of Finance and the State Administration of Taxation Concerning Several Preferential Policies Relevant to Enterprise Income Tax”, after approved by Tax Bureau, software enterprise can be entitled to income tax exemption for two years commencing from its first profit making year of operation and thereafter, entitled to a 50% relief from income tax for the following next three years. 2008 is the second year entitled to a 50% relief from income tax, hence the applicable income tax rate is 12.5% (2007: 7.5%).

• (2) Dalian Portnet Co., Ltd. is a high-tech enterprise located in Dalian high-tech industrial development park, which is an entity qualified for preferential income tax rate. Pursuant to Guo Fa [2007] No. 39, the income tax rate of the company will be transmitted to legal tax rate in the next 5 years from 1 January 2008. The applicable income tax rate during 2008 is 18%. Furthermore, According to “Bao Shui Guo Exemption [2006] No. 65” issued by the Dalian Branch State Administration of Taxation, Dalian Portnet Co., Ltd. is entitled to exemptions from income tax for two years commencing from its first profit making year of operation and thereafter, entitled to a 50% relief from income tax for the next three years. 2008 is the second 50% relief year, hence the applicable income tax rate is 9%.

– II-31 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

• (3) Dalian Tech Port Service Co., Ltd (“TPS”) is a high-tech enterprise engaged in software development which is located in Dalian high-tech industrial development park. Pursuant to the regulation of Income Tax Law, the income tax is 15%. Meanwhile, pursuant to Cai Shui [2008] No. 1 “Circular of the Ministry of Finance and the State Administration of Taxation Concerning Several Preferential Policies Relevant to Enterprise Income Tax”, after approved by Tax Bureau, software enterprise can be entitled to income tax exemption for two years commencing from its first profit making year of operation and thereafter, entitled to a 50% relief from income tax for the following next three years. 2008 is the first year entitled to a 50% relief from income tax, hence the applicable income tax rate is 7.5%.

• (4) The applicable income tax rate of other major subsidiaries of the Company is 25% (2007: 33%).

The tax charge for the year can be reconciled to the profit before tax as follows:

Profit before tax Tax at PRC income tax rate of 25% (2007: 33%) Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Tax effect of share of results of jointly controlled entities Tax effect of share of results of associates Effect of tax concessions/exemptions granted Effect of different tax rates of group entities operating in jurisdictions other than PRC Under(over)provision in prior years Others Tax charge for the year	2008 RMB’000 1,032,025	2007 RMB’000 749,516
	258,006 7,374 (6,517) (44,867) (2,231) (857) (1,876) 289 –	247,340 5,107 (17,133) (55,211) (327) (56,930) (2,967) (751) 6
	209,321	119,134

Details of movements in deferred tax have been set out in note 23.

– II-32 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

11. PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging (crediting): Staff cost, including directors’ remuneration (note 12): – Salaries, wages and other benefits – Retirement benefits scheme contributions Total staff costs Depreciation for property, plant and equipment Depreciation for investment properties Amortisation of intangible assets Less: Government grants related to depreciable assets released to consolidated income statements Total depreciation and amortisation Recovery of allowance for bad and doubtful debts, net Auditor’s remuneration Release of prepaid lease payments to consolidated income statement Foreign exchange loss, net Loss on disposal of intangible assets (Gain) loss on disposal of investment properties Interest income from jointly controlled entities and associates	2008 RMB’000 178,410 41,358	2007 RMB’000 126,751 28,437
	219,768 184,278 21,950 11,670 217,898 (38,380) 179,518	155,188
		156,694 17,622 4,361
		178,677 (23,360
		155,317
	(160) 3,042 6,907 4,331 155 (13,543) 994	(1,405 3,701 4,911 2,594 1 253 413

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ and supervisors’ emoluments

The emoluments paid or payable to the 10 (2007: 8) directors are as follows:

Fees Salaries and other allowances Retirement benefits scheme contributions	2008 RMB’000 – 1,117 86 1,203	2007 RMB’000 – 1,039 86
		1,125

– II-33 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Details of emoluments of individual directors are as follows:

Salaries and other allowances: Executive Directors Sun Hong Zhang Fengge Jiang Luning Su Chunhua Non-executive Directors Lu Jianmin Xu Jian (Note) Independent Non-executive Directors Yang Zan (Note) Wang Zuwen (Note) Zhang Xianzhi Ng Ming Wah, Charles Retirement benefits scheme contributions: Executive Directors Sun Hong Zhang Fengge Jiang Luning Su Chunhua Non-executive Directors Lu Jianmin Xu Jian (Note) Independent Non-executive Directors Yang Zan (Note) Wang Zuwen (Note) Zhang Xianzhi Ng Ming Wah, Charles	2008 RMB’000 – – 409 372 – – 37 43 80 176 1,117 2008 RMB’000 – – 43 43 – – – – – – 86	2007 RMB’000 – – 390 307 – N/A 80 N/A 80 182
		1,039
		2007 RMB’000 – – 43 43 – N/A – N/A – –
		86

No emoluments were paid by the Group to the supervisors in both years.

No directors waived any emoluments in both years.

Note: Mr. Xu Jian was appointed as a non-executive director on 18 June 2008. Mr. Wang Zuwen was appointed to replace Mr. Yang Zan as an independent non-executive director on 18 June 2008.

– II-34 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

(b) Employees’ emoluments

Of the five individuals with the highest emoluments in the Group, there were 2 (2007: 2) directors of the Company whose emoluments are included in the disclosures above. The emoluments of the remaining 3 (2007: 3) individuals were as follows:

Salaries and other allowances Retirement benefits scheme contributions	2008 RMB’000 2,522 44 2,566	2007 RMB’000 2,410 43
		2,453

Their emoluments were within the following bands:

	Number of employees
	2008	2007
Nil to HK$1,000,000	2	2
HK$1,000,001 to HK$1,500,000	1	1

13. DIVIDEND

On 18 June 2008, a dividend of RMB8 cents per share amounting to RMB234,080,000 in aggregate was approved as the final dividend for 2007 (for the year ended 31 December 2007: RMB6 cents per share amounting to RMB175,560,000 in aggregate for 2006 final dividend).

A final dividend of RMB9 cents (2007: RMB8 cents) per share has been proposed by the directors and is subject to approval by the shareholders in the annual general meeting.

14. EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the profit attributable to the equity holders of the Company and the number of 2,926,000,000 shares in issue for both years.

No diluted earnings per share is presented as the Company did not have any potential dilutive ordinary shares outstanding for both years.

– II-35 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

15. PROPERTY, PLANT AND EQUIPMENT

COST At 1 January 2007 Additions Reclassifications Transfer to intangible assets (Note 18) Transfer to non-current assets held for sale_(Restated_ and note) Transfer to investment properties_(Note 17) Disposals At 31 December 2007 and 1 January 2008(Restated_ and note) Acquired upon acquisition of subsidiaries_(Note 40) Additions Transfer from properties held for sales Reclassifications Transfer to intangible assets (Note 18) Disposals At 31 December 2008 ACCUMULATED DEPRECIATION At 1 January 2007 Provided for the year (Restated and note) Eliminated on transfer to non-current assets held for sale(Restated and note) Reclassifications Transfer to investment properties(Note 17) Eliminated on disposals At 31 December 2007 and 1 January 2008(Restated_ and note) Provided for the year Reclassifications Eliminated on disposals At 31 December 2008 CARRYING AMOUNT At 31 December 2008 At 31 December 2007	Buildings RMB’000 125,041 18,480 137,283 – (21,875) (6,410) (31,171)	Terminal facilities RMB’000 2,386,596 168,791 1,389,440 – (1,190,106) (158,691) (116,439)	Terminal equipment RMB’000 180,367 36,438 105,125 – (85,757) – (38,266)	Vessels and motor vehicles RMB’000 506,886 5,615 165,754 – – – (41,034)	Other equipment RMB’000 142,343 54,595 (127,093) – – – (12,587)	Construction in progress RMB’000 1,958,802 803,349 (1,670,509) (1,728) – – –	Total RMB’000 5,300,035 1,087,268 – (1,728) (1,297,738) (165,101) (239,497)
	221,348 3,122 3,252 56,760 62,687 – (19,276) 327,893 11,832 20,555 – 516 (4,794) (7,509) 20,600 9,340 5,708 (72) 35,576	2,479,591 64,929 1,692 – 750,511 – (24,878) 3,271,845 95,994 66,040 – (24) (29,303) (7,741) 124,966 108,987 (16,888) (3,417) 213,648	197,907 17,437 16,062 – 48,840 – (19,623) 260,623 15,988 5,204 – 5,352 – (4,729) 21,815 18,087 7,712 (7,650) 39,964	637,221 116 5,618 – 136,653 – (112,079) 667,529 32,355 38,181 – – – (7,287) 63,249 41,577 (19) (11,075) 93,732	57,258 5,114 2,580 – 55,352 – (1,520) 118,784 25,649 26,714 – (5,844) – (1,635) 44,884 6,287 3,487 (1,335) 53,323	1,089,914 – 1,208,290 – (1,054,043) (6,690) (3,331) 1,234,140 – – – – – – – – – – –	4,683,239 90,718 1,237,494 56,760 – (6,690) (180,707)
							5,880,814
							181,818 156,694 – – (34,097) (28,901)
							275,514 184,278 – (23,549)
							436,243
	292,317 200,748	3,058,197 2,354,625	220,659 176,092	573,797 573,972	65,461 12,374	1,234,140 1,089,914	5,444,571
							4,407,725

– II-36 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Note: The movement of property, plant and equipment for the year ended 31 December 2007 had been restated to reflect certain reclassification errors. The reclassification had no effect on the total carrying amounts of property, plant and equipment as at 31 December 2007, and no effect on total depreciation expenses recognised in the consolidated income statement for the year ended 31 December 2007. Details are set out in the 2008 interim report.

In 2007, a subsidiary of the Company had pledged its vessels with an aggregate carrying amount of approximately RMB102,021,000 to secure banking facilities granted to it. The vessels have been disposed of and related pledge have been released during the year.

As at 31 December 2008, the Group is in the process of obtaining the building certificates for certain buildings with net book value of approximately RMB29,816,000 (31 December 2007: RMB42,009,000).

All of the buildings are erected on land in the PRC held under medium-term leases.

16. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments comprise: Medium-term leasehold land in the PRC Analysed as: Non-current assets Current assets	2008 RMB’000 297,180	2007 RMB’000 298,848
	290,700 6,480	292,437 6,411
	297,180	298,848

– II-37 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

17. INVESTMENT PROPERTIES

COST At 1 January 2007 Additions Transfer from property, plant and equipment (note 15) Reclassification Disposals At 31 December 2007 and 1 January 2008 Disposals At 31 December 2008 ACCUMULATED DEPRECIATION At 1 January 2007 Charge for the year Transfer from property, plant and equipment (note 15) Eliminated on disposals At 31 December 2007 and 1 January 2008 Charge for the year Eliminated on disposals At 31 December 2008 CARRYING AMOUNT At 31 December 2008 At 31 December 2007	Buildings RMB’000 24,411 93 6,410 4,397 (8,903)	Container terminals RMB’000 889,523 557 158,691 (4,397) (98,669)	Total RMB’000 913,934 650 165,101 – (107,572)
	26,408 (261) 26,147 28 1,395 4,794 (916) 5,301 1,177 (138) 6,340	945,705 (10,947) 934,758 63,848 16,227 29,303 (50,250) 59,128 20,773 (2,834) 77,067	972,113 (11,208)
			960,905
			63,876 17,622 34,097 (51,166)
			64,429 21,950 (2,972)
			83,407
	19,807 21,107	857,691 886,577	877,498
			907,684

The fair value of the Group’s investment properties were approximately RMB914,009,000 and RMB944,463,000 as at 31 December 2008 and 2007, respectively.

The fair value of the Group’s investment properties at 31 December 2008 has been determined by the directors of the Company by reference to the opinion of independent qualified professional valuers, in which the valuation was determined by the present value of discounted net cash inflow of related contracted and expected rental income over the remaining economic useful lives. The discount rate applied was 9.6%.

The investment properties are depreciated on a straight-line basis ranging from 2% to 4% per annum. The investment properties are erected on land held under medium-term leases in the PRC.

Property rentals from investment properties amounted to approximately RMB121,980,000 and RMB100,918,000 for the years ended 31 December 2008 and 2007, respectively. Direct operating expenses which were included in cost of sales and services amounted to approximately RMB29,080,000 and RMB24,691,000 for the years ended 31 December 2008 and 2007, respectively.

– II-38 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

18. INTANGIBLE ASSETS

COST At 1 January 2007 Additions Transfer from property, plant and equipment_(note 15) Disposals At 31 December 2007 and 1 January 2008 Acquired upon acquisition of subsidiaries(note 40) Additions Transfer from property, plant and equipment(note 15)_ Disposals At 31 December 2008 ACCUMULATED AMORTISATION At 1 January 2007 Charge for the year Eliminated on disposals At 31 December 2007 and 1 January 2008 Charge for the year Eliminated on disposals At 31 December 2008 CARRYING AMOUNTS At 31 December 2008 At 31 December 2007	Priority right for using the rail transportation RMB’000 46,660 – – –	Computer software RMB’000 7,853 1,221 1,728 (96)	Customer relationship RMB’000 – – – –	Port information platform RMB’000 – – – –	Others RMB’000 154 1,240 – –	Total RMB’000 54,667 2,461 1,728 (96)
	46,660 – – – – 46,660 1,458 2,916 – 4,374 2,916 – 7,290	10,706 9,115 417 6,690 (350) 26,578 4,211 1,378 (55) 5,534 3,428 (195) 8,767	– 15,970 – – – 15,970 – – – – 1,441 – 1,441	– 64,310 – – – 64,310 – – – – 3,751 – 3,751	1,394 – – – – 1,394 47 67 – 114 134 – 248	58,760 89,395 417 6,690 (350)
						154,912
						5,716 4,361 (55)
						10,022 11,670 (195)
						21,497
	39,370 42,286	17,811 5,172	14,529 –	60,559 –	1,146 1,280	133,415
						48,738

Customer relationship and port information platform were purchased as part of a business combination during the year. The fair value of these intangible assets has been determined by independent qualified professional valuers, in which the valuation was determined by the present value of discounted net cash inflow over the estimated useful lives based on assumptions toward market situations and industry growth rate.

Customer relationship represents a portfolio of customers with business relationship with the subsidiaries acquired. These customers are expected to trade with the Group as a result of the efforts of these subsidiaries in building the customer relationship and loyalty.

Port information platform is an EDI data transmission system to provide digital port integration service to international shipping centers in Northeast Asia.

– II-39 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The above intangible assets have finite useful lives. Such intangible assets are amortised on a straight-line basis over the following periods:

Priority right for using the rail transportation	15 years
Computer software	2 – 10 years
Customer relationship	10 years
Port information platform	10 years
Other intangible assets	10 years

19. GOODWILL

Cost At 1 January 2007, 31 December 2007 and 1 January 2008 Arising upon acquisition of subsidiaries (note 40) At 31 December 2008	RMB’000 – 16,035
	16,035

For the purposes of impairment testing, goodwill has been allocated to three individual cash generating units (“CGUs”). The purchase consideration were determined by reference to the price earnings multiple of the related subsidiaries. The carrying amounts of goodwill with indefinite useful life as at 31 December 2008 allocated to three units are as follows:

DCT Logistics Co., Ltd. (“DCTL”) Dalian Portnet Co., Limited (“DPN”) Dalian Jiyi Logistics Co., Ltd. (“Dalian Jiyi”)	2008 RMB’000 6,218 7,420 2,397
	16,035

The goodwill arising on the acquisitions of DCTL, DPN and Dalian Jiyi are attributable to the anticipated profitability of container terminal and port value-added services business and the anticipated operating synergies from the combination. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured.

The basis of determining the recoverable amounts of the above CGUs and their major underlying assumptions are summarised below:

DCTL and Dalian Jiyi

The recoverable amount of DCTL and Dalian Jiyi has been determined based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by management covering a ten-year period, which approximates to the number of years when stable cash inflows are expected by the management based on market situations, at discount rate of 16% per annum. DCTL’s and Dalian Jiyi’s budgeted cash flows beyond the one-year period are extrapolated using a steady 3% growth rate. This growth rate is based on the relevant industry growth forecasts and does not exceed the average long-term growth rate for the relevant industry. Other key assumptions for the value in use calculation related to the estimation of cash inflows and outflows which include budgeted sales and budgeted gross margin, which is determined based on DCTL’s and Dalian Jiyi’s past performance and management’s expectation for the market development. Management believes that any reasonably possible change in any of these assumptions will not cause the aggregate carrying amounts of DCTL’s and Dalian Jiyi’s to exceed the aggregate recoverable amounts of DCTL’s and Dalian Jiyi’s.

– II-40 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

DPN

The recoverable amount of DPN has been determined based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by management covering a nineteen-year period, which approximates to the aggregate of 10-year period when stable cash inflows are expected by the management based on market situations and are reduced by an additional 25% per annum decrement for every three years after the ten-year period, at discount rate of 16% per annum. DPN’s budgeted cash flows beyond the ten-year period are extrapolated using a steady 3% growth rate. This growth rate is based on the relevant industry growth forecasts and does not exceed the average long-term growth rate for the relevant industry. Other key assumptions for the value in use calculation related to the estimation of cash inflows and outflows which include budgeted sales and budgeted gross margin, which is determined based on the unit’s past performance and managements’ expectation for the market development. Management believes that any reasonably possible change in any of these assumptions will not cause the aggregate carrying amounts of DPN to exceed the aggregate recoverable amounts of DPN.

20. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Cost of unlisted investments in jointly controlled entities Share of post-acquisition profits, net of dividends received	2008 RMB’000 841,075 52,622 893,697	2007 RMB’000 680,749 37,649
		718,398

The summarised financial information in respect of the Group’s interests in jointly controlled entities which are accounted for using the equity method is set out below:

Balance sheet Current assets Non-current assets Current liabilities Non-current liabilities Income statement Total income Total expenses	2008 RMB’000 297,074 1,111,005 (344,420) (169,962) 473,328 293,862	2007 RMB’000 168,044 1,396,964 (388,269) (290,038)
		489,691
		290,382

Particulars of the Group’s jointly controlled entities are set out in note 49.

– II-41 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

21. INTERESTS IN ASSOCIATES

Cost of unlisted investments in associates Share of post-acquisition results, net of dividends received	2008 RMB’000 1,077,406 (126,141) 951,265	2007 RMB’000 767,193 (49,648)
		717,545

The summarised financial information in respect of the Group’s associates which are accounted for using the equity method is set out below:

Balance sheet Total assets Total liabilities Net assets Group’s share of net assets of associates Income statement Revenue Profit for the year Group’s share of results of associates for the year Particulars of the Group’s associates are set out in note 50.	2008 RMB’000 6,655,135 (3,887,381) 2,767,754 951,265 806,571 39,698 8,925	2007 RMB’000 (restated) 3,158,046 (1,271,749)
		1,886,297
		717,545
		412,411
		44,296
		992

22. AVAILABLE-FOR-SALE INVESTMENTS Unlisted equity securities, at cost (note 1) Equity securities listed in Hong Kong, at fair value (note 2)	2008 RMB’000 102,076 16,566 118,642	2007 RMB’000 102,076 58,483
		160,559

Notes:

1. They represent investments in unlisted equity securities in the PRC that offer the Group the opportunity for return through dividend income. As the investments did not have a quoted market price in an active market and the range of reasonable fair value estimate is so significant, the directors of the Company are of the opinion that their fair values cannot be reliably measured. As at 31 December 2008, the directors of the Company do not intend to dispose the investments in the foreseeable future.

– II-42 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

1. They represent an investment in approximately 0.24% shareholding of Sinotrans Shipping Limited, a company incorporated and listed in Hong Kong. In 2008, an impairment loss on the investment of approximately RMB53,001,000 (2007: Nil) has been charged to the consolidated income statement as the directors of the Company are of the opinion that the investment is impaired by reference to the quoted market price listed in the SEHK.

23. DEFERRED TAX ASSETS/LIABILITIES

The following are the deferred tax assets (liabilities) recognised by the Group and movements thereon during the current and prior years:

At 1 January 2007 Credit to consolidated income statement for the year Charge to equity for the year At 31 December 2007 and 1 January 2008 Acquired upon acquisition of subsidiaries_(note 40)_ (Charge) credit to income statement for the year At 31 December 2008	Property, plant and equipment and prepaid lease payments RMB’000 78,463 (3,239) (17,515)	Intangible assets RMB’000 – – –	Unrealised profit RMB’000 – 10,202 –	Allowance for doubtful debts RMB’000 679 (5) –	Tax loss RMB’000 – 441 –	Other deductible temporary differences RMB’000 – 1,475 –	Total RMB’000 79,142 8,874 (17,515)
	57,709 (3,199) (16,686)	– (13,639) 923	10,202 – 16,410	674 179 (15)	441 – (441)	1,475 36 1,089	70,501 (16,623) 1,280
	37,824	(12,716)	26,612	838	–	2,600	55,158

For the purpose of balance sheet presentation, the above deferred tax assets and liabilities have been offset.

At 31 December 2007, the Group had unused tax losses of approximately RMB1,764,000 available for offset against future profits. A deferred tax asset had been recognised in respect of such losses in 2007 which was expired during the year ended 31 December 2008. As at 31 December 2008, there was no unused tax losses available for offset against future profits.

The expiry dates of these tax losses are as follows:

	2008	2007
	RMB’000	RMB’000
With expiry in:
2008	–	1,764

24. PROPERTIES HELD FOR SALE

Properties held for sale represent the land and development cost of infrastructure and construction cost of warehousing facilities in the bonded logistics park located adjacent to the Group’s container terminals, and is expected to be sold within twelve months.

– II-43 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

In addition to the sale of properties in the ordinary course of business, properties with aggregate carrying amount of approximately RMB82,337,000 (2007: RMB64,902,000) was used to acquire interest of associates amounting to RMB99,550,000 (2007: RMB85,594,000), resulting in a gain of approximately RMB17,213,000 (2007: RMB20,692,000) which is included in other income in the current year.

25. TRADE AND OTHER RECEIVABLES

Trade receivables Less: allowance for doubtful debts Other receivables Receivable in respect of disposal of oil tanks and prepaid lease payments Receivable in respect of compensation for terminal relocation Dividends receivable from jointly controlled entities Others Total trade and other receivables	2008 RMB’000 85,571 (3,088)	2007 RMB’000 55,562 (2,648
	82,483 74,873 172,596 135,686 21,760 404,915	52,914
		– 172,596 145,066 11,249
		328,911
	487,398	381,825

The Group allows an average credit period of 90 days to its trade customers. Trade receivables that were neither past due nor impaired are related to a number of independent customers that have a good track record with the Group. The following is an aged analysis of trade receivables before the allowance for doubtful debts at the balance sheet date:

0 – 90 days 91 – 180 days 181 – 365 days Over 365 days	2008 RMB’000 75,114 5,234 4,458 765 85,571	2007 RMB’000 54,800 77 – 685
		55,562

Before accepting any new customer, the Group assessed the potential customer’s credit quality and defined credit limits by customer. Limits attributed to customers are reviewed once a year.

Included in the Group’s trade receivables balance are debtors with aggregate carrying amounts of approximately RMB7,369,000 (2007: RMB556,000) which are past due at the reporting date for which the Group has not provided for impairment loss as the management considered that there has not been a significant change in credit quality and that they are recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 217 days (2007: 153 days).

– II-44 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Aging of trade receivables which are past due but not impaired:

91 – 180 days 181 – 365 days Over 365 days Total	2008 RMB’000 4,194 2,896 279 7,369	2007 RMB’000 73 – 483
		556

The Group provided in full for all receivables that are past due and considered to be irrecoverable after assessing their recoverability on an ongoing basis.

Movement in allowance for doubtful debts for trade receivables:

Balance at beginning of the year Addition upon acquisition of subsidiaries Impairment losses reversed Balance at end of the year	2008 RMB’000 2,648 687 (247) 3,088	2007 RMB’000 2,790 – (142
		2,648

Included in the allowance for doubtful debts are individually impaired trade receivables with an aggregate balance of RMB3,088,000 (2007: RMB2,648,000). The Group does not held any collateral over these balances.

26. AMOUNTS DUE FROM (TO) JOINTLY CONTROLLED ENTITIES

Due from jointly controlled entities: Current: Dalian China Oil Dock Management Co., Ltd. Dalian Container Terminal Co., Ltd. (“DCT”) DCTL Others Non-current: Dalian Harbour ECL Logistics Co., Ltd. (“Dalian Harbour”) Representing: Trade (Note) Non-trade	2008 RMB’000 3,464 26,324 – 530	2007 RMB’000 4,506 52,759 775 –
	30,318 3,588	58,040 –
	33,906	58,040
	5,275 28,631	7,070 50,970
	33,906	58,040

– II-45 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Except for amount due from Dalian Harbour of RMB3,588,000, the amounts are unsecured, non-interest bearing and repayable on demand. The amount due from Dalian Harbour is unsecured, interest-bearing at 3% per annum and repayable in full on 14 February 2010.

Note: The Group allows a credit period of 90 days to its jointly controlled entities.

The following is an aged analysis of trade receivables due from jointly controlled entities at the balance sheet date:

0 – 90 days 91 – 180 days 181 – 365 days Over 365 days	2008 RMB’000 5,163 – 112 – 5,275	2007 RMB’000 6,838 8 – 224
		7,070

Amounts due from jointly controlled entities of trade nature with aggregate carrying amounts of approximately RMB112,000 (2007: RMB232,000) are past due at the balance sheet date for which the Group has not provided for impairment loss as the management considered that there has not been a significant change in credit quality and that they are recoverable.

Due to jointly controlled entities: Dalian Assembling Transportation Logistics Co., Ltd. DCT Dalian Yidu Jifa Cold Logistics Co., Ltd DCTL Liaoning Con-Rail International Logistics Co., Ltd	2008 RMB’000 1,997 1,437 20 – 133 3,587	2007 RMB’000 – 814 20 727 –
		1,561

The following is an aged analysis of trade payables due to jointly controlled entities:

0 – 90 days 91 – 180 days	2008 RMB’000 3,567 20 3,587	2007 RMB’000 1,521 40
		1,561

The amounts due to jointly controlled entities are of trade nature, unsecured, non-interest bearing and repayable on demand.

– II-46 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

27. AMOUNTS DUE FROM (TO) ASSOCIATES

Due from associates: Current: China Unite Northeast Rail Containers Co., Ltd. (“China Unite”) Dalian Automobile Terminal Co., Ltd. (“Dalian Automobile”) Dalian International Container Terminal Co., Ltd. (“Dalian International”) Dalian Jiyi Dalian Port Container Terminal Co., Ltd. (“DPCM”) Dalian Singamas International Container Co., Ltd. (“Dalian Singamas”) Others Non-current: Dalian Automobile Representing: Trade (Note) Non-trade Total	2008 RMB’000 110,019 – 9,596 – 1,484 935 57	2007 RMB’000 – 64,000 2,707 5,300 1,297 1,148 3
	122,091 64,000	74,455 –
	186,091	74,455
	12,029 174,062	9,076 65,379
	186,091	74,455

Except for an amount due from Dalian Automobile and China Unite at 31 December 2008 of RMB64,000,000 (2007: RMB64,000,000) and RMB110,000,000 (2007: Nil) respectively, the amounts are unsecured, non-interest bearing and repayable on demand. The amount due from Dalian Automobile is unsecured, interest bearing at market prevailing rate and repayable in full on 24 April 2011. The amount due from China Unite is unsecured, interest bearing at 5.913% and 5.427% per annum, and repayable on demand.

Note: The Group allows a credit period of 90 days to its associates.

The following is an aged analysis of trade receivables due from associates at the balance sheet date:

0 – 90 days 91 – 180 days 181 – 365 days Over 365 days	2008 RMB’000 10,299 479 169 1,082 12,029	2007 RMB’000 4,521 1,510 3,045 –
		9,076

– II-47 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Amounts due from associates of trade nature with aggregate carrying amounts of approximately RMB1,730,000 (2007: RMB4,555,000) are past due at the balance sheet date for which the Group has not provided for impairment loss as the management considered that there has not been a significant change in credit quality and that they are recoverable.

Due to associates: Dalian Singamas Dalian Port Communication Engineering Co., Ltd. Others	2008 RMB’000 175 2,387 32 2,594	2007 RMB’000 4,067 – 694
		4,761

The amounts due to associates are of trade nature, unsecured, non-interest bearing and repayable on demand.

The following is an aged analysis of trade payables due to associates:

0 – 90 days 91 – 180 days 181 – 365 days Over 365 days	2008 RMB’000 1,379 5 1,159 51 2,594	2007 RMB’000 417 60 – 4,284
		4,761

– II-48 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

28. AMOUNTS DUE FROM (TO) RELATED COMPANIES

Due from a jointly controlled entity of PDA Dalian Golden Name Commercial Tower Co., Ltd. Due to associates of PDA: Dalian Port Design & Research Institute Co., Ltd. Dalian Port New Harbour Construction Engineering Co., Ltd. 大連港日興鍋爐安裝有限公司 Due to jointly controlled entities of PDA: Dalian Port Machinery and Electric Co., Ltd. 大連港萬鵬基礎有限公司 Dalian Port Communication Engineering Co., Ltd. Dalian Port Construction Engineering Co., Ltd. Dalian Port Machinery Co., Ltd Others Total due to related companies	2008 RMB’000 –	2007 RMB’000 80
	610 12,442 8,378 21,430 14,429 6,056 – 45,048 675 1,151 67,359	305 24,609 14,466
		39,380
		11,760 1,235 2,709 39,233 2,227 139
		57,303
	88,789	96,683

The following is an aged analysis of trade payables to related companies:

0 – 90 days 91 – 180 days 181 – 365 days Over 365 days	2008 RMB’000 1,725 10,923 74,821 1,320 88,789	2007 RMB’000 38,548 5 57,362 768
		96,683

The amounts due from (to) related companies are of trade nature. They are unsecured, non-interest bearing and repayable on demand.

– II-49 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

29. AMOUNTS DUE FROM (TO) FELLOW SUBSIDIARIES

Due from fellow subsidiaries: Dalian Golden Name Commercial Tower Co., Ltd. Dalian Port Harbour Construction Superintendence and Consulting Co., Ltd 大連港口集裝箱貨運公司 Representing: Trade Non-trade Total	2008 RMB’000 80 – 271 351	2007 RMB’000 – 2,679 –
		2,679
	271 80	– 2,679
	351	2,679

The amounts due from fellow subsidiaries of trade nature are unsecured, non-interest bearing and aged within the credit period of 90 days.

Due to fellow subsidiaries: 大連港新港電力公司 Dalian Port Habour Construction Superintendence and Consulting Co., Ltd. Dalian Port Construction Management Co., Ltd. Representing: 0 – 90 days 91 – 180 days 181 – 365 days Over 365 days	2008 RMB’000 2,701 191 – 2,892	2007 RMB’000 2,472 2,290 129
		4,891
	– 600 2,249 43	585 – 4,190 116
	2,892	4,891

The amounts due to fellow subsidiaries are of trade nature. They are unsecured, non-interest bearing and repayable on demand.

– II-50 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

30. ADVANCE TO (FROM) PDA

Advance to PDA: Trade Non-trade	2008 RMB’000 305 4,870 5,175	2007 RMB’000 14 23
		37

The Group allows a credit period of 90 days to PDA. The following is an aged analysis of trade balance at the balance sheet date:

0 – 90 days Over 365 days Advance from PDA: Trade, due within 90 days Non-trade	2008 RMB’000 305 – 305	2007 RMB’000 – 14
		14
	200 31,434	89 16,458
	31,634	16,547

The amounts are unsecured, non-interest bearing and repayable on demand.

31. BANK BALANCES

Bank balances carry interest at market rates which range from 0.36% to 3.78% (2007: 0.72% to 4.27%) per annum.

32. NON-CURRENT ASSETS HELD FOR SALE

	2008	2007
	RMB’000	RMB’000
Property, plant and equipment
Container berths and related facilities	–	1,036,293

Pursuant to an agreement dated 25 September 2005 between the Group and its associate, DPCM, the Group agreed to sell and DPCM agreed to acquire No. 13 and 14 container berths and related facilities situated in Dayao Bay of Dalian City, upon the completion of construction. The construction of the container berths and related facilities have been completed in the first half of 2007 and the sale was completed in June 2008 at a consideration of approximately RMB1,255 million. After deducting the related cost to sell and eliminating the gain on disposal attributable to the Group’s interest in the relevant associate, the gain on disposal to the Group of approximately RMB121 million was credited to consolidated income statement and included in other income. The consideration has been fully received during the year ended 31 December 2008.

– II-51 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

33. TRADE AND OTHER PAYABLES

The credit period taken for trade purchases and ongoing costs is 0 to 90 days. The following is an aged analysis of trade payables at the balance sheet dates:

Trade payables 0 – 90 days 91 – 180 days 181 – 365 days Over 365 days Other payables Construction payables Others 34. AMOUNT DUE TO A MINORITY SHAREHOLDER Pacific Bulk Maritime Holdings Limited	2008 RMB’000 36,974 47,738 185 237	2007 RMB’000 61,931 383 230 –
	85,134 204,313 157,424 361,737	62,544
		206,703 106,608
		313,311
	446,871 2008 RMB’000 –	375,855
		2007 RMB’000 22,059

The amount was of non-trade nature. It was unsecured, non-interest bearing and was fully repaid during the year.

35. BANK BORROWINGS

Secured Unsecured	2008 RMB’000 – 1,431,733 1,431,733	2007 RMB’000 65,960 2,162,000
		2,227,960

– II-52 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The above amounts are repayable as follows:

Floating-rate borrowings: On demand or within one year In the second year In the third year In the fourth year In the fifth year After five years Less: Amount due for settlement within one year shown under current liabilities Amount due for settlement after one year	2008 RMB’000 196,733 115,000 145,000 145,000 405,000 425,000	2007 RMB’000 698,060 186,855 174,045 210,000 209,000 750,000
	1,431,733 (196,733)	2,227,960 (698,060)
	1,235,000	1,529,900

The weighted average effective interest rate on the Group’s borrowings is as follows:

Floating-rate borrowings 36. GOVERNMENT GRANTS Construction of vessels (note 1) Compensation for the relocation (note 2) Others Less: Amount related to depreciable assets to be released to consolidated income statement within one year Amount shown under non-current liabilities Notes:	2008 6.40% p. a. 2008 RMB’000 9,205 738,957 1,396	2007 5.53% p. a.
		2007 RMB’000 9,982 776,560 –
	749,558 (38,380)	786,542 (38,020)
	711,178	748,522

• (1) The amount was received in relation to the subsidy for the construction of vessels. The amount has been treated as deferred income and will be recognised in the consolidated income statement over the useful lives of the relevant assets. The amount credited to the consolidated income statement to offset depreciation for the year ended 31 December 2008 is RMB777,000.

• (2) The amount was received in respect of the compensation for the relocation of the terminals. The amounts will be released over the estimated useful lives of the new terminals upon the commencement of operations of the new terminals. The amount credited to the consolidated income statement to offset depreciation for the year ended 31 December 2008 is RMB37,603,000 (2007: RMB23,360,000).

– II-53 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

37. DERIVATIVE FINANCIAL LIABILITIES

					2008	2007
					RMB’000	RMB’000
Derivative	not	under	hedge	accounting	9,034	2,911

The Group entered into a contract with a bank, under which the Group is required to pay interest at each specified date calculated by reference to a fixed interest rate based on a notional amount of RMB410,000,000 whereas the bank is required to pay to the Group interest at each specified date calculated by reference to a variable interest rate based on the same notional amount. The variable interest rate to be paid by the bank will depend on a formula, of which parameters will involve 30-year Constant Maturity Swap (“CMS”) rate and 2-year CMS rate. The contract will expire on 24 December 2015 and is therefore shown as non-current liabilities.

The fair value is determined by the bank using a valuation technique to calculate the present value of estimated future cash flow and discounted based on the applicable yield curves derived from quoted interest rates.

In the opinion of directors, the sensitivity analyses of derivative financial liabilities are unrepresentative of the inherent market risk as the pricing model used in the fair value valuation of the derivative financial instruments involves multiple variables and certain variables are interdependent.

38. LOAN FROM PDA

The amount is unsecured, bears fixed interest at approximately 5.47% per annum and the principal is repayable on 7 April 2018 and related interest payable on a quarterly basis.

39. PAID-IN CAPITAL

	Number of shares	Number of shares	Registered,
	Domestic		issued and
	shares	H shares	fully paid
	’000	’000	RMB’000
At 1 January 2007, 31 December 2007,
1 January 2008 and 31 December 2008	1,863,400	1,062,600	2,926,000

40. ACQUISITION OF SUBSIDIARIES

The Group acquired additional 59.22% equity interests in DCTL on 1 January 2008, additional 35% equity interests in DPN on 14 May 2008 and additional 39.48% equity interests in Dalian Jiyi on 30 September 2008, at a consideration of approximately RMB58,800,000, RMB36,750,000 and RMB5,900,000, respectively. The acquisitions have been accounted for using purchase method. The amount of goodwill arising as a result of the acquisition was RMB16,035,000 in aggregate.

Subsequent to the acquisitions, DCTL, DPN and Dalian Jiyi, which were previously jointly controlled entity/associates, became subsidiaries of the Group. The effective interests of DCTL, DPN and Dalian Jiyi attributable to the Group are 96.53%, 70.96% and 78.96% respectively.

– II-54 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The net assets acquired in the transaction and the goodwill arising are as follows:

Properties, plants and equipments Prepaid lease payment Intangible assets Interest in an associate Deferred tax assets (liabilities) Inventories Trade and other receivables Bank balances and cash Bank borrowings Trade and other payables Minority interest Revaluation reserve Interest in a jointly controlled entity Interests in associates Goodwill Total consideration satisfied by cash Net cash outflow arising on acquisitions: Cash consideration Bank balances and cash acquired	Acquiree’s carrying amount before combination RMB’000 79,837 29,070 466 – 99 1,026 10,348 4,133 (35,000) (20,548)	DCTL Fair value adjustment RMB’000 4,725 8,072 13,890 – (6,672) – – – – –	Fair value RMB’000 84,562 37,142 14,356 – (6,573) 1,026 10,348 4,133 (35,000) (20,548)	Acquiree’s carrying amount before combination RMB’000 4,856 – 8,132 2,645 3 – 3,514 18,135 – (8,147)	DPN Fair value adjustment RMB’000 – – 64,310 – (9,647) – – – – –	Fair value RMB’000 4,856 – 72,442 2,645 (9,644) – 3,514 18,135 – (8,147)	Acquiree’s carrying amount before combination RMB’000 1,300 – 517 – 114 110 20,947 5,425 – (21,101)	Dalian Jiyi Fair value adjustment RMB’000 – – 2,080 – (520) – – – – –	Fair value RMB’000 1,300 – 2,597 – (406) 110 20,947 5,425 – (21,101)	Total fair value RMB’000 90,718 37,142 89,395 2,645 (16,623 1,136 34,809 27,693 (35,000 (49,796
	69,431	20,015	89,446 (698) (8,006) (28,160) – 6,218	29,138	54,663	83,801 (23,942) (19,914) – (10,615) 7,420	7,312	1,560	8,872 (1,820) (624) – (2,925) 2,397	182,119 (26,460 (28,544 (28,160 (13,540 16,035
			58,800			36,750			5,900	101,450
			(58,800) 4,133			(36,750) 18,135			(5,900) 5,425	(101,450 27,693
			(54,667)			(18,615)			(475)	(73,757

The goodwill arising on the acquisitions of DCTL, DPN and Dalian Jiyi are attributable to the anticipated profitability of container terminal and port value-added services business and the anticipated operating synergies from the combination. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured.

DPN, DCTL and Dalian Jiyi contributed profit of RMB929,000, RMB2,777,000 and RMB115,000 respectively to the Group’s profit for the period between the date of acquisition and the balance sheet date.

If the acquisitions had been completed on 1 January 2008, total group revenue for the year would have been increased by RMB129 million, and profit for the year would have been increased by RMB6 million. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2008, nor is it intended to be a projection of future results.

– II-55 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

41. RELATED PARTY TRANSACTIONS

The Group entered into the following transactions with related companies/parties:

Trading transactions

Rental income received Associates Jointly controlled entities Service income received (Note) PDA Subsidiaries, associates and jointly controlled entities of PDA Associates Jointly controlled entities	2008 RMB’000 115,902 69,354 185,256	2007 RMB’000 136,797 75,862
		212,659
	2,092 2,197 73,397 42,246	500 6,182 28,929 31,667
	119,932	67,278

Note: The amounts mainly represent income in relation to the provision of tugging, provision of information technology and management services.

Comprehensive services paid PDA Subsidiaries, associates and jointly controlled entities of PDA Associates Jointly controlled entities Sales of properties Associates	2008 RMB’000 22,726 10,122 1,260 1,510 35,618 –	2007 RMB’000 13,911 9,907 2,366 526
		26,710
		92,081

– II-56 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Maintenance services paid PDA Subsidiaries, associates and jointly controlled entities of PDA Associates Jointly controlled entities Agency services paid Jointly controlled entities Property leasing expenses paid PDA Subsidiaries, associates and jointly controlled entities of PDA Associates Jointly controlled entities Purchase of raw materials and spare parts PDA Non-trading transactions Acquisition of subsidiaries Jointly controlled entities Acquisition of associates PDA Acquisition of jointly controlled entities PDA	2008 RMB’000 17 4,109 142 447 4,715 1,809	2007 RMB’000 – 5,450 – –
		5,450
		2,846
	3,488 3,696 622 11,372	943 1,109 – 803
	19,178 – 2008 RMB’000 58,800 – –	2,855
		20,751
		2007 RMB’000 –
		108,792
		5,588

– II-57 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Acquisition of property, plant and equipment PDA Subsidiaries, associates and jointly controlled entities of PDA Associates Jointly controlled entities Proceeds from disposal of property, plant and equipment PDA Associates Proceeds from disposal of non-current assets held for sale Associates Acquisition of intangible assets Subsidiaries, associates and jointly controlled entities of PDA Associates Proceeds from disposal of prepaid lease payments Associates Interest expenses paid PDA	2008 RMB’000 – 230,544 6,420 1,768 238,732 – – – 1,253,956	2007 RMB’000 3,927 135,332 – –
		139,259
		48,837 1,237
		50,074
		–
	– –	83 678
	– 27,561 31,380	761
		–
		–

In addition, as at 31 December 2008, the Group issued financial guarantees to banks in respect of banking facilities granted to a jointly controlled entity amounted to RMB54,500,000 (2007: RMB31,650,000).

– II-58 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

Short-term benefits Post-employment benefits	2008 RMB’000 3,855 302 4,157	2007 RMB’000 3,675 298
		3,973

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

42. MATERIAL TRANSACTIONS AND BALANCES WITH OTHER STATE-CONTROLLED ENTITIES

In the opinion of the directors, the Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC government (these enterprises other than PDA are hereinafter collectively referred to as “State-Controlled Entities”). During the year, the Group had material transactions with some of these State-Owned Enterprises in its ordinary and usual course of business.

In establishing its pricing strategies and approval process for its products and services, the Group does not differentiate whether the counter-party is a State-Owned Enterprise or not.

For the purpose of this report, the Group has identified the nature and quantified the amounts of its material transactions with State-Owned Enterprises during the year and material balances therewith at the respective balance sheet dates as follows:

(a) Material transactions

	2008	2007
	RMB’000	RMB’000
Nature of transactions
Payment for:
Purchase of raw materials and other services	3,335	1,455
Purchase of fuels	9,490	422
Revenue from provision of services (Note)	703,655	716,359
Acquisition of:
Terminal facilities	1,399	–
Vessels and motor vehicles	300	–
Construction in progress	257,493	193,242
Proceeds from disposal of:
Property, plant and equipment	103,966	–
Prepaid lease payments	160,420	–

Note: The amounts mainly represent revenue in relation to the provision of loading and discharging, storage, transhipment for oil products and containers and tugging service.

– II-59 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

(b) Material balances

				2008	2007
				RMB’000	RMB’000
Trade	and	other	receivables	102,037	18,092
Trade	and	other	payables	84,956	172,334

In addition, the Group entered into various transactions, including borrowings and other general banking facilities, with certain banks and financial institutions which are Stated-Controlled Entities in its ordinary course of business. In view of the nature of those banking transactions, the directors are of the opinion that separate disclosure would not be meaningful.

Except as disclosed above, the directors are of the opinion that transactions with other Stated-Owned Enterprises are not significant to the Group’s operations.

43. OPERATING LEASES

The Group as lessee

	2008	2007
	RMB’000	RMB’000
Minimum lease payments under operating leases during
the year	78,767	23,982

At the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of office premises which fall due as follows:

Within one year In the second to fifth year inclusive After five years	2008 RMB’000 2,599 3,685 1,798 8,082	2007 RMB’000 1,635 1,741 –
		3,376

Leases are negotiated and rentals are fixed for terms from one to twenty years.

The Group as lessor

Rental income earned during the year was RMB209,201,000 (2007: RMB408,599,000). The Group rents out its plant and equipment and investment properties in PRC under operating leases and included in revenue.

– II-60 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

At the balance sheet date, the Group had commitments with tenants for the following minimum lease payments:

Within one year In the second to fifth year inclusive After five years	2008 RMB’000 119,391 381,498 613,970 1,114,859	2007 RMB’000 118,141 363,174 586,198
		1,067,513

Leases are negotiated and rentals are fixed for terms from one to twenty years.

44. COMMITMENTS

Capital expenditure in respect of the acquisition of property, plant and equipment: – authorised but not contracted – contracted but not provided for Capital expenditure in respect of the acquisition of equity interests: – authorised but not contracted – contracted but not provided for (note 1) Other commitment (note 2)	2008 RMB’000 – 775,695	2007 RMB’000 71 427,061
	95,684 196,000	– 80,410
	16,689	–

Note:

• (1) The commitment in relation to the acquisition of additional interests as at 31 December 2007 has been completed during the year.

• (2) In December 2008, Asia Pacific Ports Company Limited (“APP”), a subsidiary of the Company, entered into an agreement for the acquisition of 20% interest in Jadeway Limited (“Jadeway”) from an independent third party at the consideration of HK$2,000 (equivalent to approximately RMB1,760). Jadeway is engaged in the construction and management of vessels. Pursuant to the acquisition, APP would provide a loan of Japanese Yen 220,000,000 (equivalent to approximately RMB16,689,000) to Jadeway for construction of a vessel. The above transactions were completed in January 2009.

45. RETIREMENT BENEFITS SCHEMES

The Group’s full-time employees are covered by a government-sponsored defined contribution pension scheme, and are entitled to a monthly pension from their retirement dates. The PRC government is responsible for the pension liability to these retired employees. The Group is required to make annual contributions to the retirement plan of a rate of 19% of employees’ salaries, which are charged to operations as an expense when the contributions are due.

– II-61 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

46. MAJOR NON-CASH TRANSACTIONS

During the year, the Group acquired property, plant and equipment amounting to approximately RMB13,463,000 (2007: RMB55,950,000) which remained unsettled and was included in trade and other payables.

During the year, the Group disposed of property, plant and equipment and the related proceeds amounting to approximately RMB27,090,000 (2007: RMB174,371,000) which remained unsettled and was included in trade and other receivables and current accounts with related parties.

47. POST BALANCE SHEET EVENT

The following events have occurred subsequent to 31 December 2008:

• (1) Pursuant to an extraordinary general meeting on 23 January 2009, the shareholders of the Company approved, subject to the approval of relevant authority, the issue of fixed interest rate medium-term notes or corporate bonds with a maximum principal amount of RMB2.5 billion and a maturity of not less than five years. Pursuant to the same meeting, the shareholders of the Company authorised the board of directors to determine and deal with relevant matters relating to the proposed issue. The Group has not issued any notes or bonds up to the date of approval for issuance of these financial statements.

• (2) In February 2009, the Group set up a wholly owned subsidiary, 大連港越汽車船管理有限公 司 (“港越汽車船”), by making capital contribution of RMB196,000,000. 港越汽車船 be engaged in automobile terminal and logistics services. The capital will be used for construction of a vessel.

• (3) On 18 March 2009, the Group entered into a contract in relation to the formation of a joint venture enterprise with PetroChina Company Limited (“PetroChina) and Dalian Construction Investment (“Dalian Construction”) for the purpose of investing in, constructing, managing and operating a liquefied natural gas terminal (“LNG Terminal”) in Dalian. The joint venture enterprise, with the registered capital of RMB2.6 billion, will be owned as to 75% by PetroChina, 20% by the Group, and the remaining 5% by Dalian Construction. The Initial Committed Capital Contribution by the Group of RMB520 million shall be paid in two installments. The first installment of RMB200 million (the “First Installment”) shall be paid within 45 days from the signing date of the JV Contract and the second installment of RMB320 million (the “Second Installment”) shall be paid within 30 days after the first anniversary of establishment of the JV Enterprise. The First Installment to be contributed by the Group will be funded in cash from internal resources and the Second Installment will be funded in cash from the proceeds of medium-term bonds proposed to be issued by the Group in the near future in accordance with the shareholders resolution at the extraordinary general meeting held on 23 January 2009. The LNG Terminal is expected to commence operations in 2011. A circular containing details of the transaction under the JV Contract will be despatched to the Shareholders of the Company.

– II-62 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

48. PRINCIPAL SUBSIDIARIES

Particulars of the principal subsidiaries of the Group are as follows:

		Place of	Issued and	Attributable	Attributable
		incorporation/	fully paid capital/	equity interest
	Name of subsidiary	registration	registered capital	to the Group		Principal activities
				2008	2007
	Directly held by the Company
#	Dalian Port Container Co., Ltd.	PRC	RMB1,366,210,000	91.34%	91.34%	Provision of wide range of
						container terminal and
						logistics services as well as
						port investment
	Asia Pacific Ports Company Limited	Hong Kong	75,000,000 ordinary	100.00%	100.00%	Investment holding
	(“HK”)		shares of HK$1 each
	Indirectly held by the Company
	Dalian Port Jifa Logistics Co., Ltd.	PRC	RMB717,650,000	85.00%	85.00%	Provision of depot leasing
				(directly)	(directly)	business and a wide range
				and 13.70%	and 13.70%	of other container related
				(indirectly)	(indirectly)	logistics services
	Dalian Jifa Shipping Agency Co., Ltd.	PRC	RMB500,000	90.38%	92.82%	Provision of port logistics
						and supporting services
	Dalian Port Logistics Technology Co.,	PRC	RMB10,000,000	92.08%	92.08%	Development and sales of
	Ltd.					computer software
	Dalian Jifa Bohai Rim Container Lines	PRC	RMB49,230,000	88.93%	95.03%	Provision of port logistics
	Co., Ltd.					and supporting services
*	Dalian International Container Services	PRC	US$1,440,000	70.31%	72.63%	Provision of port logistics
	Co., Ltd.					and supporting services
	Dalian Port Jihuo Logistics Co., Ltd.	PRC	RMB2,000,000	96.55%	98.23%	Provision of port logistics
						and supporting services
	Dalian International Logistics Park	PRC	RMB150,000,000	88.83%	88.83%	Operation of a bonded
	Development Co., Ltd. (“DPL”)					logistics park
	Dalian Jifa International Freight Co., Ltd.	PRC	RMB5,000,000	90.11%	96.83%	Provision of port logistics
						and supporting services
	Dalian TBT Consulting Co., Ltd.	PRC	RMB1,000,000	92.08%	92.08%	Development of software and
						ERP system
	Dalian TechPort Service Co., Ltd.	PRC	RMB3,500,000	54.11%	87.03%	Development of software and
						ERP system
	Dalian Jifa Port Engineering Co., Ltd.	PRC	RMB5,000,000	91.34%	93.55%	Provision of port logistics
						and supporting services
	Dalian ETDZ Jin Xin Petrochemistry	PRC	RMB5,000,000	100.00%	98.23%	Provision of agency services
	Company Limited			(directly)		and trading of oil and
						other related products

– II-63 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

		Place of	Issued and	Attributable	Attributable
		incorporation/	fully paid capital/	equity interest
	Name of subsidiary	registration	registered capital	to the Group		Principal activities
				2008	2007
	Dalian Jifa Shipping Management	PRC	RMB80,000,000	70.00%	97.60%	Provision of trading, leasing
	Co., Ltd.			(directly)	(indirectly)	and management of ships
				and 26.68%
				(indirectly)
	DCT Logistics Co., Ltd.	PRC	RMB63,330,000	96.53%	(Note a)	Provision of port logistics
						and supporting services
	Dalian Jiyi Logistics Co., Ltd.	PRC	RMB6,500,000	78.96%	(Note b)	Provision of port logistics
						and supporting services
*	Dalian Portnet Co., Ltd.	PRC	US$2,800,000	70.96%	(Note b)	Provision of logistics data
						transmission, conversion
						and processing services
	Asia Pacific Carrier Ltd.	British Virgin	50,000 ordinary shares	60.00%	60.00%	Investment holding
		Island (“BVI”)	of US$1 each
	Pacific Huanghai Shipping Co., Ltd.	HK	10,000 ordinary shares	60.00%	60.00%	Provision of vessel and
			of HK$1 each			chartering services
	Pacific Donghai Shipping Co., Ltd.	HK	10,000 ordinary shares	60.00%	60.00%	Provision of vessel and
			of HK$1 each			chartering services
	Harbour Full Group Limited	BVI	US$50,000	100.00%	–	Provision of vessel and
						chartering services

• The subsidiary is a foreign investment enterprise.

• # The subsidiary is a joint stock limited company.

Notes:

• (a) The company was previously a jointly controlled entity of the Group and became a subsidiary during the year ended 31 December 2008.

• (b) The companies were previously associates of the Group and became subsidiaries during the year ended 31 December 2008.

The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

None of the subsidiaries had any loan capital subsisting at the end of the year or at anytime during the year.

– II-64 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

49. PARTICULARS OF THE JOINTLY CONTROLLED ENTITIES

Particulars of the jointly controlled entities of the Group are as follows:

	Place of		Attributable	Attributable
	incorporation/		equity interest
Name	registration	Registered capital	to the Group		Principal activities
			2008	2007
Directly held by the Company
China United Tally Co., Ltd. Dalian	PRC	RMB2,800,000	50.00%	50.00%	Provision of tallying services
Dalian China Oil Dock Management	PRC	RMB10,000,000	49.00%	49.00%	Provision of loading and
Co., Ltd.					discharging services for
					refined oil
Dalian Ocean Shipping Tally Co., Ltd.	PRC	RMB3,089,200	49.00%	49.00%	Provision of tallying services
Odfjell Terminals (Dalian) Ltd.	PRC	US$14,000,000	50.00%	50.00%	Provision of storage and
					loading and discharging
					services of liquefied
					chemicals
Dalian Harbour ECL Logistics Co., Ltd.	PRC	US$1,000,000	50.00%	50.00%	Provision of automobile
					terminal and logistics
					services
大連港通利船務代理有限公司	PRC	RMB600,000	50.00%	50.00%	Provision of agency services
Dalian Port Petro China International	PRC	RMB250,000,000	50.00%	–	Providing terminal
Terminal Co., Ltd.					construction management
					and discharging services of
					refined oil
Indirectly held by the Company
Dalian Assembling Transportation	PRC	RMB30,000,000	67.57%	–	Provision of port logistics
Logistics Co., Ltd.			(note b)		and supporting services
Dalian Container Terminal Co., Ltd.	PRC	RMB1,350,000,000	46.58%	46.58%	Provision of container
					terminal and logistics
					services
Dalian United International Shipping	PRC	RMB5,000,000	45.67%	45.67%	Provision of port logistics
Agency					and supporting services
Dalian Yidu Jifa Cold Logistics Co., Ltd.	PRC	RMB40,000,000	49.35%	49.35%	Provision of port logistics
					and supporting services
DCT Logistics Co., Ltd.	PRC	RMB63,330,000	(note a)	36.03%	Provision of port logistics
					and supporting services
Liaoning Con-Rail International Logistics	PRC	RMB16,000,000	49.35%	49.35%	Provision of port logistics
Co., Ltd.					and supporting services
					processing services
Liaoning Electronicport Co., Ltd.	PRC	RMB12,000,000	39.03%	–	Provision of logistics data
					transmission transfer and
Dalian Vanguard International Logistics	PRC	RMB74,000,000	49.35%	–	Provision of port logistics
Co., Ltd.					and supporting services

– II-65 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Note:

• (a) The company became a subsidiary of the Group during the year ended 31 December 2008.

• (b) The company was a jointly controlled entity of the Group as all strategic financing and operating decisions of the company require the unanimous consent of all shareholders.

50. PARTICULARS OF THE ASSOCIATES

Particulars of the associates of the Group are as follows:

	Place of		Attributable	Attributable
	Incorporation/		equity interest
Name	registration	Registered capital	to the Group		Principal activities
			2008	2007
Directly held by the Company
Dalian Automobile Terminal Co., Ltd	PRC	RMB160,000,000	40.00%	40.00%	Provision of automobile
					terminal and logistics
					services
Dalian Petro China International	PRC	RMB100,000,000	20.00%	20.00%	Provision of storage and
Warehousing and Transportation					loading and discharging
Co., Ltd.					services of refined oil and
					liquefied chemicals
太倉興港拖輪有限公司	PRC	RMB3,000,000	30.00%	30.00%	Provision of tallying services
Indirectly held by the Company
Dalian Dagang China Shipping	PRC	RMB30,000,000	36.40%	36.40%	Provision of container
Container Terminal Co., Ltd.					terminal and logistics
					services
Dalian Port Container Terminal Co., Ltd.	PRC	RMB730,000,000	31.97%	31.97%	Provision of container
					terminal and logistics
					services
Dalian Jiyi Logistics Co., Ltd.	PRC	RMB6,500,000	(note a)	39.48%	Provision of port logistics
					and supporting services
Dalian Singamas International Container	PRC	US$11,120,000	31.39%	31.39%	Provision of port logistics
Co., Ltd.					and supporting services
Dalian Shunda Logistic Services	PRC	US$5,800,000	49.35%	49.35%	Provision of bonded goods
Corporation					warehousing, processing
					and consultation services
Dalian Jilong Logistics Co., Ltd.	PRC	RMB70,000,000	29.61%	29.61%	Provision of port logistics
					and supporting services
Dalian Portnet Co., Ltd.	PRC	US$2,800,000	(Note a)	35.96%	Provision of logistics date
					transmission, conversion
					and processing services
Dalian ETOZ Wan Da Customs Broker	PRC	RMB1,500,000	34.24%	34.24%	Provision of customs
Co., Ltd.					clearance service for
					import and export cargoes

– II-66 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

	Place of		Attributable	Attributable
	Incorporation/		equity interest
Name	registration	Registered capital	to the Group		Principal activities
			2008	2007
China Unite Northeast Rail Containers	PRC	RMB10,000,000	39.48%	39.48%	Provision of container
Co., Ltd.					terminal and logistics
					services
Dalian International Container Terminal	PRC	RMB840,000,000	36.54%	36.54%	Provision of container
Co., Ltd					terminal and logistics
					services
Dalian Prologis – Jifa Logistic	PRC	US$80,000,000	35.53%	35.53%	Development of a bonded
Development Co., Ltd.					logistics park
Shenyang Prologis – Jifa Logistic	PRC	US$16,660,000	35.53%	35.53%	Development of a bonded
Development Co., Ltd.					logistics park
Dalian Port Communication Engineering	PRC	RMB10,000,000	14.19%	–	Provision of information
Co., Ltd.			(note b)		technology engineering
					and consulting services
SINOECL Auto Liners, Limited	HK	HK$4,149,332	20.00%	–	Provision of international
					automobile transportation
					services

Note:

• (a) The companies became subsidiaries of the Group during the year ended 31 December 2008.

• (b) The company is an associate of the Group as the Group is able to exercise significant influence over the company because it holds 20% of the voting power of the Company.

