If you are in any doubt as to any aspect of this circular or as to the action to be taken, you shouldconsult your licensed securities dealer, bank manager, solicitor, professional accountant or otherprofessional adviser.
If you have sold or transferred all your shares in the Company, you should at once hand thiscircular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank,licensed securities dealer or other agent through whom the sale or transfer was effected for onwardtransmission to the purchaser or the transferee.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited takeno responsibility for the contents of this circular, make no representation as to its accuracy orcompleteness and expressly disclaim any liability whatsoever for any loss howsoever arising fromor in reliance upon the whole or any part of the contents of this circular.
(Incorporated in Hong Kong with limited liability)
(Stock Code: 368)
(1) DISCLOSEABLE AND CONNECTED TRANSACTIONIN RELATION TO DISPOSAL OF THE VESSEL
AND(2) NOTICE OF EXTRAORDINARY GENERAL MEETING
Independent Financial Adviser to the Independent Board Committee andthe Independent Shareholders
A letter from the Board is set out on pages 4 to 11 of this circular.
A notice convening the Extraordinary General Meeting to be held at the Diamond Ballroom, theRitz-Carlton Hong Kong, International Commerce Centre, 1 Austin Road West, Kowloon, HongKong on Tuesday, 10 February 2015 at 11:00 a.m. is set out on pages EGM-1 to EGM-2 of thiscircular. Whether or not you are able to attend the Extraordinary General Meeting in person, youare requested to complete and return the enclosed form of proxy in accordance with theinstructions printed thereon to the registered office of the Company, as soon as possible and in anyevent not less than 48 hours before the time appointed for holding the Extraordinary GeneralMeeting or any adjournment thereof (as the case may be). Completion and return of the form ofproxy will not preclude you from attending and voting in person at the Extraordinary GeneralMeeting or any adjourned meeting thereof (as the case may be) should you so wish.
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
21 January 2015
Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Letter from Platinum Securities Company Limited . . . . . . . . . . . . . . . . . . . . . . . . 13
Appendix I — Valuation Report of the Vessel as at 30 October 2014 . . . . . . . I-1
Appendix II — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EGM-1
CONTENTS
In this circular, the following expressions shall have the meanings set out below unless the
context requires otherwise:
“Agreement” the memorandum of agreement dated 31 December 2014
entered into between the Vendor and the Purchaser in
relation to the Disposal
“Announcement” the announcement of the Company dated 31 December
2014 in relation to the Disposal
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Board” the board of Directors
“Charter Agreement” the “Barecon 2001” Standard Bareboat Charter entered
into between the Company and the Charterer on 4 January
2011, details of which are included in the Company’s
circular dated 28 March 2011
“Charter Period” five years commenced from the date of delivery of the
Vessel under the Charter Agreement
“Charterer” Ji Sheng Marine Limited, a wholly-owned subsidiary of
Nanjing Tanker Corporation
“Company” Sinotrans Shipping Limited (中外運航運有限公司), a
company incorporated in Hong Kong with limited liability,
whose shares are listed on the Main Board of the Stock
Exchange
“Consideration” the consideration of US$61,805,000 (equivalent to
approximately HK$482,079,000) payable by the Purchaser
to the Vendor for the Disposal
“Director(s)” the director(s) of the Company
“Disposal” the disposal of the Vessel by the Vendor to the Purchaser
pursuant to the Agreement
“EGM” or “Extraordinary General
Meeting”
an extraordinary general meeting of the Company to be
held to consider and, if thought fit, approve, among other
things, the Agreement and the transactions contemplated
thereunder
“Finance Lease Arrangement” the transactions contemplated under the Charter
Agreement
DEFINITIONS
– 1 –
“Group” the Company and its subsidiaries as at the Latest
Practicable Date
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region
“Independent Board Committee” an independent committee of the Board comprising all the
independent non-executive Directors established for the
purpose of advising the Independent Shareholders on the
Agreement and the transactions contemplated thereunder
“Independent Financial Adviser” or
“Platinum Securities”
Platinum Securities Company Limited, a corporation
licensed under the SFO to carry out Type 1 (dealing in
securities) and Type 6 (advising on corporate finance)
regulated activities under the SFO, and the independent
financial adviser to the Independent Board Committee and
the Independent Shareholders on the Agreement and the
transactions contemplated thereunder
“Independent Shareholders” in respect of the Shareholders other than the Parent
Company and its associates
“Independent Third Party(ies)” individual(s) or company(ies) not connected with any
directors, chief executive or substantial shareholders of the
Company or any of its subsidiaries or any of their
respective associates
“Latest Practicable Date” 16 January 2015, being the latest practicable date prior to
the printing of this circular for ascertaining certain
information for the purpose of inclusion in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock
Exchange
“Nanjing Tanker Corporation” Nanjing Tanker Corporation, a company established in the
PRC, an indirect subsidiary of the Parent Company
“Parent Company” 中國外運長航集團有限公司 (Sinotrans & CSC Holdings
Co., Ltd.), a PRC state-owned enterprise which indirectly
owns approximately 68.10% of the issued share capital of
the Company as at the Latest Practicable Date
“PRC” the People’s Republic of China, which for the purpose of
this circular, excludes Hong Kong, the Macau Special
Administrative Region and Taiwan
DEFINITIONS
– 2 –
“Purchaser” New Enterprise Shipping Company Limited, a joint
venture established in the PRC which is indirectly owned
as to 49% by the Parent Company and 51% by China
Merchants Energy Shipping Co., Ltd. (招商局能源運輸股份有限公司), an Independent Third Party
“SASAC” the State-owned Assets Supervision and Administration
Commission of the State Council of the PRC
“SFO” the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong)
“Shareholders” holders of the issued Shares
“Shares” ordinary share(s) of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“US$” United States dollars, the lawful currency of the United
States of America
“Vendor” Grand Sea Shipping Limited, a wholly-owned subsidiary of
the Company as at the Latest Practicable Date
“Vessel” a 2008 built oil tanker, namely M/T “Yangtze Friendship”
(formerly known as M/T “GRAND SEA”)
For the purpose of this circular, the exchange rate of US$1.00 = HK$7.80 has been used for
currency translation, where applicable. Such exchange rates are for illustration purposes and do
not constitute representation that any amount in US$ or HK$ have been or may be converted in
such rates.
DEFINITIONS
– 3 –
(Incorporated in Hong Kong with limited liability)(Stock Code: 368)
Executive Directors:Mr. Li HuaMs. Feng Guoying
Non-executive Directors:Mr. Li Zhen (Chairman)Mr. Tian Zhongshan
Independent non-executive Directors:Mr. Tsang Hing LunMr. Lee, Peter Yip WahMr. Zhou Qifang
Registered office:21st Floor,Great Eagle Centre,23 Harbour Road,Wanchai,Hong Kong
21 January 2015
To the Shareholders
Dear Sir/Madam,
DISCLOSEABLE AND CONNECTED TRANSACTIONIN RELATION TO DISPOSAL OF THE VESSEL
INTRODUCTION
The Board is pleased to announce that on 31 December 2014, the Vendor entered into theAgreement with the Purchaser, pursuant to which, the Vendor has agreed to sell and the Purchaserhas agreed to purchase the Vessel. The principal terms of the Agreement are set out below:
The Agreement
Date
31 December 2014
Parties
(1) the Vendor, being a wholly-owned subsidiary of the Company; and
(2) the Purchaser
LETTER FROM THE BOARD
– 4 –
Asset to be disposed of
The Vendor has agreed to dispose the Vessel to the Purchaser.
The Vessel is a 2008 built oil tanker, namely M/T “Yangtze Friendship” (formerly
known as M/T “GRAND SEA”). The classification society/class is China Classification
Society by Mitsui Engineering & Shipbuilding Co., Ltd. (Chiba, Japan). The Vessel was
acquired by the Company in 2011 at the consideration of US$100,000,000 (approximately
HK$780,000,000). The Vessel, at the time of its delivery, will be free from all registered
mortgages, charters and liens (including maritime liens) created by the Vendor (but
excluding liens arising as a result of actions of the ship managers).
According to the management accounts of the Group for the ten months ended 31
October 2014, the unaudited net book value of the Vessel as at 31 October 2014 was
approximately US$61,805,000 (equivalent to approximately HK$482,079,000).
The net profits before and after taxation and extraordinary items attributable to the
Vessel for the financial years ended 31 December 2012 and 31 December 2013 were as
follows:
Financial yearended
31 December2013
Financial yearended
31 December2012
Net profits before taxation and
extraordinary items attributable to
the Vessel
US$5,366,028
(equivalent to
approximately
HK$41,855,000)
US$5,628,562
(equivalent to
approximately
HK$43,903,000)
Net profits after taxation and
extraordinary items attributable to
the Vessel
US$4,490,017
(equivalent to
approximately
HK$35,022,000)
US$4,697,764
(equivalent to
approximately
HK$36,643,000)
Consideration
Pursuant to the terms of the Agreement, the Consideration of US$61,805,000
(equivalent to approximately HK$482,079,000) shall be payable in cash by the Purchaser to
the Vendor on or before the delivery of the Vessel.
The Consideration has been arrived at based on normal commercial terms after arm’s
length negotiations between the Purchaser and the Vendor and was determined after taking
into account (i) the market intelligence that the Group has gathered from its own analysis of
recently concluded sale and purchase of vessels of comparable size and year of built in the
market; (ii) the net book value of the Vessel of approximately US$61,805,000 (equivalent to
HK$482,079,000) as at 31 October 2014; and (iii) the valuation of the Vessel as at 30
LETTER FROM THE BOARD
– 5 –
October 2014 of approximately US$61,805,000 (equivalent to HK$482,079,000) as
appraised by an independent valuer, the valuation report of which is contained in Appendix
I to this circular.
Condition Precedent
The Vendor’s obligations to sell and the Purchaser’s obligations to purchase the
Vessel under the Agreement are conditional upon the approval of the Agreement and the
transactions contemplated thereunder by the shareholders of the Company having been
obtained.
