Sinotrans : Annual Report 2021

Stock Code: 0598HK 601598SH

CUSTOMERS' SUCCESS

OUR ACHIEVEMENT

2020 ANNUAL REPORT

ANNUAL REPORT 2020

1

Important Notice

1. The Board and the Supervisory Committee of the Company and the Directors, Supervisors and members of the Senior Management warrant the truthfulness, accuracy and completeness of the contents in this Annual Report and confirm that there are no misrepresentations or misleading statements contained in or material omissions from this Annual Report, and accept several and joint legal responsibilities.
2. Absent Directors

Position of the	Name of the	Reason for the
absent Director	absent Director	absence of the Director	Name of the proxy
Executive Director	Song Rong	Other business engagement	Li Guanpeng
Non-executive Director	Su Jian	Other business engagement	Xiong Xianliang

1. ShineWing Certified Public Accountants LLP has issued a standard auditors' report with unqualified opinions for the Company.
2. The Company's legal representative, Li Guanpeng; Chief Financial Officer, Wang Jiuyun; and the person in charge of the Financial Department ("person in charge of accounting"), Mai Lina, hereby make the statement that they warrant the financial statements contained in this Annual Report are true, accurate and complete.
3. Proposal for profit distribution or proposal for conversion of common reserve fund into share capital during the Reporting Period considered by the Board
   The proposed annual dividend for 2020 is RMB1.2 per 10 shares (tax included) (i.e. RMB0.12 per share, tax included) to the total share capital base of 7,400,803,875 shares as at 31 December 2020. Total dividend allotment is RMB888,096,465.00 (tax included), and the remaining profits are recognized as retained earnings. The Company will not distribute shares or convert any reserve into shares this year. The proposal will be submitted to the general meeting of shareholders for approval.
4. Risk disclaimer of forward-looking statements 3 Applicable      □ Not applicable
   Forward-looking statements including future plans and development strategies in this Report do not constitute substantive commitments of the Company to investors. Investors should be aware of the investment risks.
5. Whether the controlling shareholder or its related parties has misappropriated the Company's funds for purposes other than for business
   No
6. Whether the Company has provided external guarantees in violation of any prescribed decision-making procedures
   No
7. Whether more than half of the Directors cannot ensure the truthfulness, accuracy and completeness of the Annual Report
   No
8. Significant risk alert
   The Company has described the potential risks in detail in this Report. Please refer to "Chapter 5 Management Discussion and Analysis of Business Performance (Report of the Board) - III. DISCUSSION AND ANALYSIS OF THE FUTURE DEVELOPMENT OF THE COMPANY - (IV) Potential risks" in this Report.
9. Others
   3 Applicable      □ Not applicable
   The Company's 2020 financial report has been prepared in accordance with Accounting Standards for Business Enterprises published by the Ministry of Finance of the People's Republic of China and related provisions. Unless otherwise specified, the reporting currency in this Report is Renminbi ("RMB").
   Contents contained in this Report are prepared in compliance with all disclosure requirements of the SSE Listing Rules and SEHK Listing Rules. The Report is published in both Chinese and English versions in Mainland China and Hong Kong at the same time. Should there be any discrepancies between the Chinese and English versions of this Report, the Chinese version shall prevail.

Corporate Mission

Creating a logistics ecology system connecting the world

to successfully promote industrial progress

Corporate Vision

Becoming a world-class intelligent logistics platform enterprise

CONTENTS

Performance Highlights and Major Events in 2020

Chapter 1	Definitions
Chapter 2	General Company Information and Key Financial Indicators
Chapter 3	Chairman's Statement
Chapter 4	Business Overview
Chapter 5	Management Discussion and Analysis of Business
	Performance (Report of the Board)
Chapter 6	Significant Matters
Chapter 7	Changes in Ordinary Shares and Particulars of Shareholders
Chapter 8	Particulars of Preferred Shares
Chapter 9	Directors, Supervisors, Senior Management and Employees
Chapter 10	Corporate Governance (Corporate Governance Report)
Chapter 11	Corporate Bonds
Chapter 12	Financial Report
Chapter 13	Documents Available for Check

4

6

9

16

19

32

72

106

118

119

144

168

173

492

4 SINOTRANS LIMITED

Performance Highlights and Major Events in 2020

Operating income	Earnings per share,
net of non-recurring gains or losses
(RMB billion)	(RMB per share)
84.54	0.32
9%	12%

Air freight business

(including air freight forwarding and cross-bordere-commerce logistics)

Regular Charter

478 flights

Business volume

Air freight forwarding

532.3 thousand tons

6%

Cross-bordere-commerce logistics

269.86 million units

50%

Total segment profit

218%

Segment profit

Logistics

5%

Forwarding and related business

19%

E-commerce business

174%

Business volume of China Europe Railway Express

23%

Business volume of "Sinotrans E-LCL"

27%

Core direct customers

Number 872	Percentage of the	34%
revenue contribution

Major Events in 2020

Responding in no time, Sinotrans operated the emergency logistics platform of "anti-pandemic material deliver". The "Volunteer Logistics Team of Emergency Deliver" was honored as "the National Exemplary Team of Fighting Against the Pandemic"

Completing the acquisition of 100% stake of KLG Group, Sinotrans

realized the breakthrough in grand operation network in Europe

Launching the first overseas hub in South-EastAsia, "Sinotrans E-LCL"moved forward in the path of providing end-to-endfull chain LCL service to customers globally

2020

June

2020 2020

January February

Being the first in the industry, Sinotrans

launched the first cargo plane modified from passenger plane, and resumed the Hangzhou- Liège charter plane in no time to open the air channel between China and Europe

2020

September

2020

August

Launching the "Bay Area" Railway Express, Sinotrans continued to solidify the cross-border railway express platforms to build a strategic land channel to secure the stability of international supply chain

Signing the first domestic block-chain technology backed digital NVOCC bill- of-lading,Sinotrans further promoted the innovation of trust system in the circulation process, the sales channel, the business model, and the settlement of the sea freight forwarding industry

Investing in the equity of China Southern Airlines Logistics, Sinotrans further deepened the relationship with a strategic partner and provided help to the construction of efficient, convenient, stable and leading air transportation channel

S i n o t r a n s s t a r t e d t o provide logistics service f o r a n t i C O V I D - 1 9 vaccines, and successfully completed the logistics service to Macao SAR and Djibouti

2020

December

2020 2020

September October

"Human-Machine Coordinated Digitalized Warehouse Solution" of Sinotrans was

2020

2021

Q1

honored the first prize in the first China Digitalized Warehouse Solution Competition. By collaborating human-machinecoordination solution with business application scenarios, Sinotrans optimized business procedure and elevated the operational efficiency. In 2020, the technology promoted the average handling capacity per capita to increase by more than 30% in the customs sharing center of Sinotrans, and also supported "Sinotrans E-LCL"operational efficiency to increase by more than 10%

December

Implementing the "science reform demonstration action" in its subsidiary, Y2T Technology Co., Ltd., completing the introducing of a strategic investor and the employee stock ownership plan, Sinotrans further stimulated the technology creativity ability

6 SINOTRANS LIMITED

Chapter 1

Definitions

In this report, unless the context otherwise indicates, the following words have the following meanings:

Definition of frequently used terms
A Share(s)	the Domestic Share(s) of the Company with nominal value of
	RMB1.00 each, which are listed on the SSE and traded in RMB
Articles of Association	the Articles of Association of Sinotrans Limited
Board	the Board of Directors of the Company
CG Code	code provisions of Corporate Governance Code as set out in
	Appendix 14 to the SEHK Listing Rules
China Merchants	China Merchants Group Limited (招商局集團有限公司), a wholly
	state-owned enterprise established under the laws of the PRC
	under direct control of the State-owned Assets Supervision
	and Administration Commission of the State Council, the actual
	controller of the Company, which holds approximately 57.64%
	of the issued share capital of the Company at the date of this
	Report
China Merchants Group or CMG	China Merchants and its subsidiaries
Companies Ordinance	the Companies Ordinance (Chapter 622 of the Laws of Hong
	Kong)
Company or Sinotrans	Sinotrans Limited (中國外運股份有限公司), a joint stock limited
	company incorporated in the PRC with limited liability, whose H
	Shares are listed on the SEHK and A Shares are listed on the
	SSE
Company Law	the Company Law of the People's Republic of China
CSRC	China Securities Regulatory Commission
Director(s)/Supervisor(s)	Director(s)/Supervisor(s) of the Company
Domestic Share(s)	shares issued by the Company under PRC law, the par value of
	which is denominated in Renminbi, and which are subscribed for
	in Renminbi
Finance Company	China Merchants Group Finance Co., Ltd. (招商局集團財務有限
	公司), a company owned as to 51% by China Merchants and
	49% by Sinotrans & CSC at the date of this Report
Global E-commerce Logistics Company	Sinotrans Global E-commerce Logistics Co., Ltd. (中外運跨境電
	商物流有限公司)

ANNUAL REPORT 2020

7

Chapter 1

Definitions

Group	Sinotrans Limited and its subsidiaries
HK$	Hong Kong dollars, the lawful currency of Hong Kong Special
	Administrative Region of the PRC
H Share(s)	overseas listed foreign invested Share(s) of RMB1.00 each in
	the issued share capital of the Company, which are listed on the
	Hong Kong Stock Exchange and traded in HK$
Hong Kong	Hong Kong Special Administrative Region of the People's
	Republic of China
Hong Kong Stock Exchange/SEHK	The Stock Exchange of Hong Kong Limited
Innovation & Technology Company	Sinotrans Innovation & Technology Co., Ltd. (中外運創新科技有
	限公司)
KLG Group	the joint name of the seven European logistics companies of
	KLG Europe Holding B.V. acquired by the Company, which were
	wholly-owned subsidiaries of the Company as at the date of this
	Report
Listing Rules in Listing Places	the SEHK Listing Rules and SSE Listing Rules
Logistics Real Estate Company	Sinotrans Logistics Investment Holdings Co., Ltd. (中外運物流投
	資控股有限公司)
Loscam International	Loscam International Holdings Co., Ltd. (路凱國際控股有限公
	司) (formerly known as China Merchants Loscam International
	Holdings Co., Ltd.) (招商路凱國際控股有限公司), owned by the
	Company as to 45% at the date of this Report
Model Code	the Model Code for Securities Transactions by Directors of
	Listed Issuers contained in Appendix 10 to the SEHK Listing
	Rules
Overseas Company	Sinotrans Overseas Development Co., Ltd. (中國外運海外發展有
	限公司)
PRC	the People's Republic of China
PRC GAAP Standards	Accounting Standards for Business Enterprises issued by the
	Ministry of Finance and relevant regulations
Reporting Period	the period from 1 January 2020 to 31 December 2020
RMB	Renminbi, the lawful currency of the PRC

8 SINOTRANS LIMITED

Chapter 1

Definitions

SASAC	the State-owned Assets Supervision and Administration
	Commission of the State Council of the PRC
SEHK Listing Rules	Rules Governing the Listing of Securities on The Stock Exchange
	of Hong Kong Limited
Senior Management	the Group's major operating decision-makers
SFO	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
Share(s)	H Share(s) and A Share(s)
Shareholder(s)	holder(s) of the Shares
Sinoair	Sinotrans Air Transportation Development Co., Ltd. (中外運空運
	發展股份有限公司), a subsidiary of the Company
Sinotrans & CSC	Sinotrans & CSC Holdings Co., Ltd. (中國外運長航集團有限公
	司), a wholly state-owned enterprise established under the laws
	of the PRC, a wholly owned subsidiary of China Merchants, and
	the controlling shareholder of the Company which collectively
	holds 36.01% of the issued share capital of the Company at the
	date of this Report
Sinotrans & CSC Group	Sinotrans & CSC and its subsidiaries
Sinotrans Logistics	Sinotrans	Logistics Co., Ltd. (中 外 運 物 流 有 限 公 司),	formerly
	known as	China Merchants Logistics Holding Group	Co., Ltd.
	(招 商 局 物 流 集 團 有 限 公 司) ("China Merchants Logistics"), and
	changed its name in March 2019
SSE	Shanghai Stock Exchange
SSE Listing Rules	Listing Rules of Shanghai Stock Exchange
Subsidiary(ies)	has the meaning ascribed to it under the SEHK Listing Rules
Supervisory Committee	the Supervisory Committee of the Company

ANNUAL REPORT 2020

9

Chapter 2 General Company Information and Key Financial Indicators

1. COMPANY INFORMATION

Chinese name of the Company	中國外運股份有限公司
Chinese abbreviation of the Company	中國外運
Foreign name of the Company	SINOTRANS LIMITED
Foreign abbreviation of the Company	SINOTRANS
Legal representative of the Company	Li Guanpeng

II. CONTACT PERSONS AND CONTACT METHODS

	Secretary of the Board	Representative of Securities Affairs
Name	Li Shichu	Lu Ronglei
Address	Sinotrans Building Tower B, Building 10,	Sinotrans Building Tower B, Building 10,
	No. 5 Anding Road, Chaoyang District,	No. 5 Anding Road, Chaoyang District,
	Beijing, China	Beijing, China
Tel.	8610 52295721	8610 52295721
Fax	8610 52296519	8610 52296519
Email	[e-mail]	[e-mail]

III. BASIC INFORMATION

Initial date of registration of the Company	20 November 2002
Registered address of the Company	Building A, Sinotrans Plaza, A43 Xizhimen
	Beidajie, Haidian District, Beijing, China
Postcode of the registered address of the Company	100082
Office address of the Company	Sinotrans Building Tower B, Building 10, No. 5
	Anding Road, Chaoyang District, Beijing, China
Postcode of office address of the Company	100029
Company website	www.sinotrans.com
Email	[e-mail]

IV. INFORMATION DISCLOSURE AND PREPARATION LOCATIONS

Name of disclosure media selected	China Securities Journal, Securities Times
by the Company
Website for publishing the Annual Report	www.sse.com.cn
designated by CSRC
Website for publishing the Annual Report	www.hkex.com.hk
designated by SEHK
Location for Annual Report stock	10/F, Sinotrans Building Tower B, Building 10,
	No. 5 Anding Road, Chaoyang District, Beijing,
	China

10 SINOTRANS LIMITED

Chapter 2

General Company Information and Key Financial Indicators

V. OVERVIEW OF COMPANY STOCK

Class of share	Stock exchange	Stock abbreviation	Stock code
H-Share	SEHK	Sinotrans	0598
A-Share	SSE	Sinotrans	601598

VI. OTHER RELEVANT INFORMATION

Public certified accountants	Name	ShineWing Certified Public Accountants LLP
engaged by the Company		(a recognised public interest entity auditor under
(domestic)		the Financial Reporting Council Ordinance)
	Office address	9/F, Block A, Fuhua Mansion, No. 8 Chaoyangmen
		North Street, Dongcheng District, Beijing
	Name of signing	Dong Qinchuan, Yang Xingfang
	public certified
	accountant
Compliance legal counsel	Name	FenXun Partners
engaged by the Company	Office address	Suite 3501, China World Office 2, No. 1
(domestic)		Jianguomenwai Avenue, Chaoyang District,
		Beijing
Compliance legal counsel	Name	Baker & McKenzie
engaged by the Company	Office address	14/F One Taikoo Place, 979 King's Road, Quarry
(overseas)		Bay, Hong Kong
Sponsors to continuously	Name	CITIC Securities Company Limited
perform their supervisory	Office address	21st Floor, CITIC Securities Building, 48
function during the		Liangmaqiao Road, Chaoyang District, Beijing
Reporting Period	Name of signing	Deng Shufang, Zhang Yang
	Sponsor
	representatives
	Period of	From 18 January 2019 to 31 December 2021
	continuous
	supervisory
Sponsors to continuously	Name	China Merchants Securities Co., Ltd.
perform their supervisory	Office address	26th Floor, CMS China Securities Plaza, No. 111
function during the		FuHua Rd, Futian District, Shenzhen, Guangdong
Reporting Period		Province
	Name of signing	Zhang Huanhuan, Cai Xiaodan
	Sponsor
	representatives
	Period of	From 18 January 2019 to 31 December 2021
	continuous
	supervisory

ANNUAL REPORT 2020

11

Chapter 2

General Company Information and Key Financial Indicators

A-Share registrar and transfer	Name	China Securities Depository & Clearing Corp. Ltd.
office of the Company		Shanghai Branch
	Office address	No. 188 YangGao South Road, Pudong New Area,
		Shanghai
H-Share registrar and transfer	Name	Computershare Hong Kong Investor Services
office of the Company		Limited
	Office address	17M Floor, Hopewell Centre, 183 Queen's Road
		East, Wan Chai, Hong Kong
Business address in	Office address	Room F and G, 20/F, MG Tower, No.133 Hoi Bun
Hong Kong		Road, Kwun Tong, Kowloon, Hong Kong
Principal banker	Name	Bank of China
	Office address	No.1 Inner Street, Fuxingmen, Xicheng District,
		Beijing, China

VII. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS FOR THE PAST FIVE YEARS

(I)	Key Accounting Data
							Unit: ten thousand  Currency: RMB
						Change as
						compared to the
					2019	corresponding		2018
					Before	period of last		Before	2017	2016
	Key accounting data	2020		Restated	restatement	year (%)	Restated	restatement	(Restated)	(Restated)
	Operating income	8,453,684.14		7,765,510.50	7,765,009.13	8.86	7,731,834.51	7,731,183.65	7,316,328.99	6,025,658.19
	Net profits attributable to
	shareholders of the Company	275,442.28		280,414.22	280,349.51	-1.77	270,462.08	270,410.64	230,458.86	225,373.99
	Net profits net of non-recurring
	gains and losses attributable to
	shareholders of the Company	235,436.81		207,309.76	207,260.53	13.57	110,639.59	110,588.17	122,499.46	112,483.57
	Net cash flows from operating
	activities	395,638.50		332,216.92	331,998.45	19.09	201,473.85	201,339.33	300,798.81	237,473.60
						Change as
				As at the end of 2019	compared to	As at the end of 2018	As at the	As at the
		As at the			Before	the end of last		Before	end of 2017	end of 2016
		end of 2020		Restated	restatement	year (%)	Restated	restatement	(Restated)	(Restated)
	Net assets attributable to
	shareholders of the Company	3,044,800.47		2,844,817.58	2,843,861.64	7.03	2,324,532.38	2,323,640.24	2,143,836.62	1,954,306.73
	Total assets	6,581,869.87		6,190,528.70	6,188,640.79	6.32	6,151,363.21	6,149,422.16	6,234,616.43	5,785,673.66
	Total liabilities	3,356,792.02		3,164,057.21	3,163,492.87	6.09	3,558,824.34	3,558,125.39	3,649,935.73	3,436,292.99

12 SINOTRANS LIMITED

Chapter 2

General Company Information and Key Financial Indicators

(II) Key Financial Indicators

			2019	Change as compared		2018
			Before	to the corresponding		Before	2017	2016
Key financial indicators	2020	Restated	restatement	period of last year (%)	Restated	restatement	(Restated)	(Restated)
Basic earnings per share (RMB per share)	0.37	0.38	0.38	-3.27	0.45	0.45	0.38	0.37
Diluted earnings per share (RMB per share)	0.37	0.38	0.38	-3.27	0.45	0.45	0.38	0.37
Basic earnings per share, net of
non-recurring gains or losses
(RMB per share)	0.32	0.28	0.28	11.85	0.18	0.18	0.26	0.24
Weighted average return on equity (%)	9.35	10.29	10.29	Decrease by 0.94	11.97	11.97	11.22	12.10
				percentage point
Weighted average return on equity,	7.99	7.61	7.61	Increased by 0.38	4.90	4.90	6.11	7.08
net of non-recurring gains or losses (%)				percentage point

Explanations on the key accounting data and financial indicators of the Company for the last five years

• Applicable      □ Not applicable

1. In 2020, the Company completed the acquisition of 65% stake of Jiaxing Gangyun Logistics Co., Ltd. (嘉興市港運物流有限公司) and 100% stake of Hunan Sinotrans Customs Clearance Co., Ltd. (湖南外運報關有限公司). As the acquisitions are business combinations under common control, the Company restated the financial data of previous years. Details are set out in Note VIII. to the financial statements.