– II-67 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

(C) UNAUDITED INTERIM FINANCIAL STATEMENTS

Set out below are the unaudited condensed consolidated financial statements of the Group as extracted from the interim report of the Company for the six months ended 30 June 2009.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2009

Notes Revenue 3 Cost of sales and services Gross profit Other income 4 Change in fair value of derivative financial liabilities Administrative expenses Share of profits and losses of: Associates Jointly-controlled entities Finance costs 5 Profit before tax 3, 6 Income tax 3, 7 Profit for the period 3 Attributable to: Equity holders of the Company Minority interests Dividend: Proposed interim 8 Earnings per share attributable to ordinary equity holders of the Company – Basic (RMB) 9	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 752,681 745,884 (379,603) (351,938) 373,078 393,946 14,864 299,060 2,250 (8,894) (71,555) (70,766) (12,195) 12,566 59,959 103,632 (31,885) (53,860) 334,516 675,684 (64,141) (99,244) 270,375 576,440 272,173 534,185 (1,798) 42,255 270,375 576,440 – – 0.09 0.18	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 752,681 745,884 (379,603) (351,938) 373,078 393,946 14,864 299,060 2,250 (8,894) (71,555) (70,766) (12,195) 12,566 59,959 103,632 (31,885) (53,860) 334,516 675,684 (64,141) (99,244) 270,375 576,440 272,173 534,185 (1,798) 42,255 270,375 576,440 – – 0.09 0.18
	373,078 14,864 2,250 (71,555) (12,195) 59,959 (31,885) 334,516 (64,141)	393,946 299,060 (8,894 (70,766 12,566 103,632 (53,860
		675,684 (99,244
	270,375
	272,173 (1,798)	534,185 42,255
	270,375 – 0.09

– II-68 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2009

Note Profit for the period Exchange differences on translation of foreign operations Net gain/(loss) on available-for-sale financial assets 10 Other comprehensive income/(loss) for the period, net of tax Total comprehensive income for the period, net of tax Attributable to: Equity holders of the Company Minority interests	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 270,375 576,440 36 (7,975) 11,851 (21,461) 11,887 (29,436) 282,262 547,004 284,060 504,749 (1,798) 42,255 282,262 547,004	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 270,375 576,440 36 (7,975) 11,851 (21,461) 11,887 (29,436) 282,262 547,004 284,060 504,749 (1,798) 42,255 282,262 547,004
	284,060 (1,798)	504,749 42,255
	282,262

– II-69 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 June 2009

Notes NON-CURRENT ASSETS Property, plant and equipment 11 Prepaid lease payments Investment properties Intangible assets Goodwill Interests in jointly-controlled entities Interests in associates Available-for-sale financial assets Deferred tax assets Amount due from a jointly-controlled entity 13 Amounts due from associates 13 Total non-current assets CURRENT ASSETS Properties held for sale Inventories Trade and other receivables 12 Prepaid lease payments Amounts due from jointly-controlled entities 13 Amounts due from associates 13 Amounts due from fellow subsidiaries 13 Amounts due from Dalian Port Corporation Limited (“PDA”) 13 Cash and bank balances Total current assets CURRENT LIABILITIES Trade and other payables 14 Amounts due to jointly-controlled entities 13 Amounts due to associates 13 Amounts due to related companies 13 Amounts due to fellow subsidiaries 13 Amounts due to PDA 13 Tax payable Bank borrowings – due within one year 15 Government grants Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	30 June 2009 RMB’000 (Unaudited) 5,605,102 287,434 852,597 128,095 16,035 951,761 1,186,823 141,353 59,346 – 66,645	31 December 2008 RMB’000 (Audited) 5,444,571 290,700 877,498 133,415 16,035 893,697 951,265 118,642 55,158 3,588 64,000
	9,295,191 9,987 9,383 354,235 6,495 9,802 136,930 1,491 5,002 1,015,932 1,549,257 732,341 19,971 3,688 52,007 2,683 17,499 11,130 50,000 38,380 927,699 621,558 9,916,749	8,848,569
		9,655 7,699 487,398 6,480 30,318 122,091 351 5,175 670,011
		1,339,178
		446,871 3,587 2,594 88,789 2,892 31,634 82,086 196,733 38,380
		893,566
		445,612
		9,294,181

– II-70 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Notes NON-CURRENT LIABILITIES Bank and other borrowings – due after one year 15 Government grants Derivative financial liabilities 16 Loan from PDA 17 Long term payables 18 Total non-current liabilities NET ASSETS EQUITY Equity attributable to equity holders of the Company Issued capital Reserves Minority interests Total equity	30 June 2009 RMB’000 (Unaudited) 2,783,512 691,181 6,784 – 15,725 3,497,202 6,419,547	31 December 2008 RMB’000 (Audited) 1,235,000 711,178 9,034 788,377 –
		2,743,589
		6,550,592
	2,926,000 3,445,632 6,371,632 47,915	2,926,000 3,434,846
		6,360,846
		189,746
	6,419,547	6,550,592

– II-71 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Attributable to equity holders of the Company	Available-	for-sale	Statutory financial	surplus Enterprise Discretionary assets Exchange Proposed	Issued Share Capital reserve development reserve Special Other revaluation fluctuation final Retained Minority Total	capital premium reserves fund fund fund reserve reserve reserve reserve dividend earnings Total interests equity	RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000	(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)	(Note a) (Note b) (Note c) (Note d) (Note e)	At 1 January 2009 2,926,000 1,460,941 866,025 291,989 415 216 15,666 (480,245) – (10,453) 263,340 1,026,952 6,360,846 189,746 6,550,592	Profit for the period – – – – – – – – – – – 272,173 272,173 (1,798) 270,375	Other comprehensive income – – – – – – – – 11,851 36 – – 11,887 – 11,887	Total comprehensive income – – – – – – – – 11,851 36 – 272,173 284,060 (1,798) 282,262	Acquisition of minority	interests – – (9,934) – – – – – – – – – (9,934) (140,033) (149,967)	Final 2008 dividend declared – – – – – – – – – – (263,340) – (263,340) – (263,340)	Transfer – – – – – – – 52,080 – – – (52,080) – – –	At 30 June 2009 2,926,000 1,460,941 856,091 291,989 415 216 15,666 (428,165) 11,851 (10,417) – 1,247,045* 6,371,632 47,915 6,419,547		* These reserve accounts comprise the consolidated reserves of RMB3,445,632,000 (30 June 2008: RMB3,107,847,000) in the interim condensed consolidated statement of	financial position.

– II-72 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Issued capital Share premium Capital reserves Statutory surplus reserve fund Enterprise development fund Discretionary reserve fund Special reserve Other reserve Available- for-sale financial assets revaluation reserve Exchange fluctuation reserve Proposed final dividend Retained earnings Total Minority interests Total equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Note a) (Note b) (Note c) (Note d) (Note e) 2,926,000 1,460,941 866,025 219,127 415 216 15,666 (583,950) (14,555) (6,754) 234,080 659,214 5,776,425 160,452 5,936,877 – – – – – – – – – – – 534,185 534,185 42,255 576,440 – – – – – – – – (21,461) (7,975) – – (29,436) – (29,436) – – – – – – – – (21,461) (7,975) – 534,185 504,749 42,255 547,004 – – – – – – – – – – – (13,247) (13,247) (12) (13,259) – – – – – – – – – – – – – 8,324 8,324 – – – – – – – – – – – – – (191) (191) – – – – – – – 11,456 – – – (11,456) – – – – – – – – – – – – – (234,080) – (234,080) – (234,080)

– II-73 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Notes:

• (a) According to the articles of association, the Company and certain subsidiaries are required to transfer 10% of the profit after tax (as determined under the People’s Republic of China (the “PRC”) accounting standards) to the statutory surplus reserve fund until the fund balance reaches 50% of the registered capital. The transfer to this fund must be made before distributing dividends to shareholders. The fund can be used to make up for previous years’ losses, expand the existing operations or convert into additional capital of the Company and subsidiaries.

• (b) Pursuant to regulations in the PRC, certain subsidiaries are required to transfer 5% to 10% of the profit after tax (as determined under the PRC accounting standards) to the enterprise development fund. The fund can only be used for enterprise development and is not available for distribution to shareholders.

• (c) According to the articles of association, the Company and certain subsidiaries can transfer the profit after tax to the discretionary reserve fund on a discretionary basis.

• (d) Special reserve arose from the measurement of the non-interest-bearing advance from PDA at fair value, in accordance with its accounting policies adopted for initial recognition of financial instruments.

• (e) Other reserve represents the reversal of the revaluation surplus arising from the capital contribution by PDA to Dalian Container Terminal Co., Ltd (“DCT”) and the group reorganisation in prior years and the difference between the fair values and the carrying values of the underlying assets and liabilities attributable to the acquisition of additional interests of subsidiaries. Other reserve would be released to retained earnings upon the depreciation and the disposal of those capital assets.

– II-74 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 June 2009

NET CASH FLOWS FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Purchase of property, plant and equipment Capital contribution to associates Acquisition of subsidiaries, net of cash acquired Acquisition of/investment in associates Acquisition of equity interests of a subsidiary from minority shareholders Acquisition of available-for-sale financial assets Proceeds from disposal of non-current assets held for sale Proceeds from disposal of property, plant and equipment Proceeds from disposal of an associate Dividend received from jointly-controlled entities Other investing cash flows NET CASH FLOWS USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment of bank borrowings Repayment of a loan from PDA Interest paid Proceeds from issuance of medium term notes, net Proceeds from a loan from PDA Proceeds from bank borrowings NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT END OF THE PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 228,024 246,792 (331,614) (576,772) (60,000) (207,381) – (73,283) (200,000) (4,088) (196) – (12,000) – – 400,000 27,191 246,451 4,400 – 134,894 137,205 11,579 (39,230) (425,746) (117,098) (1,501,733) (875,868) (788,377) – (87,544) (73,187) 2,492,244 – – 787,892 429,053 161,543 543,643 380 345,921 130,074 670,011 532,154 1,015,932 662,228 1,015,932 662,228	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 228,024 246,792 (331,614) (576,772) (60,000) (207,381) – (73,283) (200,000) (4,088) (196) – (12,000) – – 400,000 27,191 246,451 4,400 – 134,894 137,205 11,579 (39,230) (425,746) (117,098) (1,501,733) (875,868) (788,377) – (87,544) (73,187) 2,492,244 – – 787,892 429,053 161,543 543,643 380 345,921 130,074 670,011 532,154 1,015,932 662,228 1,015,932 662,228
	(331,614) (60,000) – (200,000) (196) (12,000) – 27,191 4,400 134,894 11,579 (425,746) (1,501,733) (788,377) (87,544) 2,492,244 – 429,053 543,643 345,921 670,011	(576,772 (207,381 (73,283 (4,088 – – 400,000 246,451 – 137,205 (39,230
		(117,098
		(875,868 – (73,187 – 787,892 161,543
		380
		130,074 532,154
	1,015,932 1,015,932

– II-75 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2009

1. CORPORATE INFORMATION

The Company was incorporated in the People’s Republic of China (the “PRC”) as a joint stock limited company on 16 November 2005 and it has been registered in Hong Kong as an overseas company under Part XI of the Hong Kong Companies Ordinance. The H shares of the Company have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “SEHK”) with effect from 28 April 2006.

The Company’s parent and ultimate holding company is PDA, which is a state-owned enterprise established on 30 April 2003 under the laws of the PRC.

The Group is engaged in oil/liquefied chemicals terminal and logistics services, container terminal and logistics services, automobile terminal and logistics services and port value-added services.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of preparation

The interim condensed consolidated financial statements have been prepared in accordance with IAS 34.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the annual financial statements of the Group as at 31 December 2008.

Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the annual financial statements of the Group for the year ended 31 December 2008, except for the following:

On 1 January 2009, the Group adopted revised IAS 1 “Presentation of Financial Statements” (IAS 1). The revised standard aims to improve users’ ability to analyse and compare information given in financial statements. The adoption of this revised standard has no effect on the results reported in the Group’s interim condensed consolidated financial statements. It does, however, result in certain presentational changes in the Group’s primary financial statements, including:

• the adoption of revised title “Statement of financial position” for the “Balance sheet”; and

• he presentation of all items of income and expenditure in two financial statements, the “Income statement” and “Statement of comprehensive income”.

Besides, the Group also adopted a number of new and revised standards and interpretations that have no material impact on the accounting policies of the Group and the methods of computation in the Group’s interim condensed consolidated financial statements. These are described under Note 2 of the Company’s 2008 Annual Report and Accounts.

– II-76 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

3. SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products and services and has four reportable segments as follows:

Oil/liquefied chemicals terminal and	Loading and discharging, storage and
logistics services	transhipment of oil products and liquefied
	chemicals and port management services;
Container terminal and logistics	Loading and discharging, storage and
services	transhipment of containers, leasing of terminals
	and related facilities and various container
	logistics services and sale of properties;
Automobile terminal and logistics	Loading and discharging of automobile and related
services	logistics services; and
Port value-added services	Tallying, tugging and information technology
	services.

The items of income and expenses and the assets attributable to the headquarter of the Company have not been allocated.

Management monitors the operating results of its business units separately for the purpose of making decisions about resources allocation and performance assessment. The Group’s reportable segments adopt accounting policies that are the same as those described in note 2 to the notes to the interim condensed consolidated financial statements.

These reportable segments are the basis on which the Group reports its segment information and no operating segments have been aggregated to form the above reportable segments.

Intersegment revenue is eliminated on consolidation. Intersegment sales and transactions are conducted in accordance with the terms mutually agreed between the parties.

No further geographical segment information is presented as over 90% of the Group’s revenue is derived from customers based in Mainland China, and over 90% of the Group’s assets are located in Mainland China.

– II-77 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The following tables present revenue and profit information regarding the Group’s operating segments for the six months ended 30 June 2009 and 2008, respectively:

For the six months ended 30 June 2009 (unaudited)

Oil/liquefied chemicals terminal and logistics services RMB’000 Revenue External sales 394,303 Intersegment sales – Total revenue 394,303 Results Profit/(loss) before tax 205,763 Income tax (45,944) Net profit/(loss) 159,819	Oil/liquefied chemicals terminal and logistics services RMB’000 Revenue External sales 394,303 Intersegment sales – Total revenue 394,303 Results Profit/(loss) before tax 205,763 Income tax (45,944) Net profit/(loss) 159,819	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 199,456 – 155,932 2,990 – 300 – 2,388 – (2,688) 199,756 – 158,320 2,990 (2,688)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 199,456 – 155,932 2,990 – 300 – 2,388 – (2,688) 199,756 – 158,320 2,990 (2,688)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 199,456 – 155,932 2,990 – 300 – 2,388 – (2,688) 199,756 – 158,320 2,990 (2,688)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 199,456 – 155,932 2,990 – 300 – 2,388 – (2,688) 199,756 – 158,320 2,990 (2,688)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 199,456 – 155,932 2,990 – 300 – 2,388 – (2,688) 199,756 – 158,320 2,990 (2,688)	Total RMB’000 752,681 –
							752,681
	205,763 (45,944)	77,791 (4,348)	(5,837) –	65,675 (16,068)	(8,876) 2,219	– –	334,516 (64,141)
	159,819	73,443	(5,837)	49,607	(6,657)	–	270,375

For the six months ended 30 June 2008 (restated)

Oil/liquefied chemicals terminal and logistics services RMB’000 Revenue External sales 321,844 Intersegment sales – Total revenue 321,844 Results Profit/(loss) before tax 276,947 Income tax (60,930) Net profit/(loss) 216,017	Oil/liquefied chemicals terminal and logistics services RMB’000 Revenue External sales 321,844 Intersegment sales – Total revenue 321,844 Results Profit/(loss) before tax 276,947 Income tax (60,930) Net profit/(loss) 216,017	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 284,697 – 135,891 3,452 – 255 – 1,848 – (2,103) 284,952 – 137,739 3,452 (2,103)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 284,697 – 135,891 3,452 – 255 – 1,848 – (2,103) 284,952 – 137,739 3,452 (2,103)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 284,697 – 135,891 3,452 – 255 – 1,848 – (2,103) 284,952 – 137,739 3,452 (2,103)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 284,697 – 135,891 3,452 – 255 – 1,848 – (2,103) 284,952 – 137,739 3,452 (2,103)	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 284,697 – 135,891 3,452 – 255 – 1,848 – (2,103) 284,952 – 137,739 3,452 (2,103)	Total RMB’000 745,884 –
							745,884
	276,947 (60,930)	381,260 (35,502)	(2,345) –	69,370 (14,987)	(49,548) 12,175	– –	675,684 (99,244)
	216,017	345,758	(2,345)	54,383	(37,373)	–	576,440

Segment profit after tax represents the profit earned by each segment. This is the measure reported to Chief Executive Officer for the purposes of resources allocation and assessment of segment performance.

– II-78 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The following tables present segment assets of the Group’s operating segments as at 30 June 2009 and 31 December 2008:

30 June 2009 (unaudited)

Oil/liquefied chemicals terminal and logistics services RMB’000 Segment assets 4,344,093 Interests in jointly- controlled entities 257,702 Interests in associates 219,138 Total assets 4,820,933	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2,455,039 219,707 788,834 898,191 – 665,116 3,939 25,004 – – 889,168 74,665 3,852 – – 4,009,323 298,311 817,690 898,191 –	Total RMB’000 8,705,864 951,761 1,186,823
		10,844,448

31 December 2008 (audited)

Oil/liquefied chemicals terminal and logistics services RMB’000 Segment assets 4,363,778 Interests in jointly- controlled entities 220,440 Interests in associates 18,060 Total assets 4,602,278	Container terminal and logistics services Automobile terminal and logistics services Port value-added services Unallocated Elimination RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2,519,434 173,560 830,522 455,491 – 646,401 4,078 22,778 – – 848,850 80,365 3,990 – – 4,014,685 258,003 857,290 455,491 –	Total RMB’000 8,342,785 893,697 951,265
		10,187,747

The Group’s sales to customers which accounted for 10% or more of its sales are as follows:

Customer A Customer B Customer C	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 125,273 142,125 115,823 41,744 89,774 92,436 330,870 276,305	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 125,273 142,125 115,823 41,744 89,774 92,436 330,870 276,305
		276,305

The above customers are in the segment of oil/liquefied chemicals terminal and logistics services.

– II-79 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

4. OTHER INCOME

An analysis of other income is as follows:

Gain on disposal of property, plant and equipment – oil storage tanks – vessels Gain on disposal of non-current assets held for sale Gain on disposal of properties held for sale Government grants Bank interest income Net interest income from derivative financial liabilities Others	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) – 80,260 – 70,099 – 150,359 – 120,515 – 16,917 6,330 – 6,969 5,491 1,158 1,162 407 4,616 14,864 299,060	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) – 80,260 – 70,099 – 150,359 – 120,515 – 16,917 6,330 – 6,969 5,491 1,158 1,162 407 4,616 14,864 299,060
		150,359 120,515 16,917 – 5,491 1,162 4,616
		299,060

5. FINANCE COSTS

Interest on bank loans Interest on a loan from PDA Less: Amount capitalised in property, plant and equipment	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 44,626 69,233 18,852 9,630 (31,593) (25,003) 31,885 53,860	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 44,626 69,233 18,852 9,630 (31,593) (25,003) 31,885 53,860
		53,860

– II-80 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

6. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

Staff costs, including directors’ remuneration – Salaries, wages and other benefits – Retirement benefit scheme contributions Total staff costs Depreciation and amortisation Less: Government grants released against depreciation Loss on disposal of property, plant and equipment, net Recovery of allowance for bad and doubtful debts, net Net foreign exchange loss Release of prepaid lease payments to the consolidated income statement Share of tax of associates (included in share of profits and losses of associates) Share of tax of jointly-controlled entities (included in share of profits and losses of jointly-controlled entities)	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 98,953 90,568 9,675 10,495	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 98,953 90,568 9,675 10,495
	108,628 125,297 (19,190) 106,107	101,063
		106,164 (19,190)
		86,974
	98 – 47 3,251 940 16,125	– (53) 2,969 3,204 1,600 20,904

7.

INCOME TAX

The charges comprise: Current – PRC enterprise income tax Deferred tax Total tax charge for the period	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 68,329 114,933 (4,188) (15,689) 64,141 99,244	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 68,329 114,933 (4,188) (15,689) 64,141 99,244
		99,244

The PRC enterprise income tax for the Company and the majority of its subsidiaries is calculated at the prevailing tax rate of 25% on their estimated assessable profit for the six months ended 30 June 2009 (for the six months ended 30 June 2008: 25%).

– II-81 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

8. DIVIDEND

On 19 June 2009, a dividend of RMB9 cents per share amounting to RMB263,340,000 in aggregate (for the six months ended 30 June 2008: RMB8 cents per share amounting to RMB234,080,000 in aggregate for the 2007 final dividend) was declared as the final dividend for 2008.

The directors do not recommend the payment of an interim dividend for the six months ended 30 June 2009 (for the six months ended 30 June 2008: nil).

9. EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The calculation of the basic earnings per share for the six months ended 30 June 2009 is based on the profit attributable to equity holders of the Company and the number of 2,926,000,000 shares (for the six months ended 30 June 2008: 2,926,000,000 shares) in issue.

Diluted earnings per share amounts for the periods ended 30 June 2009 and 2008 have not been disclosed as no diluting events existed during both periods.

10. COMPONENTS OF OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2009, the net gain on available-for-sale financial assets of RMB11,851,000 (for the six months 30 June 2008: net loss on available-for-sale financial assets of RMB21,461,000) did not have any reclassification adjustments included in the consolidated income statement or related tax effect.

11. PROPERTY, PLANT AND EQUIPMENT

For the six months ended 30 June 2009, the Group acquired items of property, plant and equipment with a total cost of RMB252,869,000 (for the six months ended 30 June 2008: RMB601,775,000).

Items of property, plant and equipment with a net book value of RMB199,000 (for the six months ended 30 June 2008: RMB90,221,000) were disposed of by the Group during the six months ended 30 June 2009, resulting in a net loss on disposal of RMB98,000 (for the six months ended 30 June 2008: net gain on disposal of RMB150,359,000).

– II-82 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

12. TRADE AND OTHER RECEIVABLES

The Group has a policy of allowing an average credit period of 90 days to its trade customers. The following is an aged analysis of trade receivables net of allowance for doubtful debts at the balance sheet dates:

Trade receivables: 0 to 90 days 91 to 180 days 181 to 365 days Over 365 days Other receivables: Receivable in respect of disposal of oil tanks and prepaid lease payments Receivable in respect of compensation for terminal relocation Dividend receivable from jointly-controlled entities Others	30 June 2009 RMB’000 (Unaudited) 90,861 4,733 3,401 1,776 100,771	31 December 2008 RMB’000 (Audited) 75,114 4,194 2,896 279
		82,483
	47,783 172,596 1,888 31,197 253,464	74,873 172,596 135,686 21,760
		404,915
	354,235	487,398

13. BALANCES WITH JOINTLY-CONTROLLED ENTITIES/ASSOCIATES/RELATED COMPANIES/FELLOW SUBSIDIARIES/PDA

The amounts are unsecured, non-interest-bearing and repayable on demand, except for the followings:

• (i) The amounts due from jointly-controlled entities consist of the amount due from Dalian Harbour ECL Logistic Co., Ltd. of RMB3,588,000 which is unsecured, interest-bearing at 3% per annum and repayable in full on 14 February 2010.

• (ii) The amounts due from associates consist of the amount due from Dalian Automobile Terminal Co., Ltd. of RMB64,000,000 which is unsecured, interest-bearing at the market prevailing rate and repayable in full on 24 April 2011; the amount due from China Unite Northeast Rail Containers Co., Ltd. of RMB110,000,000 is unsecured, interest-bearing at rates ranging from 5.43% to 5.91% per annum and repayable on demand; and the amount due from SINOECL Auto Liners Limited of RMB2,645,000 is unsecured, interest-bearing at the market prevailing rate and repayable in full on 24 April 2012.

• (iii) The amounts due to jointly-controlled entities consists of the amounts due to Dalian Assembling Transportation Logistics Co., Ltd. of RMB10,000,000 and RMB5,000,000 which are unsecured, interest-bearing at 4% and nil per annum, and repayable on 15 February 2010 and 20 May 2010, respectively.

– II-83 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

14. TRADE AND OTHER PAYABLES

The average credit period taken for trade purchases is not more than 90 days. The following is an aged analysis of trade payables at the balance sheet dates:

Trade payables: 0 to 90 days 91 to 180 days 181 to 365 days Over 365 days Other payables: Dividend payables Payables for acquisition of minority interests Construction payables Others	30 June 2009 RMB’000 (Unaudited) 53,395 29,413 1,483 366	31 December 2008 RMB’000 (Audited) 36,974 47,738 185 237
	84,657 280,732 149,771 96,913 120,268 647,684	85,134
		– – 204,313 157,424
		361,737
	732,341	446,871

15. BANK AND OTHER BORROWINGS

During the six months ended 30 June 2009, the Group repaid bank loans of RMB1,501,733,000 (for the six months ended 30 June 2008: RMB875,868,000) and obtained new bank loans of RMB429,053,000 (for the six months ended 30 June 2008: RMB161,543,000).

On 26 May 2009 and 1 June 2009, the Group issued medium term notes at nominal value of RMB1,500,000,000 and RMB1,000,000,000, respectively. As at 30 June 2009, the amount of other borrowings of RMB2,474,459,000 represents the total nominal value of medium term notes, after deducting the issuance costs of RMB25,541,000.

16. DERIVATIVE FINANCIAL LIABILITIES

The Group entered into a contract with a bank, under which the Group is required to pay interest at each specified date calculated by reference to a fixed interest rate of 5.6% per annum based on a notional amount of RMB410,000,000 whereas the bank is required to pay interest to the Group at each specified date calculated by reference to a variable interest rate based on the same notional amount. The variable interest rate to be paid by the bank will depend on a formula, of which parameters will involve 30-year Constant Maturity Swap (“CMS”) rate and 2-year CMS rate. The contract will expire on 24 December 2015 and is therefore shown as non-current liabilities.

17. LOAN FROM PDA

The balance had been fully settled during the six months ended 30 June 2009.

– II-84 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

18. LONG TERM PAYABLES

					30 June	31 December
					2009	2008
					RMB’000	RMB’000
					(Unaudited)	(Audited)
Payables	for	the	issuance	costs	15,725	–

The balance represents the amount payables to financial institutions for rendering professional services relating to the issuance of medium term notes during the six months ended 30 June 2009 which is unsecured, interest-free and repayable within five years. The current portion of RMB2,060,000 has been included in trade and other payables as at 30 June 2009.

19. RELATED PARTY TRANSACTIONS

The Group entered into the following transactions with related companies/parties:

Trading transactions

Rental income received: Associates Jointly-controlled entities Service income received (Note): PDA Subsidiaries and jointly-controlled entities of PDA Associates Jointly-controlled entities Comprehensive service paid: PDA Subsidiaries and jointly-controlled entities of PDA Associates Jointly-controlled entities Agency fee paid: Jointly-controlled entities	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 43,903 69,809 34,966 36,923 78,869 106,732	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 43,903 69,809 34,966 36,923 78,869 106,732
		106,732
	200 721 16,144 16,012	793 1,103 15,509 14,272
	33,077	31,677
	13,544 5,431 539 642	10,535 4,672 404 765
	20,156 1,329	16,376
		737

– II-85 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Leasing expenses paid: PDA Subsidiaries and jointly-controlled entities of PDA Associates Jointly-controlled entities Construction management services paid: Subsidiaries and jointly-controlled entities of PDA Non-trading transactions Acquisition of property, plant and equipment: PDA Subsidiaries and jointly-controlled entities of PDA Associates Jointly-controlled entities Proceeds from disposal of non-current assets held for sale: Associates Interest paid: PDA Jointly-controlled entities	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,471 732 2,134 1,211 1,229 19 4,113 6,040 8,947 8,002 3,602 1,882	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,471 732 2,134 1,211 1,229 19 4,113 6,040 8,947 8,002 3,602 1,882
		8,002
		1,882
	1,130 24,805 327 –	76 24,670 266 25
	26,262 –	25,037
		1,254,956
	18,852 167	9,630 –
	19,019	9,630

Note: The amounts mainly represent income in relation to the provision of tugging, and the provision of information technology and management services.

The above transactions were carried out in the Group’s ordinary and usual course of business and in accordance with the terms of the agreements governing the transactions.

– II-86 –

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Compensation of key management personnel

The remuneration of directors and other members of key management during the period was as follows:

Short-term benefits Post-employment benefits	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 2,612 2,691 56 211 2,668 2,902	Six months ended 30 June 2009 2008 RMB’000 RMB’000 (Unaudited) (Unaudited) 2,612 2,691 56 211 2,668 2,902
		2,902

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

20. COMMITMENTS

Capital expenditure in respect of the acquisition of property, plant and equipment: Contracted but not provided for Capital expenditure in respect of the acquisition of equity interests: Authorised but not contracted Contracted but not provided for	30 June 2009 RMB’000 (Unaudited) 227,140 – 320,000	31 December 2008 RMB’000 (Audited) 775,695
		95,684 196,000

21. MAJOR NON-CASH TRANSACTIONS

• (i) Included in trade and other payables as at 30 June 2009 is a balance of RMB149,771,000 which represents the unpaid balance for the acquisition of an 8.66% equity interest in Dalian Port Container Co., Ltd. from minority shareholders during the six months ended 30 June 2009 (note 14).

• (ii) Included in long term payables and trade and other payables as at 30 June 2009 are balances of RMB15,725,000 and RMB2,060,000, respectively, which represent the unpaid balances to financial institutions for rendering professional services relating to the issuance of medium term notes during the six months ended 30 June 2009 (note 18).

22. APPROVAL OF THE INTERIM FINANCIAL REPORT

These unaudited interim condensed consolidated financial statements were approved and authorised for issue by the board of directors on 21 August 2009.

– II-87 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

• (A) LETTER ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

==> picture [49 x 40] intentionally omitted <==

18th Floor

Two International Finance Center 8 Finance Street Central Hong Kong

15 October 2009

The Directors Dalian Port (PDA) Company Limited

Dear Sirs,

We report on the unaudited pro forma financial information (“Unaudited Pro Forma Financial Information”) of Dalian Port (PDA) Company Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out in Appendix III to the circular dated 15 October 2009 (the “Circular”) issued by the Company, in connection with the proposed acquisition by the Company from Dalian Port Corporation Limited certain assets and liabilities comprising the business operating its dry bulk and general cargo, passenger and roll-on, roll-off cargo terminals and other related ancillary operations (the “Acquisition”) by the Company. The Unaudited Pro Forma Financial Information has been prepared by the directors, for illustrative purposes only, to provide information about how the Acquisition, resulting in the formation of an enlarged group (the “Enlarged Group”), might have affected the financial information presented in Appendix II to the Circular. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in the section (B) headed “Introduction” in Appendix III to the Circular.

RESPONSIBILITIES

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Presentation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

It is our responsibility to form an opinion, as required by the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– III-1 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

BASIS OF OPINION

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and because of its hypothetical nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Enlarged Group as at 30 June 2009 or any future date.

OPINION

In our opinion:

• (a) the accompanying Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

– III-2 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(B) INTRODUCTION

The accompanying unaudited pro forma financial information of the Enlarged Group, comprising unaudited pro forma financial position of the Enlarged Group, has been prepared by the directors of the Company in accordance with paragraph 4.29 of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, for illustrative purposes only, to provide information about how the proposed Acquisition (as defined in this circular) as detailed in the “Letter from the Board” included in this circular might have affected the consolidated financial position of the Group as if the Acquisition had been completed on 30 June 2009.

The unaudited pro forma financial information of the Enlarged Group has been prepared based on the unaudited condensed consolidated financial statements of the Group for the six-month period ended 30 June 2009 as set out in Appendix II (C) to this circular and the audited combined financial information of the Target Assets (as defined in this circular) comprising the Business (as defined in the Appendix I) as set out in the accountants’ report in Appendix I to this circular after giving effect to the pro forma adjustments as described in the accompanying notes. A narrative description of the pro forma adjustments of the Acquisition that are (i) directly attributable to the transactions; (ii) factually supportable, is summarised in the accompanying notes.

The unaudited pro forma financial information of the Enlarged Group is based on a number of assumptions, estimates, uncertainties and currently available information. As a result of these assumptions, estimates and uncertainties, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to describe financial position of the Enlarged Group that would have been attained had the Acquisition been completed on the date indicated herein. Furthermore, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to predict the Enlarged Group’s future financial position.

The unaudited pro forma financial information of the Enlarged Group should be read in conjunction with the unaudited condensed consolidated financial statements of the Group as set out in Appendix II (C) to this circular, the audited combined financial information of the Target Assets comprising the Business as set out in Appendix I to this circular and other financial information included elsewhere in this circular.

– III-3 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(C) UNAUDITED PRO FORMA FINANCIAL POSITION OF THE ENLARGED GROUP AS AT 30 JUNE 2009

NON-CURRENT ASSETS Property, plant and equipment Prepaid lease payments Investment properties Intangible assets Goodwill Interests in jointly-controlled entities Interests in associates Available-for-sale investments Deferred tax assets Amounts due from associates Total non-current assets CURRENT ASSETS Properties held for sale Inventories Trade and other receivables Prepayment, deposits and other receivables Prepaid lease payments Amounts due from jointly-controlled entities Amounts due from associates Amounts due from fellow subsidiaries Amounts due from PDA Cash and bank balances Total current assets	The Group (Note (a)) RMB’000 5,605,102 287,434 852,597 128,095 16,035 951,761 1,186,823 141,353 59,346 66,645 9,295,191 9,987 9,383 354,235 – 6,495 9,802 136,930 1,491 5,002 1,015,932 1,549,257	The Group (Note (a)) RMB’000 5,605,102 287,434 852,597 128,095 16,035 951,761 1,186,823 141,353 59,346 66,645 9,295,191 9,987 9,383 354,235 – 6,495 9,802 136,930 1,491 5,002 1,015,932 1,549,257	The Business	Pro forma Adjustments	Pro forma Enlarged Group
			(Note (b)) RMB’000 4,521,756 – – 38,282 – 8,785 233,834 14,250 1,607 – 4,818,514 – 25,554 325,631 73,089 – – – – – 183,551 607,825	(Note (c)) (Note (d)) (Note (e)) RMB’000 RMB’000 RMB’000 2,623 1,777 (21,084) – (2,378) 840 175 1,932 (2,268) 58 (3,020) 22,958	RMB’000 10,129,481 287,434 852,597 168,154 16,035 939,462 1,418,279 155,603 61,793 66,645
	9,295,191				14,095,483
	9,987 9,383 354,235 – 6,495 9,802 136,930 1,491 5,002 1,015,932				9,987 35,112 679,530 70,127 6,495 9,802 136,930 1,491 5,002 1,222,441
	1,549,257				2,176,917

– III-4 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

CURRENT LIABILITIES Trade and other payables Other payables and accruals Amounts due to jointly-controlled entities Amounts due to associates Amounts due to related companies Amounts due to fellow subsidiaries Amounts due to PDA Tax payable Bank borrowings – due within one year Government grants Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank and other borrowings – due after one year Government grants Derivative financial liabilities Due to PDA Long term payables Total non-current liabilities NET ASSETS EQUITY Equity attributable to equity holders of the Company/PDA Minority interests Total equity	The Group (Note (a)) RMB’000 (732,341) – (19,971) (3,688) (52,007) (2,683) (17,499) (11,130) (50,000) (38,380) (927,699) 621,558 9,916,749 (2,783,512) (691,181) (6,784) – (15,725) (3,497,202)	The Group (Note (a)) RMB’000 (732,341) – (19,971) (3,688) (52,007) (2,683) (17,499) (11,130) (50,000) (38,380) (927,699) 621,558 9,916,749 (2,783,512) (691,181) (6,784) – (15,725) (3,497,202)	The Business	Pro forma Adjustments	Pro forma Enlarged Group
		) ) ) ) ) ) ) ) ) ) ) ) ) ) )	(Note (b)) RMB’000 (17,959) (204,151) – – – – – (450) (100,000) – (322,560) 285,265 5,103,779 (1,720,000) – – (866,333) – (2,586,333)	(Note (c)) (Note (d)) (Note (e)) RMB’000 RMB’000 RMB’000 2,268 (5,263) 3,020	RMB’000 (748,032 (206,394 (19,971 (3,688 (52,007 (2,683 (17,499 (11,580 (150,000 (38,380
	(927,699				(1,250,234
	621,558				926,683
	9,916,749				15,022,166
	(2,783,512 (691,181 (6,784 – (15,725				(4,503,512 (691,181 (6,784 (866,333 (15,725
	(3,497,202				(6,083,535
	6,419,547		2,517,446		8,938,631
	(6,371,632) (47,915)		(2,432,002) (85,444)	(4,016) 2,378	(8,803,634 (134,997
	(6,419,547)		(2,517,446)		(8,938,631

– III-5 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes:

• a. The balances are extracted from the unaudited condensed consolidated financial statements of Dalian Port (PDA) Company Limited (the “Company”) and its subsidiaries (the “Group”) for the six-month period ended 30 June 2009 as set out in Appendix II (C) to this circular.

• b. The balances are extracted from the audited combined financial information of the Business for the six-month period ended 30 June 2009 as set out in the accountants’ report in Appendix I.

• c. Before the completion of the Acquisition, the Group has a 49% equity interest in Dalian Ocean Shipping Tally Co., Ltd. (“DOST”), which has been accounted for as a jointly-controlled entity, in which the Business also has a 35% equity interest in it and accounts for it as a jointly-controlled entity. Upon the completion of the Acquisition, the Enlarged Group will have a 84% equity interest in DOST and the directors of the Company consider that the Enlarged Group could control the financial and operating policies of DOST so as to obtain benefits from its activities that it will, then, become the subsidiary of the Enlarged Group. The adjustment is to consolidate the assets and liabilities of DOST and recognise the minority interest.

• d. Before the completion of the Acquisition, the Group has a 20% equity interest in Dalian Port Telecommunication Engineering Co., Ltd. (“DPCE”), which has been accounted for as an associate, in which the Business also has a 45% of equity interest in it and accounts for it as a subsidiary. Upon the completion of the Acquisition, the Enlarged Group will have a 65% equity interest in DPCE and the directors of the Company consider that the Enlarged Group could control the financial and operating policies of DPCE so as to obtain benefits from its activities that it will, then, become the subsidiary of the Enlarged Group. The adjustment is to eliminate the Company’s interest in DPCE against the minority interests.

• e. The adjustment is to eliminate of inter-company balances within the Enlarged Group.

– III-6 –

APPENDIX IV UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ON THE TARGET ASSETS

• (A) LETTER ON UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF THE TARGET ASSETS

==> picture [49 x 40] intentionally omitted <==

18th Floor

Two International Finance Center 8 Finance Street Central Hong Kong

15 October 2009

The Directors

Dalian Port (PDA) Company Limited

Dear Sirs,

We report on the unaudited pro forma combined financial information (“Unaudited Pro Forma Combined Financial Information”) of the business of Dalian Port Corporation Limited (“PDA”) operating the dry bulk and general cargo, passenger and roll-on, roll-off cargo terminals and other related ancillary operations (hereinafter referred to as the “Business”) set out in Appendix IV to the circular dated 15 October 2009 (the “Circular”) issued by Dalian Port (PDA) Company Limited (the “Company”), in connection with the proposed acquisition by the Company from PDA certain assets and liabilities comprising the Business (the “Acquisition”). The Unaudited Pro Forma Combined Financial Information has been prepared by the directors, for illustrative purposes only, to provide information about how the proposed Acquisition might have affected the combined financial information of the Business presented in Appendix I to the Circular. The basis of preparation of the Unaudited Pro Forma Combined Financial Information is set out in the section (B) headed “Introduction” in Appendix IV to the Circular.

RESPONSIBILITIES

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Combined Financial Information in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Presentation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

It is our responsibility to form an opinion, as required by the Listing Rules, on the Unaudited Pro Forma Combined Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Combined Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– IV-1 –

APPENDIX IV

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ON THE TARGET ASSETS

BASIS OF OPINION

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Combined Financial Information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Combined Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Business and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Combined Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Combined Financial Information is for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and because of its hypothetical nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial results of the Business for the year ended 31 December 2008 and each of the six-month periods ended 30 June 2008 and 2009 or any future period.

OPINION

In our opinion:

• (a) the accompanying Unaudited Pro Forma Combined Financial Information has been properly compiled by the directors of the Company on the basis stated;

• (b) such basis is consistent with the accounting policies of the Business; and

• (c) the adjustments are appropriate for the purpose of the Unaudited Pro Forma Combined Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

– IV-2 –

APPENDIX IV UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ON THE TARGET ASSETS

(B) INTRODUCTION

The accompanying unaudited pro forma combined financial information of the business of Dalian Port Corporation Limited (“PDA”) operating the dry bulk and general cargo, passenger and roll-on, roll-off cargo terminals and other related ancillary operations (hereinafter referred to as the “Business”), comprising unaudited pro forma combined results of the Business for the year ended 31 December 2008 and each of the six-month periods ended 30 June 2008 and 2009, has been prepared by the directors of the Company in accordance with paragraph 4.29 of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, for illustrative purposes only, to provide information about how the proposed Acquisition (as defined in this circular) as detailed in the ‘‘Letter from the Board’’ included in this circular might have affected the combined results of the Business for the year ended 31 December 2008 and each of the six-month periods ended 30 June 2008 and 2009 as if the Acquisition had been completed on 1 January 2008.

The unaudited pro forma combined financial information of the Business has been prepared based on the combined financial information of the Business as set out in the accountants’ report in Appendix I to this circular after giving effect to the pro forma adjustments as described in the accompanying notes. A narrative description of the relevant pro forma adjustments are (i) directly attributable to the transactions; (ii) factually supportable, is summarised in the accompanying notes.

The unaudited pro forma combined financial information of the Business is based on a number of assumptions, estimates, uncertainties and currently available information. As a result of these assumptions, estimates and uncertainties, the accompanying unaudited pro forma combined financial information of the Business does not purport to describe results of the Business that would have been attained had the Acquisition been completed on the date indicated herein. Furthermore, the accompanying unaudited pro forma combined financial information of the Business does not purport to predict the future financial results of the Business.

The unaudited pro forma combined financial information of the Business should be read in conjunction with the combined financial information of the Business as set out in Appendix I to this circular and other financial information included elsewhere in this circular.

– IV-3 –

APPENDIX IV UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ON THE TARGET ASSETS

(C) UNAUDITED PRO FORMA COMBINED RESULTS OF THE BUSINESS

For the year ended 31 December 2008 and each of the six-month periods ended 30 June 2008 and 2009

REVENUE Cost of sales Gross profit Other revenue, income and gains Administrative expenses Other operating expenses, net Finance costs Share of profits and losses of: Jointly-controlled entity Associates PROFIT BEFORE TAX Tax PROFIT FOR THE YEAR/PERIOD Attributable to: PDA Minority interests	Adjusted results year ended 31 December 2008 RMB’000 1,361,096 (1,048,892)	Adjusted results six-month period ended 30 June 2008 30 June 2009 RMB’000 RMB’000 631,315 612,426 (457,973) (447,602) 173,342 164,824 3,136 7,006 (70,342) (71,087) (1,477) (1,824) – – 2,434 1,921 135 (1,251) 107,228 99,589 (26,499) (25,378) 80,729 74,211 73,580 70,913 7,149 3,298 80,729 74,211	Adjusted results six-month period ended 30 June 2008 30 June 2009 RMB’000 RMB’000 631,315 612,426 (457,973) (447,602) 173,342 164,824 3,136 7,006 (70,342) (71,087) (1,477) (1,824) – – 2,434 1,921 135 (1,251) 107,228 99,589 (26,499) (25,378) 80,729 74,211 73,580 70,913 7,149 3,298 80,729 74,211
	312,204 7,236 (168,584) (2,985) – 5,243 (2,019) 151,095 (38,284)	173,342 3,136 (70,342) (1,477) – 2,434 135 107,228 (26,499)	164,824 7,006 (71,087 (1,824 – 1,921 (1,251
			99,589 (25,378
	112,811	80,729
	88,691 24,120	73,580 7,149	70,913 3,298
	112,811	80,729

– IV-4 –

APPENDIX IV UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ON THE TARGET ASSETS

UNAUDITED PRO FORMA COMBINED RESULTS OF THE BUSINESS

For the year ended 31 December 2008

REVENUE Cost of sales Gross profit Other revenue, income and gains Administrative expenses Other operating expenses, net Finance costs Share of profits and losses of: Jointly-controlled entity Associates PROFIT BEFORE TAX Tax PROFIT FOR THE YEAR Attributable to: PDA Minority interests	Historical Results Adjustments (Note (a)) RMB’000 (Note (b)) RMB’000 1,361,096 (1,075,458) 26,566	Adjusted Results RMB’000 1,361,096 (1,048,892) 312,204 7,236 (168,584) (2,985) – 5,243 (2,019) 151,095 (38,284) 112,811 88,691 24,120 112,811
	285,638 7,236 (168,584) (2,985) – 5,243 (2,019) 124,529 (31,642) (6,642)	312,204 7,236 (168,584 (2,985 – 5,243 (2,019
		151,095 (38,284
	92,887
	68,767 19,924 24,120	88,691 24,120
	92,887

– IV-5 –

APPENDIX IV UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ON THE TARGET ASSETS

UNAUDITED PRO FORMA COMBINED RESULTS OF THE BUSINESS

For the six-month period ended 30 June 2008

REVENUE Cost of sales Gross profit Other revenue, income and gains Administrative expenses Other operating expenses, net Finance costs Share of profits and losses of: Jointly-controlled entity Associates PROFIT BEFORE TAX Tax PROFIT FOR THE PERIOD Attributable to: PDA Minority interests	Historical Results Adjustments (Note (a)) RMB’000 (Note (b)) RMB’000 631,315 (471,077) 13,104	Adjusted Results RMB’000 631,315 (457,973) 173,342 3,136 (70,342) (1,477) – 2,434 135 107,228 (26,499) 80,729 73,580 7,149 80,729
	160,238 3,136 (70,342) (1,477) – 2,434 135 94,124 (23,223) (3,276)	173,342 3,136 (70,342 (1,477 – 2,434 135
		107,228 (26,499
	70,901
	63,752 9,828 7,149	73,580 7,149
	70,901

– IV-6 –

APPENDIX IV UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ON THE TARGET ASSETS

UNAUDITED PRO FORMA COMBINED RESULTS OF THE BUSINESS

For the six-month period ended 30 June 2009

REVENUE Cost of sales Gross profit Other revenue, income and gains Administrative expenses Other operating expenses, net Finance costs Share of profits and losses of: Jointly-controlled entity Associates PROFIT BEFORE TAX Tax PROFIT FOR THE PERIOD Attributable to: PDA Minority interests	Historical Results Adjustments (Note (a)) RMB’000 (Note (b)) RMB’000 612,426 (461,131) 13,529	Adjusted Results RMB’000 612,426 (447,602) 164,824 7,006 (71,087) (1,824) – 1,921 (1,251) 99,589 (25,378) 74,211 70,913 3,298 74,211
	151,295 7,006 (71,087) (1,824) – 1,921 (1,251) 86,060 (21,996) (3,382)	164,824 7,006 (71,087 (1,824 – 1,921 (1,251
		99,589 (25,378
	64,064
	60,766 10,147 3,298	70,913 3,298
	64,064

• a. The balances are extracted from the combined financial information of the Business for the year ended 31 December 2008 and each of the six-month periods ended 30 June 2008 and2009 as set out in Appendix I to this circular.

• b. For the year ended 31 December 2008 and each of the six-month periods ended 30 June 2008 and 2009, rentals/depreciation expense attributable to certain operational assets used by the Business are fully included in the historical combined financial information of the Business, however, these assets will not be included in the Target Assets (as defined in the circular) due to their expected relocation pursuant to the urban planning of Dalian municipal government and the Company’s business development plan. Upon the completion of the acquisition, such costs will cease to be incurred by, and therefore will not affect the operational results of, the Business. In addition, as the Business could be carried on by the Target Assets without such operational assets and the functions of such operational assets will be assumed by the assets included in the Target Assets, the directors of the Company are of the view that no additional rentals/depreciation expense will be incurred by the Business in relation to such operational assets. The adjustment is to adjust such rentals/depreciation expense that would cease to be incurred and to recognise additional tax expense thereof.

– IV-7 –

APPENDIX V

PROPERTY VALUATION REPORT

==> picture [421 x 69] intentionally omitted <==

15 October 2009

The Board of Directors

Dalian Port (PDA) Company Limited

Dear Sirs,

In accordance with your instructions to value the property interests to be acquired by Dalian Port (PDA) Company Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) in the People Republic of China (the “PRC”), we confirm that we have carried out inspections for the property interests, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of such property interests as at 30 September 2009 (the “date of valuation”).

This letter that forms part of our valuation report explains the basis and methodology of valuations and clarifies our assumptions made on the ownerships to the property interests and the limiting conditions.

BASIS OF VALUATION

Our valuation is our opinion of the market values which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special considerations or concessions granted by anyone associated with the sale, or any element of special value. The value of a property is also estimated without regard to costs of sales and purchase, and without offset for any associated taxes.

– V-1 –

APPENDIX V

PROPERTY VALUATION REPORT

VALUATION METHODOLOGY

For the property interests in Group I which will be acquired and occupied by the Group but the land parcels on which the buildings and ancillary facilities erected will be rented from 大連港集團有限公司 (Dalian Port Corporation Limited) (“PDA”) and its subsidiaries (hereinafter together referred to as “PDA Group”). As the Group is prohibited from subletting the land parcels to other third parties without the written approval of PDA Group, in our valuation, we have attributed on commercial value to the property interests. For property interests in property No. 10 in Group I which will be acquired and held by the Group, we have valued the property interest by the direct comparison method where comparison is made based on prices realized on actual sales or market price information of comparable properties.

For the property interests in Group II which are under construction, as PDA Group is in the process of applying or will apply for the relevant title certificates of the land parcels on which the construction works are in progress, we have attributed on commercial value to the property interests in our valuation.

For the property interests in Group III which will be leased by the subsidiaries of PDA Group (the “Entities”) to be acquired by the Group, they are considered having no commercial value due either to the short-term nature of the leases or the prohibitions against subletting and/or assignment contained in the respective leases and/or tenancy agreements or the lack of substantial profit rent.

TITLE INVESTIGATION

We have been provided with copies of documents in relation to the title of the property interests situated in the PRC. However, we have not scrutinized the original documents to verify ownership or to verify any amendments, which may not appear on the copies handed to us. We have relied to a considerable extent on the information provided by the Group and the PRC legal opinion given by the Group’s legal adviser, Jingtian & Gongcheng (the “PRC legal adviser”) on the PRC law regarding titles to the property interests.

All legal documents disclosed in this letter and valuation certificates are for reference only and no responsibility is assumed for any legal matters concerning the legal title to the property interests set out in this letter and valuation certificates.

ASSUMPTIONS

Our valuations have been made on the assumption that the owners sell the property interests on the market in their existing state without the benefit of deferred terms contracts, leaseback, joint ventures, management agreements or any similar arrangement which would serve to affect the value of the property interests.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any of the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that all the interests are free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

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PROPERTY VALUATION REPORT

We have assumed that all consents, approvals and licences from relevant government authorities for buildings and structures erected have been granted. Also, we have assumed that unless otherwise stated, all buildings and structures erected on the site are held by the owners or permitted to be occupied by the owner.

We have not carried out investigations on site in respect of the property interests in Group II to determine the suitability of the ground conditions and the services, etc. for further development. Our valuations are prepared on the assumptions that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

It is assumed that all applicable zoning, land use regulations and other restrictions have been complied with unless a non-conformity has been stated, defined and considered in the valuation certificates. Further, it is assumed that the utilization of the land and improvements is within the boundaries of the property interests described and that no encroachment or trespass exists unless noted in the valuation certificates.

Other special assumptions and qualifications for each property, if any, have been stated in the footnotes of the valuation certificates for the respective property interests.

LIMITING CONDITIONS

We have relied to a very considerable extent on the information provided by the Group and the legal opinion of the Group’s legal advisers. We have no reason to doubt the truth and accuracy of the information as provided to us by the Group and/or its legal advisers which is material to the valuations. We have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, leases, particular of occupancy, identification of properties, site and floor areas, construction costs and all other relevant matters. Dimensions and areas included in the valuation certificates are based on information provided to us by the Group and are only approximations. No on-site measurement has been made. We have been advised by the Group that no material facts have been omitted from the information so supplied.

We have inspected the exterior and, where possible, the interior of the property interests included in the attached valuation certificates. However, no structural survey has been made and we are therefore unable to report as to whether the properties are or are not free of rot, infestation or any other structural defects. No tests were carried out on any of the services.

We have not carried out investigations on site in respect of the property interests to determine the suitability of the ground conditions and the services, etc. Our valuations are prepared on the assumptions that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

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PROPERTY VALUATION REPORT

REMARKS

In valuing the property interests, we have complied with all the requirements contained in Paragraph 34(2), (3) of Schedule 3 of the Companies Ordinance (Cap. 32), Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited, the RICS Valuation Standards (6th Edition March 2009) published by the Royal Institution of Chartered Surveyors and the HKIS Valuation Standards on Properties (1st Edition 2005) published by the Hong Kong Institute of Chartered Surveyors.

Unless otherwise stated, all monetary amounts stated in this report are in Renminbi (RMB).

We enclose herewith the summary of valuation and the valuation certificates.

Yours faithfully, For and on behalf of

AMERICAN APPRAISAL CHINA LIMITED Eric M. H. Poon MRICS, MHKIS Assistant Vice President

Note: Mr. Eric Poon, who is a Chartered Valuation Surveyor, has over 9 years experience in valuation of properties in Hong Kong and the PRC

– V-4 –

APPENDIX V

PROPERTY VALUATION REPORT

SUMMARY OF VALUATION

Group I – Property Interests to be acquired and occupied by the Group in the PRC

No. Property 1. Various buildings and ancillary facilities occupied by Dalian Port Ore Terminal Company 2. Various buildings and ancillary facilities occupied by Dalian Port Bulk Grain Terminals Company 3. Various buildings and ancillary facilities occupied by Dalian Port General Cargo Terminals Company 4. Various buildings and ancillary facilities occupied by Dalian Port Passenger Transportation Company 5. Various buildings and ancillary facilities occupied by Dalian Port Railway Company 6. Various buildings and ancillary facilities occupied by Dalian Port Construction Management Co., Ltd 7. Various buildings and ancillary facilities occupied by Dalian Port Power Supply Company 8. Various ancillary facilities occupied by Dalian Port Power Supply Company Limited 9. Various buildings and ancillary facilities occupied by PDA Corporation 10. A residential unit held by Dalian Portsoft Technology Co., Ltd. Sub-total :	Capital Value in existing state as at 30 September 2009 (RMB) No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value 1,100,000	Capital Value attributable to the Group as at 30 September 2009 (RMB) No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value No Commercial Value 539,000
	1,100,000	539,000

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APPENDIX V

PROPERTY VALUATION REPORT

Group II – Property interests under development to be acquired by the Group in the PRC

No. Property 11. Various properties located in Dalian City, Liaoning Province, the PRC Sub-total :	Capital Value in existing state as at 30 September 2009 (RMB) No Commercial Value No Commercial Value	Capital Value attributable to the Group as at 30 September 2009 (RMB) No Commercial Value
		No Commercial Value

Group III – Property interests leased by the Entities to be acquired by the Group in the PRC

No. Property 12. Various properties located in Dalian City, Liaoning Province, the PRC Sub-total : Grand-total :	Capital Value in existing state as at 30 September 2009 (RMB) No Commercial Value	Capital Value attributable to the Group as at 30 September 2009 (RMB) No Commercial Value
	No Commercial Value	No Commercial Value
	1,100,000	539,000

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APPENDIX V

PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

Group I – Property interests to be acquired and occupied by the Group in the PRC

				Capital Value in
				existing state as at
No.	Property	Description and tenure	Particulars of occupancy	30 September 2009
				(RMB)
1.	Various buildings and	The property comprises	The property is occupied	No Commercial
	ancillary facilities	18 buildings with a total	by the Dalian Port Ore	Value
	occupied by Dalian	floor area of	Terminal Company for
	Port Ore Terminal	approximately 19,434	port and ancillary
	Company	sq.m. and relevant	facilities use. The
		ancillary facilities mainly	property will be occupied
		completed between 2003	by the Group for the
		and 2006. The property is	same said use.
		located at Ore Port
		District, Dalian Free
		Trade Zone, Dalian City.
		The property will be held
		under Properties Lease
		Agreement for a term to
		be expired on 31
		December 2012 and
		renewable for a further
		term of 3 years subject to
		annual rent of
		RMB14,940,550 in 2010,
		RMB16,305,850 in 2011
		and RMB17,807,680 in
		2012 (for the land parcels
		where property Nos. 1 to
		9 situate and for the land
		parcels where part of
		property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to Building Ownership Certificates, the building ownership rights of 18 buildings with a total gross floor area of approximately 19,434 sq.m. are held by PDA Group.

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 19,434 sq.m. and will have the right to legally occupy and use the said buildings.

– V-7 –

APPENDIX V

PROPERTY VALUATION REPORT

• (5) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information :

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal means. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

– V-8 –

APPENDIX V

PROPERTY VALUATION REPORT

No. Property

Description and tenure

Capital Value in existing state as at Particulars of occupancy 30 September 2009

(RMB)

1. Various buildings and The property comprises The property is occupied ancillary facilities 25 buildings with a total by the Dalian Port Bulk occupied by Dalian floor area of Grain Terminals Port Bulk Grain approximately 43,164 Company for port and Terminals Company sq.m. and relevant ancillary facilities use. ancillary facilities mainly The property will be completed between 1990 occupied by the Group and 2004. The property is for the same said use. located at Bulk Grain Terminal and nearby area within Dayao Bay Port District, Dalian City. The property will be held under Properties Lease Agreement for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012 (for the land parcels where property Nos. 1 to 9 situate and for the land parcels where part of property No. 11 situate).

No Commercial Value

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to Building Ownership Certificates, the building ownership rights of 25 buildings with a total gross floor area of approximately 43,164 sq.m. are held by PDA Group.

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 43,164 sq.m. and will have the right to legally occupy and use the said buildings.

– V-9 –

APPENDIX V

PROPERTY VALUATION REPORT

• (5) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal means. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

– V-10 –

APPENDIX V

PROPERTY VALUATION REPORT

Capital Value in existing state as at No. Property Description and tenure Particulars of occupancy 30 September 2009 (RMB) 3. Various buildings and The property comprises The property is mainly No Commercial ancillary facilities 20 buildings with a total occupied by the Dalian Value occupied by Dalian floor area of Port General Cargo Port General Cargo approximately 23,656 Terminals Company for Terminals Company sq.m. and relevant port and ancillary ancillary facilities mainly facilities use. The completed between 1986 property will be occupied and 2005. The property is by the Group for the located at General Cargo same said use. Terminal and nearby area within Dalian Bay Port Portion of the property District, Dalian City. with a total gross area of approximately 527.46 The property will be held sq.m. is currently leased under Properties Lease to the third parties at a Agreement for a term to total monthly rental of be expired on 31 RMB18,461 for various December 2012 and terms with the latest renewable for a further expiry date on 31 term of 3 years subject to December 2009. annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012 (for the land parcels where property Nos. 1 to 9 situate and for the land parcels where part of property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to Building Ownership Certificates, the building ownership rights of 20 buildings with a total gross floor area of approximately 23,656 sq.m. are held by PDA Group.

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 23,656 sq.m. and will have the right to legally occupy and use the said buildings.

• (5) Pursuant to 7 Buildings Lease Agreements entered into between Dalian Port General Cargo Terminals Company and other third parties, portion of the property with a total gross area of approximately 527.46 sq.m. are leased to 7 third parties at a total monthly rental of RMB18,461 for various terms with the latest expiry date on 31 December 2009.