Delivery and Completion
The Vessel shall be delivered to the Purchaser on a condition that the Vessel with
everything belonging to it be at the Vendor’s risk and expense until it is delivered to the
Purchaser, but subject to the terms and conditions of the Agreement it shall be delivered and
taken over on an as is, where is basis. However, the Vessel shall be delivered with its
classification certificates and national certificates.
The Vessel is expected to be delivered on or around 10 February 2015 or such other
date as the Vendor and the Purchaser may agree. Completion of the Disposal shall take place
at the time of delivery of the Vessel. Upon completion of the Disposal, the Vendor will cease
to have any interest in the Vessel.
Termination
If the Vessel becomes an actual, constructive or compromised total loss before
delivery, the Agreement shall be null and void.
If the Consideration is not paid in accordance with the Agreement, the Vendor shall
have the right to cancel the Agreement. The Vendor shall not be entitled to claim further
compensation for their losses and for all expenses incurred thereunder.
If the Vendor fails to complete a legal transfer of the Vessel by 31 March 2015, the
Purchaser shall have the option to cancel the Agreement. If before the Purchaser has taken
delivery of the Vessel, the Vessel ceases to be physically ready for delivery and is not made
physically ready again by 31 March 2015, the Purchaser shall retain its option to cancel the
Agreement.
If the Vendor fails to complete a legal transfer as aforesaid, the Vendor shall
compensate the Purchaser for its loss and for all expenses together with interest if its failure
is due to proven negligence and whether or not the Purchaser would cancel the Agreement.
LETTER FROM THE BOARD
– 6 –
FINANCE LEASE ARRANGEMENT
Reference is made to the Company’s circular dated 28 March 2011 in relation to the FinanceLease Arrangement. On 4 January 2011, the Company entered into the Charter Agreement with theCharterer pursuant to which the Charterer has agreed to hire from the Company the Vessel for aterm of five years and to purchase the Vessel at the end of the Charter Period. The aggregateconsideration payable by the Charterer under the Charter Agreement is approximatelyUS$127,000,000 (equivalent to HK$990,600,000) of which (i) approximately US$47,000,000(equivalent to HK$366,600,000) is the total amount payable for the hire of the Vessel during theterm of the Charter Agreement at a daily rate of US$25,800 by monthly installments; and (ii)US$80,000,000 (equivalent to HK$624,000,000) is the total amount payable by the Charterer topurchase the Vessel at the end of the Charter Period.
The table below sets forth the finance lease income and the finance lease receivables of theGroup for the three years ended 31 December 2011, 2012 and 2013 under the Finance LeaseArrangement:
For the year ended 31 December2011 2012 2013
US$’000 US$’000 US$’000
Finance lease income of
the Group
3,657.71
(equivalent to
approximately
HK$28,530,000)
5,759.23
(equivalent to
approximately
HK$44,922,000)
5,531.90
(equivalent to
approximately
HK$43,149,000)
Finance lease receivables
of the Group
96,978.35
(equivalent to
approximately
HK$756,431,000)
93,294.78
(equivalent to
approximately
HK$727,699,000)
91,758.30
(equivalent to
approximately
HK$715,715,000)
The finance lease receivables of the Group under the Finance Lease Arrangement as at 30October 2014 amounted to approximately US$89,952,000 (equivalent to HK$701,626,000).
Reference is also made to the Company’s announcements dated 30 September 2014 and 30October 2014, respectively in relation to the termination of the Finance Lease Arrangement. Asdisclosed in the above announcements, the Company has exercised its rights to terminate theFinance Lease Arrangement and withdrew the Vessel from the service of the Charterer on 30October 2014 as the Charterer failed to pay the hire of the Vessel in accordance with the terms ofthe Charter Agreement due to its financial difficulties as a result of the current market condition inorder to prevent further loss incurred by the Company.
As at the Latest Practicable Date, the Company reached an agreement with the Charterer thatthe Company will enter into a settlement agreement with the Charterer on or before March 2015pursuant to which the Charterer would pay the Company an amount of approximatelyUS$36,000,000 (equivalent to HK$280,800,000, being the aggregate consideration payable by theCharterer under the Charter Agreement of approximately US$127,000,000 less the total amount ofcharter hire of the Vessel received under the Charter Agreement of approximately US$29,000,000
LETTER FROM THE BOARD
– 7 –
and the fair value of the Vessel of US$61,805,000) (the “Compensation”) on or before 31
December 2015. If the Charterer fails to settle the Compensation under the settlement agreement,
the Company will negotiate with the Charterer and/or seek legal advice on the potential legal
actions to be taken by the Company so as to recover the Compensation. The Directors (including
the independent non-executive Directors) have reviewed the terms of the settlement agreement and
are of the view that the Compensation and the terms of the settlement agreement are fair and
reasonable and in the interest of the Company and the Shareholders as a whole. The Company will
make further announcement in accordance with the Listing Rules in case if there is any material
change on the above terms.
RATIONALE OF, REASONS FOR, BENEFITS AND RISKS OF THE DISPOSAL
The Company has not identified any alternative independent purchasers for the Disposal as
at the Latest Practicable Date since the Company is of the view that transaction with a connected
person may have less uncertainties as opposed to transaction with Independent Third Parties. The
Vessel has been withdrawn from the service of the Charterer on 30 October 2014. The Company
has not considered to enter into a new finance lease arrangement in respect of the Vessel as the
Company will receive the total consideration upon disposal of the Vessel as contemplated under the
Disposal instead of by installments as in the case of finance lease arrangement. Since the Group is
not principally engaged in the business of oil tanker services and does not possess expertise in the
operation of oil tankers, the Company is of the view that it is in the interests of the Company and
its shareholders as a whole to enter into the Disposal. By entering into the Disposal, the Directors
considered that the sale proceeds from the Disposal will provide additional funding to the Group
by enhancing cashflow of the Group. The Group intends to use the sale proceeds from the Disposal
for general working capital purposes and for any future acquisition of new vessels when suitable
opportunities arise.
The consideration of the Disposal shall be settled in full by cash on or before the delivery of
the Vessel and the Vendor shall have the right to cancel the Agreement if the Purchaser fails to pay
the consideration of the Disposal. Save for the shareholdings of the Parent Company in both the
Purchaser and the Charterer, the Purchaser is not related to the Charterer. Accordingly, the
Company is of the view the financial difficulties experienced by the Charterer is not relevant to the
ability of the Purchaser to settle the Consideration. The Company believes that the Purchaser has
the ability to settle the Consideration and accordingly, the Directors (including the independent
non-executive Directors) believe that there will be no risk in relation to the Disposal.
FINANCIAL EFFECT OF THE DISPOSAL
The net proceeds of the Disposal is US$61,805,000 (equivalent to approximately
HK$482,079,000). Subject to audit, it is estimated that the Group will not record any gain or loss
from the Disposal in considering that the Consideration is equivalent to the book value of the
Vessel.
LETTER FROM THE BOARD
– 8 –
INFORMATION OF THE PURCHASER, THE PARENT COMPANY AND THE
CHARTERER
The Purchaser is, indirectly, owned as to 49% by the Parent Company and 51% by China
Merchants Energy Shipping Co., Ltd., an Independent Third Party. The Purchaser is principally
engaged in the business of oil tanker services.
The Charterer is a wholly-owned subsidiary of Nanjing Tanker Corporation, which is in turn
indirectly controlled and owned as to approximately 24.89% by the Parent Company and
approximately 75.11% by other Independent Third Parties. Save for the shareholdings of the Parent
Company in both the Purchaser and the Charterer, the Purchaser is not related to the Charterer.
The Parent Company was established in the PRC in 1950. Since its establishment, the Parent
Company has had control over one of the largest fleets of ocean-going vessels in the PRC. The
shipping business of the Parent Company has benefited from the overall development in the world
economy and the integration of international trade over the past years. The Parent Company is one
of the largest state-owned transportation and logistics services companies in the PRC and is
directly owned by the SASAC. The Parent Company is the largest integrated logistics services
supplier in the PRC and its principal business consists of the provision of logistics services and
shipping business and its subsidiary business consists of the construction of ships.
GENERAL INFORMATION OF THE VENDOR AND THE GROUP
The Vendor is a wholly-owned subsidiary of the Company which is principally engaged in
oil tanker bareboat chartering business under finance lease.
The Company was incorporated in Hong Kong and the Shares are listed on the Main Board
of the Stock Exchange. The Group is one of the largest shipping companies in the PRC in terms of
self-owned dry bulk fleet size. The Company owns, manages and operates a modern dry bulk fleet
and a container fleet on a worldwide scale. The primary focus and core business of the Group is dry
bulk vessel chartering, which involves the chartering of self-owned vessels for the transportation
of dry bulk cargo, such as iron ore, coal, grain and steel products, along with major global trade
routes.
LISTING RULES IMPLICATIONS
As one of the applicable percentage ratios (as defined under the Listing Rules) (other than
the profits ratio which is disregarded due to an anomalous result) in respect of the Disposal exceeds
5% but less than 25%, the Disposal constitutes a discloseable transaction of the Company under
Chapter 14 of the Listing Rules. As the Purchaser is owned as to 49% by the Parent Company
which is a substantial shareholder of the Company as at the Latest Practicable Date, the Purchaser
is therefore a connected person of the Company under the Listing Rules. Accordingly, the Disposal
constitutes a connected transaction under the Listing Rules and the Disposal will be subject to
reporting, announcement and Independent Shareholders’ approval requirements under Chapter
14A of the Listing Rules.
LETTER FROM THE BOARD
– 9 –
The Independent Board Committee comprising all the independent non-executive Directors
has been formed to advise the Independent Shareholders in relation to the Agreement and the
transactions contemplated thereunder. Your attention is drawn to the letter of recommendation
from the Independent Board Committee set out on page 12 of this circular.
