Tianjin Port Development Holdings Limited — Proxy Solicitation & Information Statement 2012

Nov 26, 2012

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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your Shares in Tianjin Port Development Holdings Limited , you should at once hand this circular, together with the accompanying form of proxy, to the purchaser or to the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 03382)

MAJOR AND CONTINUING CONNECTED TRANSACTIONS RENEWAL OF THE EXISTING FINANCIAL SERVICES FRAMEWORK AGREEMENT AND RE-ELECTION OF DIRECTOR

INDEPENDENT FINANCIAL ADVISER TO THE INDEPENDENT BOARD COMMITTEE AND THE INDEPENDENT SHAREHOLDERS

A letter from the Board is set out on pages 4 to 23 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 24 to 25 of this circular. A letter from Quam Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 26 to 44 of this circular.

A notice convening the EGM to be held at Gloucester Room 1, 3rd Floor, The Excelsior Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong on Wednesday, 19 December 2012 at 3:00 p.m. is set out on pages 54 to 55 of this circular. A form of proxy for use by the Shareholders at the EGM (or any adjourned meeting thereof) is also enclosed.

Whether or not you are able to attend the EGM in person, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and delivery of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

27 November 2012

CONTENTS

		Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD
1.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
2.	MAJOR AND CONTINUING CONNECTED TRANSACTIONS
	i. THE BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
	ii. NEW FINANCIAL SERVICES FRAMEWORK AGREEMENT . . . . . . . . . .	5
	iii. INTERNAL CONTROL AND RISK MANAGEMENT
	MEASURES ADOPTED BY TIANJIN PORT FINANCE . . . . . . . . . . . . .	16
	iv. FINANCIAL EFFECTS OF THE DEPOSIT SERVICES . . . . . . . . . . . . . . . .	19
	v. LISTING RULES IMPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
	vi. INFORMATION ON THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
3.	RE-ELECTION OF DIRECTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
4.	THE EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
5.	RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
6.	ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . .		24
LETTER FROM QUAM CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		26
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . .		45
APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .		47
APPENDIX III – NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . .		54

– i –

DEFINITIONS

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

• “Board” the board of Directors;

• “CBRC” China Banking Regulatory Commission;

• “Company” Tianjin Port Development Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the main board of the Stock Exchange (Stock Code: 03382);

• “Deposit Services” the deposit services contemplated under the New Financial Services Framework Agreement;

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

• “EGM” or “Extraordinary General Meeting”

• the extraordinary general meeting of the Company to be convened and held to consider and, if thought fit, approve, inter alia, (1) the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 and (2) the re-election of Director;

• “Existing Financial Services Framework Agreement”

• a framework agreement dated 18 October 2010 entered into between the Company, Tianjin Port Finance and Tianjin Port Group in relation to the provision of financial services by Tianjin Port Finance to members of the Group;

• “Group” the Company and its subsidiaries;

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong;

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC;

• “Independent Board Committee”

• the independent board committee comprising the independent non-executive Directors;

• “Independent Shareholders” Shareholders, other than Tianjin Port Group and its associates;

• “Latest Practicable Date”

• 21 November 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;

– 1 –

DEFINITIONS

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;

“New Financial Services a framework agreement dated 26 September 2012 Framework Agreement” entered into between the Company, Tianjin Port Finance and Tianjin Port Group in relation to the provision of financial services by Tianjin Port Finance to members of the Group; “Parties” collectively, the Company, Tianjin Port Finance and Tianjin Port Group; “PBOC” People’s Bank of China;

“PRC” the People’s Republic of China, which for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan; “Quam Capital” or “Independent Quam Capital Limited, being a corporation licensed by Financial Adviser” the SFC for carrying out Type 6 (advising on corporate finance) regulated activities under the SFO, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015; “RMB” Renminbi, the lawful currency of the PRC; “SFC” The Securities and Futures Commission of Hong Kong; “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong); “Shareholders” the shareholders of the Company; “Share(s)” ordinary share(s) of HK$0.10 each in the existing issued share capital of the Company; “Stock Exchange” The Stock Exchange of Hong Kong Limited;

“Tianjin Port Co” Tianjin Port Holdings Co., Ltd.*（天津港股份有限公司）, a limited liability company incorporated in the PRC, the shares of which are listed on the Shanghai Stock Exchange (stock code: 600717), and indirectly owned as to 56.81% by the Company;

– 2 –

DEFINITIONS

“Tianjin Port Finance” Tianjin Port Finance Co., Ltd.（天津港財務有限公司）, a limited liability company incorporated in the PRC, a 48% owned associate of Tianjin Port Co and a 40.24% owned associate of Tianjin Port Group; “Tianjin Port Group” Tianjin Port (Group) Co., Ltd.（天津港（集團）有限公司）, an entity reorganised as a wholly state-owned company in the PRC on 29 July 2004 and the holding company of the businesses owned and operated by the former governmental regulatory body of the port of Tianjin; “Transactions” the transactions contemplated under the New Financial Services Framework Agreement; and “%” per cent.

If there is any inconsistency between the Chinese names of the PRC entities mentioned in this circular and their English translations, the Chinese names shall prevail.

• For identification purposes only

– 3 –

LETTER FROM THE BOARD

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 03382)

Executive Directors:

Mr. YU Rumin (Chairman) Mr. TIAN Changsong (Vice Chairman) Mr. LI Quanyong (Managing Director) Mr. WANG Rui Mr. DAI Yan

Registered Office:

Clifton House 75 Fort Street P. O. Box 1350 Grand Cayman KY1-1108 Cayman Islands

Independent Non-executive Directors:

Professor Japhet Sebastian LAW Dr. CHENG Chi Pang, Leslie Mr. ZHANG Weidong

Principal Place of Business in Hong Kong:

Suite 3904-3907, 39/F., Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong

27 November 2012

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONTINUING CONNECTED TRANSACTIONS RENEWAL OF THE EXISTING FINANCIAL SERVICES FRAMEWORK AGREEMENT AND RE-ELECTION OF DIRECTOR

1. INTRODUCTION

Reference is made to the announcement of the Company dated 26 September 2012 in relation to the renewal of the Existing Financial Services Framework Agreement. Pursuant to the requirements under the Listing Rules, the Company will seek the Independent Shareholders’ approval in relation to the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 at the EGM.

Reference is also made to the announcement of the Company dated 28 June 2012 in relation to the appointment of independent non-executive Director. Pursuant to the requirements under the articles of association of the Company, the Company will seek the Shareholders’ approval in relation to the re-election of Director at the EGM.

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LETTER FROM THE BOARD

The purposes of this circular are to provide you with:–

• (a) details of the terms of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015;

• (b) details of re-election of independent non-executive Director;

• (c) a letter from the Independent Board Committee to the Independent Shareholders in respect of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015;

• (d) a letter of advice from Quam Capital to the Independent Board Committee and the Independent Shareholders in respect of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015; and

• (e) a notice of the EGM.

2. MAJOR AND CONTINUING CONNECTED TRANSACTIONS

i. THE BACKGROUND

Reference is made to the announcement of the Company dated 18 October 2010 where it was announced, among other things, that the Company entered into the Existing Financial Services Framework Agreement with Tianjin Port Finance and Tianjin Port Group on 18 October 2010.

As the Existing Financial Services Framework Agreement will expire on 31 December 2012, the Company had on 26 September 2012 entered into the New Financial Services Framework Agreement, the term of which is from 1 January 2013 to 31 December 2015, with Tianjin Port Finance and Tianjin Port Group to continue the Transactions.

ii. NEW FINANCIAL SERVICES FRAMEWORK AGREEMENT

(a) Background

Date	:	26	September 2012
Parties	:	(1)	the Company (as services user)
		(2)	Tianjin Port Finance (as services provider)
		(3)	Tianjin Port Group (as guarantor)
Term	:	1 January 2013 to 31 December 2015

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LETTER FROM THE BOARD

• Condition : The New Financial Services Framework Agreement, including the related proposed annual caps, is conditional upon obtaining the approval from the Independent Shareholders in accordance with the provisions of the Listing Rules.

• Nature of : The provision of financial services by Tianjin Port Services Finance to members of the Group, including:

• (1) deposit services;

• (2) provision of loans (excluding entrustment loans referred to in category (5) below);

• (3) commercial notes acceptance and discounting services;

• (4) settlement services;

• (5) arrangement of entrustment loans between members of the Group, whereby Tianjin Port Finance serves as a financial agency through which funds of any member of the Group may be channeled for use by other members of the Group; and

• (6) certification of financial position, financial advisory services and other advisory services (together with the services referred to in categories (3) to (5) above, the “ Other Financial Services ”).

Pursuant to the New Financial Services Framework Agreement, the Group need not utilise the financial services provided by Tianjin Port Finance and is not under any obligation to do so. The Company has the right to decide whether to maintain its relationship with Tianjin Port Finance as a provider of financial services.

Fees and : The fees and charges payable by the Group to Charges Tianjin Port Finance under the New Financial Services Framework Agreement will be on terms not less favourable than the benchmark rates set by PBOC (if applicable) as well as those available from other independent commercial banks in the PRC and are determined on the following bases:

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LETTER FROM THE BOARD

• deposit services – the interest rates for deposits placed by members of the Group must not be lower than (i) the relevant benchmark interest rates set by PBOC; and (ii) the interest rates provided by other independent commercial banks in the PRC for deposits of similar nature and under similar terms;

• provision of loans – the interest rates for borrowings by members of the Group must not be higher than (i) the relevant benchmark interest rates set by PBOC; and (ii) the interest rates charged by other independent commercial banks in the PRC for borrowings of similar nature and under similar terms;

� commercial notes acceptance and discounting services – the fees charged for the services and the interest rates for the commercial notes discounting services must not be higher than (i) the relevant benchmark charging rates (if applicable) and interest rates set by PBOC; and (ii) the fees and interest rates charged by other independent commercial banks in the PRC for providing commercial notes acceptance and discounting services of similar nature and under similar terms;

• settlement services – the fees charged for the settlement services must not be higher than (i) the relevant benchmark charging rates set by PBOC (if applicable); and (ii) the fees charged by other independent commercial banks in the PRC for providing services of similar nature;

• arrangement of entrustment loans – the fees charged for the services and the interest rates for the entrustment loans must not be higher than (i) the relevant benchmark charging rates (if applicable) and interest rates set by PBOC; and (ii) the fees and interest rates charged by other independent commercial banks in the PRC for arranging entrustment loans of similar nature and under similar terms; and

– 7 –

LETTER FROM THE BOARD

• certification of financial position, financial advisory services and other advisory services – the fees charged for these services must not be higher than (i) the relevant benchmark charging rates set by PBOC (if applicable); and (ii) the fees charged by other independent commercial banks in the PRC for providing services of similar nature and under similar terms.

• Other : The average daily amount of outstanding loans Provisions extended by Tianjin Port Finance to the Group must exceed the average daily amount of deposits placed by the Group with Tianjin Port Finance, both amounts being calculated on a monthly basis.