– V-11 –

APPENDIX V

PROPERTY VALUATION REPORT

• (6) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal means. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

• d. The lessor of the Building Lease Agreements has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. The lessor has the right to lease the properties to lessees under the Building Lease Agreements which are legal, valid, enforceable and binding on both parties. The Building Lease Agreements are not registered but the validity of the Building Lease Agreements is not affected.

– V-12 –

APPENDIX V

PROPERTY VALUATION REPORT

No. Property Description and tenure

Capital Value in existing state as at Particulars of occupancy 30 September 2009

(RMB)

1. Various buildings and The property comprises The property is occupied No Commercial ancillary facilities 3 buildings with a total by the Dalian Port value occupied by Dalian floor area of Passenger Transportation Port Passenger approximately 796 sq.m. Company for port and Transportation and relevant ancillary ancillary facilities use. Company facilities mainly The property will be completed between 2005 occupied by the Group and 2006. The property is for the same said use. located at Passenger Transportation Terminal and nearby area within Dalian Bay Port District, Dalian City. The property will be held under Properties Lease Agreement for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012 (for the land parcels where property Nos. 1 to 9 situate and for the land parcels where part of property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to Building Ownership Certificates, the building ownership rights of 3 buildings with a total gross floor area of approximately 796 sq.m. are held by PDA Group.

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 796 sq.m. and will have the right to legally occupy and use the said buildings.

– V-13 –

APPENDIX V

PROPERTY VALUATION REPORT

• (5) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal means. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

– V-14 –

APPENDIX V

PROPERTY VALUATION REPORT

No. Property Description and tenure

Capital Value in existing state as at Particulars of occupancy 30 September 2009

(RMB)

1. Various buildings and The property comprises The property is occupied No Commercial ancillary facilities 26 buildings with a total by the Dalian Railway Value occupied by Dalian floor area of Company for port and Port Railway approximately 15,898 ancillary facilities use. Company sq.m. and relevant The property will be ancillary facilities mainly occupied by the Group completed between 1995 for the same said use. and 2004. The property is located at Dayao Bay Port District, Ore Port District and Dalian Bay Port District, Dalian City. The property will be held under Properties Lease Agreement for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012 (for the land parcels where property Nos. 1 to 9 situate and for the land parcels where part of property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to Building Ownership Certificates, the building ownership rights of 26 buildings with a total gross floor area of approximately 15,898 sq.m. are held by PDA Group.

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 15,898 sq.m. and will have the right to legally occupy and use the said buildings.

– V-15 –

APPENDIX V

PROPERTY VALUATION REPORT

• (5) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal means. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

– V-16 –

APPENDIX V

PROPERTY VALUATION REPORT

No. Property

Description and tenure

Particulars of occupancy

Capital Value in existing state as at 30 September 2009

(RMB)

1. Various buildings and The property comprises The property is occupied No Commercial ancillary facilities an office building with a by the Dalian Port Value occupied by Dalian total floor area of Construction Port Construction approximately 3,533.95 Management Co., Ltd. for Management Co., Ltd sq.m. completed in 1976. office use. The property The property is located at will be occupied by the Xingang Port District, Group for the same said Dalian City. use.

The property will be held under Properties Lease Agreement for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012 (for the land parcels where property Nos. 1 to 9 situate and for the land parcels where part of property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to a Building Ownership Certificate, Da Fang Quan Zheng Bao Shui Qu Zi No. 2009000551, the building ownership rights of property with a total gross floor area of approximately 3,533.95 sq.m. are held by PDA Group.

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 3,533.95 sq.m. and will have the right to legally occupy and use the said buildings.

– V-17 –

APPENDIX V

PROPERTY VALUATION REPORT

• (5) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal methods. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

– V-18 –

APPENDIX V

PROPERTY VALUATION REPORT

Capital Value in existing state as at No. Property Description and tenure Particulars of occupancy 30 September 2009 (RMB) 7. Various buildings and The property comprises The property is mainly No Commercial ancillary facilities 32 buildings with a total occupied by The Dalian Value occupied by Dalian floor area of Port Power Supply Port Power Supply approximately 12,486 Company for port and Company sq.m. and relevant ancillary facilities use. ancillary facilities mainly The property will be completed between 1949 occupied by the Group and 2007. The property is for the same said use. located at Heizuizi Port District, Dalian Bay Port Portion of the property District, Dayao Bay Port with a total gross area of District, Xingang Port approximately 88.9 sq.m. District, Ore Port District, is currently leased to the Dagang Port District, third parties at a total Zhengnan Road of monthly rental of Zhongshan District, RMB2,083 for various Dalian City. terms with the latest expiry date on 31 The property will be held December 2009. under Properties Lease Agreement for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012 (for the land parcels where property Nos. 1 to 9 situate and for the land parcels where part of property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to Building Ownership Certificates, the building ownership rights of 32 buildings with a total gross floor area of approximately 12,486 sq.m. are held by PDA Group.

– V-19 –

APPENDIX V

PROPERTY VALUATION REPORT

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 12,486 sq.m. and will have the right to legally occupy and use the said buildings.

• (5) Pursuant to 2 Buildings Lease Agreements entered into between Dalian Port Power Supply Company and other third parties, 2 buildings of the property with a total gross area of approximately 88.9 sq.m. are leased to 2 third parties at a total monthly rental of RMB2,083 for various terms with the latest expiry date on 31 December 2009.

• (6) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal means. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

• d. The lessor of the Building Lease Agreements has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. The lessor has the right to lease the properties to lessees under the Building Lease Agreements which are legal, valid, enforceable and binding on both parties. The Building Lease Agreements are not registered but the validity of the Building Lease Agreements is not affected.

– V-20 –

APPENDIX V

PROPERTY VALUATION REPORT

Capital Value in existing state as at Particulars of occupancy 30 September 2009 (RMB)

No. Property Description and tenure Particulars of occupancy 30 September 2009 (RMB) 8. Various ancillary The property comprises The property is occupied No Commercial facilities occupied by various ancillary facilities by The Dalian Port Power Value Dalian Port Power mainly completed Supply Company Limited Supply Company between 1995 and 2007. for port and ancillary Limited The property is located at facilities use. The Xingang Port District, property will be occupied Dalian Free Trade Zone, by the Group for the Dalian City. same said use. The property will be held under Properties Lease Agreement for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012 (for the land parcels where property Nos. 1 to 9 situate and for the land parcels where part of property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

– V-21 –

APPENDIX V

PROPERTY VALUATION REPORT

				Capital Value in
				existing state as at
No.	Property	Description and tenure	Particulars of occupancy	30 September 2009
				(RMB)
9.	Various buildings and	The property comprises	The property is mainly	No Commercial
	ancillary facilities	17 buildings with a total	occupied by the PDA	Value
	occupied by PDA	floor area of	Group for port and
	Group	approximately 13,779	ancillary facilities use.
		sq.m. and relevant	The property will be
		ancillary facilities mainly	occupied by the Group
		completed between 1971	for the same said use.
		and 1995. The property is
		located at Heizuizi Port	Portion of the property
		District, Ganjingzi Port	with gross floor area of
		District, Dalian Bay Port	approximately 1,631.73
		District, Dayao Bay Port	sq.m. has been leased to
		District and Xingang Port	the Dalian Port
		District, Dalian City.	Telecommunication
			Engineering Co. Ltd.
		The property will be held	while a gross floor area
		under Properties Lease	of approximately 100
		Agreement for a term to	sq.m. has been leased to
		be expired on 31	the Dalian Port
		December 2012 and	Construction
		renewable for a further	Management co. Ltd. for
		term of 3 years subject to	a term of 1 year
		annual rent of	commencing on 1 January
		RMB14,940,550 in 2010,	2009.
		RMB16,305,850 in 2011
		and RMB17,807,680 in
		2012 (for the land parcels
		where property Nos. 1 to
		9 situate and for the land
		parcels where part of
		property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009, the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) Pursuant to Building Ownership Certificates, the building ownership rights of 17 buildings with a total gross floor area of approximately 13,779 sq.m. are held by PDA Group.

• (4) Pursuant to the Acquisition Agreement between PDA Group and the Group on 30 September 2009, the Group will legally obtain the building ownership rights of the said buildings with a total gross floor area of approximately 13,779 sq.m. and will have the right to legally occupy and use the said buildings.

– V-22 –

APPENDIX V

PROPERTY VALUATION REPORT

• (5) Pursuant to a Buildings Lease Agreements entered into between PDA Group and Dalian Port Telecommunication Engineering Co. Ltd., 5 buildings and relevant ancillary facilities with gross floor area of approximately 6,859.27 sq.m. have been leased to Dalian Port Telecommunication Engineering Co. Ltd. for a term of 1 year commencing on 1 January 2009 at a total annual rental of RMB179,020, in which about 1,631.73 sq.m. is included as part of the property. Pursuant to a Buildings Lease Agreements entered into between PDA Group and Dalian Port Construction Management Co., Ltd, a unit with gross floor area of approximately 100 sq.m. has been leased to Dalian Port Construction Management Co., Ltd for a term of 1 years commencing on 1 January 2009 at a total annual rental of RMB10,000.

• (6) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• b. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

• c. PDA Group has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. PDA Group has the right to legally occupy, use, lease, transfer, mortgage or deal with the said buildings in other legal methods. Pursuant to the Acquisition Agreement, the Group will legally obtain the building ownership rights of the buildings and will have the right to legally occupy and use the said buildings.

• d. The lessor of the Building Lease Agreements has legally obtained ownership rights of the buildings and the respective land use rights on which the said buildings are erected. The lessor has the right to lease the properties to lessees under the Building Lease Agreements which are legal, valid, enforceable and binding on both parties. The Building Lease Agreements are not registered but the validity of the Building Lease Agreements is not affected.

– V-23 –

APPENDIX V

PROPERTY VALUATION REPORT

Capital Value in existing state as at No. Property Description and tenure Particulars of occupancy 30 September 2009 (RMB) 10. A residential unit The property comprises a The property is vacant. 1,100,000 held by Dalian unit in a 18 storey Portsoft Technology residential building with (Value Co., Ltd. a gross floor area of attributable approximately 122.77 to the Group: sq.m. completed in 2001. 539,000) The property is located at No. 1 Da Zhong Street, Zhong Shan District, Dalian City.

Notes:

• (1) Pursuant to a Building Ownership Certificate, Da Fang Quan Zheng Zhong Dan Zi No. 2008204087, the building ownership rights of the property with a total gross floor area of approximately 122.77 sq.m. are held by Dalian Portsoft Technology Co., Ltd..

• (2) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. Dalian Portsoft Technology Co., Ltd is in possession of the ownership right of the property and has the right to legally occupy, use, lease, transfer, mortgage or deal with it in other legal means.

– V-24 –

APPENDIX V

PROPERTY VALUATION REPORT

Group II – Property interests under development to be acquired by the Group in the PRC

				Capital Value in
				existing state as at
No.	Property	Description and tenure	Particulars of occupancy	30 September 2009
				(RMB)
11.	Various properties	The properties comprise	The properties are under	No Commercial
	located in	6 projects including a	construction.	Value
	Dalian City, Liaoning	number of buildings and
	Province, the PRC	ancillary facilities under	Upon completion, the
		construction (CIP	properties will be
		properties) for port use.	occupied by the Group
		Upon completion, the	for port and ancillary
		total gross floor area of	facilities use.
		the buildings will be
		about 2,172 sq.m. The
		properties are located at
		Dalian Bay Port District,
		Dayao Bay Port District,
		Old Port District and Ore
		Port District, Dalian City.
		As of the date of
		valuation, a total
		construction cost of
		approximately
		2,410,059,877 has been
		incurred. The CIP
		properties are scheduled
		to complete between 2009
		and 2010.
		Part of the properties will
		be held under Properties
		Lease Agreement for a
		term to be expired on 31
		December 2012 and
		renewable for a further
		term of 3 years subject to
		annual rent of
		RMB14,940,550 in 2010,
		RMB16,305,850 in 2011
		and RMB17,807,680 in
		2012 (for the land parcels
		where property Nos. 1 to
		9 situate and for the land
		parcels where part of
		property No. 11 situate).

Notes:

• (1) Pursuant to a Properties Lease Agreement, entered into between PDA Group and the Group on 30 September 2009 the Group will lease from PDA Group a total of 16 parcels of land with a total site area of approximately 2,339,877 sq.m. for a term to be expired on 31 December 2012 and renewable for a further term of 3 years subject to annual rent of RMB14,940,550 in 2010, RMB16,305,850 in 2011 and RMB17,807,680 in 2012. According to the said Properties Lease Agreement, the Group is prohibited from subletting the land to other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the property. The Group is the subsidiary of PDA Group.

– V-25 –

APPENDIX V

PROPERTY VALUATION REPORT

• (2) Pursuant to 15 State-owned Land Use Certificates, the land use rights of 15 of the said land parcels with total site area of 2,034,397 sq.m. are held by PDA Group for Port Terminal or other commercial use for various terms to be expired between 2045 to 2057. However, PDA Group has not yet obtained the land use rights for a said land parcel with a site area of about 305,480 sq.m.

• (3) As advised by the PDA Group, 5 of said projects are erected on the land parcels under the said Properties Lease Agreement. For the remaining project, the land parcel where the project is erected is not included in the said Properties Lease Agreement. PDA Group undertakes to assist the Group to proceed with the construction works, obtain certification of building completion and relevant title certificates according to the construction progress and to bear relevant cost or expenses incurred. Upon completion of the remaining project, a lease agreement will be entered into between PDA Group and the Group. Under the said lease agreement, the Group will lease the land of the property from PDA Group and the Group is prohibited from subletting the land to the other third parties without the written approval of PDA Group. Therefore, in our valuation, we have attributed no commercial value to the remaining project of the property.

• (4) As advised by PDA Group, the amount expected to be paid to complete the development is RMB3,243,000,000. Among the 6 projects, 4 projects have completed about 90% to 97% of the construction works while the remaining 2 projects have completed about 4% and 50% of the construction works.

• (5) We have been provided with a legal opinion on the property prepared by the Group’s legal adviser, which contains, inter alia, the following information:

• a. For the CIP properties, PDA Group undertakes to assist the Group to proceed with the construction works, obtain certification of building completion and relevant title certificates according to the construction progress and to bear relevant cost or expenses incurred. There is no legal impediment to execute the said relevant procedures.

• b. For the land parcels with land use rights of legally obtained (including lands obtained through capital contribution or land grant), the PDA Group has the right to lease out the land parcels within the land use term. Pursuant to Properties Lease Agreement, the right to use of leased land parcels by the Group is legal and valid and the Group has the right to occupy and use the said leased land parcels during the lease term.

• c. For the land parcels with land use rights not yet obtained by PDA Group, the right to use of leased land parcels by the Group under the Properties Lease Agreement can only be obtained after the PDA Group has obtained the relevant land use rights. PDA Group undertakes to apply for the relevant land use right certificate and bear all the related cost or expenses incurred for the said land parcels. If there is any loss or claim against the Group caused by not having obtained the relevant certificates, PDA Group will bear all the responsibilities.

– V-26 –

APPENDIX V

PROPERTY VALUATION REPORT

Group III – Property interests leased by the Entities to be acquired by the Group in the PRC

				Capital Value in
				existing state as at
No.	Property	Description and tenure	Particulars of occupancy	30 September 2009
				(RMB)
12.	Various properties	The properties comprise	The properties will be	No Commercial
	located in	certain buildings and	occupied by the Group	Value
	Dalian City, Liaoning	ancillary facilities with a	for port and ancillary
	Province, the PRC	total floor area of	facilities use.
		approximately
		4,021 sq.m.
		The properties were
		leased for various terms
		for a total annual rent of
		RMB1,181,102.

Notes:

• (1) The Group will lease a number of buildings and ancillary facilities with a total gross floor area of 4,021 approximately from third parties at a total annual rent of RMB1,181,102. The properties are subject to 6 lease agreements with terms ranging from 1 to 15 years with the latest expiry date on 30 September 2023.

• (2) The PRC legal opinion states, inter alias, that:

• a. The lessors of the lease agreements have the right to lease the properties to lessees and the said lease agreements are legal, valid and enforceable. The said lease agreements are legally binding on lessors and lessees. There is no legal impediment for the lessees to use the properties within the lease term and leased area.

• b. The lease agreements are not registered but the validity of the lease agreements is not affected.

– V-27 –

APPENDIX VI

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiry, that to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

Directors’, Chief Executive’s and Supervisors’ Interests and Short Positions in the Shares, Underlying Shares and Debentures

As at the Latest Practicable Date, as far as the Company was aware, none of the Directors, supervisors or chief executive of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

Substantial Shareholders’ and Other Persons’ Interests and Short Positions in Shares and Underlying Shares

As at the Latest Practicable Date, so far as was known to the Directors and the chief executive of the Company, the following persons (other than the Directors, supervisors and the chief executive of the Company) 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

– VI-1 –

APPENDIX VI

GENERAL INFORMATION

SFO; or are directly or indirectly 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 any members of the Group:

		Number of		As a %
	Class of	shares/underlying		of relevant class	As a % of total
Name of shareholder	shares	shares held	Capacity	of share capital1	share capital2
Dalian Port Corporation Limited	Domestic	1,816,815,000	Beneficial owner	97.5%	62.09%
	shares	(long position)
FIL Limited	H shares	127,738,000	Beneficial owner	12.02%	4.37%
		(long position)
Nippon Yusen Kabushiki Kaisha	H shares	114,800,000	Interest of controlled	10.80%	3.92%
		(long position)	corporation
N.Y.K. Line Group (Hong Kong)	H shares	114,800,000	Interest of controlled	10.80%	3.92%
Limited		(long position)	corporation
N.Y.K. Line (Hong Kong) Limited	H shares	114,800,000	Beneficial owner	10.80%	3.92%
		(long position)
Capital Research and	H shares	94,774,000	Beneficial owner	8.92%	3.24%
Management Company		(long position)
JPMorgan Chase & Co.	H Shares	63,887,372	Beneficial owner	6.01%	2.18%
		(long position)		(long position)	(long position)
		63,799,342		6.00%	2.18%
		(lending pool)		(lending pool)	(lending pool)
Schroder Investment	H share	54,234,000	Beneficial owner	5.10%	1.85%
Management (Hong Kong)		(long position)
Limited

Notes:

1. The relevant class of share capital: Domestic Shares – 1,863,400,000 Shares, H Shares – 1,062,600,000 Shares.

2. Total share capital: 2,926,000,000 Shares.

3. SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any member of the Group other than contracts expiring or determinable by the relevant employer within one year without payment of compensation (other than statutory compensation).

– VI-2 –

APPENDIX VI

GENERAL INFORMATION

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or is likely to compete directly or indirectly with any business of the Group.

5. DIRECTORS’ INTERESTS IN THE ENLARGED GROUP’S ASSETS AND CONTRACTS

As at the Latest Practicable Date, none of the Directors and supervisors of the Company had any interest in any assets which since 31 December 2008 (being the date to which the latest published audited accounts of the Company were made up) had been acquired or disposed of by or leased to any member of the Enlarged Group, or had been proposed to be acquired or disposed of by or leased to any member of the Enlarged Group. As at the Latest Practicable Date, none of the Directors and supervisors was materially interested in any subsisting contract or arrangement which is significant in relation to the business of the Enlarged Group.

6. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, were entered into by the members of the Group within two years preceding the Latest Practicable Date and are or may be material:

• (a) The assets acquisition agreement dated 12 October 2007 entered into by the Company and Dalian Port Container Terminal Co., Ltd. (“DPCM”), pursuant to which DPCM agreed to acquire and the Company agreed to dispose of (i) No.13 and No. 14 container terminals including, inter alia, 2 container berths, container depot and yard adjacent to the terminals and the relevant port facilities; (ii) the use right of the relevant coastal line; (iii) the sea use right of the relevant sea area and (iv) infrastructures in relation to supply of electricity, water and heat, transportation and communication, for a cash consideration of RMB 1,253,955,500;

• (b) The joint venture contract dated 26 October 2007 entered into among Dalian Port Container Co., Ltd. (“DPC”), a 91.34% owned subsidiary of the Company and other two independent third parties, Qinhuangdao Port Group Co., Ltd. and China Shipping Terminal Development Company Limited, to establish a joint venture company named Qinhuangdao Port New Harbour Container Terminal Co., Ltd. with a registered capital of RMB400 million of which RMB60 million should be contributed by DPC;

• (c) The equity transfer agreement dated 22 January 2008 entered into by Dalian Port Jifa Logistics Co., Ltd. (“DPJL”), a limited liability company which is owned as to 85% by the Company, and Dalian Container Terminal Co., Ltd. (“DCT”), pursuant to which DPJL agreed to purchase the 60% equity interest owned by DCT in DCT Logistics Co., Ltd for a cash consideration of RMB 58,800,000;

– VI-3 –

APPENDIX VI

GENERAL INFORMATION

• (d) The sale and purchase agreement dated 31 March 2008 entered into by Asia Pacific Ports Company Limited (“APP”), a wholly owned subsidiary of the Company, and Pacific Logistic Cn-Net Limited (“PLC”), pursuant to which APP agreed to purchase the 35% equity interest owned by PLC in Dalian Portnet Co., Ltd for a cash consideration of RMB 36,750,000;

• (e) The investment agreement dated 22 August 2008 entered into by the Company and PetroChina International Dalian Co., Ltd. to establish a joint venture company named Dalian Port PetroChina International Terminal Co., Ltd. with a registered capital of RMB250 million of which RMB125 million shall be contributed by the Company; and

• (f) The joint venture contract dated 18 March 2009 entered into among the Company, PetroChina and Dalian Construction Investment to establish an equity joint venture enterprise named PetroChina Dalian LNG Co., Ltd. with a registered capital of RMB2.6 billion of which RMB520 million shall be contributed by the Company.

7. LITIGATION

As at the Latest Practicable Date, neither the Company nor any other members of the Enlarged Group was engaged in any litigation or arbitration of material importance and, as far as the Directors were aware, no litigation or claim of material importance was pending or threatened against the Company or any other members of the Enlarged Group.

8. 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 2008, being the date of the latest published audited financial statements of the Company.

9. EXPERTS AND CONSENTS

This circular includes statement(s), opinion(s) or advice(s) made by the following experts:

Name	Qualification
CIMB Securities (HK) Ltd.	Licensed corporation to carry out type 1 (dealing in
	securities), type 4 (advising on securities) and type 6
	(advising on corporate finance) regulated activities
	under the SFO
Ernst & Young	Certified public accountants
American Appraisal China	Chartered professional surveyors and valuers
Limited
Jingtian & Gongcheng	Legal adviser to the Company as to the PRC laws

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GENERAL INFORMATION

Each of the experts mentioned above has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and/or references to its name, in the form and context in which it appears.

As at the Latest Practicable Date, none of the experts mentioned above had 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.

As at the Latest Practicable Date, none of the experts mentioned above had any direct or indirect interest in any asset which since 31 December 2008 (being the date to which the latest published audited accounts of the Company were made up) had 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.

10. MISCELLANEOUS

• (a) As at the Latest Practicable Date, the registered share capital of the Company was RMB2,926,000,000.00 divided into 2,926,000,000 Shares of RMB1.00 each, of which 1,863,400,000 Shares were Domestic Shares and 1,062,600,000 Shares were H Shares. All the Shares in the registered share capital had been issued and fully paid up.

• (b) The joint company secretaries of the Company are Ms. Ma Jinru and Mr. Lee, Kin Yu Arthur. Mr. Lee is a member of the American Institute of Certified Public Accountants and the Hong Kong Institute of Certified Public Accountants.

• (c) The registered office of the Company is situated at Xingang Commercial Building, Dayao Bay, Dalian Free Trade Zone, PRC. The place of business of the Company is at No. 1, Gangwan Street, Zhongshan District, Dalian, Liaoning Province, PRC. The branch share registrar of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Rooms 1712-16 Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (d) If there is any discrepancy between the English text and the Chinese text in respect of Appendices VII to XIV, the Chinese text shall prevail.

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GENERAL INFORMATION

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Morrison & Foerster at Edinburgh Tower, 33/F, The Landmark, 15 Queen’s Road Central, Hong Kong during normal business hours on any business day from the date of this circular until 29 October 2009:

• (a) the Articles;

• (b) the Acquisition Agreement;

• (c) the annual reports of the Company for each of the two financial years ended 31 December 2007 and 2008;

• (d) the letter from the Independent Board Committee, the text of which is set out in this circular;

• (e) the letter from CIMB Securities (HK) Ltd, the text of which is set out in this circular;

• (f) the material contracts referred to in the section headed “Material Contracts” in this Appendix;

• (g) the accountants’ report from Ernst & Young in respect of the combined financial information of the Business, which is set out in Appendix I to this circular;

• (h) the letter from Ernst & Young in respect of the unaudited pro forma financial information of the Enlarged Group, which is set out in Appendix III to this circular;

• (i) the letter from Ernst & Young in respect of the unaudited pro forma combined financial information of the Business, which is set out in Appendix IV to this circular;

• (j) the property valuation report from American Appraisal China Limited as set out in Appendix V to this circular;

• (k) the consent letters of the experts referred to in the paragraph headed “Experts and Consents” in this Appendix;

• (l) the circular date 8 April 2009 for connected transaction and discloseable transaction of formation of a joint venture; and

• (m) this circular.

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APPENDIX VII REVISED ARTICLES OF ASSOCIATION

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

大連港股份有限公司 Dalian Port (PDA) Company Limited

ARTICLES OF ASSOCIATION

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CONTENTS

CHAPTER	I	GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-3
CHAPTER	II	OBJECTIVES AND SCOPE OF BUSINESS . . . . . . . . . . . . . .	VII-5
CHAPTER	III	SHARES AND REGISTERED CAPITAL . . . . . . . . . . . . . . . .	VII-6
CHAPTER	IV	CAPITAL REDUCTION AND REPURCHASE
		OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-11
CHAPTER	V	FINANCIAL ASSISTANCE FOR ACQUISITION OF
		COMPANY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-14
CHAPTER	VI	SHARE CERTIFICATES AND REGISTER OF MEMBERS . .	VII-16
CHAPTER	VII	SHAREHOLDERS’ RIGHTS AND OBLIGATIONS. . . . . . . .	VII-20
CHAPTER	VIII	GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-25
CHAPTER	IX	SPECIAL PROCEDURES FOR VOTING BY A CLASS
		OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-45
CHAPTER	X	BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-47
CHAPTER	XI	SECRETARY TO THE BOARD OF THE COMPANY . . . . . .	VII-59
CHAPTER	XII	GENERAL MANAGER AND DEPUTY GENERAL
		MANAGER OF THE COMPANY . . . . . . . . . . . . . . . . . . .	VII-61
CHAPTER	XIII	SUPERVISORY COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . .	VII-62
CHAPTER	XIV	QUALIFICATIONS AND DUTIES OF DIRECTORS,
		SUPERVISORS, GENERAL MANAGER AND OTHER
		SENIOR MANAGEMENT OF THE COMPANY . . . . . . . .	VII-67
CHAPTER	XV	FINANCIAL AND ACCOUNTING SYSTEMS AND
		PROFIT DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . .	VII-75
CHAPTER	XVI	APPOINTMENT OF ACCOUNTANT FIRM. . . . . . . . . . . . .	VII-79
CHAPTER	XVII	INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-82
CHAPTER	XVIII	LABOUR MANAGEMENT SYSTEM . . . . . . . . . . . . . . . . . .	VII-82
CHAPTER	XIX	TRADE UNION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-83
CHAPTER	XX	MERGER AND DIVISION OF THE COMPANY . . . . . . . . .	VII-83
CHAPTER	XXI	DISSOLUTION AND LIQUIDATION
		OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-84
CHAPTER	XXII	PROCEDURES FOR AMENDMENTS TO THE ARTICLES
		OF ASSOCIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-87
CHAPTER	XXIII	SETTLEMENT OF DISPUTES. . . . . . . . . . . . . . . . . . . . . . . .	VII-88
CHAPTER	XXIV	NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-89
CHAPTER	XXV	INTERPRETATION AND DEFINITION OF THE
		ARTICLES OF ASSOCIATION . . . . . . . . . . . . . . . . . . . . .	VII-90

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REVISED ARTICLES OF ASSOCIATION

Articles of Association of 大連港股份有限公司 Dalian Port (PDA) Company Limited

CHAPTER I GENERAL PROVISIONS

Article 1 The Articles of Association are formulated in accordance with “The Company Law of the People’s Republic of China” (hereinafter referred to as the “Company Law”), “The Securities Law of the People’s Republic of China” (hereinafter referred to as the “Securities Law”), “The Mandatory Provisions for Companies Listing Overseas” (hereinafter referred to as the “Mandatory Provisions”), “Letter of Opinions on Supplements and Amendments to Articles of Association of Companies to be Listed in Hong Kong” (hereinafter referred to as the “Letter of Opinions”), “Guidelines to Articles of Association of Listed Companies (amended in 2006)” (hereinafter referred to as the “Guidelines to Articles of Association”), “Guidance on Establishment of Independent Director System for Listed Companies” (hereinafter referred to as the “Guidance on Independent Director”), “Notice on the Standardization of the Security provided to third parties of Listed Companies” (hereinafter referred to as the “ Security provided to third parties”) and other relevant provisions, with an aim to safeguard the lawful rights and interests of the Dalian Port (PDA) Company Limited (hereinafter referred to as the “Company”) and its shareholders and creditors, and to standardize the organization and activities of the Company.

Article 2 The Company is a Sino-foreign joint stock limited company established in the People’s Republic of China (“the PRC”) in accordance with the Company Law, the “State Council’s Special Regulations Regarding the Offering and Listing of Shares Overseas by Joint Stock Limited Companies”, the “Provisional Regulations in relation to Certain Issues for Establishment of Foreign-invested Joint Stock Limited Company” and other relevant laws and administrative regulations of the State.

The Company was incorporated by way of promotion on 9 November 2005 with the approval by Da Zheng No. [2005] 153 “Approval of the People’s Government of Dalian on the incorporation of Dalian Port (PDA) Company Limited” issued by the People’s Government of Dalian City. It was registered with the Administration Bureau of Industry and Commerce of Dalian on 26 November 2005. The Company’s business license number is Qi Gu Liao Da Zong Zi No. 015478.

The promoters of the Company are 大連港集團有限公司 (Dalian Port Corporation Limited), 大連融達投資有限責任公司 (Dalian Rongda Investment Company Limited), 大連 海泰控股有限公司 (Dalian Haitai Holdings Company Limited), 大連德泰控股有限公司 (Dalian Detai Holdings Company Limited), and 大連保稅正通有限公司 (Dalian Bonded Zhengtong Company Limited).

Article 3 On 21 March 2006, upon approval by the China Securities Regulatory Commission (the “CSRC”), the Company initially issued to the public 966,000,000 overseas listed foreign shares (including the over-allotted shares), which were listed on The Stock Exchange of Hong Kong Limited (the “SEHK”) on 28 April 2006. On [●], upon

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REVISED ARTICLES OF ASSOCIATION

approval by the CSRC, the Company initially issued [●] RMB-denominated ordinary shares to the public and conducted a private placement of [●] RMB-denominated ordinary shares to 大連港集團有限公司 (Dalian Port Corporation Limited), which were listed on Shanghai Stock Exchange on [●].

Article 4 The registered name of the Company is:

In Chinese: 大連港股份有限公司

In English: Dalian Port (PDA) Company Limited

Article 5 The place of domicile of the Company: Xingang Commercial Building, Dayao Bay, Dalian Free Trade Zone

Postal code: 116001

Phone number: 86 411 82798566

Fax number: 86 411 82798108

Article 6 The Chairman of the Board is the legal representative of the Company.

Article 7 The Company is a Sino-foreign joint stock limited company of permanent existence. The nature of the Company is a Sino-foreign joint stock limited company.

The Company is an independent legal person under the jurisdiction and protection of the laws, regulations and other relevant stipulations of the PRC.

All assets of the Company shall be divided into shares of equal amount and the rights and liability of a shareholder of the Company shall be limited to the proportion of shareholding held by him. The Company shall undertake its liabilities with all of its assets.

Article 8 The Articles of Association shall come into effect commencing from the date of the establishment of the Company.

From the date on which the Articles of Association come into effect, the Articles of Association shall constitute a legally binding document regulating the Company’s organisation and activities, and the rights and obligations between the Company and each shareholder and among the shareholders.

Article 9 The Articles of Association shall have binding effect on the Company and its shareholders, directors, supervisors, general manager, deputy general manager and other senior management members; the aforementioned person(s) may assert claims in respect of the Company’s affairs pursuant to the Articles of Association.

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Shareholders may institute legal proceedings against the Company and shareholders, directors, supervisors, general manager, deputy general manager and other senior management members of the Company pursuant to the Articles of Association, and the Company may institute legal proceedings against the shareholders, directors, supervisors, general manager, deputy general manager and other senior management members pursuant to the Articles of Association.

The term “legal proceedings” referred to in the preceding paragraph includes any legal action brought before a court and any arbitration application submitted to an arbitration institution.

The term “other senior management members” referred to in the preceding paragraph includes the financial controller of the Company and the secretary to the Board.

Article 10 The Company may invest in other limited liability companies and joint stock limited companies and undertake liabilities for the invested company as limited to the capital contribution made by it provided that, unless otherwise provided by law and administrative regulations, the Company shall not become an investor that is jointly and severally liable for the liabilities owed by the invested company, nor shall it become a shareholder of unlimited liabilities of other profit-making organizations.

With the approval by the examining and approving authorities delegated by the State Council, the Company may operate in accordance with the relevant provisions on holding company in the Companies Law as and when required for operation and management purposes.

Article 11 Subject to compliance with the laws and administrative regulations of the PRC, the Company has the rights to raise and borrow funds. The Company’s rights to raise funds include but not limited to the issue of debentures, the charge or mortgage of part or whole of the ownership and right to use of the Company’s assets and other rights permitted by the PRC laws and administrative regulations. However, the exercise of such rights by the Company shall not be prejudicial or causing revocation to the rights of shareholders of any class.

CHAPTER II OBJECTIVES AND SCOPE OF OPERATION

Article 12 The business objectives of the Company are as follows: to provide top quality, highly efficient, secured and environmental-friendly comprehensive port services that facilitate convenient and smooth transportation; to develop itself into a comprehensive port logistics operator that is capable of competing at the international level; and consequently to realise maximisation of the Company’s value.

Article 13 The Company’s scope of operation shall be consistent with the scope of operation approved by the authority responsible for the Company’s registration.

The Company’s major scope of operation includes: provision of loading and discharging, transportation, trans-shipment, storage and other port and logistics services at international and domestic levels.

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The Company also engages in the following ancillary businesses: tallying labours for international and domestic routes vessels; tugging business, port logistics and port information technology consultancy services.

Article 14 By referring to any changes in the domestic and overseas markets and the development of its business and capability, the Company may adjust its scope and methods of operation in due time upon passing a resolution in the general meeting and upon submission to the relevant government authority-in-charge for approval, and may set up subsidiaries, subsidiaries and branch offices in the PRC, regions of Hong Kong, Macau and Taiwan, as well as other countries.

CHAPTER III SHARES AND REGISTERED CAPITAL

Article 15 The Company shall have ordinary shares at all times. The Company may, according to its needs and subject to the approval by the companies’ approval authority authorised by the State Council, create other classes of shares.

Article 16 Shares of the Company shall be in the form of share certificates. All shares issued by the Company shall have a par value of RMB1 per share.

The term “RMB” referred to in the preceding paragraph means the lawful currency of the PRC.

Article 17 Shares of the Company shall be issued in accordance with the principles of openness, fairness and justice so that each of the shares of the same class shall carry the same rights.

Each of the shares of the same class shall be issued under the same conditions and at the same price in each issuance. The same price shall be paid for each of the shares subscribed by any entity or individual.

Article 18 Subject to approval of the competent securities authorities of the State Council, the Company may issue shares to domestic investors and overseas investors.

The term “overseas investors” referred to in the preceding paragraph means investors located in foreign countries, regions of Hong Kong, Macau and Taiwan, who subscribe shares issued by the Company. The term “domestic investors” means investors located in the PRC, excluding the regions mentioned above, who subscribe shares issued by the Company.

Article 19 Shares issued by the Company to domestic investors for subscription in RMB are referred to as domestic shares. Domestic shares listed in the PRC are referred to as domestically listed domestic shares or in short, “A Shares”. Shares issued by the Company to overseas investors for subscription in foreign currencies are referred to as foreign investor shares. Overseas listed foreign investor shares are referred to as overseas listed foreign shares.

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REVISED ARTICLES OF ASSOCIATION

Foreign investor shares issued by the Company and listed in Hong Kong shall be referred to as “H Shares”. H Shares are shares which have been admitted for listing on the SEHK with a par value denominated in RMB and are subscribed and traded in Hong Kong dollars. H Shares may also be listed in a stock exchange within the United States in the form of American Depository Receipts.

Upon obtaining an approval from the competent securities authorities of the State Council, domestic shareholders of the Company may transfer the Company’s shares held by them to overseas investors and have such shares listed and traded publicly in overseas. Shares transferred and listed on an overseas stock exchange shall also be subject to the regulatory procedures, regulations and requirements of the overseas exchange.

Unless otherwise required by an overseas stock exchange, the listing and trading on such overseas stock exchange of shares so transferred do not need approval by voting in any meetings of class Shareholders.

The term “foreign currencies” referred to in the preceding paragraph means the lawful currencies (other than RMB) of other countries or regions which are recognised by the department in charge of foreign exchange of the State and which can be used to pay the share price to the Company.

Article 20 Upon approval by the companies’ approval authority authorised by the State Council, the total number of ordinary shares issued prior to the initial offering of H shares of the Company was 1,960,000,000 shares, the entire of which were subscribed by the promoters, among which:

大連港集團有限公司 (Dalian Port Corporation Limited) subscribed 1,911,000,000 shares, representing 97.5% of the total number of ordinary shares that may be issued at the time of the establishment of the Company;

大連融達投資有限責任公司 (Dalian Rongda Investment Company Limited) subscribed 19,600,000 shares, representing 1% of the total number of ordinary shares that may be issued at the time of the establishment of the Company;

大連海泰控股有限公司 (Dalian Haitai Holdings Company Limited) subscribed 9,800,000 shares, representing 0.5% of the total number of ordinary shares that may be issued at the time of the establishment of the Company;

大連德泰控股有限公司 (Dalian Detai Holdings Company Limited) subscribed 9,800,000 shares, representing 0.5% of the total number of ordinary shares that may be issued at the time of the establishment of the Company;

大連保稅正通有限公司 (Dalian Bonded Zhengtong Company Limited) subscribed for 9,800,000 shares, representing 0.5% of the total number of ordinary shares that may be issued at the time of the establishment of the Company.

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Article 21 Upon approval by the competent securities authorities of the State Council, the Company has initially issued 966,000,000 shares (including the over-allotted shares) subsequent to its establishment, representing 33.01% of the total number of ordinary shares that may be issued by the Company.

The structure of the Company’s share capital was as follow: 2,926,000,000 ordinary shares, in which an aggregate of 1,863,400,000 shares were held by the promoters of the Company, namely 大連港集團有限公司 (Dalian Port Corporation Limited), 大連融達投資有 限責任公司 (Dalian Rongda Investment Company Limited), 大連海泰控股有限公司 (Dalian Haitai Holdings Company Limited), 大連德泰控股有限公司 (Dalian Detai Holdings Company Limited) and 大連保稅正通有限公司 (Dalian Bonded Zhengtong Company Limited), representing 63.68% of the total number of issued ordinary shares of the Company; and 1,062,600,000 shares were held by holders of the overseas listed foreign shares, representing 36.32% of the total number of issued ordinary shares of the Company.

Upon approval by the competent securities authorities of the State Council, the Company, subsequent to its establishment, issued initially [●] domestically listed domestic shares, representing [●]% of the total number of ordinary shares that may be issued by the Company. Upon entire [●] outstanding domestic shares’ (not yet listed or traded) being approved for listing and trading on Shanghai Stock Exchange, the structure of the Company’s share capital is as follow: [●] ordinary shares, in which an aggregate of [●] restricted A shares are held by the promoters of the Company, namely 大連港集團有限 公司 (Dalian Port Corporation Limited), 大連融達投資有限責任公司 (Dalian Rongda Investment Company Limited), 大連海泰控股有限公司 (Dalian Haitai Holdings Company Limited), 大連德泰控股有限公司 (Dalian Detai Holdings Company Limited) and 大連保稅 正通有限公司 (Dalian Bonded Zhengtong Company Limited), representing [●]% of the total number of issued ordinary shares of the Company; [●] unrestricted A shares are held by holders of the domestically listed domestic shares, representing [●]% of the total number of issued ordinary shares of the Company; and [●] H shares are held by holders of the overseas listed foreign investor shares, representing [●]% of the total number of issued ordinary shares of the Company.

The restricted A shares, unrestricted A shares and H shares as mentioned above shall rank pari passu in respect of entitlements to dividends and other forms of distributions without priority or seniority.

Article 22 The domestic shares issued by the Company shall be centralised and held in custody by the China Securities Depository & Clearing Corporation Limited. The Hong Kong-listed foreign investor shares of the Company shall be held principally by Hong Kong Securities Clearing Company Limited.

Article 23 The Company’s proposal for the issuance of overseas listed foreign shares and domestic shares, upon approval by the competent securities authorities of the State Council, may be implemented by the Board through separate offerings.

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The Company may implement its proposal for separate offerings of overseas listed foreign shares and domestic shares pursuant to the preceding paragraph within 15 months from the date of approval by the competent securities authorities of the State Council.

Article 24 Where the Company issues overseas listed foreign shares and domestic shares seperately within the total number of shares stated in the Company’s proposal for the issuance of shares, such shares shall be fully subscribed at one time respectively. If the shares cannot be fully subscribed at one time in special circumstances, the shares may be issued in separate offerings subject to the approval of the competent securities authorities of the State Council.

Article 25 The registered capital of the Company shall be RMB[●].

Article 26 The Company may, according to its operation and development needs, approve an increase of its registered capital in accordance with the relevant provisions of the Articles of Association, subject to requirements of the laws and regulations and a relevant resolution being passed in a general meeting.

The Company may increase its capital in the following ways:

• (1) public share offering;

• (2) non-public share offering;

• (3) allotting bonus shares to its existing shareholders;

• (4) capital increase by conversion from common reserve funds;

• (5) any other means permitted by the laws and administrative regulations as well as upon approval of the CSRC.

The Company’s increase of share capital through issuance of new shares, after approval is obtained in accordance with the provisions of the Articles of Association, shall be implemented in accordance with the procedures set out in the relevant laws and administrative regulations of the State.

Article 27 Unless otherwise provided for by the laws and administrative regulations, shares of the Company are freely transferable and are not subject to any lien.

Article 28 The Company does not accept pledges created over the Company’s shares.

Article 29 Shares held by promoters shall not be transferred within one year from the date of establishment of the Company. Shares previously issued by the Company prior to the initial public offering shall not be transferred within one year from the first day listing and trading of the Company’s shares on a stock exchange.

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REVISED ARTICLES OF ASSOCIATION

During their terms of office, directors, supervisors and other senior management members of the Company shall report to the Company their shareholdings in the Company and changes therein and shall not transfer in a given year during their terms of office more than 25% of the total number of shares of the Company which they hold; the shares of the Company held by them shall not be transferred within one year from the first day on which the shares of the Company are listed and traded. The aforesaid persons shall not transfer the shares of the Company held by them within six months from the date of their leaving the Company.

Article 30 Any gains from any sale of shares of the Company by any director, supervisor, senior management member or shareholder of the Company holding 5% or more of the shares of the Company within six months after the date of purchase of the same, and any gains from any purchase of shares of the Company by any of the aforesaid parties within six months after the date of sale of the same shall be disgorged and paid to the Company, and the Board shall recover such gains from the abovementioned parties.

If the Board fails to comply with the requirements in accordance with the preceding paragraph, a shareholder shall have the right to request the Board to effect the same within 30 days. If the Board fails to do so within the said time limit, a shareholder shall have the right to initiate proceedings in the Court directly in his own name for the interests of the Company.

If the Board fails to comply with the requirements in accordance with the first paragraph, the responsible director or directors shall assume joint and several liabilities in accordance with the law.

Article 31 Subject to compliance with the provisions in the Articles of Association and other applicable requirements, upon a transfer of share(s) of the Company, the name(s) of the transferee(s) shall be recorded in the register of members as the holder(s) of such share(s).

Article 32 All issues or transfers of overseas listed foreign shares will be registered in the register of members of overseas listed foreign shares at the place of listing in accordance with the requirements set out in Article 48 of the Articles of Association.

Article 33 The Company shall ensure that the following statements are included in the share certificates of all overseas listed foreign shares and shall direct and procure its share registrar to reject registration of any person as the holder of the shares of the Company which have been subscribed or purchased by or transferred to that person, unless and until such person has presented to the registrar a duly signed instrument in respect of such shares indicating the following statements:

• (1) the purchaser of the shares agrees with the Company and each of the shareholders, and the Company agrees with each of the shareholders that, they will observe and comply with the Company Law, the requirements of relevant laws and administrative regulations and the Articles of Association;

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REVISED ARTICLES OF ASSOCIATION

• (2) the purchaser of the shares agrees with each of the shareholders, directors, supervisors, general manager, deputy general manager and senior management members of the Company, and the Company, acting on behalf of itself and each of directors, supervisors, general manager, deputy general manager and senior management members of the Company, agrees with each of the shareholders that, they will refer to arbitration for settlement all disputes and claims arising from the Articles of Association, or disputes and claims of rights in relation to the Company’s affairs arising from any rights or obligations under the Company Law or other relevant laws and administrative regulations in accordance with the provisions of the Articles of Association, and that any referral to arbitration shall be deemed as an authorisation to an arbitral court to hold a public hearing and announce its arbitration award to the public. Such award shall be final and conclusive;

• (3) the purchaser of the shares agrees with the Company and all of the shareholders of the Company that the shares of the Company may be freely transferable;

• (4) the purchaser of the shares authorises the Company to act on its behalf to enter into a contract with each of directors and management personnel of the Company, whereby each of the directors and management personnel undertakes to observe and comply with the provisions of the Articles of Association in respect of their responsibility to the shareholders.

CHAPTER IV CAPITAL REDUCTION AND REPURCHASE OF SHARES

Article 34 The Company may reduce its registered capital pursuant to the provisions of the Articles of Association. Where the Company reduces its registered capital, procedures shall be made in accordance with the Company Law and other relevant requirements and the Articles of Association.

Article 35 Where the Company reduces its registered capital, it must prepare a balance sheet and an inventory of assets.

The Company shall notify its creditors within ten days of the date of the Company’s resolution for reduction of registered capital and shall publish a public announcement for at least 3 times in newspapers within thirty days from the date of such resolution. A creditor of the Company shall be entitled, within thirty days from the date of receipt of the notice from the Company or, in case of a creditor who has not received such notice, within ninety days from the date of the first public announcement, to require the Company to repay its debts or provide a corresponding guarantee for such debt.

The Company’s registered capital after the capital reduction may not be less than the minimum statutory amount.

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Article 36 The Company may repurchase its own shares in accordance with the laws, administrative regulations, departmental rules and regulations as well as the Articles of Association and with the approval of the relevant organizations of the State under the following circumstances:

• (1) to cancel shares for the purpose of reducing the capital of the Company;

• (2) to merge with other companies that hold shares in the Company;

• (3) to grant shares as incentive compensation to the staff of the Company;

• (4) to acquire the shares of shareholders (upon their request) who vote against to any resolution adopted at any general meetings on the merger or division of the Company; or

• (5) such other circumstances permitted by the laws and administrative regulations.

The Company shall not purchase or sell the Company’s shares save and except for the aforesaid conditions.

Article 37 Upon approval by the relevant State authorities of the repurchase of its own shares of the Company, it may proceed to any of the following manners:

• (1) to make a repurchase offer in proportion to respective shareholdings of all shareholders;

• (2) to repurchase through open transactions on a securities exchange;

• (3) to repurchase by an agreement outside a securities exchange;

• (4) such other means which are permitted by the competent securities authorities.

Article 38 The Company must obtain prior approval of the shareholders at a general meeting in accordance with the Articles of Association before it can repurchase shares by means of an off-market agreement. The Company may, upon prior approval of the shareholders at a general meeting, release or vary any contract which has been entered into by the Company in the manner set forth above, or waive any of its rights thereunder.

The agreement for the repurchase of shares referred to in the preceding paragraph includes (but not limited to) an agreement to assume the obligations of repurchasing shares or acquire the rights of repurchasing shares.

The Company may not assign an agreement for the repurchase of its shares or any right contained in such agreement.

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Where the Company has the right to repurchase redeemable shares which are not made through the market or by tender, such repurchase shall be limited to a maximum price, and if such repurchase is made by tender, tenders shall be offered to all Shareholders alike.

Article 39 If the Company repurchases its own shares for the reasons under Sub-paragraphs (1) through (3) of Article 36 hereof, resolutions related thereto shall be adopted at a general meeting. If the Company repurchases its own shares in accordance with Article 36 under the circumstances set forth in Sub-paragraph (1), the shares so repurchased shall be cancelled within ten days from the date of repurchase. In the event of the circumstances set forth in Sub-paragraphs (2) and (4), the shares so repurchased shall be transferred or cancelled within six months.

If the Company repurchases its own shares in accordance with Sub-paragraph (3) of Article 36 hereof, the shares so repurchased shall not exceed 5% of the total number of shares issued by the Company. The repurchase shall be funded with the after-tax profit of the Company, and the shares so repurchased shall be transferred to the employees within one year.

Shares which have been legally repurchased by the Company shall be cancelled within the period prescribed by the laws and administrative regulations, and the Company shall apply to the Company’s original registration authorities for registration of the change in its registered capital.

The aggregate par value of the cancelled shares shall be deducted from the Company’s registered capital.

Article 40 Unless the Company is in the course of liquidation, it must comply with the following provisions in relation to repurchasing its issued and outstanding shares:

• (1) where the Company repurchases shares at par value, payment shall be made out of surplus distributable profits of the Company or out of the proceeds from new shares issued for such purpose;

• (2) where the Company repurchases shares at a premium to the par value, payment up to the par value may be made out of the book surplus distributable profits of the Company or out of the proceeds from new shares issued for that purpose. Payment of the portion in excess of the par value shall be effected as follows:

• if the shares being repurchased were issued at par value, payment shall be made out of the book surplus distributable profits of the Company;

• if the shares being repurchased were issued at a premium to the par value, payment shall be made out of the book surplus distributable profits of the Company or out of the proceeds from new shares issued for that purpose, provided that the amount paid out of such proceeds shall not exceed the aggregate of the premiums received by the

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Company on the issue of the shares repurchased nor shall it exceed the book value of the Company’s premium account (or capital common reserve fund) (including the premiums on the new issue) at the time of the repurchase;

• (3) The Company shall make payments for the following applications out of the Company’s distributable profits:

• acquisition of the right to repurchase its own shares;

• variation of any contract for the repurchase of its shares;

• release of its obligation(s) under any contract for repurchasing its shares.

• (4) After the Company’s registered capital has been reduced by the aggregate par value of the cancelled shares in accordance with the relevant regulations, the amount deducted from the distributable profits of the Company for payment of the par value of the repurchased shares shall be transferred to the Company’s premium account (or capital common reserve fund).

CHAPTER V FINANCIAL ASSISTANCE FOR PURCHASE OF COMPANY SHARES

Article 41 The Company and its subsidiaries (including the entities under the Company) shall not, by way of a gift or by granting an advance, guarantee, compensation, loan or otherwise at any time, provide any form of financial assistance to a person who purchases or intends to purchase shares in the Company. The person who purchases shares in the Company set forth above includes any person who directly or indirectly assumes any obligations as a result of the acquisition of shares in the Company.

Neither the Company nor its subsidiaries (including the subordinated enterprise of the Company) shall, by any means at any time, provide financial assistance to such person for the purposes of reducing or discharging the obligations assumed by such person.

This Article shall not apply to the circumstances referred to in Article 43 in this Chapter.

Article 42 For the purposes of this Chapter, the term “financial assistance” shall include (but not limited to):

• (1) gifts;

• (2) guarantee (including the assumption of liability or the provision of assets by the guarantor to secure the performance of obligations by the obligor), compensation (other than compensation in respect of the Company’s own default) or release or waiver of any rights;

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• (3) provision of a loan or entering into any other agreement under which the obligations of the Company are to be fulfilled prior to the fulfillment of obligations of another party to the agreement, or a change in the parties to, or the assignment of rights under, such loan or agreement;

• (4) any other form of financial assistance given by the Company when the Company is insolvent or has no net asset or when its net assets would thereby be reduced to a material extent.

For the purposes of this Chapter, the “assumption of obligations” means the assumption of obligations by way of contract or by way of arrangement (irrespective of whether such contract or arrangement is enforceable or not, and irrespective of whether such obligations are to be borne by the obligor solely or jointly with other persons), or by any other means which results in a change in the Company’s financial position.

Article 43 The following activities shall not be treated as activities prohibited under Article 41 of this Chapter:

• (1) the provision of financial assistance by the Company where the financial assistance is provided in good faith in the interests of the Company and the principal purpose of which is not for the acquisition of shares in the Company, or where the provision of financial assistance is an incidental part of certain overall plan of the Company;

• (2) the lawful distribution of the Company’s properties by way of dividends;

• (3) the allotment of bonus shares as dividends;

• (4) a reduction of registered capital, repurchase of shares of the Company or adjustment of the share capital structure of the Company effected in accordance with the Articles of Association;

• (5) loans extended by the Company within its scope of operation and in the ordinary course of its business (provided that the net assets of the Company are not thereby reduced or that, to the extent that the assets are thereby reduced, the financial assistance is provided out of its distributable profits);

• (6) the monetary contribution by the Company to the employee share option schemes (provided that the net assets of the Company are not thereby reduced or that, to the extent that the assets are thereby reduced, the financial assistance is provided out of its distributable profits).

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CHAPTER VI SHARE CERTIFICATES AND REGISTER OF MEMBERS

Article 44 A share certificate issued by the Company is the evidence of the share(s) held by a shareholder. The Company shall issue its share certificates either by way of book entries, or by issuing physical share certificates, or otherwise in accordance with requirements of the competent securities authorities of the State Council according to the relevant government or authority at the place of issue or listing of shares.

Article 45 The share certificates of the Company shall be in registered form.

In addition to those provided in the Company Law, a share certificate of the Company shall also contain any other items required to be specified by the stock exchange on which the shares of the Company are listed.

Article 46 The share certificates shall be signed by the Chairman of the Board. Where the stock exchange on which the shares of the Company are listed requires the share certificates to be signed by other senior management members, the share certificates shall also be signed by such senior management members. The share certificates shall take effect after being affixed or printed with the seal of the Company. The share certificates shall only be affixed with the company seal with the authorization of the Board. The signatures of the Chairman of the Board or other relevant senior management members on the share certificates may also be in printed form.

Article 47 The Company shall keep a register of members based on the evidence provided by the share registrar. The register of members shall contain the following particulars:

• (1) the surname and name (name), address (place of domicile), occupation or nature of business of each shareholder;

• (2) the class and number of shares held by each shareholder;

• (3) the amount paid-up or payable in respect of shares held by each shareholder;

• (4) the share certificate numbers of the shares held by each shareholder;

• (5) the date on which each shareholder was registered in the register as a shareholder; and

• (6) the date on which any shareholder ceased to be a shareholder.

Unless there is evidence to the contrary, the register of members shall be the sufficient evidence of the shareholders’ shareholding in the Company.

Article 48 The Company may, in accordance with the mutual understanding and agreements made between the competent securities authorities of the State Council and overseas securities regulatory authorities, keep its register of holders of overseas listed foreign shares outside of China and appoint overseas agent(s) to manage such register. The original register of holders of overseas listed foreign shares listed in Hong Kong shall be maintained in Hong Kong.

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The Company shall maintain a duplicate of the register of holders of overseas listed foreign shares at its place of domicile. The appointed overseas agent(s) shall ensure consistency between the original version and the duplicate register of holders of overseas listed foreign shares at all times.

If there is any inconsistency between the original and the duplicate register of holders of overseas listed foreign shares, the original version shall prevail.

Article 49 The Company shall maintain a complete register of members.

The register of members shall include the following parts:

• (1) the register of members which is maintained at the Company’s place of domicile (other than those share registers which are described in paragraphs (2) and (3) of this Article);

• (2) the register of members in respect of the holders of overseas listed foreign shares of the Company which is maintained at the place where the overseas stock exchange on which the shares are listed is located; and

• (3) the register of members which is maintained in such other place as the Board may consider necessary for the purpose of listing of the Company’s shares.

Article 50 Different parts of the register of members shall not overlap one another. No transfer of the shares registered in any part of the register shall, during the existence of that registration, be registered in any other part of the register of members.

Alteration or rectification of each part of the register of members shall be made in accordance with the laws of the place where that part of the register of members is maintained.

• Article 51 All fully paid-up H shares are freely transferable pursuant to the

• Articles of Association. The Board may refuse to recognize any instrument of transfer without explanation unless such transfer is in compliance with the following conditions: (1) payment of HK$2.50 or such higher fees as agreed by the SEHK has been paid to the Company to register the instrument of transfer of shares and other documents relating to or which may affect the ownership of such shares;

• (2) the instrument of transfer involves only the overseas listed foreign shares listed in Hong Kong;

• (3) the stamp duty payable on the instrument of transfer has been paid;

• (4) the relevant share certificates and evidence reasonably required by the Board showing that the transferor has the right to transfer such shares;

• (5) if the shares are to be transferred to joint holders, the number of such joint holders shall not exceed 4;

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• (6) the Company has not created any lien over the Relevant Shares; and

• (7) no share shall be transferred to a minor or an individual with unsound mind or individual of incapacity.

If the Company refuses to register a share transfer, the Company shall send the transferor and the transferee a notice of refusal to register the said share transfer within 2 months after the application for transfer is submitted.

Article 52 All transfers of H shares shall be effected by a written instrument of transfer in an ordinary or usual form or any other form acceptable to the Board (including the standard transfer format or form of transfer specified by HKSE from time to time). The instrument of transfer may be signed under hand or by an imprint only, or (where the transferor or transferee is a corporation) by the company’s seal. Where the transferor or transferee is a recognized clearing house (as defined by relevant regulations in Hong Kong law effective from time to time) or its nominee, it may be signed in a machine-imprinted format.

All instruments of transfer shall be maintained at the legal address of the Company or such places as the Board may specify from time to time.

Article 53 No registration of amendment of the register of members caused by transfer of shares shall be carried out within 30 days prior to the date of a general meeting or within 5 days before the reference date on which the Company decides to distribute dividends.

Article 54 When the Company intends to convene a general meeting, distribute dividends, enter into liquidation and engage in other activities that involve confirmation of interests, the convener of the Board meeting or general meeting shall determine a specific day for confirmation of interests (date of registration of interests). Shareholders named in the register of members by the end of the date of confirmation of interests (date of registration of interests) shall be the shareholders of the Company.

Article 55 Any person who objects to the register of members and requests to have his name included in or removed from the register of members may apply to the court of relevant jurisdiction to correct the register of members. Article 56 Any shareholder who is registered in, or any person requests to have his name entered into, the register of members may, if his share certificate (the “Original Certificate”) is lost, apply to the Company for a replacement share certificate in respect of such shares (the “Relevant Shares”).

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If a holder of the domestic shares loses his share certificate and applies for a replacement share certificate, it shall be dealt with in accordance with the provisions of the Company Law and the relevant laws and regulations.

If a holder of overseas listed foreign investor shares loses his share certificate and applies for a replacement share certificate, it may be dealt with in accordance with the relevant laws, the rules of the stock exchange and other relevant regulations of the place where the original register of holders of overseas listed foreign investor shares is maintained.