The Company has appointed Platinum Securities Company Limited as the independent
financial adviser to advise the Independent Board Committee and the Independent Shareholders in
respect of the Agreement and the transactions contemplated thereunder. Your attention is drawn to
the letter of advice set out on pages 13 to 23 to this circular.
EXTRAORDINARY GENERAL MEETING
A notice convening the EGM to be held at the Diamond Ballroom, the Ritz-Carlton Hong
Kong, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong on Tuesday, 10
February 2015 at 11:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular for the purpose
of considering and, if thought fit, passing the ordinary resolution as set out therein. Voting at the
EGM will be by poll.
A form of proxy for use by the Shareholders at the EGM is enclosed herewith. Whether or
not you are able to attend the EGM in person, you are requested to complete and return the
enclosed form of proxy in accordance with the instructions printed thereon and deposit at the
registered office of the Company at 21st Floor, Great Eagle Centre, 23 Harbour Road, Wanchai,
Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for
the holding of the EGM or any adjourned meeting thereof (as the case may be). Completion and
return of the form of proxy will not preclude you from attending and voting in person at the EGM
or any adjourned meeting thereof (as the case may be) should you so wish.
Pursuant to the articles of association of the Company, where there is any matter which
involves transaction(s) between the Company and (i) the Parent Company and/or its subsidiaries
and/or their respective associates; or (ii) any connected persons of the Company, it is to be
considered and voted solely by independent non-executive Directors. Accordingly, the executive
Directors including Mr. Li Hua and Ms. Feng Guoying and the non-executive Directors including
Mr. Li Zhen and Mr. Tian Zhongshan are required to abstain and have abstained from voting on the
relevant Board resolutions to approve the Agreement and the transactions contemplated
thereunder.
The Parent Company and its associates, who are beneficially interested in 2,718,520,000
Shares, approximately 68.10% of Shares issued as at the Latest Practicable Date. The Parent
Company and its associates are required to abstain from voting for the resolution approving the
Agreement and the transactions contemplated thereunder. Save as disclosed above, to the best of
the knowledge of the Directors, information and belief having made all reasonable enquiries, no
other Shareholders has a material interest in the Disposal. Accordingly, save for the Parent
Company and its associates, no other Shareholder is required to abstain from voting for the
resolution to approve the Agreement and the transactions contemplated thereunder.
LETTER FROM THE BOARD
– 10 –
CLOSURE OF REGISTER OF MEMBERS OF THE COMPANY
Shareholders whose names appear on the register of members of the Company on Tuesday,
10 February 2015 will be entitled to attend and vote at the EGM. The register of members of the
Company will be closed from Monday, 9 February 2015 to Tuesday, 10 February 2015 (both days
inclusive), during which period no transfer of Shares will be registered.
In order to be entitled to attend and vote at the EGM, all share certificates with completed
transfer forms must be lodged with the Company’s Share Registrar, Computershare Hong Kong
Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
East, Wanchai, Hong Kong not later than 4:30 p.m. on Friday, 6 February 2015.
RECOMMENDATION
Your attention is drawn to the letter from the Independent Board Committee set out on page
12 of this circular which contains its recommendations to the Independent Shareholders on the
Agreement and the transactions contemplated thereunder and the letter of advice from the
Independent Financial Adviser which contains, amongst other matters, its advice to the
Independent Board Committee and the Independent Shareholders in relation to the Agreement and
the transactions contemplated thereunder as set out from pages 13 to 23 of this circular. Your
attention is also drawn to the valuation report of the Vessel as at 30 October 2014 which is set out
in Appendix I to the circular.
The Directors consider that the Agreement and the transactions contemplated thereunder are
entered into in the ordinary and usual course of business of the Company, on normal commercial
terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.
Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the
relevant ordinary resolution to be proposed at the EGM.
Your attention is also drawn to the additional information set out in the appendices of this
circular.
By Order of the BoardSinotrans Shipping Limited
LI HUAExecutive Director
LETTER FROM THE BOARD
– 11 –
(Incorporated in Hong Kong with limited liability)
(Stock Code: 368)
21 January 2015
To the Independent Shareholders
Dear Sir or Madam,
DISCLOSEABLE AND CONNECTED TRANSACTIONIN RELATION TO DISPOSAL OF THE VESSEL
We refer to the circular of the Company to the Shareholders dated 21 January 2015 (the“Circular”), in which this letter forms a part. Unless the context requires otherwise, capitalisedterms used in this letter will have the same meanings given to them in the Circular.
We have been authorised by the Board to form the Independent Board Committee to advisethe Independent Shareholders on whether the Agreement and the transactions contemplatedthereunder, are entered into on normal commercial terms, are fair and reasonable so far as theCompany and the Independent Shareholders are concerned, and in the interests of the Shareholdersas a whole.
We wish to draw your attention to the letter of advice from Platinum Securities CompanyLimited (the “Independent Financial Adviser”). The Independent Financial Adviser has beenappointed to advise the Independent Board Committee and the Independent Shareholders inrelation to the Agreement and the transactions contemplated thereunder, as set out on pages 13 to23 of the Circular and the letter from the Board set out on pages 4 to 11 of the Circular.
Having considered, among other matters, the terms of the Agreement, the factors andreasons considered by, and the opinion of the Independent Financial Adviser as stated in its letterof advice, we consider that the Agreement and the transactions contemplated thereunder, which areentered into in the ordinary and usual course of business of the Company, on normal commercialterms, 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 ordinaryresolution in relation to the Agreement and the transactions contemplated thereunder, to beproposed at the EGM.
Yours faithfullyThe Independent Board Committee of
Sinotrans Shipping LimitedMr. Tsang Hing Lun
Mr. Lee Yip Wah, PeterMr. Zhou Qifang
Independent Non-executive Directors
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
– 12 –
The following is the text of the letter of advice from the Independent Financial Adviser to the
Independent Board Committee and the Independent Shareholders for the purpose of incorporation
into this circular.
21 January 2015
To the Independent Board Committee and the Independent Shareholders
Dear Sir or Madam,
DISCLOSEABLE AND CONNECTED TRANSACTIONIN RELATION TO DISPOSAL OF THE VESSEL
INTRODUCTION
We refer to our engagement as the Independent Financial Adviser to advise the Independent
Board Committee and the Independent Shareholders in respect of the discloseable and connected
transaction (the “Transaction”) contemplated under the Agreement. Details of the Transaction are
contained in the letter from the Board as set out in the circular of the Company dated 21 January
2015 (the “Circular”). Terms used in this letter shall have the same meanings as defined in the
Circular unless the context requires otherwise.
In our capacity as the Independent Financial Adviser, our role is to advise the Independent
Board Committee and the Independent Shareholders as to whether the Transaction was in the
ordinary and usual course of business of the Company, the terms of the Transaction were agreed on
normal commercial terms and are fair and reasonable, and in the interests of the Company and the
Shareholders as a whole; and to give independent advice to the Independent Board Committee.
In formulating our opinion, we have relied on the information and facts supplied to us by the
Directors and/or management of the Company. We have reviewed, among other things: (i) the
announcement of the Company dated 31 December 2014 (the “Announcement”); (ii) the Valuation
Report prepared by the Beijing Golden Standard & Headmen Appraisal and Advisory Co., Ltd. (the
“PRC Valuer”) dated 29 December 2014; (iii) the Agreement; (iv) the audited 2013 annual report
of the Group (the “2013 Annual Report”); and (v) the unaudited 2014 interim report of the Group
(the “2014 Interim Report”).
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 13 –
We have assumed that all information, facts, opinions and representations contained in the
Circular are true, complete and accurate in all material respects and we have relied on the same.
The Directors have confirmed that they take full responsibility for the contents of the Circular and
have made all reasonable inquiries that no material facts have been omitted from the information
supplied to us.
We have no reason to suspect that any material facts or information have been withheld or to
doubt the truth, accuracy or completeness of the information of all facts as set out in the Circular
and of the information and representations provided to us by the Directors and/or management of
the Company. Furthermore, we have no reason to suspect the reasonableness of the opinions and
representations expressed by the Directors and/or management of the Company, which have been
provided to us. In line with normal practice, we have not, however, conducted a verification
process of the information supplied to us, nor have we conducted any independent in-depth
investigation into the business and affairs of the Company. We consider that we have reviewed
sufficient information to enable us to reach an informed view and to provide a reasonable basis for
our opinion regarding the Transaction.
During the past two years, Mr. Lenny Li, for and on behalf of Platinum Securities Company
Limited, signed the opinion letter from the independent financial adviser contained in the
Company’s circular dated 22 April 2014 in respect of (1) very substantial acquisition; (2)
connected transactions; and (3) continuing connected transactions. The past engagement was
limited to providing independent advisory services to the independent board committee and the
independent shareholders of the Company pursuant to the Listing Rules. Under the past
engagement, Platinum Securities Company Limited received normal professional fee from the
Company. Notwithstanding the past engagement, as at the Latest Practicable Date, we are
independent from, and are not associated with the Company or any other party to the Transaction,
or their respective substantial shareholder(s) or connected person(s), as defined under the Listing
Rules and accordingly, are considered eligible to give independent advice on the Transaction. We
will receive a fee from the Company for our role as the Independent Financial Adviser to the
Independent Board Committee and the Independent Shareholders in relation to the Transaction.
Apart from the normal professional fee payable to us in connection with this appointment, no
arrangements exist whereby we will receive any fees or benefits from the Company or any other
party to the Transaction or their respective substantial shareholder(s) or connected person(s), as
defined under the Listing Rules.