• In respect of the deposits placed by the Group with Tianjin Port Finance and if Tianjin Port Finance misuses or defaults the deposits placed by the Group with Tianjin Port Finance which renders the Group unable to recover such deposits (including accrued interest), the Group will have the right to set off such deposits (including accrued interest) against the outstanding loans (including accrued interest) extended by Tianjin Port Finance to the Group. However, if the Group fails to repay its loans extended by Tianjin Port Finance on time, Tianjin Port Finance does not have the right to set off such outstanding loans due from the Group with the deposits placed by the Group with Tianjin Port Finance.

Termination

• : The New Financial Services Framework Agreement may be unilaterally terminated by the Company upon:

• (1) the occurrence of any of the following which exposes or potentially exposes the Group to substantial risks or losses:

  • breach or potential breach of PRC laws and regulations by Tianjin Port Finance or its non-performance of any terms or default of the New Financial Services Framework Agreement;

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LETTER FROM THE BOARD

� Tianjin Port Finance experiences or foresees to experience any major operational problem or difficulty with liquidity; or (2) breach or potential breach of laws and regulations (including the Listing Rules) by the Company as a result of compliance with the New Financial Services Framework Agreement. Undertakings : As part of the New Financial Services Framework by Tianjin Agreement, Tianjin Port Group undertakes to the Port Group Company that: � it is duly established, validly existing and constitutes a separate legal entity, having the ability to guarantee Tianjin Port Finance’s execution of its duties and obligations under the New Financial Services Framework Agreement; � it has the necessary right, power and authority to execute the New Financial Services Framework Agreement and all other documents necessary for the execution of the same. Upon the effectiveness of the said agreement and documents above, these will be valid, binding and enforceable against Tianjin Port Group; � the signing of the New Financial Services Framework Agreement by Tianjin Port Group does not breach or lead to breach of: (a) its articles of association, business certificate and other similar establishment documents; (b) other contracts and agreements to which Tianjin Port Group is a party; and (c) any PRC laws and regulations; � it has undertaken and warranted to both the Company and the CBRC that if Tianjin Port Finance experiences or foresees to experience any liquidity problems, it will inject capital to Tianjin Port Finance based on the latter’s needs in order to ensure the latter’s normal operation; and

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LETTER FROM THE BOARD

• Tianjin Port Group undertakes and warrants to compensate the Group jointly and severally with Tianjin Port Finance for all the financial losses (including but not limited to the Group’s deposits, interests and related expenses incurred) caused by Tianjin Port Finance’s breaches or potential breaches of PRC laws and regulations, or by its having or potentially having any major operational problems or difficulties with liquidity, or by its non-performance of any terms or default of the New Financial Services Framework Agreement.

• Internal : In order to safeguard the interests of the Company Control and and the Shareholders, the New Financial Services Risk Framework Agreement provides for the following Management internal control and risk management measures: Measures � Tianjin Port Finance shall ensure the secure operation of its fund management information system. The system has passed all the security tests for the internet banking connection with other commercial banks, and that the system adopts the digital certificates for security certification for ensuring the security of the Group’s funds;

• � Tianjin Port Finance guarantees that it will strictly comply with and operate under the finance company risk management specifications issued by the CBRC. The gearing, liquidity and other ratios should comply with the ratios specified by CBRC and other PRC laws and regulations as amended from time to time;

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LETTER FROM THE BOARD

• Tianjin Port Finance shall at all times monitor its credit risks. If (i) any specific situation arises which may affect the security of the deposits placed by the Group with Tianjin Port Finance, or (ii) any other circumstances occur, which may cause serious concern to such security, Tianjin Port Finance shall give written notice to the Group within two business days after the happening of such situations or circumstances, and to take measures to avoid or contain any losses. Once being notified, the Group has the right to withdraw its deposits (including the accrued interest) forthwith, or if it is unable to do so, it may set off the deposits (including the accrued interest) placed by the Group with Tianjin Port Finance against the outstanding loans (including the accrued interest) extended by Tianjin Port Finance to the Group;

� during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall provide the Company with a report before 10:00 a.m. each working day on the amount of deposits placed and loans borrowed by the Group (the “Report”). The Report will be reviewed, on a daily basis, by the Company to monitor and ensure that the average daily amount of deposits (including accrued interest) placed by the Group does not exceed the proposed annual caps and the average daily amount of outstanding loans extended by Tianjin Port Finance to the Group must be more than the average daily balance amount of deposits placed by the Group with Tianjin Port Finance, both amounts being calculated on a monthly basis;

• during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall provide the Company on the fifth working day of every month its financial statements and other returns submitted to the CBRC the previous month;

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LETTER FROM THE BOARD

• during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall provide the Company within three working days after submission a copy of every regulatory report it submitted to the CBRC; and

• during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall implement all the measures in relation to risk control.

(b) Historical figures and proposed annual caps

The table below sets out a summary of the historical transaction amounts of the deposits placed by the Group with Tianjin Port Finance (deposit services: category (1) of the financial services referred to above) for the year ended 31 December 2010, the year ended 31 December 2011 and the six months ended 30 June 2012 and the proposed annual caps for the three years ending 31 December 2013, 2014 and 2015:

	**Historical **	**figures and **	historical	**Proposed annual **	**Proposed annual **	caps
	**annual caps (RMB in **		million)	(RMB in million)
	For the	For the	For the	For the	For the	For the
	year	year	six months	year	year	year
	ended 31	ended 31	ended 30	ended 31	ended 31	ended 31
	December	December	June	December	December	December
	2010	2011	2012	2013	2014	2015
Maximum	1,111	1,836	2,182	2,200	2,200	2,200
daily	(2010 cap:	(2011 cap:	(2012 cap:
outstanding	2,200)	2,200)	2,200)
balance of
deposits
(including
accrued
interest)

• (c) Basis of the proposed annual caps

The proposed annual caps on the maximum daily outstanding balance of deposits (including accrued interest) to be placed by the Group with Tianjin Port Finance (excluding the deposits for the purpose of extending entrustment loans referred to above) are arrived at after considering the historical highest daily outstanding balances of deposits placed by the Group with Tianjin Port Finance, and the treasury requirements of the Group as a whole taking into account the settlement trend of its business partners as well as the expected continuous growth of business of the Group. The proposed annual caps represented approximately 60% of the total deposits of the Group as at 30 June 2012. The Group expected the proposed annual caps would meet the funding management purposes of the

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LETTER FROM THE BOARD

Group. The Directors consider that the proposed annual caps were at the optimum level and were at the best interests of the Company and its Shareholders as a whole after taking into account the above factors.

For the Other Financial Services (categories (3) to (6) of the financial services referred to above), the Company expects that the relevant percentage ratios of the aggregate fees and charges payable by the Group to Tianjin Port Finance will not, on an annual basis, exceed 0.1% under the Listing Rules during the term of the New Financial Services Framework Agreement and are exempted from the reporting, announcement and independent shareholders’ approval requirements of the Listing Rules.

(d) Reasons for and benefits of entering into the Transactions

Given Tianjin Port Co (which is owned as to 56.81% by the Company) and Tianjin Port Group are shareholders with effective interest of 48% and 40.24% respectively of the issued share capital of Tianjin Port Finance, the reasons and benefits for the Group to use the services of Tianjin Port Finance include, but are not limited to: (i) the formulation of a deposit mix between other independent commercial banks in the PRC and Tianjin Port Finance, while at the same time retaining sufficient working capital flexibility; (ii) enhancing cost savings by reducing the amount of finance fees and charges payable to external banks when Tianjin Port Finance offers more favourable terms than those offered by external banks; and/or (iii) sharing profits of Tianjin Port Finance attributable to the Group through its shareholding in Tianjin Port Co. It is expected that Tianjin Port Finance, being an affiliate company of Tianjin Port Co, will be placed in a better position to serve the financial needs of the Group as it has better understanding of the operation and development needs of the Group. Accordingly, it is envisaged that Tianjin Port Finance will be more efficient in terms of processing transactions for the Group than other external banks in the PRC.

The Directors believe that the risk profile of Tianjin Port Finance is no greater than that of other independent commercial banks in the PRC, whilst there are numerous advantages of utilising the financial services provided by Tianjin Port Finance over similar services provided by other independent commercial banks in the PRC for the following reasons:

• similar to other independent commercial banks in the PRC, Tianjin Port Finance is regulated by the PBOC and the CBRC, and it provides services pursuant to the relevant rules and requirements including capital risk guidelines and requisite capital adequacy ratios of such regulatory authorities;

• the regulation of finance companies (such as Tianjin Port Finance) by CBRC is more stringent than the regulation of commercial banks in the PRC in certain aspects, for example, finance companies are required to have a higher capital adequacy ratio;

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LETTER FROM THE BOARD

• Tianjin Port Finance has been rated by the CBRC as a Grade B finance company in the PRC, which placed Tianjin Port Finance as one of the top ranked finance companies in the PRC. The CBRC reviews the finance companies in the PRC pursuant to the Guideline of Risk Assessment and Classified Regulation on Financial Companies of Enterprise Groups （“企業集團財務公司風險評價和分類監管指引”） which covers areas including the finance company’s internal management, operating conditions and the related group’s influence over and support to the finance company. After each review exercise, the CBRC will assign one of five grades (Grade A to Grade E) to the finance companies. Grade B is the second highest grade which indicates that the finance company concerned possesses comprehensive internal management, maintains good operating conditions and is well suited for the provision of central treasury management function for its related group companies;

• Tianjin Port Finance has not defaulted on any of its credit obligations or, to the knowledge of the Directors, breached any rule or requirement of the PBOC and the CBRC;

• Tianjin Port Finance has implemented stringent internal control and risk management measures, the efficiency and effectiveness of which are regularly reviewed by CBRC. Furthermore, Tianjin Port Finance will provide the Company access to its books and accounts for inspection upon the Company’s request;

• as stated in its articles of association, Tianjin Port Finance operates independently and is responsible for its own financial performance. When Tianjin Port Finance provides financial services to members of Tianjin Port Group, it will exercise its own judgment and prudent approval process in determining whether to provide particular financial services to these members. With the implementation of stringent credit control measures, Tianjin Port Finance has never experienced any bad debt since its establishment in 2006; and

• the risk is minimised by: (i) Tianjin Port Group’s undertakings to the Group; (ii) the Group’s right of set-off; and (iii) that the average daily amount of outstanding loans of the Group shall exceed the average daily amount of deposits placed by the Group, both amounts being calculated on a monthly basis.