2. In 2020, the Company achieved operating revenue of RMB84.537 billion, representing

1. year-on-yeargrowth of 8.86%, and net profits net of non-recurring gains and losses attributable to shareholders of the Company of RMB2.354 billion, representing a year- on-year growth of 13.57%, mainly benefiting from the Company's efforts in improving the efficiency of whole network operation, making early deployment on air freight channels while the strong demands in the air freight market drove the air freight rate hiking to an extraordinary level; strengthening the concentrated procurement of transportation capacity and actively promoting the growth of cross-bordere-commerce logistics, air freight forwarding, railway express freight and other key businesses thus realizing the fast growth of profits. Besides the newly acquired KLG Group overcame the impact of the Pandemic and kept its profits from operation at the similar level with that in 2019. The net profits attributable to shareholders of the Company were RMB2.754 billion, representing a year- on-year decrease of 1.77%, mainly due to the large base of net profits attributable to the Company in 2019 resulting from the write-off of the previous year's large amount of income tax on stock disposal income in 2019 and there was no such matter in 2020.

ANNUAL REPORT 2020

13

Chapter 2

General Company Information and Key Financial Indicators

VIII. ACCOUNTING INFORMATION DIFFERENCES BETWEEN DOMESTIC AND OVERSEAS ACCOUNTING STANDARDS

1. Difference of net profits and net assets attributable to shareholders of the Company in the financial reports disclosed under IFRS and PRC GAAP Standards
   □ Applicable      3 Not applicable

1. Difference of net profits and net assets attributable to shareholders of the Company in the financial report disclosed under the overseas accounting standards and PRC GAAP standards
   □ Applicable      3 Not applicable

1. Explanation on the differences between domestic and overseas accounting standards
   □ Applicable      3 Not applicable

IX. KEY FINANCIAL INDICATORS OF 2020 BY QUARTER

			Unit: Yuan	Currency: RMB
	the First Quarter	the Second Quarter	the Third Quarter	the Fourth Quarter
	(January-March)	(April-June)	(July-September)	(October-December)
Operating income	16,382,711,535.10	23,310,964,590.98	22,600,792,843.11	22,242,372,409.93
Net profits attributable to
shareholders of the Company	242,231,989.51	973,118,172.36	866,452,480.01	672,620,168.96
Net profits net of non-recurring
gains and losses attributable to
shareholders of the Company	182,982,349.95	904,628,619.88	726,078,076.65	540,679,024.58
Net cash flows from operating
activities	-966,647,927.07	1,486,210,981.25	488,349,974.49	2,948,471,986.33

Explanation on the differences between the quarterly data and the disclosed in Periodic Reports

• Applicable      □ Not applicable

1. In 2020, the Company completed the acquisition of 65% stake of Jiaxing Gangyun Logistics Co., Ltd. (嘉興市港運物流有限公司) and 100% stake of Hunan Sinotrans Customs Clearance Co., Ltd. (湖南外運報關有限公司). As the acquisitions are business combinations under common control, the Company restated the financial data of previous years. Details are set out in Note VIII. to the financial statements.
2. The Company's net profit attributable to shareholders of the Company in the fourth quarter of 2020 decreased by RMB193 million compared with the third quarter, mainly because of the centralized accrual of bonuses in the fourth quarter resulting in an increase of RMB166 million of staff compensation and the provision of RMB54 million of impairment of goodwill.

14 SINOTRANS LIMITED

Chapter 2

General Company Information and Key Financial Indicators

X. NON-RECURRING GAINS AND LOSSES ITEMS AND AMOUNTS

3 Applicable      □ Not applicable

			Unit: Yuan  Currency: RMB
		Note
Non-recurring gains and losses items	2020	(if applicable)	2019	2018
Gains and losses from disposal of non-current assets	36,872,665.25		203,048,696.02	693,786,460.93
Tax returns and abatement that are examined and approved beyond
authority, or without official approval documents or occasional
Government subsidies recognized in current profit or loss, except
government subsidies which are closely related to the Company's
normal business operations, which comply with national policies
and can be obtained continuously based on a set of standards by
fixed amount or fixed quantity	317,362,769.02		269,249,478.94	152,105,123.07
Capital occupation fees charged from the non-financial enterprises
and counted into the current profits or losses of the Company	4,696,765.71		11,513,523.89	8,978,297.29
Gains when the investment cost of acquiring a subsidiary, an
associate and a joint venture is less than the fair value of the
identifiable net assets of the invested entity			43,242,304.47
Gains and losses from exchange of non-monetary assets
Gains and losses from entrusting others to invest or manage assets
Asset impairment provisions due to force majeure factors such as
natural disasters
Gains and losses from debt restructuring	-912,478.58		15,487,084.02
Enterprise restructuring costs such as staff settlement expenses and
integration costs
Gains and losses that exceeds the fair value in transactions with unfair
price
Current net profit or loss of subsidiaries from the merger of enterprise
under common control from the beginning of the period to the date
of the merger	767,861.96
Gains and losses arising from contingencies irrelevant to the
Company's normal business operations
Gains and losses from changes in fair value arising from held-for-
trading financial assets, derivative financial assets, held-for-trading
financial liabilities, derivative financial liabilities, and investment
income arising from disposal of held-for-trading financial assets,
derivative financial assets, held-for-trading financial liabilities,
derivative financial liabilities and other debt investment other
than effective hedging business related to the Company's normal
business operations	-20,301,938.07		20,186,939.33	442,838,077.81
Reversal of impairment of accounts receivables and contract assets
that had impairment test separately	4,151,524.79		20,095,517.46	11,371,444.80
Gains and losses from external entrusted loans
Gains and losses from changes in fair value of investment properties
subsequently measured in the fair value model

ANNUAL REPORT 2020

15

Chapter 2

General Company Information and Key Financial Indicators

		Note
Non-recurring gains and losses items	2020	(if applicable)	2019	2018
Impact on the current profits and losses by one-off adjustment
according to laws and regulations related to tax and accounting
Trusteeship fee income from entrusted operations	39,150,943.40		25,471,698.11	10,377,358.50
Other non-operating income and expenses other than the above items	96,064,534.33		-122,254,654.08	-249,262,816.86
Other gains and losses classified to non-recurring profits or losses	60,020,588.34	Additional VAT	318,572,149.70	660,598,884.90
		deduction
Impact on non-controlling interests	-12,528,926.86		-6,052,715.61	-15,792,966.65
Impact on income tax	-125,289,569.51		-67,515,400.08	-116,774,977.15
Total	400,054,739.78		731,044,622.17	1,598,224,886.64

XI. ITEMS MEASURED BY FAIR VALUE

3 Applicable      □ Not applicable

			Unit: Yuan	Currency: RMB
	Balances at	Balances at
	the beginning	the end of	Current	Effect on
Items	of the period	the period	changes	current profit
Trading debt investment (note 1)	5,500,000.00	302,500,000.00	297,000,000.00	338,607.47
Investment in trading equity instruments
(note 2)	141,228.80	792,565.44	651,336.64	-13,454.09
Other non-current financial assets (note 3)	692,424,249.35	871,156,840.33	178,732,590.98	-21,140,225.25
Investment in other equity instruments
(note 4)	256,540,744.93	21,605,631.53	-234,935,113.40	768,133.80
Total	954,606,223.08	1,196,055,037.30	241,448,814.22	-20,046,938.07

Note 1: As at 31 December 2020, the Group held structural deposits of RMB300 million and ABN assets of RMB2.50 million.

Note 2: Investment in trading equity instruments mainly refers to the equity interest in the preference shares of China Merchants Port Holdings Company Limited and shares of ST Antong newly possessed held by the Group due to debt restriction.

Note 3: The Group increased investment in Southern Airlines Freight and Logistic (Guangzhou) Co., Ltd. (南方航空貨運物流 (廣州)有限公司) at an amount of RMB223,636,365.50.

Note 4: As at 31 December 2020, investment in other equity instruments refers to the 2,884,597 shares of Air China Limited held by the Group, the fair value of which was RMB21,605,631.53 as at the end of the period; the 50,350,000 shares of BOE Technology Group Co., Ltd. held by the Group have been disposed of during the year.

XII. OTHERS

□ Applicable      3 Not applicable

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Chapter 3

Chairman's Statement

Li Guanpeng

Chairman

2020 was an extraordinary year. Facing the severe impact of the outbreak of the COVID-19 pandemic (the "Pandemic"), the Company overcame difficulties together with customers, made concerted efforts with employees, and thoroughly implemented the work policy of "leading the overall situation with strategy and ensuring quality and efficiency throughout". The Company prevented and controlled the Pandemic, resumed work and production effectively and orderly, steadily increased income, continuously deepened the reform and development, and well fulfilled the task of the whole year.

In 2020, we went retrograde to fight the Pandemic. With priority given to people's life safety and health, we resumed work and production and extended support to the Pandemic area as soon as possible. Under the severe situation where international and domestic transportation was suspended to some extent, we worked hard in "connections", and lost no time in building the anti-Pandemic lifeline and the transportation line for resumption of work and production. 20,600 tons of emergency anti-Pandemic materials have been transported to the anti-Pandemic front lines at home and abroad, demonstrating Sinotrans' fulfillment of

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Chairman's Statement

its corporate social responsibility "Emergency Delivery Volunteer Service Team" was honored as "National Advanced Group in Fighting the Pandemic".

In 2020, we created value for our customers. At the time of the Pandemic crisis, we worked hard on "transportation" to actively resolve the pain points and difficulties of customers not being able to ship raw materials and products. By implementing innovative measures such as chartered cargo planes converted from passenger planes, additional trains, and special lines, we maintained the stability of customers' production chains and the continuity of supply chains, effectively promoting the normal operation of social production, circulation and trade.

In 2020, we proactively integrated into the new development pattern. We launched 1,580 trains during the year with a new European train named the "Bay Area Express". The volume reached 157.5 thousand TEUs, representing an increase of 21.7% year-on-year.We grasped regional development opportunities, and Shanghai Lingang Project, Beijing Logistics Park Project and Shenyang Railway Express platform have made positive progresses.

In 2020, we continued to make innovation of digital drives. With intelligent logistics as the direction and digital transformation as the main line, we strove to enhance our independent innovation capabilities. Our intelligent logistics project was selected into the "Pilot Project for Building Strong Transportation Network of China". Our digital platform "Y2T.COM" was included in the list of "Science Reform Demonstration Action Enterprises". And our "Human-MachineCoordinated Digitalized Warehouse Solution" won the first prize of the first China Digitalized Warehouse Solution Competition.

In 2020, we continued to reform and achieved success. Centering on the vision of "building a world- class intelligent logistics platform enterprise", we maintained strategic determination and carried out continuous reforms. During the "13th Five Year" Plan period, we formed a development pattern of three major sectors including logistics, forwarding and related business, and e-commerce business. We have completed the operating layout of five major regions and five professional subsidiaries, completed the acquisition of KLG Group - the largest overseas acquisition in the Company's history, and launched a human resources system and a culture of innovation, further condensing the endogenous driving force for development.

In 2020, we realized the growth of revenue scale and improvement of operation quality. We recognized operating income of RMB84.537 billion, representing a year-on-yearincrease of 8.86%. Net profits net of non-recurringgains or losses attributable to shareholders of the Company recorded RMB2.354 billion, representing a year-on-yearincrease of 13.57%. All the three major businesses developed continuously and recorded year-on-yearincreases in both segment profit and profit margin, among which, the segment profit of the logistics business, the forwarding and related business and the e-commercebusiness recorded a year-on-yearincrease of 5.35%, 19.42% and 173.94% respectively.

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Chairman's Statement

Struggle to create history, work hard to better the future. Currently the Pandemic is not over yet, and the changes are still evolving. We will continue to seek opportunities amidst crisis and open new paths amidst the changes. Embarking on the new journey of the "14th Five Year" Plan, Sinotrans will firmly promote the realization of being world-class, and strive to form a digital, networked and intelligent development model with data-driven as the core, platform-based ecology as the support, and entire network operation as the main line by 2025. It will initially develop into a world-class intelligent logistics platform enterprise.

We must work harder, as there is a long way to go and there will be many difficulties. 2021 is the first year of the "14th Five Year" Plan. Sinotrans will continue to maintain the spirit of "breakthrough", the zeal of "innovation", and the style of "struggling", and will draw the blueprint of "building a world-class intelligent logistics platform enterprise", to successfully promote industrial progress with logistics!

Li Guanpeng

Chairman

Beijing, China

30 March 2021

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Chapter 4

Business Overview

1. DESCRIPTION OF THE PRINCIPAL BUSINESS, OPERATING MODEL AND INDUSTRY OF THE COMPANY DURING THE REPORTING PERIOD

(I) Principal Business of the Company and Its Business Model

The Group is a leading integrated logistics service provider and integrator in the PRC. Adhering to the mission of the enterprise of "creating a logistics ecology system connecting the world to successfully promote industrial progress", leveraging on its comprehensive service network, abundant logistics resources, strong professional capabilities of logistics solutions, and leading supply chain logistics model, the Group provides customers with customized logistics solutions and integrated whole supply chain logistics services.

The Group's principal businesses include logistics, forwarding and related business and e-commerce business. As the core business, logistics business focus on high-growth, high- value-addedsub-industries and their upstream and downstream industries, so as to promote high-quality industrial development. As the cornerstone business, forwarding and related business provides support for the development of logistics business. As the innovative business, e-commerce business combine internet and logistics technology to promote the Company's transformation and upgrading to a digital and intelligent logistics enterprise.

1. Logistics

Based on the different demands of customers, Sinotrans provides tailor-made integrated logistics solutions covering the entire value chain and ensures the smooth implementation of such solutions, including contract logistics, project logistics, chemical logistics, cold chain logistics and other logistics services.

Contract logistics is based on long-term cooperation relationship to provide customers with supply chain logistics management services, including procurement logistics, production logistics, sales logistics and reverse logistics, and also provide value-added services such as logistics solution design and consultation, supply chain optimization, and supply chain finance. The contract logistics service of the Company has been carried out cluster management according to the target industries and possess leading solution capabilities in multiple industries and fields, such as consumer products and retail, automobile and industrial manufacturing, electronics and high-tech products, medical and health, and buyer consolidation. The Company has established long-term cooperative relationship with many well-known enterprises at home and abroad. Contract logistics is affected by changes in macro-economy, domestic manufacturing industry, consumer market and other factors.

Project logistics mainly serves export projects and provides design and implementation of end-to-end one stop logistics solutions to export engineering equipments and materials from the PRC for Chinese international EPC enterprises in industries such as electric power, petrochemical, metallurgical mining, infrastructure and rail vehicles. The services include but are not limited to the provision of logistics solution design, arranging sea, air, and land transportation, warehousing, packaging, customs declaration and inspection, port transit, transportation of large items, import and export policy consultation, etc. The Company has operated many logistics projects in approximately 100 countries and regions around the world and has extensive project experience. Project logistics is mainly affected by factors such as China's overseas contracting projects and the economic, political and security situation of various countries and regions in the world.

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Chemical logistics mainly serves refined chemical industry customers, and provides supply chain solutions and logistics services to customers, which mainly include warehousing, transportation and distribution, international freight forwarding and multimodal transportation of hazardous chemicals and ordinary packaged chemicals. The Company has a set of integrated service system for warehousing, transportation (including liquid tank container), freight forwarding, multimodal transport and tax declaration, coordinates in different regional subsidiaries in China, and forms resource network layout of five regions, namely Northeast China, North China, Central China, East China and South China. In addition to being affected by the prosperity of the chemical industry, chemical logistics is also closely related to industry policies and safety supervision measures.

Cold chain logistics mainly provides service to customers in brand catering, retailing and supermarkets, fool processing and circulation industry, and import and export trade customers. We can provide one-stopend-to-end service including integrated storage, trunk-line transportation and distribution cold chain service, international cold-chain supply chain and exporting cold-chain management operation services. The Company has established national cold chain logistics network layout, and has strong overall solution service ability of warehousing, line-haul transportation and distribution, whole process cold chain temperature control, tracking, and the ability of design, investment construction and operation management of high standard cold storage. The cold chain industry is driven by consumption upgrade and technological improvement, and was supported by policies, which was generally positive.