The Independent Board Committee, comprising Mr. Tsang Hing Lun, Mr. Lee Peter Yip Wah
and Mr. Zhou Qifang, has been established to advise the Independent Shareholders as to whether
the Transaction was entered into in the ordinary and usual course of business of the Company, the
terms of the Transaction were agreed on normal commercial terms and are fair and reasonable so
far as the Independent Shareholders are concerned and that the entering into the Transaction is in
the interests of the Company and the Shareholders as a whole.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 14 –
PRINCIPAL FACTORS AND REASONS CONSIDERED
In formulating and giving our independent financial advice to the Independent Board
Committee and the Independent Shareholders, we have taken into account the principal factors as
follows:
1. Background of the Transaction
The Board announced that on 31 December 2014, the Vendor entered into the
Agreement with the Purchaser, pursuant to which, the Vendor has agreed to sell and the
Purchaser has agreed to purchase the Vessel.
1.1 Background of the Group
The Group is one of the largest shipping companies in the PRC in terms of
self-owned dry bulk fleet size. The Company owns, manages and operates a modern
dry bulk fleet and a container fleet on a worldwide scale. The primary focus and core
business of the Group is dry bulk vessel chartering, which involves the chartering of
self-owned vessels for the transportation of dry bulk cargo, such as iron ore, coal,
grain and steel products, along major global trade routes.
1.2 Background of the Parent Company
The Parent Company was established in the PRC in 1950. Since its
establishment, the Parent Company has had control over one of the largest fleets of
ocean-going vessels in the PRC. The shipping business of the Parent Company has
benefited from the overall development in the world economy and the integration of
international trade over the past years. The Parent Company is one of the largest
state-owned transportation and logistics services companies in the PRC and is
directly owned by the SASAC. The Parent Company is the largest integrated logistics
services supplier in the PRC and its principal business consists of the provision of
logistics services and shipping business and its subsidiary business consists of the
construction of ships.
1.3 Background of the Purchaser
The Purchaser is, indirectly, owned as to 49% by the Parent Company and 51%
by China Merchants Energy Shipping Co., Ltd., an Independent Third Party. The
Purchaser is principally engaged in business of oil tanker services.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 15 –
1.4 The Vessel
The Vessel is a 2008 built oil tanker, namely M/T “Yangtze Friendship”
(formerly known as M/T “GRAND SEA”). The size of the Vessel was about 310,444
DWT, which was classified as a very large crude oil carrier (“VLCC”). The
classification society/class is China Classification Society by Mitsui Engineering &
Shipbuilding Co., Ltd. (Chiba, Japan). The Vessel was acquired by the Company in
2011 at the consideration of US$100,000,000 (approximately HK$780,000,000). The
Vessel, at the time of its delivery, will be free from all registered mortgages, charters
and liens (including maritime liens) created by the Vendor (but excluding liens arising
as a result of actions of the ship managers).
According to the management accounts of the Group for the ten months ended
31 October 2014, the unaudited net book value of the Vessel as at 31 October 2014
was approximately US$61,805,000 (equivalent to approximately HK$482,079,000).
The net profits before and after taxation and extraordinary items attributable to
the Vessel for the financial years ended 31 December 2012 and 31 December 2013
were as follows:
Financialyear ended
31 December2013
Financialyear ended
31 December2012
Net profits before taxation and
extraordinary items
attributable to the Vessel
US$5,366,028
(equivalent to
approximately
HK$41,855,000)
US$5,628,562
(equivalent to
approximately
HK$43,903,000)
Net profits after taxation
and extraordinary items
attributable to the Vessel
US$4,490,017
(equivalent to
approximately
HK$35,022,000)
US$4,697,764
(equivalent to
approximately
HK$36,643,000)
However, as described in section below headed “Termination of the finance
lease of the Vessel”, due to the fact that the finance lease of the Vessel was terminated
on 30 October 2014, the Vessel will not generate sound return until the Company
enters into a new long-term charterer agreement for the Vessel.
2. Reasons for and benefits of the Transaction
2.1 The Group does not focus on the business of oil tanker services and instead, the
Group intends to focus more on dry bulk shipping business
The Group is one of China’s largest shipping companies in terms of self-owned
dry bulk fleet size, whose primary focus and core business is dry bulk shipping.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 16 –
Table 1 below shows fleet size of respective business segments of dry bulk shipping,
container shipping and oil tanker shipping.
Table 1: fleet size of the business segments
Number of self-owned vesselsas the Latest Practicable Date
Dry bulk shipping 50Container shipping 11Oil tanker shipping 1
Source: Information provided by the management of the Company
As illustrated from the Table 1, the oil tanker shipping segment has only one
self-owned vessel, i.e. the Vessel, as compared to the dry bulk shipping segment
which has 50 self-owned vessels. In addition, income generated from the oil tanker
shipping business for the six months ended 30 June 2014 was only US$2.7 million in
comparison with revenue generated from the dry bulk shipping business for the six
months ended 30 June 2014 of more than US$106 million. We understand from the
management of the Company that since the Group is not principally engaged in the
business of oil tanker services and does not possess expertise in the operation of oil
tanker, therefore we concur with the management of the Company that the oil tanker
shipping business represents a significantly less important segment as compared to
the dry bulk shipping. As such, we are of the view that it is in the interests of the
Company and its shareholders as a whole to enter into the Agreement and focus more
on its dry bulk business.
Reference is made to the circular of the Company dated 22 April 2014 in
relation to the very substantial acquisition. The acquisition was subsequently
completed on 31 July 2014 and the Company’s self-owned fleet size of dry bulk
shipping was further enlarged by 4 vessels. On the other hand, self-owned fleet size of
oil tanker business has not been increased through this transaction. We consider it
further demonstrates the Company’s greater and continued focus on its core business
of dry bulk shipping.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 17 –
By entering into the Agreement, the sale proceeds from the Disposal willprovide additional funding to the Group by enhancing cashflow of the Group, whichcould be used for general working capital purposes and for any future acquisition ofnew vessels when suitable opportunities arise.
2.2 Uncertain outlook of the oil tanker industry
The oil tanker industry may continue to face pressure owing to the subdueddemand. According to the research report issued by Clarkson (one of the world’sleading providers of integrated shipping services) in the fourth quarter of 2014, totalcrude trade volumes are expected to decline slightly in 2014, due to imports to manyOECD countries declining. Therefore, we consider that there remain uncertainties forthe oil tanker market.
We have reviewed the VLCC spot earnings rates of the past two years fromJanuary 2013 to December 2014, which is the one of the key benchmarks for the oiltanker industry. We noted that VLCC spot rates fluctuated between the lower end ofapproximately US$3,000 per day in February 2013 and upper end of approximatelyUS$46,000 per day in December 2013. In December 2014, the VLCC spot ratesfurther dropped to approximately US$40,000 per day, representing a 13% decreaseyear-on-year. During the review period of the past two years, there was a hugedifference between the lower end and the upper end of VLCC spot earnings rateswhich implies an uncertain oil tanker market.
Given the uncertain outlook of oil tanker industry and the fluctuation of theVLCC spot rates, we concur with the management of the Company that it is in theinterest of the Company to focus less on oil tanker business through disposal of theVessel.
2.3 Termination of the finance lease of the Vessel
Reference is made to the Company’s (i) circular dated 28 March 2011 inrelation to the Finance Lease Arrangement entered into between the Company and JiSheng Marine Limited, a wholly-owned subsidiary of Nanjing Tanker Corporation;(ii) announcement dated 30 September 2014 in relation to an update of the FinanceLease Arrangement; (iii) announcement dated 30 October 2014 in relation to thetermination of the Finance Lease Arrangement. With the Charterer having sufferedserious loss and failed to meet its obligation under the terms of the Finance LeaseAgreement as a result of the prolonged downturn of the oil tanker market condition,pursuant to the terms of the Finance Lease Agreement, the Company has exercised itsrights to terminate the Finance Lease Arrangement and withdraw the Vessel from theservice of the Charterer on 30 October 2014. We also understand from themanagement of the Company that on 16 January 2015, the Company reached anagreement with the Charterer that the Company will enter into a settlement agreementwith the Charterer on or before March 2015 pursuant to which the Charterer wouldpay the Company an amount of approximately US$36,000,000 on or before 31December 2015. If the Charterer fails to settle the compensation under the settlementagreement, the Company will negotiate with the Charterer and/or seek legal advice onthe potential legal actions to be taken by the Company so as to recover thecompensation.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 18 –
The Company has not considered to enter into a new finance lease arrangement
in respect of the Vessel as the Company will receive the total consideration upon
disposal of the Vessel as contemplated under the Disposal instead of by installments
as in the case of finance lease arrangement. Furthermore, due to the uncertain oil
tanker market condition, the management of the Company considers it will be
difficult for the Company to find a new charterer, who possesses sound
creditworthiness, at similar level of charter hire rate for similar charter period.
Therefore, in order to avoid future losses, the management of the Company
considered disposal of the Vessel is reasonable to realise the investment immediately.
3. Principal terms of the Transaction
3.1 The Agreement
Detailed terms of the Agreement have been contained in the letter from the
Board as set out in the Circular.
3.2 Basis in determining the Consideration
As stated in the letter from the Board in the Circular, the Consideration is
based on normal commercial terms after arm’s length negotiations between the
Purchaser and the Vendor and was determined after taking into account (i) the market
intelligence that the Group has gathered from its own analysis of recently concluded
sale and purchase of vessels of comparable size and year of built in the market; (ii) the
net book value of the Vessel of approximately US$61,805,000 (equivalent to
HK$482,079,000) as at 31 October 2014; and (iii) the valuation of the Vessel as at 30
October 2014 of approximately US$61,805,000 (equivalent to HK$482,079,000) as
appraised by the PRC Valuer.
To assess the basis in determining the Consideration, we have reviewed the
Valuation Report, discussed with the PRC Valuer and enquired the management of the
Company. We noted and discussed with the PRC Valuer that they had considered three
general accepted valuation approaches, i.e. cost approach, income approach and
market approach.