If a holder of overseas listed foreign investor shares of a company listed in Hong Kong loses his share certificate and applies for a replacement share certificate, such share certificate shall be issued in compliance with the following requirements:

• (1) the applicant shall submit an application to the Company in the standard form prescribed by the Company accompanied by a notarially certified certificate or statutory declaration containing the grounds upon which the application is made and the circumstances and evidence of the loss of the share certificate as well as declaring that no other person is entitled to request to be registered as the shareholder of the Relevant Shares.

• (2) before the Company decides to issue the replacement share certificate, no statement made by a person other than the applicant requesting that he shall be registered as the shareholder in respect of the Relevant Shares has been received.

• (3) the Company shall, if it decides to issue a replacement share certificate to the applicant, make an announcement of its intention to issue the replacement share certificate in such newspapers designated by the Board; the announcement shall be made at least once every 30 days for a period of 90 days.

• (4) the Company shall have, prior to the publication of its intention to issue a replacement share certificate, delivered to the stock exchange on which its shares are listed a copy of the announcement to be published. The Company may publish the announcement upon receiving a confirmation from such stock exchange that the announcement has been displayed at the premises of the stock exchange. The announcement shall be displayed at the premises of the stock exchange for a period of 90 days.

In case an application to issue a replacement share certificate has been made without the consent of the registered holder of the Relevant Shares, the Company shall deliver by mail to such registered shareholder a copy of the announcement to be published.

• (5) if, upon expiration of the 90-day period of announcement, display referred to in paragraphs (3) and (4) of the Articles of Association, the Company has not received from any person any objection to such application, the Company may issue a replacement share certificate to the applicant accordingly.

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• (6) where the Company issues a replacement share certificate in accordance with the Articles of Association, it shall forthwith cancel the Original Certificate and record the cancellation and replacement matters in the register of members accordingly.

• (7) all expenses relating to the cancellation of an Original Certificate and the issuance of a replacement share certificate by the Company shall be borne by the applicant. The Company may refuse to take any action until a reasonable guarantee is provided by the applicant for such expenses.

Article 57 After the Company issues a replacement share certificate pursuant to the Articles of Association, the name of a bona fide purchaser who obtains the aforementioned new share certificate or a shareholder who thereafter registers as the owner of such shares (in the case where he is a bona fide purchaser) shall not be deleted from the register of members.

Article 58 The Company shall not have any obligation to indemnify any person for any damages suffered thereby arising out of the cancellation of the Original Certificate or the issuance of a replacement share certificate, unless such person concerned can prove that the Company has committed a fraudulent act.

CHAPTER VII SHAREHOLDERS’ RIGHTS AND OBLIGATIONS

Article 59 A shareholder of the Company is a person who lawfully holds shares of the Company and has his name (title) recorded in the register of members.

A shareholder shall enjoy the relevant rights and assume the relevant obligations in accordance with the class and number of shares he holds. Shareholders holding the same class of shares shall enjoy the same rights and assume the same obligations.

Article 60 When two or more persons are registered as joint holders of any shares, they shall be deemed to be joint owners of such shares and subject to constraints of the following terms:

• (1) the company does not need to register more than 4 persons as joint holders for any shares;

• (2) the joint holders of any shares shall jointly or severally assume the liability to pay for all amounts of fee payable for the Relevant Shares;

• (3) in case one of the joint holders has deceased, only the surviving joint holders shall be deemed by the Company to be such persons as having the ownership of the Relevant Shares. But the Board shall have the right, for the purpose of making amendments to the register of members, to demand a death certificate of such shareholder where it deems appropriate to do so.

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• (4) for joint holding of any shares, only the joint holder whose name appears first in the register of members is entitled to receive the certificate for the Relevant Shares, receive the Company’s notices, and to attend and exercise all voting rights of the Relevant Shares in the general meetings of the Company. Any notice serviced to the above persons shall be deemed to be serviced to all joint holders of the Relevant Shares.

If any one of the joint holders sends to the Company a receipt of any dividend, bonus or capital return payable to such joint holders, the receipt shall be deemed as a valid receipt sent by such joint holders to the Company.

Article 61 Holders of the ordinary shares of the Company shall enjoy the following rights:

• (1) the right to dividends and other profit distributions in proportion to the number of shares held;

• (2) the right to propose, convene and preside over, to attend or appoint a proxy to attend the general meetings and to exercise the corresponding voting right thereat in accordance with the law;

• (3) the right to supervise and manage , present proposals or raise enquiries about the Company’s business operations;

• (4) the right to transfer, give as a gift or pledge the shares in their possession in accordance with the laws, administrative regulations and provisions of the Articles of Association;

• (5) the right to obtain relevant information in accordance with the provisions of the Articles of Association, including:

• the right to obtain a copy of the Articles of Association, subject to payment of relevant costs;

• the right to inspect and copy, subject to a payment of a reasonable fee:

  • (i) all parts of the register of members;

  • (ii) personal particulars of each of the Company’s directors, supervisors, general manager, and other senior management members, including:

    • (a) present and former name or alias;

    • (b) principal address (place of domicile);

    • (c) nationality;

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• (d) primary and all other part-time occupations and duties;

• (e) identification document and its number.

• (iii) reports on the status of the Company’s share capital;

• (iv) reports showing the aggregate par value, quantity, highest and lowest prices in respect of each class of shares repurchased by the Company since the end of the last accounting year, and the aggregate amount paid by the Company for this purpose;

• (v) minutes of the general meetings, and resolutions of board meetings and Supervisory Committee meetings;

• (vi) corporate bond certificates and financial accounting reports.

Documents of items (i) and (iii) to (vi) mentioned above and any other applicable documents shall be made available by the Company, according to the requirements of the Listing Rules, at the Company’s address in Hong Kong, for the public and overseas listed foreign-invested shareholders to inspect with no charge.

• (6) in the event of the termination or liquidation of the Company, the right to participate in the distribution of the remaining assets of the Company in accordance with the number of shares held;

• (7) with respect to shareholders who vote against any resolution adopted at the general meeting on the merger or division of the Company, the right to demand the Company to acquire the shares held by them;

• (8) such other rights conferred by the laws, administrative regulations, departmental rules and regulations and the Articles of Association.

The Company shall not exercise its rights to freeze or harm in any other forms the rights attaching to any shares held in the event that any person has not disclosed the rights and interests they hold directly or indirectly.

Article 62 Shareholders demanding inspection of the relevant information or copies of the materials mentioned in the preceding provision shall provide to the Company written documents evidencing the class and number of shares of the Company they hold. After confirmation of the shareholder’s identity, the Company shall provide such information at the shareholder’s request.

Article 63 If a resolution of the Company’s general meeting or board meeting violates the laws or administrative regulations, the shareholders shall have the right to submit a petition to the people’s court to render the same as invalid.

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If the procedures for convening a meeting of, or the method of voting at, a general meeting or board meeting violate the laws, administrative regulations or the Articles of Association, or the contents of a resolution violates the Articles of Association, shareholders shall be entitled to submit a petition to the people’s court to rescind such resolutions within 60 days from the date on which such resolution is adopted.

Article 64 Where the Company incurs losses as a result of directors’ and senior management members’ violation of the laws, administrative regulations or the Articles of Association in the course of performing their duties with the Company, shareholders severally or jointly holding 1% or more of the Company’s shares for more than 180 consecutive days shall be entitled to request in writing the Supervisory Committee to initiate proceedings in the court; where the Company incurs losses as a result of the Supervisory Committee’s violation of any provision of law, administrative regulation or the Articles of Association in the course of performing its duties with the Company, such shareholders shall be entitled to request in writing to the Board to initiate proceedings in the court.

In the event that the Supervisory Committee or the Board refuses to initiate proceedings after receiving the written request of shareholders stated in the foregoing paragraph, or fails to initiate such proceedings within 30 days from the date on which such request is received, or in case of emergency where failure to initiate such proceedings immediately will result in irreparable damage to the Company’s interests, shareholders described in the preceding paragraph shall have the right to initiate proceedings in the court directly in their own names in the interest of the Company.

Shareholders described in the first paragraph of this Article may also initiate proceedings in the people’s court in accordance with the preceding two paragraphs in the event that the lawful interests of the Company are infringed upon by any third parties.

Article 65 Shareholders may initiate proceedings in the people’s court in the event that a director or a senior management member has violated the laws, administrative regulations or the Articles of Association, thereby infringing the interests of shareholders.

Article 66 Holders of the ordinary shares of the Company shall have the following obligations:

• (1) to abide by the laws, administrative regulations and the Articles of Association;

• (2) to pay the share subscription price based on the shares subscribed and the method of subscription;

• (3) not to withdraw their shares unless required by the laws and regulations;

• (4) not to abuse their shareholders’ rights to harm the interests of the Company or other shareholders, and not to abuse the independent legal person status of the Company and the limited liability of shareholders to harm the interest of any creditor.

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If a shareholder of the Company abuses its shareholder’s rights and thereby causes loss on the Company or other shareholders, such shareholder shall be liable for indemnity in accordance with the law.

If a shareholder of the Company abuses the Company’s independent legal person status and the limited liability of shareholders for the purposes of avoiding debts, thereby materially impairing the interests of the creditors of the Company, such shareholder shall be jointly and severally liable for the debts owed by the Company.

• (5) to assume other obligations required by the laws, administrative regulations and the Articles of Association.

Shareholders shall not be liable to make any further contributions to the share capital other than according to the terms agreed by the subscribers at the time of share subscription.

Article 67 Where a shareholder holding 5% or more voting shares of the Company pledges any domestic shares in his possession, he shall report the same to the Company in writing on the day on which he pledges his shares.

Article 68 The controlling shareholder of the Company and persons who exercise de facto control over the Company shall not take advantage of their connected relationship to act in detriment to the Company’s interests. If they have violated the provision and caused damage to the Company, they are liable for such damages.

The controlling shareholder of the Company and persons exercising de facto control over the Company shall have a fiduciary duty towards the Company and its public shareholders. The controlling shareholder shall execute its rights as an investor in strict compliance with the law. The controlling shareholder shall not adversely affect the lawful interests of the Company and its public shareholders through profit distribution, asset restructuring, foreign investment, possession of capital, lending guarantees and shall not make use of its controlling status against the interests of the Company and public shareholders.

In addition to obligations imposed by the laws, administrative regulations or required by the listing rules of the stock exchange on which the shares of the Company are listed, a controlling shareholder shall not exercise his voting rights in respect of the following matters in a manner prejudicial to the interests of all or part of the shareholders of the Company:

• (1) to waive a director or supervisor of his responsibility to act honestly in the best interests of the Company;

• (2) to approve the expropriation by a director or supervisor (for his own benefits or for the benefits of another person), in any way, of the Company’s properties, including (but not limited to) any opportunities beneficial to the Company;

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• (3) to approve the expropriation by a director or supervisor (for his own benefits or for the benefits of another person) of personal rights of other shareholders, including (but not limited to) rights to distributions and voting rights save pursuant to a restructuring submitted to shareholders for approval at a general meeting in accordance with the Articles of Association.

Article 69 The term “controlling shareholder” referred to in the preceding provision means a person who satisfies any one of the following conditions:

• (1) he severally or jointly, acting in concert with others, is entitled to elect more than half of the Board;

• (2) he severally or jointly, acting in concert with others, is entitled to exercise or to control the exercise of more than 30% of the voting rights of the Company;

• (3) he severally or jointly, acting in concert with others, holds more than 30% of the outstanding issued shares of the Company;

• (4) he severally or jointly, acting in concert with others, has de facto control over the Company in any other manner(s).

For the purposes hereof, the term “persons exercising de facto control over the Company” means the persons, not being shareholders of the Company, who are able to exercise actual control over the acts of the Company through an investment relationship, agreement or other arrangements.

For the purposes hereof, the term “connected relationship” means the relationship between the controlling shareholders, persons exercising de facto control over the Company, directors, supervisors or senior management members of the Company and the enterprise directly or indirectly controlled thereby and any other relationship that may lead to the transfer of any interest of the Company. However, enterprises controlled by the State do not have a connected relationship with one another simply because they are under the control of the State.

CHAPTER VIII GENERAL MEETINGS

Article 70 The general meeting is the Company’s authoritative organ which shall exercise its functions and powers in accordance with the laws.

Article 71 The general meeting shall have the following functions and powers:

• (1) to decide on the Company’s operational policies and investment plans;

• (2) to elect and replace directors who are not appointed from the employees’ representatives and decide on matters relating to their remuneration;

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• (3) to elect and replace supervisors who are appointed from the shareholders’ representatives and decide on matters relating to their remuneration;

• (4) to consider and approve the reports of the Board;

• (5) to consider and approve the reports of the Supervisory Committee;

• (6) to consider and approve the Company’s proposed annual budgets and final accounts;

• (7) to consider and approve the Company’s profit distribution plans and loss recovery plans;

• (8) to decide on the increase or reduction of the Company’s registered capital and the acquisition of the Company’s shares;

• (9) to decide on matters such as merger, division, dissolution, liquidation and change in the form of the Company;

• (10) to decide on the issue of debentures by the Company;

• (11) to decide on the appointment, dismissal and non-reappointment of the accountants of the Company;

• (12) to amend the Articles of Association of the Company;

• (13) to consider the motions raised by shareholders who represent more than 5% of the total number of voting shares of the Company;

• (14) to consider and approve the provision of guarantees under Article 72 of the Articles of Association;

• (15) to consider the Company’s significant acquisition or disposal of material assets with a value exceeding 30% of the latest audited total assets of the Company within one year;

• (16) to consider and approve changes in the use of proceeds raised;

• (17) to consider the share incentive schemes;

• (18) to consider other matters which, according to the laws, administrative regulations, departmental rules and regulations and the Articles of Association, should be resolved by the shareholders at general meetings.

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The aforesaid functions and powers of general meetings shall not be exercised by the Board or by other organizations and individuals on behalf of shareholders through authorization. General meetings may authorize or appoint the Board to deal with such other matters besides the aforesaid powers and functions.

Article 72 The following security provided to third parties provided by the Company shall be subject to consideration and approval at general meetings:

• (1) a guarantee which is given after the total amount of the security provided to third parties provided by the Company and its controlling subsidiaries exceeds 50% of its latest audited net assets of the Company;

• (2) a guarantee which is given after the total amount of security provided to third parties given by the Company which is equal to or exceed 30% of the latest audited total assets of the Company;

• (3) a guarantee which is provided in favour of an object which has an asset to liability ratio exceeding 70%;

• (4) a guarantee of which the single guarantee amount exceeds 10% of the latest audited net assets of the Company;

• (5) based on the principle of aggregating the total amount of guarantees for 12 consecutive months, any guarantee exceeding 30% of the Company’s latest audited total assets;

• (6) based on the principle of aggregating the total amount of guarantees for 12 consecutive months, any guarantee exceeding 50% of the Company’s latest audited net assets and with an absolute amount of more than 50 million;

• (7) a guarantee which is provided to shareholders, persons exercising de facto control over the Company and their respective connected parties;

• (8) such other guarantees as required by the stock exchange on which the shares of the Company are listed or the Articles of Association.

Security provided to third parties which shall be approved at a general meeting shall be considered and approved by the Board before submission to the general meeting for approval. When the general meeting is considering a proposal to provide security for any shareholder, persons exercising de facto control over the Company or their respective connected parties, the said shareholder or the shareholders controlled by the said persons exercising de facto control over the Company shall be abstained from voting on the proposal, and the approval of such proposal shall be subject to more than half of the voting rights of the other attending shareholders.

Save and except for the aforesaid security, the Board shall be authorized to consider and approve other security provided to third parties. However, such security must be approved by adopting a resolution by more than two thirds of the attending directors.

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Article 73 The Company shall not, without prior approval of shareholders at general meetings, enter into any contract with any person other than a director, supervisor, general manager, deputy general manager or other senior management member whereby the administration of the whole or any substantial part of the business of the Company is to be handed over to such person.

Article 74 General meetings are divided into annual general meetings and extraordinary general meetings. General meetings shall be convened by the Board. Annual general meetings are held once a year and within six months from the end of the preceding financial year.

Under any of the following circumstances, the Board shall convene an extraordinary general meeting within two months:

• (1) the number of directors is less than that is required by the Company Law or two thirds of the number of directors specified in the Articles of Association;

• (2) the accrued losses of the Company amount to one third of the total amount of its share capital;

• (3) shareholder(s) holding 10% or more of the Company’s outstanding issued shares carrying voting rights request(s) in writing the convening of an extraordinary general meeting;

• (4) it is deemed necessary by the Board or requested by the Supervisory Committee to convene an extraordinary general meeting;

• (5) more than 2 of the independent directors propose to convene the meeting;

• (6) such other circumstance specified in the laws, administrative regulations, departmental rules or the Articles of Association.

In the event of Sub-clauses (3), (4) and (5) above, the agenda shall include the topics proposed by the meeting conveners.

Article 75 The venue for convening the general meeting shall be the domocile of the Company or other specific places notified by the general meeting conveners.

The general meeting shall have a meeting venue set and be convened by ways of on-site meetings. The Company will also provide online or other means of transmission for the convenience of participation by shareholders. Shareholders who attend general meetings in the aforesaid manners shall be deemed as present.

Article 76 The Company shall engage lawyers to attend general meetings and advise on the following issues with announcements made thereon:

• (1) whether the convening of the general meeting and its procedures are in compliance with the laws, administrative regulations and the Articles of Association;

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• (2) whether the attendees are eligible and whether the eligibility of the convener is lawful and valid or not;

• (3) whether the procedures of voting and the voting results of the meeting are lawful and valid or not;

• (4) legal opinions on other related matters at the request of the Company.

Article 77 Independent directors shall be entitled to propose to the Board the convening of an extraordinary general meeting. The Board shall, in accordance with the laws, administrative regulations and the Articles of Association, furnish a written reply stating its agreement or disagreement to the convening of the extraordinary general meeting within ten days upon receipt of such proposal.

If the Board agrees to convene an extraordinary general meeting, a notice of meeting shall be issued within five days after adopting the relevant resolution by the Board. If the Board does not agree to convene an extraordinary general meeting, reasons for such disagreement shall be given by way of announcement.

Article 78 The Supervisory Committee shall be entitled to propose to the Board the convening of an extraordinary general meeting, provided that such proposal shall be made in writing. The Board shall, in accordance with the laws, administrative regulations and the Articles of Association, furnish a written reply stating its agreement or disagreement to the convening of an extraordinary general meeting within ten days upon receipt of such proposal.

If the Board agrees to convene an extraordinary general meeting, a notice of meeting shall be issued within five days after adopting the relevant resolution by the Board. Any change to the original proposal made in the notice shall require the approval of the Supervisory Committee.

If the Board does not agree to convene an extraordinary general meeting or does not furnish any reply within ten days after receiving such proposal, the Board shall be deemed to be incapable of or failure in performing the duty of convening a general meeting, in which case the Supervisory Committee may convene and preside over such meeting on an unilateral basis.

Article 79 Shareholders severally or jointly holding 10% or more of the Company’s shares shall be entitled to request the Board to convene extraordinary general meetings, provided that such request shall be made in writing. The Board shall, in accordance with provisions of the laws, administrative regulations and the Articles of Association, furnish a written reply stating its agreement or disagreement to the convening of an extraordinary general meeting within ten days after receiving such proposal of the same.

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If the Board agrees to convene an extraordinary general meeting, the notice of general meeting shall be issued within five days after adopting the relevant resolution of the Board. Any changes to the original request made in the notice shall be subject to prior approval of the shareholders concerned.

If the Board does not agree to convene an extraordinary general meeting or does not furnish any reply within ten days after receiving such proposal, shareholders severally or jointly holding 10% or more of the Company’s shares shall be entitled to propose to the Supervisory Committee the convening of extraordinary general meeting, provided that such proposal shall be made in writing.

If the Supervisory Committee agrees to convene an extraordinary general meeting, the notice of convening the general meeting shall be issued within five days after receiving such request. Any changes to the original request made in the notice shall require prior approval of the shareholders concerned.

Failure of the Supervisory Committee to issue a notice of general meeting within the stipulated period shall be deemed as the failure of the Supervisory Committee to convene and preside over a general meeting, and shareholders severally or jointly holding 10% or more of the Company’s shares for more than ninety consecutive days shall be entitled to convene and preside over the meeting on an unilateral basis.

Article 80 Where the shareholders require the holding of a class meeting, it shall be performed in accordance with the following procedures:

• (1) two or more shareholders holding in aggregate 10% or more of the shares carrying the right to vote at the meeting to be held shall sign one or more counterpart requisitions stating the objectives of the meeting and requiring the Board to convene a shareholders’ extraordinary general meeting or a class meeting. The Board shall as soon as possible proceed to convene the extraordinary general meeting or a class meeting after receiving such written requisition. The amount of shareholdings referred to above shall be calculated as at the date of the deposit of the requisition by the shareholders.

• (2) if the Board fails to issue a notice of convening such a meeting within 30 days from the date of the receipt of such requisition in writing, the requisitor may themselves convene such a meeting with the procedures as similar as possible as that in which shareholders’ meetings are to be convened by the Board within four months from the date of receipt of the requisition by the Board.

Any reasonable expenses incurred by shareholders’ convening and presiding over a meeting by reason of the failure of the Board to duly convene a meeting as requested above shall be borne by the Company and shall be set off against sums owed by the Company to the directors in default.

Article 81 If the Supervisory Committee or shareholders determine to convene a general meeting on their own, they shall give a written notice to the Board and file the same with the local office of the CSRC and the stock exchange at the place where the Company is located for the record.

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The shareholding proportion of the convening shareholders shall not be lower than 10% prior to the announcement of the resolutions of the general meeting.

The convening shareholders shall submit relevant evidence to the local office of the CSRC and the stock exchange at the place where the Company is located upon issuance of the notice of general meeting and the announcement of the resolutions of the general meeting.

Article 82 The Board and the secretary to the Board shall cooperate with respect to matters relating to a general meeting convened by the Supervisory Committee or the shareholders on their own. The Board shall provide the shareholder registers as of the date of equity registration. If the Board fails to provide the register of members, the convener may apply to the securities registration and clearing institution for such register on the strength of the relevant announcement on the convening of the general meeting. The register of members obtained by the convener shall not be used for any purpose other than the convening of the general meeting.

Article 83 If a general meeting is convened by the Supervisory Committee or the shareholders on their own, all necessary expenses arising therefrom shall be borne by the Company.

Article 84 When the Company convenes a general meeting, written notice of the meeting shall be given forty-five days before the date of the meeting to notify all shareholders whose names appear in the register of members of the matters to be considered at and the date and place of the meeting. Shareholders who intend to attend the meeting shall serve to the Company a written reply of their attendance twenty days before the date of the meeting.

In determining the commencement date of the period, the Company shall not include the date on which the meeting is held.

Article 85 Whenever the Company convenes a general meeting, the Board, the Supervisory Committee and shareholder(s) severally or jointly holding more than 3% of the total number of the Company’s shares shall have the right to propose motions to the Company.

Shareholder(s) severally or jointly holding more than 3% of the total number of the Company’s shares shall have the right to propose an ex tempore motion ten days prior to the general meeting by submitting the same to the convener in writing. The convener shall issue a supplemental notice of general meeting within two days after receiving the proposed motion to announce the contents of the ex tempore motion.

Save as provided above, the convener shall not amend motions stated in or add new motions to the notice of general meeting after the same has been issued and announced.

No voting or resolution shall be effected or adopted at the general meeting for motions that have not been stated in the notice of general meeting or that do not comply with Article 86 of the Articles of Association.

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Article 86 A motion proposed at general meetings shall be subject to and conditional upon:

• (1) the substance of the motion proposed shall not be in conflict with the laws, administrative regulations and the requirements set forth in the Articles of Association, and shall fall within the scope of operation of the Company and the functions of general meetings;

• (2) there is a clear subject matter of discussion and a specific resolution;

• (3) the motion shall be submitted or served to the Board in writing.

Article 87 The Company shall, based on the written replies received twenty days before the date of the general meeting from the shareholders, calculate the number of voting shares represented by the shareholders who intend to attend the meeting. If the number of voting shares represented by the shareholders who intend to attend the meeting reaches more than one half of the Company’s total voting shares, the Company may convene the general meeting; if not, then the Company shall, within five days, notify the shareholders again by announcement of the matters to be considered at, the place and date for, the meeting. The Company may then convene the meeting after such announcement made.

Article 88 A notice of a general meeting shall be subject to and conditional upon:

• (1) being served in writing;

• (2) specifying the place, the date and time of the meeting;

• (3) stating the issues to be considered at the meeting;

• (4) specifying the registration date of the shareholders entitled to attend the general meeting;

• (5) providing such information and explanation as are necessary for the shareholders to make an informed decision on the proposals put before them. Without limiting the generality of the foregoing, where a proposal is made (including but limited to) upon an merger of the Company, share repurchases, share capital reorganisation, reconstruction of the Company in any other way, the specific terms of the proposed transaction must be provided in details together with copies of the proposed agreement (if any), and the cause and effect of such proposal must be properly explained;

• (6) containing a disclosure of the nature and extent, if any, of the material interests of a director, supervisor, general manager, deputy general manager and other senior management member in the proposed transaction; and the effect of the proposed transaction on the director, supervisor, general manager, deputy general manager and other senior management member in their capacity as shareholders in so far as it is different from the effect on the interests of the shareholders of the same class;

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• (7) containing the full text of a special resolution to be proposed at the meeting;

• (8) containing a conspicuous statement that a shareholder entitled to attend and vote may appoint one or more proxies to attend and vote instead of him and such proxy is not necessarily be a shareholder;

• (9) specifying the time and place for service of voting proxy forms for the relevant meeting;

• (10) specifying the name and telephone number of the contact person of the meeting.

For issues to be discussed requiring the opinions of independent directors, the notice of general meeting or the supplementary notice shall disclose both the opinions and the reasons of independent directors.

Where the Company convenes the general meeting online or by other means, the notice of meeting shall specify the time and procedures of online voting or other means of voting. Online or other means of voting for general meeting shall start no earlier than 3:00 p.m. on the day before the convening of the on-site general meeting and no later than 9:30 a.m. on the day of convening of the on-site general meeting, and shall end no earlier than 3:00 p.m. on the day when the on-site general meeting is concluded.

No changes may be made once the registration date is confirmed.

Article 89 Where the general meeting intends to deliberate the election of directors or supervisors, the notice of meeting shall fully disclose the detailed information on the candidates of directors or supervisors, at least in the following aspects: (1) personal information such as educational background, working experience and other engagements;

• (2) whether such candidate has any affiliation with the Company or its controlling shareholders or persons exercising de facto control over the Company;

• (3) the number of shares of the Company such candidate holds;

• (4) whether such candidate has been penalised by the CSRC or any other relevant authorities and the stock exchange.

Save and except for directors or supervisors who are elected by way of cumulative voting system, a single proposal shall be put forward for each candidate of directors or supervisors.

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Article 90 Notice of general meeting shall be served on the shareholders (whether or not they are entitled to vote at the meeting), by hand or by prepaid mail at their addresses as shown in the register of members. For the holders of Domestic Shares, notice of meetings may be issued by way of announcement.

The announcement referred to in the preceding paragraph shall be published in one or more newspapers designated by the securities regulatory authorities of the State Council within the period between forty-five days and fifty days before the date of the meeting; after the publication of the announcement, the holders of Domestic Shares shall be deemed to have received the notice of the relevant general meeting.

The Company should, when serving the notice convening the general meeting to shareholders, ensure the holders of foreign investor shares with their registered address in Hong Kong would have sufficient time to exercise their rights or act in accordance with the terms of the notice.

Article 91 Upon serving the notice convening the general meeting to the shareholders, the general meeting shall not be postponed or canceled without any justified cause, and the proposals set out in the notice convening the general meeting should not be canceled. Should there be any postponement or cancellation, the convener shall make an announcement at least two working days before the convening of the meeting and explain the reasons thereof.

Article 92 The Board and other conveners shall take necessary measures to ensure the good order of the general meeting, take measures to deter any act disturbing the meeting, picking quarrels and provoking troubles or infringing the lawful rights and interests of any shareholder, and shall report in a timely manner such act to the relevant department for investigation and penalisation.

Article 93 All the shareholders or their proxies recorded in the register of members on the registration date are entitled to attend the general meeting, and shall exercise their voting rights pursuant to the laws, regulations and the Articles of Association.

Shareholders may attend the meeting in person, or they may appoint proxies to attend the meeting on their behalf.

Article 94 An individual shareholder who attends the general meeting in person shall produce his identification card or other valid credentials or evidence, his stock account card which can prove his identity. Where a proxy is appointed to attend the meeting, the proxy shall produce his own valid identification documents and the instrument for appointing a proxy.

A legal person shareholder shall attend the meeting by its legal representative or the attorney as appointed by such legal representative. An legal representative who attends the general meeting shall produce his identification card and valid documents which can prove his being qualified as. Where an attorney is appointed to attend the meeting, the attorney shall produce his own identification card and the relevant power of attorney executed by such legal representative pursuant to the laws.

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Article 95 Any shareholder entitled to attend and vote at a meeting of the Company shall be entitled to appoint one or more other persons (whether a shareholder or not) as his proxy (proxies) to attend and vote on his behalf. A proxy so appointed shall be entitled to exercise the following rights pursuant to the authorisation from that shareholder:

• (1) the shareholder’s right to speak at the meeting;

• (2) the right to demand or join in demanding a poll;

• (3) the right to vote on a show of hands or on a poll, unless otherwise stipulated by the applicable securities listing rules or other securities laws and regulations, but for a shareholder who has appointed more than one proxy, such proxies may only vote on a poll.

Article 96 Proxy forms issued by shareholders appointing other proxies to attend general meetings should include the following information:

• (1) name of the proxy;

• (2) whether or not one has voting right;

• (3) instructions on voting for, against or abstention on each of the matters to be considered and specified in the agenda of the general meeting;

• (4) date of issue of the proxy form and its valid term;

• (5) signature (or seal) of the appointer. If the appointer is a legal person shareholder, it should be affixed with the seal of the legal person entity.

Article 97 The proxy form should specify whether the proxy is entitled to vote at his own discretion in the absence of specific instruction from the shareholder.

Article 98 The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or if the appointer is a legal entity, either under seal or under the hand of a director or attorney duly authorised. Such power of attorney shall contain the number of shares represented by a proxy; if several persons are appointed as proxies, the number of shares represented by each proxy should be specified.

Article 99 An instrument appointing a proxy for voting shall be deposited at the domocile of the Company or any other addresses specified in the notice convening the meeting 24 hours before the time for convening the meeting or the time for voting. If an instrument appointing a proxy is signed by an attorney authorised by an appointer, the relevant power of attorney or any other authority shall be notarized. The power of attorney or other authority so notarized together with the instrument appointing a proxy shall be deposited at the domocile of the Company or any other addresses specified in the notice convening the meeting.

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If an appointer is a legal person, its legal representative or any other person authorized by its Board of Directors or by other decision-making authorities may attend a general meeting on behalf of such appointer.

Where such shareholder is a recognised clearing house within the meaning of the relevant ordinances formulated in Hong Kong from time to time (hereinafter referred to as “Recognised Clearing House”) (or its nominees), the shareholder may authorize a person or persons as he thinks fit to act as his representative (or representatives) at any general meeting or any meeting of any class of shareholders, provided that if more than one person is so authorised, the authorisation must specify the number and class of shares in respect of which each such person is so authorised. The person so authorised is entitled to exercise the rights on behalf of the Recognised Clearing House (or its nominees) as if he was an individual shareholder of the Company.

Article 100 Any instrument issued to a shareholder by the Board of the Company for use in appointing a proxy shall be in such format as to enable the shareholder to instruct the proxy to vote in favour of or against the motions according to his free will, and instructions shall be given in respect of each individual matter to be voted on at the meeting. The instrument of proxy shall contain a statement that in the absence of instructions by the shareholder the proxy may vote as it thinks fit.

Proxies should, when attending the general meeting on behalf of the shareholders, present their identification proof and the power of attorney signed by the appointer or signed by a legal representative of the appointer or a duly appointed nominee. The power of attorney should specify the date of issuance.

If a legal person shareholder (other than the Recognized Clearing House or its nominees) delegates its legal representative to attend the meeting, the Company shall have the right to request such legal representative to provide a proof of its identity and a valid proof of its legal representative qualification.

Article 101 A vote given by a proxy in accordance with the terms of an instrument of proxy shall remain valid notwithstanding the death or loss of capacity of the appointer or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the shares in respect of which the proxy is given, provided that no notice in writing of such aforesaid issues shall have been received by the Company before the commencement of the meeting .

Article 102 The register of attendees of the meeting shall be prepared by the Company. Such register of the meeting shall specify such information as the name, identity card number, residential address of, number of voting shares held or represented by the persons (or units) attending the meeting, name of the persons (or units) the proxy represent(s).

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Article 103 In connection with the convening of the general meeting, the convener and the legal counsel retained by the Company shall jointly verify the qualifications of shareholders according to the register of members provided by the securities depository and clearing authority, and shall register the name of the shareholders and the number of their voting shares. Such registration shall be concluded prior to the announcement by the chairman of the general meeting of the number of shareholders and their proxies attending the meeting and the total number of their voting shares.

Article 104 All directors and supervisors and the board secretary shall attend the general meeting, whereas the general manager, deputy general manager and other senior management members shall be present at the meeting.

Article 105 Resolutions of general meeting are divided into ordinary resolutions and special resolutions.

To adopt an ordinary resolution at a general meeting, votes representing more than one half of the voting rights represented by the shareholders (including the proxies) present at the meeting must be exercised in favour of the resolution in order for it to be passed.

To adopt a special resolution at a general meeting, votes representing more than two thirds of the voting rights represented by the shareholders (including the proxies) present at the meeting must be exercised in favour of the resolution in order for it to be passed.

Article 106 In the case of voting at general meetings, shareholders (including their proxies) may exercise their voting rights in accordance with the number of their voting shares. Save and except for Article 110 hereof, each share shall have one vote. Shares of the Company are without voting rights and such shares shall not be taken in the total number of voting shares represented at the meeting.

The review and consideration of the connected transactions or continuing connected transactions at the general meeting shall be subject to laws, administrative regulations and regulatory requirements of the place(s) where the Company’s shares are listed, including the Listing Rules of the Hong Kong Stock Exchange amended from time to time. If required by the listing rules of the stock exchange on which the Company’s shares are listed, the shareholders associated with such transactions should abstain from voting and the number of voting shares represented by them shall not be taken in the total number of valid voting. The announcement on the resolutions at the general meeting should contain a complete disclosure of the voting details of non-associated shareholders.

The Board, independent directors and shareholders who meet the relevant requirements may solicit the voting rights from other shareholders.

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Article 107 Unless otherwise stipulated by the applicable securities listing rules or other securities laws and regulations, or a poll is demanded before or after any vote by show of hands by the following persons, at any general meeting, a resolution shall be decided on a show of hands:

• (1) by the presider of the meeting;

• (2) by at least two shareholders entitled to vote in person or by proxy;

• (3) by a shareholder or certain shareholders (including their proxies) present in person or by proxy and representing more than 10% of all shares carrying the rights to vote at the meeting.

Unless a poll be so demanded, a declaration by the chairman on the voting on a resolution by a show of hands, and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

The demand for a poll may be withdrawn by the person who makes such a demand.

Article 108 A poll demanded on the election of the chairman of the meeting, or on adjournment of the meeting, shall be taken forthwith. A poll demanded on any other issues shall be taken at such time as the chairman of the meeting directs, and any matter other than that upon which a poll has been demanded may proceed with, pending the taking of the poll. The result of the poll shall be deemed to be a resolution of the meeting at which the poll was demanded.

Article 109 On a poll taken at a meeting, a shareholder (including his proxies) entitled to two or more votes need not cast all his votes in the same way.

Article 110 In the case of equal pros and cons votes, whether on a show of hands or on a poll, the chairman of the meeting shall be entitled to a casting vote.

Article 111 The following matters shall be resolved by an ordinary resolution at a general meeting:

• (1) working reports of the Board and the Supervisory Committee;

• (2) plans formulated by the Board for distribution of profits and for making up losses;

• (3) removal of any members of the Board and members of the Supervisory Committee, and determination of their remuneration and method of payment;

• (4) annual preliminary and final budget, balance sheet, profit and loss account and other financial statements of the Company;

• (5) annual reports of the Company;

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• (6) such other matters other than those specified by the laws, administrative regulations or the Articles of Association to be resolved by special resolutions.

Article 112 The following matters shall be resolved by a special resolution at a general meeting:

• (1) the increase or decrease in share capital, repurchase of shares of the Company and the issue of shares of any class, warrants and other similar securities of the Company;

• (2) the issue of debentures of the Company;

• (3) the division, merger, dissolution and liquidation of the Company;

• (4) amendments to the Articles of Association;

• (5) the plans of the Company to purchase or sell major assets or provides a guarantee, within a year, the amount of which exceeds 30% of the Company’s latest audited total assets;

• (6) share option scheme;

• (7) such other matters provided by the laws, administrative regulations or the Articles of Association and be considered by the general meeting by way of an ordinary resolution to be of a nature which may have a material impact on the Company and shall be adopted by a special resolution.

Article 113 A general meeting shall be convened and presided over by the Chairman of the Board. If the Chairman is unable or fails to attend the meeting, the Board may designate a director to convene and take the chair of the meeting. If no chairman of the meeting has been designated, shareholders present shall choose one person to be the chairman of the meeting. Where the shareholders fail to elect a chairman for any reasons, the shareholder (including his proxy) present in person or by proxy who holds the largest number of shares carrying the right to vote thereat shall be the chairman of the meeting.

General meeting convened by the Supervisory Committee shall be presided over by the chairman of the Supervisory Committee. If the chairman of the Supervisory Committee is unable or fails to perform his duties, a supervisor elected by more than half of supervisors shall preside over the meeting.

A general meeting convened by the shareholders themselves shall be presided over by a representative nominated by the convening shareholders.

When a general meeting is held and the chairman of the meeting violates the rules of procedures such that the general meeting cannot proceed, a person may be elected to preside over the meeting, subject to approval of shareholders entitled to more than half of the voting rights present at the meeting.

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Article 114 The Company shall formulate rules of procedures of the general meeting to specify in details the convention and voting procedures of the meeting, including notice, registration, deliberation of proposals, votes, vote counting, announcement of voting results, form of resolutions, minutes and the signatures thereon, announcements, as well as the principles of authorisation by the general meeting to the Board, the contents of such authorisation shall be expressly specified. The rules of proceedings of the general meeting shall be an appendix to the Articles of Association, and shall be drafted by the Board and approved by the general meeting.

Article 115 At the annual general meeting, the Board and the Supervisory Committee shall report their respective work of the previous year to the general meeting, and each independent director shall also make his duty report correspondingly.

Article 116 Directors, supervisors and senior management member shall give explanation and description to the inquiries and suggestions raised by the shareholders at the general meeting.

Article 117 Chairman of the meeting should announce the number of shareholders and proxies present at the meeting and the total number of voting shares held by them before voting. The record of the meeting which states the number of shareholders and proxies present at the meeting and the total number of voting shares held by them shall prevail.

Article 118 The board secretary shall be responsible for preparing minutes of general meetings, which shall contain:

• (1) the time, venue, agendas of the meeting, and the name of the convener;

• (2) the names of the chairman of the meeting, the directors, supervisors, general manager and other senior management members attending the meeting;

• (3) the number of shareholders and proxies attending the meeting, the total number of their voting shares and their respective proportions to the total number of shares of the Company;

• (4) the process of deliberation of each proposal, the main points of speeches and the voting results;

• (5) the inquiries or suggestions of the shareholders and the corresponding replies or explanations;

• (6) the names of legal counsel, vote counters, and scrutineer;

• (7) such other contents which should be contained in the minutes of the meeting as prescribed by the Articles of Association.

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Article 119 The convener of meeting shall guarantee the truthfulness, accuracy and completeness of the minutes of the meetings. Directors, supervisors, board secretary, convener or their representatives, chairman of the meeting shall sign on the minutes of the meetings. The minutes of meetings shall be kept together with the valid information such as the attendance register of the attending shareholders and the power of attorney of their proxies, the votes cast by way of internet and by other means shall be kept at the premises of the Company for a period fifteen years.

Article 120 The convener shall ensure that the continuity of the general meeting until the final resolution is formed. Where the general meeting is suspended or no resolution can be made due to force majeure or any other special causes, necessary measures shall be taken to resume as soon as possible or directly terminate the general meeting, and an announcement shall be made in a timely manner. Meanwhile, the convener shall submit a report to the agency of the CSRC or the stock exchange on which the Company’s shares are listed.

Article 121 The chairman of the meeting shall be responsible for deciding whether a resolution has been adopted. His decision shall be final and shall be announced at the meeting and recorded in the minutes of meeting.

Article 122 The list of candidates for directors and supervisors shall be submitted to shareholders for voting by way of a proposal.

When a voting is made on the election of directors or supervisors at a general meeting, the cumulative voting system may be adopted in accordance with the provisions of the Articles of Association or the resolutions of the general meeting.

The “cumulative voting system” as mentioned in the preceding paragraph means that each share has the voting right for the number of directors or supervisors to be elected, and the voting right owned by the shareholders may be cumulatively used when the directors or supervisors are elected at the general meeting. The Board shall simultaneously provide shareholders with the bibliographical details and basic information about the candidates for directors and supervisors.

Article 123 The approach and procedures for nomination of candidates for directors and supervisors are as follows:

• (1) shareholder(s) severally or jointly holding more than 3% of the total outstanding issued voting shares of the Company may, by way of a written proposal, put forward to the general meeting about the candidates for directors and supervisors (not being staff representatives). However, the number of candidates proposed shall comply with the provisions of the Articles of Association, and shall not be more than the number to be elected. The aforesaid proposal put forward by shareholders to the Company should be served to the Company at least 14 days before the convening of the general meeting.

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• (2) within the number of head count as specified by the Articles of Association and based on the proposed number of candidates to be elected, the Board and the Supervisory Committee may propose a list of candidates for directors and supervisors, which shall be submitted to the Board and the Supervisory Committee for examination. After the list of candidates for directors and supervisors is determined according to the examination by the Board and the Supervisory Committee and the adoption of a resolution, it should be proposed at a general meeting by way of a written proposal.

• (3) the nomination of independent directors should be made in accordance with the provisions of Article 157 hereof.

• (4) the written materials of the intention to propose a candidate for election as a director or a supervisor, the acceptance of such candidate of his willingness to be nominated and the details and written information of the nominated candidate shall be given to the Company no less than seven days prior to the date of holding the general meeting. The Board shall provide shareholders with bibliographical details and basic information of the candidates for directors and supervisors.

• (5) the period given by the Company to the relevant nominees and nominated candidates for providing the aforesaid notice and documents shall be no less than seven days (such period shall commence from the day following the date of serving the notice of convening of the general meeting).

• (6) at the general meeting, voting for each candidate for a director and supervisor shall be taken on a one-by-one basis.

• (7) in the case of any need of addition to or change in any director or supervisor, the Board or the Supervisory Committee shall be responsible for putting forward a proposal to the general meeting for the selection or change of a director or supervisor.

Article 124 Save and except for the accumulative voting system, the general meeting shall vote on all motions item by item, and shall vote on the motions in time sequence when various proposals are put forward for a single matter. Unless the general meeting is suspended or no resolution can be passed due to force majeure or any other special reasons, the general meeting shall not set aside or cast no vote on the motions.

Article 125 The following matters shall not be implemented or applied for unless they are in compliance with the provisions of the laws, administrative regulations and the Articles of Association, and have been approved by all the shareholders at a general meeting and passed by more than half of the public shareholders with voting rights present at the general meeting:

• (1) any issue of new shares by the Company to the public (including issue of overseas listed foreign investor shares or shares of other natures), issue of

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convertible debentures, placing of shares to existing shareholders (except in such placing where the controlling shareholders have provided an undertaking to fully subscribe the shares in cash before the general meeting is convened);

• (2) major asset restructuring in which the assets will be acquired at a total price which is 20% (or more) higher than the audited net book value of such assets;

• (3) repayment of debts due to the Company by any shareholder with his shares in the Company;

• (4) overseas listing of any significant subsidiary of the Company;

• (5) such other relevant issues which may have a material impact on the interests of the public shareholders in the development of the Company.

Upon servicing notice convening of a general meeting by the Company, such general meeting notice should be published again within three days after the registration date. Where the Company makes an announcement on the resolutions of the general meeting, the announcement shall set out the number of the public shareholders voting at the general meeting, the total number of shares they held and its percentage in the total number of shares held by the public shareholders of the Company, as well as disclose the voting result and shareholdings of the ten largest public shareholders taking part in the vote and the results of their votes.

Article 126 When a motion is put forward for discussion at the general meeting, no modification of the motion shall be made, or the relevant change shall be deemed as a new motion which shall not be voted at the meeting.

Article 127 The voting right of the same shares shall be exercised only by one of the ways of on-site voting, online voting or other means of voting. In the case of repeated voting for the same shares, only the first vote is valid.

Article 128 The voting at the general meeting shall be conducted in the form of open ballot. Before a resolution is voted on at a general meeting, two representatives of the shareholders shall be elected as vote counters and scrutinisers. Any shareholder who is interested in the matter to be received and considered and proxies of such shareholder shall not participate in vote counting or scrutinising.

When the shareholders are voting on the motions, lawyers, shareholder representatives and supervisory representatives shall count and scrutinize the votes jointly, and the voting result will be announced forthwith. Voting on the resolutions will be recorded in the minutes of meeting.

Shareholders or their proxies that vote online or by other means shall have the right to check and inspect their voting results through the relevant voting system.

Article 129 The on-site general meeting shall not end earlier than the online means or other means. The chairman of the meeting shall announce the voting and results of each of the motions, and announce whether or not they are approved according to the results.

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Before the results are officially announced, all the on-site related parties such as the companies, vote counters, vote scrutinisers, substantial shareholders and network labour providers involved are obliged to keep the result confidential.

Article 130 Shareholders present at the general meeting should express their opinions on the motion put forward for voting in one of the following options: For, Against, or Abstain.

Any incomplete, incorrectly completed or illegible ballots of any voters shall be deemed to be forbidden voting rights, thus the voting result in respect of these shares shall be counted as “Abstention”.

Article 131 If the chairman of the meeting has any doubt as to the result of a resolution put to the vote of the meeting, he may have the votes counted. If the chairman of the meeting fails to have the votes counted, any shareholder who is present in person or by proxy and who objects to the result announced by the chairman of the meeting may demand that the votes be counted immediately after the declaration of the result, and the chairman of the meeting shall have the votes counted promptly.

Article 132 If vote counting is carried out at the general meeting, the vote counting result should be recorded in the minutes of the meeting.

The minutes of the meeting together with the attendance register of the attending shareholders and the power of attorney of their proxies shall be kept at the premises of the Company.

Article 133 Results of the resolution shall be announced timely, and the announcement shall contain the number of shareholders and proxies present, the total number of voting rights and the percentage of the voting rights to the total of voting shares of the Company, means of voting, the voting result for each motion and the details of each of the resolutions.

Article 134 If the motion is not passed, or if the resolutions of the previous general meeting have been changed by the present general meeting, a special highlight should be made in the announcement of the resolutions of the general meeting.

Article 135 If a proposal relating to the election of directors or supervisors is adopted at a general meeting, the term of office for the newly elected directors or supervisors shall be commenced from date of adoption of the proposal relating to election at the general meeting.

Article 136 When the general meeting has passed motions regarding cash distribution, bonus issue or conversion of capital common reserve into capital, the specific proposals will be implemented within two months after the close of the general meeting.

Article 137 Copies of the minutes of meeting shall be available for inspection free of charge by shareholders during the business hours of the Company. If a shareholder requests the Company for a copy of such minutes, the Company shall send a copy of such minutes to him within seven days after having received reasonable charges.

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Article 138 Provided that any shareholder shall, according to the “Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited”, have to abstain from voting or be limited to vote in favor of or against any designated resolution, any votes made by such shareholder or by the proxy of such shareholder in contravention of the aforesaid regulation or limitation shall not be counted in the total number of voting shares.

CHAPTER IX SPECIAL PROCEDURES FOR VOTING BY A CLASS OF SHAREHOLDERS

Article 139 Shareholders holding different classes of shares shall be class shareholders.

Class shareholders shall enjoy rights and assume obligations in accordance with the laws, administrative regulations and the Articles of Association.

Article 140 Any variation or abrogation of the rights of any class of shareholders proposed by the Company may only come into effect upon adoption of a special resolution at a general meeting and approval by the affected shareholders of that class at a separate meeting convened in accordance with Articles 142 to 146.

Article 141 The following acts shall be deemed to be a variation or abrogation of the rights attaching to a particular class of shares:

• (1) to increase or decrease the number of shares of that class or increase or decrease the number of shares of a class having voting rights, rights to receive distributions or other privileges equal or superior to those of shares of that class;

• (2) to exchange all or part of the shares of that class for shares of another class, or to exchange or grant a right to exchange all or part of the shares of another class for shares of that class;

• (3) to remove or reduce rights to any accrued or cumulative dividends attaching to shares of that class;

• (4) to reduce or remove the preference rights attaching to shares of that class to have priority in receiving dividends or in distribution of assets in the event that the Company is liquidated;

• (5) to add, cancel or reduce the conversion privileges, options, voting rights, transfer or preemptive rights, or rights to acquire the Company’s securities attached to shares of that class;

• (6) to cancel or reduce the rights to receive payments payable by the Company in particular currencies attached to shares of that class;

• (7) to create a new class of shares having voting rights or rights to receive distributions or other privileges equal or superior to those of the shares of that class;

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• (8) to restrict the transfer or ownership of shares of that class or to increase the types of restrictions attaching thereto;

• (9) to issue rights to subscribe for, or convert into, shares in the Company of that class or another class;

• (10) to increase the rights and privileges of shares of another class;

• (11) to restructure the Company in such a way so as to result in a disproportionate distribution of obligations among various classes of shareholders;

• (12) to vary or abrogate the provisions of this Chapter.

Article 142 Shareholders of the affected class, whether having the right to vote in general meeting, shall be entitled to vote in class meetings in respect of matters concerning items (2) through (8), (11) and (12) of Article 141. However, interested shareholder(s) shall have no voting right at such class meetings.

For the purposes of those set forth, the term “interested shareholder(s)’’ means:

• (1) in the event that the Company makes a repurchase offer to all shareholders in the same proportion or the Company repurchases its own shares by way of public dealings on a stock exchange pursuant to Article 37 hereof, a “controlling shareholder” within the meaning of Article 69 hereof;

• (2) in the event that the Company repurchases its own shares by an off-market agreement pursuant to Article 38 hereof, a holder of the shares to which the proposed agreement relates;

• (3) in the event of a restructuring of the Company, a shareholder within a class who assumes a relatively lower proportion of obligations than the obligations imposed on shareholders of that class or who has an interest in the proposed restructuring different from the general interests of the shareholders of that class.

Article 143 Resolutions of a class meeting shall be passed by no less than two-thirds of the votes cast by class shareholders carrying voting rights and attending the class meeting in accordance with Article 142.

Article 144 The Company shall issue a written notice to all class shareholders whose names appear in the share register forty-five days before the class meeting is convened. The notice shall contain notice of the matters to be considered at such meeting and the date and place of the meeting. Shareholders who intend to attend the meeting shall serve a written reply to the Company twenty days before the meeting is convened.

In the event that the number of shares (carrying voting rights) held by shareholders who intend to attend the meeting reaches one-half of the total class shares with voting

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rights at the meeting, the Company may convene the class meeting; if not, the Company shall issue a public announcement to inform shareholders of matters to be considered at the meeting and the date and place of the meeting within five days. The Company may then convene the class meeting after issuing such public announcement.

Article 145 Notice of the class meeting shall only be required to be served on the shareholders entitled to vote thereat.

The procedures of the class meeting shall resemble those of the general meeting to the fullest extent as possible. Provisions in the Articles of Association regarding the procedures for holding a general meeting shall be applicable to class meetings.

Article 146 In addition to shareholders of other classes, holders of domestic shares and holders of overseas listed foreign shares shall be deemed to be holders of different classes of shares.

The special voting procedures of the class meeting shall not apply to the following circumstances:

• (1) where the Company issues, upon approval by a special resolution of the general meeting, not more than 20% of each of its existing outstanding issued domestic shares and overseas listed foreign investor shares, either separately or concurrently once every twelve months;

• (2) where the plan to issue domestic shares and overseas listed foreign shares at the time of establishment of the Company is completed within fifteen months from the date of approval given by the securities regulatory authorities of the State Council.

CHAPTER X BOARD OF DIRECTORS

Article 147 Directors shall be elected at the shareholders meeting. The term of office shall be three years from the date of election. Directors may be re-appointed upon election. However, the first session of the Board shall be elected at the inaugural meeting and its term of office shall end at the close of the third annual general meeting. Directors shall retire by rotation.

The written notice of the intention to propose a candidate for election as a director, notice of acceptance by such candidate of his willingness to be nominated shall be served to the Company after the notice of the general meeting convened for election of such director and seven days prior to the date of convening the meeting.

The chairman shall be elected and removed by more than one half of all the members of the Board. The term of office of the chairman shall be three years, and renewable upon re-election. However, the term of office of the first session of the chairman shall be end at the conclusion of the current Board of Directors.

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The general meeting may, by ordinary resolution, remove any director before the expiration of his term of office (but without prejudice to such director’s right to claim damages based on any contract) on the condition that all the relevant laws and administrative regulations are fully complied with.

Any person appointed by the directors to fill a casual vacancy on or as an addition to the board shall hold office only until the next annual general meeting of the Company and shall then be eligible for re-election.

The number of senior management member of the controlling shareholder (being the chairman and executive directors) holding concurrent office as the chairman and an executive director shall not be more than two.

A director is not required to hold shares of the Company.

Article 148 A director failing to attend in person and not entrusting other directors to attend two consecutive board meetings shall be deemed to be unable to perform his duties. The Board shall propose to the general meeting to remove such director.

Article 149 A director may resign before the expiration of his term. The resigning director shall submit to the Board a written notice of resignation. The Board shall disclose the relevant information within two days.

If the resignation of any director makes the number of directors constituting the Board fall below the quorum, before a new director is appointed, the original director shall perform his duties as a director according to the laws, administrative regulations and the relevant provisions of the Articles of Association.

Save and except for the circumstances specified above, the resignation of a director shall become effective upon notice of resignation is served to the Board.

Article 150 Any director shall, upon effectiveness of his resignation or expiration of his term of office, complete all the transfer process with the Board. His commitment and duty of fiduciary towards the Company and the shareholders shall not be necessarily discharged upon conclusion of his term of labour, but shall remain in force within a reasonable period stipulated in the Articles of Association.

Article 151 Without stipulation by the Articles of Association or lawful authorization by the Board, no director shall in his own name act for the Company or the Board. Provided where a director acts in his own name but a third party reasonably believes that such director is acting for the Company or the Board, such director shall declare in advance his position and status.

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Article 152 Where a director violates any the laws, administrative regulations, departmental rules or the provisions of the Articles of Association in the course of performing his duties and causes loss to the Company, such executive director shall be liable for compensation.

Article 153 Independent directors of the Company are directors who do not hold any positions in the Company other than their directorship, do not maintain with the Company and its substantial shareholders (shareholders separately or jointly holding more than 5% voting shares of the Company) a connection which may possibly hamper their independent and objective judgments, and comply with the independence provision of the rules of the stock exchange on which the Company’s shares are listed.

The term of office of independent directors is the same as other directors, and the term is renewable upon re-election when it expires, but the renewed term shall not exceed six years.

Article 154 An independent director shall meet the following requirements:

• (1) he shall be qualified as a director of a listed company according to the laws, administrative regulations, the listing rules of the stock exchange on which the Company’s shares are listed and other relevant provisions;

• (2) he shall have independence as required by the rules of the stock exchange on which the Company’s shares are listed;

• (3) he shall have the basic knowledge of operating a listed company, and is well acquainted with the relevant laws, administrative rules and other rules and regulations;

• (4) he shall have at least five years of experience in the legal or economic field, or other experience necessary for the performance of his duties as an independent director;

• (5) he shall ensure that he has sufficient time and energy to effectively discharge the duties as an independent director;

• (6) such other conditions set forth in the Articles of Association.

• Article 155 The following persons shall not be independent directors of the

• Company: (1) persons who are employed by the Company or its subsidiaries, or direct and close relatives thereof (direct relatives mean spouses, parents, and offspring, and close relatives include siblings, father-in-law and mother-in-law, daughter-in-law and son-in-law, brother-in-law and sister-in-law, and the siblings of the spouses);

• (2) natural persons who hold directly or indirectly more than 1% of the Company’s issued shares, or who are among the top ten shareholders of the Company, and direct relatives thereof;

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• (3) persons employed by company shareholders which hold directly or indirectly more than 5% of the issued shares of the Company or are among the top five shareholders of the Company, and direct relatives thereof;

• (4) persons who fall under any of the above three categories in the past one year;

• (5) persons who provide financial, legal or consultation labours to the Company or any of its subsidiaries;

• (6) such other persons specified in the Articles of Association;

• (7) such other persons specified by the CSRC.

Article 156 At least one third of the members of the Board shall be independent directors. The Company shall make up for the required number of independent directors in accordance with regulations if any independent director does not satisfy the requirements of independence or such director cannot perform his duties and functions as an independent director, resulting in insufficient number of independent directors as required.

The Company shall have at least one independent director with a habitual residence in Hong Kong.

Article 157 Independent directors of the Company shall be elected by the following forms:

• (1) the Board, the Supervisory Committee, and shareholder(s) who severally or jointly with other persons hold(s) more than 1% of the issued shares of the Company shall have the right to nominate candidates as independent directors, and the nominated candidates shall become independent directors by election at a general meeting;

• (2) the nominator shall obtain approval of the proposed candidate for the nomination before making a nomination. The nominator shall have adequate knowledge of the profession, education, professional title and detailed work experience of the nominee as well as status of all his part-time jobs. The nominator shall also comment on the qualification and independence of the nominee as an independent director. The nominee shall make a public statement disclaiming any relationship between him and the Company that will affect his independent judgment;

• (3) before the shareholders meeting for the election of independent directors, the Company’s Board of Directors shall announce the above information in accordance with the relevant provisions;

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• (4) provided where RMB denominated ordinary shares are issued by the Company and are listed on the domestic stock exchange, before convening the general meeting for the election of independent directors, the Company shall submit the written opinion of the Board, and the relevant materials of all the nominees to the CSRC and its local office as well as the stock exchange on which the Company’s shares are listed. Dissenting opinions of the Board with regard to the nominees shall also be submitted.

Nominees of independent directors objected by the CSRC may be candidates for the directors of the Company but not as candidates for independent directors of the Company.

At the general meeting for the election of independent directors, the Board shall make clear whether the nominees of independent directors are objected to by the CSRC.

Article 158 An independent director who fails to attend at three consecutive board meetings in person shall be replaced upon proposal of the Board to the general meeting.

Article 159 An independent director shall not be dismissed without a justified cause before the expiration of his term, unless under the above circumstances and any of the conditions specifying the disqualification of a director under the Company Law have occurred. When an independent director is dismissed before expiration of his term, the Company shall disclose the dismissal as a special disclosable issue.

Independent directors shall have the following special functions and powers, in addition to entitling to those powers vested to directors by the Company Law, other relevant laws and regulations and the listing rules of the stock exchange on which the Company’s shares are listed:

• (1) any major connected transactions (referring to a connected transaction to be entered into between the Company and a connected person, the aggregate value of which is in excess of RMB3 million or accounts for more than 5% of the Company’s latest audited net asset value) shall be approved by independent directors before being submitted to the Board for discussion;

• (2) proposing to the Board with respect to engaging or disengaging accounting firms;

• (3) proposing to the Board with respect to the convening of an extraordinary general meeting;

• (4) proposing the convening of board meetings;

• (5) engaging external auditing firms or consultancy firms;

• (6) openly soliciting and collecting proxies before the convening of a general meeting.