The advantages of utilising the deposit services and other services provided by Tianjin Port Finance over similar services provided by other independent commercial banks in the PRC are as follows:

• PRC laws do not permit companies, including affiliates, to extend intra-group loans directly without going through a financial intermediary. Tianjin Port Finance serves as the financial intermediary

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LETTER FROM THE BOARD

through which the funds of the members of the Group may be deposited with Tianjin Port Finance and channeled efficiently to be used by one another;

• as an intra-group service provider, Tianjin Port Finance generally has better and more efficient communication and understanding with the Group compared with other independent commercial banks in the PRC. For example, by coordinating the members of the Group with surplus deposits with members who are borrowers, the costs and efficiency of the services provided will be improved;

• Tianjin Port Finance offers interest rates that are no less favourable than the applicable PBOC benchmark or reference rates and those offered by other independent commercial banks in the PRC:

• in the PRC, the deposit rates set by the PBOC represent the benchmark rates which serve as the deposit rates for all financial institutions in the PRC. Currently, the financial institutions may offer deposit rates that are up to 10% premium above the benchmark rate. Tianjin Port Finance offers interest rates that are up to 10% premium above the benchmark rate for deposits placed by members of the Group (category (1) of the financial services referred to above), which is no less favorable than the applicable PBOC benchmark rates and the interest rates provided by other independent commercial banks in the PRC for deposits of similar nature and under similar terms;

• benchmark borrowing rates are also set by the PBOC for financial institutions in the PRC. Tianjin Port Finance charges interest rates on loans extended to the members of the Group (category (2) of the financial services referred to above), which is no less favorable than the applicable PBOC benchmark rates and the interest rates charged by other independent commercial banks in the PRC for borrowings of similar nature and under similar terms;

• for other financial services, the PBOC sets benchmark or reference rates (where applicable) for the reference of the financial institutions in the PRC. For the provision of such services (the “Other Financial Services” as referred to above), Tianjin Port Finance charges members of the Group rates and fees that are no less favorable than the benchmark or reference rates set by the PBOC (where applicable) as well as those offered by other independent commercial banks in the PRC. Such rates are determined by Tianjin Port Finance after taking into consideration the benchmark or reference rates set by PBOC (if applicable) and those offered by other major independent commercial banks in Tianjin for providing services of similar nature and under similar terms in accordance with normal commercial practices;

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LETTER FROM THE BOARD

• Tianjin Port Finance can assist the Group to formulate a beneficial deposit mix comprising different types of deposits such as current deposits, call deposits and fixed deposits, which allows the Group to increase its return on funds and retain sufficient working capital flexibility;

• the fees and charges generated from the utilisation of Tianjin Port Finance’s services will be credited to Tianjin Port Finance instead of other independent commercial banks in the PRC, which allows the Group to benefit financially. The Company through Tianjin Port Co indirectly holds 48% equity interest in Tianjin Port Finance and will share the profits of Tianjin Port Finance accordingly;

• as Tianjin Port Finance is familiar with the business and transaction patterns of the Group, the settlement services provided by Tianjin Port Finance tend to provide a more efficient and orderly platform than those platforms that could be provided by other independent commercial banks in the PRC. This also helps to reduce the transaction costs of the Group such as handling fees for transfer of funds and other administrative expenses;

• discounting of commercial notes by Tianjin Port Finance provides the Group’s customers with flexibility in payment terms and accelerates the Group’s collection of sale proceeds. Upon discounting of the commercial notes, the Group may receive the sale proceeds as if the sale was effected as a cash sale. This arrangement helps to efficiently reduce the receivables balance of the Group and accelerate its fund flows; and

• when there is credit squeeze in the PRC, it is generally more difficult or costly to obtain loans from commercial banks in the PRC, Tianjin Port Finance can provide an additional financing platform to the Group which can reduce the impact of the credit squeeze to the Group.

iii. INTERNAL CONTROL AND RISK MANAGEMENT MEASURES ADOPTED BY TIANJIN PORT FINANCE

Tianjin Port Finance has implemented stringent internal control and risk management measures through its various committees and departments with clearly defined roles and responsibilities. The management and staff of Tianjin Port Finance have a balance of skills, knowledge and experience appropriate for the requirements of the business of Tianjin Port Finance to ensure the effective and efficient execution of these control functions.

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LETTER FROM THE BOARD

The following is a summary of the various committees and departments and their respective key roles and responsibilities in the internal control and risk management functions of Tianjin Port Finance:

• (a) Supervisory Board

• Inspecting the books and records of Tianjin Port Finance and raising enquiries;

• Supervising the directors, management and staff in their compliance with laws and internal policies and requesting any non-compliance be rectified; and

• Examining the financial reports; and to supervise, inspect and audit the major policy initiatives when required.

• (b) Board Committees

• Monitoring the long-term development strategies/policies of Tianjin Port Finance;

• Monitoring the effectiveness of Tianjin Port Finance’s risk management strategies and policies; and

• Monitoring the quality of the investments made as well as their risk and benefits, and examines the investment proposals.

• (c) Credit Review Committee

• Setting the credit limits to be extended to customers, being members of Tianjin Port Group;

• Considering/reviewing the applications of the various types of loans and guarantees and to provide credit ratings on the loans extended; and

• Providing comments if there are any major problem areas such as doubtful loans, high risk credit business and asset protection issues.

• (d) Business and Operations Department

• Carrying out the inspection, approval and other procedures necessary in extending loans, entrustment loans and secured loans, and carrying out the statistical and other related work; and

• Performing evaluation of credit risks and the assignment of credit ratings to the loans extended, in order to control the credit risk and ensuring the recoverability of the loans.

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LETTER FROM THE BOARD

• (e) Settlement and Finance Department

• Monitoring the financial performance and budgetary control of Tianjin Port Finance;

• Drafting and implementing the various accounting guidelines and policies; and

• Preparing and submitting the relevant financial returns to the various regulatory authorities.

• (f) Compliance Department

• Developing the necessary risk management policies and procedures in light of the development of Tianjin Port Finance, and to check whether they are complete and able to cover all aspects of the business processes;

• Checking whether the risk management policies and procedures are designed reasonably, and whether they can effectively control the risks of the various businesses and departments;

• Establishing effective assessment and monitoring measures for the risk management policies and procedures;

• Checking whether the risk management/internal control policies and procedures can be strictly implemented and complied with by the various businesses and departments;

• Reporting (on regular and irregular basis) to the senior management and the risk management committee the status of the risk management and compliance work report; and

• Carrying out training programs on risk management and compliance.

• (g) Information Technology Department

• Implementing risk management strategies appropriate for all aspects of the information system; and

• Drafting and implementing rules and usage guidelines in relation to information technology.

• (h) Internal Audit Department

• Assessing the accuracy and reliability of financial reports and accounting records;

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LETTER FROM THE BOARD

• Reviewing Tianjin Port Finance’s internal control procedures for their existence and effectiveness; and

• Monitoring the approval procedures for approving and extending loans.

iv. FINANCIAL EFFECTS OF THE DEPOSIT SERVICES

Generally, the interest rates for the deposit services offered by Tianjin Port Finance must not be lower than the relevant benchmark interest rates set by PBOC and the interest rates provided by other independent commercial banks in the PRC for deposits of similar nature and under similar terms. As the deposits with Tianjin Port Finance for the three years ending 31 December 2015 will be at the level of not more than RMB2,200 million, the Company expects the interest income to be earned from Tianjin Port Finance will be affected by the level of interest rates. Given the interest income earned from Tianjin Port Finance for the year ended 31 December 2011 was approximately HK$14.8 million, which represents a small contribution to the Group’s earnings and assets, the Company anticipates that the interest income to be earned from the deposits for the three years ending 31 December 2015 will not have any material impact to the Group’s earnings, assets and liabilities.

v. LISTING RULES IMPLICATIONS

Tianjin Port Group is the controlling Shareholder indirectly interested in 53.5% of the issued capital of the Company. Tianjin Port Finance is a 40.24% owned associated company of Tianjin Port Group. Hence, both Tianjin Port Group and Tianjin Port Finance are connected persons of the Company under the Listing Rules. Accordingly, the Transactions constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios as defined in the Listing Rules in respect of the proposed annual caps for the Deposit Services are 5% or more, the Deposit Services and the related proposed annual caps will be subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Under the Listing Rules, one of the Transactions involving the provision of loans to the Group by Tianjin Port Finance (i.e. category (2) of the financial services referred to above) are exempted from the reporting, announcement and independent shareholders’ approval requirements as these constitute financial assistance provided by a connected person for the benefit of the Group on normal commercial terms where no security over the assets of the Group is granted in respect of the financial assistance. Under the Listing Rules, the Transactions involving the Other Financial Services (i.e. categories (3) to (6) of the financial services referred to above) are exempted from the reporting, announcement and independent shareholders’ approval requirements as the relevant percentage ratios under Rule 14.07 of the Listing Rules in relation to these categories are, on an annual basis, expected to be less than 0.1%.

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LETTER FROM THE BOARD

As the applicable percentage ratios in respect of the proposed annual caps for the Deposit Services exceed 25%, in addition to being continuing connected transactions, the Deposit Services also constitute major transactions for the Company and are subject to the relevant major transaction requirements under Chapter 14 of the Listing Rules.

An Independent Board Committee has been formed to consider and to advise the Independent Shareholders as to the fairness and reasonableness of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 and whether they are in the interests of the Company and the Shareholders as a whole, and to advise whether or not the Independent Shareholders should vote in favour of the ordinary resolution to be proposed at the EGM in relation to the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015. Quam Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

The Company will seek the Independent Shareholders’ approval for the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 at the EGM. As Tianjin Port Group is a controlling Shareholder materially interested in the Deposit Services, Tianjin Port Group and its associates will abstain from voting in respect of such resolution.

The Directors are of the view that the New Financial Services Framework Agreement and the Transactions were entered into in the ordinary and usual course of business of the Group and are on normal commercial terms which are fair and reasonable and in the interests of the Group and the Shareholders as a whole. The Directors are also of the view that the proposed annual caps for the New Financial Services Framework Agreement are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

None of the Directors had material interest in the Transactions. However, in view of good corporate governance practices, as Mr. Yu Rumin and Mr. Tian Changsong are both directors of the Company and Tianjin Port Group, and Mr. Li Quanyong is a director of the Company and the chief economist of Tianjin Port Group, they had all abstained from voting in the relevant Board resolutions concerning the Transactions.

vi. INFORMATION ON THE PARTIES

The Group is principally engaged in the provision of containerised and non-containerised cargo handling services, sales and other port ancillary services at the port of Tianjin in the PRC, primarily through its subsidiaries and associated companies.

The principal business of Tianjin Port Finance is the provision of financial services to the members of Tianjin Port Group but not to other parties. Tianjin Port Finance is a non-bank financial institution established under PRC law on 9 December 2006 with the approval of CBRC and is subject to the supervision of CBRC. Its total

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LETTER FROM THE BOARD

registered and paid-up capital is RMB850 million. The business activities of Tianjin Port Finance are regulated and supervised by the PBOC and the CBRC and its approved business scope comprises general banking services including deposit taking, loan servicing and notes acceptance and discounting, as well as the provision of financial and other advisory services, insurance agency services and investing activities.