For the valuation of the Vessel, the PRC Valuer have adopted the market
approach as there are relatively large number of transactions to be used as market
comparables similar to the Vessel and the PRC Valuer therefore consider that the
market approach produces a more reliable estimation of the market value rather than
the cost approach and the income approach which are less direct in estimating value
in a transaction. Therefore, the PRC Valuer relied solely on the market approach in
the valuation of the Vessel. The PRC Valuer has used the market approach to
determine the market value of the Vessel by referencing comparable sales evidence of
similar vessels, in terms of function, size, condition and age, with adjustments for the
size, condition and age of the Vessel.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 19 –
We have obtained and reviewed the information of the aforesaid comparabletransactions and noted that the comparable transactions that chosen by the PRCValuer are similar to that of the Vessel (in terms of size and age of vessel) and the dateof such comparable transactions are the most recent (i.e. within the six months fromthe valuation date) among all the other comparable transactions.
The market value of the Vessel is defined as the estimated amount for which anasset or liability should exchange on the valuation date between a willing buyer and awilling seller in an arm’s-length transaction after proper marketing and where theparties had each acted knowledgeably, prudently and without compulsion. Inconducting the valuation of the Vessel, the PRC Valuer has also adopted the followingassumptions:
– The general economic environment will not change substantially;
– There will be no significant change in the taxation policies; and
– The PRC Valuer did not take into account the inflation factor.
In order to assess the fairness and reasonableness of the above assumptions, wehave also discussed with the PRC Valuer regarding the major assumptions made in thevaluation process and noted that these are normal assumptions in relation to thevaluation of vessels.
Besides, we have discussed with the PRC Valuer in relation to their experiencesand understood that the PRC Valuer is an independent valuers approved by theMinistry of Finance the PRC and China Securities Regulatory Commission. The PRCValuer has extensive experience in valuing various tangible and intangible properties.It is currently equipped with approximately 80 Chinese Certified Public Valuers and 5members of Royal Institution of Chartered Surveyors (“RICS”). We also understoodthat Mr. Yu Yuexin, the president of the PRC Valuer, has the qualification of CertifiedPublic Valuer and the member of RICS and over 20 years of experience in the field ofappraisal, and Mr. Luo Junjun, the vice president of the PRC Valuer, has thequalification of Certified Public Valuer and over 10 years of experience in the field ofappraisal. According to the “RICS Valuation – Professional Standards” published byRICS, practical experience is one of the way to test whether an individual isappropriately qualified to accept the responsibility for a valuation. Given that Mr. YuYuexin and Mr. Luo Junjun have plenty of practical experience in the valuation asstated above, we are of the view that they are qualified to provide a reliable valuationfor the Vessel. As discussed with the PRC Valuer, they have no current or priorrelationships with other parties and connected persons to the Transaction over thepast two years.
Given (i) the market approach is a commonly adopted and well recognisedmethodology for valuing vessels; (ii) the major assumptions made in connection withthe valuation approach are reasonable; and (iii) the PRC Valuer is qualified andappropriate to provide a reliable valuation for the Vessel, we are of the view that thebasis in determining the Consideration is fair and reasonable so far as the Companyand the Shareholders as a whole are concerned.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 20 –
4. Financial Impacts of the Transaction
4.1 Effect on net asset value
As disclosed in the 2014 Interim Report, the unaudited net asset value (the
“NAV”) attributable to the Shareholders as at 30 June 2014 was US$2,185.0 million.
According to the management of the Company, the net proceeds of the Disposal is
US$61,805,000 (equivalent to approximately HK$482,079,000). Subject to audit, it
is estimated that the Group will not record any gain or loss from the Disposal. As
such, the Transaction will not have a direct impact on the NAV attributable to the
Shareholders.
The management of the Company expects that the Group would possibly
generate better return by focusing its investment on dry bulk shipping business, which
the overall market condition is improving.
As such, we consider that the Transaction will have a potential positive effect
on the NAV of the Group.
4.2 Effect on earnings
As disclosed in the 2014 Interim Report, the unaudited profit attributable to the
Shareholders was US$10.0 million for the six months ended 30 June 2014. With
reference to the announcement dated 30 September 2014 in relation to an update of
the Finance Lease Arrangement and the announcement dated 30 October 2014 in
relation to the termination of the Finance Lease Arrangement, the Company has
exercised its rights to terminate the Finance Lease Arrangement and withdraw the
Vessel from the service of the Charterer on 30 October 2014. Without the Disposal,
the Company may suffer loss attributable to the Vessel as there will be no sound return
generated by the Vessel but depreciation expense and other maintenance costs, if
there is no new charterer being identified for the Vessel. Therefore, we consider that
the Disposal may avoid incurring future loss.
According to the management of the Company, the Group will not record any
gain or loss from the Disposal, but sale proceeds from the Disposal will provide
additional funding to the Group for working capital purpose by enhancing cashflow
of the Group and for any future acquisition of new vessels when suitable
opportunities arise.
Therefore, we consider that the Transaction will have no immediate direct
effect on the earnings of the Group but may limit any future losses arising from
owning the Vessel.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 21 –
4.3 Effect on cash/working capital
As disclosed in the 2014 Interim Report, the Group had current assets of
approximately US$936.8 million (including cash and bank balances of US$863.4
million) and current liability of US$28.4 million as at 30 June 2014. As the Directors
confirmed that the net proceeds from the Transaction would increase the Group’s
bank balance and cash before the Group utilises them for general working capital
purposes and exploring other investment opportunities, we consider that the cash
position and the working capital of the Group will be strengthened upon completion
of the Transaction.
Therefore, we consider that the Transaction will have a positive effect on the
cash position and the working capital of the Group.
In light of:
(i) the potential positive effect on the NAV of the Group;
(ii) no immediate direct effect on the earnings of the Group but may limit
any future losses arising from owning the Vessel; and
(iii) the positive effect on the cash position and the working capital of the
Group,
we are of the view that the Transaction will have an overall positive financial effect on
the Group and is in the interests of the Company and the Shareholders as a whole.
RECOMMENDATION
In relation to the Transaction, we have considered the above principal factors and reasons, in
particular, having taken into account the following in arriving at our opinion:
(i) the Transaction is in the ordinary and usual course of business of the Company and it
is in line with the Group’s overall business strategy;
(ii) the reasons for and benefits of the Transaction are in the interests of the Company and
the Shareholders as a whole;
(iii) the basis in determining the Consideration is fair and reasonable so far as the
Company and the Shareholders as a whole are concerned;
(iv) the Consideration is fair and reasonable so far as the Independent Shareholders are
concerned; and
(v) the Transaction will have an overall positive financial effect on the Group and is in the
interests of the Company and the Shareholders as a whole.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 22 –
Having considered the above, we are of the view that the Transaction is in ordinary and usual
course of business of the Company and it is in line with the Group’s overall business strategy, and
the terms of the Transaction were agreed on normal commercial terms and are fair and reasonable
and in the interests of the Company and the Shareholders as a whole.
Accordingly, we advise the Independent Board Committee to recommend, and we ourselves
recommend the Independent Shareholders to vote in favour of the ordinary resolution in relation to
the Transaction to be proposed at the EGM.
Yours faithfully,
For and on behalf of
Platinum Securities Company Limited
Lenny Li
Director and Co-head of Corporate Finance
Mr. Lenny Li is a licensed person registered with the Securities and Futures Commission and
as a responsible officer of Platinum Securities Company Limited to carry out Type 1 (dealing in
securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and has
over eight years of experience in corporate finance industry.
LETTER FROM PLATINUM SECURITIES COMPANY LIMITED
– 23 –
The following is the text of the valuation report, prepared for the purpose of inclusion in this
circular received from Beijing Golden Standard & Headman Appraisal and Advisory Co., Ltd.
Asset Valuation Report
In respect of the Proposed Transfer of the“Yangtze Friendship” Oil Tanker byGRAND SEA SHIPPING LIMITED
Da Zheng Hai Di Ren Ping Bao Zi (2014) No. 441A
(Volume 1, Book 1)
Beijing Golden Standard & Headman Appraisal and Advisory Co., Ltd.
29 December 2014
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-1 –
CONTENTS
Disclaimer of the Asset Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
Summary of the Asset Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4
Full Text of the Asset Valuation Report
I. The Principal, the Title Holder and the Valuation Report Users . . . . . . . . . . . I-6
II. Valuation Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
III. Subject and Scope of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
IV. Type and Definition of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
V. Valuation Base Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
VI. Basis of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
VII. Valuation Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
VIII. Implementation Process and Conditions for the Valuation Procedures . . . . . . I-10
IX. Valuation Hypothesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-11
X. Valuation Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
XI. Special Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
XII. Restrictions on the Usage of the Valuation Report . . . . . . . . . . . . . . . . . . . . I-13
XIII. Valuation Reporting Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-14
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-2 –
Disclaimer of the Asset Valuation Report
This asset valuation report is prepared by our valuers on the basis of due and thorough check
and verification as well as upon performance of necessary valuation procedures such as valuations
and estimation in respect of all of the assets involved within the scope of the valuation. With regard
to this valuation report, we hereby in particular make the following statements:
I. The certified asset valuer carries out assets valuation based on the relevant laws and
regulations and the asset valuation standards on the principle of independence,
objectiveness and fairness. Based on the information collected in the course of our
practice, the statements in the valuation report are objective, and we assume
corresponding legal responsibilities for the reasonableness on the conclusion of the
valuation.
II. Lists of appraised assets have been provided and declared by the principal and the
asset ownership party with their signatures and seals. The principal and the related
parties shall be responsible for the authenticity, legality, and completeness of the data
provided as well as the appropriate usage of the valuation report.
III. The certified asset valuer does not have existing or prospective interests in the subject
matter of this valuation report; and the certified asset valuer has no existing or
prospective interests with the principal and any related parties or any bias towards the
principal and any related parties.
IV. The certified asset valuer and other valuers have carried out on-site investigation on
the subject matter of the valuation and the related assets thereof that are mentioned in
the valuation report. We have paid due attention to the legal ownership of the subject
matter of the valuation and the assets thereof. We have verified the legal ownership of
the subject matter of the valuation and the assets thereof and faithfully disclosed any
findings. We have also requested the principal and the related parties to fulfill their
property ownership formalities so as to meet the requirements for issuing the report,
but do not give any form of guarantee as to the legal title of the subject matter of the
valuation.