The vision of the Company's logistics business is to extend the business to value chain consolidation. As the core business of the Company, logistics business will stick to the target of "customized solution, industrialized sale, consolidated service, and unified operation", let the solution lead the whole process, focus on selected target industries, deepen and refine industrial chain, vertically extend the business, and horizontally replicate experience, to forge expertise and advantage of scale in target industries.

2. Forwarding and related business

The forwarding and related business of Sinotrans mainly includes sea freight forwarding, air freight forwarding, railway freight forwarding, shipping agency, storage and terminal services and etc. Sinotrans is the largest freight forwarding company in China and has an extensive service system covering China and radiating the world.

In respect of sea freight forwarding, Sinotrans mainly provides customers with multi- link logistics services related to shipping such as booking space from shipping companies, arranging transportation, container delivery, container loading, storage, port collection and distribution, customs declaration and inspection, distribution and delivery. Sinotrans is one of the world's leading sea freight forwarding service providers, handling more than 10 million TEUs of containers each year, and is capable of providing whole supply chain logistics services from major ports in China to more than 70 major trading countries and regions.

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In respect of air freight forwarding, Sinotrans mainly provides professional air freight forwarding services such as pick-up and dispatch, customs declaration and inspection, warehousing, packaging, booking and handling, trunk air line freight forwarding and trucking transit services. As a leading air freight forwarding company in China, Sinotrans has accumulated extensive industrial experience and established stable strategic cooperative relationship with major domestic and international airlines (eg. China Southern Airlines, Deutsche Lufthansa AG, Emirates Airline, Air China, Korean Air Lines), core overseas agents and domestic logistics service providers. Through the layout of air transportation channels, Sinotrans has centrally controlled 38 routes including Asian routes, American routes, and European routes, and overseas channels, and is able to provide customers with full-process, visualized and standardized whole supply chain air related logistics services.

In terms of railway freight forwarding, Sinotrans is a leading railway freight forwarding service provider in China. It is able to provide customers with railway freight forwarding and information services in bulk cargo, containers and in a variety of ways, including integrated whole supply chain service like domestic railway freight forwarding, international railway freight forwarding (including transit railway freight forwarding) and sea-railmulti-modal transportation. So far, cross-border railway express self-operated platform of the Company has launched over 40 routes from Changsha, Dongguan, Shenzhen, Shenyang, Xinxiang, Weihai, Xi'an and other places (including 11 routes operating weekly), dispatched over 4,400 trips in total. At the same time, the Company also cooperates with other domestic train platforms to participate in the cross-border railway express business in the form of chartered cabins and chartered express.

In terms of shipping agency, Sinotrans is a leading shipping agency service company in China, with branches in more than 70 ports along the coast of China and the Yangtze River, and representative offices in Hong Kong SAR, Japan, Korea, Singapore, the United Kingdom, Germany and Thailand, providing shipping companies with services such as port arrival and departure, documentation, ship supplies and other ship related services at ports.

In terms of storage and terminal services, Sinotrans provides customers with services such as storage, container consolidating and devanning, cargo loading and unloading, dispatching and distribution, etc. Sinotrans has rich resources of warehouses and container yards, and 10 self-operated river terminals in Guangdong province and Guangxi province, which are important base for the Company to provide high-quality and efficient freight forwarding and integrated logistics services.

The Company's forwarding and related business is mainly affected by factors such as global trade situation, China's export container freight price, China's port container throughput capacity, air cargo and mail volume and market supply and demand.

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Forwarding and related business is the cornerstone of development of logistics segment, it will closely stick to the customers' requirement, emphasize on customer-driven, the valuation creation and model innovation, extend the service chain, mine the value of customers and suppliers, push forward the construction of platform and products, so that to gradually turn the service to whole supply chain logistics.

3. E-commerce business

Sinotrans' e-commerce business includes cross-bordere-commerce logistics, logistics e-commerce platform and logistics equipment sharing platform. The cross-border e-commercelogistics business mainly refers to the whole-chain and partial chain professional logistics service provided to e-commerce customers. The products and services cover Europe, America, the Middle East, Japan, Korea, Southeast Asia and other regions. The scope of services includes door-to-door collection, domestic (bonded) warehouse management, import and export customs clearance, international transportation, overseas warehouse management, last mile distribution, etc. The cross-bordere-commerce logistics business is mainly affected by factors such as the trading scale of cross-bordere-commerce import and export, and customs policy. Logistics e-commerceplatform refers to the provision of various public services by the Company to the platform customers through the unified online logistics e-commerce platform, namely Y2T, such as information services such as visualization and tracking, handling services, settlement agency services, freight factoring and technical services. Its products cover logistics services such as Sinotrans E-LCL, online freight (trucking transportation), customs service, air freight forwarding, railway and multimodal transport, and has launched a number of whole-chain products. Logistics equipment sharing platform refers to the Company providing logistics equipment leasing service, including containers and mobile fridge containers, tracking and monitoring services.

The e-commerce business of the Company aims at turning into platform and building ecology system. We will grasp the two main streams of logistics e-commerce and e-commerce logistics, consolidate internal and external resources by innovation of technologies and business model. Based on fully promoting the digital operation of major business, we will intensify our efforts to develop the cross-bordere-commerce logistics, actively explore logistics e-commerce platform model, strengthen scientific and technological innovation, promote the link with the industry, and form a "four streams into one" platform ecosystem.

(II) Industry Development

The logistics industry in China started relatively late. However, with the rapid development of the national economy, the logistics industry maintains a rapid growth, the logistics system is increasingly improved, and the logistics industry gradually tends to enter a relatively mature stage. Furthermore, the logistics industry is closely related to macroeconomic operation and thus will change with macro economic cycle. Impacted by COVID-19, 2020 saw the shrinking global economy and shrinking of trade. China took the lead in controlling the Pandemic, realized the positive growth of GDP and total foreign trade volume and kept the general stable logistics operation.

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1. Stable domestic economy with improvement amidst shrinking global economy

Clouded by Pandemic outbreak in early 2020, China's GDP reduced by 6.8% year-on-year in the first quarter; with the powerful and effective promotion of work resumption, from the second quarter to the fourth quarter, China's GDP recovered the year-on-year growth, and economic operation gradually returned to normal; the annual domestic GDP was RMB101.60 trillion, representing a year-on-year growth of 2.3% based on comparable price calculation and a decrease of 3.7 percentage points in growth rate as compared to the corresponding period of last year. In 2020, total import and export volume of goods trade of China was RMB32.16 trillion, representing a year-on-year growth of 1.9% and a decrease of 1.5 percentage points in growth rate as compared to the corresponding period of last year; among which, export volume was RMB17.93 trillion, representing a year-on-year growth of 4%; import volume was RMB14.23 trillion, representing a year-on-year decrease of 0.7%; the trade surplus was RMB3.7 trillion, representing a year-on-year growth of 27.4%.

As Pandemic broke out in the world, many countries took blockade, isolation and shutdown measures. After the decline in the first quarter, the world's major economies declined at a larger extent in the second quarter, reduced by nearly 10% and the downward trend continued to the fourth quarter. In the whole year, both the global economy and the trade declined year-on-year. Furthermore, due to the blockade of borders, restrictions on people's entry and exit, and stoppage of project sites, the progress of engineering projects was generally hindered.

Changes in China's total foreign trade from 2016 to 2020

35			14.3%	30.5	31.6	32.2	16%
					14%
30		27.8
25	24.3						12%
			9.7%			10%
20							8%
15					3.4%		6%
						4%
10
						2%
5						1.9%
						0%
0	-0.9%						-2%
	2016	2017	2018	2019	2020

China's total foreign trade (RMB trillion)		Year-on-year growth

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Business Overview

1. Continuous improvement of policy environment of logistics industry to promote the development of logistics industry
   In 2020, Pandemic exacerbated the risk of global economy decoupling and chain breaking. The global industrial chain and supply chain were facing the impact of non-economic factor. In China, logistics hub and emergency response system, international air cargo and other fields were facing challenges in operation and supply. Logistics is the key force to resume work and production and ensure national industrial security. The government successively issued many documents, such as Implementation Opinions on Further Reducing Logistics Costs, Opinions on Promoting Hub Airport to Connect With Rail Transit, Notice on Further Innovation and Application Pilot of Supply Chain, and Implementation Opinions of the Ministry of Transport concerning Overall Promoting Pandemic Prevention and Control and Economic and Social Development of Transportation, proposed to cultivate backbone logistics enterprises, encouraged large logistics enterprises to merge and reorganize in the market, and improved the development level of modern supply chain.
2. Stable operation of logistics market and facilitation of logistics market to speed up transformation by Pandemic
   In 2020, after the decline at the beginning of the year, the total social logistics volume in China increased steadily; the annual total social logistics volume in China was RMB300.1 trillion, representing a year-on-year growth of 3.5% based on comparable price calculation and a decrease of 2.4 percentage points in growth rate as compared to the corresponding period of last year. In 2020, total social logistics costs were RMB14.9 trillion, representing a year-on-year growth of 2.0%; the proportion of total social logistics costs to GDP was 14.7%, reduced by 1.3 percentage points compared with that in the "13th Five Year" Plan period, showing the obvious effect of logistics to reduce costs while increasing efficiency. From the perspective of structure, the logistics demand of agricultural products grew steadily, the industrial logistics demand stabilized and rebounded, and the logistics demand related to consumption, people's livelihood and renewable resources recovered rapidly. From the perspective of international logistics, the import logistics volume increased by 8.9% year-on-year with an increase of 4.7 percentage points in growth rate as compared to the corresponding period of last year, and the growth rate of export logistics volume amounted to nearly 5%.

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Changes in total social logistics volume from 2016 to 2020

350						8%
300		6.7%	283.1	298.0	300.1	7%
6.1%
	252.8	6.4%	5.9%		6%
250	229.7
200						5%
						4%
150					3.5%	3%
100						2%
50						1%
0						0%
	2016	2017	2018	2019	2020

Total social logistics volume (RMB trillion)		Growth based on comparable price

4. Shortage of sea transportation capacity and sustainable recovery of CCFI

In the first half of 2020, affected by traditional shipping off season and COVID-19, the trade activities were depressed and the cargo volume reduced. China Export Container Freight Index (CCFI) dropped to 836 in May from 939 in January, and shipping companies greatly reduced the transportation capacities and the container shipping market was in a downturn. Since June, with the gradual recovery of foreign trade, the transportation demand of China export container increased, the shortage of shipping space and the insufficient empty containers caused the shortage of shipping capacity and most shipping booking rates continued to rise. CCFI showed a rapid rise, up to 1446.08 in December. The annual CCFI was 984.42, representing a year-on-year growth of 19.54%. In 2020, China's port container throughput was 264 million TEUs, representing a year-on-year growth of 1.2%; China's port cargo throughput was 14.55 billion tons, representing a year-on-year growth of 4.3%.

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Changes in CCFI from 2016 to 2020

1200					40%
				984.4
900	820.5	817.8	823.5	19.5%	20%
	709.8
600	15.6%	-0.3%			0%
		0.7%
300	-19.0%				-20%
0					-40%

2016	2017	2018	2019	2020
		CCFI		Year-on-year growth and decrease

5. Reduction of global air freight capacity, leading to continuous high price

In 2020, Pandemic brought challenges to air freight industry globally. The International Air Transport Association (IATA) predicted that in 2020, global air freight volume would be 54.20 million tons, representing a year-on-year decrease of 11.58%. In respect of air freight income, the cargo transportation capacity of bellyhold reduced due to grounding of passenger plane; however, cargo plane and "passenger to cargo flight" made up for part of the capacity shortage. Besides, in whole 2020, freight prices were basically at a high level. IATA predicted that in 2020, the global freight income would increase to USD117.7 billion in 2020 from USD102.4 billion in 2019.

Changes in global air freight volume from 2016 to 2020

64		7.9%	63.3	10.0%
		61.5		61.3
	4.0%	2.9%
60		5.0%
	57.0			-3.2%
56
			0.0%
				54.2
52				-10.0%
				-11.6%
48				-15.0%

2016	2017	2018	2019	2020
	Global air freight volume (million tons)		Year-on-year growth and decrease

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Business Overview

1. Rapid growth of cross-bordere-commerce increasing logistics demand
   In 2020, affected by the Pandemic, online consumption increased, e-commerce penetration increased, and cross-bordere-commerce import and export volume increased significantly. According to the preliminary statistics of the customs, in 2020, China's cross-bordere-commerce import and export volume was RMB1.69 trillion, representing a year-on-year growth of 31.1%, among which the export volume was 1.12 trillion, representing a year- on-year growth of 40.1%, and the import volume was 0.57 trillion, representing a year- on-year growth of 16.5%. From the perspective of policy, cross-bordere-commerce regulatory innovation was expanded from B2C to B2B field. In 2020, General Administration of Customs issued the matching customs clearance measures, added cross-bordere-commerce B2B export regulatory code (9710 and 9810), and carried out the pilots in 22 customs checkpoints to further promote the facilitation of customs clearance in the cross- border e-commerce field and to improve the regulatory system; besides 59 comprehensive cross-bordere-commerce pilot zones, the State Council has also set up 46 new comprehensive pilot zones. After expansion, there are 105 comprehensive pilot zones in 30 provinces and cities in China which will speed up the growth of cross-bordere-commerce business and provide opportunities for cross-bordere-commerce logistics.
2. Growth of China Europe Railway Express to stabilize the international supply chain and industry chain
   In 2020, affected by COVID-19, in the case that international sea and air freight were blocked at different extents, China Europe Railway Express was developed against the trend and made contributions to jointly build the "Belt and Road" with high quality, stabilize the international supply chain and industry chain and help the world fight the Pandemic together through giving play to its unique advantages of international railway transport. In 2020, China Europe Railway Express operated 12,406 trains, representing a year-on-year growth of 50%; it broke through 10,000 trains for the first time, which was 7.3 times of that in 2016; China Europe Railway Express totally transported cargos of 1.135 million TEUs, accumulatively transported 9.31 million pieces and 76,000 tons of international cooperation Pandemic prevention materials. From the perspective of operation quality, China Europe Railway Express made great improvement in heavy load transportation, especially return heavy load transportation, with comprehensive heavy container rate up to 98.4%, representing a year- on-year growth of 4.6 percentage points, among which comprehensive heavy container rate of return increased by 9.3 percentage points year-on-year.

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China Europe Railway Express operation from 2016 to 2020

16,000			160%
	116%		12,406
12,000		120%
109%
	6,300	8,225
8,000	72%		80%
			50%
4,000	3,673	29%	40%
	1,702
0			0%

2016	2017	2018	2019	2020
		Operation volume (train)			Year-on-year growth

1. EXPLANATION ON MATERIAL CHANGES IN MAJOR ASSETS OF THE COMPANY DURING THE REPORTING PERIOD

3Applicable      □Not applicable

Significant changes in major assets of the Company during the Reporting Period are detailed in "II. MAJOR BUSINESS CONDITIONS DURING THE REPORTING PERIOD (III) Analysis of Assets and Liabilities" under "Chapter 5 Management Discussion and Analysis of Business Performance (Report of the Board)" in this report.

Including: overseas assets RMB19,047,065,981.52, accounting for 28.94% of the total assets (2019: RMB17,935,457,444.17, accounting for 28.98%).

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1. ANALYSIS OF CORE COMPETITIVENESS DURING THE REPORTING PERIOD

3Applicable      □Not applicable

1. Well-established Service Network and Abundant Logistics Resources

The Group has an extensive and comprehensive domestic and overseas service network. The domestic service network covers 32 provinces, autonomous regions, municipalities and Hong Kong SAR in China. The Group has more than 10 million sq.m. of land in China, more than 4 million sq.m. of warehouses and 10 river terminals with more than 4,000 meters of coastal line, while leasing approximately 3 million sq.m. of warehouses for operation. The self-owned overseas network covers 34 countries and regions with 65 business outlets worldwide. The Group has abundant logistics resources such as logistics centers, container freight stations and terminals in coastal ports, key domestic cities and overseas regions. Meanwhile, the Group also implements industry-finance integration and enjoy the cross-industry synergies with China Merchants Group's financial, trading, industrial park development, shipping and port business segments around the world to provide customers with access to global logistics services.

2. Strong Logistics Solution Capabilities

Inheriting 70 years of deep cultivation and accumulation in the field of international freight forwarding and integrated logistics, the Company forms strong logistics resource integration, coordination and operation capabilities, as well as extensive operating experience in improving the deployment of cargo and equipment of all aspects of production, manufacturing and engineering projects of customers, the Company is able to deliver production resources scattered around the world to the designated locations as scheduled. For operations, the Company has experienced industry teams, and overseas teams familiar with the import and export policies of various countries. They can integrate and coordinate the logistics resources in various areas, and formulate customized and whole supply chain solutions which include all complicated logistics segments. The Company focuses on key industries, including consumer products and retail, automobile and industrial manufacturing, electronics and high-tech products, medical and health, buyer consolidation, engineering energy, chemical, and cold chain, and provides tailor- made integrated logistics solutions covering the entire value chain to such industry leaders and their upstream and downstream customers, and ensure the smooth implementation of such solutions. The Company has accumulated extensive industry-oriented service experience and has established industry-leading advantages in full-value chain logistics services.

3. Leading Supply Chain Logistics Service Model

Following the development trend of the industry and in response to the changes in customer demand, Sinotrans keeps innovating its logistics service model by the reorganisation of forwarding and related business products to improve product research, development and design capability. It focuses on six product systems, namely full container load, less than container load, railway express, air freight, bulk cargo logistics and carrier integrated logistics services, increases the construction channels of water, land and air freight channels, trucking and multimodal transport and is capable of providing end-to-endone-stop whole supply chain logistics service to domestic and international enterprises and satisfying comprehensive logistics demands of customers in a fast and high-efficient manner. Especially for air transportation channels, Sinotrans adapts various

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measures including charter planes and BSA (Block Space Agreement), and makes full use of the synergistic advantages of heavy cargo of air transportation and bulk cargo of e-commerce logistics to achieve the optimization of operational efficiency and profitability.