The principal business of Tianjin Port Group includes port handling and stevedoring services, warehousing, logistics, and port area land development at the port of Tianjin in the PRC primarily through its group companies.

3. RE-ELECTION OF DIRECTOR

Pursuant to article 112 of the articles of association of the Company, the Board shall have the power from time to time and at any time to appoint any person as a Director to fill a causal vacancy on the Board.

Pursuant to article 112 of the articles of association of the Company and Code Provision A.4.2 in Appendix 14 to the Listing Rules, any Director so appointed by the Board shall hold office only until the next general meeting of the Company and shall then be eligible for re-election.

Accordingly, Mr. Zhang Weidong (“ Mr. Zhang ”), an independent non-executive Director, was appointed by the Board as an independent non-executive Director, the chairman and a member of the nomination committee, a member of the audit committee and a member of the remuneration committee of the Company with effect from 28 June 2012 and shall hold the office until the EGM. Mr. Zhang, being eligible, will offer himself for re-election at the EGM. A biography of Mr. Zhang is set out below.

Mr. Zhang, aged 47, is the deputy chief executive officer of OP Financial Investments Limited (Stock Code: 01140). He is also the general manager of Jin Dou Development Fund, L.P., a joint venture investee of China Investment Corporation (CIC) and OP Financial Investments Limited, and a partner of Oriental Patron Financial Group primarily responsible for private equity investments. Mr. Zhang has over 13 years of experience in the operation and management of commercial banking, during which he worked in the international business department of the Industrial and Commercial Bank of China Limited (“ICBC”) with final position level as deputy general manager of department, including 3 years in ICBC Almaty Branch, where he was in charge of treasury, credit lending and office operations. Moreover, Mr. Zhang has 11 years of investment banking experience, served as executive director of ICEA Finance Group (the investment banking arm of ICBC) and managing director of Alpha Alliance Finance Holdings, responsible for corporate finance and sales department respectively. Mr. Zhang holds a master degree from Renmin University in Economics, a diploma of Programme for Management Development of Harvard Business School, and held a fellowship from Columbia University in New York.

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LETTER FROM THE BOARD

Mr. Zhang has entered into a service contract with the Company for a term from 28 June 2012 to 27 June 2014, which shall continue for further successive periods. Pursuant to the terms of the service contract, Mr. Zhang is entitled to a director’s fee of HK$356,900 per annum, which is determined by the Board having regard to his duties and responsibilities. There is no change to Mr. Zhang’s service terms upon his re-election.

As at the Latest Practicable Date, Mr. Zhang was interested in 450,000 Shares, which represent the Shares which may fall to be allotted and issued upon exercise in full of the share options granted by the Company to Mr. Zhang under the share option scheme of the Company which was adopted on 26 April 2006.

Save as disclosed above, Mr. Zhang has not hold any directorships in the last three years in other public companies the securities of which are listed on any securities market in Hong Kong or overseas. Mr. Zhang is not connected with any other directors, senior management or substantial or controlling shareholders of the Company.

In relation to the re-election of Mr. Zhang as independent non-executive Director, there is no information that is required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules or any other matter that needs to be brought to the attention of the Shareholders in relation to his appointment.

4. THE EGM

It is set out on pages 54 to 55 of this circular a notice convening the EGM to be held at Gloucester Room 1, 3rd Floor, The Excelsior Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong at 3:00 p.m. on Wednesday, 19 December 2012 at which ordinary resolutions will be proposed (1) for the approval by the Independent Shareholders of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 and (2) for the approval by the Shareholders of the re-election of Mr. Zhang Weidong as an independent non-executive Director. In compliance with the Listing Rules, the votes to be taken at the EGM will be taken by poll, the results of which will be announced after the EGM.

Whether or not you are able to attend the EGM in person, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

5. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee and the letter from Quam Capital which are set out on pages 24 to 25 and on pages 26 to 44 of this circular respectively. The Independent Board Committee, having taken into account the advice of Quam Capital, considers that the New Financial Services Framework Agreement,

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LETTER FROM THE BOARD

the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 are in the ordinary and usual course of business of the Group and are on normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Independent Board Committee therefore recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015.

The Directors believe that the re-election of Mr. Zhang as independent non-executive Director is in the best interest of the Company and its Shareholders. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the re-election of Mr. Zhang as independent non-executive Director.

6. ADDITIONAL INFORMATION

Your attention is drawn to (i) the financial information of the Group and (ii) the general information set out in Appendices I and II of this circular respectively.

Yours faithfully, For and on behalf of

Tianjin Port Development Holdings Limited Yu Rumin Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 03382)

27 November 2012

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONTINUING CONNECTED TRANSACTIONS RENEWAL OF THE EXISTING FINANCIAL SERVICES FRAMEWORK AGREEMENT

We refer to the circular dated 27 November 2012 issued by the Company (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed as the members of the Independent Board Committee to consider and to advise the Independent Shareholders as to the fairness and reasonableness of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 and whether they are in the interests of the Company and the Shareholders as a whole, and to advise whether or not the Independent Shareholders should vote in favour of the ordinary resolution to be proposed at the EGM in relation to the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015. Quam Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to the letter from the Board, as set out on pages 4 to 23 of the Circular, and the letter from Quam Capital which contains its advice to the Independent Board Committee and the Independent Shareholders in respect of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 as set out on pages 26 to 44 of the Circular.

After taking into consideration the advice from Quam Capital, we consider that the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 are in the ordinary and usual course of business of the Group and are on normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

resolution to be proposed at the EGM to approve the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015.

Yours faithfully,

For and on behalf of the Independent Board Committee

Japhet Sebastian LAW CHENG Chi Pang, Leslie ZHANG Weidong Independent Non-executive Independent Non-executive Independent Non-executive Director Director Director

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LETTER FROM QUAM CAPITAL

The following is the text of a letter of advice from Quam Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps.

27 November 2012

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONTINUING CONNECTED TRANSACTIONS RENEWAL OF THE EXISTING FINANCIAL SERVICES FRAMEWORK AGREEMENT

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 (the “ Proposed Annual Caps ”). Details of the proposed transactions are set out in the “Letter from the Board” contained in the circular dated 27 November 2012 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular, unless the context otherwise requires.

Professor Japhet Sebastian Law, Dr. Cheng Chi Pang, Leslie and Mr. Zhang Weidong, the independent non-executive Directors, have been appointed as members of the Independent Board Committee to consider and to advise the Independent Shareholders as to (a) whether the New Financial Services Framework Agreement, the Deposit Services and the Proposed Annual Caps are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole; (b) whether the Deposit Services are conducted in the ordinary and usual course of business of the Group; and (c) whether to vote in favour of the New Financial Services Framework Agreement, the Deposit Services and the Proposed Annual Caps. As the Independent Financial Adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders in this regard.

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LETTER FROM QUAM CAPITAL

Quam Capital is independent of and not connected with any members of the Group or any of their substantial shareholders, directors or chief executives, or any of their respective associates, and is accordingly qualified to give an independent advice in respect of the New Financial Services Framework Agreement, the Deposit Services and the Proposed Annual Caps.

In formulating our recommendation, we have relied on the information and facts supplied by the Company, and the opinions expressed by and the representations of the directors and the management of the Company. We have assumed that all the information and representations contained or referred to in the Circular were true and accurate in all respects at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time that they were made and continue to be true until the date of the EGM. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors, and the Directors have confirmed that no material facts have been withheld or omitted from the information provided and referred to in the Circular, which would make any statement therein misleading.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Company, Tianjin Port Group, Tianjin Port Finance or any of their respective subsidiaries or associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation, we have taken into consideration the following principal factors and reasons:

A. Background to entering into the New Financial Services Framework Agreement

The Company entered into the Existing Financial Services Framework Agreement with Tianjin Port Finance and Tianjin Port Group on 18 October 2010. As the Existing Financial Services Framework Agreement will expire on 31 December 2012, the Company entered into the New Financial Services Framework Agreement on 26 September 2012 with Tianjin Port Finance and Tianjin Port Group (as guarantor) to continue the Transactions for a term from 1 January 2013 to 31 December 2015. It is noted that the terms of the New Financial Services Framework Agreement are substantially the same as those of the Existing Financial Services Framework Agreement.

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LETTER FROM QUAM CAPITAL

B. Transactions contemplated under the New Financial Services Framework Agreement

Pursuant to the New Financial Services Framework Agreement, Tianjin Port Finance will provide the following financial services to the Group:

• (1) deposit services;

• (2) provision of loans (excluding entrustment loans referred to in category (5) below);

• (3) commercial notes acceptance and discounting services;

• (4) settlement services;

• (5) arrangement of entrustment loans between members of the Group, whereby Tianjin Port Finance serves as a financial agency through which funds of any member of the Group may be channeled for use by other members of the Group; and

• (6) certification of financial position, financial advisory services and other advisory services.

The Transactions are conducted in the ordinary and usual course of business of the Group.

As Tianjin Port Group and Tianjin Port Finance are connected persons of the Company under the Listing Rules, the Transactions constitute continuing connected transactions of the Company under the Listing Rules.

As the applicable percentage ratios as defined in the Listing Rules in respect of the Proposed Annual Caps are 5% or more, the Deposit Services and the Proposed Annual Caps are subject to reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Save for the Deposit Services, the other Transactions (categories (2) to (6) of the financial services referred to above) are exempted from the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

Furthermore, the Deposit Services also constitute major transactions for the Company and are subject to the relevant major transaction requirements under Chapter 14 of the Listing Rules.

The New Financial Services Framework Agreement will be subject to the Independent Shareholders’ approval.

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LETTER FROM QUAM CAPITAL

C. Reasons for and benefits of the Transactions

It is stated in the letter from the Board in the Circular that given Tianjin Port Co (which is owned as to 56.81% by the Company) and Tianjin Port Group are shareholders with effective interest of 48% and 40.24% respectively of the issued share capital of Tianjin Port Finance, the reasons and benefits for the Group to use the services of Tianjin Port Finance include, but are not limited to: (i) the formulation of a deposit mix between other independent commercial banks in the PRC and Tianjin Port Finance, while at the same time retaining sufficient working capital flexibility; (ii) enhancing cost savings by reducing the amount of finance fees and charges payable to external banks when Tianjin Port Finance offers more favourable terms than those offered by external banks; and/or (iii) sharing profits of Tianjin Port Finance attributable to the Group through its shareholding in Tianjin Port Co. It is expected that Tianjin Port Finance, being an affiliate company of Tianjin Port Co, will be placed in a better position to serve the financial needs of the Group as it has better understanding of the operation and development needs of the Group. Accordingly, it is envisaged that Tianjin Port Finance will be more efficient in terms of processing transactions for the Group than other external banks in the PRC.