V. The analysis, judgment, and conclusions in the valuation report are restricted by the
assumptions and limiting conditions set out in the valuation report. Users of this
report shall give due consideration to the assumptions, limiting conditions, and
explanations for specific issues stated in the valuation report as well as their impacts
on the valuation conclusions.
VI. The issued valuation report and the disclosure of the valuation conclusion therein are
limited to the valuation purpose as stated in the valuation report. They are effective
for use during the effective period of the valuation conclusion. The certified asset
valuer signing this report and the valuation institution are not responsible for any
consequences from any misuse thereof.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-3 –
Summary of the Asset Valuation Report
In respect of the Proposed Transfer of the“Yangtze Friendship” Oil Tanker byGRAND SEA SHIPPING LIMITED
Da Zheng Hai Di Ren Ping Bao Zi (2014) No. 441A
IMPORTANT NOTE
This summary is extracted from the text of the valuation report. Fordetails of this valuation project and reasonable understanding of thevaluation conclusions, please read the full text of the valuation reportcarefully.
Beijing Golden Standard & Headmen Appraisal and Advisory Co., Ltd. accepted the
entrustment from GRAND SEA SHIPPING LIMITED, in accordance with relevant laws,
regulations and asset valuation standards of the State, observing the independent, objective and
fair principles, to conduct a valuation on the “Yangtze Friendship” Oil Tanker owned by GRAND
SEA SHIPPING LIMITED and involved in the proposed transfer of assets by GRAND SEA
SHIPPING LIMITED.
The subject and scope of this valuation are the “Yangtze Friendship” Oil Tanker owned by
GRAND SEA SHIPPING LIMITED. The value type for the valuation is market value. The
valuation base date is 30 October 2014.
The valuer followed through the necessary valuation procedures, taking the continuous use
of assets and open market as a basis, the market approach was adopted to make valuation and
estimations.
As on the valuation base date, being 30 October 2014, the valuation result of the “Yangtze
Friendship” Oil Tanker owned by GRAND SEA SHIPPING LIMITED was US$61,805,000.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-4 –
Summary Table of Asset Valuation Result
Unit: USD10,000
ItemBookvalue
Appraisedvalue
Appreciation/Depreciation
Appreciationrate %
A B C = B-A D = C/A×100%
1 The “Yangtze Friendship”
Oil Tanker
– 6,180.50 6,180.50 –
2 Total assets – 6,180.50 6,180.50 –
Summary Table of Asset Valuation Result
Unit: RMB10,000
ItemBookvalue
Appraisedvalue
Appreciation/Depreciation
Appreciationrate %
A B C = B-A D = C/A×100%
1 The “Yangtze Friendship”
Oil Tanker
– 37,983.50 37,983.50 –
2 Total assets – 37,983.50 37,983.50 –
The valuer has made explanations of special issues on the Valuation Report in relation to the
restricted matters of the valuation procedures found during the valuation process, to which users of
the Report should pay attention.
The valuation conclusions of this Report will be valid for one year from the valuation base
date, that is, from the date of asset valuation, 30 October 2014 to 29 October 2015.
The valuation reporting date is 29 December 2014.
The above content is extracted from the text of the valuation report. For details of this
valuation and reasonable understanding of the valuation conclusions, please read the full text of
the valuation report carefully.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-5 –
Full Text of the Asset Valuation Report
In respect of the Proposed Transfer of the“Yangtze Friendship” Oil Tanker byGRAND SEA SHIPPING LIMITED
Da Zheng Hai Di Ren Ping Bao Zi (2014) No. 441A
GRAND SEA SHIPPING LIMITED:
Beijing Golden Standard & Headmen Appraisal and Advisory Co., Ltd. accepted the
entrustment from your Company, in accordance with relevant laws, regulations and asset valuation
standards, asset valuation principles of the State, observing the independent, objective and fair
principles, to conduct an appraisal on the market value of the “Yangtze Friendship” Oil Tanker
owned by GRAND SEA SHIPPING LIMITED and involved in the proposed transfer of assets by
GRAND SEA SHIPPING LIMITED as of 30 October 2014 by using the market approach. The
valuer has performed necessary valuation procedures. The valuation report is hereby summarised
as follows:
I. THE PRINCIPAL, THE TITLE HOLDER AND THE VALUATION REPORTUSERS
The Principal and the Title Holder were GRAND SEA SHIPPING LIMITED. The
Valuation Report Users were the Principal and other valuation report users stipulated by the
State laws and regulations.
(I) Information of the Principal
1. Overview:
Name of company: GRAND SEA SHIPPING LIMITED
Legal representative: Li Hua (李樺)
Corporate domicile: 21/F, Great Eagle Centre, No. 23 HarbourRoad, Wan Chai, Hong Kong
Business scope: Shipping and related businesses.
Ownership structure: Marine Peace Shipowning Ltd holding100% equity interest of GRAND SEASHIPPING LIMITED. Sinotrans & CSCHoldings Co. Ltd. indirectly holds MarinePeace Shipowning Ltd.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-6 –
(II) Relationship between the Principal and the Title Holder
The Principal and the Title Holder were GRAND SEA SHIPPING LIMITED.
II. VALUATION PURPOSE
The purpose of this valuation was to provide the market value of the “Yangtze
Friendship” Oil Tanker owned by GRAND SEA SHIPPING LIMITED as of the valuation
base date by undergoing an appraisal so as to offer a reference value in the proposed transfer
of the “Yangtze Friendship” Oil Tanker.
Document on Economic Behaviors involved in this valuation is:
Resolutions of the Board of GRAND SEA SHIPPING LIMITED on 30 October 2014.
III. SUBJECT AND SCOPE OF VALUATION
The subject and scope of this valuation are the “Yangtze Friendship” Oil Tanker
owned by GRAND SEA SHIPPING LIMITED.
The “Yangtze Friendship” VLCC was built by the Japanese MTISUI ENGINEERING
& SHIPBUILDING CO., LTD. in March 2008. With a total vessel’s main dimensions length
of 323 m, width 60 m, depth 28.8 m, DWT of about 312,000 tons, the hull was entirely
welded with steel; the main engine is of one MAN B & W 7S80MC-C type diesel engine; a
total of three sets of generators, prime mover consists of two 8N21AL-EV type diesel engine
and one Shinko RG64-M type diesel engine. The vessel operates normally and is managed
with practices and its daily maintenance is good.
The subject and scope of this valuation are consistent with those confirmed in the
entrustment.
IV. TYPE AND DEFINITION OF VALUE
Pursuant to relevant conditions such as economic behavior and valuation purpose, the
value type of this valuation is market value. Market value refers to the estimated amount of
the valuation target on the valuation base date in a normal arm’s length transaction that the
free-will buyer and free-will seller conduct a transaction rationally not subject to duress.
V. VALUATION BASE DATE
The valuation base date of this project is 30 October 2014.
The valuation base date was determined by the principal. Factors such as the end of
accounting period and favorability of realizing such economic behavior were taken into
consideration of the determination of the valuation base date.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-7 –
The evaluated price standards during the valuation were the effective price standards
as at the valuation base date.
VI. BASIS OF VALUATION
(I) Basis of Economic Behavior
Resolutions of the Board of GRAND SEA SHIPPING LIMITED on 30 October
2014.
(II) Basis of Laws and Regulations
1. “Administrative Measures on Appraisal of State-owned Assets” (1991,
Order No. 91 of the Stat Council of the People’s Republic of China);
2. “Detailed Rules for the Implementation of the Administrative Measures
for State-owned Asset Assessments” (Guo Zi Ban Fa [1992] No. 36);
3. “Administration Measures on Appraisal of the State-owned Assets of
Enterprises” (2005, Order No. 12 of the SASAC of the State Council);
4. “Notice of Certain Issues on Strengthening Administration on
State-owned Assets Appraisal” (Guo Zi Wei Chan Quan [2006] No.
274);
5. Other relevant laws, regulations, rules and systems related to appraisal
work.
(III) Basis of Valuation Standards
1. “Asset Valuation Standards – Basic Standards” (MOF Cai Qi (2004) No.
20);
2. “Ethical Norms for Assets Valuation – Basic Norms” (MOF Cai Qi
(2004) No. 20);
3. “Asset Valuation Standards – Valuation Report” (Zhong Ping Xie [2007]
No. 189);
4. “Asset Valuation Standards –Valuation Process” (Zhong Ping Xie [2007]
No. 189);
5. “Asset Valuation Standards – Machinery & Equipment” (Zhong Ping Xie
[2008] No. 217);
6. “Guidelines on Valuation Report of State-Owned Assets of Enterprises”
(Zhong Ping Xie [2008] No. 218);
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-8 –
7. “Guidelines on Valuation Report of Institutional Business Quality
Control” (《評估機構業務質量控制指南》) (Zhong Ping Xie [2010] No.
214);
8. “Guidelines for Certified Assets Valuers Concerning Legal Ownership
of Evaluation Object Ref No: [2003] No. 18) (《註冊資產評估師關注評估對象法律權屬指導意見》) (中注協會協[2003]No. 18));
9. “Guidelines on Type of Value on Asset Valuation” (《資產評估價值類型指導意見》) (Zhong Ping Xie [2007] No. 189).