4. Leading Industry Position, Good Brand Image and Strong Supplier Resources

With 70 years of history and experience, the Group has established good brand awareness in the logistics industry at home and abroad and has been granted many important awards in the industry. As an AAAAA logistics enterprise rated by the China Federation of Logistics & Purchasing, Sinotrans has consecutively won the first prize of the Top 100 Logistics Enterprises in China and the first prize of the Top 100 International Freight Forwarding Logistics in China, and has been awarded as the "Most Competitive (Influential) Logistics Enterprises in China" for many times. As the largest third-party logistics service provider in China, the Company has good reputation and image in terms of both customers and suppliers. On the one hand, Sinotrans has established long-term and stable cooperative relationship with many well-known domestic enterprises and multinational corporations, and has been well recognized by customers. On the other hand, based on its own stable customer resources and strong logistics service capabilities, Sinotrans maintains good and stable partnership with many suppliers, such as internationally renowned shipping companies and airlines.

5. The All-scenario Application of Innovative Technology Takes the Lead in Intelligent Logistics

Relying on its extensive advantages of all scenarios and big data of comprehensive logistics, the Company actively implemented technology innovation activities based on scenario + technology, and customer + technology. The Company developed a digitalization plan, established an innovative technology subsidiary and an intelligent logistics technology center, and applied ABCDT (artificial intelligent, blockchain, cloud computing, big data and internet of things) and other intelligent technologies to all logistics scenarios, making notable breakthrough in the application of the above five key intelligent technologies. As of the end of the Reporting Period, the members of employees of the research and development team of the Company increased to 603. The Company declared 75 new invention patents and 185 software copyrights and received 16 awards for innovation granted by the government at all levels (above the provincial and ministerial level) and organizations in the industry.

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Chapter 4

Business Overview

1. In the field of artificial intelligent, the intelligent document processing platform is capable of processing 2,700 document types under 5 categories, with a document processing capacity of over 5 million, of which, the RPA (Robotic process automation) technology has been applied to 119 business operation automatic processes; the intelligent loading algorithm has been promoted to the central warehouses of "Sinotrans E-LCL" in Shenzhen Pinghu and Qingdao, which resulted in a year-on-year increase of 10% approximately in container utilization and improved loading efficiency significantly; and the intelligent goods receipt and delivery system has been tentatively applied to the electronic communications industry, the chemical industry, the fast moving consumer products industry and automobile and industrial manufacturing industry, pursuant to which, the goods scanning and sorting efficiency may be improved by at least 2 times during the process of goods receipt and delivery of the warehouse and the overall identification accuracy may reach approximately 100%.
2. In the field of blockchain, the development of a blockchain-based supply chain financial service platform has been completed, which provided services to more than 100 enterprises and issued the first blockchain technology electronic NVOCC bill-of-lading) in China.
3. In the field of cloud computing, the basic structure of Iaas (Infrastructure as a Service) for Hybrid Cloud has been established. The implementation of the Hybrid Cloud strategy has

reduced 40% cost of IT infrastructure construction, with service efficiency improved by 3 times, for the recent four years; the independently developed FROS (frontal routing of signals) framework fully supports the micro service structure and has been used in more than

1. 50 applications.

2. In the field of big data & algorithm, it connects 115 internal and external data resources, covering more than 60 shipping companies, 120 airlines and 8 major ports in China; and the logistics control tower helped certain core customer to reduce nearly 70% old and obsolete stocks, almost 10% inactive stocks and approximately 30% redundant stocks.
3. In the field of Internet of Things, the hardware equipment of Internet of Things has been developed and upgraded and the solution to the integration of software and hardware of Internet of Things has been applied in more than 60 business projects of the Company.

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Management Discussion and Analysis of Business Performance

(Report of the Board)

Song Rong

Executive Director and President

1. DISCUSSION AND ANALYSIS OF BUSINESS PERFORMANCE

(I) Overall Operations during the Reporting Period

Impacted by the Pandemic, 2020 saw the recession of global economy and shrinking of global trade. China took the lead in controlling the Pandemic and restoring the economic growth. The year-on-year GDP growth was 2.3%, and total foreign trade (denominated in RMB) increased by 1.9% year-on-year. After the outbreak of the Pandemic, Sinotrans actively fulfilled its social responsibilities, built a global anti-Pandemic life line and work-resumption transportation line, completed the task of ensuring the transportation of anti-Pandemic materials at home and abroad, completed the whole process logistics transportation services for the COVID-19 vaccine to Djibouti and Macao SAR. Confronted with the severe impact of the Pandemic, the Company thoroughly implemented its working policy of "strategy-driven, quality and efficiency-based approach", and comprehensively promoted the Pandemic prevention and control as well as the operational development, realizing the continuous improvement of operation quality and the stable growth of revenue scale.

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1. Continuous quality and efficiency enhancement to realize stable growth of revenue scale

In 2020, although the external situation was becoming more and more complex, and the impact of the Pandemic made the situation even harder, the Company still continuously improved its operating quality, enhanced the integration of quality and efficiency enhancement. During the Reporting Period, the Company continuously enhanced the credit risk management, reduced the turnover days of accounts receivable by 2.6 days year-on- year, and practically prevented the liquidity risk. The net cash flow from operating activities increased by RMB634 million year-on-year.

In 2020, the Company achieved operating revenue of RMB84.537 billion, representing

a year-on-year growth of 8.86%, and net profits net of non-recurring gains and losses attributable to shareholders of the Company of RMB2.354 billion, representing a year- on-year growth of 13.57%, mainly benefiting from the Company's efforts in improving the efficiency of whole network operation, making early deployment on air freight channels while the strong demands in the air freight market drove the air freight rate hiking to an extraordinary level; strengthening the concentrated procurement of transportation capacity and actively promoting the growth of cross-bordere-commerce logistics, air freight forwarding, railway express and other key businesses thus realizing the fast growth of profits. Besides the newly acquired KLG Group overcame the impact of the Pandemic and kept its profits from operation at the similar level with that in 2019. The net profits attributable to shareholders of the Company were RMB2.754 billion, representing a year-on-year decrease of 1.77%, mainly due to the large base of net profits attributable to the Company in 2019 resulting from the write-off of the previous year's large amount of income tax on stock disposal income in 2019 and there was no such matter in 2020.

2. Acceleration of the business transformation to create the strong product system and strong operation system

1. Product system construction
2. 1. In the logistics business, the Company accelerated the integration and transformation to value chain and thoroughly cultivated key industries with high growth and high added value, such as consumer products and retail, automobile and industrial manufacturing, electronics and high-tech products, medical and health, and buyer consolidation to continuously improve its solution capability in the target industry. The Company established an integrated truck- cargo-warehouse operation platform, and explored to create the whole network operation capacity. During the Reporting Period, the Company formulated Guidance on Framework of Logistics Solution System; its businesses covered 50 business links in key industries and 258 service modules in segment markets; the Company formed the logistics solutions in consumption products and retail, automobile and industrial manufacturing, electronics and high-tech products and other industries; the Company implemented the new mode of trunk line FCL/trunk line LCL+ city distribution trucking transportation channel, developed the truck+ cargo + warehouse integrated operation, confirmed the unified truck transportation channel platform operation system and realized the 60% application coverage of transportation businesses.

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In 2020, the Company made positive progress in logistics key target industries: ① In the consumer goods and retail industry, the Company continuously optimized the business structure, persisted in key customer strategy, successfully renewed contracts with key customers, further deepened our long term partnerships, developed new large customers in fashion industry, initially formed the whole link solution of basic logistics + e-commerce sales, prepared analysis reports based on logistics control tower for core customers, and significantly reduced the long term inventory rate and inventory slack rate; ② In the automobile and industrial manufacturing industry, the Company focused on automotive segment market, and made the inbound and line side logistics, tyre industry, dangerous goods logistics, complete vehicle and Complete knocked Down(CKD), Semi- complete knocked Down(SKD) and other logistics solutions; ③ In the electronics and high-tech products industry, the Company expanded segmentation field from consumption electronics field to electronic component, semiconductor and intelligent electronic product field with high added value, and provided its self- developed "warehouse visual recognition automatic receiving and delivering system" for core customers which increased the single scanning success rate to 100%, increased the document entry efficiency by 30% and optimized the personal allocation by 30%; ④ In medical and health industry, the Company provided the whole chain services of medical devices ranging from procurement, production, sales to after-sales for Siemens, GE, Philips and other global leading brands, continued to develop Sinopharm, Beiyi Medicine and other pharmaceutical customers and expanded its service chain to upstream and downstream of medical and health industry; ⑤ In the buyers consolidation business, the Company accelerated to expand the emerging market, actively expanded business and optimized operation on the basis of signing contract with famous brands in retail industry in South America and realized the stable growth of revenue and profits; ⑥ In the chemical industry, the Company achieved breakthroughs in hazardous chemical logistics business, such as the new energy vehicle battery, and signed contracts with many customers for dangerous goods spare parts business. The successive kickoff and operation of the Company's key projects, including the logistics center for hazardous chemicals in Shanghai and Nantong, laid an essential foundation for the development of the chemical logistics industry; ⑦ In the cold chain industry, despite the impact of the Pandemic, the Company actively developed Ningbo Kecheng, Mondelēz International, Beijing Capital Agribusiness Group and other customers to provide new value-added services such as import agency, strictly controlled costs and realized the 12% growth of gross profits.

1. In the forwarding and related business, the Company accelerated its transformation to the whole supply chain, optimized the construction of sea, land and air channels, and gradually formed six product systems, namely FCL products, LCL products, railway express products, air freight products, bulk cargo logistics services, and carrier integrated logistics services.

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In respect of FCL products, in 2020, the Company developed FCL products in Southeast Asia line, and started to design the FCL products in the Middle East- India Pakistan line and the Europe-Mediterranean line; besides, the Company promoted the creation and launching of selected lines, focused on selected lines in South East Asia area and launched the products on Y2T.

In respect of LCL products, as the first national standardized product of the Company, "Sinotrans E-LCL" launched the first oversea central warehouse in South East Asia area in 2020, and established an integrated service network comprising 15 central warehouses and 30 satellite warehouses. In 2020, the Company realized a total business volume of 5.15 million cubic meters in "Sinotrans E-LCL", representing a year-on-year increase of 27%.

In respect of railway express products, in 2020, the Company created three select railway lines, namely Shilong-VorsinoLine, Shenyang-MoscowLine and Changsha-MinskLine, formed the diversified train products comprising public trains, customized trains and specialized trains. In 2020, the Company had 11 regular operation routes, which created the important logistics channels to ensure the stable international supply chain under the Pandemic situation. In 2020, the Company totally operated 1,580 trains with the transportation volume of 157 thousand TEUs, representing year-on-yeargrowth rates of 25.6% and 21.7% respectively.

In respect of air freight products, in 2020, the Company strengthened its control of port operation, trunk line capacity, overseas service, etc., uniformly planned and designed the products and formed 43 air logistics products, 15 whole link products and 33 standardized whole link products. Confronted with the shortage of air freight capacity under the Pandemic situation, the Company actively responded, strengthened cooperation with airlines, ensured the transportation capacity through innovatory "cargo plane modified from passenger plane", increasing the charter airplane lines, increasing the charter airplane operation density, etc., provided the powerful support and guarantee for transportation of the Pademic prevention materials and meeting the demands of key customers, and formed the cycle improvement of "promoting cargo by transportation capacity and promoting transportation capacity by cargo". The revenue and profit from air freight business increased significantly. In 2020, the revenue from air freight forwarding business increased by 41% and segment profits increased by 1.5 times year-on-year.

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Management Discussion and Analysis of Business Performance

(Report of the Board)

In respect of bulk cargo logistics service, in 2020, the Company initially formed a product portfolio composed of whole process products, land operation products and shipping agency products, focused on the construction of whole process product of subdivided cargoes, and launched shipping agency operation visualization service system phase I in 11 main ports in China, which effectively improved data quality and extraction efficiency, and enhanced customer satisfaction and stickiness.

In respect of carrier integrated logistics service, in 2020, the Company promoted the implementation of smart cargo station phase I (empty container) project in the whole country and started the phase II (Heavy Container) project. On the basis of unifying the inspection and repair information system of main container stations, the Company established the inspection and repair sharing center to gradually realize the whole network operation of stations and other businesses.

The Company continuously optimized the construction of sea, land and air transportation channels to form a resource agglomeration effect. As for shipping transportation channel, the Company centrally purchased part of the transportation capacity to improve its bargaining power, and focused on the promotion of the centralized procurement of transportation capacity of the Southeast Asian line, the Middle East-India Pakistan line and the Europe- Mediterranean line; as for land transportation channel, the Company enhanced the hub construction, added Shenzhen "Bay Area" China Europe Railway Express operation platform, operated 11 normal operation trains, and further consolidated its position in the market. In 2020, the Company centrally procured transportation capacity of 979 trains which strongly supported the transportation volume of cross-border railway express; as for air transportation channel, the Company completed the establishment of 4 regional operation and control centers, centrally managed the 38 air transportation lines including Asia Line, America Line and Europe Line, operated 11 regular charter airplane lines, created an operation control center (Frankfurt) in Western Europe, and comprehensively connected with KLG Group in the service such as customs clearance and delivery in Europe, the capability of air channel was significantly enhanced.

1. In the e-commercebusiness, the Company built whole link products of cross- border e-commerce logistics, accelerated the transformation to platform and ecosystem, and constantly strengthened the link ability of the whole scenarios and the public aggregation ability.

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(Report of the Board)

In respect of cross-bordere-commerce logistics business, the Company continuously optimized its services, strengthened the marketing efforts for large e-commercecustomers, promoted customer diversification, and realized the transformation from customized services to the standard whole link products. In 2020, the Company seized the opportunities in the market, deepened the strategic cooperation with key customers, and significantly increased the export business volume; further deployed the air transportation channel, greatly increased the controllable capacity in form of charter airplane, increased to 11 lines and developed up to 43 products starting from the single line of Hangzhou- Liège of 2019; enhanced the capacity construction of e-commerceports, used Jiaxing distribution center and Dongguan distribution center, and further improved its sorting operation capability of e-commercelogistics hub; improved the function construction of cross-border e-commercelogistics system, carried out the iterative optimization of related existing structure, order management, declaration management and data connection of main systems, added the product management, pricing management, head-endoperations, online services and other functions and completed the promotion and system deployment in Nanjing, Weihai, Wuhan, Hefei, Dubai and Hong Kong ports; created cross-bordersmall package product, BC-in-1warehousing and distribution product, B2B (code 9710 and code 9810) product, code 1210 import product, single link sorting service product, etc.

In respect of logistics e-commerce platform, the Company enhanced internal collaboration, developed and launched 5 whole link digital products, covering Europe-Asia,Southeast Asia, China-Japan-SouthKorea, South Asia and Asia- Africa, and 55 waterway-railwayintermodal products covering Europe, Japan, South Korea and Southeast Asia. Furthermore, the Company built a logistics e-commercepublic platform - Y2T platform with 8,650 monthly average active enterprises, 60,500 daily average page views, and RMB1.023 billion public transaction amount (excluding Sinotrans); Y2T network freight platform obtained the first batch of network freight license, and realized the year-on-yeargrowth of 182% in transaction amount of transport business in 2020. Besides, the Company promoted the implementation of Y2T "science reform demonstration action" pilot scheme, and formulated first capital increase and share issue and employee stock ownership plan for Y2T to improve the development driving force of Y2T.

1. Establishment of operation system
   During the Reporting Period, the Company continued to improve the development of its operation system in order to promote the systematic management of customers and suppliers, optimize management procedure and further empower the frontline.

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In respect of procedures, in 2020, the Company issued the Draft Standard Operating Procedures Manual (2020) and the Draft Business Management Procedures (2020), in a bid to lay a foundation for standardization through established procedures and data standards. As of the end of 2020, the Company initially built the big data management and analysis platform with order pool as the source and settlement management as the core control points to realize the closed-loop management of business orders. The Company also issued the rules of collaboration with some sub-business lines to support the network-based operation.

In respect of system, in 2020, the Company issued the Framework Solution to Product Systems to identify the components of products and solutions and accelerate the establishment of product systems. The Company also promoted the systematization and digitalization of customer management through classified customer management, information management and customer satisfaction survey. In addition, the Implementation Rules on Procurement Management (2020) has been established to continuously improve the procurement management organization and optimize procedures to intensify the system protection for supplier and procurement management.

3. Seizing the opportunity and deepening the overseas network layout and asset layout

1. In respect of overseas network layout
   In 2020, the Company constantly improved its overseas network layout and committed to becoming a modern logistics enterprise with international competitiveness. In 2020, the Company completed the acquisition of 100% equity of KLG Group, deepened the network construction in Europe, and increased collaboration and integration with existing business. In 2020, KLG Group overcame the adverse effects of the Pandemic in Europe, realized the revenue of approximately RMB1.58 billion, and the profit generated from operation was approximately RMB180 million, which were of the similar level with 2019, showing high business resilience and quality. In 2020, the Company established four overseas institutions respectively in Mongolia, Uzbekistan, Ethiopia and UAE; started the integration of its institutions in Japan, South Korea and Australia; completed the reconstruction of the overseas warehouses of approximately 20,000 sq.m. in Dubai, and improved the cross border e-commerce logistics operation capability.
2. In respect of asset layout
   In 2020, the Company took Sinotrans Logistics Investment Holdings Co., Ltd. as the unified investment mainbody of strategic logistics resources and new logistics facilities to gradually implement the "light and heavy asset separation". And the projects including Shanghai Lingang Project and Beijing Logistics Park Projects have made positive progresses.

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Management Discussion and Analysis of Business Performance

(Report of the Board)

4. Persisting in the innovation guidance, and speeding up the digital transformation

In 2020, the Company thoroughly initiated the digital transformation, set a digital transformation office, focused on domestic end, trunk line end, overseas end, truck-cargo- warehouse integration, online transaction-delivery-payment platform, and mainly built the digital intelligent operation system.