It is also stated in the letter from the Board in the Circular that the advantages of utilising the financial services provided by Tianjin Port Finance over similar services provided by other independent commercial banks in the PRC are as follows:

• (1) PRC laws do not permit companies, including affiliates, to extend intra-group loans directly without going through a financial intermediary. Tianjin Port Finance serves as the financial intermediary through which the funds of the members of the Group may be channeled efficiently to be used by one another;

• (2) as an intra-group service provider, Tianjin Port Finance generally has better and more efficient communication and understanding with the Group compared with other independent commercial banks in the PRC. For example, by coordinating the members of the Group with surplus deposits with members who are borrowers, the costs and efficiency of the services provided will be improved;

• (3) Tianjin Port Finance offers interest rates that are no less favourable than the applicable PBOC benchmark or reference rates and those offered by other independent commercial banks in the PRC. Furthermore, Tianjin Port Finance can assist the Group to formulate a beneficial deposit mix comprising different types of deposits such as current deposits, call deposits and fixed deposits, which allows the Group to increase its return on funds and retain sufficient working capital flexibility;

• (4) the fees and charges generated from the utilisation of Tianjin Port Finance’s services will be credited to Tianjin Port Finance instead of other independent commercial banks in the PRC, which allows the Group to benefit financially. The Company through Tianjin Port Co indirectly holds 48% equity interest in Tianjin Port Finance and will share the profits of Tianjin Port Finance accordingly;

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LETTER FROM QUAM CAPITAL

• (5) as Tianjin Port Finance is familiar with the business and transaction patterns of the Group, the settlement services provided by Tianjin Port Finance tend to provide a more efficient and orderly platform than those platforms that could be provided by other independent commercial banks in the PRC. This also helps to reduce the transaction costs of the Group such as handling fees for transfer of funds and other administrative expenses;

• (6) discounting of commercial notes by Tianjin Port Finance provides the Group’s customers with flexibility in payment terms and accelerates the Group’s collection of sale proceeds. Upon discounting of the commercial notes, the Group may receive the sale proceeds as if the sale was effected as a cash sale. This arrangement helps to efficiently reduce the receivables balance of the Group and accelerate its fund flows; and

• (7) when there is credit squeeze in the PRC, it is generally more difficult or costly to obtain loans from commercial banks in the PRC, Tianjin Port Finance can provide an additional financing platform to the Group which can reduce the impact of the credit squeeze to the Group.

The aforementioned advantages are further analysed as follows:

• (i) Tianjin Port Finance as a centralised financial platform

PRC laws do not permit companies, including affiliates, to extend intra-group loans directly without going through a financial intermediary. It is a common practice amongst major PRC companies and major state-owned companies based in the PRC to utilise financial services (including deposit services and provision of loans) provided by finance companies owned by their respective parent groups in the PRC.

Tianjin Port Finance was established with a view to act as a centralised financial platform to facilitate treasury operations within Tianjin Port Group, its subsidiaries and related companies as permitted by PBOC (the “ Members of Tianjin Port Group ”). Members of Tianjin Port Group have the option to use Tianjin Port Finance’s financial services which in turn facilitates the flow of surplus funds from certain Members of Tianjin Port Group to other Members of Tianjin Port Group which may require cash and which would otherwise be borrowed from other commercial banks, primarily in the form of deposits placed with and loans extended from Tianjin Port Finance. Tianjin Port Finance serves as a treasury role for the Group which eventually reduces the level of external borrowings. Therefore, we concur with the management’s view that Tianjin Port Finance serves as the financial intermediary through which the funds of the members of the Group may be channeled efficiently to be used by one another.

• (ii) Share of the results of Tianjin Port Finance

During the course of utilising Tianjin Port Finance’s services, interests, fees and charges paid to Tianjin Port Finance form part of Tianjin Port Finance’s revenue which in turn contributes to the financial results of Tianjin Port Finance, an associate of the Company. We note from the letter from the Board in the Circular that the Company

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LETTER FROM QUAM CAPITAL

through Tianjin Port Co indirectly holds 48% equity interest in Tianjin Port Finance and will share the results of Tianjin Port Finance accordingly. Based on the audited accounts of Tianjin Port Finance, it was profitable for the three years ended 31 December 2011. As such, the utilisation of Tianjin Port Finance’s services by the Group may allow the Group to benefit financially.

(iii) Flexibility in borrowing unsecured funds

The loans extended from Tianjin Port Finance to the Group amounted to approximately HK$2.1 billion and HK$2.2 billion as at 31 December 2010 and 2011 respectively, which represented approximately 21.0% and 22.1% of the Group’s borrowings on the same dates. Furthermore, it is noted that no security over the assets of the Group is required for obtaining loans from Tianjin Port Finance. As such, we believe that it is in the interests of the Group to have the flexibility in borrowing unsecured loans from Tianjin Port Finance to meet its financing needs in the future. We concur with the Directors’ view that Tianjin Port Finance can provide an additional financing platform to the Group which reduces the impact of a credit squeeze to the Group.

(iv) Other advantages of utilising financial services of Tianjin Port Finance

The customers of Tianjin Port Finance are the Members of Tianjin Port Group. Given that Tianjin Port Finance has been operating for more than five years, Tianjin Port Finance shall have a better understanding of the operational and financial needs of members of the Group. Thus, it can provide efficient and cost effective services to the Group which is beneficial to the Group from a customer’s perspective.

Based on the aforesaid, we consider that there are advantages of utilising financial services provided by Tianjin Port Finance over utilising similar services provided by other independent commercial banks in the PRC.

D. Principal terms of the New Financial Services Framework Agreement

Set out below are the major terms of the New Financial Services Framework Agreement:

• (i) Term

The New Financial Services Framework Agreement shall be for a term of three years from 1 January 2013 to 31 December 2015.

(ii) Nature of services

Details regarding the scope of services to be provided by Tianjin Port Finance under the New Financial Services Framework Agreement are set out in the section headed “Transactions contemplated under the New Financial Services Framework Agreement” above.

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LETTER FROM QUAM CAPITAL

Furthermore, pursuant to the New Financial Services Framework Agreement, the Group does not need to utilise the financial services provided by Tianjin Port Finance, and is not under any obligations to do so. As such, Tianjin Port Finance is one of the financial institutions which provide financial services to the Group. The Company has the right to decide whether to maintain its relationship with Tianjin Port Finance as a provider of financial services. Therefore, we consider that the New Financial Services Framework Agreement provides an additional option for the Group to utilise the financial services of Tianjin Port Finance.

(iii) Interest rates, fees and charges

The interest rates, fees and charges for the financial services to be provided by Tianjin Port Finance are as follows:

• deposit services – the interest rates for deposits placed by members of the Group must not be lower than (i) the relevant benchmark interest rates set by PBOC; and (ii) the interest rates provided by other independent commercial banks in the PRC for deposits of similar nature and under similar terms;

• provision of loans – the interest rates for borrowings by members of the Group must not be higher than (i) the relevant benchmark interest rates set by PBOC; and (ii) the interest rates charged by other independent commercial banks in the PRC for borrowings of similar nature and under similar terms;

• commercial notes acceptance and discounting services – the fees charged for the services and the interest rates for the commercial notes discounting services must not be higher than (i) the relevant benchmark charging rates (if applicable) and interest rates set by PBOC; and (ii) the fees and interest rates charged by other independent commercial banks in the PRC for providing commercial notes acceptance and discounting services of similar nature and under similar terms;

• settlement services – the fees charged for the settlement services must not be higher than (i) the relevant benchmark charging rates set by PBOC (if applicable); and (ii) the fees charged by other independent commercial banks in the PRC for providing services of similar nature;

• arrangement of entrustment loans – the fees charged for the services and the interest rates for the entrustment loans must not be higher than (i) the relevant benchmark charging rates (if applicable) and interest rates set by PBOC; and (ii) the fees and interest rates charged by other independent commercial banks in the PRC for arranging entrustment loans of similar nature and under similar terms; and

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LETTER FROM QUAM CAPITAL

• certification of financial position, financial advisory services and other advisory services – the fees charged for these services must not be higher than (i) the relevant benchmark charging rates set by PBOC (if applicable); and (ii) the fees charged by other independent commercial banks in the PRC for providing services of similar nature and under similar terms.

As stated above, the fees and charges payable by the Group to Tianjin Port Finance under the New Financial Services Framework Agreement will be on terms not less favourable than the benchmark rates set by PBOC (if applicable) as well as those available from other independent commercial banks in the PRC for providing services of similar nature and under similar terms. Thus, we consider that the pricing principles are reasonably determined.

(iv) Average daily amount of outstanding loans versus deposits

The average daily amount of outstanding loans extended by Tianjin Port Finance to the Group must exceed the average daily amount of deposits placed by the Group with Tianjin Port Finance, both amounts being calculated on a monthly basis.

(v) Right to set-off deposits against loans

In respect of the deposits placed by the Group with Tianjin Port Finance and in the event that Tianjin Port Finance misuses or defaults such deposits which results in the inability of the Group to recover such deposits (including the accrued interest), the Group will have a right to set-off such deposits (including the accrued interest) against the amounts of outstanding loans (including the accrued interest) extended by Tianjin Port Finance to the Group. However, if the Group fails to repay its loan extended by Tianjin Port Finance on time, Tianjin Port Finance does not have a right to set off such outstanding loan amounts due from the Group with the deposits placed by the Group with Tianjin Port Finance.

(vi) Undertakings by Tianjin Port Group

As part of the New Financial Services Framework Agreement, Tianjin Port Group undertakes to the Company that, among other things:

• a) it has the necessary right, power and authority to execute the New Financial Services Framework Agreement and all other documents necessary for the execution of the same. Upon the effectiveness of the said agreement and documents above, these will be valid, binding and enforceable against Tianjin Port Group;

• b) it has undertaken and warranted to both the Company and CBRC that if Tianjin Port Finance experiences or foresees to experience any liquidity problems, it will inject capital to Tianjin Port Finance based on the latter’s needs in order to ensure the latter’s normal operation; and

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LETTER FROM QUAM CAPITAL

• c) it undertakes and warrants to compensate the Group jointly and severally with Tianjin Port Finance for all the financial losses (including but not limited to the Group’s deposits, interests and related expenses incurred) caused by Tianjin Port Finance’s breaches or potential breaches of PRC laws and regulations, or by it having or potentially having any major operational problems or difficulties with liquidity, or by its non-performance of any terms or default of the New Financial Services Framework Agreement.

Tianjin Port Group had a registered capital of RMB3,601 million and total assets of approximately RMB90.0 billion as at 31 December 2011. Based on the net asset value of Tianjin Port Group as advised by the Company and the maximum amount of deposits which the Group can place with Tianjin Port Finance as governed by the Proposed Annual Caps, we have no reason to doubt that Tianjin Port Group cannot provide the necessary support or rescue actions required should Tianjin Port Finance face any operational or liquidity problems barring unforeseen circumstances.