(IV) Basis of Asset Ownership
1. Vessel Ownership Registration Certificate (船舶所有權登記證書);
2. Nationality Certificate (船舶國籍證書);
3. Other property rights documents.
(V) Basis of Valuation Pricing
1. Introduction to vessels (《船舶概論》);
2. List of materials and equipment of vessel and technical specification
table etc. provided by the appraised party;
3. List of assets and other information provided by the appraised party;
4. “Table of Interest Rate on Loan of the People’s Bank of China”
(implemented from 6 July 2012);
5. “Common Data and Parameters for Asset Valuation” (《資產評估常用數據與參數手冊》);
6. Market information, economic data of the industry and macroeconomy
information collected by the valuers;
7. Other reference materials.
VII. VALUATION METHODS
Asset valuation approaches mainly comprise the cost approach, income approach and
market approach. In analyzing the available information in accordance with the purposes of
this valuation and based on the valuation of the characteristics of the valuation object, the
trading market of vessels is considered to be relatively active. There are readily identifiable
market comparable transactions in this valuation and the conditions for adopting the market
approach are satisfied. Thus, the market approach is adopted in this valuation.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-9 –
Market approach refers to the valuation method which determines the value of thevaluation object by comparing it with comparable transaction cases.
The market price of the valuation object is estimated by comparisons and revisionsanalysis on factors that affect the market price of vessels in accordance with the condition ofthe valuation object and the comparable cases, which were more relevant and substitutionalto the valuation object in the recent second-hand vessel trading market.
VIII. IMPLEMENTATION PROCESS AND CONDITIONS FOR THE VALUATIONPROCEDURES
Beijing Golden Standard & Headman Appraisal and Advisory Co., Ltd. accepted theentrustment from GRAND SEA SHIPPING LIMITED to evaluate the “Yangtze Friendship”Oil Tanker held by GRAND SEA SHIPPING LIMITED and the valuation base date wasagreed to set on 30 October 2014. Beijing Golden Standard & Headman Appraisal andAdvisory Co., Ltd. prepared the valuation plans and decided the valuation processes. Thevaluation procedures are mainly as follows:
(I) Preparation stage before the valuation
1. Negotiated and agreed with the Principal and the Title Holder on basicissues including the valuation purpose, the scope of valuation, thevaluation base date of this valuation and signed the “BusinessEngagement Letter” with the Principal, and a work plan was formulated;
2. Coordinated with the Title Holder to complete tasks such as conductingasset inventory inspection and filling in the “Asset Valuation DetailsForm”. Valuation team staff paid on-site visit to have an initialunderstanding on the entrusted assets and assisted the enterprise toconduct the asset report work for conducting asset valuation, and tocollect documents and information as required by the asset valuation.
(II) On-site Verification and Valuation Stage
1. To listen to the relevant staff from the Principal and the appraised partyto give an introduction to the general enterprise status and the historyand current of the appraised assets, to understand the financial system,fixed asset technology and other information of the enterprise;
2. To verify the “Asset Valuation Details Form” and relevant financialrecords and data as provided by the appraised party, and to coordinatewith the appraised party to make adjustments when problems are found;
3. To conduct verification on fixed assets listed on the “Asset ValuationDetails Form” based on the requirements of the asset valuation;
4. To review and collect property certification documents of the appraisedassets;
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-10 –
5. To confirm the actual valuation methods according to the actual
situation and characteristics of the appraised assets;
6. To review and collect technical information and collection information
of the relevant assets; to conduct market research, survey and collect
relevant information and price information;
7. To make an initial valuation and calculation of the assets within the
scope of valuation.
(III) Valuation Summary Stage
To compile an initial analysis and summary of various types of assets, to make
necessary adjustments, amendments and improves on the valuation results.
(IV) Preparation and Submission Stage of the Valuation Report
To compile asset valuation report, and to exchange opinions on the valuation
draft with the principal. After make comprehensive consideration of relevant
opinions, amendments and corrections were made to the valuation report according to
the internal three-tier audit system and procedures of the valuation authority, and to
provide the official asset valuation report.
IX. VALUATION HYPOTHESIS
(1) Hypothesis on transaction;
(2) Hypothesis on open market;
(3) Hypothesis on continuous use of assets;
(4) The existing macroeconomy would have no substantial changes;
(5) The social economy environment where the parties are in, and policies such as
tax and tax rate would have no substantial changes;
(6) The parties are unanimous in scope and approach of business and outlook on
the basis of existing administrative strategies and standards;
(7) This valuation does not consider the effect of inflation.
The valuer determined that these hypotheses were tenable on valuation base date
pursuant to the requirement of asset appraisal. Should there be any material changes in the
future economic environment or any changes in the preceding conditions, the valuer would
not be liable for the difference in appraisal results arising from any changed preceding
conditions.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-11 –
X. VALUATION CONCLUSIONS
Based on the implementation of the above valuation procedures and methods and on
the premise of continuing utilization, as of the Valuation Base Date (30 October 2014), the
valuation result of the “Yangtze Friendship” Oil Tanker held by GRAND SEA SHIPPING
LIMITED was US$61,805,000. The result of asset valuation is as follows:
Summary Table of Asset Valuation Result
Unit: US$10,000
ItemsBookvalue
Appraisedvalue
Appreciation/Depreciation
Appreciationrate %
A B C=B-A D=C/A×100%
1 The “Yangtze Friendship”
Oil Tanker
– 6,180.50 6,180.50 –
2 Total assets – 6,180.50 6,180.50 –
Summary Table of Asset Valuation Result
Unit:RMB10,000
ItemsBookvalue
Appraisedvalue
Appreciation/Depreciation
Appreciationrate %
A B C=B-A D=C/A×100%
1 The “Yangtze Friendship”
Oil Tanker
– 37,983.50 37,983.50 –
2 Total assets – 37,983.50 37,983.50 –
XI. SPECIAL MATTERS
(i) For the conclusion of this valuation report, the complete market value of the
“Yangtze Friendship” Oil Tanker at the valuation base date was valued. This
valuation does not consider the “Yangtze Friendship” Oil Tanker’s possible
relevant outstanding payables and taxes as at the valuation base date.
(ii) The conclusion of this valuation report does not consider the “Yangtze
Friendship” Oil Tanker’s possible relevant taxes arising from the transfer
transaction.
(iii) Circumstances where valuation procedures may be subject to restrictions
The title holder did not provide the book value of the “Yangtze Friendship” Oil
Tanker in this valuation, so the valuer of this valuation was unable to verify the book
value of the “Yangtze Friendship” Oil Tanker.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-12 –
(iv) Major matters after valuation base date
With due diligence, the valuer did not find any major matter that may have
significant influence on the valuation conclusions from the valuation base date to the
valuation reporting date. After the valuation base date and during the validity of the
valuation conclusions, in case of any change in the quantity and valuation standard of
the assets, the following principles will apply:
1. In case the quantity of assets changes, the amount of assets shall be
adjusted accordingly based on the original valuation approach;
2. In case the price standard of assets changes and has an obvious impact
on the appraised value of assets, the principal shall engage a qualified
appraisal agency to re-determine the appraised value in a timely manner;
3. For any change in the quantity and price standard of assets after the
valuation base date, the principal shall take due considerations and make
adjustment accordingly during actual valuation.
(v) The appraisal agency and valuer disclaim any liability for the defects of the
business which may affect the appraised value of the asset, but no special notes
were made at the time of entrustment and the valuer cannot know them even
after performing the valuation procedures.
For the said special matters, the valuer would like to draw the attention of the
report users.
XII. RESTRICTIONS ON THE USAGE OF THE VALUATION REPORT
(i) This valuation report can only be used for the valuation purpose as indicated
herein other than other purposes. The undersigned valuer and his appraisal
agency disclaim any liability for the results caused by improper use;
(ii) This valuation report can be used only by the valuation report users agreed in
the asset valuation agreement between Beijing Golden Standard & Headmen
Appraisal and Advisory Co., Ltd. and the principal as well as those under the
State laws and regulations;
(iii) The valuation conclusions shall not be used before the valuation report is
approved or filed;
(iv) All or part of the valuation report shall not be extracted, cited or disclosed to
the public media without the consent of the appraisal agency;
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-13 –
(v) In case there are no significant changes in the market conditions or asset
condition since the valuation base date, the valuation conclusions of the report
will be valid for one year from the valuation base date, that is from the date of
asset valuation 30 October 2014 to 29 October 2015;
(vi) In case any policy adjustment has major impact on the valuation conclusions,
the valuation base date shall be re-determined for valuation.
XIII. VALUATION REPORTING DATE
The valuation reporting date is 29 December 2014.
Beijing Golden Standard & Headmen Appraisal and Advisory Co., Ltd.
Legal Representative: Ms. Chen Dongmei
Certified Asset Valuers: Mr. Yu Yuexin and Mr. Luo Junjun
29 December 2014
Note:
Beijing Golden Standard & Headmen Appraisal and Advisory Co., Ltd. (hereinafter referred to as “GSHAA”) was founded
in 1997. It owns the securities assets appraisal qualification granted by the MOF China and CSRC, the exploration and
mining right appraisal qualification granted by the Ministry of Land and Resources, the land planning qualification granted
by BLSS, and price appraisal qualification granted by NDRC etc. Beijing Golden Standard & Headmen Appraisal and
Advisory Co., Ltd. is currently equipped with approximately 80 Chinese CPVs and 5 members of the Royal Institution of
Chartered Surveyors, and has branches and agencies in Shandong, Shenzhen, Shanxi, Shaanxi and Shanghai etc. The
comprehensive strength ranks top 15 in the Chinese appraisal industry.
Mr. Yu Yuexin, born in October 1963. He graduated from Wuhan University of Technology in 1985. Mr. Yu has the
qualification of Certified Public Valuer and the member of Royal Institution of Chartered Surveyors, etc. He has over 20
years of experience in the field of appraisal. From July 1985 to May 1994, he took office as senior engineer in Design &
Research Institute of Ministry of machine building industry. He joined Chesterton Petty. Ltd as the general manager of
China region in June 1994. He joined Sallmanns (Far East) Limited as President of China region in June 2007. Mr. Yu held
the posts of President in Golden Standard & Headmen Appraisal and Advisor Co., Ltd since November 2009.