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Independent directors shall obtain the consent of over half of all the independent directors in exercising any of the above functions and powers. If any of the above proposals have not been adopted or if any the above powers may not be exercised, the Company shall disclose the relevant information.

Article 160 In addition to the above obligations, the independent directors shall provide their independent opinions to the Board or the general meeting on the following matters:

• (1) nomination, appointment and removal of directors;

• (2) appointment and dismissal of senior management;

• (3) determination of remuneration of directors and senior management;

• (4) existing or new loans and other financial transactions, the aggregate value of which is in excess of RMB3 million or accounts for more than 5% of the Company’s latest audited net asset value, between the Company and its shareholders, persons exercising de facto control over the Company or their affiliates, and whether the Company has taken effective measures to collect the amounts due;

• (5) matters which may harm the interests of the minority shareholders in the opinion of the independent directors;

• (6) such other matters provided for by the Articles of Association.

Independent directors shall express one of the following opinions in respect of the aforesaid matters: consent opinion; qualified opinion and the reasons thereof; objection opinion and the reasons thereof; unable to express an opinion and the reasons thereof.

If the relevant matters are subject to disclosure, the Company shall make an announcement of the opinions of independent directors. If independent directors fail to reach a consensus, the Board shall disclose the opinion of each independent director separately.

Article 161 The Company shall establish the Board, which shall be accountable to and report to the general meeting. The Board shall be composed of nine directors, three of which are independent directors. The Board shall have one chairman. Independent directors shall include at least one accounting professional (an accounting professional is a person with a senior professional capacity or certified public accountant qualification).

Article 162 The Board shall be responsible to the general meeting and shall exercise the following functions and powers:

• (1) to be responsible for the convening of the general meeting and to report on its work to the general meeting;

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• (2) to implement the resolutions of the general meeting;

• (3) to decide on the Company’s business plans and investment plans;

• (4) to formulate the Company’s annual preliminary and financial budgets;

• (5) to formulate the Company’s profit distribution plan and plan for making up losses;

• (6) to formulate proposals for increase or decrease in the registered capital and the issue of debentures of the Company;

• (7) to draw up plans for the material acquisitions, share repurchases, merger, division, dissolution or change of the Company;

• (8) to decide on matters relating to the Company’s external investments, assets acquisitions and disposals, assets pledges, entrusted financial management and connected transactions within the authorisation of the general meeting;

• (9) to decide on the establishment of the Company’s internal management structure;

• (10) to appoint or dismiss the Company’s general manager, and pursuant to the general manager’s nominations to appoint or dismiss the deputy general manager and other senior management of the Company and determine their remunerations;

• (11) to establish the Company’s basic management system;

• (12) to formulate proposals for amendments to the Articles of Association;

• (13) to determine the Company’s wages and salaries, fringe benefits and incentive scheme subject to and conditional upon relevant national provisions;

• (14) to make decisions on other material businesses and administrative matters of the Company, which are not provided for in the Articles of Association and to be determined by the general meeting;

• (15) to formulate proposals for material acquisitions or disposals;

• (16) to manage the information disclosure issue of the Company;

• (17) to propose to the general meeting for the engagement or change of accounting firm for the audit work of the Company;

• (18) to receive the work report and to check the work of the general manager of the Company;

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• (19) such other powers conferred by the laws, administrative regulations, departmental rules, shareholder ’s general meeting or the Articles of Association.

Save and except for the resolutions of the Board in respect of the matters specified in Sub-clauses (6), (7) and (12) of this Article which shall be passed by more than two-thirds of all directors, resolutions of the Board in respect of all other matters may be passed by more than one half of all directors.

Article 163 The Board shall explain to the general meeting regarding the non-standard auditors’ advice given by the chartered accountant in relation to the financial report of the Company.

Article 164 The Board shall formulate the rules of procedures of board meetings to ensure the implementation by the Board of the resolutions of the general meeting, the enhancement of work efficiency, and the guarantee of scientific decision making. The procedural rules for business discussion of the Board provides for the convening and voting procedures for meetings of the Board, as an appendix of the Company’s Articles of Association, which shall be prepared by the Board and shall be subject to approval of the general meeting.

Article 165 The Board shall have the right to decide on the transactions, otherwise than those which shall be subject to approval by shareholders as required by Article 111 and Article 112, including but not limited to, external investments, assets acquisition and disposals, asset pledges, security to third parties, entrusted financial management and connected transactions. The Company should establish stringent examination and procedures; and specialists or professional personnel shall be organised to assess and examine any material investment projects, and such investment projects shall be submitted to the general meeting for approval.

Article 166 The Board shall not, without prior approval of shareholders in a general meeting, dispose of or agree to dispose of any fixed assets of the Company where the aggregate of the expected value of the consideration for the proposed disposal and the value of the consideration for any similar disposal of fixed assets in the four months immediately preceding the proposed disposal, exceeds 33% of the value of the Company’s fixed assets as stated in the latest balance sheet placed before the general meeting.

A “disposal of fixed assets” as referred to in this Article includes an act involving the transfer of an interest in certain assets but does not include the provision of fixed assets by way of security.

Breach of sub-clause 1 of this Article shall not prejudice the validity of any transaction entered into by the Company in disposal of fixed assets.

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Article 167 The Chairman of the Board shall exercise the following functions and powers:

• (1) to preside over the general meeting, and to convene and preside over the meetings of the Board;

• (2) to check the implementation of board resolutions;

• (3) to sign the securities issued by the Company;

• (4) to exercise other powers vested by the Board.

If the Chairman is unable to exercise his duties, he may designate an acting director to exercise such functions and powers in his stead.

Article 168 The Board shall establish several special committees.

The functions and duties of the special committees of the Board shall be determined according to the relevant State provisions and the resolutions of the Board.

Article 169 Board meetings shall be held at least four times every year and shall be convened by the Chairman of the Board by serving a notice on all the directors and supervisors no later than fourteen days prior to the convening date of the meeting.

An extraordinary board meeting shall be convened by the Board upon occurrence of any of the following circumstances:

• (1) it is proposed by shareholders representing more than one tenth of voting rights;

• (2) it is proposed by more than one third of the directors;

• (3) it is proposed by the Supervisory Committee;

• (4) it is considered necessary by the Chairman of the Board;

• (5) it is proposed by more than half of the independent directors;

• (6) it is proposed by the general manager;

• (7) it is requested to be convened by the securities regulatory authorities;

• (8) such other situations prescribed by the Articles of Association.

The Chairman of the Board shall convene and preside over a board meeting within ten days after receiving such proposal. If the chairman is unable or fails to exercise his duties, a director jointly recommended and appointed by more than one half of the directors shall convene and preside over the meeting.

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The reasonable costs incurred by the directors for attending board meetings shall be borne by the Company. Such costs include traveling expenses incurred by the directors for traveling from his place to the meeting venue (if a director’s place is different from the meeting venue), food and board expenses during the meeting period, rental for the meeting venue and transport expenses for traveling to the meeting venue.

Article 170 The time and place of a meeting of the Board may be prescribed in advance, and recorded in the minutes, which are distributed to all directors at least 10 days prior to the convening of the next board meeting. No further notice shall be required to be served to the directors in respect of the convening of the meeting.

In connection to the convening of a regular meeting and an extraordinary meeting of the Board, a notice shall be served 14 days and 5 days prior to the holding of the meeting. Notice of a meeting may be submitted to all the directors and supervisors as well as the general manager and board secretary by direct service, e-mail, telegram, telex, fax, express courier, registered mail or by other means.

Notice shall be in Chinese language, with an English version attached if necessary. Notice should include an agenda. Any director can renounce his right to be issued a notice of the board meeting or to receive a meeting notice within the above time limit. In an urgent situation when an extraordinary board meeting has to be convened with short notice as soon as practicable, the notice of the meeting may be served at any time by telephone or other verbal means will be issued notices of meetings, but the convener should provide reasons thereof in the meeting.

Directors who have attended the meeting will be deemed to have been issued a notice of board meeting if he had not raised any issues of not having received such notice before or during the board meeting.

A meeting or extraordinary board meeting may be convened by means of telephone conference or other similar communications equipment through which directors participating in the meeting can communicate with each other simultaneously and instantaneously and such participation shall constitute presence at a meeting as if those participating were present in person.

Article 171 Notice of a board meeting shall contain at least the following information:

• (1) the date and venue of the meeting;

• (2) the method by which the meeting is held;

• (3) the matters to be discussed (the agenda);

• (4) the convener and the chairman of the meeting, the person who proposes the special board meeting and his written proposal;

• (5) the request for the personal attendance of the directors or the attendance through the appointment of an alternate director;

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• (6) the contact person and the method of contact.

• (7) the issue date of the notice.

Verbal notice shall at least include the details of item (1) and (2) and the reason for convening an urgent special board meeting with short notice.

Article 172 Otherwise than the situations stipulated by Article 175 and Article 219 hereof, the board meetings shall be held only if more than half of the directors are present.

A show of hands is adopted for voting at any Board meetings, where each Director shall have one vote. Save for the exceptional circumstances set out in Articles 175 and 219, a simple majority of the votes of all Directors is required for passing of a Board resolution.

Where the number of votes cast for and against a resolution is equal, the Chairman of the Board shall have a casting vote.

In the case of any contradictory in terms of contents and meanings amongst different resolutions, the resolution made at the latest time shall prevail.

Article 173 Directors shall attend any board meeting in person. Where a director is unable to attend for some reasons, he may authorise in writing another director to attend the board meeting in his stead. The instrument of proxy shall specify the scope of authorization.

The director attending the meeting for another director shall exercise the rights of the latter director within the scope of authorisation. Any director who is unable to attend a particular board meeting and has not authorised a proxy to attend in his stead shall be deemed as a waiver of the right to vote at that meeting.

Article 174 A director shall vote for, against or abstain from a voting. Attending directors shall choose one among the above intentions. Shall a director make no choice, or choose more than two intentions, the chairman of the meeting shall require such director to choose again. Shall a director refuse to choose, he shall be deemed abstained.

Article 175 Under any of the following circumstances, directors shall abstain from voting on the related resolutions:

• (1) as required by the listing rules of the stock exchange on which the Company’s shares are listed;

• (2) as considered necessary by the director himself;

• (3) such other circumstances as required by the Articles of Association of the Company, where connected relationships exist between the directors and the enterprises involved in the meeting proposals.

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Where directors have abstained from voting, the related board meetings shall be attended by more than half of the unaffiliated directors, and the related resolutions shall be adopted by more than half of the unaffiliated directors. Shall the unaffiliated directors attending the meeting be less than three in number, such matter shall be submitted for review to a general meeting. The Board should, when making resolutions on connected transactions or continuing connected transactions, seek for opinions of the independent directors.

Article 176 If more than half of the directors present at the meeting or more than two independent directors consider the proposal to be indefinite and unspecific, or where an informed determination cannot be made due to other reasons including inadequate meeting materials, they may jointly propose to postpone the board meeting or the discussion on part of matters at the meeting, and the Board shall accept their opinions.

Directors who propose the postponement of voting shall make clear requirements for re-consideration of the subject proposal.

Article 177 The Board shall keep minutes of its decisions on the matters considered. Directors attending the meeting and the person taking the minutes shall sign the minutes of the meeting. Directors shall be responsible for the resolutions of the board meetings. Where a resolution of the board meetings violates the laws, administrative regulations or the Articles of Association and causes serious losses to the Company, the directors who took part in such a resolution shall be liable to compensate the Company. However, if a director can prove that he had expressed his opposition to such resolution when it was put to the vote, and such opposition is recorded in the minutes of the meeting, the director may be relieved of such liability.

The opinions expressed by the independent directors should be stated in the resolutions of the Board.

Article 178 The minutes shall contain the following information:

• (1) the session of the meeting, time, venue and form of the meeting;

• (2) the particulars of issuing the notice of the meeting;

• (3) the names of the convener and the chairman of the meeting;

• (4) the directors attending in person or by proxy;

• (5) the proposals reviewed in the meeting, the main points of speeches and major opinions by each director;

• (6) the voting result of each proposal (specifying numbers of affirmative, opposing and abstention votes);

• (7) such other matters to be recorded as the directors attending the meeting consider appropriate.

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Article 179 The Board may adopt resolution in writing to substitute for holding the board meeting, but the draft of such resolution must be sent by one of the means of by hand, mail, fax or email to each of the directors. If the relevant written resolution has been distributed to all directors, and the number of directors having signed on the draft or several copies of the draft (in the same form) indicating his consent amounted to the necessary quorum for the relevant decision and the same being returned to the board secretary in any of the aforesaid manners, such resolutions shall become the resolution of the Board and no board meeting is further required to be held.

Article 180 The board meeting documents, including meeting notices and meeting materials, the power of attorney of appointing directors, meeting taping information, meeting minutes signed and confirmed by attending directors, meeting summaries (if any), resolution records (if any), resolutions, among others, shall be filed by the secretary to the Board.

The board meeting documents shall be filed for a period of at least fifteen years.

CHAPTER XI SECRETARY TO THE BOARD OF THE COMPANY

Article 181 The Company shall have a secretary to the Board, who is a senior management member of the Company.

An administrative officer of the controlling shareholder may not hold the office of the secretary to the Board concurrently.

• Article 182 The secretary to the Board of the Company shall be a natural person

• who has the requisite professional knowledge and experience, and shall be appointed by the Board. The primary duties of the secretary to the Board are: (1) to be responsible for the communication and liaison between the Company and the related parties and the SEHK and other securities regulatory authorities, to guarantee the Company is legally entitled to prepare and submit required reports and documents to competent authorities;

• (2) to be responsible for dealing with the disclosure of corporate information affairs, to urge the Company to develop and implement the management systems of information disclosure and the internal reporting system of material information in order to promote the Company and the related parties to carry out their information disclosure obligations according to the laws, and handle disclosure of the periodic reports and the interim reports to the SEHK in accordance with the relevant provisions;

• (3) to coordinate the relationship between the Company and its investors, to play host to investors’ visits, to answer investors’ enquiries, to provide investors with an access to information disclosure of the Company;

• (4) to prepare a general meeting and a board meeting in accordance with the legal procedures, and to prepare and submit the documents and information for the relevant meetings;

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• (5) to participate in board meetings and produce minutes of meeting with signatures;

• (6) to be responsible for the confidentiality of the corporate information disclosure, to draw up security measures, to procure the directors, supervisors, general manager, deputy general manager and other senior management members and the informed associated personnel to keep information in confidentiality prior to its disclosure, and take timely remedial measures upon divulging of insider information and report accordingly to the SEHK;

• (7) to be responsible for keeping the Company’s register of members, roster of directors, as well as the information about the holding of shares of Company by the major shareholders, directors, supervisors, general manager, deputy general manager and other senior management members, and the documents and minutes of a general meeting and a board meeting and so on, to assure the Company of a complete organization of documents and records for ensuring that the relevant records and documents of the Company shall be obtained in a timely manner by those with the right of access to such relevant records and documents;

• (8) to assist the directors, supervisors, general manager, deputy general manager and other senior management members to understand the information disclosure related the laws, rules and regulations, the Listing Rules of the SEHK, other provisions and the Articles of Association, and their legal responsibilities regarding the listing agreement;

• (9) to procure the Board to exercise their powers in pursuance to the laws; to remind the attending directors in case of any violation of the laws, rules, regulations, the Listing Rules of the SEHK and other provisions or the Articles of Association by a board resolution intended to be made at a meeting of the Board, and seek for expression of views from the attending supervisors in this respect; if the aforesaid resolution is insisted by the Board, the secretary to the Board should record the views of supervisors and individuals in the minutes, and report to the SEHK at the same time;

• (10) to discharge such other duties as provided by the applicable laws, administrative regulations, departmental rules, the listing rules of the stock exchange on which the Company’s shares are listed, other provisions and the Articles of Association.

Article 183 Each director or other senior management members of the Company may concurrently hold the office of the secretary to the Board. The accountant(s) of the certified public accountant firm(s) engaged by the Company shall not act as the secretary to the Board.

Provided that where the office of the secretary to the Board is held concurrently by a director and an act is required to be done by a director and a board secretary separately, the person who holds the office of director and board secretary may not perform the act in dual capacity.

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CHAPTER XII GENERAL MANAGER AND DEPUTY GENERAL MANAGERS OF THE COMPANY

Article 184 The Company has one general manager and a certain number of deputy general managers, who shall be appointed or dismissed by the Board. The deputy general manager shall assist the general manager in his work, and shall be accountable to the general manager. In absence or incapability of the general manager in performing his duties, such duties shall be performed by the deputy general manager(s). The Board may decide upon whether a member of the Board shall concurrently act as the general manager.

A board member may assume the concurrent office of a general manager, deputy general manager and other senior management members as determined by the Board of the Company, but the number of directors holding the concurrent office of a general manager, deputy general manager and other senior management members shall not exceed by one half of the total number of directors of the Company.

Each general manager, deputy general manager and other senior management members shall have an every term of office of three years, and shall be renewable for re-election.

Article 185 A personnel holding other duties other than a directorship in the Company’s controlling shareholder and persons exercising de facto control over the Company shall not hold the office of a senior management members of the Company.

Article 186 The general manager shall be accountable to the Board and exercise the following functions and powers:

• (1) to be in charge of the Company’s production, operation and management and to organise the implementation of the resolutions of the Board, and report the work to the Board;

• (2) to organise the implementation of the Company’s annual business plans and investment plans;

• (3) to draft plans for the establishment of the Company’s internal management structure;

• (4) to establish the Company’s basic management system;

• (5) to formulate basic rules and regulations for the Company;

• (6) to propose the appointment or dismissal of the Company’s deputy general manager (s) and financial controller;

• (7) to appoint or dismiss management personnel other than those required to be appointed or dismissed by the Board;

• (8) such other powers conferred by the Articles of Association and the Board.

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Article 187 The general manager may be present at a meeting of the Board. The general manager has no voting rights at the board meetings unless he is also a director.

Article 188 The general manager shall prepare the rules of working procedures for approval by the Board before implementation.

Article 189 The rules of working procedures of general manager contain the following information:

• (1) requirements for the convening of, procedures for, and persons attending to the general manager meeting;

• (2) respective duties and responsibilities and division of work of general manager and other senior management members;

• (3) scope of power of using the funds and assets of the Company and entering into material contracts, and the system of reporting to the Board and the Supervisory Committee;

• (4) such other matters deemed necessary by the Board.

Article 190 Each general manager and deputy general manager shall not, in exercising his functions and powers, vary the resolutions of a general meeting and board meeting or exceed the scope of his authorities.

Article 191 The general manager and deputy general manager of the Company, in exercising their functions and powers, shall act honestly and diligently in accordance with the laws, administrative regulations and the Articles of Association. In the event that general manager and deputy general manager have violated any provision of the laws, administrative regulations, departmental rules or the Articles of Association in exercising their functions and powers and thereby causing losses to the Company, they shall bear the indemnification liability.

Article 192 Each general manager and deputy general manager may tender his resignation before expiration of their terms of his office. The specific procedures and measures of resignation of the general manager and deputy general manager shall be subject to related labour contract between the general manager and deputy general manager and the Company.

CHAPTER XIII SUPERVISORY COMMITTEE

Article 193 The Company shall have a Supervisory Committee. The Supervisory Committee is a standing supervisory agency of the Company which is responsible of the supervision of Board of Directors and its members and senior management members such as the general manager and deputy general manager so as to prevent them from the misuse of authority and infringing upon lawful rights of the shareholder, the Company and the Company’s employees.

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Article 194 The Supervisory Committee shall be composed of six supervisors, one of which shall be the chairman of the Supervisory Committee. The term of office of each supervisor shall be a period of 3 years and shall be renewable for re-election.

The chairman of the Supervisory Committee is subject to election or removal with the consent of two thirds or more of the members of the Supervisory Committee.

The supervisors of the first Supervisory Committee shall be elected at the inaugural meeting by the Company and shall have a term of office until the close of the third annual general meeting.

Article 195 The Supervisory Committee shall be composed of two shareholder representatives, two independent supervisors and two representatives of the staff and workers of the Company. The shareholder representatives and the independent supervisors shall be subject to election and removal at a general meeting. Supervisors represented by representatives of staff and workers shall be elected and removed by the staff and workers of the Company democratically.

The supervisors represented by the staff and workers of the Company co-opted or by-elected at a general meeting shall have a term of office commencing from the effective date of their election and expiring upon conclusion of the tenure of the Supervisory Committee.

Article 196 Each director, general manager and financial controller of the Company may not hold the office of a supervisor concurrently.

Article 197 Where no re-election is made in time upon expiry of the term of a supervisor, or any supervisor’s resign resulting in the number of members of the Supervisory Committee below the statutory number, the original supervisor shall, prior to a new supervisor entering on the office, continue to perform his duties as a supervisor in accordance with the laws, administrative regulations and the Articles of Association.

Article 198 Supervisors shall ensure that the information disclosed by the Company is true, accurate and complete.

Article 199 Supervisors may attend as non-voting members at a Board meeting and shall have the right to inquire or put forward suggestions on resolutions of Board of Directors.

Article 200 Supervisors shall not exploit their Connected Relationship with the Company to the prejudice of the interests of the Company. Where they have violated such provision and thereby causing damages to the Company, they shall be liable for compensation.

Article 201 Where a supervisor violates any the laws, administrative regulations, departmental rules or the provisions of the Articles of Association in the course of performing his duties and causes loss to the Company, such supervisor shall be liable for compensation.

Article 202 A meeting of the Supervisory Committee shall be convened at least twice a year, and shall be held at least once every six months in each year.

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An extraordinary general meeting should be convened within 10 days by the Supervisory Committee upon occurrence of any of the following circumstances:

• (1) it is proposed by any supervisors;

• (2) a resolution is in violation of any of the laws, the regulations, the statutes, the provisions and requirements of the supervisory department, these Articles of Association, the resolutions of general meeting and other relevant resolutions as required at a general meeting or board meeting;

• (3) any inappropriate behavior of any of the directors and the senior management members has incurred possible material damages to the Company or adverse impacts to the market;

• (4) any of the Company, the directors, the supervisors or the senior management is sued by shareholders;

• (5) any of the Company, the directors, the supervisors or the senior management members is subject to any penalisation by the securities regulatory authorities or condemnation by the stock exchange on which the Company’s shares are listed;

• (6) a request is made by the securities regulatory authorities;

• (7) such other circumstances prescribed by the Articles of Association.

A meeting of the Supervisory Committee shall be convened and presided over by the chairman of the Supervisory Committee. When the chairman of Supervisory Committee is unable or fails to perform such duties, a supervisor shall be elected by half or more of the supervisors to convene and preside over a meeting of the Supervisory Committee. A resolution of the Supervisory Committee shall be passed by half or more of the supervisors.

Article 203 The Supervisory Committee is accountable to the general meeting, and shall exercise the following functions and powers pursuant to the laws:

• (1) to review and express its view in writing on regular reports prepared by the Board;

• (2) to examine the finance of the Company;

• (3) to monitor the performance of duties of directors and senior management members, and the proposing of dismissal of any directors and senior management members who have breached the laws, administrative regulations and the Articles of Association or resolutions of general meeting;

• (4) to demand for rectification in the event of any damages to the interests of the Company caused by any of the directors, general manager or other senior management members;

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• (5) to inspect the financial reports, operation reports and profit appropriation proposals prepared by the Board to be submitted to general meeting. In the case of any doubts, the committee may appoint a registered accountant or practicing auditor to help in the review in the name of the Company;

• (6) to propose the convening of an extraordinary general meeting, and convening and chairing of a general meeting in the event of the Board having failed to perform its duties;

• (7) to propose motions to general meeting;

• (8) to negotiate with any of the directors and senior management members, or instituting proceedings against any of the directors and senior management members;

• (9) such other functions prescribed by the Articles of Association.

The supervisors attending a meeting of the Board shall raise questions and put forward recommendations on the issues relating to meetings of the Board.

Article 204 The Supervisory Committee shall formulate the procedural rules for business discussion, and shall make a clear definition of the procedural rules for business discussion and voting procedures of the Supervisory Committee to ensure the efficiency and scientific decision-making of the Supervisory Committee. The procedural rules for business discussion of the Supervisory Committee provides for the convening and voting procedures of the Supervisory Committee, as an appendix of the Articles of Association of the Company, which is prepared by the Supervisory Committee and is subject to approval of a general meeting.

Article 205 The notice convening a regular meeting or an extraordinary general meeting of the Supervisory Committee shall be subject to a notice period of 10 days and 5 days respectively, and shall be served to all supervisors by means of direct delivery, fax, e-mail or other means.

In an urgent situation when an extraordinary general meeting of the Board has to be convened as soon as practicable, notice of the meeting may at any time be served on the telephone or by other verbal means, but the convener shall elucidate the same at the meeting.

The written meeting notice shall include at least the following information:

• (1) the time and place of the meeting;

• (2) the mode of convening the meeting;

• (3) the issues to be considered (the agendas);

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• (4) the person who convenes or presides over the meeting as well as the moderator of the extraordinary general meeting and its written proposal;

• (5) the request concerning whether a supervisors should be present in person or may attend the same by other supervisor instead of him as his proxy;

• (6) contact person and contact method;

• (7) the date of issue of the notice.

Verbal notice of meetings should at least include those contents mentioned in sub-clauses (1) and (2) above, and shall elucidate the urgency of the situation when an extraordinary general meeting of the Board has to be convened as soon as practicable.

Article 206 A meeting of the Supervisory Committee shall only be convened with the attendance of two thirds or more of the supervisors.

The vote at a meeting of the Supervisory Committee shall be taken by poll, and each supervisor shall have one vote.

A resolution of the Supervisory Committee shall be passed by over two thirds of the members of the Supervisory Committee.

A meeting of the Supervisory Committee shall be attended by the supervisors in person. Where any supervisor cannot attend the meeting for any reason, he may appoint another supervisor as his proxy to attend the meeting and vote in his stead, with the proxy form specifying the scope of authorization.

Article 207 The minutes of the Supervisory Committee shall include the following information:

• (1) the time, venue and form of the meeting session and meeting convened;

• (2) dispatch of the notice of the meeting;

• (3) the convener and presider of the meeting;

• (4) the attendance of the meeting;

• (5) the motions considered by the meeting, major comments and opinions of directors on the relevant issues;

• (6) the voting result for each motion (the voting result shall set out the respective numbers of affirmative, opposing and abstention votes); and

• (7) such other issues that should be recorded in the opinion of the attending supervisors.

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Article 208 Minutes shall be kept for meetings of the Supervisory Committee. The supervisors present at meetings and the person taking minutes shall sign on the minutes. The supervisors are entitled to request to record their statements at the meeting in the minutes. When necessary, a prompt report should be made to the regulatory authorities and a public statement may also be issued.

Provided where supervisors have neither signed for their confirmation, nor made any written record for their different opinions or made a report to the regulatory authorities or issued a public statement according to the preceding paragraph, they shall be considered to have fully agreed with the contents of the records of the meeting.

Minutes of a meeting of the Supervisory Committee shall be kept by the board secretary as a file of the Company. Minutes shall be kept for a period of 15 years.

Article 209 All reasonable fees incurred in respect of the engagement of professionals such as lawyers, certified public accountants or practicing auditors by the Supervisory Committee in exercising its functions and powers shall be borne by the Company.

Article 210 The supervisors shall faithfully discharge their supervisory responsibilities in accordance with the laws, administrative regulations and the Articles of Association. CHAPTER XIV QUALIFICATIONS AND OBLIGATIONS OF DIRECTORS, SUPERVISORS, GENERAL MANAGER AND OTHER SENIOR MANAGEMENT MEMBERS OF THE COMPANY

Article 211 A person shall be disqualified for being a director, a supervisor, a general manager, a deputy general manager or other senior management members of the Company in any of the following circumstances: (1) the individual has no capacity to undertake civil liabilities or restricted capacity to undertake civil liabilities;

• (2) a period of five years has not yet elapsed since the penalisation on conviction of corruption, bribery, unauthorised taking of property, misappropriation of property or disrupting social and economic order; or a period of five years has not yet elapsed since being deprived of political rights for commission of offences;

• (3) a period of three years has not yet elapsed since the completion of the liquidation of any Company or enterprise which was insolvent due to unsound business operation and management and where the person acted as a director, factory manager or manager of such Company or enterprise and was personally liable for such insolvency;

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• (4) a period of three years has not yet elapsed since revocation of the business license of a company or enterprise due to illegal business operations where the person was the legal representative of such company or enterprise and for which he was personally liable;

• (5) the person is personally liable for a substantial loan which is due for payment but remains unpaid;

• (6) the person is currently being prohibited from participating in the securities market by the CSRC and such barring period has not elapsed;

• (7) the person has been involved in a criminal offence which is subject to investigation by the judicial authority, and the case remains unsettled;

• (8) the person is not eligible for acting in the leadership of a Company or an enterprise according to the laws or administrative regulations;

• (9) the person is not a natural person;

• (10) a period of five years has not yet elapsed since the person was adjudged by the relevant regulatory authorities to be guilty of contravention of provisions of securities regulations involving fraud or dishonesty;

• (11) such other stipulations of the laws, administrative regulations rules, departmental rules or the provisions as prescribed by the securities regulatory authorities and the stock exchange on which the shares of the Company are listed.

In addition to the above conditions, a director of the Company should also meet the following criteria:

• (1) over the past three years, he has not been subject to any administrative penalty by the CSRC;

• (2) over the past three years, he has not been subject to any public condemnation or promulgated criticism for more than two times by the stock exchange on which the shares of the Company are listed;

• (3) he has not been publicly identified as unsuitable for being a director of the Company during the period by the stock exchange on which the shares of the Company are listed (such period shall commence from the closing date of the meeting convened for the election and appointment of directors).

For any election and appointment of a director in contravention of the provisions prescribed by this Article, such election, appointment or employment shall be void and null. Provided where any of these circumstances occur in a director in his term of office, the director shall be dismissed of his duties.

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Article 212 The validity of an act of a director, general manager, deputy general manager and other senior management members on behalf of the Company is not, vis-a` -vis a bona fide third party, affected by any irregularity in his office, election or any defect in his qualification.

Article 213 In addition to the obligations imposed by the laws, administrative regulations or required by the listing rules of the stock exchange on which Shares of the Company are listed, each director, supervisor, general manager, deputy general manager and other senior management members of the Company shall, in the exercise of the functions and powers of the Company entrusted to him, be obliged to bear the following duties towards each shareholder:

• (1) not to cause the Company to exceed the scope of business stipulated in its business license;

• (2) to act honestly in the best interest of the Company;

• (3) not to expropriate in any guise the Company’s property, including but not limited to usurpation of opportunities advantageous to the Company;

• (4) not to expropriate the individual rights of shareholders, including but not limited to rights to distribution and voting rights, save pursuant to a restructuring of the Company submitted to shareholders for approval in accordance with the Articles of Association.

Article 214 Each director, supervisor, general manager, deputy general manager, and other senior management members of the Company shall, in the exercise of his powers and discharge of his obligations, be obliged to exercise the care, diligence and capability that a prudent person would reasonably exercise in comparable circumstances. Each of the Company’s directors, supervisors, general manager, deputy general manager, and other senior management members shall perform their due diligence obligations towards the Company in pursuance to the laws, administrative regulations and the Articles of Association as follows:

• (1) to exercise the rights accredited by the Company in a cautious, serious and due diligent manner so as to ensure the commercial behaviors of the Company shall be in compliance with the requirements of the State the laws, administrative regulations and the national economic policies in the PRC, and the commercial activities shall not exceed the scope of business stipulated in the business license;

• (2) to treat all shareholders fairly;

• (3) to keep informed of the operation and financial position of the Company on a timely basis;

• (4) to sign on the Company’s regular reports for written confirmation in order to ensure the truthfulness, accuracy and completeness of the information disclosed by the Company within their duties;

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• (5) to provide true information and data to the Supervisory Committee, and not to interfere with the Supervisory Committee or supervisors in the exercise of their functions and powers;

• (6) to perform other due diligence obligations imposed by the laws, administrative regulations, departmental rules and the Articles of Association.

Article 215 Each director, supervisor, general manager, deputy general manager and any other senior management members of the Company shall exercise his powers or perform his duties in accordance with the principle of fiduciary; and shall not put himself in a position where there may be conflicts between his duties and his interests. Without limiting the generality of the foregoing, the following obligations (including but not limited to) shall be discharged:

• (1) to act honestly in the best interests of the Company;

• (2) to exercise powers within the scope of his powers and not to exceed those authorisations;

• (3) to exercise the discretion vested in him personally and not to allow himself to act under the control of another and, unless and to the extent permitted by the laws, administrative regulations or with the consent of informed shareholders at a general meeting, not to delegate the exercise of his discretion;

• (4) to treat shareholders of the same class equally and to treat shareholders of different classes fairly;

• (5) except otherwise stipulated by the Articles of Association or otherwise consented by informed shareholders at a general meeting, not to enter into any contract, transaction or arrangement with the Company;

• (6) without the consent of informed shareholders at a general meeting, not to use the Company’s property for his own benefits;

• (7) not to exploit his position to accept bribes or other illegal income or expropriate the Company’s property by any means, including but not limited to opportunities advantageous to the Company;

• (8) without the consent of informed shareholders at a general meeting, not to accept commissions in connection with any of the Company’s transactions;

• (9) to abide by the Articles of Association, perform his official duties faithfully and protect the Company’s interests, and not to exploit his position and power in the Company to advance his own private benefits;

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• (10) not to compete with the Company in any way unless with the consent of informed shareholders at a general meeting;

• (11) not to misappropriate the Company’s funds or lend such funds to others, not to open accounts in his own name or other names for the deposit of the Company’s assets and not to provide a guarantee for debts of a shareholder of the Company or other individual(s) with the Company’s assets;

• (12) unless otherwise permitted by informed shareholders at a general meeting, to keep information acquired by him in confidentiality in the course of and during his tenure and not to use the information other than in furtherance of the interests of the Company, save and except that disclosure of such information to the court or other governmental competent authorities is permitted if:

• disclosure is made under compulsion of the laws;

• the interests of the public require disclosure;

• the interests of the relevant director, supervisor, general manager or other senior management members require disclosure.

Where a director, supervisor, general manager, deputy general manager and other senior management member has violated the provisions prescribed in this Article, the revenue should be counted in the interest of the Company; and they shall be liable for reimbursement to the Company for any losses caused to the Company.

Article 216 Each director, supervisor, general manager, deputy general manager and any other senior management members of the Company shall not cause the following persons or institutions (“associates”) to do what he is prohibited from doing: (1) the spouse or minor children of that director, supervisor, general manager, deputy general manager and other senior management members;

• (2) a person acting in the capacity of a trustee of that director, supervisor, general manager, deputy general manager and other senior management members or any person referred to in Sub-clause (1) of this Article;

• (3) a person acting in the capacity of partner of that director, supervisor, general manager, deputy general manager and other senior management members or any person referred to in Sub-clauses (1) and (2) of this Article;

• (4) a company in which that director, supervisor, general manager, deputy general manager and other senior management members, alone or jointly with one or more personnel referred to in sub-clauses (1), (2) and (3) of this Article and other directors, supervisors, general manager, deputy general manager and other senior management members having a de facto controlling interest;

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• (5) directors, supervisors, general manager and other senior management members of the controlled entities referred to in Sub-clause (4) of this Article.

Article 217 The fiduciary duties of each director, supervisor, general manager, deputy general manager and other senior management members of the Company shall not be necessarily ceased with the termination of his tenure. The duty of confidentiality in relation to trade secrets of the Company shall survive upon termination of his tenure. Other duties may continue for such period as fairness may require depending on the time lapses between the termination and the act concerned and the circumstances and conditions under which the relationships between him and the Company are terminated.

Article 218 Except as provided in Article 68 hereof, each director, supervisor, general manager, deputy general manager and any other senior management members of the Company may be relieved of liability for specific breaches of his duties by the consent of informed shareholders at a general meeting.

Article 219 Where a director, supervisor, general manager, deputy general manager and any other senior management members of the Company is in any way, directly or indirectly, materially interested in a contract, transaction or arrangement or proposed contract, transaction or arrangement with the Company (other than an employment contract of each director, supervisor, general manager, deputy general manager and any other senior management members with the Company), he shall declare the nature and extent of his interests to the Board at the earliest opportunity, whether or not the relevant issues shall be otherwise subject to approval of the Board.

Unless an interested director, supervisor, general manager, deputy general manager and other senior management members disclose his interests in accordance with this Article and the contracts, transactions or arrangements are approved by the Board at a meeting at which such interested director, supervisor, general manager, deputy general manager or other senior management members shall not be counted in the quorum and shall have abstained from voting. A contract, transaction or arrangement in which that particular director, supervisor, general manager and other senior management members is materially interested is avoidable at the instance of the Company, except as against a bona fide party thereto acting without being aware of the breach of duty by the interested director, supervisor, general manager, deputy general manager or other senior management members.

For the purposes of this Article, each director, supervisor, general manager, deputy general manager and other senior management of the Company shall be deemed to be interested in a contract, transaction or arrangement in which any associate of the director, supervisor, general manager, deputy general manager and other senior management members are interested.

Article 220 Where a director, supervisor, general manager, deputy general manager and other senior management members of the Company gives to the Board, before the Company’s first consideration of formulation of any contract, transaction or arrangement, a general notice in writing stating that, by reason of the facts specified in the notice, he is interested in such contracts, transactions or arrangements of any description

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which may subsequently be made by the Company, the content stated in such notice shall be deemed for the purposes of the preceding Article of this Chapter to be a sufficient disclosure of the interests of the director, supervisor, general manager, deputy general manager and other senior management members.

Article 221 The Company shall not in any manner pay taxes for or on behalf of its director, supervisor, general manager, deputy general manager and any other senior management members.

Article 222 The Company shall neither directly or indirectly make a loan to or provide any loan guarantee to its director, supervisor, general manager, deputy general manager and other senior management members of the Company or of its parent company, nor make a loan to or provide any loan guarantee in connection thereto to any of their respective associates.

The provisions of the preceding paragraph shall not be applicable to the following circumstances:

• (1) the provision by the Company of a loan or a loan guarantee to a Company which is a subsidiary of the Company;

• (2) the provision by the Company of a loan or a loan guarantee or any other funds to a directors, supervisor, general manager, deputy general manager and other senior management members of the Company to meet expenditures incurred or to be incurred by him for the purposes of the Company or for the purpose of enabling him to properly perform his duties, in accordance with the terms of a employment contract approved by shareholders at a general meeting;

• (3) the Company may make a loan to or provide a loan guarantee to any of the relevant directors, supervisors, general manager, deputy general manager and other senior management members or their respective associates in the ordinary course of its business on normal commercial terms, provided that the ordinary course of business of the Company should include the lending of money or the giving of guarantees.

Article 223 A loan made by the Company in breach of the preceding Article shall be forthwith repayable by the recipient of the loan regardless of the terms of the loan. Article 224 A guarantee for repayment of loan provided by the Company in breach of sub-clause 1 of Article 222 shall not be enforceable against the Company, unless:

• (1) the guarantee was provided in connection with a loan to an associate of any of the directors, supervisors, general manager and other senior management members of the Company or of the Company’s parent company and the lender were not aware of the relevant circumstances at the time the loan was advanced; or

• (2) the collateral provided by the Company has been lawfully disposed of by the lender to a bona fide purchaser.

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Article 225 For the purpose of the foregoing paragraph of this Chapter, a “guarantee” shall include an undertaking or property provided to secure the performance of obligations by the obligor.

Article 226 In addition to any rights and remedies provided by the laws and administrative regulations, where a director, supervisor, general manager, deputy general manager or other senior management members of the Company is in breach of his duties to the Company, the Company shall have a right to:

• (1) claim damages from the director, supervisor, general manager, deputy general manager and other senior management members in compensation for losses sustained by the Company as a result of such breach;

• (2) rescind any contract or transaction entered into by the Company with the director, supervisor, general manager, deputy general manager and other senior management members or with a third party (where such third party knows or should know that there is such a breach of obligations by such a director, supervisor, general manager, deputy general manager and other senior management members);

• (3) demand an account of the profits made by the director, supervisor, general manager, deputy general manager and other senior management members in breach of his obligations;

• (4) recover any monies received by the director, supervisor, general manager, deputy general manager and other senior management members which should otherwise have been received by the Company, including but not limited to commissions; and

• (5) request such director, supervisor, general manager, deputy general manager and other senior management members to return the interests accrued or may be accrued on the monies which otherwise should have been paid to the Company.

Article 227 The Company shall, with prior approval of shareholders at a general meeting, enter into a contract in writing with a director or supervisor wherein his emoluments are stipulated. The aforesaid emoluments shall include:

• (1) the emoluments in respect of his labour as a director, supervisor or senior management members of the Company;

• (2) the emoluments in respect of his labour as director, supervisor or senior management members of any subsidiary of the Company;

• (3) the emoluments in respect of the provision of other labours in connection with the management of the affairs of the Company and any of its subsidiaries;

• (4) the payment to such a director or supervisor by way of compensation for his loss of office, or as consideration for or in connection with his retirement from office.

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Except under a contract entered into in accordance with the foregoing paragraph, no proceedings may be brought by a director or supervisor against the Company for any benefits due to him in respect of the matters mentioned in this Article.

Article 228 The contract concerning the emoluments between the Company and its directors or supervisors should provide that in the event of a takeover of the Company, the Company’s directors and supervisors shall, subject to prior approval of shareholders at a general meeting, have the right to receive compensation or other payment in respect of his loss of office or retirement. A takeover of the Company referred to of the preceding paragraph means any of the following circumstances:

• (1) an offer made by any person to all the shareholders;

• (2) an offer made by any person with a view to have the offerer becoming a “controlling shareholder” within the same defined meaning as ascribed to it in Article 69.

Where the relevant director or supervisor is in breach of this Article, any sum so received by him shall belong to those persons who have sold their shares as a result of the acceptance of the said offer. The expenses incurred in distributing that sum pro rata amongst those persons shall be borne by the relevant director or supervisor and shall not be deductible form that sum.

CHAPTER XV FINANCIAL AND ACCOUNTING SYSTEMS AND PROFIT DISTRIBUTION

Article 229 The Company shall establish its financial and accounting systems in accordance with the laws, administrative regulations and the PRC accounting standards formulated by the finance regulatory department of the State Council.

Article 230 At the end of each fiscal year, the Company shall prepare a financial report, which shall be audited by an accounting firm as provided by the laws.

The Company’s fiscal year shall be based on the Gregorian calendar, being that each of our fiscal years shall commence on 1 January and end upon 31 December each year. The recording currency of the Company’s accounts is dominated in RMB.

Within four months from the date of the expiration of each fiscal year, an annual financial and accounting report shall be submitted to the CSRC and the SEHK respectively. Within two months after the first six months of each fiscal year, a semi-annual financial and accounting report shall be submitted to the agency of the CSRC and the SEHK respectively. Within one month after the first three and nine months of each fiscal year, a quarterly financial and accounting report shall be submitted to the agency of the CSRC and the SEHK respectively.

Article 231 The Board shall, at each annual general meeting, submit to shareholders the financial reports prepared by the Company in accordance with the provisions for normative documents which are promulgated by the relevant laws, administrative regulations and local governments and departmental authorities.

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Article 232 The Company’s financial reports shall be made available for shareholders’ inspection at the Company not later than twenty days before the date of each annual general meeting. Each shareholder shall be entitled to an access of a copy of the financial reports referred to in this Chapter.

The Company shall deliver to each shareholder of overseas listed foreign shares a copy of the report of the Board together with the balance sheet (including such documents as shall be attached to the balance sheet according to applicable laws and regulations) and profit and loss (including the financial report) not later than twenty-one days before the date of each annual general meeting by postage paid mail or other means permitted by the stock exchange on which the shares of the Company are listed at the address as shown in the register of members.

Article 233 The financial statements of the Company shall, in addition to being prepared in accordance with the PRC accounting standards and regulations, be prepared in accordance with either international accounting standards, or that of the place outside the PRC where the Company’s shares are listed. If there is any material difference between the financial statements prepared respectively in accordance with the two accounting standards, such difference shall be stated in the financial statements. When the Company is to distribute its after-tax profits of the relevant accounting year, the lower of the after-tax profits as shown in the two financial statements shall be adopted.

Article 234 Any interim results or financial information published or disclosed by the Company must also be prepared and presented in accordance with the PRC accounting standards and regulations, and also in accordance with either the international accounting standards or those of the overseas location where the shares of the Company are listed. Article 235 The Company shall publish two interim financial reports in each fiscal year, meaning that the interim reports shall be published within sixty days after the first six months of the fiscal year and the annual reports shall be published within 120 days after the expiration of the fiscal year.

Article 236 The Company shall not keep accounts other than those provided for by the laws. Assets of the Company shall not be deposited in any account under the name of an individual.

Article 237 The Company shall allocate 10% of the profits after tax to its statutory surplus reserve in the distribution of profits. The Company is not required to make appropriation to its statutory surplus reserve when such reserve exceeds 50% of the registered capital of the Company.

If the statutory surplus reserve of the Company is insufficient to offset the losses of the previous year, the profits of the current year shall be used to offset such losses before allocating to its statutory surplus reserve in accordance with the preceding paragraph.

After allocation of its profits after tax to its statutory surplus reserve, the Company may allocate its profits after tax to its discretionary statutory reserve upon approval of the general meeting.

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The remaining profits after tax after offsetting its losses and allocating to its reserves may be distributed to its shareholders pro rata to their respective shareholdings, except in the circumstances that non-pro rata distribution is provided in the Articles of Association.

If at a general meeting, the requirements stipulated in the preceding paragraph are breached by distributing profits to the shareholders before offsetting losses of the Company and allocating to its statutory surplus reserve, the profits so distributed are required to be returned to the Company.

The shares held by the Company are not entitled to any profits distribution.

Article 238 Any amount paid up in advance of calls on any share may carry interest but shall not entitle the relevant shareholders to participate in respect thereof in a dividend subsequently declared.

Article 239 Capital common reserve fund includes the following items:

• (1) premium on shares served at a premium price;

• (2) any other income designated for the capital common reserve fund by the regulations of the competent financial authority of the State Council.

Article 240 The Company’s capital reserve may be used to cover the Company’s losses, expand the Company’s production and operation or enlarge the Company’s capital. However, capital reserve shall not be used for recovery of the Company’s loss.

Where any statutory surplus reserve funds are converted into part of the capita, the balance of the statutory surplus reserve may not be less than 25% of the registered capital of the Company before such increase.

Article 241 Dividend distribution proposal shall be passed by shareholders by an ordinary resolution. Unless otherwise resolved by shareholders, the Board may be authorised to distribute an interim dividend at a general meeting.

Article 242 The Company may distribute a dividend in the following forms:

• (1) cash;

• (2) shares.

Upon passing a profit distribution resolution at a general meeting, the Board of the Company shall complete the dividend (or shares) distribution within 2 months after the general meeting is convened.

The Company shall make a cash dividend distribution for at least once for every 3 consecutive years, and the concrete allocation ratio shall be determined by the Board according to the Company’s operational conditions and the relevant provisions of the CSRC, and shall be reviewed and decided at a general meeting. Provided that no cash

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profit distribution has been made by the Company in the recent three years, no public issuance of new shares, issuance of convertible bonds or placement of shares to the existing shareholders shall be carried out.

The Company’s profit allocation is aimed at rewarding our investors with a reasonable investment return. The Company’s profit distribution policy should be maintained at a certain degree of continuity and stability. Provided that the Company’s profit and cash flows are sufficient to meet its normal operations and long-term development, the profit distribution in form of cash accumulated over the recent three years shall not be less than 30% of the average annual distributable profit achieved over the recent three years.

The Company may make cash or share dividends and an interim dividend may be made in cash.

Article 243 Dividends or other payments to be payable by the Company to holders of Domestic Shares shall be declared and calculated in RMB, and paid in RMB; and those payable to holders of overseas listed foreign shares shall be declared and calculated in RMB, and paid in the local currency at the place where such overseas listed foreign shares are listed (if there is more than one place of listing, then paid in the currency at the primary place of listing as determined by the Board).

Article 244 Payments of dividends and other sums by the Company to holders of foreign shares shall be made in accordance with the relevant foreign exchange control regulations.

Article 245 The Company shall, in accordance with the PRC tax the laws, withhold and make payments on behalf of shareholders in respect of their tax payable on their dividends income.

Article 246 The Company shall appoint on behalf of the holders of the overseas listed foreign shares receiving agents to receive on behalf of such shareholders dividends declared and all other monies owing by the Company in respect of such shares.

The receiving agents appointed by the Company shall satisfy the relevant requirements of the laws of the place and relevant regulations of the stock exchange on which the Company’s shares are listed.

The receiving agents appointed on behalf of holders of H Shares shall be a Company registered as a trust Company under the Trustee Ordinance of Hong Kong.

Article 247 Subject to relevant laws and regulations of the PRC, the Company may exercise its right of forfeiture over unclaimed dividends, provided that such right cannot be exercised prior to the expiration of the applicable statute of limitation.

The Company has the right to terminate the dispatch of dividend warrants to holders of overseas listed foreign shares by mail, provided that such right shall not be exercised until the dividend warrants have not been cashed for two consecutive occasions. However, where the dividend warrant fails to be served to the addressee and returned, the Company may also exercise such right.

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In the case of exercising general mandate to issue warrants to holders, no new warrants shall be issued to replace the lost ones unless the Company confirms the destroy loss of the original warrants.

Article 248 The Company has the right to sell, in such manner as the Board thinks fit, any shares of an overseas listed foreign shareholder who is untraceable, subject to and conditional upon:

• (1) the Company has distributed dividends for at least 3 times for such Shares within 12 years, but none of such dividends was claimed; and

• (2) the Company, after the expiration of 12 years, made the public notice on the newspaper(s) at the jurisdiction where the Company is listed, stating its intention to sell such shares, and notified the stock exchange on which such shares are listed.

The foregoing penalisation paragraphs shall come into force provided that the relevant laws, administrative regulations and the mandatory provisions shall not be breached.

Article 249 The Company shall implement an internal audit system, and shall retain exclusive auditors to conduct internal audit of its income and expenditure and financial activities.

Article 250 The internal audit system and the terms of reference of the auditors are implemented under the approval of the Board. The auditors are required to report to the Board.

CHAPTER XVI APPOINTMENT OF ACCOUNTANT FIRM

Article 251 The Company shall appoint an independent accountant firm which is qualified under the relevant regulations of the State to audit the Company’s annual report and review the Company’s other financial reports.

The first accountant firm of the Company may be appointed by the inaugural meeting of the Company before the first annual general meeting. The accountant firm so appointed shall hold office until the close of the first annual general meeting.

If the inaugural meeting fails to exercise its powers under the preceding paragraph, those powers shall be exercised by the Board.

Article 252 The accountant firm appointed by the Company shall hold office from the close of the annual general meeting until the conclusion of the next annual general meeting.

Article 253 The accountant firm appointed by the Company shall have the following rights:

• (1) a right to inspect the books, records and vouchers of the Company at any time, the right to require directors, general manager, deputy general manager or other senior management members of the Company to supply relevant information and explanation;

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• (2) a right to require the Company to take all reasonable steps to obtain from its subsidiaries such information and explanation as are necessary for the purpose of discharging its duties;

• (3) a right to attend general meeting and to receive all notices of, and other communications relating to, any general meeting which any shareholder is entitled to receive, and to speak at any general meeting in relation to matters concerning its role as the Company’s accountant firm.

Article 254 The Company shall provide true and complete accounting evidences, books, financial and accounting reports and other accounting data to the accountant it engages without any refusal, withholding and false information.

Article 255 If there is a vacancy in the position of the auditor of the Company, the Board may retain an accountant firm to fill such vacancy before the convening of the general meeting. Any other accountant firm which has been engaged by the Company may continue to act during the period of existence of such vacancy.

Article 256 The employment of an accounting firm by the Company shall be decided at a general meeting. Otherwise than the circumstances prescribed under Article 255 hereof, the Board shall not decide the appointment of an accountant firm before the general meeting.

Notwithstanding the stipulations in the contract between the Company and the accountant firm, shareholders at a general meeting may, by ordinary resolution, remove an accountant firm before the expiration of its term of office, but without prejudice to the firm’s right to claim, if any, for damages in respect of such removal.

Article 257 The remuneration of an accountant firm or the manner in which such firm is to be remunerated shall be determined by shareholders at a general meeting. The remuneration of an accountant firm appointed by the Board shall be determined by the Board.

Article 258 The Company’s appointment, removal and non-reappointment of an accountant firm shall be resolved upon by shareholders in general meeting. The resolution of the general meeting shall be filed with the securities regulatory authorities of the State Council. Article 259 Where it is proposed that any resolution be passed at a general meeting concerning the appointment of an accountant firm which is not an incumbent firm to fill a casual vacancy in the office of the accountant firm, re-appointment of a retiring accountant firm which was appointed by the Board of the Company to fill a casual vacancy, or removal of the accountant firm before the expiration of its term of office, the following provisions shall apply:

• (1) a copy of the proposal shall be sent before notice of meeting is given to the shareholders to the accountant firm proposed to be appointed or proposing to leave its post, or the accountant firm which has left its post in the relevant fiscal year. (Leaving from office includes leaving by removal, resignation and retirement.)

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• (2) if the accountant firm leaving its post makes representations in writing and requests the Company to notify such representations to the shareholders, the Company shall (unless the written representations are received too late):

• state the fact of the representations having been made by the accountant firm leaving in any notice of the resolution given to shareholders, and

• deliver as prescribed by the Articles of Association a copy of the representations as attachment to the notice to the shareholders.

• (3) the relevant accountant firm may (in addition to its right to be heard) require that the representations be read out at the meeting if the representations of the relevant accountant firm are not sent in accordance with this sub-clause (2).

• (4) An accountant firm which is leaving its post shall be entitled to attend meetings as follows:

• the general meeting at which its term of office would otherwise have expired;

• any general meeting at which it is proposed to fill the vacancy caused by its removal;

• any general meeting convened on its resignation.

An accountant firm which is leaving its post shall be entitled to receive all notices of, and other communications relating to, any such meetings, and to speak at any such meetings in relation to matters concerning its role as the former accountant firm of the Company.

Article 260 Prior to the removal or the non-renewal of the appointment of the accountant firm, notice of such removal or non-renewal shall be given in advance to the accountant firm and such firm shall be entitled to make representation at the general meeting. Where the accountant firm resigns its post, it shall make clear to the general meeting whether there has been any impropriety on the part of the Company.

Article 261 An accountant firm may resign its office by depositing at the Company’s domocile a resignation notice which shall become effective on the date of such deposit or on such later date as may be stipulated in such notice. Such notice shall include the following information: (1) a statement to the effect that there are no circumstances connected with its resignation which it considers should be brought to the notice of the shareholders or creditors of the Company; or

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(2) a statement of any such circumstances which should be brought to notice.

Where a notice is deposited as mentioned of the preceding paragraph, the Company shall, within fourteen days, send a copy of the notice to the relevant competent authorities. If the notice contains a statement under sub-clause (2) of the preceding paragraph, a copy of such statement shall be placed at the domocile of the Company for the inspection of shareholders. The Company shall also send a copy of such statement by prepaid mail to each holder of overseas listed foreign shares at the address registered in the register of members.

Where the accountant firm’s notice of resignation contains a statement of any circumstance which should be brought to the notice, it may require the Board to convene an extraordinary general meeting for the purpose of receiving an explanation of the circumstances connected with its resignation.

CHAPTER XVII INSURANCE

Article 262 All kinds of insurance of the Company shall be filed with the insurance companies that are registered in the PRC and are permitted by the PRC laws to provide insurance to Chinese companies.

Article 263 Type of insurance, insured amount, insurance period and other insurance terms are determined after discussion by the Board of the Company in accordance with the practice of companies of the same sector in other countries, convention in the PRC, as well as legal requirements.

CHAPTER XVIII LABOUR MANAGEMENT SYSTEM

Article 264 The Company formulates its regulations regarding labor management, personnel affairs, wage and welfare and social insurance in accordance with the laws, administrative rules and regulations, and relevant regulations the PRC.

Article 265 The Company implements the system of appointment for all levels of management personnel and a contract system for ordinary employees. The Company may decide by itself on personnel deployment, and is entitled to recruit by itself management personnel as well as workers and staff and dismiss them according to the laws and regulations in the contract.

Article 266 The Company is entitled to decide by itself the wage income and welfare benefits of all levels of management personnel and other employees, depending on its own economic efficiency in the scope specified by relevant administrative regulations.

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Article 267 The Company arranges medical insurance, retirement insurance and unemployment insurance for its management personnel and other employees in accordance with relevant administrative regulations of the Chinese government and local government, as well as implements the laws, stipulations and relevant regulations regarding the labor insurance for retired and unemployed workers.

CHAPTER XIX TRADE UNION

Article 268 The Company’s employees are entitled to organise a trade union and carry out its activities in accordance with the Trade Union Law of the People’s Republic of China. The trade union shall organise activities out of the normal business hours, unless otherwise specified by the Board.

CHAPTER XX MERGER AND DIVISION OF THE COMPANY

Article 269 For the Company’s merger or separation, the Board of the Company should submit a proposal. After its adoption in the procedure specified in the Articles of Association, relevant procedures for examination and approval will be handled according to the laws. Shareholders against the proposal for the Company’s merger or separation are entitled to request the Company or the shareholders that agree to such proposal to purchase its stock at a fair price. The contents of the Company’s resolutions on the merger or separation should form a special document for inspection by the shareholders.

In respect of the holders of H shares, the aforesaid document should also be dispatched to the shareholders by mail at the address as shown on the register of members.

Article 270 The Company’s merger may either be effected in the form of consolidation or new establishment.

For the Company’s merger, the parties thereto shall sign an agreement on the merger and formulate a balance sheet and lists of property. The Company shall inform the creditors in 10 days after the date of making the resolution for such merger, and make at least 3 times of newspaper notices in 30 days as provided by the applicable laws, administrative regulations or the regulatory provisions of the place where the Company’s shares are listed.

After the Company’s merger, the claims and debts of all the parties thereto shall be carried on by the Company existing after such merger or the new Company.

Article 271 Upon separation of the Company, its property shall be split correspondingly.

For the separation of the Company, all the parties involved in the separation should sign an agreement on the separation, and formulate a balance sheet and lists of property. The Company shall inform the creditors in 10 days after the date of making the resolution for such merger, and make at least 3 times of newspaper announcements in 30 days as provided for by the applicable laws, administrative regulations or the regulatory provisions of the place where the Company’s shares are listed.

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Debts incurred by the Company before its separation shall be borne by the companies after the separation according to the agreement reached.

Article 272 Where registered items are changed on account of the Company’s merger or separation, registration for such changes shall be completed with the Company’s registration authorities. In the event of the Company’s dissolution, the registration procedure for cancellation of the Company should be completed according to law. Where a new Company is established, the registration procedures for Company establishment should be completed according to law.

CHAPTER XXI DISSOLUTION AND LIQUIDATION OF THE COMPANY

Article 273 In one of the following cases, the Company shall be dissolved, and undergo liquidation according to law:

• (1) the general meeting makes a resolution on dissolution;

• (2) the Company has to be dissolved on account of its merger or separation;

• (3) the Company is declared as bankrupt according to law on account of its being unable to repay due debts;

• (4) the Company has been ordered to close down for violation of the laws or administrative regulations;

• (5) if the Company gets into serious trouble in operations and management and continuation may incur material losses of the interests of the shareholders, and no solution can be found through any other channel, the shareholders holding more than 10% of the total voting rights of the Company may request the people’s court to dissolve the Company.

Article 274 Where the Company is dissolved on account of the regulation in sub-clause (1) of the preceding Article, a clearing group shall be set up in 15 days, and its members shall be determined by the general meeting through an ordinary resolution.