(vii) Internal control and risk management measures

In order to safeguard the interests of the Company and the Shareholders, the New Financial Services Framework Agreement provides for the following internal control and risk management measures:

• Tianjin Port Finance shall ensure the secure operation of its fund management information system. The system has passed all the security tests for the internet banking connection with other commercial banks, and that the system adopts the digital certificates for security certification for ensuring the security of the Group’s funds;

• Tianjin Port Finance guarantees that it will strictly comply with and operate under the finance company risk management specifications issued by CBRC. The gearing, liquidity and other ratios should comply with the ratios specified by CBRC and other PRC laws and regulations as amended from time to time;

• Tianjin Port Finance shall at all times monitor its credit risks. If (i) any specific situations arises which may affect the security of the deposits placed by the Group, or (ii) any other circumstances occur, which may cause serious concern to such security, Tianjin Port Finance shall give a written notice to the Group within two business days after the happening of such situations or circumstances, and to take measures to avoid or contain any losses. Once being notified, the Group has the right to immediately withdraw its deposits (including the accrued interests) forthwith, or if it is unable to do so, it may set-off the deposits (including the accrued interests) placed by the Group with Tianjin Port Finance against the outstanding loans (including the accrued interest) extended by Tianjin Port Finance to members of the Group;

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LETTER FROM QUAM CAPITAL

• during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall provide the Company with a report before 10:00 a.m. each working day on the amount of deposits placed and loans borrowed by the Group (the “ Report ”). The Report will be reviewed, on a daily basis, by the Company to monitor and ensure that the average daily amount of deposits (including the accrued interest) placed by the Group does not exceed the Proposed Annual Caps and the average daily amount of outstanding loans extended by Tianjin Port Finance to the Group must be more than the average daily amount of deposits placed by the Group with Tianjin Port Finance, both amounts being calculated on a monthly basis;

• during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall provide the Company on the fifth working day of every month its financial statements and other returns submitted to CBRC the previous month;

• during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall provide the Company within three working days after submission a copy of every regulatory report it submitted to CBRC; and

• during the term of the New Financial Services Framework Agreement, Tianjin Port Finance shall implement all measures in relation to risk control.

With the aforesaid internal control and risk management measures in place, in particular, the provision of timely financial statements and regulatory reports of Tianjin Port Finance, these will allow the Group to monitor the financial position and risk profile of Tianjin Port Finance regularly.

After taking into account that (i) the Company has the right to decide whether to utilise the financial services of Tianjin Port Finance; (ii) the interest rates, fees and charges stipulated under the New Financial Services Framework Agreement are no less favourable to the Group than those provided by independent commercial banks in the PRC for providing services of a similar nature and under similar terms; (iii) measures in place to safeguard deposits of the Group including the right of set-off arrangement under certain circumstances and restrictions on the average daily amount of outstanding loans relative to that of deposits; (iv) Tianjin Port Group has undertaken to compensate all financial losses of the Group caused by Tianjin Port Finance; and (v) the provision of timely financial statements and regulatory reports of Tianjin Port Finance to the Group, we consider that the terms of the New Financial Services Framework Agreement are on commercial terms and are fair and reasonable.

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LETTER FROM QUAM CAPITAL

E. Information on Tianjin Port Finance

(i) Business scope

The principal business of Tianjin Port Finance is the provision of financial services to the Members of Tianjin Port Group but not to other parties. Tianjin Port Finance is a non-bank financial institution established under PRC law on 9 December 2006 with the approval of CBRC and is subject to the supervision of CBRC. The business activities of Tianjin Port Finance are regulated and supervised by PBOC and CBRC and its approved business scope comprises general banking services including deposit taking, loan servicing and notes acceptance and discounting, as well as the provision of financial and other advisory services, insurance agency services and investing activities.

(ii) Shareholding structure and board of directors composition

Set out below are the shareholders and their respective shareholding in Tianjin Port Finance as at the Latest Practicable Date:

	Shareholding
	interest
Tianjin Port Group	40.24%
Tianjin Port Co and its subsidiaries in aggregate	48.00%
中國光大控股有限公司（香港）(China Everbright Limited*)	11.76%
	100.00%

* For identification purpose only

As advised by the Company, Tianjin Port Group, Tianjin Port Co and China Everbright Limited have appointed three, two and one board representative(s) respectively. China Everbright Limited has also appointed one independent board representative （外部董事）. We understand that China Everbright Limited is not a connected person of the Group. Among the directors of Tianjin Port Finance, Mr. Tian Changsong and Mr. Li Quanyong are common directors of the Company and Tianjin Port Finance.

The Group, through Tianjin Port Co, has influence in major corporate actions of Tianjin Port Finance and can ensure that Tianjin Port Finance does not act in a manner that will jeopardise the interest of the Group. The board representatives of Tianjin Port Co, together with the timely financial statements and regulatory reports to be provided by Tianjin Port Finance as required under the New Financial Services Framework Agreement, enable the Group to monitor the financial position and risk profile of Tianjin Port Finance so as to safeguard its interests.

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LETTER FROM QUAM CAPITAL

(iii) Regulatory requirements

Tianjin Port Finance is regulated by PBOC and CBRC and it provides its services pursuant to the relevant rules and operational requirements including capital risk guidelines and requisite capital adequacy ratios of such regulatory authorities.

We understand from the Company that based on its understanding, the regulation of finance companies of enterprise groups (such as Tianjin Port Finance) by CBRC is more stringent than the regulation of commercial banks in the PRC in certain aspects, such as the requirement for finance companies to have a higher capital adequacy ratio.

We understand from the Company that Tianjin Port Finance is required to place a portion of the deposits received, such proportion to be determined by PBOC from time to time, with commercial banks in the PRC to ensure that sufficient liquid funds will be available to satisfy the needs of its customers. It then utilises the remaining funds for other uses permitted by CBRC rules and regulations, such as providing discounting services, making loans to customers, purchasing government bonds or other notes issued by the PRC government to earn interest.

To the best knowledge of the Directors, Tianjin Port Finance has not breached any rules or operation requirements of such regulatory authorities in the past.

• (iv) Financial information

Set out below is the selective financial information of Tianjin Port Finance:

• The total registered and paid-up capital was RMB850 million as at the Latest Practicable Date;

• As at 31 December 2011, the audited net assets value amounted to approximately RMB1,170 million;

• Profit after taxation for the three years ended 31 December 2011 were approximately RMB67.9 million, RMB81.6 million and RMB114.4 million respectively; and

• Tianjin Port Finance has not experienced any non-performing loans since its establishment in 2006.

• (v) Internal control and risk management systems

The following is a summary of the various committees and departments which have respective key roles and responsibilities in the internal control and risk management functions of Tianjin Port Finance:

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LETTER FROM QUAM CAPITAL

• a) Supervisory board

• inspecting the books and records of Tianjin Port Finance and raising enquiries;

• supervising the directors, management and staff in their compliance with laws and internal policies and requesting any non-compliance be rectified; and

• examining the financial reports; and to supervise, inspect and audit the major policy initiatives when required.

b) Board committees

• monitoring the long-term development strategies/policies of Tianjin Port Finance;

• monitoring the effectiveness of Tianjin Port Finance’s risk management strategies and policies; and

• monitoring the quality of the investments made as well as their risk and benefits, and examines the investment proposals.

• c) Credit review committee

• setting the credit limits to be extended to customers, being the Members of Tianjin Port Group;

• considering/reviewing the applications of the various types of loans and guarantees and to provide credit ratings on the loans extended; and

• providing comments if there are any major problem areas such as doubtful loans, high risk credit business and asset protection issues.

• d) Business and operations department

• carrying out the inspection, approval and other procedures necessary in extending loans, entrustment loans and secured loans, and carrying out the statistical and other related work; and

• performing evaluation of credit risks and the assignment of credit ratings to the loans extended, in order to control the credit risk and ensuring the recoverability of the loans.

• e) Settlement and finance department

• monitoring the financial performance and budgetary control of Tianjin Port Finance;

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LETTER FROM QUAM CAPITAL

• drafting and implementing the various accounting guidelines and policies; and

• preparing and submitting the relevant financial returns to the various regulatory authorities.

• f) Compliance department

• developing the necessary risk management policies and procedures in light of the development of Tianjin Port Finance, and to check whether they are complete and able to cover all aspects of the business processes;

• checking whether the risk management policies and procedures are designed reasonably, and whether they can effectively control the risks of the various businesses and departments;

• establishing effective assessment and monitoring measures for the risk management policies and procedures;

• checking whether the risk management/internal control policies and procedures can be strictly implemented and complied with by the various businesses and departments;

• reporting (on regular and irregular basis) to the senior management and the risk management committee the status of the risk management and compliance work report; and

• carrying out training programs on risk management and compliance.

• g) Information technology department

• implementing risk management strategies appropriate for all aspects of the information system; and

• drafting and implementing rules and usage guidelines in relation to information technology.

• h) Internal audit department

• assessing the accuracy and reliability of financial reports and accounting records;

• reviewing Tianjin Port Finance’s internal control procedures for their existence and effectiveness; and

• monitoring the approval procedures for approving and extending loans.

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LETTER FROM QUAM CAPITAL

Based on our discussion with the management of Tianjin Port Finance, we understand that the various departments and committees have clearly defined roles in respect of maintaining Tianjin Port Finance’s internal control and risk management systems.

(vi) Risk profile of Tianjin Port Finance

It is stated in the letter from the Board in the Circular that the risk profile of Tianjin Port Finance is no greater than other independent commercial banks in the PRC because:

• similar to independent commercial banks in the PRC, Tianjin Port Finance is regulated by PBOC and CBRC and provides its services pursuant to the relevant rules and requirements including capital risk guidelines and requisite capital adequacy ratios of such regulatory authorities;

• the regulation of finance companies (such as Tianjin Port Finance) by CBRC is more stringent than the regulation of commercial banks in the PRC in certain aspects, such as finance companies are required to have a higher capital adequacy ratio of 10% compared to 8% for commercial banks;

• Tianjin Port Finance has been rated by CBRC as a Grade B finance company in the PRC, which placed Tianjin Port Finance as one of the top ranked finance companies in the PRC. CBRC reviews the finance companies in the PRC pursuant to the Guideline of Risk Assessment and Classified Regulation on Financial Companies of Enterprise Groups（企業集團財務公司風險評價和分 類監管指引） which covers areas including the finance company’s internal management, operating conditions and the related group’s influence over and support to the finance company. After each review exercise, CBRC will assign one of five grades (Grade A to Grade E) to the finance companies. Grade B is the second highest grade which indicates that the finance company concerned possesses comprehensive internal management, maintains good operating conditions and is well suited for the provision of central treasury management function for its related group companies;

• Tianjin Port Finance has not defaulted on any of its credit obligations or, to the knowledge of the Directors, breached any rules or requirements of PBOC and CBRC. The Company advised that Tianjin Port Finance has not received any notice, warning, penalty or other disciplinary action by CBRC and PBOC for breach of any relevant rules or requirement thereof;

• Tianjin Port Finance has implemented stringent internal control and risk management measures, the efficiency and effectiveness of which are regularly reviewed by CBRC. Furthermore, Tianjin Port Finance will provide the Company access to its books and accounts for inspection upon the Company’s request;

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LETTER FROM QUAM CAPITAL

• as stated in its articles of association, Tianjin Port Finance operates independently and is responsible for its own financial performance. When Tianjin Port Finance provides financial services to members of the Group, it will exercise its own judgment and prudent approval process in determining whether to provide particular financial services to these members. With the implementation of the stringent credit control measures, Tianjin Port Finance has never experienced any bad debts since its establishment in 2006; and

• the risk is minimised by: (i) Tianjin Port Group’s undertakings to the Group; (ii) the Group’s right of set-off; and (iii) that the average daily amount of outstanding loans of the Group shall exceed the average daily amount of deposits placed by the Group, both amounts being calculated on a monthly basis.