Mr. Luo Junjun, born in August 1972. He was appointed as Vice President of Golden Standard & Headmen Appraisal and
Advisor Co., Ltd in June 2012. Mr. Luo graduated from Wuhan Institute of Technology in 1995. He got a Degree of
Bachelor of Engineering and the qualification of Certified Public Valuer. He has over 10 years of experience in the field of
appraisal. From May 2004 to May 2009, Mr. Luo served as assistant appraiser, project manager and department manager of
appraisement in Beijing Northen Yashi Assets Appraisal Co., Ltd. He joined Golden Standard & Headmen Appraisal and
Advisor Co., Ltd since June 2009. He successively held the posts of senior project manager, department manager of
appraisement, assistant to the general manager, from June 2012 he promoted to Vice President.
APPENDIX I VALUATION REPORT OF THE VESSEL AS AT 30 OCTOBER 2014
– I-14 –
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept fullresponsibility, includes particulars given in compliance with the Listing Rules for the purpose ofgiving information with regard to the Company. The Directors, having made all reasonableenquiries, confirm that to the best of their knowledge and belief the information contained in thiscircular is accurate and complete in all material respects and not misleading or deceptive, there areno other matters the omission of which would make any statement herein or this circularmisleading.
2. DISCLOSURE OF INTERESTS
(a) Directors’ Interests and Short Positions
As at the Latest Practicable Date, none of the Directors or the chief executive of theCompany had any interests and short positions in the Shares, underlying Shares anddebentures of the Company and its associated corporations (within the meaning of Part XVof the SFO) which were required to be notified to the Company and the Stock Exchangepursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positionswhich the Directors or the chief executive of the Company were taken or deemed to haveunder provisions of the SFO), or which were required, pursuant to section 352 of the SFO, tobe entered in the register referred to therein, or which were required, pursuant to the ModelCode for Securities Transactions by Directors of Listed Companies contained in the ListingRules, to be notified to the Company and the Stock Exchange.
(b) Substantial Shareholders’ Interest
As at the Latest Practicable Date, so far as is known to any Director or the chiefexecutive of the Company, the following persons (other than the Directors or chief executiveof the Company) had interests or short positions in the Shares or underlying Shares of theCompany as recorded in the register kept by the Company pursuant to section 336 of theSFO which would fall to be disclosed to the Company under the provisions of Divisions 2and 3 of Part XV of the SFO.
Long positions in the Shares and underlying Shares of the Company
Name of substantialshareholders
Capacity andnature ofinterests
Number ofShares held
Approximatepercentage ofshareholding
The Parent Company (Note 1) Interest ofcontrolledcorporation
2,718,520,000 68.10%
Sinotrans Shipping (Holdings)Limited (Note 1)
Beneficialowner
2,600,000,000 65.13%
Note 1: The Parent Company is the beneficial owner of all the issued shares in Sinotrans Shipping(Holdings) Limited. Accordingly, the Parent Company is deemed to be interested in the sharesowned by Sinotrans Shipping (Holdings) Limited for the purposes of the SFO.
APPENDIX II GENERAL INFORMATION
– II-1 –
Save as disclosed above, as at the Latest Practicable Date, no other person (other than the
Directors or chief executives of the Company) had an interest or short position in the Shares or
underlying Shares of the Company which were recorded in the register kept by the Company
pursuant to section 336 of the SFO which would fall to be disclosed to the Company under the
provisions of Divisions 2 and 3 of Part XV of the SFO.
3. DIRECTORS’ COMPETING INTERESTS
As at the Latest Practicable Date, none of the Directors nor his associates is and was
interested in any business which competes or may compete, either directly or indirectly, with the
business of the Group.
4. DIRECTORS’ INTERESTS IN ASSETS
As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors had
any interest, either directly or indirectly, in any assets which has since 31 December 2013 (being
the date to which the latest published audited consolidated financial statements of the Group were
made up) up to the Latest Practicable Date, been acquired or disposed of by or leased to, any
member of the Group or are proposed to be acquired or disposed of by, or leased to, any member of
the Group.
5. DIRECTORS’ SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had any existing or proposed service
contract with any member of the Group which does not expire or is not determinable by such
member of the Group within one year without payment of compensation (other than statutory
compensation).
6. DIRECTORS INTERESTS IN CONTRACT OR ARRANGEMENT OF
SIGNIFICANCE
As at the Latest Practicable Date, none of the Directors was materially interested, directly or
indirectly, in any contract or arrangement entered into by any member of the Group subsisting at
the Latest Practicable Date and which is significant in relation to the business of the Group.
7. MATERIAL ADVERSE CHANGE
The Company is not aware of any material adverse change in the financial or trading
position of the Group since 31 December 2013, being the date to which the latest published audited
financial statements of the Company were made and up to the Latest Practicable Date.
APPENDIX II GENERAL INFORMATION
– II-2 –
8. EXPERT’S QUALIFICATIONS AND CONSENT
Below set out the qualifications of the expert whose name/advice and/or report is contained
in this circular:
Name Qualification
Platinum Securities Company
Limited
A licensed corporation under the SFO to carry out
Type 1 (dealing in securities) and Type 6 (advising
on corporate finance) regulated activities under the
SFO
Beijing Golden Standard &
Headman Appraisal and
Advisory Co., Ltd.
Independent professional valuer
As at the Latest Practicable Date, each of Platinum Securities and Beijing Golden Standard
& Headman Appraisal and Advisory Co., Ltd. (i) had no shareholding in any member of the Group
and did not have 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) had no direct or indirect
interest in any assets which had been, since 31 December 2013 (the date to which the latest
published audited consolidated financial statements of the Group were made up), acquired,
disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of
by, or leased to any member of the Group; and (iii) has given and has not withdrawn its written
consent to the issue of this circular with the inclusion of its letter and the reference to its name
included herein in the form and context in which it appears.
9. MISCELLANEOUS
The English text of this circular shall prevail over its respective Chinese text for the purpose
of interpretation.
10. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the Company’s
principal place of business in Hong Kong at 21st Floor, Great Eagle Centre, 23 Harbour Road,
Wanchai, Hong Kong during normal business hours on any weekdays, except public holidays, from
the date of this circular up to and including the date of the EGM:
(a) the valuation report on the Vessel as at 30 October 2014 as set out in Appendix I to
this circular;
(b) the letter from the Independent Board Committee to the Independent Shareholders,
the text of which is set out on page 12 of this circular;
APPENDIX II GENERAL INFORMATION
– II-3 –
(c) the letter from the Independent Financial Adviser to the Independent Board
Committee and the Independent Shareholders, the text of which is set out on pages 13
to 23 of this circular;
(d) the written consents referred to in the paragraph headed “Expert’s Qualifications and
Consent” in this Appendix;
(e) the Charter Agreement;
(f) the Agreement; and
(g) this circular.
APPENDIX II GENERAL INFORMATION
– II-4 –
(Incorporated in Hong Kong with limited liability)
(Stock Code: 368)
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “EGM”) of
Sinotrans Shipping Limited (the “Company”) will be held at the Diamond Ballroom, the
Ritz-Carlton Hong Kong, International Commerce Centre, 1 Austin Road West, Kowloon, Hong
Kong on Tuesday, 10 February 2015 at 11:00 a.m. for the purpose of considering and, if thought fit,
passing the following resolution as an ordinary resolution of the Company:
ORDINARY RESOLUTION
1. “THAT
(a) the memorandum of agreement dated 31 December 2014 (the “Agreement”)
(copy of which is marked “A” and now produced to the meeting and initialled
by the chairman of the meeting for the purpose of identification) entered into
between Grand Sea Shipping Limited as vendor and New Enterprise Shipping
Company Limited as purchaser in respect of the disposal of the 2008 built oil
tanker, namely M/T “Yangtze Friendship” (formerly known as M/T “GRAND
SEA”) and the transactions contemplated thereunder be and are hereby
approved, confirmed and ratified; and
(b) any one director of the Company, or any two directors of the Company if the
affixation of the common seal is necessary, be and is/are hereby authorised to
sign and execute all documents, instruments and agreements and to do all such
acts or things deemed by him/her to be incidental to, ancillary to or in
connection with the matters contemplated in the Agreement.”
By Order of the BoardSinotrans Shipping Limited
Huen Po WahCompany Secretary
Hong Kong, 21 January 2015
NOTICE OF EXTRAORDINARY GENERAL MEETING
– EGM-1 –
Registered office:
21st Floor, Great Eagle Centre, 23 Harbour Road,
Wanchai, Hong Kong
Notes:
1. The register of members of the Company will be closed from Monday, 9 February 2015 to Tuesday, 10 February
2015 (both days inclusive) during which period no transfer of Share(s) will be effected. In order to determine the
entitlement to attend and vote at the EGM, all transfer of Share(s), accompanied by the relevant share certificate(s)
with the properly completed transfer form(s) either overleaf or separately, must be lodged with the Company’s
share registrar, Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell
Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Friday, 6 February
2015.
2. Any member of the Company entitled to attend and vote at the EGM is entitled to appoint one or, if he/she is the
holder of two or more shares, more than one proxy to attend and, on a poll, vote instead of him/her. A proxy needs
not be a member of the Company.
3. A form of proxy for use at the EGM is enclosed herewith.
4. To be valid, the proxy form, together with the power of attorney or other authority (if any) under which it is signed
or a notarially certified copy thereof, must be deposited at the registered office of the Company at 21st Floor, Great
Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding
the EGM or any adjournment thereof (as the case may be) and in default thereof the proxy form and such power or
authority shall not be treated as valid.
5. Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person
at the EGM or any adjournment thereof (as the case may be) and in such event, the instrument appointing a proxy
shall be deemed to be revoked.
6. As at the date of this notice, the Directors of the Company are Mr. Li Hua and Ms. Feng Guoying as the executive
Directors; Mr. Li Zhen (Chairman) and Mr. Tian Zhongshan as the non-executive Directors; and Mr. Tsang Hing
Lun, Mr. Lee Peter Yip Wah and Mr. Zhou Qifang as the independent non-executive Directors.
NOTICE OF EXTRAORDINARY GENERAL MEETING
– EGM-2 –