Where the Company is dissolved on account of the regulation in sub-clause (2) of the preceding Article, the liquidation work shall be carried out by the parties to the merger or separation in accordance with the contract entered into at the time of such merger or separation.

Where the Company is dissolved on account of the regulation in sub-clauses (3) and (5) of the preceding Article, the people’s court shall according to the relevant laws, organise the shareholders, the relevant authorities and the professionals to form a liquidation group for the liquidation work.

Where the Company is dissolved on account of the regulation in sub-clause (4) of the preceding Article, the relevant competent department shall organise the shareholders, the relevant authorities and the professionals to form a liquidation group for carrying out the liquidation work.

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Article 275 In the event that the Board makes a decision upon liquidation of the Company (save and except for a liquidation in the event of the Company being declared as bankrupt), it shall, in the notice on the general meeting to be held on this, state that the Board has made a comprehensive investigation of the Company’s conditions, and hold that the Company can clear off all liabilities of the Company within 12 months from the commencement of liquidation.

Upon passing of the resolution on liquidation at the general meeting, the functions of the Board of the Company shall be immediately terminated.

The liquidation group shall follow the instructions from the general meeting, make at least one report each year to the general meeting on the income and expenditure of the liquidation group as well as Company’s business and progress on the liquidation, and make the final report to the general meeting at the end of the liquidation.

Article 276 The liquidation committee shall notify all creditors within 10 days after its establishment and shall make at least 3 newspaper announcements within 60 days. Creditors should, within 30 days from the date of receipt of notice, or (if no written notice is received in person) within 90 days from the date of the first notice, claim for their creditors’ rights to the liquidation group. Any overdue unclaimed creditors’ rights shall be deemed as a waiver of the same. Creditors, when filing their claims, should illustrate those claim-related issues and provide supporting documentation thereon. The liquidation group should register such claims.

Article 277 During the period of liquidation, the liquidation group shall perform the following functions and powers:

• (1) clear up the Company’s property and formulate the balance sheet and list of property;

• (2) send notifications or declarations to the creditors;

• (3) dispose of and clear up pending business of the Company;

• (4) pay due taxes and taxes accrued during the course of liquidation;

• (5) clear off claims and debts;

• (6) dispose of the Company’s remaining property after the repayment of the debts;

• (7) participate in civil proceedings on behalf of the Company.

Article 278 After clearing up Company’s property and formulating the balance sheet and list of property, the liquidation group shall formulate the liquidation scheme and submit the same to the general meeting or the relevant competent authorities for confirmation.

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The assets of the Company shall be liquidated in the following order of priority:

• (1) liquation costs;

• (2) salaries and social insurance premiums owed to the employees of the Company;

• (3) outstanding taxes;

• (4) debts of the Company.

The remaining assets of the Company upon repayment as specified in the preceding paragraph shall be distributed to the shareholders as per the types of their shares and their shareholding percentages.

During the period of liquidation, the company continues to exist, but it shall not carry out any business activities which are irrelevant with the liquidation. The Company’s property shall not be allocated to the shareholders before repayment has been made according to the preceding paragraph.

Article 279 In the event of Company’s liquidation owing to dissolution, where the liquidation group finds out that Company’s property are not sufficient for repayment of the debts after clearing up Company’s property and formulating the balance sheet and lists of property, it shall immediately apply for declaration of bankruptcy with the people’s court.

After the Company is declared as bankrupt through a verdict made by the people’s court, the liquidation group shall prepare and hand over the liquidation matters to the people’s court.

Article 280 Upon completion of the Company’s liquidation, the liquidation group shall prepare a liquidation report as well as an income/expenditure statement and financial books for the period of liquidation, which shall, after verification by certified public accountants in the PRC, be submitted at the general meeting or to the relevant competent authorities for confirmation.

The liquidation group shall submit the aforesaid documents to the Company registration authorities, apply for cancellation of the Company’s registration, and announce the Company’s dissolution within 30 days after confirmation at the general meeting or by the relevant competent authorities.

Article 281 Members of the liquidation committee shall perform their duty honestly and discharge the obligation of liquidation in accordance with the laws.

Members of the liquidation committee shall not take personal advantage of their posts to take bribes, receive other illegal incomes, or misappropriate properties of the Company.

Members of the liquidation committee shall compensate the losses of the Company or the creditors made due to their intent or gross negligence.

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CHAPTER XXII PROCEDURES FOR AMENDMENTS TO THE ARTICLES OF ASSOCIATION

Article 282 The Company shall amend the Articles of Association on the occurrence of any of the following events:

• (1) the provisions of the Articles of Association are in conflict with the amended Company Law or the relevant laws or administrative regulations;

• (2) there is change in the Company which makes it inconsistent with the Articles of Association;

• (3) the amendments to the Articles of Association have been approved by the shareholders at a general meeting.

Article 283 Any amendments to the Articles of Association by the Company shall be made in the following manner:

• (1) the Board shall pass a resolution to propose amendments to the Articles of Association and draw up a proposal for such amendments;

• (2) the foregoing proposal shall be furnished to the shareholders in writing and a general meeting shall be convened for poll voting;

• (3) subject to the relevant provisions of the Articles of Association, the amendments submitted to the general meeting for approval shall be approved by a special resolution.

Article 284 The amendment to the Company’s Articles of Association involving the Mandatory Provisions shall become effective upon approval by the company approving department authorised by the State Council. If there is any change relating to the registered particulars of the Company, application shall be made for registration of the changes in accordance with law.

Article 285 The Board may amend the Articles of Association of the Company in accordance with the resolution on amendments to the Articles of Association of the Company passed at the general meeting and the examination opinions from the relevant authorities for amendments to the Articles of Association of the Company.

Article 286 Any amendments to the Articles of Association of the Company shall be subject to disclosure as required by the laws and regulations.

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REVISED ARTICLES OF ASSOCIATION

CHAPTER XXIII SETTLEMENT OF DISPUTES

Article 287 The Company shall act according to following principles to settle disputes:

• (1) Whenever any disputes or claims arising between holders of overseas listed foreign shares and the Company, between holders of overseas listed foreign shares and the Company’s directors, supervisors, general manager or other senior management members, or between holders of overseas listed foreign shares and holders of Domestic Shares based on the Articles of Association or any rights or obligations conferred or imposed by the Company Law or any other relevant PRC laws and administrative regulations concerning the affairs of the Company, such disputes or claims shall be referred by the relevant parties to arbitration.

Where such dispute or claim of rights just mentioned is referred to arbitration, the entire claim or dispute must be referred to arbitration, and all parties who have a cause of action based on the same facts giving rise to the dispute or claim or whose participation is necessary for the resolution of such dispute or claim shall abide by the arbitration, provided that such parties shall be the Company or the Company’s shareholder, director, supervisor, general manager or other senior management members.

Disputes in relation to the definition of shareholders and disputes in relation to the shareholders’ register need not be resolved by arbitration.

• (2) A claimant may elect arbitration at either the China International Economic and Trade Arbitration Commission in accordance with its Arbitration Rules or the Hong Kong International Arbitration Center in accordance with its Securities Arbitration Rules. Once a claimant refers a dispute or claim to arbitration, the other party must submit to the arbitral body elected by the claimant.

If a claimant elects arbitration at Hong Kong International Arbitration Center, any party to the dispute or claim may apply for a hearing to take place in Shenzhen in accordance with the Securities Arbitration Rules of the Hong Kong International Arbitration Center.

• (3) If any disputes or claims of rights are settled by way of arbitration in accordance with sub-clause (1), law of the People’s Republic of China shall apply, save as otherwise provided by the laws and administrative regulations.

• (4) The award of an arbitration body shall be final and conclusive and binding on all the parties.

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REVISED ARTICLES OF ASSOCIATION

CHAPTER XXIV NOTICES

Article 288 A notice of the Company may be sent by:

• (1) hand;

• (2) mail;

• (3) public announcement;

• (4) such other methods provided for by the Articles of Association.

Article 289 Unless otherwise provided for in the Articles of Association, any notices, information or written statements distributed to holders of H shares by the Company shall be dispatched to each holder of H Shares at the address as shown in the register of members by hand or by mail or such other means permitted by the Listing Rules of the Hong Kong Stock Exchange (including a public announcement or notice to be published at the website of the Hong Kong Stock Exchange and the website of the Company, respectively).

All notices, information or written statements from the Company to holders of the Domestic Shares shall be served at the registered address of each holder of the Domestic Shares or by other contact methods as notified in writing to the Company by such holders of the Domestic Shares from time to time by means of e-mail, fax, mail, hand, and public announcement.

Once the Company has sent any notices, information or written statements by any of the aforesaid means, all shareholders shall be deemed to have received such notices, information or written statements.

Article 290 Any notices, documents, information or written statements served by shareholders or directors to the Company shall be personally delivered or sent by registered mail to the legal address of the Company.

Article 291 In order to prove that such notices, documents, information or written statements have been already sent, evidence should be provided to prove that the notices, documents, information or written statements have been served within the prescribed time in the way prescribed by Article 289 hereof; where a notice is served by hand, a confirmation of due receipt should be provided to the Company. Where a notice is served by a registered mail, evidence should be provided to prove that such notice should be sent by prepaid postage at the correct address of the Company.

Article 292 Where a notice is served by the Company by way of public notice, after the publication of such public notice, all related parties shall be deemed to have received the relevant notice.

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REVISED ARTICLES OF ASSOCIATION

In relation to the term “public announcement” as referred to in the Articles of Association, unless the context otherwise requires, in respect of a notice issued to the holders of Domestic Shares or a notice required to be served within the PRC according to the relevant regulations and the Articles of Association, it shall mean an announcement to be published in newspapers in the PRC, which are designated by the PRC laws, administrative regulations or the securities regulatory authorities of the State Council; in respect of an announcement issued to the holders of foreign investor shares or an announcement required to be made in Hong Kong according to the relevant regulations and the Articles of Association, it shall mean an announcement to be published at the related websites as requested by the relevant Listing Rules.

Except as otherwise provided in the Articles of Association, where a notice from the Company to holders of overseas listed foreign shares is served by way of a public announcement, the public announcement should be issued at the website of the Hong Kong Stock Exchange and the website of the Company respectively on the same day in accordance with the requirements of the local listing rules.

Article 293 Except as otherwise provided in the Articles of Association, the various forms of serving a notice prescribed by the provisions of the preceding paragraph shall be applicable to the notices issued for the purpose of convening a general meeting, board meeting and supervisory meeting of the Company.

Article 294 Where a notice of the Company is served by hand, the addressee shall be required to sign his name (or affix his chop) on the receipt, and the date on which the addressee signs the receipt shall be the date of service. Where a notice of the Company is sent by mail, the notice shall be deemed to be served after 24 hours from the date of delivery of the same to the post. Where a notice is served by way of public announcement, the date on which the public notice is first published shall be deemed as the date of serve.

Article 295 In the event that a notice of meeting is accidentally omitted to be sent to a person who is entitled to receive the notice or where such person has not received the notice of meeting, the meeting and any resolutions made therein shall not become void accordingly.

CHAPTER XXV INTERPRETATION OF THE ARTICLES OF ASSOCIATION

Article 296 The Board shall be responsible for the interpretation of the Articles of Association. Where there are matters not contained in the Articles of Association, such matters shall be passed by way of special resolutions at the general meetings as proposed by the Board.

Article 297 Except for any resolutions of the Board and any resolutions of general meetings passed pursuant to Article 296 hereof, the resolutions of the Company’s general meetings and the Board, as well as the rules and regulations of the Company established therein that are inconsistency with the Articles of Association shall be null and void.

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REVISED ARTICLES OF ASSOCIATION

Article 298 The Articles of Association are written in Chinese. Where there is any ambiguity between any other languages or different versions and the Chinese version of the same, the Chinese version which has been approved and registered at the company registration authority at the latest time shall prevail.

Article 299 References to “above”, “within” and “below” in the Articles of Association are inclusive of the item itself whereas “except”, “outside”, “less than” and “more than” are exclusive of the item itself.

Article 300 Reference to the term “Accountant Firm” shall have the same meaning as ascribed to the term “Auditors” according to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Article 301 Annex to the Articles of Association shall include the procedural rules for business discussion at a general meeting, the procedural rules for business discussion at a board meeting, the procedural rules for business discussion at a supervisory meeting and the system of the independent directors.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

CHAPTER I GENERAL PROVISIONS

Article 1 Pursuant to the Company Law of the People's Republic of China (the “Company Law”), the Securities Law of the People's Republic of China (the “Securities Law”), the Rules of Shareholders’ Meetings of Listed Companies (the “Rules of shareholders’ meetings”) issued by the China Securities Regulatory Commission (the “CSRC”), the Articles of Association of Dalian Port (PDA) Company Limited (the “Articles of Association”) and other relevant requirements, the Company has formulated these rules of procedure for shareholders’ meetings (these “Rules”) in order to standardise the acts and safeguard the lawful exercise of the functions and powers of the shareholders’ meetings of Dalian Port (PDA) Company Limited (the “Company”).

Article 2 The shareholders’ meetings of a listed company shall be held in strict compliance with the relevant requirements of laws, administrative regulations and the Articles of Association in order to ensure that the rights of shareholders can be exercised in accordance with the law.

Article 3 The board of directors (the “Board”) of a listed company shall pragmatically perform its duties and responsibilities, and organise shareholders’ meetings in a conscientious and timely manner. All directors of a listed company shall exercise their diligence and responsibility to ensure the proper holding of shareholders’ meeting and exercise of its functions and powers in accordance with the laws.

CHAPTER II GENERAL RULES OF SHAREHOLDERS’ MEETINGS

Article 4 The shareholders’ meeting is the organ of authority of the Company, and shall exercise the following functions and powers in accordance with law:

• (1) to decide on the operating policies and investment plans of the Company;

• (2) to elect and remove directors (not being staff representatives) and to fix the remuneration of relevant directors;

• (3) to elect and remove supervisors (represented by shareholders), and to fix the remuneration of relevant supervisors;

• (4) to examine and approve the reports of the Board;

• (5) to examine and approve the reports of the Supervisory Committee;

• (6) to examine and approve the proposed annual financial budgets and final accounts of the Company;

• (7) to examine and approve the profit distribution plans and loss recovery plans of the Company;

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PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

• (8) to adopt resolutions on any increase or reduction of registered capital and the acquisition of shares of the Company;

• (9) to adopt resolutions on matters such as merger, division, dissolution, liquidation and conversion of corporate form of the Company;

• (10) to adopt resolutions on the issue of bonds of the Company;

• (11) to adopt resolutions on the appointments, dismissals or non-reappointments of accounting firms;

• (12) to amend the Articles of Association;

• (13) to examine the proposals submitted by shareholders holding more than 5% of the Company's voting shares;

• (14) to examine and approve matters relating to security under Article 5 of these Rules;

• (15) to examine matters relating to the purchases and disposals of the Company's material assets within one year, which exceed 30% of the Company's latest audited total assets;

• (16) to examine and approve matters relating to changes in use of proceeds;

• (17) to examine the equity incentive plans;

• (18) to examine other matters required by shareholders’ meeting, laws, administrative regulations, departmental rules or the Articles of Association to be resolved by shareholders’ meeting.

The aforesaid functions and powers of the shareholders’ meeting shall not be exercised by the Board or other institutions and individuals by means of authorisation. The shareholders’ meeting may authorise or delegate to the Board to attend to other matters other than the aforesaid powers and functions.

Article 5 The following security to third parties of the Company are subject to the review and approval of the shareholders’ meeting:

• (1) any security provided after the total amount of security to third parties provided by the Company and its subsidiaries has reached or exceeded 50% of the Company's latest audited net assets;

• (2) any security provided after the total amount of security to third parties provided by the Company has reached or exceeded 30% of the Company's latest audited total assets;

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PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

• (3) a security to be provided in favour of an object which has a asset-liability ratio in excess of 70%;

• (4) a single security in excess of 10% of the Company's latest audited net assets;

• (5) any security, when aggregated on a cumulative basis for 12 consecutive months, is in excess of 30% of the Company's latest audited total assets;

• (6) any security, when aggregated on a cumulative basis for 12 consecutive months, is in excess of 50% of the Company's latest audited net assets, and the absolute amount of which is in excess of RMB50 million;

• (7) the security to be provided in favour of shareholders, de facto controllers and their related parties;

• (8) other security as required by the stock exchange on which the Company's shares are listed or the Articles of Association.

Security to third parties subject to the review and approval of the shareholders’ meeting shall be submitted to the shareholders’ meeting for examination and approval only after such security to third parties are reviewed and passed by the Board. Where the shareholders’ meeting is reviewing a resolution on guarantees to be provided to shareholders, defacto controllers and its related parties, such shareholders or shareholders under the control of such defacto controllers shall abstain from voting. Such resolution is subject to the approval of more than half of the voting rights held by the other shareholders present at the meeting.

Save for the aforesaid circumstances, security to third parties provide otherwise shall be examined and approved by the Board through authorisation. Nevertheless, such security must be approved and resolved by more than two-thirds of the directors present at the board meeting accordingly and subsequently passed as a resolution by more than half of all directors of the Company.

Article 6 Shareholders’ meetings are divided into annual shareholders’ meetings and extraordinary shareholders’ meetings. The shareholders’ meeting shall be convened by the Board. The annual shareholders’ meeting is held once every year within six months of the end of the previous accounting year.

Article 7 The Board shall hold an extraordinary shareholders’ meeting within two months upon the occurrence of one of the following circumstances:

• (1) the number of directors is less than the number required by the Company Law or less than two-thirds of the number required by the Articles of Association;

• (2) the uncovered losses are in excess of one third of the Company's total share capital;

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

• (3) shareholders holding more than 10% of the Company's issued shares with voting rights submit a written request to hold an extraordinary general meeting;

• (4) the Board considers it necessary or the Supervisory Committee proposes to hold such a meeting;

• (5) two or more independent directors propose to hold such a meeting;

• (6) such other circumstances as provided for by laws, administrative regulations, departmental rules or the Articles of Association.

If any of the aforesaid cases referred to in clause (3), (4) and (5) occurs, the agenda items proposed by the requisitioners of such meeting shall be included in the agenda of the shareholders’ meeting.

Article 8 Where the shareholders’ meeting cannot be held within the aforesaid time limit, the Company shall report to the local office of the CSRC in the locality of the Company as well as the stock exchange, by giving reasons and making announcements accordingly.

Article 9 The place for holding the shareholders’ meeting of the Company shall be the domocile of the Company or such other location as informed by the convenor of the shareholders’ meeting.

The shareholders’ meeting shall have a venue and be held on-site. The Company shall also provide internet or other conveniences to facilitate the attendance of shareholders in the shareholders’ meeting. Shareholders attending shareholders’ meetings in the aforesaid manners shall be deemed to be present.

Article 10 The Board shall engage lawyers to issue legal opinions in respect of the following matters relating to the holding of shareholders’ meeting and make relevant announcements accordingly:

• (1) whether the procedures relating to the convening and the holding of such meeting comply with laws, administrative regulations and the Articles of Association;

• (2) the legality and validity of the qualifications of the attendees and the convener;

• (3) the legality and validity of the voting procedures and results of the voting;

• (4) the issuance of legal opinions on other related matters upon request by the Company.

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PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

CHAPTER III CONVENING OF SHAREHOLDERS’ MEETINGS

Article 11 The Board shall hold the shareholders’ meeting within the time limit stipulated herein.

Article 12 Independent directors shall have the right to propose to the Board to hold an extraordinary general meeting. In respect of such proposal by the independent directors, the Board shall, in accordance with laws, administrative regulations and the Articles of Association, make a written response whether or not it agrees to hold an extraordinary general meeting, within 10 days upon receipt of such proposal.

If the Board agrees to hold an extraordinary general meeting, a notice of such meeting shall be dispatched within five days after the resolution of the Board. If the Board disagrees to hold an extraordinary general meeting, it shall give an explanation and issue an announcement accordingly.

Article 13 The Supervisory Committee shall have the right to propose to the Board to hold an extraordinary general meeting in writing. The Board shall, in accordance with laws, administrative regulations and the Articles of Association, make a written response whether or not it agrees to hold an extraordinary general meeting, within 10 days upon receipt of such proposal.

If the Board agrees to hold an extraordinary general meeting, a notice of such meeting shall be dispatched within five days after the resolution has been adopted by the Board. Changes made to the original proposal in the notice shall be approved by the Supervisory Committee.

If the Board disagrees to hold an extraordinary general meeting, or gives no response within 10 days upon receipt of such proposal, the Board shall be deemed to be unable or to have failed to perform its duties and responsibilities in holding the shareholders’ meeting, and the Supervisory Committee may hold and preside over such meeting by itself.

Article 14 Shareholders individually or jointly holding more than 10% of the Company's shares shall have the right to request the Board to hold an extraordinary general meeting in writing. The Board shall, in accordance with the laws, administrative regulations and the Articles of Association, make a written response whether or not it agrees to hold an extraordinary general meeting, within 10 days upon receipt of such request.

If the Board agrees to hold an extraordinary general meeting, a notice of such meeting shall be dispatched within 5 days after the resolution of the Board. Changes made to the original request in the notice shall be approved by the relevant shareholders.

If the Board disagrees to hold an extraordinary general meeting, or gives no response within 10 days upon receipt of such request, shareholders individually or jointly holding more than 10% of the Company's shares shall have the right to request the Supervisory Committee to hold such meeting in writing.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

If the Supervisory Committee agrees to hold an extraordinary general meeting, a notice of such meeting shall be dispatched within 5 days upon receipt of such request. Changes made to the original proposal in the notice shall be approved by the relevant shareholders.

If the Supervisory Committee fails to give the notice of such meeting within the specified time limit, it shall be deemed to have failed to hold and preside over such meeting, in which case, shareholders individually or jointly holding more than 10% of the Company's shares for more than 90 consecutive days shall have the right to hold and preside over such meeting by themselves.

Article 15 The following procedures shall be followed by shareholders requesting the convening of class meetings:

• (1) two or more than two shareholders jointly holding more than 10% of voting shares in such proposed meeting may request the Board in respect of the convening of an extraordinary general meeting or a class meeting by signing and submitting one or several written requests with the same format and contents and clarifying the agenda of the meeting. An extraordinary general meeting or a class meeting shall be held by the Board as soon as practicable upon receipt of the aforesaid written request. The aforesaid proportion of shareholding is calculated on the date on which the relevant shareholders submit the written request.

• (2) if the Board fails to dispatch a notice of such meeting within 30 days upon receipt of the aforesaid written request, shareholders submitting such request may hold such meeting by themselves within 4 months upon the Board's receipt of such request in which case, the holding procedures should follow that of the convening a shareholders’ meeting by the Board as closely as practicable.

Reasonable expenses by shareholders arising from the holding of the aforesaid meeting by shareholders due to the Board's failure to hold such meeting in response to the aforesaid request shall be borne by the Company. Such expenses shall be deducted from the amounts due by the Company to the director(s) who have neglected their duties.

Article 16 When the Supervisory Committee or shareholders decide to hold a shareholders’ meeting by themselves, they shall notify the Board in writing, and at the same time submit a filing with the local office of the CSRC in the locality of the Company and the stock exchange.

Prior to the announcement of the resolution of the shareholders’ meeting, the proportion of shares held by the convening shareholders shall not be less than 10%.

When the notice of the shareholders’ meeting is dispatched and the resolutions of such meeting is announced, the convening shareholders shall submit relevant evidences to the local office of CSRC in the locality of the Company and the stock exchange.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 17 The Board and the Secretary of the Board shall assist the Supervisory Committee or shareholders in holding the shareholders’ meeting by themselves. The Board shall provide the register of members as at the date of registration of equity entitlements. If the Board fails to provide the register of members, the convener may apply to and obtain such register of members from the securities registration and clearing houses or agents upon presentation of the relevant notice or announcement relating to the holding of the shareholders’ meeting. The register of members obtained by the convener shall not be used for any purpose other than the holding of the shareholders’ meeting.

Article 18 Expenses incurred by the Supervisory Committee or shareholders arising from the holding of the shareholders’ meeting by the Supervisory Committee or shareholders shall be borne by the Company.

CHAPTER IV PROPOSALS AND NOTICES OF SHAREHOLDERS’ MEETINGS

Article 19 A proposal of the shareholders’ meeting shall meet the following requirements:

• (1) the contents of a proposal shall not be in conflict with the laws, administrative regulations and the Articles of Association and shall be within the operating scope of the Company and the duties and responsibilities of the shareholders’ meeting;

• (2) have definite topics and specific matters for resolution;

• (3) be submitted or delivered to the Board in written form.

Article 20 The Board, the Supervisory Committee, and shareholders individually or jointly holding 3% or more of the Company's shares shall have the right to submit proposals to the Company at the shareholders’ meeting held by the Company.

Shareholders individually or jointly holding 3% or more of the Company's shares may submit an extempore proposal to the convener in writing 10 days prior to the meeting being held. The convener shall dispatch a supplementary notice of the shareholders’ meeting and announce the contents of such extempore proposal within 2 days upon receipt of the proposal.

Unless otherwise required by the preceding paragraph, the convener shall not amend the proposals listed in the aforesaid notice or add any new proposals subsequent to the dispatch of a notice of the shareholders’ meeting.

The shareholders’ meeting shall not vote and adopt a resolution on any proposal that is not listed in the notice of the shareholders’ meeting or that is inconsistent with Article 18 of these Rules.

Article 21 A written notice of the shareholders’ meeting to be held by the Company shall be dispatched to all shareholders, whose names appear in the register of members, 45 days before the meeting is held, specifying the matters to be considered and the date and

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

place of the meeting. Shareholders who intend to attend the shareholders’ meeting shall serve a written reply slip concerning attendance of the meeting to the Company 20 days before the meeting is held.

The date of holding the meeting shall be excluded from calculating the commencement of the time limit.

Article 22 A notice of the shareholders’ meeting shall meet the following requirements:

• (1) it shall be in written form;

• (2) it shall specify the place, date and time of the meeting;

• (3) it shall state the matters to be discussed at the meeting;

• (4) it shall state the date of registration of equity entitlements for shareholders having the right to attend the shareholders’ meeting;

• (5) provide shareholders with such information and explanation as are necessary for them to make informed decisions in connection with the matters to be discussed. This principle shall include (but not limited to) where the Company proposes to merge, repurchase its shares, restructure share capital or undergo other reorganization, the specific conditions and contracts (if any) of the proposed transactions must be provided and the reasons and effects of the same must be properly explained;

• (6) if any director, supervisor, general manager, deputy general manager and other senior management members have material interests in the matters subject to discussion, the nature and extent of such material interests shall be disclosed, and if the effect of the proposed matters on such director, supervisor, general manager, deputy general manager and other senior management members in their capacity as shareholders is different from that of other shareholders of the same class, the differences shall also be contained;

• (7) contain the full text of any special resolution to be proposed and approved at the meeting;

• (8) contain a clear statement that a shareholder who has the right to attend and vote at the meeting shall have the right to appoint one or more proxies to attend and vote at the meeting on his behalf and that such proxies need not be shareholders;

• (9) state the date and place to serve the proxy forms for the meeting;

• (10) state the names and contact numbers of the contact persons in connection with the meeting.

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

In the event that independent directors are required to express their views on the matters to be discussed, the notice of the shareholders’ meeting (or any supplemental notice) shall also disclose the opinions of independent directors and the reasons thereon.

Where the internet or other means are adopted for the shareholders’ meeting, it shall clearly state in the notice of the shareholders’ meeting the time and procedures of voting by internet or other means. The voting by internet or other means of the shareholders’ meeting shall not be earlier than 3:00 p.m. on the day before the on-site shareholders’ meeting is held and not later than 9:30 a.m. on the day when the on-site shareholders’ meeting is held, and shall be concluded not earlier than 3:00 p.m. on the day when the on-site shareholders’ meeting ends.

Once the date of registration of equity entitlements is confirmed, it shall not be altered.

Article 23 The Company shall calculate the number of voting shares represented by shareholders who intend to attend the meeting, based on the written replies it has received 20 days before the date of the shareholders’ meeting. In the event that the number of voting shares represented by shareholders who intend to attend the meeting is more than half of the total number of the voting shares of the Company, the Company may hold the shareholders’ meeting; if not, the Company shall, within 5 days, notify shareholders again of the matters to be considered at, and the date and place for, the meeting by public announcement. The Company may hold the shareholders’ meeting after such an announcement has been made.

Article 24 Where the elections of directors and supervisors are to be discussed, a notice of the shareholders’ meeting shall fully disclose the particulars of the candidates for a director and supervisor and at least shall include the following contents:

• (1) personal particulars such as educational background, working experience and part-time jobs;

• (2) whether or not they have any affiliated relationship with the Company or its controlling shareholders and defacto controllers;

• (3) disclose the number of shares of the Company held;

• (4) whether or not they have been subject to penalties by the CSRC and other relevant authorities as well as sanctions by any stock exchange.

Save the elections of directors and supervisors by cumulative voting system, each candidate for a director or supervisor shall be proposed by way of single proposal.

Article 25 A notice of the shareholders’ meeting shall be dispatched to shareholders (regardless of their voting rights at the shareholders’ meeting) in person or by prepaid mail. The addresses of the recipients shall be such addresses as shown in the register of members. For holders of domestic shares, a notice of the shareholders’ meeting may also be made by way of announcement.

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

The announcement referred in the preceding paragraph shall be published in one or more newspapers and journals designated by securities regulatory authorities of the State Council within a period of 45 to 50 days prior to the date of the shareholders’ meeting. Once an announcement is made, all holders of the domestic shares are deemed to have received the relevant notice of the shareholders’ meeting.

The Company shall give notice with sufficient time to enable holders of foreign investor shares, whose registered addresses are in Hong Kong, to exercise their rights or act in accordance with the terms of the notice.

Article 26 Subsequent to the dispatch of a notice of the shareholders’ meeting, the shareholders’ meeting shall not be postponed or cancelled without proper reasons, and the proposals set out in the notice of the shareholders’ meeting shall not be withdrawn. Once the meeting is postponed or cancelled, the convener shall make an announcement and give reasons therefor at least two working days prior to the original date of the meeting.

CHAPTER V CONVENING OF SHAREHOLDERS’ MEETINGS

Article 27 The Board of the Company and other conveners shall take necessary measures to safeguard the proper order of the shareholders’ meeting. The Board shall take measures to stop and report to relevant departments for investigation in a timely manner any acts of disturbing the shareholders’ meeting, stirring up fights and causing troubles, or infringing upon shareholders' actions of legal rights and interests.

Article 28 All shareholders whose names appear on the register of members on the date of registration of equity entitlements or their proxies shall be entitled to attend the shareholders’ meeting and exercise their voting rights in accordance with relevant laws, regulations and the Articles of Association.

Shareholders may attend in person or appoint proxies to attend and vote at shareholders’ meetings on their behalf.

Article 29 Individual shareholders attending the meeting in person shall present their identity cards or other valid credentials or proof of their identities as well as stock account cards; in the case of attendance by proxies, the proxies shall present valid proof of their identities and the letter of authorisation from shareholders.

Where a shareholder is a legal entity, its legal representative or proxy authorised by the legal representative shall attend the meeting on behalf of such legal entity. In case of attendance by legal representatives, they shall present their identity cards, valid certificates of their capacities of legal representatives and, in the case of attendance by proxies, the proxies shall present their identity cards and letter of authorisation duly issued by the legal representatives of the legal entity.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 30 Any shareholder entitled to attend and vote at the shareholders’ meeting shall have the right to appoint 1 or several persons (who may not be shareholders) to act as his proxy to attend and vote at the meeting on his behalf. The proxy/proxies so appointed by the shareholder shall exercise the following rights:

• (1) have the same right as the shareholder to speak at the meeting;

• (2) have authority to demand or jointly with others in demanding a poll;

• (3) have the right to vote by hands or on a poll, unless otherwise required by the applicable securities listing rules or other securities laws and regulations. Where more than one proxy is appointed, the proxies may only exercise the voting right on a poll.

Article 31 Instruments issued by shareholders appointing others to attend the shareholders’ meeting shall specify the following:

• (1) the name of the proxy;

• (2) whether or not the proxy is entitled to vote;

• (3) the instructions in relation to voting for or against or abstain from voting on each item to be considered at the shareholders’ meeting;

• (4) the date of the issue and the valid term of the letter of authorisation;

• (5) the signature (or seal) of the appointing party. Where the appointing party is a legal entity shareholder, the letter of authorisation shall be affixed with its common seal.

Article 32 The letter of authorisation shall contain a note that whether or not in the absence of specific instructions by shareholders, his proxy may vote as he thinks fit.

Article 33 The instrument appointing a proxy by shareholders shall be in writing under the hand of the appointer or his attorney duly authorised in writing; where the appointer is a legal person, either under the seal or such legal person or under the hands of its director or attorney duly authorised. The instrument shall specify the number of shares represented by the proxy; where more than one person is appointed as proxies, the instruments shall specify the number of shares represented by each proxy.

Article 34 Proxy forms shall be lodged at the domocile of the Company or other places specified in the notice of meeting 24 hours before the relevant meeting for voting according to the proxy form, or 24 hours before the designated time of voting. Where the proxy form is signed by a person under a power of attorney on behalf of the appointer, the power of attorney or other authorization documents authorized to be signed shall be notarized. A notarially certified copy of that power of attorney or other authorization documents, together with the proxy form, shall be deposited at the domocile of the Company or other places specified in the notice of meeting.

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Where the appointer is a legal person, its legal representative or other persons as authorized by resolution the Board or other decision-making authority to act as its representatives may attend the shareholders’ meeting of the Company as a representative of the appointer.

Where the shareholder is a recognized clearing house (the “Recognized Clearing House”) (or its nominee) as defined by relevant regulations enacted in Hong Kong from time to time, such shareholder is entitled to appoint 1 or more persons as it deems fit to act on its behalf at any shareholders’ meeting or any other shareholders’ meetings; whereas more than 1 person are authorized, the letter of authorization shall specify the number and class of shares involving each person so authorized. Such persons as authorized shall be entitled to exercise their rights on behalf of the Recognized Clearing House (or its nominee) as if they were individual shareholders of the Company.

Article 35 Any form issued to a shareholder by the Board for use by him for appointing a proxy shall allow the shareholder to freely instruct the proxy to cast vote in favour or against each resolution dealing with the businesses to be transacted at the meeting. Such a letter of authorization shall contain a statement that in the absence of instructions by the shareholder, his proxy may vote as he thinks fit.

In the case of attendance by proxy on behalf of a shareholder, he shall present his identity card and the letter of authorization signed by the appointer or his legal representative or attorney. The letter of authorization shall specify the date of issuance.

Where a legal representative is entrusted to attend the meeting by a legal entity (other than a Recognized Clearing House or its nominee), the Company shall be entitled to demand the legal representatives to present their identity proof and any valid certificates of their capacities as legal representatives.

Article 36 Where the appointer has deceased, incapacitated to act, withdrawn the appointment or the power of attorney, or where the relevant shares have been transferred prior to the voting, a vote given in accordance with the letter of authorization shall remain valid provided that no written notice of such event has been received by the Company prior to the commencement of the relevant meeting.

Article 37 Registration book for attending the shareholders’ meeting shall be prepared by the Company. The registration book shall set forth the names of attendees (or the attending units), their identity card numbers, residential address, number of voting shares held or represented, and name of the appointer (or the appointing unit), etc.

Article 38 During the course of a shareholders’ meeting, the convener and the lawyers engaged by the Company shall jointly verify the validity of the shareholders' qualifications based on the register of members provided by the securities registration and clearing authority, and shall register the names of the shareholders as well as the number of their voting shares. The registration for a meeting shall end before the chairman of the meeting announces the number of shareholders and proxies attending the meeting in person and the total number of their voting shares held.

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Article 39 All directors, supervisors and the Secretary of the Board shall attend the shareholders’ meeting. General manager, deputy general manager and other senior management members shall also be present at the meeting.

Article 40 The shareholders’ meeting shall be convened and presided over by the chairman of the Board. Where the chairman of the Board is unable to perform or fails to perform his duties and responsibilities, the Board may designate a director of the Company to convene and preside over the meeting on his behalf. Where no chairman is designated, the shareholders attending the meeting may elect one person to preside over the meeting. If for any reason the shareholders are unable to elect a chairman, the shareholder holding the largest number of voting shares and attending the meeting (whether in person or by proxy) shall preside over the meeting.

For a shareholders’ meeting convened by the Supervisory Committee itself, such meeting shall be presided over by the chairman of the Supervisory Committee. If the chairman of the Supervisory Committee is unable to perform or fails to perform his duties and responsibilities, a supervisor jointly elected by over one half of all supervisors shall preside over the meeting.

For a shareholders’ meeting convened by the shareholders themselves, such meeting shall be presided over by a representative of shareholders elected by the convener.

During the course of a shareholders’ meeting, if the chairman of the meeting is in breach of these Rules and renders it impossible for the meeting to continue, with the consent of the shareholders present at the meeting and representing more than one half of the total voting rights of all shareholders so present, the shareholders’ meeting may elect one individual to be the chairman of the meeting and the meeting shall continue.

Article 41 During the annual general meeting, the Board and the Supervisory Committee shall respectively give a report on their work in the previous year to the shareholders’ meeting, and each independent director shall also make his duty report correspondingly.

Article 42 Directors, supervisors and senior management shall make response to and give explanation of the inquiries and suggestions made by shareholders.

Article 43 The chairman of meeting shall, prior to voting, announce the number of shareholders and proxies attending the meeting in person as well as the total number of their voting shares, which shall be the number of shareholders and proxies attending the meeting in person and the total number of their voting shares as indicated in the meeting's registration record.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 44 Minutes of shareholders’ meetings shall be kept by the Secretary of the Board. The minutes shall contain the following items:

• (1) the date, place and agenda of the meeting, and the name of the convener;

• (2) the name of the chairman of the meeting, and the names of directors, supervisors, general manager and other senior management members of the Company attending or present at the meeting;

• (3) the number of shareholders and proxies attending the meeting, the total number of voting shares they represent and the percentage of the total number of shares of the Company they represent;

• (4) the discussions in respect of each motion, highlights of the speeches made at the meeting and the voting results;

• (5) details of the queries or recommendations of the shareholders, and the corresponding answers or explanations;

• (6) the name of lawyers, counting officers and scrutinizers;

• (7) such other matters which shall be recorded in the minutes of the meeting in accordance with the provisions of the Articles of Association.

Article 45 The convener shall ensure the truthfulness, accuracy and completeness of the minutes of the meeting. Directors and supervisors attending the meeting, the Secretary of the Board, the convener or his representative, and the chairman of the meeting shall sign the minutes of the meeting. The minutes of the meeting and the signed attendance record of the shareholders who attended in person, the proxy forms and the valid information relating to voting online and by other means shall be kept together for a term of 15 years.

Article 46 The convener shall ensure that a shareholders’ meeting is held continuously until final resolutions have been reached. In the event that the shareholders’ meeting is suspended or the shareholders fail to reach any resolution due to force majeure or other special reasons, necessary measures shall be taken to resume the meeting as soon as possible or the meeting shall be terminated directly and an announcement of such termination shall be made promptly. At the same time, the convener shall report to the agency of CSRC in the locality of the Company and the stock exchange.

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

CHAPTER VI VOTING AND RESOLUTION OF GENERAL MEETINGS

Article 47 Resolutions of the shareholders’ meeting are divided into ordinary resolutions and special resolutions.

The ordinary resolutions of a shareholders’ meeting shall be passed by shareholders (including proxies) present in person at the meeting with more than one-half of the voting shares.

The special resolutions of at a shareholders’ meeting shall be passed by shareholders (including proxies) present in person at the meeting with more than two-thirds of the voting shares.

Article 48 The following matters shall be passed by ordinary resolutions of a shareholders’ meeting:

• (1) the work report of the Board and the Supervisory Committee;

• (2) the plans formulated by the Board for profit distribution and making up losses;

• (3) the removal of members of the Board and the Supervisory Committee and their remuneration and payment methods;

• (4) the Company's annual financial budgets and final accounts, balance sheets, income statements and other financial statements;

• (5) the annual reports of the Company;

• (6) the matters other than those required by laws, administrative regulations or the Articles of Association to be passed by special resolutions.

Article 49 The following matters shall be passed by special resolutions of a shareholders’ meeting:

• (1) the increase and reduction of the Company's share capital, the repurchase of shares and the issue of any class of shares, warrants and other similar securities of the Company;

• (2) the issue of corporate bonds;

• (3) the division, merger, dissolution, liquidation or change of corporate forms of the Company;

• (4) the amendments to the Articles of Association;

• (5) the major acquisitions or disposals of the Company's assets within 1 year period or total guarantees exceeding 30% of the Company's latest audited total assets;

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

• (6) the equity incentive plans;

• (7) such other matters as required by laws, administrative regulations or the Articles of Association, and passed by ordinary resolutions that such matters are of material effects to the Company and require adoption of special resolutions.

Article 50 Shareholders (including proxies) shall exercise their voting rights at a shareholders’ meeting according to the number of voting shares they represent, with one vote for each share, save for those provided in Article 55 of these Rules. Shares held by the Company are not entitled to any voting rights, and shall not be counted in the total number of voting shares present at the shareholders’ meeting.

The Board, independent directors and shareholders who are qualified under the relevant conditions may canvass shareholders for votes.

Article 51 When related party transactions are being reviewed by a shareholders’ meeting, the related shareholders shall abstain from voting, and the number of voting shares held by them shall not be counted in the total number of valid voting shares. An announcement of the resolutions of the shareholders’ meeting shall fully disclose the voting results of shareholders unrelated with such transactions.

The abstention and voting procedures of the related party shareholders shall be as follows:

• (1) when the shareholders’ meeting is reviewing related party transactions, the chairman of the meeting shall announce the list of related shareholders, and the total number of voting shares held by shareholders unrelated to such transactions and present at the meeting, and the percentage of such voting shares to the total shares of the Company.

• (2) the related shareholders shall actively propose to the Board of their abstention from voting, while the chairman of the meeting shall demand the related shareholders to abstain from voting.

• (3) if the Board attends the meeting as the representative of related shareholders, the Chairman of the Board shall delegate another director to preside over the meeting during the review and voting of the related party transactions.

• (4) If the related shareholders disagree with the decision of the convener, they shall have the right to report to the relevant securities regulatory authorities and may appeal to the people's court for judgment in respect of whether or not they are related to the relevant transactions and have the voting rights. Subject to the final and binding judgement of the securities regulatory

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

authority or the people's court, such shareholders shall abstain from voting, and the voting shares they represent shall not be counted in the total number of valid voting shares.

• (5) related shareholders who shall abstain from voting may participate in the discussion of their related party transaction, and make explanation and illustration to shareholders’ meeting on issues such as the reasons for the incurrence of the related party transaction, basic information about the transaction and whether or not the transaction is fair and valid.

Article 52 Unless otherwise provided by applicable securities listing rules or other securities laws and regulations, voting at a shareholders’ meeting shall be decided on a show of hands unless a poll is (before or after any vote by show of hands) demanded by the following persons:

• (1) by the chairman of the meeting;

• (2) by at least two shareholders entitled to vote in person or proxies with voting rights;

• (3) by one or more shareholders (including proxies) individually or jointly holding more than 10% of the voting shares of all shareholders present at the meeting.

Unless a poll is so demanded, a declaration by the chairman of the meeting that a resolution has on a show of hands been carried, and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolutions at the meeting.

The demand for a poll may be withdrawn by the person who makes such demand.

Article 53 A poll demanded on such matters as the election of chairman or the adjournment of the meeting, shall be taken forthwith. A poll demanded on any other matters shall be taken at such time as the chairman may decide, and the meeting may proceed to discuss other matters, while the results of the poll shall still be deemed to be a resolution of that meeting.

Article 54 On a poll taken at a meeting, a shareholder (including proxy) entitled to 2 or more votes need not cast all his votes for or against in the same way.

Article 55 In the case of an equality of votes, whether on a show of hands or a poll, the chairman of the meeting shall be entitled to a casting vote.

Article 56 The Company shall provide conveniences to shareholders to facilitate their participation in the shareholders’ meeting through various means and approaches, including modern information technology such as on-line voting platform, provided that the legality and validity of the shareholders’ meeting are assured.

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 57 Save for the special circumstances under which the Company is in a crisis, without the prior approval of a special resolution by the shareholders’ meeting, the Company shall not enter into a contract with a person other than a director, general manager, deputy general manager or other senior management members whereby the management of all or major business operations of the Company is delegated to such person.

Article 58 The manner and procedures in which directors and supervisors shall be nominated are as follows:

• (1) shareholders individually or jointly holding more than 3% of the Company's total issued shares with voting rights may propose non-staff representatives as candidates for directors or supervisors to the shareholders’ meeting in written proposals, but the number of persons nominated shall comply with the Articles of Association and shall not be greater than the number of directors or supervisors to be elected. Such proposal submitted by a shareholder to the Company shall be lodged with the Company at least 14 days before the date of the shareholders’ meeting.

• (2) Subject to the number of persons specified in the Articles of Association, the Board or Supervisory Committee may propose and submit the list of candidates for directors and supervisors to the Board and the Supervisory Committee respectively for examination. Subject to the examination and adoption of resolutions of the Board and the Supervisory Committee, the candidates for directors and supervisors shall be submitted to the shareholders’ meeting in written proposals.

• (3) the nomination and related procedures of independent directors shall be conducted in a manner in compliance with Article 59 of these Rules.

• (4) written notices on the intention to propose the candidates for directors and supervisors and the notice of the candidates' acceptance of such nominations and relevant written materials of the information of candidates shall be sent to the Company at least seven days before the date of the shareholders’ meeting. The Board and the Supervisory Committee shall provide the biographies and basic information of the candidates of directors and supervisors to shareholders.

• (5) the time period for the submission of the aforesaid notices and documents (commencing from the next day after the dispatch date of the notice of the shareholders’ meeting) by the relevant nominators and nominees prescribed by the Company shall be no less than seven days.

• (6) each candidate of directors and supervisors shall be voted on separately at the shareholders’ meeting.

• (7) in the event of a casual vacancy of director or supervisor, the Board or the Supervisory Committee shall propose to elect or replace one at the shareholders’ meeting.

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 59 Independent directors of the Company shall be nominated in following manner and procedures:

• (1) The Board, the Supervisory Committee, and shareholders individually or jointly holding more than 1% of the issued shares of the Company shall have the right to nominate candidates for independent directors to be elected and decided at shareholders’ meetings;

• (2) The nominator of an independent director shall have the approval of the proposed candidate before making a nomination. The nominator shall have adequate knowledge of the profession, education, professional title and detailed work experience of the candidates as well as status of all his part-time jobs. The nominator shall also comment on the qualifications and independence of the candidate for being an independent director. The candidate shall make a public statement disclaiming any relationship between him and the Company that will affect his independent and objective judgment;

• (3) Prior to the shareholders’ meeting for the election of independent directors, the Board of the Company shall announce the above information in accordance with the relevant provisions.

• (4) Where RMB ordinary shares are issued by the Company and listed on a domestic stock exchange, then prior to the shareholders’ meeting for the election of independent directors, the Company shall submit the relevant materials of all candidates to CSRC and its local office in the locality of the Company as well as the stock exchange on which the Company's shares are listed. Dissenting opinions of the Board with regard to the candidates shall also be submitted in written form.

Candidates being objected by CSRC may become candidates for directors of the Company but not as candidates for independent directors of the Company.

At the shareholders’ meetings for the election of independent directors, the Board shall state clearly whether or not the candidates for independent directors have been subject to objection by CSRC.

Article 60 The lists of candidates for directors and supervisors shall be submitted to the shareholders’ meeting by proposals.

In the course of the election of directors and supervisors, the accumulative voting system may be adopted in accordance with the provisions of the Articles of Association or resolutions of the shareholders’ meeting.

The accumulative voting mechanism in the preceding paragraph means, each share is entitled to such number of votes equivalent to the number of candidates for director and supervisor which may be pooled in the course of the election of directors and supervisors at the shareholders’ meeting. The Board shall make an announcement to shareholders concerning the biographies and general information of the candidates for directors and supervisors.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 61 Save for the accumulative voting system, all proposals shall be voted at the shareholders’ meeting separately. In case of different proposals for the same matter, the proposals shall be voted according to the order of being proposed accordingly. Unless a shareholders’ meeting is suspended or no resolution can be adopted due to force majeure or other special reasons, no proposal shall be set aside or rejected for voting at the shareholders’ meeting.

Article 62 The following matters shall not be implemented or applied for unless they have been approved at the shareholders’ meeting by more than half of the holders of public shares with voting rights present in accordance with the requirements of the laws, administrative regulations and the Articles of Association:

• (1) the issue of additional new shares by the Company to the public (including the issue of overseas listed foreign investor shares or other certificates of securities nature), issue of convertible corporate bonds and placing of shares to existing shareholders (except for the shares which the shareholder with effective controlling right has undertaken to subscribe for in full wholly in cash before the shareholders’ meeting is held);

• (2) any major asset restructuring of the Company in which the total consideration for the assets to be purchased exceeds the audited net book value of the assets purchased by 20% or more;

• (3) the repayment by shareholders of their debts due to the Company with their equity in the Company;

• (4) the overseas listing of subsidiaries of the Company which have a material effects on the Company;

• (5) any relevant matters relating to the development of the Company which may have material effects on the interests of the public shareholders.

Subsequent to the dispatch of the notice of shareholders’ meeting, the Company shall announce such notice again within three days after the date of registration of equity entitlements. In the announcement of resolutions of the shareholders’ meeting, the Company shall indicate the number of public shareholders that attended the voting, the total amount of shares held thereby and its proportion to the total public shares, the voting results, and disclose the shareholdings and votes of top ten public shareholders that participated in the voting.

Article 63 When considering a proposal at the shareholders’ meeting, no change shall be made thereto. Otherwise, such related change shall be treated as a new proposal which shall not be processed for voting at the then shareholders’ meeting.

Article 64 The same voting right may only be exercised by electing to vote on-site, online or by other means. In the event that the same voting right has been exercised twice, the result of the first voting shall prevail.

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PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 65 The voting at the shareholders’ meeting shall be conducted in the form of poll. Before a resolution is voted on at the shareholders’ meeting, two representatives of the shareholders shall be elected as counting officers and scrutinizers. Any shareholder who is interested in the matter under consideration and their proxies shall not participate in vote counting or scrutinizing.

When the shareholders are voting on the proposals, lawyers, shareholders' representatives and supervisors' representatives shall count and scrutinize the votes jointly, and the voting result will be announced forthwith. Voting results for the resolutions shall be recorded in the minutes of meeting.

Shareholders of the Company or their proxies that vote online or by other means shall have the right to check and inspect their voting results through the corresponding voting system.

Article 66 The ending time of on-site shareholders’ meeting shall not be earlier than that of online voting or by other means. The chairman of the meeting shall announce the voting status and results of each proposal, and whether or not the proposals have been passed accordingly.

Prior to the formal announcement of voting results, the Company, counting officers, scrutinizers, major shareholders, internet voting service provider and other relevant parties in relation to voting at on-site shareholders’ meeting, online or by other means shall be obliged to keep the voting results confidential.

Article 67 The chairman of the meeting shall determine whether or not a resolution of the shareholders’ meeting has been adopted. His decision shall be final and conclusive and shall be announced at the meeting and recorded in the minutes.

Article 68 Shareholders attending the shareholders’ meeting shall submit their voting on the proposals in the following ways: “for”, “against” or “abstain”.

Ballot papers that are left in blank, unduly completed or illegible or that have not been used shall be deemed to be waiver by the voter, and the voting results corresponding to the number of shares they hold shall be treated as “abstain from voting”.

Article 69 In the event that the chairman of the meeting has any doubt as to the result of a resolution put forward to the vote, he may have the votes counted. In the event that the chairman of the meeting fails to have the votes counted, any shareholder present in person or by proxy objects to the result announced by the chairman of the meeting may demand that the votes be counted immediately after the declaration of the voting result, the chairman of the meeting shall have the votes counted immediately.

Article 70 In the event that the votes are counted at the shareholders’ meeting, the counting results shall be recorded in the minutes of the meeting.

The minutes of the meeting together with the attendance book for shareholders' signing and the proxy forms for proxies attending the meeting shall be kept at the domocile of the Company.

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 71 The resolution of the shareholders’ meeting shall be announced in a timely manner, and the announcement shall indicate the number of shareholders and proxies that attended the meeting, the total amount of their voting shares and its proportion to the total voting shares of the Company, and the voting method, voting results of each proposal and detailed contents of each resolution.

Article 72 Where a proposal has not been adopted or the resolution of any previous shareholders’ meeting has been modified in the current shareholders’ meeting, a special explanation shall be given in the announcement on the resolutions of the shareholders’ meeting.

Article 73 Where the proposals on the election of directors and supervisors have been adopted at the shareholders’ meeting, the terms of office of new directors and supervisors shall commence from the time the relevant resolutions are passed at the shareholders’ meeting.

Article 74 Where the proposals on cash dividends, bonus shares or stock dividends from capital reserves have been passed by the shareholders’ meeting, the Company shall implement the specific plans within two months from the conclusion of the shareholders’ meeting.

Article 75 Shareholders may inspect photocopies of the minutes of meetings free of charge during the business hours of the Company. In the event of any shareholder requesting for photocopies of such minutes, the Company shall deliver the photocopies within seven days upon receipt of a reasonable charge.

Article 76 Where, according to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, any shareholder cannot vote on any particular resolution or restricted to the casting of votes for or against any particular resolution, any voting conducted by such shareholders or on behalf of them in violation of such regulation or restrictions shall not be counted in the voting results.

CHAPTER VII SPECIAL PROCEDURES FOR VOTING BY CLASS SHAREHOLDERS

Article 77 Shareholders holding different classes of shares shall be class shareholders.

Class shareholders shall enjoy the rights and assume obligations pursuant to the provisions of laws, administrative regulations and the Articles of Association.

Article 78 Any variation or abrogation of the rights of any class of shareholders proposed by the Company may only come into effect upon the adoption of a special resolution at a shareholders’ meeting and approval by the affected shareholders of that class at a separate meeting held in accordance with Articles 80 to 84 of these Rules.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

Article 79 The following circumstances shall be deemed to be variation or abrogation of the rights of shareholders of a certain class:

• (1) to increase or decrease the number of shares of a particular class, or increase or decrease the number of shares of another class having rights on voting, distribution or other privileges equal or superior to those of the shares of such class;

• (2) to effect an exchange of all or part of shares of such class into shares of another classes, or to effect an exchange or grant a right of exchange of all or part of the shares of another classes into shares of such class;

• (3) to remove or reduce rights to accrued dividends or cumulative dividends attached to shares of such class;

• (4) to reduce or remove the rights to a dividend preference or a liquidation preference to distribution of property attached to shares of such class;

• (5) to add, remove or reduce the rights to conversion, options, voting, transfer, pre-emptive rights to placement and acquire securities of the Company attached to shares of such class;

• (6) to remove or reduce rights to receive payment payable by the Company in particular currencies attached to shares of such class;

• (7) to create a new class of shares having rights on voting, distribution or other privileges equal or superior to those of the shares of such class;

• (8) to restrict the transfer or ownership of the shares of such class or add to such restrictions;

• (9) to issue subscription rights or share conversion rights for shares of such class or another classes;

• (10) to increase the rights and privileges of shares of another classes;

• (11) to restructure the Company where the proposed restructuring scheme will result in different classes of shareholders bearing a disproportionate burden of obligations of such restructuring;

• (12) to vary or abrogate the terms provided in this chapter.

Article 80 Shareholders of the affected class, whether or not having the right to vote at the shareholders’ meeting, shall nevertheless have the right to vote at class meetings on matters concerning in clause (2) to (8) and (11) to (12) of Article 79 of these Rules, but interested shareholders shall not be entitled to vote at class meetings.

The interested shareholders mentioned in the preceding paragraph shall have the following meanings:

• (1) in the case of a repurchase of its own shares by offers to all shareholders pro rata or a public dealing on a stock exchange in accordance with the provisions

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APPENDIX VIII

PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

of the Articles of Association, “interested shareholder” shall refer to the controlling shareholders as defined in the Articles of Association;

• (2) in the case of a repurchase of its own shares by an off-market agreement in accordance with the provisions of the Articles of Association, “interested shareholders” shall refer to the shareholders to which the proposed agreement relates;

• (3) in the case of a restructuring of the Company, “interested shareholder” shall refer to a shareholder within a class who bears liabilities less than the proportion burden imposed on other shareholders of that class or who has interests different from those held by shareholders of the same class.

Article 81 A resolution of the class meeting shall be passed in accordance with Article 80 of these Rules by equities representing more than two-thirds of voting rights of shareholders present in the meeting.

Article 82 Written notice of a class meeting convened by the Company shall be dispatched 45 days prior to the date of the class meeting to all shareholders of such class whose names appear on the register of members, specifying the matters to be considered and the date and place of the meeting. Shareholders who intend to attend the meeting shall serve on the Company written replies of their intention to attend 20 days prior to the date of the meeting.

If the number of voting shares at such meeting held by shareholders who intend to attend such meeting reachs more than one-half of the total number of voting shares at such meeting, the Company may hold such class meeting; if this cannot be attained, the Company shall further notify the shareholders by way of announcement within five days thereof specifying the matters to be considered and the date and place of the meeting. After such announcement has been given, the Company may then hold the class meeting.

Article 83 Notices of the class meeting need only be served on shareholders entitled to vote thereat.

The procedures of the class meeting shall be held in a manner as similar as possible to that of a shareholders’ meeting, and the provisions in the Articles of Association relating the procedures of a shareholders’ meeting shall apply to the class meeting.

Article 84 Save for shareholders of shares of other classes, the holders of domestic shares and holders of overseas listed foreign shares are deemed to be different classes of shareholders.

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APPENDIX VIII PROPOSED RULES OF PROCEDURE FOR SHAREHOLDERS’ MEETINGS

The special procedures for voting at a class of shareholders shall not apply in the following circumstances:

• (1) where the Company issues, upon approval by a special resolution at a shareholders’ meeting, domestic shares and overseas listed foreign shares once every 12 months, either separately or concurrently, and the number of domestic shares and overseas listed foreign shares proposed to be issued does not exceed 20% of each of the issued domestic shares and overseas listed foreign shares respectively;

• (2) where the Company's plan to issue domestic shares and overseas listed foreign shares at the time of incorporation is carried out within 15 months from the date of approval by the securities regulatory authorities of the State Council.

CHAPTER VIII SUPPLEMENTARY PROVISIONS

Article 85 Unless the context otherwise requires, the “announcement” set out in these Rules to be issued to domestic shareholders or required to be issued in the PRC pursuant to relevant regulations and the Articles of Association shall be published in relevant newspapers or journals in the PRC as required by PRC laws and administrative regulations or designated by the securities regulatory authority of the State Council; the “announcement” set out in these Rules to be issued to foreign shareholders or required to be issued in Hong Kong pursuant to relevant regulations and the Articles of Association shall be published in relevant websites as required by relevant listing rules.

Unless otherwise provided for in these Rules, notices issued by the Company to overseas listed foreign shareholders in the form of announcement shall be published in the websites of Stock Exchange of Hong Kong and the Company respectively on the same date as required by the local listing rules.

The supplementary notice to the shareholders’ meeting set out in these Rules shall be posted on the same designated newspaper, journal or website on which the notice of such meeting is posted.

Article 86 The references “not less than”, “within” and “not more than” referred to in these Rules are all inclusive terms, while the references “below”, “other than”, “less than” and “more than” are exclusive terms.

Article 87 These Rules is an annexure to the Articles of Association and subject to the interpretation of the Board.