During the Reporting Period, the Company increased its investment in technology research and development, and gradually increased the technology application scenarios. The Company launched intelligent order services which can match with intelligent order reviewing services on the order intelligent processing platform to increase the per capita business processing capacity of customs sharing center by more than 30%, and increase the operation efficiency of "Sinotrans E-LCL" business by more than 10%; the financing scale of blockchain + supply chain financial service business increased by more than 22 times; the Company successfully issued the first NVOCC electronic bill-of-lading based on blockchain technology in China and further promoted the transformation of trust system, sales channel, transaction mode and payment system in the circulation of sea freight forwarding industry; completed the establishment of the middle-platform for customers and suppliers which realized integration of customer relationship management system and master data management system certification; applied the intelligent scheduling algorithm in logistics solutions for chemical, consumption products and retail, electronics and high-tech product, cold chain and other industries and adopted the intelligent loading algorithm to realize single cabinet orderly loading services.

During the Reporting Period, the Company completed the research, development and production of the receiving and sending identification sorting system with independent intellectual property rights; the system has been used in chemical logistics and "Sinotrans E-LCL" Pudong storage and transportation automatic warehouse; the Company has declared for 59 intellectual property rights, among which "man machine cooperation digital warehouse solution", "intelligent cargo receipt and delivery system", "intelligent storage platform" and many other projects won great industrial awards.

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1. Highlights of the Business
2. 1. Centralized purchase of shipping capacity to push forward refined operation "Sinotrans E-LCL" stepped out to form international layout
      In 2020, to enhance the service stability and increase profitability, the Company launched the centralized purchase of shipping capacity in South-East Asia route and started actual operation. The Company also initiated the centralized purchase of shipping capacity in Middle East Asia-India-Pakistan route and Europe-Mediterranean route as well. As the first standardized national product of the Company, "Sinotrans E-LCL" launched the first overseas hub in 2020, and formed the unified service network of 15 hubs+30 satellite warehouses, with the support of intelligent logistics system and hardware, the operational capability of "Sinotrans E-LCL" was further improved. In 2020, "Sinotrans E-LCL" achieved the business volume of 5.15 million cubic-meter, representing a 27% year-on-year growth, and continued to maintain the leading position in its niche market.
   2. Increased controllable capacity and optimized cargo loading Promoted virtuous circle with scale effect
      In 2020, Sinotrans continued to build up the air transportation trunk line capacity. Backed by the existing air transportation channel, Sinotrans adapted various measures including transforming the passenger planes to cargo plane, charting planes and blocking spaces. Sinotrans managed to improve the loading utility rate and profitability by balancing the heavy cargo and bulk cargo resources so that to further solidify the leading position in air related logistics market. Sinotrans executed 478 regular charter flights and 280 temporary charter flights in total in 2020. The air channel of Sinotrans handled 532 thousand tons cargo in 2020, the aggregated segment profit of air freight related segments increased by 218%. Presently, Sinotrans operates 57 charter flights per week, such capacity help to meet the demand of clients, and also secure the stability and safety of supply chain to the most extend.
   3. Built up business volume in railway express to promote the development of cross- border e-commerce logistics
      In 2020, the railway express service of Sinotrans launched 7 new routes. The Company operates more than 40 cross-border railway express routes, among which, 11 are regular routes, which provide China Europe Railway Express as a new channel for business like cross-bordere-commerce logistics, and we newly launched "Bay Area" train platform. In 2020, the aggregate volume of cross-border railway of Sinotrans amounted to 1,580 trains, and 157 thousand TEUs which representing a year-on-year increase of 21.7%; among which, the China Europe Railway Express volume was 1,388 trains and 134 thousand TEUs which representing a year-on-year increase of 22.5%, and ranking No. 4 in China.
   4. Focusing on both self-owned and agency network, to support the modern logistics enterprise with international competitiveness
      Committing to becoming a modern logistics enterprise with international competitiveness, Sinotrans accelerated the construction of overseas network. The Company continued refining the overseas agency network, at the same time strengthened the intensive management of overseas agencies. In 2020, the Company selected out 8 major overseas agencies and started to concentrate business to such agencies. Sinotrans also completed the acquisition of 100% stake of KLG Group in 2020, who has successfully initiated business coordination with existing business including contract logistics, cross-bordere-commerce logistics and railway express. In the future, KLG Group will act as the operation core of Sinotrans in European area and generate synergies in providing extending service to domestic customer, developing new customers and markets, etc.

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1. Business Segments and Segment Profit (in which, the segment profit is the operating profit of the segment deducting the impact of investment income in associates and joint ventures)

Logistics

In 2020, external revenue from the Group's logistics business amounted to RMB19,585 million, representing a decrease of 1.28% from RMB19,839 million of last year, because affected by the global outbreak of the Pandemic, many overseas projects came to suspension, thus the revenue of the Company's project logistics largely decreased by approximately RMB600 million year-on- year; and the segment profit amounted to RMB715 million, representing an increase of 5.35% from RMB679 million of last year, which was mainly attributable to the contribution of RMB131 million by the newly consolidated KLG Group.

Forwarding and related business

In 2020, external revenue from the Group's forwarding and related business amounted to RMB57,776 million, representing an increase of 5.37% from RMB54,833 million of last year; and the segment profit amounted to RMB1,863 million, representing an increase of 19.42% from RMB1,560 million for the corresponding period of last year, because the increase of air freight rates and the Company locked certain airline space in advance, which led to significant increase in the profitability of air freight forwarding business.

E-commerce business

In 2020, external revenue from the Group's e-commerce business amounted to RMB7,176 million, representing an increase of 140.55% from RMB2,983 million of last year; and the segment profit amounted to RMB196 million, representing an increase of 173.94% from RMB71 million of last year, because benefiting from the air transportation channel construction, the Company locked certain airline space in advance and expanded the corporation with key clients in 2020, the revenue of cross-bordere-commerce logistics doubled to over RMB 7 billion while its segment profit reached RMB 167 million, increasing by 4.4 times year-on-year.

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(IV) Operation Statistics of Principal Business

	For the year ended 31 December
	2020	2019
Logistics (in million tonnes)
Contract Logistics*	33.1	38.0
Project Logistics	5.2	6.2
Chemical Logistics	3.2	3.3
Cold Chain Logistics	1.0	1.3
Forwarding and related business
Sea Freight Forwarding (in ten thousand TEUs)	1,308.8	1,313.4
Air Freight Forwarding (in million kilograms) **	532.3	502.0
Rail Freight Forwarding (in ten thousand TEUs)	19.1	11.2
Shipping Agency (in ten thousand TEUs)	2,317.7	2,674.9
Warehouse and Yard Service (in million tons)	19.1	16.0
E-commerce business
Cross-bordere-commerce logistics
(in ten thousand units)	26,985.5	17,979.5
Cross-bordere-commerce logistics
(in ten thousand tons)	2.7	0.8
Logistics equipment sharing platform
(ten thousand TEUs/day)	8.0	8.2
Logistics e-commerce platform
(in ten thousand TEUs)	46.1	4.7

• Does not include the business volume of KLG Group
• The business volume of 2020 includes the trunk line transportation of 27 thousand tons for cross-bordere-commerce customers; the business volume of 2019 includes the trunk line transportation of 8 thousand tons for cross-bordere-commerce customers.

External Revenue	(RMB million)	Segment Profit	(RMB million)
84,537	77,655
7,176	2,774
2,983
		196	2,310
				71
57,776	54,833	1,863	1,560

			19,585	19,839		715	679
2020				2019		2020		2019
		Logistics			Forwarding and related business			Logistics		Forwarding and related business
		E-commerce business					E-commerce business

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Key Segment Revenue and Profit
Logistics					(RMB million)
14,741				611
14,153
	2,106	553
	2,720	92
				115
Segment			1,673	Segment
2019			2019	72
revenue	1,710		profit
	575		533		79
			22
	1,495
	1,415	-97	15
			-71
2020

Contract logistics		Project logistics		Chemical logistics
Cold-chain logistics		Other services

2019

Contract logistics		Project logistics		Chemical logistics
Cold-chain logistics		Other services

Forwarding and related business

(RMB million)

42,096	7,180
42,206
	5,108
	2,731	3,501
Segment
2019	3,357	4,000
revenue	2,718
	3,498	2,967
	3,921

2020

237	91
96	53
593
575	411	373
Segment
2019
profit
88	358
362
182

	Sea Freight Forwarding		Air Freight Forwarding		Rail Freight Forwarding
	Shipping Agency		Storage and Terminal Services		Others Services

2019

	Sea Freight Forwarding		Air Freight Forwarding		Rail Freight Forwarding
	Shipping Agency		Storage and Terminal Services		Others Services

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1. MAJOR BUSINESS CONDITIONS DURING THE REPORTING PERIOD
2. 1. Analysis on Principal Businesses
      1. Analysis Statement of Changes to Relevant Items in Statements of Income and Cash Flow

				Unit: Yuan	Currency: RMB
		Amount for the
	Amount for the	same period of
Item	current period	last year	Change (%)	Analysis of reason for changes
Operating income	84,536,841,379.12	77,655,104,976.98	8.86	In 2020, affected by the Pandemic, the online
				consumption demand further expanded and led to a
				significant increase in the cross-bordere-commerce
				logistics business volume; the strong demand in
				the air freight market and the rising freight rate led
				to a significant increase in the income from the air
				freight forwarding business; and the newly acquired
				KLG Group was consolidated into the financial
				statement.
Operating cost	79,595,940,834.17	73,425,097,330.63	8.40	Costs increased as a result	of the increase in both
				of the air freight forwarding and cross-border
				e-commerce logistics business.
Selling expenses	806,339,597.85	851,739,192.62	-5.33 Affected by the Pandemic, the business entertainment
				fees and traveling expenses decreased for the
				Reporting Period.
Administrative expenses	2,735,273,675.53	2,596,298,000.77	5.35	The newly acquired KLG Group was consolidated
				into financial statement, resulting in the increase of
				administrative expenses.
R&D expenses	149,205,749.71	73,437,937.69	103.17	The Company increased the investment in research
				and development in order to accelerate the
				digitalization construction.
Finance cost	625,170,299.30	288,775,817.70	116.49	During the Reporting Period, the Company's
				subsidiaries recorded foreign exchange losses due
				to the significant depreciation of the Belarusian
				Ruble; and recorded foreign exchange losses in
				respect of assets held in US dollars due to the
				significant appreciation of Renminbi.

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				Unit: Yuan  Currency: RMB
		Amount for the
	Amount for the	same period of
Item	current period	last year	Change (%)	Analysis of reason for changes
Net cash flows from operating	3,956,385,015.00	3,322,169,198.10	19.09	The change was due to the combined effect of
activities				increased business volume, faster account
				receivables turnover and good receivables collection
				performance during the period.
Net cash flows from investment	-1,341,620,965.80	-2,054,978,249.70	N/A	The change was due to the effect of the acquisition of
activities				KLG Group, and 80% of the consideration was paid
				in 2019 and the remaining 20% was paid in 2020.
Net cash flows from financing	-1,548,921,167.75	-6,336,246,978.17	N/A	The repayment of various borrowings caused a larger
activities				amount of cash outflows in 2019, which didn't
				occur in 2020.

2. Income and Cost Analysis

3Applicable      □Not applicable

(1). Principal Businesses by Sector and Product

				Unit: Yuan  Currency: RMB
Principal businesses by sector
				Increase/	Increase/	Increase/
				decrease in	decrease in	decrease in gross
				operating income	operating cost	margin over last
By sector	Operating income	Operating cost	Gross margin(%)	over last year (%)	over last year (%)	year (%)
Logistics industry	84,536,841,379.12	79,595,940,834.17	5.84	8.86	8.40	Increase by 0.4
						percentage point
Principal businesses by product
				Increase/	Increase/	Increase/
				decrease in	decrease in	decrease in gross
				operating income	operating cost	margin over last
By product	Operating income	Operating cost	Gross margin(%)	over last year (%)	over last year (%)	year (%)
Logistics	19,585,303,438.15	17,576,824,014.17	10.26	-1.28	-1.97	Increase by 0.63
						percentage point
Forwarding and related business	57,775,688,360.16	55,129,259,034.68	4.58	5.37	4.69	Increase by 0.62
						percentage point
E-commerce business	7,175,849,580.81	6,889,857,785.32	3.99	140.55	143.06	Decrease by 0.99
						percentage points

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(Report of the Board)

Description of Principal Businesses by Sector and by Product

1. 1. Income and cost items for current and last year are taken from operating income and operating cost.
   2. Operating income and operating cost from the e-commence business recorded year-on-year increases, primarily attributable to the increase in both volume and price of the cross-bordere-commence logistics business as a result of the effect of, among others, the COVID-19 pandemic.
2. . Analysis Statement of Production and Sales

□Applicable      3Not applicable

(3).		Statement of Cost Analysis
						Unit: Yuan  Currency: RMB
		By sector
								Change in
								percentage of
							Percentage of	the amount as
					Percentage of		total cost for the	compared with
					total cost for	Amount for the	corresponding	the corresponding
				Amount for the	current period	corresponding	period of last year	period last year
		By sector	Cost components	current period	(%)	period of last year	(%)	(%)
		Logistics industry	Transportation and relevant expense	72,472,732,387.14	91.05	66,790,886,460.75	90.96	8.51
		Logistics industry	Labor cost	3,598,711,554.05	4.52	3,356,004,904.45	4.57	7.23
		Logistics industry	Depreciation and amortization	1,371,172,983.74	1.72	1,144,044,137.97	1.56	19.85
	Logistics industry	Rental cost	405,423,202.15	0.51	399,171,233.94	0.54	1.57
		Logistics industry	Fuel expense	361,146,231.85	0.45	429,123,812.40	0.58	-15.84
		Logistics industry	Repair and maintenance expense	95,318,285.86	0.12	80,119,553.69	0.11	18.97
		Logistics industry	Safe production expense	76,011,388.15	0.10	57,814,903.91	0.08	31.47
		Logistics industry	Other operating expenses	1,215,424,801.23	1.53	1,167,932,323.52	1.59	4.07
		By product
								Change in
								percentage of
							Percentage of	the amount as
					Percentage of		total cost for the	compared with
					total cost for	Amount for the	corresponding	the corresponding
				Amount for the	current period	corresponding	period of last year	period last year
		By product	Cost components	current period	(%)	period of last year	(%)	(%)
		Logistics		17,576,824,014.17	22.08	17,930,300,886.48	24.42	-1.97
		Forwarding and related business	55,129,259,034.68	69.26	52,660,160,516.04	71.72	4.69
	E-commerce business		6,889,857,785.32	8.66	2,834,635,928.11	3.86	143.06

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47

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Management Discussion and Analysis of Business Performance

(Report of the Board)

1. . Key customers and Key Suppliers
   3Applicable      □Not applicable

Unit: ten thousand  Currency: RMB

Sales to top five customers amounted to RMB12.99 billion, accounting for 15.36% of the total sales in the year; Among the sales to top five customers, the sales to related parties amounted to RMB0, accounting for 0% of the total sales in the year.

		Unit: ten thousand	Currency: RMB
		Percentage of
		total sales	Related
Customer	Total sales	of the year	party or not
Customer 1	545,006.16	6.45%	No
Customer 2	287,356.00	3.40%	No
Customer 3	210,083.99	2.49%	No
Customer 4	139,400.08	1.65%	No
Customer 5	117,018.81	1.38%	No
Total	1,298,865.02	15.36%	/

Purchases from top five suppliers amounted to RMB15.40 billion, accounting for 19.34% of the total purchases in the year; Among the purchases from top five suppliers, the purchases from the related parties amounted to RMB0, accounting for 0% of the total purchases in the year.

		Unit: ten thousand	Currency: RMB
		Percentage of
		total purchases	Related
Supplier	Total purchases	of the year	party or not
Supplier 1	364,854.85	4.58%	No
Supplier 2	347,797.41	4.37%	No
Supplier 3	319,094.88	4.01%	No
Supplier 4	301,385.45	3.79%	No
Supplier 5	206,578.05	2.60%	No
Total	1,539,710.64	19.34%	/

48 SINOTRANS LIMITED

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

Other Matters

1. During the year ended 31 December 2020, none of the Directors, Supervisors, their close associates and any shareholders (who to the knowledge of the Board owns more than 5% of the share capital of the Company) of the Company had any interests in the top five customers or the top five suppliers of the Group.
2. Relationship with Customers
   The Group maintains long-standing, healthy and cooperative relationships with the Company's major customers, follow the general commercial terms and shares consistent credit terms with other customers. The Group settles its major customers in accordance with the contract payment terms, combining judgment on amount of account receivables, adopts provision for bad debts of receivables that are specifically classified by similar credit risk. The Group monitors and assesses the information of major customers on an on-going and timely basis, to promote the communication and relationship with major customers.
3. Relationship with Suppliers
   In selecting suppliers to purchase from, the Group has been applying a standard of high quality and high integrity, and has established relevant systems to ensure that the purchase process remains open, fair and just. Aiming to improve purchase quality, critical assessment and guidelines are utilized by the Group to measure the sustainability of the suppliers in terms of labor, health and safety and environmental influences. Relevant departments of the Group conduct performance assessments to the suppliers on a regular basis in order to manage the suppliers in a more efficient manner and reduce potential risks in supplier, which promote the communication and relationship with the suppliers.

3. Expense

3Applicable      □Not applicable

For details, please refer to "(I) Analysis on Principal Businesses 1. Analysis Statement of Changes to Relevant Items in Statements of Income and Cash Flow" under "II. MAJOR BUSINESS CONDITIONS DURING THE REPORTING PERIOD" in this chapter.