Tianjin Port Finance is regulated by PBOC and CBRC. In addition to the fulfilment of the regulatory requirements, the set-off arrangement, the restriction on the average daily deposit balance against the average daily loan balance and the compensation of all the financial losses of the Group caused by Tianjin Port Finance from Tianjin Port Group detailed in the above section headed “Principal terms of the New Financial Services Framework Agreement” are measures to safeguard the Group’s deposits to be placed with Tianjin Port Finance. Based on the aforesaid, we consider that there are appropriate measures to safeguard the Group’s deposits to be placed with Tianjin Port Finance and, accordingly, to protect the interests of the Company and the Shareholders as a whole.

F. The Proposed Annual Caps

The maximum daily outstanding balance of deposits (including accrued interest) to be placed by the Group with Tianjin Port Finance (excluding the deposits for the purpose of extending entrustment loans referred to above) pursuant to the New Financial Services Framework Agreement is proposed to be RMB2,200 million for each of the three years ending 31 December 2015.

As stated in the letter from the Board in the Circular, the Proposed Annual Caps are arrived at after considering the historical highest daily outstanding balances of deposits placed by the Group with Tianjin Port Finance, and the treasury requirements of the Group as a whole taking into account the settlement trend of its business partners as well as the expected continuous growth of business of the Group.

The table below sets out a summary of the historical transaction amounts of the deposits placed by the Group with Tianjin Port Finance:

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LETTER FROM QUAM CAPITAL

Historical transaction amounts For the year For the year For the six ended 31 ended 31 months December December ended 30 2010 2011 June 2012 (RMB’million) (RMB’million) (RMB’million) Maximum daily outstanding balance of deposits placed by the Group with Tianjin Port Finance during the reporting year/period 1,111 1,836 2,182

Source: The Company

Having taken into account (i) the historical highest daily outstanding balances of deposits placed by the Group with Tianjin Port Finance; (ii) the expected continuous growth of the business of the Group; (iii) that the Group also places deposits in other financial institutions; (iv) that the Proposed Annual Caps represented approximately 60% of the total deposits of the Group as at 30 June 2012; and (v) that the Group considers the Proposed Annual Caps are at the optimum level and expects the Proposed Annual Caps would meet the funding management purposes of the Group, we are of the view that the Proposed Annual Caps in relation to the Deposit Services are set by the Company after due and careful consideration.

G. Annual review of the Deposit Services

Pursuant to Rules 14A.37 to 14A.40 of the Listing Rules, the Deposit Services are subject to the following requirements:

• (i) each year the independent non-executive Directors will review the Deposit Services and confirm in the annual report and accounts that they have been entered into:

• (a) in the ordinary and usual course of business of the Group;

• (b) 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 Group than terms available to or from (as appropriate) independent third parties; and

• (c) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;

• (ii) each year the auditors of the Company will provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the Company’s annual report), confirming that the Deposit Services:

• (a) have received the approval of the Directors;

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LETTER FROM QUAM CAPITAL

• (b) are in accordance with the pricing policies of the Group if the transactions involving provision of goods and services by the Group;

• (c) have been entered into in accordance with the relevant agreements governing the Deposit Services; and

• (d) have not exceeded the relevant annual caps.

The Directors must state in the annual report whether the auditors have confirmed the above matters;

• (iii) the Company shall allow, and shall procure the relevant counterparties to the Deposit Services to allow, the auditors of the Company sufficient access to their records for the purpose of reporting on the Deposit Services as set out in paragraph (ii) above; and

• (iv) the Company will promptly notify the Stock Exchange and publish an announcement if it knows or has reason to believe that the independent non-executive Directors and/or the auditors will not be able to confirm the matters set out in (i) and/or (ii) respectively.

As the maximum balances of deposits placed by the Group with Tianjin Port Finance will be restricted by the Proposed Annual Caps and the Deposit Services will be subject to annual review by the independent non-executive Directors and auditors of the Company, we are of the view that appropriate measures will be in place to govern the conduct of the Deposit Services and safeguard the interest of the Independent Shareholders.

We have reviewed the annual reports of the Company for 2010 and 2011, whereby the independent non-executive Directors have confirmed that the transactions pursuant to the Existing Financial Services Framework Agreement during the two years have been entered into in accordance with the Existing Financial Services Framework Agreement on terms that are fair and reasonable and in the interest of the Shareholders as a whole. We also noted in the annual reports that the Company’s auditor has also confirmed that the transactions pursuant to the Existing Financial Services Framework Agreement during the two years have been entered into in accordance with the Existing Financial Services Framework Agreement.

RECOMMENDATION

Having considered the principal factors and reasons as discussed above, and in particular the following (which should be read in conjunction with and interpreted in the full context of this letter):

• the Group has the option but not the obligation to utilise the financial services of Tianjin Port Finance;

• the terms of the services to be provided by Tianjin Port Finance are no less favourable than those offered by independent commercial banks in the PRC for providing services of a similar nature and under similar terms to the Group;

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LETTER FROM QUAM CAPITAL

• advantages of utilising the financial services of Tianjin Port Finance such as the flexibility in borrowing unsecured loans from Tianjin Port Finance;

• Tianjin Port Finance is a non-banking financial institution regulated by PBOC and CBRC;

• measures are in place to safeguard deposits placed with Tianjin Port Finance, amongst others:

• the average daily amount of outstanding loans extended by Tianjin Port Finance to the Group must exceed the average daily amount of deposits placed by the Group with Tianjin Port Finance, both amounts being calculated on a monthly basis;

• the right to set-off the deposits (including accrued interests) against the outstanding loans (including accrued interests) extended by Tianjin Port Finance to the Group in the event that Tianjin Port Finance misuses or defaults such deposits;

• Tianjin Port Group will indemnify any financial losses incurred by the Group due to, among others, the non-performance of any terms or default of the New Financial Services Framework Agreement by Tianjin Port Finance;

• Tianjin Port Group shall inject capital to Tianjin Port Finance if Tianjin Port Finance faces any major liquidity problems; and

• the internal control and risk management measures pursuant to the New Financial Services Framework Agreement;

• the basis of determination of the Proposed Annual Caps; and

• appropriate measures will be in place to govern the conduct of the Deposit Services,

we are of the view that (i) the terms of the New Financial Services Framework Agreement are on normal commercial terms, fair and reasonable; (ii) the Proposed Annual Caps are fair and reasonable; and (iii) the Deposit Services are conducted in the ordinary and usual course of business of the Group, fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the New Financial Services Framework Agreement, the Deposit Services and the Proposed Annual Caps.

Yours faithfully, For and on behalf of

Quam Capital Limited Noelle Hung Managing Director

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. THREE-YEAR FINANCIAL INFORMATION OF THE GROUP

The Company is required to set out in this circular the information for the last three financial years with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited balance sheet together with the notes to the annual accounts for the last financial year for the Group.

The audited consolidated financial statements of the Group for the years ended 31 December 2009, 2010 and 2011 have been disclosed in the following documents published on the HKExnews website (www.hkexnews.hk) and the Company’s website (www.tianjinportdev.com):

• Annual report of the Company for the year ended 31 December 2011 published on 25 April 2012 (Pages 48 to 109);

• Annual report of the Company for the year ended 31 December 2010 published on 19 April 2011 (Pages 43 to 105);

• Annual report of the Company for the year ended 31 December 2009 published on 23 April 2010 (Pages 51 to 95).

2. FINANCIAL AND TRADING PROSPECTS

In the first nine months of 2012, the global environment remained volatile. Due to the slowdown of the world trade and China’s economy, the growth of China’s import and export trade, on a year-on-year basis slowed down to 4.8% and 7.4% respectively in the first nine months of 2012. According to the Ministry of Transport of the PRC, total cargo throughput and container throughput at China’s major ports in the first nine months of 2012 was 7,195 million tonnes and 130.9 million TEUs, increased by 6.3% and 8.1% respectively as compared with the same period of last year. As the economic outlook remains uncertain, the fourth quarter of 2012 and 2013 is expected to be challenging.

Looking forward, the Group will further strengthen the coordinations between business segments and actively integrate resources to make new progress in optimisation of our business mix and operational structure. With an aim to enhancing economy of scale while ensuring stable growth, the Group will actively explore innovative modes of operation, more efficiently use of resources and improve its investment portfolio in order to raise the level of profitability and economic efficiency. The Group will further strengthen the port operation system and on-site management to enhance the quality and efficiency of its production; develop new functions and broaden its markets to create further room for growth.

3. FURTHER INFORMATION

Pursuant to the major transaction requirements under Chapter 14 of the Listing Rules, the Company is required to include in this circular (a) a statement of indebtedness of the Group and (b) a statement of working capital sufficiency of the Group made by the Directors.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors are of the view that state of indebtedness and sufficiency of working capital of the Group would not be adversely affected by using the Deposit Services and the Company has applied for and the Stock Exchange has granted a waiver from compliance with (a) a statement of indebtedness of the Group and (b) a statement of working capital sufficiency of the Group made by the Directors under Chapter 14 of the Listing Rules. The information with respect to the Group’s solvency and capital adequacy by using the Deposit Services is alternatively disclosed as follows:

i. Indebtedness

The Deposit Services would not increase the indebtedness of the Group and the amount of indebtedness of the Group as at 30 June 2012 have been disclosed in the interim report of the Company for the six months ended 30 June 2012.

ii. Working capital

The Deposit Services have no adverse effect towards the sufficiency of working capital of the Group.