Article 88 These Rules and its amendments shall become effective upon the approval of the shareholders’ meeting.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

RULES OF PROCEDURES FOR BOARD MEETINGS

Article 1 Purpose

In order to further regulate the transaction of business and decision-making procedures of the board of directors (hereinafter referred to as the “Board”) of Dalian Port (PDA) Company Limited (hereinafter referred to as “the Company”), procure the directors and the Board to effectively perform their duties and enhance the Board in terms of standardized operations and efficiency in decision-making, the Company has formulated these procedural rules (hereinafter referred to as the “Rules”) in accordance with the Company Law of the People’s Republic of China (hereinafter referred to as “Company Law”), the Securities Law of the People’s Republic of China (hereinafter referred to as “Securities Law”), the Guidelines for the Governance of Listed Companies of China Securities Regulatory Commission (hereinafter referred to as “CSRC”), the Rules For Listing of Shanghai Stock Exchange and the relevant rules and regulations. The Rules shall form an attachment to the Articles of Association, and shall be prepared by the Board and approved by the shareholders’ meeting.

Article 2 Office of the Board

The Office of the Board is established by the Board which is responsible for attending to the daily affairs of the Board.

Article 3 Regular Meetings

The meetings of the Board shall be in the form of either regular meetings or interim meetings.

At least four regular meetings of the Board shall be held in each year.

Article 4 Proposals for Regular Meetings

Before the notice on a regular meeting of the Board is circulated, the Office of the Board shall solicit the opinions of the specialized committees of the Board, the directors and the general manager in an adequate manner to form preliminary proposals for the meeting to be submitted to the Chairman of the Board who shall finalise such proposals.

Before finalising the proposals, the Chairman of the Board shall solicit the opinions of the general manager, deputy general managers and other senior officers.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Proposal documents included in the meeting agenda are drafted by the proponent or relevant functional departments of the Company, and reviewed and confirmed by the proponent. Proposal documents and relevant materials reviewed and confirmed by the proponent shall be submitted to the Secretary of the Board for standardization and compliance review within three working days upon the issue of the notice on the meeting of the Board. The proponent or the proposing department shall revise the proposal documents or provide other supplementary materials based on the review opinion of the Secretary of the Board. All formal proposal documents of the Board shall be submitted to the Secretary of the Board four working days prior to the meeting of the Board or its specialized committees.

The Secretary of the Board shall submit the documents subject to the review of the specialized committees to members of the specialized committees and other related persons three working days prior to the meeting of the specialized committees. The agenda of the meeting of the Board and all proposal documents shall be submitted to all the directors three working days prior to the meeting of the Board.

No amendment or changes shall be made to the meeting of the Board meeting documents once they have been dispatched in accordance with the timeframe provided in the preceding paragraph.

Article 5 Interim Meetings

The Board shall convene an interim meeting in any of the following circumstances:

• (1) when proposed by shareholders holding 10% or more of the Company’s shares carrying voting rights;

• (2) when proposed by more than one third directors;

• (3) when proposed by the Supervisory Committee;

• (4) when deemed necessary by the Chairman of the Board;

• (5) when proposed by more than one-half of the independent directors;

• (6) when proposed by the general manager;

• (7) when required by the securities regulatory authority;

• (8) any other circumstances as prescribed by the Articles of Association.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Article 6 Proposing Procedures for Interim Meetings

Where an interim meeting of the Board is proposed in accordance with the provisions set out in the preceding paragraph, a written proposal signed under the hand or seal of the proponent shall be submitted through the Office of the Board or directly to the Chairman of the Board. The following shall be indicated in the written proposal:

• (1) the name of the proponent;

• (2) the reasons for the proposal or objective facts/ causes on which the proposal is based;

• (3) the time or timeframe, venue and format of the proposed meeting;

• (4) the proposals in clear and specific terms; and

• (5) the contact information of the proponents and the date of proposal, etc.

The proposals shall be concerning matters that fall within the scope of the authorities of the Board as prescribed in the Articles of Association, and be submitted together with the relevant materials.

After receiving the aforesaid written proposals and the relevant materials, the Office of the Board shall forward such proposals and materials to the Secretary of the Board for standardization and compliance review. If the Secretary of the Board considers the contents of the proposals not clear and not specific, or consider the relevant materials insufficient, they may request the proponent to revise or supplement the relevant contents. Upon the review by the Secretary of the Board, the written proposals and materials shall be submitted to the Chairman of the Board for review and finalizing.

The Secretary of the Board shall submit the documents subject to the review of the specialized committee to members of the specialized committees and other related persons three working days prior to the meeting of the specialized committees. The agenda of the meeting of the Board and all proposal documents shall be submitted to all the directors three working days prior to the proposed meeting of the Board.

No amendment or change shall be made to the Board meeting documents once they have been dispatched in accordance with the timeframe provided in the preceding paragraph.

The meeting of the Board shall be convened by the Chairman of the Board within 10 days upon receipt of the proposals or the request of the securities regulatory authority. The Chairman of the Board shall preside over the meeting.

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APPENDIX IX

PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Article 7 The Convening and Chairing of the Meeting

The meeting of the Board shall be convened and presided over by the Chairman of the Board. Where the Chairman of the Board is unable to perform his duties and responsibilities, the Chairman of the Board may designate a director to perform his duties and responsibilities on his behalf. Where the Chairman of the Board fails to designate or perform his duties and responsibilities, one of the directors shall be elected by more than half or more of the directors to convene and preside over the meeting.

Article 8 Notices on the Meeting

To hold a regular or interim meeting of the Board, the Office of the Board shall submit a notice on the meeting to all directors, supervisors, the general manager and the Secretary of the Board through direct delivery, e-mail, telegraph, telex, fax, express post, registered post or any other means 14 days in advance in case of a regular meeting or 5 days in advance in case of an interim meeting.

Where the circumstance is urgent and requires an interim meeting of the Board to be held as soon as practical, the notice on the meeting may be circulated at any time by phone or other verbal means, but the convener shall make explanations at the meeting.

Article 9 Contents of the Notice on the Meeting

A written notice on the meeting shall at least include:

• (1) the time and venue of the meeting;

• (2) the form in which the meeting is convened;

• (3) the matters (proposals) to be reviewed;

• (4) the convener and the presider of the meeting, the proponent of the interim meeting as well as the written proposals;

• (5) the requirement that the director shall attend the meeting in person or appoint another director as his proxy to attend the meeting;

• (6) the contact person and contact method;

• (7) the date of issuance of the notice.

A verbal notice on meeting shall at least include the contents set out in paragraphs (1) and (2) above, as well as explanations for the convening of an interim meeting of the Board under urgent circumstances.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

In principle, the meeting of the Board shall not consider matters not set out in the notice on the meeting. Where the addition of new items to the agenda on an ad hoc basis is required, it shall be agreed upon by more than half of the directors present before it is considered and put forward for voting.

Article 10 Alteration of the Notice on the Meeting

After a written notice on the regular meeting of the Board is circulated, if the time or venue or such other details of the meeting needs to be changed or the proposals for the meeting need to be supplemented, revised or cancelled, a written notice on changes specifying the circumstances, the relevant details of the new proposals, and the relevant materials shall be distributed three days before the original date of the meeting. If the meeting is less than three days away, the meeting shall be correspondingly postponed or held as originally scheduled with the unanimous approval of all directors attending the meeting.

After a notice on an interim meeting of the Board is issued, if the time or venue or such other details of the meeting needs to be changed or the proposals for the meeting need to be added, changed or cancelled, prior approval of all the attending directors shall be obtained and corresponding records shall be made.

Article 11 Holding of the Meetings

The meeting of the Board shall be held only when over half of the directors attend the meeting. If the quorum of the meeting cannot be met as a result of directors’ refusal to attend or absence without reasons, the Chairman of the Board and the Secretary of the Board shall timely report such circumstances to the regulatory authority.

Supervisors may attend the meeting as non-voting delegates; the general manager, deputy general managers or the Secretary of the Board who is not a director shall attend the meeting as non-voting delegates. If considered necessary, the presider of the meeting may notify other relevant persons to attend the meeting as non-voting delegates.

Article 12 Personal Attendance and Proxy Attendance at the Meeting

In principle, directors shall attend the meeting of the Board in person. If they are not able to attend the meeting due to certain reasons, they shall read the conference materials in advance, furnish clear opinions and appoint other directors with letter of authorization to attend the meeting on their behalf.

A letter of authorization shall indicate:

• (1) the names of the appointing party and the trustee;

• (2) the scope of authorization of the appointing party and his instructions on voting intention in respect of the proposals;

• (3) the signature of the appointing party and the date, etc.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

In case a director authorizes any other director to sign a written confirmation for a regular report, he shall give a special authorization in the letter of authorization.

The appointed director shall submit a letter of authorization to the presider of the meeting, stating the details of such appointment.

The appointed director attending the meeting shall exercise the rights of a director within the scope of authorization. If a director does not attend a meeting of the Board, and does not authorize any other director to attend the meeting, the voting right at the meeting shall be deemed waived.

Article 13 Restrictions in Connection with the Proxy Attendance

The following principles shall be observed by directors appointing proxies to attend the meeting of the Board and the proxies so appointed:

• (1) when a connected transaction is being reviewed, a director who is not a related party shall not appoint a director who is a related party to attend the meeting, and a director who is a related party shall not accept the appointment of any director who is not a related party;

• (2) an independent director shall not appoint any non-independent director to attend the meeting, and a non-independent director shall not accept the appointment of any independent director;

• (3) a director shall not appoint any other director to attend the meeting with full discretion to act on his/her behalf without having explained his opinions and voting intentions to the proposals, and the relevant directors also shall not accept any appointment with full discretion or with unclear scope of authorization;

• (4) a director shall not accept the appointment of more than two directors, or appoint any director that has accepted the appointment of two directors to attend the meeting on his behalf.

Article 14 Form in which a Meeting is Held

In principle, the meeting of the Board shall be held on-site. When necessary, the meeting may also be held as voting via video, telephone, fax, mail or e-mail, etc. upon consent of the convener (presider) and the proponents so long as the directors are able to fully express their opinions. The meeting of the Board can also be held on-site in combination with other means.

In the case of meetings other than meetings held on-site, the number of attending directors shall be calculated by including the directors who are on the spot as showed by video, the directors who have expressed opinions in the telephone conference, valid documents actually received within the prescribed deadline via faxes, mails, e-mails, or according to the written confirmation letters submitted by the directors proving that they have attended the meeting.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Upon the approval of the Chairman of the Board, the meeting of the Board may be replaced by the circulation of written proposals. Generally only under urgent circumstances when the meeting of the Board is not able to be held on-site, or by way of telephone, video etc. due to certain reasons, the meeting of the Board may be replaced by the circulation of written proposals. For circulation of written proposals, upon the approval of the Chairman of the Board, the Secretary of the Board may distribute the relevant proposals at any time provided that the directors shall have sufficient time to consider and decide over the matter. Directors’ opinions expressed in respect of the proposals considered in such manner shall be recorded and forwarded to all directors by the Secretary of the Board. The draft of such proposals shall be delivered to each director either through direct delivery, mail, fax or e-mail. The proposal shall be adopted as a resolution of the meeting of the Board upon delivery to the Secretary of the Board through any of the aforementioned ways where the number of directors signing affirmative opinions on one or several copies of resolutions with the same content reaches the quorum for making the relevant decision and no further meeting of the Board shall be convened. The adoption of a resolution by way of circulation of written proposals shall not be recorded as a session of meeting of the Board.

The following matters may not be adopted as resolutions of the Board by way of circulation of written proposals:

• (1) the matters subject to the approval of the shareholders’ meeting as provided by the listing rules of the stock exchange on which the Company’s shares are listed, the Articles of Association, other laws and administrative regulations;

• (2) the regular meetings of the Board;

• (3) the material connected transactions;

• (4) where any director is in dissent.

Article 15 Review Procedures of the Meetings

The presider shall request all the directors attending the meeting of the Board to express clear opinions in respect of each proposal.

With respect to the proposals that shall be approved in advance by the independent directors according to the provisions, the presider shall, before considering the relevant proposals, designate one independent director to read out the written approval opinions reached by the independent directors.

The presider shall restrain in a timely manner any director who obstructs the normal conduct of the meeting or interrupts the speech of other directors.

Unless it is unanimously agreed by all attending directors, the meeting of the Board shall not vote on any proposal not included in the notice on the meeting. Where a director accepts the appointment of any other director to attend the meeting of the Board on his behalf, he shall not vote on the proposal not included in the notice on the meeting on behalf of any other director.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Article 16 Expressing Opinions

The directors shall seriously read the relevant meeting materials, and independently and prudently express their opinions in a fully informed manner.

A director may inquire, prior to the meeting, the Office of the Board, the convener, the general manager, deputy general managers and other senior officers, all specialized committees, the accountant firm, the legal firm and other relevant persons and institutions to obtain necessary information for decision-making, and may also propose to the presider during the course of the meeting to request the aforesaid persons or representatives of the institutions to attend the meeting to give relevant explanations.

Article 17 Voting at the Meeting

After each proposal has been fully discussed on, the presider shall submit it for voting by the attending directors at an appropriate timing.

A show of hand shall be adopted in the voting at the meeting of the Board, each director shall have one vote. In case of a tie between negative and affirmative votes on a particular matter, the Chairman of the Board shall have the casting vote.

The voting intention of the directors shall be divided into the following categories: affirmative, negative or abstention from voting. The attending directors shall choose any one of the aforesaid voting intentions. If any director does not choose any intentions or simultaneously chooses two or more intentions, the presider shall require such director to make a new choice. If such director refuses to do so, he shall be deemed as abstaining from voting. If any director leaves the meeting venue halfway without returning and thus does not make a choice, he shall be deemed as abstaining from voting.

Article 18 Calculation of Voting Results

The presider shall announce the calculation results on the spot. Where any director votes after the presider announces the voting results or upon conclusion of the prescribed time limit for voting, such vote shall not be counted in the calculation results.

Article 19 Formation of Resolutions

Except for the circumstances prescribed in Article 20 of the Rules, proposals submitted to the meeting of the Board may be adopted as resolutions only with the consent of more than half of all directors. Where any provision in any laws, administrative regulations or the Articles of Association prescribes a higher proportion of affirmative votes casted by directors for the adoption of resolutions by the Board, such provision shall prevail.

Where the Board makes a resolution for the guarantee matters within the scope of its powers according to the provisions in the Articles of Association, in addition to more than half of all directors of the Company, there shall be more than two thirds of the attending directors who cast affirmative votes.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

In case there is any conflict between different resolutions in terms of contents or meaning, the resolution formed at a later time shall prevail.

Article 20 Abstaining from Voting

A director shall abstain from the voting on the relevant proposals in any of the following circumstances:

• (1) where the director’s abstention is prescribed in the listing rules of the stock exchange on which the Company’s shares are listed;

• (2) where the director is of the view that he/she should abstain;

• (3) any other circumstances under which the director shall abstain as a result of his being related to the enterprise involved in the proposal as prescribed in the Articles of Association.

Under the circumstances where any director abstains from voting, the relevant meeting of the Board can be held if more than half of the non-related directors attend the meeting, and the resolution thus formed shall be adopted by more than half of the non-related directors. Where there are less than three non-related attending directors, the voting on the relevant proposals shall not be conducted, and the relevant matters shall instead be submitted to the general meeting for consideration.

Article 21 Compliance with Scope of Authority

The Board shall transact business in strict compliance with its scope of authority as mandated by the general meeting and laid down in the Articles of Association, and shall not adopt any resolution beyond its authority.

Article 22 Special Provisions on the Distribution of Profits

Where the meeting of the Board needs to make a resolution regarding the distribution of profits, it may first notify the certified public accountant of the preliminary distribution plan to be submitted to the Board for review, and require the certified public accountant to issue a draft of audit report based thereon (all financial data other than those relating to the distribution of profits shall have been ascertained). After making a resolution on the distribution of profits, the Company shall require the certified public accountant to issue a formal audit report, on the basis of which the Board shall make resolutions on other relevant matters of the regular report.

Article 23 Handling of Proposals Not Adopted

Where a proposal fails to be adopted at a meeting of the Board, any proposal with the same contents shall not be considered again before the period of one month has lapsed in the absence of any significant changes in the relevant conditions and factors.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Article 24 Suspension of Voting

Where more than half of the attending directors or more than two independent directors consider any proposal not clear and specific, or such directors are not able to make a judgment on the matter due to the insufficiency of conference materials, such directors may jointly request that the meeting of the Board or the discussion of certain items at the meeting to be suspended, and the Board shall accept such request.

The directors who suggest suspending the voting shall put forward specific requirements for the resubmission of a proposal that meet their requirements.

Article 25 Audio Records of Meeting

Audio records may be made where necessary for the whole process of a meeting of the Board held on-site, via video or telephone and by other means.

Article 26 Minutes of Meeting

The Secretary of the Board shall arrange the staff members of the Office of the Board to prepare the minutes of meeting for the meeting of the Board. The minutes of meeting shall include:

• (1) the number of session, time, venue of the meeting and the form in which it is convened;

• (2) the circulation of the notice on the meeting;

• (3) the convener and the presider of the meeting;

• (4) whether the directors attended the meeting in person or by proxy;

• (5) the proposals considered at the meeting, the major points of the views given by each director on the relevant matters;

• (6) the voting results of each proposal (the number of affirmative, negative and abstention votes shall be specifically indicated);

• (7) such other matters which the attending directors consider necessary to indicate.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Article 27 Meeting Summary and Resolution Records

In addition to the minutes of meeting, the Secretary of the Board may also arrange the staff members of the Office of the Board to make summarized recored of the meeting when necessary, and to make separate records of the resolutions formed at the meeting in light of the voting results.

Article 28 Signature of Directors

Minutes of meeting and resolution of each meeting of the Board shall be submitted to the attending directors for review immediately after the meeting. The attending directors shall sign their names on the minutes of meeting and resolution for confirmation on behalf of themselves or the directors who appoint them to attend the meeting. If any director holds dissenting opinions to the minutes of meeting or resolution, he may make a written explanation when signing his name. Where necessary, the director may report the same to the regulatory authority or may make a public declaration. If the minutes of meeting and resolution cannot be submitted to the attending directors immediately after the meeting, the Secretary of the Board shall provide such records to the attending directors within two days after the meeting. Save for any omission, directors shall not request to include in the minutes of meeting any opinions or relevant explanations not expressed at the meeting.

If any director refuses to sign and confirm in accordance with the preceding paragraph, and does not express dissenting opinions with written explanation, report his dissenting opinions to the regulatory authority or deliver a public declaration, such director shall be deemed to be in total agreement with the contents of the minutes of meeting and resolutions.

If the meeting of the Board is held via telephone, video, or any other similar communication devices, minutes of meeting and resolution may be signed by way of fax.

If the issuance of a single resolution of the Board in respect of the matters considered at the meeting of the Board is required, the resolution text shall be drafted by the functional department of the Company which is in charge of the matter and then submitted together with relevant proposals. Such resolution shall be submitted to the directors for signature upon examination by the Secretary of the Board.

Article 29 Announcement of Resolutions

The announcement of the resolutions adopted by the Board shall be made by the Secretary of the Board according to the relevant provisions of the stock exchange on which the Company’s shares are listed. Before the disclosure of an announcement of resolutions, the attending directors, the persons attending the meeting as non-voting delegates, the personnel for recording and other services, etc. shall be obliged to keep the resolutions confidential.

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APPENDIX IX PROPOSED RULES OF PROCEDURE FOR BOARD MEETINGS

Article 30 Implementation of Resolutions

The Chairman of the Board shall procure the relevant persons to implement the resolutions formed by the Board, check the implementation of resolutions, and circulate a notice at a future meeting of the Board on the implementation of resolutions adopted.

Article 31 Filing of Meeting Archives

The archives of meetings of the Board, including the notices on the meeting, conference materials, letters of authority on appointing other directors to attend the meeting, the audio records of the meeting, the minutes of meeting, meeting summary (if any), resolution records (if any) and resolutions, etc. as signed and confirmed by the attending directors, etc., shall be maintained by the Secretary of the Board.

The meeting archives of the meeting of the Board shall be kept for 15 years.

Article 32 Supplementary Provisions

In these Rules, references to “or more”, “within” and “or less” shall indicate a range that includes the relevant numerical values whereas “less than”, “other than”, “lower than” and “more than” shall indicate a range that excludes the relevant numerical values.

The Rules and any amendments thereof shall become effective upon formulation by the Board and the approval of the general meeting.

The Rules shall be subject to the interpretation by the Board.

– IX-12 –

APPENDIX X

PROPOSED RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

Article 1 Purpose

In order to further regulate the transaction of business and decision-making procedures of the Supervisory Committee (hereinafter referred to as the “Supervisory Committee”) of Dalian Port (PDA) Company Limited (hereinafter referred to as “the Company”), procure the supervisors and the Supervisory Committee to effectively perform their duties and improve the governance structure of the legal person of the Company, the Company has formulated the procedural rules (hereinafter referred to as the “Rules”) in accordance with the Company Law of the People’s Republic of China (hereinafter referred to as “Company Law”), the Securities Law of the People’s Republic of China (hereinafter referred to as “Securities Law”), the Guidelines for the Governance of Listed Companies of China Securities Regulatory Commission (hereinafter referred to as “CSRC”), the Rules For Listing of Shanghai Stock Exchange and other relevant rules and regulations. The Rules are the attachment of the Articles of Association, and shall be prepared by the Supervisory Committee and approved by the shareholders’ general meeting.

Article 2 Work Organization of the Supervisory Committee

The Company shall establish or designate a relevant department as the work organization of the Supervisory Committee for handling the daily affairs of the Supervisory Committee and keeping the seal of the Supervisory Committee.

Article 3 Regular Meetings and Interim meetings of the Supervisory Committee

The meetings of the Supervisory Committee shall be in the form of either regular meetings or interim meetings.

Meetings of the Supervisory Committee shall be held at least twice a year and at least once every six months. An interim meeting of the Supervisory Committee shall be held within 10 days under any of the following circumstances:

• (1) when proposed by any of the supervisors;

• (2) when the shareholders’ general meeting or the meeting of the Board has adopted a resolution that is against laws, rules, regulations, various provisions and requirements of the regulatory authority, the Articles of Association, resolutions of the shareholders’ general meetings of the Company or other relevant provisions;

• (3) when the misconduct of directors and senior officers may cause material damage to the Company or affect the market in a reprehensible way;

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APPENDIX X PROPOSED RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

• (4) when the Company, directors, supervisors or senior officers are sued by the shareholders;

• (5) when the Company, directors, supervisors or senior officers are punished by securities regulatory authority or publicly denounced by the stock exchange on which the Company’s shares are listed;

• (6) when required by the securities regulatory authority;

• (7) any other circumstances as prescribed by the Articles of Association.

Article 4 Proposals for Regular Meetings

The work organization of the Supervisory Committee shall collect the proposals from all the supervisors and to solicit the opinions of the Company’s employees over a period of no less than 2 days. When collecting proposals and soliciting opinions, it shall be clarified that it shall focus on the supervision on the standardized operation of the Company and the duties of directors and senior officers, rather than decision-making on the Company’s operation and management.

Article 5 Proposing Procedures for Interim Meetings

Where an interim meeting of the Supervisory Committee is proposed, a written proposal signed by the proponent shall be submitted through the Office of the Supervisory Committee or directly to the Chairman of the Supervisory Committee. The written proposal shall indicate:

• (1) the name of the proponent;

• (2) the reasons for the proposal or objective facts/ causes on which the proposal is based;

• (3) the proposed timing or timeframe, venue and format of the meeting;

• (4) the proposals in clear and specific terms;

• (5) the contact information of the proponent and the date of proposal, etc.

The work organization of the Supervisory Committee shall issue a notice on the interim meeting of the Supervisory Committee within three days upon the receipt of supervisors’ written proposals by the work organization of the Supervisory Committee.

In the event that the work organization of the Supervisory Committee delays the issue of the notice on such meeting, the proponent shall, in a timely manner, report any delay of notice on such meeting by the Supervisory Committee to the regulatory authority.

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APPENDIX X

PROPOSED RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

Article 6 Convening of and Presiding over the Meeting

The meeting of the Supervisory Committee shall be convened and presided over by the Chairman of the Supervisory Committee. Where the Chairman of the Supervisory Committee is unable or fails to perform his duties, one supervisor shall be elected to convene and preside over the meeting with the approval of half or more of the supervisors.

Article 7 Notices on the Meeting

To hold a regular or interim meeting of the Supervisory Committee, the work organization of the Supervisory Committee shall submit a notice on the meeting to all the supervisors through direct delivery, fax, e-mail or any other means 10 days in advance in case of a regular meeting or 5 days in advance in case of an interim meeting.

In urgent cases which require an interim meeting of the Supervisory Committee to be held as soon as practical, the notice on the meeting can be circulated at any time by phone or any other verbal means, but the convener shall make explanations at the meeting.

Article 8 Contents of the Notice on the Meeting

A written notice on the meeting shall at least include:

• (1) the time and venue of the meeting;

• (2) the form in which the meeting is convened;

• (3) the matters (proposals of the meeting) to be reviewed;

• (4) the convener and the presider of the meeting, the proponent of the interim meeting as well as the written proposals;

• (5) the requirement that the supervisors shall attend the meeting in person or appoint other supervisors as proxies to attend the meeting;

• (6) the contact person and contact method;

• (7) the date of the notice.

A verbal notice of meeting shall at least include the contents mentioned in the aforesaid clause (1) and (2) as well as the explanations on the interim meeting of the Supervisory Committee under urgent circumstances.

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APPENDIX X

PROPOSED RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

Article 9 Form in which a Meeting is Convened

In principle, the meeting of the Supervisory Committee shall be held on-site. When necessary, the meeting may be held via telephone, video or any other similar communication devices. During such meetings, so long as the supervisors attending the meeting can clearly hear the speech of other supervisors and communicate with each other, all attending supervisors shall be deemed as present in person at the meeting.

During the voting on a communication basis, supervisors shall fax their written opinions and voting intentions on the matters reviewed and confirmed with their signatures to the work organization of the Supervisory Committee.

A meeting of the Supervisory Committee may be replaced by circulation of written proposals if the Chairman of the Supervisory Committee or more than one-half of supervisors put forward such a proposal.

Article 10 Holding of the Meetings

The meeting of the Supervisory Committee shall be held only when more than two thirds of the supervisors attend the meeting. If the quorum of the meeting cannot be met as a result of supervisors’ refusal to attend or absence without reasons, other supervisors shall timely report such circumstances to the regulatory authority.

The Secretary of the Board and securities affairs representatives shall attend the meeting as non-voting delegates.

Article 11 Personal Attendance and Proxy Attendance at the Meeting

Supervisors shall attend the meeting of the Supervisory Committee in person. If they cannot attend the meeting due to certain reasons, they may appoint other supervisors with letter of authorization to attend the meeting on their behalf (for independent supervisors who cannot attend the meeting in person, they should appoint other independent supervisors as their proxies).

A letter of authorization shall indicate:

• (1) names of the entrusting party and the trustee;

• (2) the scope of authorization of the entrusting party and his instructions concerning the voting intentions to the proposals;

• (3) the signature of the entrusting party and the date, etc.

The appointed supervisor shall exercise the rights of a supervisor within the scope of authorization. If a supervisor does not attend a meeting of the Supervisory Committee, and does not authorize any representative to attend the meeting on his/her behalf, he/she shall be deemed as waiving the voting right in the meeting.

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APPENDIX X

PROPOSED RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

Article 12 Review Procedures of the Meetings

The presider shall request all the attending supervisors to express specific opinions in respect of each proposal.

The presider of the meeting shall, in response to the supervisors’ proposals, request the directors, senior officers, other staff of the Company or business personnel of relevant intermediaries to attend the meeting and response to the relevant inquires.

Article 13 Resolution of the Supervisory Committee

A show of hand shall be adopted in the voting at the meeting of the Supervisory Committee, each supervisor shall only have one vote.

The voting intention of the supervisors shall be divided into the following categories: affirmative, negative or absention from voting. The attending supervisors shall choose any one of the aforesaid voting intentions. If any supervisor does not choose any intentions or simultaneously chooses two or more intentions, the presider shall require such supervisor to make a new choice. If such shareholder refuses to do so, he shall be deemed as abstaining from voting. If any supervisor leaves the venue halfway and thus does not make a choice, he shall be deemed as abstaining from voting.

A resolution of the Supervisory Committee shall be approved by more than two thirds of all supervisors.

Article 14 Audio Records of Meetings

Audio records may be made for the whole process of the meeting of the Supervisory Committee where necessary.

Article 15 Meeting Records

Staff members of the Office of the Supervisory Committee shall prepare the minutes of meeting for on-site meetings of the Supervisory Committee. The minutes of meeting shall include:

• (1) the number of session, time, venue of the meeting and the form in which it is convened;

• (2) the circulation of the notice on the meeting;

• (3) the convener and the presider of the meeting;

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APPENDIX X PROPOSED RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

• (4) the attendance of the meeting;

• (5) the proposals reviewed at the meeting, the major points of the views given by each supervisor on the relevant matters;

• (6) the voting results of each proposal (the number of affirmative, negative and abstention votes shall be specifically indicated);

• (7) other matters which the attending supervisors consider necessary to indicate.

In the event of a meeting of the Supervisory Committee held by way of communication, the work organization of the Supervisory Committee shall compile the minutes of meeting in accordance with the aforesaid requirements. In the event of a meeting of the Supervisory Committee held by circulating the written proposals, supervisors shall sign one or several copies of the resolution with the same contents, and it is not necessary to prepare any minutes of meeting.

Article 16 Signature of Supervisors

The attending supervisors shall sign their names on the minutes of meeting for confirmation on behalf of themselves or other supervisors who appoint them to attend the meeting. In the event that the meeting of the Supervisory Committee is held via telephone, video, or any other similar communication devices, meeting minutes may be signed by way of fax. If any supervisor holds dissenting opinions to the minutes of meeting, he may make a written explanation when signing his name. Where necessary, the supervisor may report it to the regulatory authority or make a public declaration of the same in a timely manner. Except the contents omitted, the Supervisory Committee shall not request for the addition in the minutes of meeting its opinions not expressed in the meeting of Supervisory Committee and the relevant statements.

If any supervisor refuses to sign and confirm in accordance with the aforementioned requirements, and does not express any dissenting opinions with written explanation, report it to the supervisory authority or deliver a public declaration, such supervisor shall be deemed to be in total agreement with the contents of the minutes of meeting.

Article 17 Announcement of Resolutions

The resolutions adopted by the Supervisory Committee shall be announced to the public by the Secretary of the Board as appropriate in accordance with the relevant provisions of the stock exchange on which the Company’s shares are listed.

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APPENDIX X

PROPOSED RULES OF PROCEDURE FOR SUPERVISORY COMMITTEE MEETINGS

Article 18 Implementation of Resolutions

The supervisors shall procure the relevant persons to implement the resolutions formed by the Supervisory Committee. The Chairman of the Supervisory Committee shall, at a future meeting of the Supervisory Committee, report to the supervisors on the implementation of resolutions already adopted.

Article 19 Filing of Meeting Archives

The archives of meetings of the Supervisory Committee, including the notices on the meeting, conference materials, the letters of authorization on appointing other supervisors to attend the meeting, the audio records of the meeting, the minutes of meeting, resolutions, etc. as signed and confirmed by the attending supervisors, etc., shall be maintained by the Secretary of the Board.

The meeting archives of the meeting of the Supervisory Committee shall be kept for 15 years.

Article 20 Supplementary Provisions

In these Rules, references to “or more”, “within” and “or less” shall indicate a range that includes the relevant numerical values whereas “less than”, “other than”, “lower than”, “more than” shall indicate a range that excludes the relevant numerical values.

The Rules and any amendments thereof shall become effective upon formulation by the Supervisory Committee and the approval of the shareholders’ meeting.

The Rules shall be subject to the interpretation by the Supervisory Committee.

– X-7 –

APPENDIX XI PROPOSED WORKING RULES FOR INDEPENDENT DIRECTORS

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

Article 1 Pursuant to the Guiding Opinions on Establishing the System of Independent Directors by Listed Companies (the “Guiding Opinions”), Code of Corporate Governance for Listed Companies of China Securities Regulatory Commission (the “CSRC”) and Certain Provisions on Strengthening the Protection of the Rights and Interests of Public Shareholders , and the Rules for Listing of Shares on Shanghai Stock Exchange and such other laws, rules and regulations, relevant regulatory documents and the Articles of Association, Dalian Port (PDA) Company Limited (the “Company”) has established the Working System of Independent Directors (the “System”), in order to further improve the corporate governance structure, enhance the standardised operation of the Company, and practically safeguard the interests of all shareholders (in particular, the small and medium shareholders) of the Company.

Article 2 Independent directors of the Company refers to directors who do not hold any position in the Company other than directors, and have no relationship with the Company and its major shareholders (referring to the shareholders individually or jointly hold more than 5% of the Company’s total number of shares with voting rights) that may hinder such directors’ ability to make independent and objective judgments, and comply with the requirements on independence as stipulated in the relevant rules of the stock exchange on which the Company’s shares are listed.

Article 3 Independent directors shall bear a fiduciary obligation and an obligation of diligence towards the Company and all of its shareholders. Independent directors shall, pursuant to the requirements of the relevant laws, rules and regulations, regulatory documents and the Articles of Association, conscientiously perform their duties and responsibilities, safeguard the Company’s interests as a whole and, in particular, focus on the lawful rights and interests of small and medium shareholders not impaired. Independent directors shall perform their duties and responsibilities independently, not being affected by the major shareholders and defacto controllers of the Company, or other units or individuals who may be interested in the Company and its major shareholders, defacto controllers or in the Company.

Article 4 Independent directors shall not concurrently hold the position of Independent Director in more than five listed companies (inclusive of the Company), and shall ensure that they have sufficient time and energy to effectively perform their duties and responsibilities as independent directors.

Article 5 In accordance with the Articles of Association, the Company shall appoint three independent directors, including at least one accounting professional (referring to a person with a senior title of accounting profession or qualified as a certified public accountant), and at least one independent director with habitual residence in Hong Kong.

Article 6 Independent directors and the persons to be appointed as independent directors shall participate in training courses arranged by CSRC and the institutions authorised thereby in accordance with the requirements of CSRC.

Article 7 Independent directors shall attend board meetings on a timely manner, understand the production processes and operating conditions of listed companies, and actively investigate into and secure the circumstances and information necessary for decision making.

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APPENDIX XI PROPOSED WORKING RULES FOR INDEPENDENT DIRECTORS

Article 8 Independent directors shall fulfil the basic conditions set forth below:

• (1) being qualified to hold the position of independent director in a listed company in accordance with the laws, administrative rules and regulations, the relevant rules of the stock exchange on which the Company’s shares are listed and such other relevant regulations;

• (2) being independent as required by the listing rules of the stock exchange on which the Company’s shares are listed, the Guiding Opinions and the System;

• (3) having basic knowledge of the operation of listed companies and being familiar with the relevant laws, administrative rules and regulations, departmental rules and regulations;

• (4) having no less than five years’ experience in the legal or economic field, or other work experience necessary for performing the duties and responsibilities of an independent director;

• (5) such other conditions specified in the relevant laws, rules and regulations, rules and the Articles of Association.

Article 9 Independent directors shall be independent from the Company, and the following persons shall not hold the position of independent director:

• (1) the persons who are employed by the Company or its subsidiaries, or direct relatives and major social relationships thereof (direct relatives shall refer to spouses, parents, and issues; and major social relationships shall include siblings, fathers-in-law and mothers-in-law, daughters-in-law and sons-in-law, brothers-in-law and sisters-in-law, and the siblings of the spouses);

• (2) the shareholders of natural persons which directly or indirectly hold more than 1% of the issued shares of the Company, or are among the top ten shareholders of the Company, and the direct relatives thereof;

• (3) the persons employed by corporate shareholders which directly or indirectly hold more than 5% of the issued shares of the Company or are among the top five shareholders of the Company, and the direct relatives thereof;

• (4) the persons who fell under any of the above three sub-clauses in the past one year;

• (5) the persons who provide financial, legal or consultation services to the Company or any of its subsidiaries;

• (6) such other persons specified in the Articles of Association;

• (7) such other persons recognized by CSRC and relevant securities regulatory authorities.

– XI-2 –

APPENDIX XI PROPOSED WORKING RULES FOR INDEPENDENT DIRECTORS

Article 10 The Board, the Supervisory Committee, and the shareholders who individually or jointly hold more than 1% of the issued shares of the Company shall have the right to propose candidates as independent directors, who shall be subject to elections at shareholders’ meetings.

Article 11 The nominator of an independent director shall have the prior approval of the proposed candidate before making a nomination. The nominator shall have adequate knowledge of the profession, education, job titles and detailed work experience of the candidate as well as the status of all his part-time jobs, and give an opinion on his qualifications and independence as an independent director. The candidate shall make a public declaration disclaiming any relationship between himself and the Company that will affect his independent judgment. Prior to the shareholders’ meeting for elections of independent directors, the Board of the Company shall announce the above information in accordance with the relevant provisions.

Article 12 On the despatch of a notice of convening a shareholders’ meeting for the election of independent directors, the Company shall submit the relevant materials of all candidates to CSRC and its local agency where the Company is located as well as the stock exchange on which the Company’s shares are listed. Where there is any dissenting opinion of the Board with regard to the relevant conditions of any candidate, it shall also be submitted in written form at the same time.

CSRC will review the qualifications and independence of the independent directorship candidates in accordance with relevant regulations. When a candidate is subject to an objection by the CSRC, the Company shall immediately amend the relevant motion for election of independent directors and make an announcement of the same. Candidates objected by CSRC may become candidates of directors of the Company but not as candidates of independent directors of the Company. At the shareholders’ meetings for the elections of independent directors, the Board shall state the details of whether or not the candidates of independent directors have been objected by CSRC.

Article 13 The term of office of an independent director shall be identical to that of other directors, which shall be three years. An independent director is eligible for election for successive terms, which may not exceed six years, upon expiry of the present term.

Article 14 An independent director who fails to attend three consecutive board meetings in person shall be removed upon a motion of the Board to the shareholders’ meeting. Save for the occurrence of the above circumstances or any of the situations in respect of the disqualification of a director under the Company Law, an independent director shall not be dismissed without cause prior to the expiry of his term. When an independent director is dismissed prior to the expiry of his term, the Company shall disclose the dismissal as a special discloseable matter. The dismissed independent director may make a public statement if he considers the reasons for dismissal improper.

Article 15 An independent director may tender resignation prior to the expiry of his term. A resigning independent director shall submit to the Board a written resignation report, which shall contain explanations on matters related to his resignation or any other matters that he may consider necessary to be brought to the attention of the shareholders and creditors of the Company. For example, if the resignation of an independent director results in the percentage of independent directors in the Board fallen below the prescribed minimum requirement of the Articles of Association, the resignation report of such independent director shall become effective only when his vacancy has been filled by a new independent director.

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APPENDIX XI PROPOSED WORKING RULES FOR INDEPENDENT DIRECTORS

Article 16 In addition to the powers conferred to directors by the Company Law, other relevant laws, rules and regulations, and the listing rules of the stock exchange on which the Company’s shares are listed, independent directors shall be entitled to the following functions and powers:

• (1) major connected transactions (referring to a connected transaction to be entered into between the Company and a connected person with a total amount in excess of RMB3 million and more than 5% of the Company’s latest audited net asset value) shall be approved by independent directors before being submitted to the Board for discussion. Prior to making judgments, independent directors may engage an intermediary to issue an independent financial adviser report as the basis of their judgments;

• (2) proposing to the Board with respect to the engagement or dismissal of accounting firms;

• (3) proposing to the Board with respect to the holding of extraordinary shareholders’ meetings;

• (4) proposing the holding of board meetings;

• (5) independently engaging external audit and consultancy firms;

• (6) openly soliciting and collecting voting rights prior to shareholders’ meetings.

Independent directors shall obtain the unanimous consents of all independent directors before exercising their power referred to in sub-clause (5) above, and consents of more than 1/2 of all independent directors before exercising other powers referred to above (not in sub-clause (5)). If any of the aforesaid proposals are not adopted or any of the aforesaid powers could not be exercised properly, the Company shall disclose the details thereof.

Article 17 In addition to exercising the aforesaid duties, independent directors shall also express their independent opinions to the Board or the shareholders’ meetings on the following matters:

• (1) the nomination, appointment or removal of directors;

• (2) the engagement or dismissal of senior management members;

• (3) the remuneration of the Company’s directors and senior management members;

• (4) the existing or new loans or other current accounts between the Company’s shareholders, defacto controllers and affiliates and the Company with a total amount in excess of RMB3 million or 5% of the Company’s latest audited net asset value, and whether or not the Company has taken effective measures to recover the amounts due;

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APPENDIX XI

PROPOSED WORKING RULES FOR INDEPENDENT DIRECTORS

• (5) the matters that, in the opinion of an independent director, may impair the rights and interests of the small and medium shareholders;

• (6) such other matters required by the relevant securities regulatory authorities and the Articles of Association.

Independent directors shall express one of the following opinions in respect of the aforesaid matters: consent opinion; qualified opinion and the reasons thereof; objection opinion and the reasons thereof; unable to express an opinion and the reasons thereof.

If the relevant matters are subject to disclosure, the Company shall make an announcement of the opinions of independent directors. If independent directors fail to reach a consensus, the Board shall disclose the opinion of each independent director separately.

Article 18 The Company shall ensure that independent directors have the same right of access to information as its other directors, provide independent directors with related materials and information on a timely basis, regularly inform them of the Company’s operating status and organise on-site inspections for them when necessary. For any matter that are subject to board decision, the Company shall serve notice on independent directors in advance within the prescribed period of time and provide sufficient information. If independent directors take the view that the information provided is insufficient, they may request for supplementary information. When independent directors consider the information provided as insufficient or inadequately explained, they may propose to the Board in writing for a postponement of the Board meeting or for a postponement of examination and discussion of the matters concerned. Such proposal shall be adopted by the Board. Materials provided by the Company to independent directors shall be kept by the Company and the independent directors respectively for at least five years.

Article 19 The Company shall provide necessary working conditions to independent directors for the performance of their duties. The Secretary to the Board shall actively offer assistance to independent directors to facilitate their work, such as providing background information and materials. With regard to independent opinions, proposals and written statements made by independent directors which shall be announced, the Secretary to the Board shall make timely arrangement with CSRC for such announcement.

Article 20 In the exercise of duties and powers by the independent directors, the relevant personnel of the Company shall actively cooperate with them, shall not reject, hinder or conceal, or interfere with their exercising duties and powers independently.

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APPENDIX XI PROPOSED WORKING RULES FOR INDEPENDENT DIRECTORS

Article 21 The expenses incurred by the independent directors in the engagement of intermediaries and other expenses in the performance of their duties and powers shall be borne by the Company.

Article 22 The Company shall offer appropriate allowances to independent directors. The rate of such allowances shall be proposed by the Board for revision and approval by shareholders’ meetings, and disclosed in the Company’s annual report. Save for the above allowances, independent directors shall not receive any other undisclosed additional benefits from the Company and its major shareholders or interested parties and persons.

Article 23 The Company may establish the requisite system of liability insurance for independent directors to mitigate the risks that may arise in the normal performance of their duties and responsibilities.

Article 24 The System shall come into effect upon the date of its being adopted by the shareholders’ meeting of the Company. Matters not mentioned in the System shall be implemented in accordance with the relevant laws, rules and regulations, and the provisions of the Articles of Association.

Article 25 This System is subject to the interpretation by the Board.

– XI-6 –

APPENDIX XII

PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

CHAPTER I GENERAL PROVISIONS

Article 1 With a view of regulating the security provided by Dalian Port (PDA) Company Limited (hereinafter referred to as the “Company”) to third parties, protecting the lawful rights and interests of investors and the financial security of the Company, strengthening the bank credit and security management of the Company, averting and mitigating operating risks, the Company has formulated this system (hereinafter referred to as “System”) based on its actual situation in accordance with such laws, regulations, regulatory documents as the Company Law of the People’s Republic of China (hereinafter referred to as “Company Law”), the Securities Law of the People’s Republic of China (hereinafter referred to as “Securities Law”), the Security Law of the People’s Republic of China (hereinafter referred to as “Security Law”), Notice on Regulating the External Security Provided by Listed Companies and the Share Listing Rules of Shanghai Stock Exchange (as amended in 2008) (hereinafter referred to as “Listing Rules”) issued by China Securities Regulatory Commission (hereinafter referred to as “CSRC”) and relevant provisions of the Articles of Association of Dalian Port (PDA) Company Limited (hereinafter referred to as “Articles of Association”).

Article 2 External security specified in the System shall refer to the security provided by the Company to a third party, including those provided by the Company to its subsidiaries.

Article 3 The Company exercises centralized management over external security, unless otherwise approved by the board of directors (the “Board”) or the shareholders’ meeting (the “Shareholders’ Meeting”) of the Company, no individual is entitled to enter into any contracts, agreements or other similar legal documents on external security in the name of the Company.

Article 4 The Directors and senior management members of the Company shall exercise caution and strict control over liability risks associated with security, and bear joint and several liability for losses arising from illegal or inappropriate external security.

Article 5 The external security provided by the subsidiaries of or actually controlled by the Company shall be approved by the Board or the Shareholders’ Meeting pursuant to the System. The Company shall comply with all the relevant information disclosure requirements in relation to such external security. Upon authorisation by the Board or the Shareholders’ Meeting, the external security of the subsidiaries of or actually controlled by the Company may be approved by a resolution at its board meeting or shareholders’ meeting.

Article 6 The Company shall observe the principle of legal compliance, caution, mutual benefit and security when providing external security, with a view of controlling security risk in a stringent manner.

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PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

Article 7 Necessary risk-control measures such as counter-security shall be taken as regarding to the security provided by the Company to a third party, and the provider of counter-security must be actually capable of honoring such undertakings.

Article 8 The independent shareholders of the Company shall make specific statements on the accumulated and current external security provided by the Company and furnish independent opinions of the same in the annual report.

Article 9 The external security as mentioned herein refer to warranties, mortgage or pledge of assets and other security provided by the Company to other entities or individuals against its owned assets or reputation as security. The specific categories of security include loan security, security for bank’s issuance of letters of credit, security for banker’s acceptance, as well as security for issuance of letters of guarantee.

CHAPTER II EXAMINATION OF PARTIES SEEKING EXTERNAL SECURITY FROM THE COMPANY

Article 10 The Company may provide security to an entity which is an independent legal person and meets one of the following criteria:

• (1) it is a mutual security entity due to business needs of the Company;

• (2) it is an entity that has an important business relationship with the Company;

• (3) it is an entity that has a potential important business relationship with the Company;

• (4) it is the Company’s subsidiary or other controlling or affiliated entity of the Company .

The aforementioned entities shall have relatively strong solvency and meet other relevant provisions of the System.

Article 11 The Company shall not provide security directly or indirectly to any entities that are not legal persons or individuals.

Article 12 Notwithstanding the criteria set out in Article 10 herein, the Company may still provide security to parties who do not comply with such criteria upon the approval of more than two-third of members of the Board or the Shareholders’ Meeting, if the development of business relationship and partnership with such parties is deemed desirable by the Company and the level of risks involved is relatively.

Article 13 Before making decision to provide security to a third party or submitting such proposal to the Shareholders’ Meeting for voting, the Board of the Company shall procure a thorough understanding of the debtor’s credit status and make thorough analysis of the benefits and risks associated with such security.

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APPENDIX XII

PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

Article 14 Credit documents and information of a security applicant shall at least include the following items:

• (1) the primary business documents and information including photocopies of the business license and the Articles of Association, proof of the legal representative’s identity, the relevant information indicating its connected relationships and other relationships with the Company;

• (2) the security application letter, including but not limited to the form, duration and amount of security;

• (3) the audited financial reports in the past three years and solvency analysis;

• (4) the photocopy of the principal contracts related to the loan;

• (5) the ability of the security applicant to provide counter-security and relevant information;

• (6) a statement declaring that it is not involved in any threatened or on-going material litigation, arbitration or executive penalty;

• (7) such other important documents or information.

Article 15 Based on the basic information provided by the security applicant, the responsible officer shall investigate and verify the applicant’s business operation, financial position, project status and credit status, as well as the prospects of the industry and then submit the application to the relevant departments for review in accordance with the contract approval procedures. Following the approval by line managers and the office of the general manager, the relevant information shall be submitted to the Board or the Shareholders’ Meeting for approval.

Article 16 The Board or the Shareholders’ Meeting shall review and vote upon the submitted materials. The voting results shall be kept in record. No security shall be provided in case of any of the following circumstances or if the information provided is deemed insufficient: (1) the use of capital does not comply with the laws, rules and regulations or industry policy of the PRC;

• (2) false records or information are found in the financial and accounting documentation of the past three years;

• (3) overdue of loan repayments or default of interest payments on bank loans for which the Company has provided security, and remained outstanding without any effective remedial measures confirmed as at the time of the security application;

• (4) deterioration in operating conditions and reputation, with no signs of improvement;

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APPENDIX XII

PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

• (5) failure to secure valid property against which counter-security are to be provided;

• (6) such other circumstances under which the Directors decide that a security shall not be provided.

Article 17 Counter-security or other effective risk-control measures provided by the security applicant shall match the secured amount. No security shall be provided to the security applicant if the property pledged by the security applicant as counter-security is prohibited by the laws and regulations against free transfer or otherwise non-negotiable.

CHAPTER III EXAMINATION AND APPROVAL PROCEDURES FOR EXTERNAL SECURITY

Article 18 The Shareholders’ Meeting is the highest decision-making body in respect of external security provided by the Company. The Board exercises its decision-making power over external security pursuant to its authority for the approval of external security as specified in the Articles of Association. As regarding external security beyond the approval authority of the Board as specified in the Articles of Association, the Board should prepare and submit a proposal to the Shareholders’ Meeting for approval. The Board shall organize, manage and implement external security approved by the Shareholders’ Meeting.

Article 19 External security subject to the approval of the Shareholders’ Meeting must be reviewed and approved by the Board before being be submitted to the Shareholders’ Meeting for approval. The following external security provided by the Company are subject to the approval of the Shareholders’ Meeting: (1) any security as provided after the total amount of external security provided by the Company and its subsidiaries reaches or exceeds 50% of the Company’s latest audited net asset value;

• (2) any security as provided after the total amount of external security provided by the Company reaches or exceeds 30% of the Company’s latest audited total assets;

• (3) any security provided for a party with an asset to liability ratio of more than 70%;

• (4) a single security with an amount exceeding 10% of the Company’s latest audited net asset value;

• (5) any security with an aggregate amount accumulated through 12 consecutive months exceeding 30% of the Company’s latest audited total assets;

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APPENDIX XII

PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

• (6) any security with an aggregate amount accumulated through 12 consecutive months exceeding 50% of the Company’s latest audited net asset value, and exceeding RMB50 million in absolute value;

• (7) the security provided to the Company’s shareholders, defecto controllers and the affiliated parties thereof;

• (8) such other securities as defined by the stock exchange on which the Company’s shares are listed and the Articles of Association.

Where the Shareholders’ Meeting is considering a resolution on security provided to shareholders, defecto controllers and its affiliated parties, such shareholders or shareholders under the control of such defecto controllers shall abstain from voting in respect of such security. The resolution concerned shall require the approval of shareholders with more than half of the voting rights held by other remaining shareholders present at the Shareholders’ Meeting.

A resolution in respect of the security specified in Paragraph (4) in the foregoing shall be made by the Shareholders’ Meeting, and passed by the shareholders holding more than two thirds of the voting rights attending the meeting.

Article 20 The external security other than that subject to the approval of the Shareholders’ Meeting as set out in Article 19 of the System shall be decided by the Board. External security within the authority of the Board shall be approved in writing by more than two thirds of the members of the Board.

Article 21 Where necessary, the Company may engage an external professional organization to evaluate the risks relating to the implementation of external security, and the report of such evaluation shall be the basis of decision-making for the Board or the Shareholders’ Meeting.

Article 22 The Company’s independent shareholders shall furnish independent opinions on the consideration of external security by the Board and may engage an accounting firm where necessary to review the Company’s accumulated and current external security. Any irregularities found shall be reported to the Board and the regulatory authority and an announcement should be made in a timely manner.

Article 23 The Company shall enter into security contracts and counter-security contracts in respect of external security in writing. The security contracts and the counter-security contracts shall include contents as required by such laws and regulations as the Security Law and the Contract Law of the People’s Republic of China .

Article 24 The security contracts shall at least include the following particulars:

• (1) the category and amount of the principal creditor’s right to be secured;

• (2) the term for the debtor to settle his debt;

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PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

• (3) the form of security;

• (4) the scope of security;

• (5) the term of security;

• (6) the rights, obligations and default liabilities of each party;

• (7) such other matters deemed as necessary to be agreed upon by both parties.

Article 25 Before signing a security contract, the person in charge shall comprehensively and diligently review the signees and relevant particulars of the principal contract, the security contract and the counter-security contract. The person in charge shall request the relevant party to revise clauses which contravene the laws, regulations, the Articles of Association and relevant resolutions of the Board or the Shareholders’ Meeting and which impose unreasonable obligations on the Company or terms involving unpredictable risks. If such party refuses to revise these clauses, the person in charge shall decline to provide security for such party and report to the Board or the Shareholders’ Meeting.

Article 26 The Chairman of the Board or other personnel legally authorized may sign security contracts on behalf of the Company pursuant to the resolutions of the Board or the Shareholders’ Meeting. No individual is entitled to sign security contracts on behalf of the Company without approval and authorization through resolution adoption by the Shareholders’ Meeting or the Board. The person in charge shall not sign security contracts or act as the guarantor to sign or seal principal contracts which are beyond his authorization.

Article 27 The Company may enter into mutual security agreements with corporate legal person who meets the conditions specified in the System. The person in charge shall, in a timely manner, require such corporate legal person to provide authentic financial and accounting statements and other materials that reflects its solvency.

Article 28 Upon the receipt of a counter-security mortgage or a counter-security pledge, the Company’s financial department shall complete relevant legal procedures in association with its legal department, especially the timely registration of such security or pledge.

Article 29 If a debt secured by the Company needs to be extended with the Company as the guarantor upon expiration, such security shall be deemed as a new external security and undergo relevant approval procedures.

Article 30 After the signing of a security contract, the personnel responsible for signing the contract shall report to the Secretary of the Board for record in a timely manner.

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APPENDIX XII

PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

CHAPTER IV MANAGEMENT OF EXTERNAL SECURITY

Article 31 External security shall be managed by the financial department with the assistance of the legal department.

Article 32 The major duties and responsibilities of the Company’s financial department are as follows:

• (1) to investigate into and evaluate the credit status of the secured entity;

• (2) to complete the formalities for the security procedures;

• (3) to duly keep track of, inspect and monitor the secured entity after external security is provided;

• (4) to manage the filing of the documentation of the secured business in a serious manner;

• (5) to provide the Company’s auditor with a complete and accurate record of all the Company’s external security in a timely manner in accordance with the requirements;

• (6) to handle such other matters related to security.

Article 33 The major duties and responsibilities of the legal department during in the process of external security are as follows:

• (1) to duly investigate into and evaluate the credit status of the secured entity in conjunction with the financial department;

• (2) to be responsible for the examination of all documentation related to security;

• (3) to be responsible for handling legal disputes related to security;

• (4) to, when security has been provided by the Company, assist the business department in handling matters related to relevant obligations;

• (5) to handle such other matters relating to security.

Article 34 The Company shall keep the security contracts and relevant original materials in proper order and conduct reviews in a timely manner; it shall conduct cross-checking with relevant institutions such as the bank to ensure the completeness, accuracy and validity of its filed data, and take heed of the term of the security. During the course of contract management, the Company shall report to the Board and the Supervisory Committee in a timely manner if improper contracts that have not been approved in accordance with the examination procedures of the Board or the Shareholders’ Meeting are identified.

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PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

Article 35 The Company shall assign a specific officer to monitor the condition of the secured party on a regularly basis, gather the latest audited financial information and audit report of the secured party, analyze regularly its financial position and solvency, and monitor its business operation, assets and liabilities, external security, division and merger and changes of legal representatives. The relevant responsible officer shall report to the Board in a timely manner if significant issues are noticed, such as the business operation of the secured party is suffering a serious downturn, or its company is being dissolved or divided. The Board is obliged to adopt effective measures to minimize the losses.

Article 36 In the event of provision of security by the Company and the secured party’s failure to honor debt repayment upon maturity, or the bankruptcy or liquidation of the secured party or creditors’ claim against the Company’s security obligations, the Company’s responsible departments shall inquire the conditions of debt repayment of the secured party in a timely manner, be prepared to activate the counter-security claim procedures and simultaneously report such matter to the Secretary of the Board, who shall inform the Board of the same promptly.

Article 37 In the event that the secured party fails to fulfil its contractual obligations and its creditor requests the Company to fulfill its security obligation, the Company’s responsible departments shall activate the counter-security claim procedures instantly and simultaneously report such matter to the Secretary of the Board, who shall inform the Board of the same promptly.

Article 38 After fulfilling its security obligation for the debtor, the Company shall adopt effective measures to demand compensation from the debtor. The Company’s responsible departments shall report the claim issue to the Secretary of the Board, who shall inform the Board of the same promptly.

Article 39 If it becomes evident to the Company that the secured party has become or is likely to become insolvent, the Company shall adopt necessary measures in a timely manner for effective risk control. If malicious collusion between the creditor and the debtor that impairs the Company’s interests is found, the Company shall take prompt measures such as requesting relevant authorities to confirm the nullification of the security contract; the Company shall make claims against the secured party in a timely manner for any financial losses due to the default of the secured party.

Article 40 In response to other potential risks, the financial department and the legal department shall adopt effective measures and submit the corresponding risk control measures for review by line managers, who shall then submit such measures to the office of the general manager, the Board or the Supervisory Committee of the Company, as the case may be.

Article 41 If the Company acts as one of the guarantors of a debt that has been secured by two guarantors or more and its obligation is limited to a pre-determined proportion, it shall reject to undertake any security obligation beyond such pre-determined proportion.

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PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

Article 42 If the Company acts as a general guarantor, it shall not fulfill its security obligation to a debtor if a dispute relating to the security contract has not been judged or arbitrated and the debtor’s properties still fails to fulfill its debt repayment obligation following compulsory legal enforcement.

Article 43 After the debtor’s bankruptcy application is accepted by the People’s Court and before any creditor has submitted its claims, the responsible officer, the financial department and the legal department shall propose the Company to participate in the property allocation for bankruptcy and exercise its rights to claim in advance.

CHAPTER V INFORMATION DISCLOSURE OF EXTERNAL SECURITY

Article 44 Pursuant to the relevant provisions in the Listing Rules and the Articles of Association, the Company shall duly perform its information disclosure obligation in relation to the provision of external security.

Article 45 Any department or responsible officer involved in the Company’s external security shall be obliged to report the status of external security to the Company’s Secretary of the Board and the Secretarial of the Board, and to provide necessary documents for information disclosure.

Article 46 In regard to the external security examined and approved by the Board or the Shareholders’ Meeting of the Company as set out in Article 19, the relevant disclosure shall be made in a timely manner in the information disclosure journal designated by CSRC, the contents to be disclosed shall include but not limited to the resolutions of the Board or the Shareholders’ Meeting, and the following information as of the information disclosure date: the total amount of external security provided by the Company and its majority-owned subsidiaries, the total amount of security provided by the Company to its majority-owned subsidiaries, and the respective proportions of the aforementioned amounts to the Company’s latest audited net asset value. If the secured party fails to repay debts within 15 trading days following maturity or it is in bankruptcy or liquidation or faces other situations that substantially affect its solvency, the Company shall make relevant disclosure in a timely manner.

Article 47 Before the disclosure of security information in accordance with laws, the Company’s relevant departments shall adopt necessary measures to keep to the minimum the number of people to which such information is available. Any person who is aware of the Company’s security information by legal or illegal means shall be subject to inherent obligations for confidentiality until the day such information is disclosed in accordance with laws, failing which they shall assume any legal liability arising therefrom.

CHAPTER VI RESPONSIBILITIES OF RELEVANT OFFICERS

Article 48 The Company’s external security shall be provided in strict compliance with the System. The corresponding penalty imposed on relevant officers who has committed misconduct is subject to the size of the loss and risk, and the significance of the misconduct considered by the Board.