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49

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

4. R&D investment

1. . Statement of research and development (R&D) investment
   3Applicable      □Not applicable

Unit: Yuan	Currency: RMB
Expensed R&D investment for the Reporting Period	149,205,749.71
Capitalized R&D investment for the Reporting Period	78,327,906.31
Total R&D investment	227,533,656.02
Total R&D investment as a percentage of operating income (%)	0.27
Number of R&D employees in the Company (person)	603
R&D employees as a percentage of total employees
of the Company (%)	1.74
Capitalized R&D investment as a percentage of total R&D
investment (%)	34.42

(2). Description

	□Applicable      3Not applicable
5. Cash Flow
	3Applicable      □Not applicable
		For the year ended 31 December
		2020	2019
		RMB million	RMB million
Net cash generated from operating activities	3,956.39	3,322.17
Net cash generated from investment activities	-1,341.62	-2,054.98
Net cash generated from financing activities	-1,548.92	-6,336.25
Effect of foreign exchange rate changes	-163.32	139.35
Net increase in cash and cash equivalents	902.53	-4,929.71
Cash and cash equivalents at the end of the
	Reporting Period	11,292.44	10,389.91

50 SINOTRANS LIMITED

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

Operating Activities

During the year ended 31 December 2020, the Group's net cash inflow generated from the operating activities increased by RMB634 million or 19.09% from the corresponding period last year to RMB3,956 million, which was mainly due to the following factors, as the account receivables turnover got higher, the Group received cash for the sale of products and provision of services of approximately 84,212 million (2019: RMB78,523 million), and it paid cash for the purchase of goods and receipt of services of RMB73,728 million (2019: RMB68,352 million), so the net cash was RMB10,484 million (corresponding period of last year: RMB10,170 million), representing an increase of RMB313 million compared with last year; the employee remuneration paid by the Group increased by RMB336 million, while other cash inflow related to operating activities for the current period increased by RMB639 million compared with the corresponding period of last year.

Investment Activities

For the year ended 31 December 2020, the net cash outflow generated from investment activities amounted to RMB1,342 million, including the purchase of property, machinery and equipment of RMB1,483 million, additions in intangible assets and other long-term assets of RMB330 million, investment in joint ventures and associates and financial assets of RMB247 million, net cash paid for the acquisition of KLG, etc. of RMB530 million, loans to related companies of RMB5 million and purchase of structural deposits of RMB300 million; partially offset by the proceeds from disposal of property, machinery and equipment of RMB108 million, proceeds from disposal of intangible assets of RMB26 million, investment income of RMB1,066 million, proceeds from disposal of financial assets of RMB257 million, and repayment from related companies of RMB97 million.

For the year ended 31 December 2019, the net cash outflow generated from investment activities amounted to RMB2,055 million, including the purchase of property, machinery and equipment of RMB1,447 million, purchase of intangible assets and other long-term assets of RMB474 million, investment in joint ventures and associates and financial assets of RMB2,462 million and net cash paid for the acquisition of three subsidiaries including Keppel, etc. of RMB188 million; partially offset by the proceeds from disposal of property, machinery and equipment of RMB196 million, proceeds from disposal of intangible assets of RMB122 million, investment income of RMB1,122 million, divestment from joint ventures and associates of RMB125 million, recovery of financial products at the beginning of the period of RMB400 million, repayment from joint ventures and associates of RMB483 million, and fixed deposits interest of RMB167 million.

Financing Activities

For the year ended 31 December 2020, the net cash outflow generated from financing activities amounted to RMB1,549 million, mainly including new borrowings raised of RMB5,704 million, acquisition of minority shareholders' equity of subsidiaries of RMB70 million, and related party borrowings of RMB81 million, partially offset by repayment of borrowings of RMB5,321 million, dividend payment of RMB889 million, repayment of interest of RMB374 million, payment of lease liability of RMB599 million, repayment of related party borrowings of RMB59 million and acquisition of enterprises under common control of RMB22 million.

ANNUAL REPORT 2020

51

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

For the year ended 31 December 2019, the net cash outflow used in financing activities amounted to RMB6,336 million, mainly including repayment of borrowings of RMB4,905 million, dividend payment of RMB1,163 million, payment of borrowings and bonds interest of RMB548 million, refund of transaction payment to factoring companies of RMB692 million, acquisition of minority shareholders' equity of subsidiaries of RMB108 million and payment of lease liability of RMB636 million, partially offset by new borrowings of RMB1,531 million and capital increase from minority shareholders of RMB273 million.

6. Other Matters

1. Tax
   Details of the Group's taxes as at 31 December 2020 are set out in Note VII to the financial statements.
2. Income Tax
   The Group's income tax expense was RMB663 million, representing an increase of 66.38% as compared with RMB399 million last year, mainly due to the significant decrease of income tax expense for the corresponding period of last year as a result of the write-off of the previous year's income tax expense by Sinotrans in the corresponding period of last year, which didn't occur in the Reporting Period; and the increase of RMB27.90 million in income tax expense caused by the newly acquired KLG Group in the Reporting Period.
3. Fixed Assets
   The details of changes in fixed assets of the Group as of 31 December 2020 are set out in Note IX.16 to the financial statements.
4. Capital Expenditure
   For the year ended 31 December 2020, the Group's capital expenditure was RMB1,916 million, mainly including RMB1,090 million used for the construction of infrastructure, port and terminals facilities and other projects, RMB270 million used for the purchase of land and software, RMB488 million for the purchase of machineries and equipment, containers and vehicles, and RMB68 million for asset improvement.
5. Securities Investment
   As at 31 December 2020, the listed equity investments held by the Group was RMB22 million, the details of which are set out in Note IX. 13 to the financial statements.
6. Contingent Liabilities and Guarantees
   As at 31 December 2020, contingent liabilities mainly comprised pending lawsuits of the Group arising from its ordinary course of business amounting to RMB66 million (as at 31 December 2019: RMB120 million).
   Please see "XV. MATERIAL CONTRACTS AND PERFORMANCE (II) Guarantee" under "Chapter 6 Significant Matters" of this Report for details of the guarantees.

52 SINOTRANS LIMITED

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

1. Borrowings and Bonds
   As at 31 December 2020, the Group's total borrowings amounted to RMB8,989 million (as at 31 December 2019: RMB9,001 million), among which, RMB874 million shall be settled in Renminbi, RMB494 million in US dollars, RMB1,798 million in Euro and RMB5,823 million in Hong Kong dollars. Of the above borrowings, RMB2,230 million was bank borrowings payable within a year.
   As at 31 December 2020, the Group's total bonds payable amounted to RMB3,421 million (as at 31 December 2019: RMB3,419 million). Of the above bonds, RMB3,421 million shall be payable within a year.
   The details of the Group's borrowing and bonds for the year ended 31 December 2020 are set out in Notes IX. 27, 36 and 37 to the financial statements.
2. Bank Loans
   The details of the Company's and the Group's bank loans are set out in Note IX. 27 and 36 to the financial statements.
3. Secured and Guaranteed Borrowings
   For details, please refer to "2. Restriction on Material Assets as of the End of the Reporting Period" in "II. MAJOR BUSINESS CONDITIONS DURING THE REPORTING PERIOD (III) Analysis of Assets and Liabilities" under "Chapter 5 Management Discussion and Analysis of Business Performance (Report of the Board)" and "XV. MATERIAL CONTRACTS AND PERFORMANCE (II) Guarantee" under "Chapter 6 Significant Matters" in this Report.
4. Special Reserve
   As at 31 December 2020, the special reserve of the Group was approximately RMB69.2499 million.
5. Distributable Reserves
   Distributable reserves of the Company as at 31 December 2020 amounted to approximately RMB2.616 billion.
6. Debt-to-AssetRatio
   As at 31 December 2020, the debt-to-asset ratio of the Group was 51.00% (as at 31 December 2019: 51.11%), which was calculated by dividing total liabilities by total assets of the Group as at 31 December 2020.
7. Material Litigation and Contingent Liabilities
   Details of the Group's litigation and contingent liabilities as at 31 December 2020 are set out in Note XII to the financial statements.

ANNUAL REPORT 2020

53

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

1. 1. Foreign Exchange Risk
      The Group's turnover and transportation and related expenses are partially settled in foreign currencies. The Group's expose to foreign exchange risk is mainly from the exchange rate fluctuation of foreign currencies, such as US dollar and Hong Kong dollars. Details are set out in Note XI to the financial statements.
   2. Government Subsidy
      During the year ended 31 December 2020, the Group received government subsidies related to income totaling RMB1,506 million, details of which are set out in Note IX. 62 to the financial statements.
   3. Pension Schemes
      Details of the Group's pension schemes for the year ended 31 December 2020 are set out in Note IX. 31 to the financial statements.
   4. Donations
      During the Reporting Period, the Group made charitable and other donations amounted to approximately RMB9.8657 million.
2. Significant Changes to the Profit Resulting from Non-principal Business

3Applicable      □Not applicable

1. 1. Gains from disposal of assets for the Reporting Period was RMB35.0132 million, representing a decrease of RMB117.8058 million as compared with RMB152.8190 million for the corresponding period of last year, mainly due to the absence of gains from disposal of assets from the disposal of land and the housing expropriation compensation received, both being subsidiaries of the Group, as compared to the corresponding period of last year.
   2. Non-operatingincome for the current period was RMB195.5411 million, representing an increase of RMB42.5284 million as compared with RMB153.0127 million for the corresponding period of last year, mainly due to the compensation for housing demolition and relocation received by the subsidiaries of the Group in the current year.
   3. Non-operatingexpense for the Reporting Period was RMB39.3494 million, representing a decrease of RMB159.4927 million as compared with the corresponding period of last year, mainly due to more accrued liabilities provided by the Group for litigations pending last year, while no additional significant risks in the current year.
2. Analysis of Assets and Liabilities

3Applicable      □Not applicable

54 SINOTRANS LIMITED

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

1.	Assets and Liabilities
				Unit: Yuan  Currency: RMB
					Amount at the end
			Amount at the end		of the previous
			of the period as a	Amount at the end	period as a
		Amount at the end	percentage of total	of the previous	percentage of total	Year-on-year
	Item	of the period	asset (%)	period	assets (%)	change (%)
	Held-for-trading financial assets	303,292,565.44	0.46	5,641,228.80	0.01	5,276.36
	Bills receivable	50,643,103.40	0.08	18,389,129.53	0.03	175.40
	Long-term receivables	63,372,794.47	0.10	102,637,410.37	0.17	-38.26
	Other equity instrument investment	21,605,631.53	0.03	256,540,744.93	0.41	-91.58
	Goodwill	2,278,747,212.67	3.46	172,612,157.55	0.28	1220.15
	Short-term borrowings	502,472,110.58	0.76	1,202,384,395.00	1.94	-58.21
	Bills payable	25,717,690.68	0.04	-	-	N/A
	Non-current liabilities due within one year	6,251,548,647.08	9.50	3,268,689,764.93	5.28	91.26
	Deferred tax liabilities	180,703,468.18	0.27	84,305,482.60	0.14	114.34
	Other non-current liabilities	196,349,994.80	0.30	71,319,466.31	0.12	175.31

Other description

1. The change in held-for-trading financial assets was primarily due to the additional structural deposits of RMB300 million in the current year.
2. The change in bills receivable was primarily due to the subsidiaries of the Group agreed with certain customers to change the method of payment into payment by bill, which led to more bills not due for acceptance at the end of the period.
3. The change in long-term receivables was primarily due to that the Group made an impairment provision for the long-term receivables from Uni-top and recovered some related party borrowings.
4. The change in other equity instrument investment was primarily due to the disposal of all 50,350,00 shares of BOE Technology Group Co., Ltd. held by the Group for a consideration of RMB229 million in 2020.
5. The change in goodwill was mainly caused by the following:
   The Group completed the acquisition of KLG Group and consolidated it into the Group in 2020, resulting in the increase in goodwill of RMB2,160 million; and other subsidiaries of the Group made an impairment provision for goodwill of RMB54 million in the year.
6. The change in short-term borrowings was primarily because the Company continuously reduced the scale of short-term financing.

ANNUAL REPORT 2020

55

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

1. 1. The change in bills payable was primarily due to the tentative usage of bills payable for settlement by some subsidiaries of the Group in the current period.
   2. The change in non-current liabilities due within one year was primarily due to the reclassification of the portion due within one year (RMB3,421 million) under bonds payable and the portion due within one year (RMB2,230 million) under long term borrowings into non-current liabilities due within one year for the current period, as well as the increase in lease liabilities due within one year.
   3. The change in deferred tax liabilities was primarily due to the increase in temporary difference as a result of the change in the scope of consolidation for the current year. For details, please refer to Note VIII. 2 to the financial statements.
   4. The change in other non-current liabilities was primarily due to the increase in liabilities related to Lanshi Port of RMB125 million (i.e. compensation for demolition and relocation from the government), the Group's trusted asset under management, in the Reporting Period.
2. Restriction on Major Assets as at the End of the Reporting Period
   3Applicable      □Not applicable
   The major restricted assets of the Group mainly consists of cash and bank balances with limited usage, such as guaranteed deposit, and collateralized assets for obtaining long-term and short-term borrowings from banks, mainly including the following:
   The capital in the accounts of the subsidiaries of the Group, which was under supervision and with limited right of use, amounted to RMB76.8868 million at the end of the period, primarily including guaranteed deposit of RMB13.7218 million, frozen deposits in respect of the lawsuit with Tianjin Keerun Investment Co., Ltd. of RMB12.2446 million and interest receivable of unexpired bank deposits of RMB41.3924 million.
   For details, please refer to Note IX. 25 to the financial statements.
3. Other Description
   □Applicable      3Not applicable

(IV) Analysis of the Industry Operation Information

3Applicable      □Not applicable

For details, please refer to "I. DESCRIPTION OF THE PRINCIPAL BUSINESS, OPERATING MODEL AND INDUSTRY OF THE COMPANY DURING THE REPORTING PERIOD" under "Chapter 4 Business Overview" of this Report.

56 SINOTRANS LIMITED

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

1. Analysis of Investments
   1. Overall Analysis of External Equity Investments
   3Applicable      □Not applicable
   The Group's long-term equity investment at the end of the Reporting Period amounted to RMB7,752 million, representing a decrease of RMB1,616 million as compared to RMB9,368 million at the beginning of the year or a year-on-year decrease of 17.26%, primarily due to the decrease of RMB2,202 million in the current period as a result of changes in the scope of consolidation since the consolidation of KLG Group by the Group on 1 January 2020, partially offset by the increase of RMB1,216 million from the profit or loss adjustment of DHL-Sinotrans International Air Courier Ltd and increase of RMB132 million from the profit or loss adjustment of China Merchants Loscam International Co., Ltd for the current period.
2. 1. Major equity investment
      □Applicable      3Not applicable
   2. Major non-equity investment
      □Applicable      3Not applicable
   3. Financial assets at fair value
      3Applicable      □Not applicable

						Unit: Yuan	Currency: RMB
							Change in fair value
		Cost at the	Acquisition		Disposal		At the
	Source of	beginning of	during the		during the	Cost at the end	beginning of	At the end of	Investment
Item/Company name	funds	the year	current period	Addition	current period	of the period	the year	the year	income
Structural deposit	Self-	-	300,000,000.00	-	-	300,000,000.00	-	-	-
	financing
China Southern Airlines Cargo	Self-	-	223,636,365.50	-	-	223,636,365.50	-	-	-
and Logistic (Guangzhou)	financing
Co., Ltd.
Nanjing Port Longtan Container	Self-	188,756,354.15	-	-11,420,623.35	-	177,335,730.80	-	14,342,510.79	8,615,633.08
Co., Ltd.	financing
China Merchants Logistics	Self-	176,113,822.12	-	-10,655,692.30	-	165,458,129.82	-	20,250,924.68	-
Synergy Limited Partnership	financing
Ouyeel Co., Ltd.	Self-	147,747,600.00	-	-	-	147,747,600.00	-	-	-
	financing
China United Tally Co., Ltd.	Self-	91,441,143.61	-	-	-	91,441,143.61	-	-50,481,143.61	-
	financing
SINO-BLR Industrial	Self-	46,890,242.29	-	-	-	46,890,242.29	-	-14,616,171.92	-
Investment Fund	financing
Shenyang Airport	Self-	33,730,000.00	-	-	-	33,730,000.00	-	-	-
Logistics Co., Ltd.*	financing
(瀋陽空港物流有限公司)

ANNUAL REPORT 2020

57

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

							Change in fair value
		Cost at the	Acquisition		Disposal		At the
	Source of	beginning of	during the		during the	Cost at the end	beginning of	At the end of	Investment
Item/Company name	funds	the year	current period	Addition	current period	of the period	the year	the year	income
China International Exhibition and	Self-	-	-	8,122,321.98	-	8,122,321.98	-	-	-
Transportation Co., Ltd.	financing
Air China Limited	Self-	8,076,871.60	-	-	-	8,076,871.60	19,874,873.33	13,528,759.93	128,133.80
	financing
Pingze Container Port Co., Ltd.*	Self-	2,870,000.00	-	45,905.46	-	2,915,905.46	-	-	146,464.00
(平澤集裝箱碼頭有限公司)	financing
Pankorea Yingkou Ferry	Self-	2,896,775.00	-	-	-	2,896,775.00	-	-	-
Co., Ltd.	financing
"20 Sinotrans ABN001	Self-	-	2,500,000.00	-	-	2,500,000.00	-	-	338,607.47
Preference" Targeted Asset-	financing
Backed Notes
Guangdong Waiyun	Self-	805,325.00	-	-	-	805,325.00	-	-	-
Automobile Fitting Factory*	financing
(廣東外運汽車服務有限公司)
ST Antong	Self-	-	666,498.09	-	-	666,498.09	-	-	-
	financing
Chengdu Rongjie	Self-	400,000.00	-	-	-	400,000.00	-	-	-
Technology Co., Ltd.*	financing
(成都蓉捷科技有限公司)
Ocean Network Express	Self-	250,000.00	-	-	250,000.00		-	-	-
(China) Ltd.	financing
Sichuan Tianhua Co., Ltd.	Self-	134,680.92	-	-	-	134,680.92	-	-	-
	financing
China Ferry Terminal	Self-	131,806.25	-	-7,974.89	-	123,831.36	-	-123,831.36	70,389.09
Services Limited	financing
Taizhou Yiyou Shipping	Self-	100,000.00	-	-	-	100,000.00	-	-	400,000.00
Agency Co., Ltd.*	financing
(泰州益友船務代理有限公司)
Shaanxi Sinotrans Sanyuan	Self-	100,000.00	-	-	-	100,000.00	-	-	-
Coal Co., Ltd.*	financing
(陝西中外運三原煤炭有限公司)
Beijing BITEMC Electronic	Self-	46,500.00	-	-	-	46,500.00	-	-	-
Co., Ltd.	financing
China Merchants Port Holdings	Self-	8,958.00	-	-1,707.36	-	7,250.64	32,270.80	18,816.71	-
Company Limited	financing
BOE Technology Group Co., Ltd.	Self-	127,133,750.00	-	-	127,133,750.00	-	101,455,250.00	-	640,000.00
	financing
2019 First Tranche of RMB	Self-	5,500,000.00	-	-	5,500,000.00	-	-	-	-
Targeted Asset-Backed Notes	financing
Shenzhen Sealink	Self-	110,000.00	-	-110,000.00	-	-	-	-	-
Technology, LLC*	financing
(深圳市海易通科技有限責任公司)
Total	--	833,243,828.94	526,802,863.59	-14,027,770.46	132,883,750.00	1,213,135,172.07	121,362,394.13	-17,080,134.78	10,339,227.44