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives of the Company in the Shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO to be entered in the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies as contained in the Listing Rules, were as follows:

i. Long position in the Shares

				Number	Percentage of
			Nature of	of Shares	total issued
**Name **	of Director	Capacity	interest	held	share capital
Japhet	Sebastian	Beneficial	Interest held	2,700,000	0.04%
Law		owner	jointly with
			another person

ii. Long position in underlying shares of equity derivatives of the Company

The share option scheme of the Company was adopted pursuant to the written resolutions of the sole shareholder of the Company passed on 26 April 2006 under which the Directors may, at their discretion, invite any employees of the Group or Directors to take up options to subscribe for Shares subject to the terms and conditions stipulated in the share option scheme. The details of share options granted to the Directors which are outstanding as at the Latest Practicable Date are as follows:

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GENERAL INFORMATION

APPENDIX II

	Number of
	Shares over
	which
	options are	Exercise		Exercisable	Exercisable
Name of Director	exercisable	price	Grant date	from	until
Yu Rumin	1,900,000	HK$2.74	03/02/2007	03/08/2007	03/02/2017
	400,000	HK$4.24	25/01/2008	25/07/2008	24/01/2018
	1,150,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022
Tian Changsong	2,200,000	HK$2.34	08/04/2010	08/10/2010	07/04/2020
	1,100,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022
Li Quanyong	2,100,000	HK$2.34	08/04/2010	08/10/2010	07/04/2020
	1,050,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022
Wang Rui	1,000,000	HK$1.846	15/10/2010	15/04/2011	14/10/2020
	1,000,000	HK$1.904	28/03/2011	28/09/2011	27/03/2021
	1,000,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022
Dai Yan	1,100,000	HK$3.036	01/09/2009	01/03/2010	31/08/2019
	550,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022
Japhet Sebastian	300,000	HK$4.24	25/01/2008	25/07/2008	24/01/2018
Law	150,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022
Cheng Chi Pang,	300,000	HK$4.24	25/01/2008	25/07/2008	24/01/2018
Leslie	150,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022
Zhang Weidong	450,000	HK$0.896	28/06/2012	28/12/2012	27/06/2022

As at the Latest Practicable Date, none of the Directors had exercised any share options in the Company.

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors, none of the Directors and chief executives of the Company or their respective associates had any interests or short positions in any Shares, underlying shares or debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which are 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 or short positions which they are 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 maintained by the Company referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies as contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX II

As at the Latest Practicable Date, so far as was known to the Directors, the following Directors were also directors or employees of a company which has an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Name of
Director	Name of company	Position
Yu Rumin	Tianjin Port Group	Chairman
	Tianjin Development Holdings Limited	Chairman
	(“Tianjin Development”)
Tian Changsong	Tianjin Port Group	Chief Executive Officer
Li Quanyong	Tianjin Port Group	Chief Economist
Dai Yan	Tsinlien Group Company Limited	Director
	(“Tsinlien”)
	Tianjin Development	Director

3. DISCLOSURE OF SUBSTANTIAL SHAREHOLDERS’ INTERESTS

So far as was known to the Directors or chief executive of the Company, as at the Latest Practicable Date, the following persons (other than a Director or chief executive of the Company) or corporations had an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under Divisions 2 and 3 of Part XV of the SFO or was, 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 meeting of any member of the Group or in any options in respect of such capital:

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GENERAL INFORMATION

APPENDIX II

			Approximate
			percentage of
			shareholding in
			the Company’s
		Number of	total issued
Name of Shareholder	Capacity	Shares held	share capital	Note
Tianjin Port Overseas	Beneficial owner	3,294,530,000	53.5%	1
Holding Limited
Tianjin Port Group	Interest of a	3,294,530,000	53.5%	1
	controlled
	corporation
Leadport Holdings Limited	Beneficial owner	1,293,030,000	21.0%	2
Tianjin Development	Interest of	1,293,180,000	21.0%	2
	controlled
	corporations
Tsinlien	Interest of	1,303,010,000	21.2%	3
	controlled
	corporations

Notes:

1. Tianjin Port Overseas Holding Limited is a wholly-owned subsidiary of Tianjin Port Group. By virtue of the SFO, Tianjin Port Group is deemed to be interested in all the Shares held by Tianjin Port Overseas Holding Limited.

2. Leadport Holdings Limited is a wholly-owned subsidiary of Tianjin Development. By virtue of the SFO, Tianjin Development is deemed to be interested in all the Shares held by Leadport Holdings Limited.

3. Tianjin Development is a subsidiary of Tianjin Investment Holdings Limited which in turn is a wholly-owned subsidiary of Tsinlien. As at the Latest Practicable Date, Tianjin Investment Holdings Limited and Tsinlien Investment Limited were directly interested in 6,820,000 Shares and 3,010,000 Shares respectively, representing an aggregate of approximately 0.2% of the issued share capital of the Company. Tsinlien Investment Limited is a wholly-owned subsidiary of Tsinlien. By virtue of the SFO, Tsinlien is deemed to be interested in all the Shares held by each of Tianjin Development, Tianjin Investment Holdings Limited and Tsinlien Investment Limited. As at the Latest Practicable Date, Mr. Yu Rumin and Mr. Dai Yan were directors of Tianjin Development.

Save as disclosed above, as at the Latest Practicable Date, there was no person, other than a director or chief executive of the Company, known to the Directors who had an interest or short position in the Shares or underlying shares of the Company (as the case may be) which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, 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 other member of the Group.

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GENERAL INFORMATION

APPENDIX II

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group which does not expire or is not terminable within one year without payment of compensation (other than statutory compensation).

5. COMPETING INTEREST

Mr. Yu Rumin, the chairman of the Company and an executive Director, is the chairman of Tianjin Port Group. Mr. Tian Changsong, the vice chairman of the Company and an executive Director, is the chief executive officer of Tianjin Port Group.

As the board of the Company is independent of the board of Tianjin Port Group (save for Mr. Yu Rumin and Mr. Tian Changsong, who are common directors in both companies) and Mr. Yu Rumin and Mr. Tian Changsong have no control over the board of the Company, the Group is capable of carrying on its businesses independently of the businesses of Tianjin Port Group.

As at the Latest Practicable Date, save as disclosed above and in so far as the Directors were aware, none of the Directors or their respective associates (as defined in the Listing Rules) had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

6. INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which had been, since 31 December 2011, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, save as disclosed, none of the Directors was materially interested in any contract or arrangement which is significant in relation to the business of the Group.

7. 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 2011, being the date to which the latest published audited financial statements of the Company were made up.

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GENERAL INFORMATION

APPENDIX II

8. EXPERT

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

Qualification

Name Qualification Quam Capital Limited a corporation licensed by the SFC for carrying out Type 6 (advising on corporate finance) regulated activities under the SFO.

• i. As at the Latest Practicable Date, Quam Capital did not have any shareholding, direct or indirect in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

• ii. As at the Latest Practicable Date, Quam Capital did not have any direct or indirect interest in any asset which had been, since 31 December 2011, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to, or are proposed to be acquired or disposed of by or leased to any member of the Group.

• iii. Quam Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and reference to its name in the form and context in which they appear.

• iv. The letter given by Quam Capital is given as of the date of this circular for incorporation herein.

9. MATERIAL CONTRACTS

In the two years immediately preceding the date of this circular and up to the Latest Practicable Date, the following contracts, not being contracts entered into in the ordinary course of business, were entered into by the Company or any of its subsidiaries which are or may be material:

• the agreement dated 6 May 2011 entered into between Tianjin Port Co and Tianjin Port Group, pursuant to which Tianjin Port Co agreed to purchase and Tianjin Port Group agreed to sell 50% equity interests in Tianjin Port Shihua Crude Oil Terminal Co., Ltd.* (天津港實華原油碼頭有限公司) at the consideration of approximately RMB329.6 million.

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GENERAL INFORMATION

APPENDIX II

10. LITIGATION

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

11. GENERAL

• i. The registered office of the Company is at Clifton House, 75 Fort Street, P. O. Box 1350, Grand Cayman, KY1-1108, Cayman Islands and the principal place of business of the Company in Hong Kong is at Suite 3904-3907, 39/F., Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.

• ii. The Hong Kong branch share registrar and transfer office of the Company is Tricor Investor Services Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• iii. The company secretary of the Company is Madam Chan Yeuk Kwan, Winnie who holds bachelor’s degrees in administrative studies and statistics and is a fellow member of the Hong Kong Institute of Certified Public Accountants.

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

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at Suite 3904-3907, 39/F., Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong during normal business hours within 14 days from the date of this circular:

• i. the memorandum and articles of association of the Company;

• ii. the Existing Financial Services Framework Agreement;

• iii. the New Financial Services Framework Agreement;

• iv. the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix II;

• v. the letter from the Company’s Independent Board Committee, the text of which is set out in this circular;

• vi. the letter from Quam Capital, the text of which is set out in this circular;

• vii. the consent letter of Quam Capital referred to in the paragraph headed “Expert” in this Appendix; and

• viii. the annual reports of the Company for the years ended 31 December 2010 and 31 December 2011 respectively.

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APPENDIX III NOTICE OF EXTRAORDINARY GENERAL MEETING

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 03382)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Tianjin Port Development Holdings Limited (the “Company”) will be held at Gloucester Room 1, 3rd Floor, The Excelsior Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong at 3:00 p.m. on Wednesday, 19 December 2012 for the purposes of considering and, if thought fit, passing, with or without modification, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

(1) “ THAT

the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015, all as defined and described in the circular of the Company dated 27 November 2012, and all other transactions contemplated thereunder and in connection therewith and any other ancillary documents, be and are hereby approved, confirmed and/or ratified; and that the directors of the Company be and are hereby authorised for and on behalf of the Company to sign, seal, execute, perfect, perform, deliver all such agreements, instruments, documents and deeds, and do all such acts, matters and things and take all such steps as they may in their discretion consider necessary, desirable or expedient to implement and/or to give effect to the New Financial Services Framework Agreement, the Deposit Services and the related proposed annual caps for the three years ending 31 December 2015 and all other transactions thereby contemplated as they may in their discretion consider to be desirable and in the interests of the Company.”

(2) “ THAT

Mr. Zhang Weidong be re-elected as an independent non-executive director of the Company and THAT the board of directors of the Company be and is hereby authorised to fix the director’s remuneration of Mr. Zhang Weidong.”

By order of the Board Tianjin Port Development Holdings Limited Yu Rumin Chairman

Hong Kong, 27 November 2012

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APPENDIX III NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. Any member of the Company entitled to attend and vote at the meeting (or any adjourned meeting thereof) is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a member of the Company.

2. To be valid, the form of proxy together with any power of attorney or other authority (if any) under which it is signed, or a certified copy of that power or authority, must be deposited at the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting.

3. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

4. Where there are joint registered holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she was solely entitled, but if more than one of such joint holders are present at the meeting, whether in person or by proxy, the joint registered holder present whose name stands first on the register of members in respect of the shares shall be accepted to the exclusion of the votes of the other registered holders.

5. As at the date of this notice, the board of directors of the Company consists of Mr. Yu Rumin, Mr. Tian Changsong, Mr. Li Quanyong, Mr. Wang Rui and Mr. Dai Yan as executive directors; Professor Japhet Sebastian Law, Dr. Cheng Chi Pang, Leslie and Mr. Zhang Weidong as independent non-executive directors.

– 55 –