– XII-9 –

APPENDIX XII

PROPOSED SYSTEM FOR THE MANAGEMENT OF PROVISION OF SECURITY TO THIRD PARTIES

Article 49 If the Company’s directors, general manager or other senior management members fails to act in accordance with the provisions of the System and sign a security contract beyond their authority without authorization, the liabilities of the relevant officer shall be investigated into.

Article 50 If losses are sustained as a result of violations of the legal requirements or the provisions of the System, negligence of risks and provision of security without authorization on the part of any of the Company’s responsible departmental staff or other responsible officers, they shall assume liability for compensation.

Article 51 If any of the Company’s responsible departmental staff or other responsible officers fails to fulfill his duties and subsequently causes a loss to the Company, he shall be subject to fines or administrative disciplinary actions depending on the severity of his failure in duties.

Article 52 If any of the Company’s responsible departmental staff or other responsible officers acts without authorization and results in the Company’s liability, which has been waived by legal provisions initially, and causes a loss to the Company, he shall be subject to the administrative disciplinary actions by the Company and shall assume liability for compensation.

CHAPTER VII SUPPLEMENTARY PROVISIONS

Article 53 In the System, references to “or more”, “within” and “over” shall indicate a range that includes the relevant numerical values whereas “less than”, “exceeding”, “lower than” and “more than” shall indicate a range that excludes the relevant numerical values.

Article 54 Matters not covered in the System shall be executed in accordance with relevant laws, regulations and regulatory documents of the PRC and the relevant provisions of the Articles of Association. If there are any inconsistencies between the System and the relevant laws, regulations, regulatory documents and relevant provisions of the Articles of Association, the provisions of relevant laws, regulations, regulatory documents and the Articles of Association shall prevail.

Article 55 The System shall be subject to the interpretation by the Board.

Article 56 The System shall come into effect upon the review and approval of the Shareholders’ Meeting.

– XII-10 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

CHAPTER I GENERAL PROVISIONS

Article 1 In order to regulate the management and use of issue proceeds of Dalian Port (PDA) Company Limited (hereinafter referred to as the “Company”) and practically protect the rights and interests of investors, the Company has formulated this system (“System”) based on its actual situation in accordance with the requirements of such laws, regulations, regulatory documents as the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China, the Administrative Measures for Initial Public Offerings of Shares and Listing, Administrative Measures for the Issuance of Securities by Listed Companies, Notice on the Report of Use of Proceeds from the Previous Offering, Notice on Further Regulating the Use of Proceeds of Listed Companies and Share Listing Rules of Shanghai Stock Exchange and the Articles of Association.

Article 2 Issue proceeds specified in the System refer to funds raised by the Company from investors through issue of securities (including initial public offering of shares, allotment of shares, additional issue of shares, issue of convertible corporate bonds and issue of detachable convertible corporate bonds, etc) and non-public issue of securities, but excluding the funds raised from the implementation of share incentive plans.

Article 3 After receiving the issue proceeds from issue of shares or convertible bonds, the Company shall perform verifying procedures in a timely manner by engaging an accounting firm with professional qualifications in security business to issue a verification report, and organize the utilization of issue proceeds in accordance with the planned use of issue proceeds as committed in the Prospectus.

Article 4 The issue proceeds can only be used in projects that the Company has publicly indicated its intention to invest issue proceeds into. The Board shall prepare a detailed plan on the use of issue proceeds, with a view to standardized, open and transparent utilization of funds. In respect of investment projects using issue proceeds implemented through the Company’s subsidiaries or other enterprises under its control, the Company shall ensure that such subsidiaries or other enterprises under its control are in compliance with the relevant provisions of the System.

Article 5 The Board shall disclose the use of issue proceeds in a timely manner in accordance with the relevant provisions of such laws and regulations as the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China and the listing rules of the stock exchange on which the shares of the Company are listed.

Article 6 Responsible persons who apply the issue proceeds in a manner in breach of the provisions of the System and thereby causing the Company to incur losses as a result shall be subject to administrative disciplinary actions and, where necessary, civil liability for compensation in accordance with relevant laws and regulations.

– XIII-1 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

CHAPTER II DEPOSIT OF ISSUE PROCEEDS

Article 7 Issue proceeds shall be deposited in the designated account (hereinafter referred to as “Designated Account for Proceeds”) set up by the Board for the purpose of centralized management. The Designated Account for Proceeds shall not be used for the deposit of funds other than the issue proceeds or for other purposes.

Article 8 The establishment of the Designated Account for Proceeds of the Company shall require the approval of the Board. Information and documents relating to the establishment of the account shall be filed with relevant securities regulatory authorities upon the Company’s application for the fund raising.

Article 9 Where the Company determines that the amount of issue proceeds is significant and it is necessary to set up designated accounts at more than one bank as per the credit arrangement of investment projects, it may open designated accounts at more than one bank as approved by the Board subject to the condition that funds under the same investment project shall be deposited in the same designated account and that the total number of designated accounts to be opened shall not exceed the total number of projects to be invested with such issue proceeds.

Article 10 The Company shall enter into the Supervision Agreement among the Three Parties Regarding the Deposit of Proceeds with the Sponsor and the commercial banks (hereinafter referred to as “Commercial Banks”) where the issue proceeds deposited within two weeks after receiving the issue proceeds. Such agreement shall at least include the followings:

• (1) the issue proceeds shall be deposited to the centralized Designated Account for Proceeds by the Company;

• (2) the Commercial Banks shall provide monthly bank statements of the Designated Account for Proceeds to the Company and copy the same to the Sponsor;

• (3) the Company shall inform the Sponsor in a timely manner where over RMB50 million (which amount accounts for 20% or more of the net amount of gross issue proceeds from offering less issue expenses (hereinafter referred to as “Net Proceeds”)) is withdrawn from the Designated Account for Proceeds in one transaction or over a period of 12 months on an accumulative basis.

• (4) the Sponsor may approach the Commercial Banks for information of the Designated Account for Proceeds at all times;

• (5) the default liability of the Company, Commercial Banks and the Sponsor.

– XIII-2 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

The Company shall file the aforesaid agreement with the stock exchange on which its shares are listed within two trading days upon its execution and make an announcement accordingly. Where the aforesaid agreement is terminated in advance of the expiration of its effective term due to change of the Sponsor or Commercial Banks, the Company shall enter into new agreements with the relevant parties within two weeks upon the termination of the existing one, and file the same with the stock exchange on which its shares are listed and make an announcement accordingly within two trading days upon the execution of the new agreements.

SECTION III USE AND MANAGEMENT OF ISSUE PROCEEDS

Article 11 The procedures of approving fund utilization must be observed in strict compliance with the fund management system of the Company in connection with any capital expenditure of the Company’s project investment.

Article 12 The Company shall utilize issue proceeds in accordance with investment plans of issue proceeds set out in the documents issued in connection with the application for offering.

Article 13 Where circumstances emerge which has a significant impact on the normal progress of the plan for the utilization of issue proceeds, the Company shall report the same in a timely manner to the stock exchange on which its shares are listed and publish an announcement accordingly.

Article 14 The Company shall reassess the feasibility and estimated return of an investment projects using issue proceeds (hereinafter referred to as “Proceeds Investment Projects”) to decide whether to proceed with such projects, and disclose the progress, causes of exceptions as well as the amended Proceeds Investment Projects (if any) in the latest regular report if any of the followings occur to the Proceeds Investment Projects: (1) substantial changes in the market conditions in which the Proceeds Investment Projects are involved;

• (2) the Proceeds Investment Projects has been suspended for over one year;

• (3) the planned completion date for the Proceeds Investment Projects is not met and less than 50% of the planned investment amount has been actually contributed;

• (4) other exceptions occurring to the Proceeds Investment Projects.

Article 15 The Company shall not be engaged in the following in the utilization of the issue proceeds:

• (1) Investing in Proceeds Investment Projects which comprise the holding of financial assets held for trade, financial assets available for sale or financial investments such as money lending and entrusted investment, as well as direct or indirect investment in companies mainly engaging in trading quoted securities;

• (2) Disguised changes in the use of issue proceeds by way of pledge, entrusted loan or otherwise;

– XIII-3 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

• (3) appropriation or embezzlement of the issue proceeds and generation of unlawful benefits from the Proceeds Investment Projects by connected persons such as controlling shareholders and effective controllers.

Article 16 Where the Company has disclosed in relevant documents issued in connection with the application for offering that it proposed to replace previously invested internal funds with the issue proceeds and that the previously invested amount has been ascertained, such replacement shall be implemented only after the accounting firm has performed relevant special audit, the Sponsor has issued its opinion on such replacement and the Board has reviewed and approved such replacement. The Board shall report to the stock exchange on which the Company’s shares are listed and make an announcement within two trading days upon the completion of the replacement.

Save for the above, the Company shall perform corresponding procedures and disclosure obligations in accordance with the change of the Proceeds Investment Projects for any replacement of previously invested internal funds with issue proceeds.

Article 17 Where the Company applies idle funds in the issue proceeds as additional working capital on a temporary basis, the following requirements shall be complied with: (1) There shall not be any disguised change in the use of issue proceeds and the normal progress of the Proceeds Investment Projects shall not be affected;

• (2) Each single funding of additional working capital shall not exceed 50% of the Net Proceeds;

• (3) Each single funding of additional working capital shall last for a period of no more than six months;

• (4) the previous temporary allocation of issue proceeds as additional working capital (if any) has been reimbursed upon maturity.

Where the Company uses unutilized issue proceeds as additional working capital on a temporary basis, it shall be implemented only after the Board has reviewed and approved such supply and the independent directors, the Sponsor and the Supervisory Committee have issued their opinions on such supply. The Company shall report to the stock exchange on which the Company’s shares are listed and make an announcement accordingly within two trading days. Any use of unutilized issue proceeds as additional working capital that exceed 10% of the issue proceeds shall be reviewed and approved by the general meeting, with the option of on-line voting available to shareholders.

The Company shall return part of the additional working capital to the Designated Account for Proceeds prior to the due date for such additional working capital, report to the stock exchange on which the Company’s shares are listed and make an announcement within two trading days after such funds has been fully repaid.

– XIII-4 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

Article 18 Where any single Proceeds Investment Projects is completed and the Company proposes to use the balance of the issue proceeds (including interest income) in other Proceeds Investment Projects, it shall be implemented only after the Board has reviewed and approved such use and the independent directors, the Sponsor and the Supervisory Committee have issued their opinions on such use.

The balance of issue proceeds (including interest income) with a balance of less than RMB1 million or 5% of the committed investment amount of such Proceeds Investment Project may be exempted from the procedures set out in preceding paragraph and the relevant utilization shall be disclosed in the annual report.

For the utilization of the balance of issue proceeds (including interest income) of any single Proceeds Investment Project in projects other than Proceeds Investment Projects (including as additional working capital), the corresponding procedures and disclosure obligations for the change of the Proceeds Investment Projects shall be performed.

Article 19 Where any Proceeds Investment Project is completed and the balance of the issue proceeds (including interest income) accounts for more than 10% of the Net Proceeds, such balance shall be utilized only after the Board and general meeting have reviewed and approved such use and the independent directors, the Sponsor and the Supervisory Committee have issued their opinions on such use.

For the balance of the issue proceeds (including interest income) which is less than 10% of the Net Proceeds, such balance shall be utilized only after the Board has reviewed and approved such use and the independent directors, the Sponsor and the Supervisory Committee have issued their opinions on such use.

For the balance of the issue proceeds (including interest income) which is less than RMB5 million or 5% of the Net Proceeds, the Company shall be exempted from the procedures set out in preceding paragraph and relevant application shall be disclosed in the latest regular report.

CHAPTER IV CHANGES IN USE OF PROCEEDS

Article 20 Any change in the use of issue proceeds shall be reviewed and approved by the Board and the general meeting.

A proposed change that involves only the location of implementation of a Proceeds Investment Project may be exempted from the procedures set out in the preceding paragraph, but shall be reviewed and approved by the Board and reported to the stock exchange on which the Company’s shares are listed, and an announcement explaining the reasons for such change and opinions of the Sponsor shall be made within two trading days.

Article 21 The changed Proceeds Investment Projects shall be investment in a principal business of the Company.

– XIII-5 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

The Company shall conduct a feasibility analysis on the new Proceeds Investment Projects in an objective and prudent manner to ensure that the investment projects have promising prospects and profitability, with an aim of minimizing investment risks and increasing the efficiency in the use of issue proceeds.

Article 22 Any proposed change of the purpose of a Proceeds Investment Project shall be reported to the stock exchange on which the Company’s shares are listed and an announcement containing the following information shall be made within two trading days after such proposal’s being submitted to the Board for review: (1) an overview of the original Proceeds Investment Project and specific reasons for the proposed change;

• (2) an overview, a feasibility analysis and risk warnings regarding the new Proceeds Investment Project;

• (3) the investment plan of the new Proceeds Investment Project;

• (4) a statement specifying whether the new Proceeds Investment Project has obtained or is pending the approval of competent authorities (if applicable);

• (5) opinions of the independent directors, Supervisory Committee, and Sponsor in respect of the proposed change;

• (6) the change of the project is subject to a statement specifying review by the general meeting;

• (7) such other information as required by the stock exchange on which the Company’s shares are listed.

Any new Proceeds Investment Project that involves a connected transaction, asset acquisition or external investment, shall also be disclosed in accordance with relevant rules.

Article 23 Any change of Proceeds Investment Projects by the Company for the acquisition of assets (including interests) of controlling shareholders or defacto controllers, shall be made only if the industry competition and connected transactions can be effectively averted or reduced upon the completion of such acquisition.

Article 24 Any proposed transfer or replacement of Proceeds Investment Projects to a third party (excluding the complete transfer or replacement of Proceeds Investment Projects to a third party during the reorganization of the Company’s material assets) shall be reported to the stock exchange on which the Company’s shares are listed and an announcement containing the following information shall be made within two trading days after such proposal’s being submitted to the Board for review:

• (1) the specific reasons for the transfer or replacement of Proceeds Investment Projects to a third party;

– XIII-6 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

• (2) the amount of issue proceeds already used in the project;

• (3) the progress and realized benefits of the project;

• (4) an overview, a feasibility analysis and risk warnings regarding the substitute project (if applicable);

• (5) the basis of pricing of the transfer or replacement and underlying interests;

• (6) the opinions of the independent directors, Supervisory Committee, and Sponsor in respect of the transfer or replacement of Proceeds Investment Projects;

• (7) a statement specifying that the transfer or replacement of Proceeds Investment Projects is subject to the review of the general meeting;

• (8) such other information as required by the stock exchange on which the Company’s shares are listed.

The Company shall closely monitor the collection and use of the proceeds from such transfer, the ownership change and the ongoing operation of the substitute assets, and perform its requisite obligation of information disclosure.

CHAPTER V MANAGEMENT AND SUPERVISION OF THE USE OF ISSUE PROCEEDS

Article 25 The Board shall conduct a thorough audit on the progress of the Proceeds Investment Projects on a semi-annual basis, and a Special Report of the Deposit and Actual Use of Proceeds shall be issued in respect of the deposit and use of issue proceeds.

The Special Report of the Deposit and Actual Use of Proceeds is subject to review and approval of the Board and Supervisory Committee, and shall be reported to the stock exchange on which the Company’s shares are listed, and an announcement shall be made accordingly within two trading days after such report has been submitted to the Board for review.

After the end of each accounting year, the Board shall disclose the conclusive opinion of the Sponsor for the special audit report in the Special Report of the Deposit and Actual Use of Proceeds .

Article 26 A Certified Public Accountant (“CPA”) may be appointed by the audit committee of the Board, the Supervisory Committee, or more than one half of independent directors to conduct a special audit on the deposit and use of issue proceeds and issue a special audit report. The Board shall provide necessary support, while all necessary costs shall be assumed by the Company.

– XIII-7 –

APPENDIX XIII

PROPOSED SYSTEM FOR THE MANAGEMENT OF FUNDS RAISED FROM THE CAPITAL MARKETS

The Board shall report to the stock exchange on which the Company’s shares are listed and make an announcement accordingly, within two trading days upon the receipt of the special audit report issued by the CPA. Should there be any non-compliance of the management of issue proceeds as set out in the special audit report by the CPA, the Board shall also make an announcement in respect of the non-compliance of the deposit and use of issue proceeds, any incurred or potential consequences thereof and measures already adopted or proposed to be adopted.

CHAPTER VI SUPPLEMENTARY PROVISIONS

Article 27 The System shall become effective upon the review and approval of the general meeting. In case of any inconsistencies between the System and the relevant laws, administrative regulations, regulatory documents and the Articles of Association or issues not covered in the System, the relevant laws, administrative regulations, regulatory documents or the Articles of Association shall prevail.

Article 28 In the System, references to “above” and “within” shall indicate a range that includes the relevant numerical values whereas “exceeding”, “lower than” and “more than” shall indicate a range that excludes the relevant numerical values.

Article 29 The interpretation on the System shall be subject to the Board. The System shall be amended in a timely manner in accordance with any laws, regulations and stipulations to be promulgated by relevant authorities and institutions of the PRC, subject to the review and approval by the general meeting.

– XIII-8 –

APPENDIX XIV

REPORT ON USE OF FUNDS RAISED IN THE COMPANY’S PREVIOUS FUND RAISING EXERCISES

If there is any discrepancy between the English text and the Chinese text in respect of this appendix, the Chinese text shall prevail.

The Company, its directors, supervisors and senior management guarantee the truthfulness, accuracy, completeness of this announcement, which contains no false statements, misleading representations or material omissions.

I. BASIC INFORMATION ABOUT THE FUNDS

On 21 March 2006, “The Approval Reply in Relation to Issue of Overseas Listed Foreign Shares by Dalian Port (PDA) Company Limited”(Zheng Jian Guo He Zi [2006] No.4)(《關於同意大連港股份有限公司發行境外上市外資股的批覆》（證監國合字[2006]4號）) was issued by the China Securities Regulatory Commission, pursuant to which Dalian Port (PDA) Company Limited (the “Company”) was approved to issue, through the Stock Exchange of Hong Kong Limited(the “Hong Kong Stock Exchange”) (H share), to the public 966,000,000 new shares, including 126,000,000 shares subject to over allotment option, with a nominal value of RMB1.00 per share, all of which are ordinary shares. Meanwhile, according to “The Approval Reply in relation to the Transfer of the Domestic Shares of the Dalian Port (PDA) Company Limited (Guo Zi Chan Quan [2005] No. 1499)” (《關於大連港股份有限公司國有股劃轉有關問題的批覆》（國資產權[2005]1499號）) issued by the State-owned Assets Supervision and Administration Commission of the State Council (the “SASAC”), at the time when overseas H shares were issued by the Company, the original promoters were Dalian PDA Corporation Limited, Dalian Detai Holdings Company Limited, Dalian Rongda Investment Company Limited, Dalian Haitai Holdings Company Limited and Dalian Bonded Zhengtong Company Limited, where 94,185,000 shares, 483,000 shares of State shares) and 966,000 shares, 483,000 shares and 483,000 shares of State-owned legal person shares) held by these parties, 96,600,000 shares in aggregate, were required to be transferred to the National Social Security Fund Council (the “NSSF Council”)(全國社會保障基金理事會). Pursuant to the approvals issued by the NSSF Council dated 20th December 2005, entitled “Circular Concerning the Listing of the Dalian Port (PDA) Company Limited in Hong Kong (She Bao Ji Jin Gu [2005] No. 24)”(《關於 大連港股份有限公司到香港上市有關問題的函》（社保基金股[2005] 24號）) and “The Approval Reply in Relation to Consent to Issuance of Overseas Listed Foreign Shares by Dalian Port (PDA) Company Limited (Zheng Jian Guo He Zi [2006]No.4)”, 《關於同意大連港股份有限公( 司發行境外上市外資股的批覆（証監國合字[2006]4號）》) upon the completion of issue of overseas listed foreign shares of the Company, the above domestic shares held by NSSF Council will be converted to overseas listed foreign shares.

Upon the approval of the listing, and trading of offer shares by the Hong Kong Stock Exchange, 966,000,000 new shares (taking into account 126,000,000 shares of over allotment) was effectively issued by the Company at an issue price of HK$2.575 per share with funds raised of HK$2,487,450,000.00 (equivalent to RMB2,571,525,810.00), of which HK$2,302,184,205.00 (equivalent to RMB2,379,998,031.13) was deposited by the major underwriter, BNP Paribas Peregrine Capital Limited, into the Company’s account maintained at Hong Kong Branch of Bank of Communications (account number: 02753293053852) on 28 April 2006. The remaining fund, HK$185,265,795.00 (equivalent to RMB191,527,778.87), was retained by BNP Paribas Peregrine Capital Limited for payment of expenses in relation to the fund raising.

– XIV-1 –

APPENDIX XIV

REPORT ON USE OF FUNDS RAISED IN THE COMPANY’S PREVIOUS FUND RAISING EXERCISES

On 28 April 2006 and 3 May 2006, the funds raised of HK$2,091,219,802.54 and HK$316,306,305.00 were deposited into the account at the Hong Kong Branch of Bank of Communications respectively, meanwhile, 96,600,000 State shares or State-owned legal person shares held by the original promoters of the Company were transferred to NSSF Council and converted to overseas listed foreign shares. On 8 December 2006, the balance of HK$21,559,206.06 (equivalent to RMB22,287,907.23), after deducting expenses in relation to the fund raising, was deposited into the account at the Hong Kong Branch of Bank of Communication. The receipt of fund has been examined by Deloitte Touche Tohmatsu CPA Ltd, which issued a verification report (De Shi Bao (Yan)(06) No. 0032 (德師 報（驗）(06)第0032號)).

The net funds of RMB2,385,339,787.00 (exclusive of interest income) was arrived at after deducting RMB16,946,151.36 of agency fees (including auditing, evaluation, solicitor and financial advisor) from the actual funds received by the Company.

II. MANAGEMENT OF USE OF FUNDS

Funds in various bank accounts

The Board of directors (the “Board”) of the Company approved the opening and maintenance of a designated account at the Hong Kong Branch of Bank of Communications (account number: 02753293053852). As at 30 September 2009, the funds in the Hong Kong Branch of Bank of Communications was entirely transferred to an account at the Manxing Branch of Bank of Communications (account number: 212060190136760000145).

The use of funds was implemented in accordance with the financial and accounting policies of the Company. All investment expenses out of the funds shall be utilised pursuant to the plans of use of the funds or within the budget of the Company. Subject to the examination approval formalities for the utilization of the funds according to the financial and accounting policies of the Company, the relevant departments shall propose a plan of use of the funds, and the responsible personnel in the operation department shall sign off the plan, within the scope of authorisation by the Board and the budget of the project, and report to the finance department that shall perform a review thereon. After signing off by the chief accountant, general manager and chairman by authorization, the payment will be made. Review of use of the funds shall be performed by the finance department on regular basis.

– XIV-2 –

APPENDIX XIV REPORT ON USE OF FUNDS RAISED IN THE COMPANY’S PREVIOUS FUND RAISING EXERCISES

III. ACTUAL USE OF THE FUNDS

Committed investments in the Prospectus

1. The committed investments in the Prospectus of the Company on 18 April 2006 are as follows:

Units: in RMB10,000

No. Proposed investment 1 12 crude oil storage tanks at Nanhai tank area 2 No. 13-16 berths at Dayao Bay Phase II 3 Purchase of 8 tugboats 4 Repayment of bank loans 5 General working capital Total	Proposed investment amount 68,000 40,000 27,000 85,000 18,534
	238,534

– XIV-3 –

APPENDIX XIV REPORT ON USE OF FUNDS RAISED IN THE COMPANY’S PREVIOUS FUND RAISING EXERCISES

1. As at 30 September 2009, the reconciliation of actual use of the funds and the expected investments is set out below:

Unit: in RMB 10,000

Total funds: 238,534

• Total amount relating to change in use of the funds: 0

• Percentage of amount relating to change in use of funds to total funds: 0

Total accumulated funds utilised: 229,592

• Total funds utilised in each year: 2006: 166,747 2007: 34,401 2008: 23,086 January – September 2009: 5,358

Investment No. Committed investment Actual investment 1 12 crude oil storage tanks at Nanhai storage area 12 crude oil storage tanks at Nanhai storage area 2 No. 13-16 berths at Dayao Bay Phase II No.13-14 berths at Dayao Bay Phase II 3 Purchase of 8 tugboats Purchase of 8 tugboats 4 Repayment of bank loans Repayment of bank loans 5 General working capital General working capital Total	Total investment out of the funds Committed investment before the fund raising Committed investment after the fund raising Actual investment amount 68,000 68,000 68,000 40,000 40,000 40,000 27,000 27,000 27,000 85,000 85,000 85,000 18,534 18,534 18,534 238,534 238,534 238,534	Accumulated investment amount out of funds at closing date Committed investment before the fund raising Committed investment after the fund raising Actual investment amount Difference between actual investment amount and committed investment amount after the fund raising Expected date when useful status is achieved 68,000 68,000 60,358 7,642 December 2006 for Phase I and 30 November 2008 for Phase II 40,000 40,000 40,000 0 30 June 2007 27,000 27,000 25,700 1,300 December 2006 – October 2008 (by phase) 85,000 85,000 85,000 0 18,534 18,534 18,534 0 238,534 238,534 229,592 8,942

– XIV-4 –

APPENDIX XIV

REPORT ON USE OF FUNDS RAISED IN THE COMPANY’S PREVIOUS FUND RAISING EXERCISES

Note: the balance of funds $89,420,000 was due to outstanding construction fee, the remaining of which, if any, would be used to supplement the working capital.

Note: the amount of $400,000,000 that was committed to use in respect of No. 13-16 berths at Dayao Bay Phase II was fully utilised upon the construction of No. 13-14 berths at Dayao Bay Phase II. The fund for No.15-16 berths was paid out of internal resources and bank loans.

• Note: 12 crude oil storage tanks at Nanhai storage area are constructed by two phases, in which 6 tanks of Phase I and 6 tanks of Phase II were put into operation in December 2006 and on 30 November 2008 respectively.

• Realised Return of Investment out of Funds in Previous Fund Raising Exercises

Units: in RMB 10,000

		Accumulated
		utilisation of
	Actual investment	Capacity of		Return for	the latest three	years	Accumulated	Whether
		investments				January –	return	expected
		at closing	Committed			September	achieved at	return
No.	Name of investment	date	return	2007	2008	2009	closing date	is achieved
1	12 crude oil storage tanks	100%	–	2121	2135	6472	10728	–
	at Nanhai storage area
2	No. 13 and 14 berths at	81%	–	3020	6337	2698	12055	–
	Dayao Bay Phase II
3	Purchase of 8 tugboats	34.32%	–	3155	3912	3921	10988	–

• Note 1: The Company has not made any public undertaking regarding the return of the investments.

• Note 2: The accumulated capacity utilisation rate of investments at the closing date refers to the ratio of actual capacity to nominal capacity of the investments during the period between the date when expected status for use was achieved for the investments and the closing date.

IV. ACTUAL USE OF FUNDS RAISED IN PREVIOUS FUND RAISING EXERCISE AND THAT DISCLOSED IN REGULAR REPORTS OF EACH YEAR AND OTHER DOCUMENTS OF DISCLOSURE OF THE COMPANY

There is no difference between the actual use of the funds raised in previous fund raising exercise and that disclosed in the regular reports of each year and other documents of disclosure of the Company.

– XIV-5 –

NOTICE OF EGM

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

==> picture [92 x 42] intentionally omitted <==

==> picture [109 x 28] intentionally omitted <==

Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

NOTICE IS HEREBY GIVEN that the second extraordinary general meeting (the “EGM”) of Dalian Port (PDA) Company Limited (the “Company”) in 2009 will be held at Room 602, PDA Group Building, No. 1 Gangwan Street, Zhongshan District, Dalian City, Liaoning Province, PRC at 9:00 a.m. on 30 November 2009 for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolutions. Unless otherwise indicated, capitalised terms used herein shall have the same meaning as in the circular of the Company dated 15 October 2009 (the “Circular”):

PROPOSED A SHARE ISSUE

Special Resolutions

1. “ THAT conditional upon the passing of resolution no. 4 and obtaining all necessary approvals of the CSRC and other relevant regulatory authorities, the allotment and issue of the A Shares by the Company and each of the following terms and conditions of the A Share Issue be approved:

2. (a) Type of securities to A Shares be issued:

3. (b) Nominal value: RMB1.00

• The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

– EGM-1 –

NOTICE OF EGM

• (c) Listing stock exchange:

• Shanghai Stock Exchange

• (d) Methods of issue:

• Offering of the Public A Shares via a combination of placement through offline offering to investors with whom a market consultation on price will be conducted, public offering through online subscription at the Issue Price and other methods approved by the CSRC; and

• Placement of the Consideration Shares to PDA at the Issue Price.

• (e) Target Subscribers:

• Public A Shares: Qualified Public A Share Investors

• Consideration Shares: PDA

• (f) Method for determining the Issue Price:

• The range for the Issue Price will be determined based on preliminary price consultation with selected potential investors. An offline cumulative bidding price consultation will then be conducted within such range. The Issue Price will be determined by the Board on the basis of the results of the cumulative bidding price consultation and the prevailing conditions of the PRC securities market at the time when the A Share Issue takes place. In any event, the Issue Price will not be less than 90% of the average trading price of the H Shares during the period of 20 Trading Days immediately prior to the publication of the preliminary prospectus for the A Share Issue.

• (g) Number of the • Not more than 1,200,000,000 Public A A Shares to be Shares to Qualified Public A Share issued: Investors; and

– EGM-2 –

NOTICE OF EGM

• Not more than 1,200,000,000 Consideration Shares to PDA in respect of the Initial Consideration for the Acquisition. The number of the Consideration Shares will be determined pursuant to the following formula:

Number of Initial Consideration Consideration = Issue Price Shares

In the event that the number of the Consideration Shares determined pursuant to the above mentioned formula (i) is more than 1,200,000,000, only a total of 1,200,000,000 Consideration Shares will be issued to PDA and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be paid by the Company to PDA in cash; or (ii) is equal to or less than 1,200,000,000, the number of the Consideration Shares determined pursuant to the above mentioned formula will be rounded down to the nearest multiple of 10,000 and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be contributed by PDA to the capital reserve of the Company.

The final number of the Public A Shares and the Consideration Shares shall be determined by the Board after the Issue Price is fixed, subject to authorisation by the Shareholders at the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting, respectively, and to approval from the relevant regulatory authorities.

– EGM-3 –

NOTICE OF EGM

• Pursuant to the relevant PRC laws and regulations, a number of Public A Shares representing 10% of the total number of the A Shares to be issued to the public will be created by conversion from an equal number of the Domestic Shares currently held by PDA and other existing Domestic Shareholders (as the holders of the state-owned Domestic Shares). Such number of Public A Shares will be transferred to the NSSF Council for nil consideration. The final number of Public A Shares to be so created by conversion and allocated to the NSSF Council will be subject to the determination of the final number of A Shares to be issued pursuant to the A Share Issue, and confirmation by the relevant PRC state-owned assets supervision and administration authorities.

• (h) Rights attached to Except as otherwise provided in the relevant the A Shares: laws, administrative regulations, departmental rules and other regulatory documents and the Articles, holders of the A Shares will be entitled to the same rights as the holders of existing Domestic Shares and H Shares in all respects.

• (i) Listing of the Domestic Shares

• Application will be made to the Shanghai Stock Exchange for Domestic Shares comprising the existing Domestic Shares, the Public A Shares and the Consideration Shares to be listed on the Shanghai Stock Exchange.

• (j) Term

   - The above resolutions (a) to (i), if approved, shall be valid for a period of 12 months from the date of approval by the Shareholders at the EGM.”
  

• “ THAT conditional upon the passing of resolutions no.1 and 4 and obtaining all necessary approvals of the CSRC and other relevant regulatory authorities, the proceeds from the issue of the Public A Shares be and are hereby approved to be applied as follows:

• For the oil/liquefied chemicals terminal and related logistics services

  • (a) as to approximately RMB890,000,000 to fund the construction of 10 oil storage tanks with a total capacity of 1,000,000 m[3] in the Xingang area of Dalian;

  • (b) as to approximately RMB550,000,000 to fund the construction of six oil storage tanks with a total capacity of 600,000 m[3] in the Xingang resort area of Dalian;

– EGM-4 –

NOTICE OF EGM

• (c) as to approximately RMB29,600,000 to fund the construction of four oil storage tanks with a total capacity of 400,000 m[3] for the second phase of the Group’s Shatuozi oil storage tanks project;

• (d) as to approximately RMB320,000,000 to fund the construction of a liquefied natural gas project in Dalian;

• For the container terminal and related logistics services

• (e) as to approximately RMB192,500,000 to fund an proposed increase in the registered capital of Dalian Port Container Terminal Co., Ltd. which operates the second phase of the Dayao Bay container terminals in Dalian;

• (f) as to approximately RMB224,000,000 to fund the further investment in Dalian International Container Terminal Co., Ltd. which operates the third phase of the Group’s Dayao Bay container terminals in Dalian;

• (g) as to approximately RMB54,000,000 to purchase two container vessels;

• For the ore terminal and related logistics services

• (h) as to approximately RMB520,000,000 to fund the construction of No. 4 stacking yard in Dalian;

• (i) as to approximately RMB37,200,000 to purchase a gantry;

• For the general cargo terminal, the passenger and roll-on, roll-off terminal and related logistics services

• (j) as to approximately RMB400,000,000 to be applied to fund the construction of seven general cargo berths and four roll-on, roll-off berths at Dalian Bay in connection with the relocation of the general cargo and roll-on, roll-off terminal operation;

• For the automobile terminal and related logistics services

• (k) as to approximately RMB230,000,000 to be applied to purchase two ro-ro ships each with a capacity of 2,000 cars;

• For the bulk grain terminal and related logistics services

• (l) as to approximately RMB150,000,000 to be applied to purchase 300 bulk grain carriages;

– EGM-5 –

NOTICE OF EGM

• For the comprehensive logistics services

• (m) as to approximately RMB101,250,000 to be applied to fund the construction of inland logistics depots and centers ;

• For the port value-added services and ancillary port operations

• (n) as to approximately RMB100,000,000 to be applied to fund the construction of the Enlarged Group’s information systems;

• Others

• (o) as to approximately RMB300,000,000 to be applied to repay bank loans and to be used as general working capital.

• Authorisation

• (p) Prior to completion of the issue of the Public A Shares, the Company may fund the above mentioned projects by using its internal resources or by bank loans. Upon completion of the issue of the Public A Shares, the Company may, upon having complied with the relevant requirements of the competent regulatory authorities, apply the proceeds from the issue of the Public A Shares to repay the bank loans. In the event that the proceeds from the issue of the Public A Shares are not sufficient to finance the above mentioned uses, the Company will complete the investments by other means. To the extent that the proceeds from the issue of the Public A Share exceed the estimated aggregate amount of investments set out above, the surplus will be applied as general working capital.

• (q) The Board be and is hereby authorised to modify the investment amount of the above mentioned projects and to allocate among such projects the proceeds from the issue of the Public A Shares by taking into account the timing, amount and other circumstances of receiving such proceeds and the progress of such projects; the Board be and is hereby further authorised to modify the investment plan for the above mentioned projects according to the instructions of the competent regulatory authorities.”

Ordinary Resolution

1. “ THAT conditional upon the passing of resolutions no. 1 and 4, any distribution out of the retained distributable profit of the Company as at 31 December 2009 shall be made as follows:

– EGM-6 –

NOTICE OF EGM

The retained distributable profit of the Company as at 31 December 2009 will, conditionally as aforesaid, be distributed pursuant to the Shareholders’ resolution, if any, at the annual general meeting of the Company for 2009 which will be convened in 2010 to the Shareholders on record immediately prior to completion of the A Share Issue. The balance of such retained distributable profit after any such distribution and the profit accrued from 1 January 2010 till completion of the A Share Issue will be held by the Company for the benefit of all the Shareholders from time to time, including the holders of the A Shares issued pursuant to the A Share Issue.

In the event that the A Share Issue is launched after 30 June 2010, a general meeting of the Shareholders may be convened to re-consider and, if thought fit, approve a new proposal for distribution of the retained distributable profit of the Company.”

PROPOSED ACQUISITION

Ordinary Resolution

1. “ THAT conditional upon the passing of resolution no. 1 and completion of the A Share Issue:

2. (a) the terms of the Acquisition Agreement entered into between the Company and PDA on 30 September 2009 in relation to the Acquisition and all other incidental transactions be and are hereby approved, ratified and confirmed; and

3. (b) the execution of the Acquisition Agreement by any Director be and is hereby approved, ratified and confirmed and any Director be and is hereby authorized to approve, sign or execute all such documents, instruments and agreements, and to take such steps, as he/she may consider necessary or appropriate to give effect to or in connection with the Acquisition Agreement.”

CONTINUING CONNECTED TRANSACTIONS

Ordinary Resolutions

1. “ THAT , conditional upon the passing of resolutions no.1 and 4 and completion of the A Share Issue,

2. (a) the Mutual Supply Master Agreement dated 30 September 2009, the continuing connected transactions contemplated thereunder and the related proposed annual caps be and are hereby approved; and

3. (b) the Terminal Facilities Design and Construction Services Agreement dated 30 September 2009, the continuing connected transactions contemplated thereunder and the related proposed annual caps be and are hereby approved.”

– EGM-7 –

NOTICE OF EGM

OTHERS

Special Resolutions

1. “ THAT conditional upon the passing of resolutions no. 1 and 4 and completion of the A Share Issue,

2. (a) the revised Articles as set out in Appendix VII to the Circular be and are hereby approved; and

3. (b) the proposed rules of procedure for shareholders’ meetings as set out in Appendix VIII to the Circular be and are hereby approved;

4. (c) the proposed rules of procedure for board meetings as set out in Appendix IX to the Circular be and are hereby approved;

5. (d) the proposed rules of procedure for supervisory committee meetings as set out in Appendix X to the Circular be and are hereby approved;

6. (e) the proposed working rules for independent directors as set out in Appendix XI to the Circular be and are hereby approved; and

7. (f) the Board be and is hereby authorized to further amend the revised Articles and carry out relevant filing procedures with the relevant authorities based on the total number of shares and share capital of the Company upon completion of the A Share Issue pursuant to the requirements of the relevant regulatory authorities.”

8. “ THAT , conditional upon the passing of resolutions no.1 to 6, the Board be and is hereby authorised to take all necessary actions and/or sign any documents in connection with the A Share Issue, including but not limited to the following matters:

9. (a) to determine the appropriate time of issue, price range for consultation, issue price, number of A Shares to be issued, target subscribers, method of issue, and ratio of number of the A Shares offered for offline subscription to those offered for online subscription and other relevant matters, and to further authorise the chairman of the Board to modify, supplement and implement the A Share Issue in accordance with the instructions of CSRC; to engage intermediaries and to sign the relevant engagements, underwriting agreement and sponsorship agreement;

10. (b) to determine the offering period of the A Share Issue according to CSRC’s approval;

11. (c) to prepare, sign, submit and modify any documents relating to the Acquisition;

– EGM-8 –

NOTICE OF EGM

• (d) to prepare, sign, submit and modify any documents relating to the A Share Issue and apply for all the Domestic Shares comprising the existing Domestic Shares, the Public A Shares and the Consideration Shares to be listed on the Shanghai Stock Exchange;

• (e) to do any other acts or things necessary or appropriate to give the effect to the A Share Issue, Acquisition and application for listing of all the Domestic Shares on the Shanghai Stock Exchange; and

• (f) to modify the A Shares Issue according to the regulations which may be promulgated by the State prior to completion of the A Shares Issue.

• (g) this authorisation shall be valid for a period of 12 months from the date of approval at the EGM.”

Ordinary Resolutions

1. “ THAT , conditional upon the passing of resolutions no. 1 and 4 and completion of the A Share Issue, the proposed system for the management of provision of security to third parties as set out in Appendix XII to the Circular be and is hereby approved.”

2. “ THAT , conditional upon the passing of resolutions no. 1 and 4 and completion of the A Share Issue, the proposed system for the management of funds raised from the capital markets as set out in Appendix XIII to the Circular be and is hereby approved.”

3. “ THAT the report on funds raised the Company’s in previous fund raising exercise as set out in Appendix XIV to the Circular be and is hereby approved.”

By Order of the Board of Directors DALIAN PORT (PDA) COMPANY LIMITED MA Jinru LEE Kin Yu, Arthur Joint Company Secretaries

15 October 2009

– EGM-9 –

NOTICE OF EGM

Notes:

1. Pursuant to Rule 13.39(4) of the Listing Rules, votes of the Shareholders at the EGM shall be taken by poll.

2. Any Shareholder entitled to attend and vote at the EGM is entitled to appoint one or more proxies to attend and vote on his/her/its behalf at the EGM. A proxy need not be a Shareholder. A proxy of a Shareholder shall vote on a poll. Shareholders shall have one vote for each Share that they hold.

3. In order to determine the list of the Shareholders who are entitled to attend the EGM, the registers of members of the Company will be closed from 31 October 2009 to 30 November 2009 (both days inclusive), during which no transfer of Shares will be registered. Shareholders whose names appear on the register of members on 31 October 2009 are entitled to attend the EGM. In order to attend and vote at the EGM, holders of H Shares and holders of Domestic Shares whose transfers have not been registered shall lodge the transfer documents together with the relevant share certificates with Computershare Hong Kong Investor Services Limited, the Company’s registrar of H Shares, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong and China Securities Depository and Clearing Corporation Limited, the Company’s registrar of Domestic Shares, at 22nd and 23rd Floors, Investment Plaza, Financial Street, Xicheng District, Beijing, the PRC, respectively, not later than 4:30 p.m. on 30 October 2009.

4. The instrument appointing a proxy must be in writing under the hand of a Shareholder or his/her/its attorney duly authorized in writing. If the Shareholder is a corporation, that instrument must be either under the company seal or under the hand of its director or duly authorized attorney. If that instrument is signed by an attorney of the Shareholder, the power of attorney authorising that attorney to sign or other authorization documents must be notarized.

5. The proxy form together with the power of attorney or other authorization document (if any) must be lodged with the Office of the Board of Directors of the Company, at the address stated in Note 7 below for holders of the Domestic Shares and with Computershare Hong Kong Investor Services Limited, the Company’s registrar of H Shares, at the address stated in Note 3 above for holders of H Shares, not less than 24 hours before the time designated for holding the EGM or any adjournment thereof.

6. Completion and return of proxy form will not preclude a Shareholder from attending and voting in person at the meeting or any adjournment thereof should such Shareholder so wish.

7. Shareholders who intend to attend the EGM in person or by proxy should return the reply slip to the Office of the Board of Directors of the Company at the address stated in Note 7 below on or before 9 November 2009 by hand, by post or by fax.

8. The contact details of the Office of the Board of Directors of the Company are as follows:

Room 616, PDA Group Building, No.1, Gangwan Street Zhongshan District Dalian City, Liaoning Province PRC Postal Code: 116004 Telephone No.: 86 411 8279 8566-801/811 Facsimile No.: 86 411 8279 8566-805/8279 8108

1. Shareholders or their proxies attending the EGM are responsible for their own transportation and accommodation expenses.

As at the date of this notice, the Board of Directors of the Company comprises four executive directors, namely Mr. SUN Hong, Mr. ZHANG Fengge, Mr. JIANG Luning and Ms. SU Chunhua, two non-executive directors, namely Mr. LU Jianmin and Mr.XU Jian, and three independent non-executive directors, namely Mr. ZHANG Xianzhi, Mr. Ng Ming Wah, Charles and Mr. WANG Zuwen.

– EGM-10 –

NOTICE OF DOMESTIC SHAREHOLDERS CLASS MEETING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

==> picture [92 x 42] intentionally omitted <==

==> picture [109 x 28] intentionally omitted <==

Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

NOTICE IS HEREBY GIVEN that the first class meeting of holders of domestic shares (the “Domestic Shareholders Class Meeting”) of Dalian Port (PDA) Company Limited (the “Company”) in 2009 will be held at Room 602, PDA Group Building, No. 1 Gangwan Street, Zhongshan District, Dalian City, Liaoning Province, PRC at 11:00 a.m. on 30 November 2009 or if sooner then immediately after the conclusion of the EGM for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution. Unless otherwise indicated, capitalised terms used herein shall have the same meaning as in the circular of the Company dated 15 October 2009 (the “Circular”):

PROPOSED A SHARE ISSUE

Special Resolutions

1. “ THAT conditional upon the passing of resolution no. 4 proposed at the EGM and obtaining all necessary approvals of the CSRC and other relevant regulatory authorities, the allotment and issue of A Shares by the Company and each of the following terms and conditions of the A Share Issue be approved:

2. (a) Type of securities to A Shares be issued:

3. (b) Nominal value: RMB1.00

• The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

– DSM-1 –

NOTICE OF DOMESTIC SHAREHOLDERS CLASS MEETING

• (c) Listing stock exchange:

• Shanghai Stock Exchange

• (d) Methods of issue:

• Offering of the Public A Shares via a combination of placement through offline offering to investors with whom a market consultation on price will be conducted, public offering through online subscription at the Issue Price and other methods approved by the CSRC; and

• Placement of the Consideration Shares to PDA at the Issue Price.

• (e) Target Subscribers:

• Public A Shares: Qualified Public A Share Investors

• Consideration Shares: PDA

• (f) Method for determining the Issue Price:

• The range for the Issue Price will be determined based on preliminary price consultation with selected potential investors. An offline cumulative bidding price consultation will then be conducted within such range. The Issue Price will be determined by the Board on the basis of the results of the cumulative bidding price consultation and the prevailing conditions of the PRC securities market at the time when the A Share Issue takes place. In any event, the Issue Price will not be less than 90% of the average trading price of the H Shares during the period of 20 Trading Days immediately prior to the publication of the preliminary prospectus for the A Share Issue.

• (g) Number of the • Not more than 1,200,000,000 Public A A Shares to be Shares to Qualified Public A Share issued: Investors; and

– DSM-2 –

NOTICE OF DOMESTIC SHAREHOLDERS CLASS MEETING

• Not more than 1,200,000,000 Consideration Shares to PDA in respect of the Initial Consideration for the Acquisition. The number of the Consideration Shares will be determined pursuant to the following formula:

Number of Initial Consideration Consideration = Issue Price Shares

In the event that the number of the Consideration Shares determined pursuant to the above mentioned formula (i) is more than 1,200,000,000, only a total of 1,200,000,000 Consideration Shares will be issued to PDA and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be paid by the Company to PDA in cash; or (ii) is equal to or less than 1,200,000,000, the number of the Consideration Shares determined pursuant to the above mentioned formula will be rounded down to the nearest multiple of 10,000 and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be contributed by PDA to the capital reserve of the Company.

The final number of the Public A Shares and the Consideration Shares shall be determined by the Board after the Issue Price is fixed, subject to authorisation by the Shareholders at the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting, respectively, and to approval from the relevant regulatory authorities.

– DSM-3 –

NOTICE OF DOMESTIC SHAREHOLDERS CLASS MEETING

Pursuant to the relevant PRC laws and regulations, a number of Public A Shares representing 10% of the total number of the A Shares to be issued to the public will be created by conversion from an equal number of the Domestic Shares currently held by PDA and other existing Domestic Shareholders (as the holders of the state-owned Domestic Shares). Such number of Public A Shares will be transferred to the NSSF Council for nil consideration. The final number of Public A Shares to be so created by conversion and allocated to the NSSF Council will be subject to the determination of the final number of A Shares to be issued pursuant to the A Share Issue, and confirmation by the relevant PRC state-owned assets supervision and administration authorities.

• (h) Rights attached to Except as otherwise provided in the relevant the A Shares: laws, administrative regulations, departmental rules and other regulatory documents and the Articles, holders of the A Shares will be entitled to the same rights as the holders of existing Domestic Shares and H Shares in all respects.

• (i) Listing of the Application will be made to the Shanghai Stock Domestic Shares Exchange for all Domestic Shares comprising the existing Domestic Shares, the Public A Shares and Consideration Shares to be listed on the Shanghai Stock Exchange.

• (j) Term

• The above resolutions (a) to (i), if approved, shall be valid for a period of 12 months from the date of approval at the Domestic Shareholders Class Meeting.”

• By Order of the Board of Directors

• DALIAN PORT (PDA) COMPANY LIMITED MA Jinru LEE Kin Yu, Arthur Joint Company Secretaries

15 October 2009

– DSM-4 –

NOTICE OF DOMESTIC SHAREHOLDERS CLASS MEETING

Notes:

1. Pursuant to Rule 13.39(4) of the Listing Rules, votes of the Domestic Shareholders at the Domestic Shareholders Class Meeting shall be taken by poll.

2. Any Domestic Shareholder entitled to attend and vote at the Domestic Shareholders Class Meeting is entitled to appoint one or more proxies to attend and vote on his/her/its behalf at the Domestic Shareholders Class Meeting. A proxy need not be a Shareholder. A proxy of a Domestic Shareholder shall vote on a poll. Domestic Shareholders shall have one vote for each Domestic Share that they hold.

3. In order to determine the list of the Shareholders who are entitled to attend the Domestic Shareholders Class Meeting, the register of Domestic Shareholders will be closed from 31 October 2009 to 30 November 2009 (both days inclusive), during which no transfer of Shares will be registered. Domestic Shareholders whose names appear on the register of Domestic Shareholders on 31 October 2009 are entitled to attend the Domestic Shareholders Class Meeting. In order to attend and vote at the Domestic Shareholders Class Meeting, holders of Domestic Shares whose transfers have not been registered shall lodge the transfer documents together with the relevant share certificates with China Securities Depository and Clearing Corporation Limited, the Company’s registrar of Domestic Shares, at 22nd and 23rd Floors, Investment Plaza, Financial Street, Xicheng District, Beijing, the PRC not later than 4:30 p.m. on 30 October 2009.

4. The instrument appointing a proxy must be in writing under the hand of a Domestic Shareholder or his/her/its attorney duly authorized in writing. If the Shareholder is a corporation, that instrument must be either under the company seal or under the hand of its director or duly authorized attorney. If that instrument is signed by an attorney of the Domestic Shareholder, the power of attorney authorising that attorney to sign or other authorization documents must be notarized.

5. The proxy form together with the power of attorney or other authorization document (if any) must be lodged with the Office of the Board of Directors of the Company at the address stated in Note 7 below not less than 24 hours before the time designated for holding the Domestic Shareholders Class Meeting or any adjournment thereof.

6. Completion and return of the proxy form will not preclude any Domestic Shareholder from attending and voting in person at the meeting or any adjournment thereof should such Domestic Shareholder so wish.

7. Domestic Shareholders who intend to attend the Domestic Shareholders Class Meeting in person or by proxy should return the reply slip to the Office of the Board of Directors of the Company at the address stated in Note 7 below on or before 9 November 2009 by hand, by post or by fax.

8. The contact details of the Office of the Board of Directors of the Company are as follows:

Room 616, PDA Group Building, No.1, Gangwan Street Zhongshan District Dalian City, Liaoning Province PRC Postal Code: 116004 Telephone No.: 86 411 8279 8566-801/811 Facsimile No.: 86 411 8279 8566-805/8279 8108

1. Domestic Shareholders or their proxies attending the Domestic Shareholders Class Meeting are responsible for their own transportation and accommodation expenses.

As at the date of this notice, the Board of Directors of the Company comprises four executive directors, namely Mr. SUN Hong, Mr. ZHANG Fengge, Mr. JIANG Luning and Ms. SU Chunhua, two non-executive directors, namely Mr. LU Jianmin and Mr.XU Jian, and three independent non-executive directors, namely Mr. ZHANG Xianzhi, Mr. Ng Ming Wah, Charles and Mr. WANG Zuwen.

– DSM-5 –

NOTICE OF H SHAREHOLDERS CLASS MEETING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

==> picture [92 x 42] intentionally omitted <==

==> picture [109 x 28] intentionally omitted <==

Dalian Port (PDA) Company Limited[] 大連港股份有限公司*

(a sino-foreign joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 2880)

NOTICE IS HEREBY GIVEN that the first class meeting of holders of H shares (the “H Shareholders Class Meeting”) of Dalian Port (PDA) Company Limited (the “Company”) in 2009 will be held at Room 602, PDA Group Building, No. 1 Gangwan Street, Zhongshan District, Dalian City, Liaoning Province, PRC at 11:30 a.m. on 30 November 2009 or if sooner then immediately after the conclusion of the EGM and the Domestic Shareholders Class Meeting for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution. Unless otherwise indicated, capitalised terms used herein shall have the same meaning as those defined in the circular of the Company dated 15 October 2009 (the “Circular”):

PROPOSED A SHARE ISSUE

Special Resolution

1. “ THAT conditional upon the passing of resolution No. 4 proposed at the EGM and obtaining all necessary approvals of the CSRC and other relevant regulatory authorities, the allotment and issue of A Shares by the Company and each of the following terms and conditions of the A Share Issue be approved:

2. (a) Type of securities to A Shares be issued:

3. (b) Nominal value: RMB1.00

• The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under the English name “Dalian Port (PDA) Company Limited”.

– HSM-1 –

NOTICE OF H SHAREHOLDERS CLASS MEETING

• (c) Listing stock exchange:

• Shanghai Stock Exchange

• (d) Methods of issue:

• Offering of the Public A Shares via a combination of placement through offline offering to investors with whom a market consultation on price will be conducted, public offering through online subscription at the Issue Price and other methods approved by the CSRC; and

• Placement of the Consideration Shares to PDA at the Issue Price.

• (e) Target Subscribers:

• Public A Shares: Qualified Public A Share Investors

• Consideration Shares: PDA

• (f) Method for determining the Issue Price:

• The range for the Issue Price will be determined based on preliminary price consultation with selected potential investors. An offline cumulative bidding price consultation will then be conducted within such range. The Issue Price will be determined by the Board on the basis of the results of the cumulative bidding price consultation and the prevailing conditions of the PRC securities market at the time when the A Share Issue takes place. In any event, the Issue Price will not be less than 90% of the average trading price of the H Shares during the period of 20 Trading Days immediately prior to the publication of the preliminary prospectus for the A Share Issue.

• (g) Number of the • Not more than 1,200,000,000 Public A A Shares to be Shares to Qualified Public A Share issued: Investors; and

– HSM-2 –

NOTICE OF H SHAREHOLDERS CLASS MEETING

• Not more than 1,200,000,000 Consideration Shares to PDA in respect of the Initial Consideration for the Acquisition. The number of the Consideration Shares will be determined pursuant to the following formula:

Number of Initial Consideration Consideration = Issue Price Shares

In the event that the number of the Consideration Shares determined pursuant to the above mentioned formula (i) is more than 1,200,000,000, only a total of 1,200,000,000 Consideration Shares will be issued to PDA and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be paid by the Company to PDA in cash; or (ii) is equal to or less than 1,200,000,000, the number of the Consideration Shares determined pursuant to the above mentioned formula will be rounded down to the nearest multiple of 10,000 and the difference between the amount of the proceeds from the issue of the Consideration Shares and the Initial Consideration will be contributed by PDA to the capital reserve of the Company.

The final number of the Public A Shares and the Consideration Shares shall be determined by the Board after the Issue Price is fixed, subject to authorisation by the Shareholders at the EGM, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting, respectively, and to approval from the relevant regulatory authorities.

– HSM-3 –

NOTICE OF H SHAREHOLDERS CLASS MEETING

Pursuant to the relevant PRC laws and regulations, a number of Public A Shares representing 10% of the total number of the A Shares to be issued to the public will be created by conversion from an equal number of the Domestic Shares currently held by PDA and other existing Domestic Shareholders (as the holders of the state-owned Domestic Shares). Such number of Public A Shares will be transferred to the NSSF Council for nil consideration. The final number of Public A Shares to be so created by conversion and allocated to the NSSF Council will be subject to the determination of the final number of A Shares to be issued pursuant to the A Share Issue, and confirmation by the relevant PRC state-owned assets supervision and administration authorities.

• (h) Rights attached to Except as otherwise provided in the relevant the A Shares: laws, administrative regulations, departmental rules and other regulatory documents and the Articles, holders of the A Shares will be entitled to the same rights as the holders of existing Domestic Shares and H Shares in all respects.

• (i) Listing of the Application will be made to the Shanghai Stock Domestic Shares Exchange for all Domestic Shares comprising the existing Domestic Shares, the Public A Shares and Consideration Shares shall be applied to be listed on the Shanghai Stock Exchange.

• (j) Term The above resolutions (a) to (i), if approved, shall be valid for a period of 12 months from the date of approval at the H Shareholders Class Meeting.”

• By Order of the Board of Directors

• DALIAN PORT (PDA) COMPANY LIMITED MA Jinru LEE Kin Yu, Arthur Joint Company Secretaries

15 October 2009

– HSM-4 –

NOTICE OF H SHAREHOLDERS CLASS MEETING

Notes:

1. Pursuant to Rule 13.39(4) of the Listing Rules, votes of the H Shareholders at the H Shareholders Class Meeting shall be taken by poll.

2. Any H Shareholder entitled to attend and vote at the H Shareholders Class Meeting is entitled to appoint one or more proxies to attend and vote on his/her/its behalf at the H Shareholders Class Meeting. A proxy need not be a Shareholder. A proxy of a H Shareholder shall vote on a poll. H Shareholders shall have one vote for each H Share that they hold.

3. In order to determine the list of the H Shareholders who are entitled to attend the H Shareholders Class Meeting, the register of H Shareholders will be closed from 31 October 2009 to 30 November 2009 (both days inclusive), during which no transfer of Shares will be registered. H Shareholders whose names appear on the registers of H Shareholders on 31 October 2009 are entitled to attend the H Shareholders Class Meeting. In order to attend and vote at the H Shareholders Class Meeting, holders of H Shares whose transfers have not been registered shall lodge the transfer documents together with the relevant share certificates with Computershare Hong Kong Investor Services Limited, the Company’s registrar of H Shares, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 30 October 2009.

4. The instrument appointing a proxy must be in writing under the hand of a H Shareholder or his/her attorney duly authorized in writing. If the shareholder is a corporation, that instrument must be either under the company seal or under the hand of its director or duly authorized attorney. If that instrument is signed by an attorney of the H Shareholder, the power of attorney authorising that attorney to sign or other authorization documents must be notarized.

5. The proxy form together with the power of attorney or other authorization document (if any) must be lodged with Computershare Hong Kong Investor Services Limited, the Company’s registrar of H Shares, at the address stated in Note 3 above not less than 24 hours before the time designated for holding the H Shareholders Class Meeting or any adjournment thereof.

Completion and return of the form of proxy will not preclude any H Shareholder from attending and voting in person at the meeting or any adjournment thereof should such H Shareholder so wish.

1. H Shareholders who intend to attend the H Shareholders Class Meeting in person or by proxy should return the reply slip to the Office of the Board of Directors of the Company at the address stated in Note 7 below on or before 9 November 2009 by hand, by post or by fax.

2. The contact details of the Office of the Board of Directors of the Company are as follows:

Room 616, PDA Group Building, No.1, Gangwan Street Zhongshan District Dalian City, Liaoning Province PRC Postal Code: 116004 Telephone No.: 86 411 8279 8566-801/811 Facsimile No.: 86 411 8279 8566-805/8279 8108

1. H Shareholders or their proxies attending the H Shareholders Class Meeting are responsible for their own transportation and accommodation expenses.

As at the date of this notice, the Board of Directors of the Company comprises four executive directors, namely Mr. SUN Hong, Mr. ZHANG Fengge, Mr. JIANG Luning and Ms. SU Chunhua, two non-executive directors, namely Mr. LU Jianmin and Mr.XU Jian, and three independent non-executive directors, namely Mr. ZHANG Xianzhi, Mr. Ng Ming Wah, Charles and Mr. WANG Zuwen.

– HSM-5 –