58 SINOTRANS LIMITED

Chapter 5

Management Discussion and Analysis of Business Performance

(Report of the Board)

(VI) Disposal of Major Assets and Equity

□Applicable      3Not applicable

(VII) Analysis of Major Companies Controlled and Invested in by the Company

3Applicable      □Not applicable

1. Major Subsidiaries Controlled by the Company

						Currency: RMB
				Total assets	Net assets	Operating	Net profit
		Registered	Shareholding	(RMB: ten	(RMB: ten	income (RMB:	(RMB: ten
Company Name	Nature of business	capital (Yuan)	(%)	thousand)	thousand)	ten thousand)	thousand)
Sinotrans Logistics Co., Ltd	Logistics	1,444,000,000.00	100	2,073,026.41	717,553.87	1,293,965.62	22,067.53
Sinotrans Air Transportation	Air freight forwarding	905,481,720.00	100	1,254,284.99	1,027,493.23	1,278,808.33	149,514.91
Development Co., Ltd.	and express services
Sinotrans South China	Freight forwarding,	1,349,668,931.90	100	866,584.15	372,887.11	939,605.67	28,991.46
Co., Ltd.	logistics, and storage
	and terminal services
Sinotrans Eastern Company	Freight forwarding,	1,120,503,439.18	100	659,303.23	263,101.50	1,850,546.23	32,444.54
Limited	logistics, and storage
	and terminal services
Sinotrans Central China	Freight forwarding and	645,339,941.77	100	495,663.33	184,531.71	1,003,141.24	27,624.10
Co., Ltd.	logistics

2. Major Subsidiaries Invested in by the Company

						Currency: RMB
						Operating
				Total assets	Net assets	income	Net profit
			Shareholding	(RMB: ten	(RMB: ten	(RMB: ten	(RMB: ten
Company Name	Nature of business	Registered capital	(%)	thousand)	thousand)	thousand)	thousand)
China Merchants Loscam	Pallet leasing	US$101	45	687,925.89	378,763.57	172,995.63	30,493.94
International Co., Ltd
DHL-Sinotrans International	International express	US$14.50 million	50	586,175.37	303,129.73	1,816,813.32	243,209.19
Air Courier Ltd
Wuhan Port Container	Containers handling and	RMB400 million	30	81,745.09	58,259.66	9,655.92	1,964.16
Co., Ltd.	freight forwarding

Details of the financial information of the material associates and joint ventures are set out in Note IX. 12 to the financial statements.

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(VIII) Structured Entities Controlled by the Company

□Applicable      3Not applicable

1. DISCUSSION AND ANALYSIS OF THE FUTURE DEVELOPMENT OF THE COMPANY

(I) Industrial Layout and Trend

3Applicable      □Not applicable

With further development of a new round of scientific and technological revolution and industrial transformation, the global economic and trade environment is becoming more complicated, with a significant increase of instability and uncertainty. Meanwhile, impacted by the Pandemic, the economic globalization is facing a headwind and the distribution of international supply chain tends to be "multi-centered". However, the economic development in China is still resilient and strong with a positive prospect in the long term. The foreign trade of China is stable at fundamental level and has clear signs of recovery. The innovation of foreign trade mode and the signing of Regional Comprehensive Economic Partnership (RCEP) are expected to bring more opportunities to the development of foreign trade and logistics industry in China.

Through the analysis from the demand side, during the "14th Five Year" Plan period, the transformation of consumption mode and commodity circulation system will promote the fragmentation of orders, thus generating fragmented demand on logistics fragmentation and driving the rapid development of sub markets such as LCL service and cross-bordere-commerce logistics; under the influence of multiple factors such as trade friction and the Pandemic, the customer's requirements for stability and security of supply chain will increase significantly; the opportunities of balanced international trade of China are expected to appear, and the import market business opportunities will be highlighted.

Through the analysis from the supply side, the cross-industrial competition and the integration in the logistics industry will become a normality. The Pandemic will urge more enterprises to reshape their supply chain logistics systems and will promote the continuous acceleration of digitization process and online and offline integration of logistics industry. New generation of technologies, ABCDT (AI, Blockchain, Cloud computing, Big data and Internet of Things), will rapidly develop, assisting the logistics enterprises in reducing costs and increasing efficiency and improving the customer's experience.

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In above trend, opportunities and challenges coexist in the logistics industry. Taking the whole network operation as the main line, the Company will accelerate the construction of digital products, network organizations, intelligent operation, systematic management and platform- based ecology, continue to carry out the quality and efficiency improvement and process optimization, continuously improve the end-to-end whole process supply chain service ability, create value for customers and shareholders, and contribute to the guarantee of the smooth industrial chain and supply chain.

(II) Development Strategy of the Company

3Applicable      □Not applicable

As the operation platform and brand of logistics business of China Merchants Group, Sinotrans has persisted in its mission of "creating a logistics ecology system connecting the world to successfully promote industrial progress" and has established the corporate vision of "becoming a world-class intelligent logistics platform enterprise". During the "14th Five Year" Plan period, the Company will also adhere to its development idea of "quality, profitability and moderate scale", enhance and optimize the core businesses of logistics, accelerate the transformation and upgrading through innovation driving and digital empowerment with the customer as center to increase its market competitiveness, create an "integrated, open, shared and collaborative" supply chain logistics ecosystem, and assist the stabilization of global supply chain in and international and domestic double circulation to realize the high-quality development. By 2025, the Company will realize the strategy objective of "form a digital, networked and intelligent development mode with the data drive as the core, the platform-based ecology as the support and the whole network operation as the main line, and preliminarily establish a world-class intelligent logistics platform enterprise".

During the "14th Five Year" Plan period, on the basis of the "one, three and five" strategy, Sinotrans will optimize to form its "one, two, three, four and five" strategy system; holding on one, namely, implementing a differentiated strategy of integrating "product + network + model + platform" and achieve the vision of becoming a world-class intelligent logistics platform enterprise; focusing on two, namely, digital transformation and corporate culture construction; passing three barriers, namely, achieving restructuring of business, reshaping of operations and rebuilding of organization through transformation, integration and change; building four competitiveness, namely, building the connection ability of the whole scenarios, the service ability of the whole link, the integration ability of the whole network, and the ability of public aggregation; finally achieving the goal of digital products, networked organization, systematic management, intelligent operation, and platform-based ecology.

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During the "14th Five Year" Plan period, the Group will standardize and modularize the core process and service link with the customer as center and combine the standardized modules to create a product system with whole process integration, online and offline, rational costs, high efficiency, high stability and visual intelligence. The headquarters will be responsible for product planning and market strategy; the regional subsidiary will be responsible for selling products and delivering in local places, forming a standard customer management, rate and supplier system and uniformly operating and scheduling; realize the online query, order placing, operation, settlement, after-sales service and other functions; establish a collaborative mechanism, scientific evaluation and incentive mechanism and uniformly configure resources; uniform the data standards to realize the free flow of data in the whole network so as to provide an important support to analysis and decision making and improve the whole network operation capability so as to realize the transformation from traditional forwarding business model to integrated product operation model. Furthermore, the Company will continue to optimize the structure of the three major business segments to form an echelon business portfolio with optimization and improvement of forwarding and related business, rapid development of logistics business, and key breakthroughs in the e-commerce business.

The logistics business will transform to value chain integration in a faster way to improve the ability of industrial solutions in the industry and will promote the construction of trucking channel with the unified truck-cargo-warehouse system as the core. The Company will focus on the target markets of consumer products and retails, automobile and industrial manufacturing, electronics and high-tech products, medical and health, and buyers' consolidation, chemical, cold chain, project logistics, and the construction of industry solution product systems, and promote the capital operation, vigorously improve the market share.

The forwarding and related business will transform to the whole supply chain in a faster manner. The Company will actively consider the customer needs, focus on costs, efficiency, experience and definitive services, promote the standardization and modularization of core business and shipping, land, air and trucking transportation (collection to and distribution from port) channels with the whole process end-to-end product as orientation and with the channel construction as key point, focus on six logistics products, namely LCL products, FCL products, railway express, air freight products, bulk cargo logistics services and carrier integrated logistics services, develop the import business, realize the online transaction, and form the forwarding and related business "N+1" product system. The Company will continuously increase the proportion of products of whole process.

The e-commercebusiness will transform to platform and ecosystem in a faster manner. The Company will optimize and refine the cross-bordere-commerce logistics business to realize the economy of scale, pay attention to and develop import logistics business to achieve two-way balance, focus on four major directions, i.e. online and platformization, cross-bordere-commerce logistics, ecosystem and technology empowerment, continue to promote the online orientation of main business, jointly create the digital products with the forwarding and related business segment, and logistics business segment to realize the connection of transaction, delivery and payment, enhance the capital management, and increase the investment in logistics technology.

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(III) Operating plans

3Applicable      □Not applicable

In 2021, the Pandemic is still a major topic in the global economy, and the normalization of the Pandemic is a high probability event. China will enter into a new stage of development as a whole and speed up the construction of a new development layout. The Company will seize the opportunity of expanding the domestic market, optimize and refine the cross-bordere-commerce logistics business to achieve the economy of scale, and pay attention to and develop the import logistics business to achieve two-way balance.

In 2021, the Company is expected to achieve operating income of RMB85 billion. The above number does not constitute a performance commitment or profit forecast to investors. Actual results will be affected by macro-economy, industry development, market demands and epidemic situation.

In 2021, the Company will focus on the following aspects:

1. Promotion of the transformation with higher quality and continuous creation of "two strong systems", i.e. enhancing products system and strengthening operation system

The Company will accelerate the construction of "enhancing products system and strengthening operation system", and take advantage of the new development layout to promote the high-quality development of business.

1. Restructuring business and strengthening products
   In 2021, the Company will focus on the security of the industrial chain and supply chain, and promote the business transformation of three segments based on the digital scenarios.
   In the logistics, the Company will focus on "domestic circulation", pay attention to the market opportunities brought by consumption upgrading and "new infrastructure", accelerate the transformation to value chain integration and build a logistics product system. ① Focus on industry segments in depth, form the industrial solutions for automobile tire, refined chemical industry, consumer goods omni-channel BC warehouse and other special segments, increase the market share in key industries. ② By centralizing the source of cargo, build a diversified transportation pool, form a trunk line + regional distribution + city distribution network with the unified information system and intensive management under the control of unified dispatching, build an end-to-end and intelligent integrated truck-cargo-warehouse operation platform supporting contract logistics business, and basically complete the launching of the operation system of unified trucking channel platform for transportation business. ③ Continuously drive the replication and promotion of application of control tower, automated warehouse, blockchain and algorithm core technology in logistics, and form a capability of digital solution.

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In the forwarding and related business, the Company will further consolidate its advantages, set building a safe, stable and smooth international supply chain as its goal, and speed up to create the whole supply chain products. ① As for air freight products, the Company will continuously increase its controllable the transportation capacity by contracting, etc., continuously integrate the port operation, air trunk line capacity, overseas services and other resources, research and develop product categories that meet market demands, and diversify product portfolio and standardize product operation to improve its competitiveness in international air freight logistics chain; ② As for railway products, the Company will make efforts to improve the lean operation level of cross-border railway express, realize the standardized, whole process and digital operation, optimize the product structure, enrich the product serials, develop the core customer train, e-commerce, post, cold chain, LCL and other specialized products, focus on the new land-sea channel and actively participate in the development and operation of shipping- railway multimodal transportation products; ③ As for FCL products, the Company will continue to push forward the centralized procurement of transportation capacity, grasp the chance to start the trial of blocking space and focus on the construction of selected routes; ④ As for LCL products, the Company will constantly improve its service network, establish new satellite warehouses and overseas warehouses, continuously improve its digital operation capability, promote intelligent operation scenarios; ⑤ As for bulk cargo logistics, the Company will construct around specialization and whole process, increase and improve bulk cargo logistics service product portfolio composed of the whole process products, land operation products, shipping agency (general agency) products, broaden product categories, enlarge the product scale, and promote the construction of bulk cargo logistics service platform with whole network operation and online and offline integration; ⑥ As for carrier integrated logistics service, the Company will continue to promote the construction of intelligent yard, speed up the improvement of standardization and intelligence level of station business, establish a unified operation platform for station business and accelerate the whole network operation of yard and freight station and other businesses.

In the e-commercebusiness, the Company will accelerate the transformation to platform and ecosystem and coordinate the online and offline channels to build

1. competitive digital product system. ① As for cross-bordere-commerce logistics business, the Company will rely on the sea, air and railway resources, actively expand the 2B and 2C business of cross-bordere-commerce logistics, establish an e-commerce core customer marketing system, realize core customers coordinate marketing and take the initiative to connect the commodity circulation; ② As for logistics e-commerce platform, the Company will take Y2T as the main body to facilitate the concentrated management of the transportation capacity via the online freight platform, realize the online auto-match of waybills, purchase orders and warehouse receipt, and materialize the integration of the Company's trucks, cargo and warehouses of the Company; complete the implementation of "science reform demonstration action" pilot scheme, continue to improve platform operation capacity, online marketing capability and technical competence, and seek to increase the platform's average monthly active enterprises of 10,000 and average daily visits of 80,000.

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1. Reshaping operation and strengthening back office
   In 2021, the Company will push forward operation reshaping, and build the foundation of the network-wide operation system of the Company from the following four aspects: product, customer, operation and resource.
   In respect of product management, the Company will promote the implementation of the framework solution to product systems and commence the pilot scheme of digitalization, improve the product management procedure and mechanism and promote the launch of the product management center system to realize the lifecycle management of product orders.
   In respect of customer management, the Company will prioritize the promotion of customer management digitalization, facilitate classified customer management, optimize and adjust customer structure, effectively identify customer value, intensify the management of strategic customers and propel the business growth of the Company in a quality manner.
   In respect of operation management, the Company will prioritize the establishment and optimization of business standard, focus on the criterion and indicator system of business data and deepen internal business collaboration.
   In respect of resource management, the Company will promote the establishment of a product-centered supplier management system in the scenario of digitalization, improve supplementary supplier management, organization and assessment mechanism and establish a centralized procurement strategy to support the whole network operation of the Company.

2. Promotion of the integration with higher efficiency, optimization and improvement of the "two strategic arrangements of the overseas and asset"

Firstly, optimize and improve the overseas layout. The Company will grasp the favorable opportunities of the signing of Regional Comprehensive Economic Partnership (RCEP) and regular and stable operation of European railway express and focus on Asia Pacific and Europe markets. ① In the Asian-Pacific region, in 2021, the Company will complete the integration of institutions in Japan, South Korea and Australia, and deeply cultivate the Southeast Asian market; and expand the scale and coverage of the overseas warehouses of "Sinotrans E-LCL".② In Europe, in 2021, the Company will focus on promoting the comprehensive docking and integration of KLG and the Company and promote KLG to become the core subject of the Company in Europe. ③ In 2021, the Company will also continuously promote the integration in the Middle East, South Asia and Africa, form the regional overall planning capacity, and emphasize the construction of customs clearance, warehousing and distribution services and import return marketing capabilities in Southeast Asia, Japan and South Korea.

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Secondly, optimize and improve the asset management mode. The Company will further form a closed-loop management system of asset deployment, investment construction, operation management and asset exit; continue to improve the management mode of separating light and heavy assets and promote the implementation of asset operation indicator system to effectively improve asset utilization efficiency and operation efficiency; continue to promote the idle assets sharing and internal adjustment mechanism to accelerate the disposal of redundant and inefficient assets and equities.

3. Promotion of the innovation with more leading force and acceleration of digital transformation and scientific and technology reform project

The Company will lead the innovation and development of intelligent logistics by creating its independent innovation core technology, core algorithm, core team and innovation management system and through the comprehensive digital transformation, vigorously improving the independent innovation capacity and scientific and technological leading capacity of intelligent logistics.

In respect of digital transformation, the Company will accelerate the implementation of digital transformation planning, form six platforms, namely product service, business operation, resource management, data service, management support and technical support and recongnized the digital competitive advantage. In respect of intelligent logistics development, the Company will accelerate the formation of independent and controllable logistics core technology capabilities and focus on promoting the full coverage application of related technologies in logistics scenarios to realize the cost reduction and efficiency enhancement; as for intelligent application, the Company will expand the application scope of document intelligent processing platform and strive to improve the annual document processing volume by over 60%; as for automatic application, the Company will promote the application of Robotic Process Automation (RPA) and strive to complete over 150 process automation operations; as for algorithm application, the Company will apply the transportation scheduling algorithm to cold chain, chemical industry, Fast Moving Consumer Goods (FMCG) and other industry scenarios, and complete the implementation of trucking channel scheduling algorithm; as for blockchain application, the Company will research and develop the innovative products of supply chain financial services based on the real logistics scenario information of the third party together with the financial institutions; as for Internet of Thing (IoT) application, the Company will continue to promote the connection of intelligent hardware, sensors and Radio Frequency Identification (RFID), and promote the full coverage of transportation capacity state visualization. In respect of innovation system and mechanism, the Company will continue to promote "science reform demonstration action" of Y2T, complete the first-dispatch option granting on the basis of the previous capital increase and share issue and really stimulate the kinetic energy and vitality of scientific and technological innovation through the reform of system and mechanism.

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4. Promotion of the innovation of commercial mode and construction of "trinity" logistics ecosystem

The Company will further accelerate the transformation to integrators and platform providers, actively explore the platform business model, promote the positioning of Y2T on the vertical logistics e-commerce platform, further improve platform functions and accelerate the realization of a closed-loop of trading, delivery and payment. In 2021, the Company will promote the internal collaboration of the whole link products, launch the China-Russia railway products on the "Y2T" platform; promote the integration and application of "Y2Pay" to products supporting online transaction, support the payment needs of online transactions in different business scenarios, and designate each business unit to provide logistics delivery capacity; and also strengthen the linkage with product ownership transfer to attract traffic to our business and boost platform traffic and business growth.

(IV) Potential Risks

3Applicable      □Not applicable

The Group has established a comprehensive risk management system, and focuses on the collection, identification, evaluation and management of risks and the establishment of prevention and control mechanism. In consideration of COVID-19 impact, the macroeconomic situation and the actual conditions, the Company evaluates and determines its potential risks and makes the counter measures by way of management interview, and online risk assessment questionnaire, etc., as follows:

1. Market competition risks

The market competition will be intensified because the concentration of logistics industry is low, the homogeneity of its products and services is high, cross-field competitors such as e-commerce enterprises and shipping companies continuously enter the market, and the leading players in the logistics segment market continuously expand their business and network scope. If the Company is unable to respond to the changes in market structure, to enhance its ability of new product design and R&D and platform-based integration, to increase its innovation response and to realize the differentiation by improving the service quality, focusing on the cost control, improving the product structure and other ways, the Company may not form the core competitiveness, which may lead to the risks of reduction of business volume and market share of the Group.

Counter measures: The Group strengthens the research on the change of market competition pattern and industry trend, actively seeks for change, focuses on the enhancement of products and operation, strengthens the reconstruction of business model and the improvement of the whole network operation ability, improves the solving ability and differential competitiveness of logistics solutions, promotes the integration process of "product + network + mode + platform", and improves the market competitiveness of the Group; strengthens the construction of series products, such as "Sinotrans E-LCL" and China Railway Express express products, promotes the standardization construction of products; accelerates digital construction to assist in Y2T platform operation, builds the platform ecology construction, and increases the technology empowerment and whole-chain integration ability.

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1. Macro-economyrisks
   In 2020, the global economy recovered moderately after suffering from the impact of the Pandemic. However, the complex and severe international political and economic situation and the impact of uncertainty brought by many factors, such as continuous Pandemic situation, may lead to slowdown or reduction of import and export growth, insufficient transportation capacity, reduce of cargo volume, and fluctuation of exchange rate and interest rate. The development of logistics supply chain is facing a relative complicated situation. There exist unfavorable factors that may impact the operation of the Group.
   Counter measures: The Group strengthens the tracking, research and analysis of macro- economic situation, industrial policies, and monetary and financial policies of major economies involved in its business, dynamically adjusts its business structure and customer structure, targets the industries with high growth rate, emphasizes the development of logistics business, strengthens the expansion of domestic business, and constantly improves profitability and comprehensive competitiveness; masters relevant policies to realize better overseas network layout, speeds up the process of automation, digitization and intellectualization, accelerates the upgrading of product structure, improves the product quality, improves the level of industrial supply chain, increases the brand awareness, and expands market share in the existing market.
2. Credit control and accounts receivable risks
   Due to the changes of economic environment such as the Pandemic, there may be risks of untimely adjustment of credits and failure of timely and complete collection of accounts receivables due to untimely identifying and tracking the change of customer's credit situation, resulting in economic losses of the Group.
   Counter measures: The Company strengthens the research on relevant risks and policy response, focuses on the enhancement of prior access and evaluation and the application of digital technology to alarm in event, promotes the implementation of credit management platform in regional companies, and promotes the online management, dynamic evaluation and monitoring of customer credit.
3. Operating control risks
   The Group aims at providing customers with services in whole value chain and whole supply chain which involve many logistics operation scenarios and links. If the whole scenario connection capability, whole chain service capability, whole network integration capability and public aggregation capability are insufficient, its operation efficiency, quality and brand may be affected. The lack of perfect risk prevention measures and emergency plans, the lack of risk compliance awareness, and the failure to implement relevant control measures as required may lead to the occurrence of risk events and cause the Group to suffer economic losses.

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Counter measures: The Company's headquarters cooperate with the business line and digital team to increase the research on services, strengthen the data management and application through mutual connection and effective integration of domestic and overseas networks and online and offline networks, and improve the whole network operation capability; regularly sort out and update the Company's internal control system and improve the internal control process in key business fields; review and summarize previous related risk events, establish 12 basic risk early warning models in five risk scenarios, initially complete the digital early warning work, and will continue to update and improve them; strengthen the training and education of relevant personnel, improve the compliance awareness and risk prevention and control awareness of front-line operators and standardize their operation behaviors so as to fundamentally prevent the major risk accidents.

1. 5. Procurement management risks

   The whole supply chain management needs the enhancement of the integration of related logistics resources. The changes in the economic environment bring challenges to suppliers' production and quality. In practice, there may be problems that the performance of suppliers is not inspected or monitored thoroughly, resulting in that the quality of products or services provided by suppliers can't be guaranteed and can't meet the requirements, thus bringing losses to the Group.

   Counter measures: The Group uniformly strengthens the research and guidance of policies for supplier management, manages the suppliers at different levels and in different categories, formulates the unified standards, standardizes the supplier management process, and promotes systematic management by building a system; strengthens the data analysis of supplier transactions, shares the supplier resources, regularly or irregularly inspects the supplier performance, and evaluates the supplier performance.

2. Others

□Applicable      3Not applicable

IV. EXPLANATION AND REASONS FOR FAILURE TO DISCLOSE IN ACCORDANCE WITH STANDARDS DUE TO INAPPLICABILITY OF STANDARDS OR SPECIAL REASONS SUCH AS NATIONAL OR TRADE SECRETS

□Applicable      3Not applicable

1. OTHER DISCLOSURES (DISCLOSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE SEHK LISTING RULES)
2. 1. Principal Business

Please refer to "Chapter 4 Business Overview" in this report for details.

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(II) Final Dividend and Book Closure Periods

Please refer to "I. PROPOSALS OF ORDINARY SHARES PROFIT DISTRIBUTION OR CONVERSION OF COMMON RESERVE FUND INTO SHARE CAPITAL (I) Formulation, Implementation of or Adjustment to the Cash Dividend Policy" under "Chapter 6 Significant Matters" in this Report for details.

(III) Employee, Major Customers and Suppliers

The Group fully understands that employees, customers and suppliers are the key to our sustained and stable development. We are committed to working closely with our employees and suppliers to provide our customers with quality products and services to achieve sustainable growth.

For details of the employees of the Group, please refer to "Chapter 9 Directors, Supervisors, Senior Management and Employees" in this report.

For details of major customers and suppliers, please refers to "(4) Key Customers and Key Suppliers" under "II. MAJOR BUSINESS CONDITIONS DURING THE REPORTING PERIOD (I) Analysis on Principal Businesses 2. Income and Cost Analysis" in this chapter.

(IV) Issuance of Shares and Debentures

Please refer to "II. SECURITY ISSUANCE AND LISTING" under "Chapter 7 Change in Ordinary Shares and Particulars of Shareholders" in this Report.

(V) Sufficiency of Public Float

As at the date of this report, the Directors confirm that, based on publicly available information and to the knowledge of the Directors, the Company has sufficient public float as required under the SEHK Listing Rules.

(VI) Equity-Linked Agreement

During the year ended 31 December 2020, as far as the Directors of the Company were aware, the Company was not involved in any equity-linked agreement.

(VII) Purchase, Sale or Redemption of Listed Securities of the Company

So far as known to the Directors of the Company, there was no purchase, sale or redemption of its listed securities by any member of the Group during the year ended 31 December 2020.

(VIII) Tax Relief and Exemption

The Company is not aware of any particulars of tax relief and exemption available to Shareholders for holding of the Company's securities.

(IX) Pre-Emptive Rights

There are no provisions for pre-emptive rights under the Articles of Association of the Company or the laws of the PRC.

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1. Related matters of Directors, Supervisors and Senior Management
2. 1. Directors, Supervisors and senior management member, and their biographies, changes and remuneration are set in "Chapter 9 Directors, Supervisors, Senior Management and Employees" of this Report.
   2. Directors' and Supervisors' Service Contracts, interests in Shares, interests in Transactions, arrangements or contracts, interests in Competing Businesses, and rights to Acquire Shares or Bonds are set out in "VII. Others" under "Chapter 9 Directors, Supervisors, Senior Management and Employees" of this Report.
   3. The Articles of Association of the Company does not contain any permitted indemnity provision as specified in section 470 of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong).

(XI) Material Contracts with Connected Parties

The controlling Shareholder of the Company is Sinotrans & CSC, and the actual controller of the Company is China Merchants. The details of the connected transactions and continuing connected transaction agreements of the Company with China Merchants and Sinotrans & CSC or their subsidiaries are set out in "XIV. CONNECTED TRANSACTIONS, MAJOR RELATED PARTY TRANSACTIONS (I) Connected Transactions (Disclosed in Accordance with the SEHK Listing Rules)" under "Chapter 6 Significant Matters" in this Report.

(XII) Management Contracts

No contract concerning the management of or administrative work on the whole or any substantial part of the business of the Company was entered into or existed during the year.

(XIII) Compliance with the Relevant Laws and Regulations that Have a Significant Impact on the Company

The Group has set up a department in charge of documenting and updating the laws and regulations that have a significant impact on the Company, and continuously monitoring their compliance to ensure that the Group abides by such laws and regulations from time to time. Besides those general laws and regulations such as the Company Law of the PRC, the SEHK Listing Rules, the Group has also complied in all material respects with all the logistics related laws and regulations that have a significant impact on the business of the Group during the Reporting Period, including the Road Traffic Safety Law of the PRC, the Maritime Law of the PRC, etc.

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(XIV) Environmental and Social Responsibilities

The Group pays great attention to environmental and social responsibility, and believes that active performance of social responsibilities represents an essential quality for a good enterprise, which is very important in terms of both the community's future and the sustainable development of the Company. All along, Sinotrans effectively links our fulfillment of social responsibilities with corporate development strategies, incorporates social responsibilities into all aspects of corporate production and operations, and strives to achieve the sustainable development of the Company. At present, the Company has established a comprehensive management system including quality management system, environmental management system and occupational health and safety management system in accordance with ISO9001:2015, ISO14001:2015 and ISO45001:2018 standards. Since 2015, the Company has prepared and issued an "Environmental, Social and Governance Report" annually, iterating its performance in the previous year. For more information on the Group's performance of environmental and social responsibilities in 2020, please refer to the "2020 Social Responsibility Report (ESG Report)" to be published by the Company subsequently.

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Significant Matters

1. PROPOSALS OF ORDINARY SHARES PROFIT DISTRIBUTION OR CONVERSION OF COMMON RESERVE FUND INTO SHARE CAPITAL

1. Formulation, Implementation of or Adjustment to the Cash Dividend Policy

3Applicable      □Not applicable

1. Formulation of and adjustment to profit distribution policy:

1. The Articles of Association contains express provisions for the profit distribution policy and approval procedures, and the relevant policies are set out below:
2. 1. Forms of profit distribution: the Company may make profit distribution in the forms of cash payment of dividend, distribution of dividend in the form of shares or a combination of the two forms; where permitted, the Company may make interim profit distribution;
   2. Details of conditions and proportions of the Company's cash dividends: Except in the case of special circumstances, the Company may distribute dividend in cash, provided that the Company is profitable in that year and the aggregate undistributed profit is positive. The profits distributed in cash for each year shall not be less than 10% of the realized distributable profit in that year. The "special circumstances" referred to above shall mean: the net cash flow generated from the operation in that year is negative, and dividend payment in cash will have an adverse effect on the subsequent existence of the Company as a going concern; the auditors have not issued a standard auditor's report with unqualified opinions regarding the financial reports for that year; the Company has major investment plans or other major cash expenditures or otherwise (other than any fund raising projects). The "major investment plans" or "major cash expenditures" mentioned above shall mean where the aggregate expenditures for any proposed investments or asset acquisition by the Company in next twelve months are equal to or exceed 30% of the audited total assets in the most recent audit of the Company.
   3. When the Company's operation is satisfactory, and the Board believes that the share price of the Company is disproportionate to the share capital size of the Company, and dividend payment in shares is in the best interests of all shareholders of the Company, subject to satisfaction of the above dividend payment conditions, the Company may put forward a proposal for dividend payment in shares.

Please refer to Article 216 of the Articles of Association disclosed on the websites of the SSE (www.sse.com.cn) and the Hong Kong Stock Exchange (www.hkex.com.hk) on 2 June 2020 for details.

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1. On the basis of profit distribution policy stipulated in the Articles of Association, the policy of 2018-2020 cash dividend distribution ratio has been further specified in the "Plan of Sinotrans Limited on Shareholder Return for the Next Three Years (2018- 2020)", which is as follows:
   The Company shall maintain the continuity and stability of the profit distribution policy. Subject to the satisfaction of cash dividend payment conditions, the profits distributed by the Company in cash in any three consecutive years in aggregate shall not be less than 30% of the average distributable profits in such three years and the profits distributed by the Company in cash for each year shall not be less than 10% of the realized distributable profit in that year. The Board of the Company shall put forward a policy of differentiated cash dividend distribution in accordance with the procedures set forth in the Articles of Association after taking into account such factors as the characteristics of the industry where the Company operates, the stage of development, its own operating mode, profit level and whether there are significant capital expenditure arrangements on a comprehensive basis and distinguishing the following situations:
2. 1. If the Company's development is in the phase of maturity and no material capital expenditure has been arranged, the minimum ratio of cash dividend in that profit distribution shall be 80%;
   2. If the Company's development is in the phase of maturity and material capital expenditure has been arranged, the minimum ratio of cash dividend in that profit distribution shall be 40%;
   3. If the Company's development is in the phase of growth and material capital expenditure has been arranged, the minimum ratio of cash dividend in that profit distribution shall be 20%;

When the Company conducts profit distribution, the Board shall determine the specific stage of the Company according to specific circumstances. If it is difficult to identify the Company's phase of development but material capital expenditure has been arranged, it can proceed according to the previous provision.

1. Dividend and bonus income tax was withheld and exempted in accordance with the State's relevant laws and regulations.
2. The implementation of cash dividend policy during the Reporting Period:
   The 2019 profit distribution plan of the Company adopted dividends distribution in cash. According to the Proposal in Relation to the Profit Distribution Plan for the Year 2019 considered and approved at 2019 Annual General Meeting convened on 1 June 2020, a final dividend of RMB0.12 per share (tax included), totaling RMB888,096,465.00 (tax included), shall be distributed for the year 2019. The dividend distribution of the Company for the year 2019 was completed on 16 July 2020. For further details of A share dividend distribution, please refer to the Announcement on the Implementation of A Share Equity Distribution for the Year 2019 (Lin No.2020-032) disclosed by the Company on the website of the SSE (www.sse.com.cn).

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4. Matters related to the profit distribution for the year 2020

According to the profit distribution policy stipulated in the Articles of Association and in combination of the Company's actual situation, the Resolution in Relation to Profit Distribution Proposal for the Year 2020 was considered and approved at the 24th meeting of the second session of the Board, the particulars of which are as follows: Based on the total share capital of 7,400,803,875 shares as at 31 December 2020, a total of RMB888,096,465.00 (tax included) shall be distributed with RMB0.12 (tax included) distributed for every one share and RMB1.2 distributed (tax included) for every ten shares, the remaining profit shall be recognized as retained earnings, and no shares shall be distributed and no capital reserve shall be converted into share capital. For the details, please refer to the Announcement of the Company on the Profit Distribution Proposal for the Year 2020 (Lin No. 2021-003) disclosed by the Company on the website of the SSE (www. sse.com.cn).

Independent Directors of the Company have expressed their independent opinions in agreement with the above-mentioned resolution, which is still subject to the approval by the shareholders at the 2020 Annual General Meeting of the Company. The 2020 Annual General Meeting of the Company will be convened by way of the combination of on-site voting and online voting, to provide minority shareholders with the opportunity to fully express their opinions and demands, fully safeguarding the legitimate rights and interests of minority shareholders. After the resolution is considered and approved at the general meeting, it is expected that the Company will pay the cash dividend on or before 27 July 2021. The Company will make further announcement(s) on the closure of books for holders of H shares or record date for A shares and the expected date of payment in relation to the payment of cash dividend in the notice of the general meeting or after the convening of the general meeting.

Pursuant to the Articles of Association of the Company, dividends payable to the holders of A Shares of the Company shall be paid in RMB, and dividends payable to the holders of H Shares of the Company shall be calculated and declared in RMB, and paid in HK$. The exchange rate for dividends payable in HK$ is the average exchange rate of RMB to HK$ published by the People's Bank of China during the week (23 March 2021 to 29 March 2021) preceding the date of recommendation of the 2020 dividend by the Board. The average exchange rate of RMB to HK$ for the said week was HK$1=RMB0.84033. Accordingly, the amount of 2020 dividend for each H Share of the Company is approximately HK$0.1428.

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1. Ordinary Shares Profit Distribution Plan or Proposal, Conversion of Capital Reserve into Share Capital Plan or Proposal for the Previous Three Years, Including the Reporting Period

					Unit: Yuan  Currency: RMB
						Net profit	Percentage
						attributable	in net profit
						to ordinary	attributable
						shareholders of	to ordinary
						the Company in	shareholders
						the consolidated	of the
		Amount of		Number		financial	Company
	Number of	dividend	Basic	of shares		statement	in the
	bonus shares	for every 10	earnings	converted	Amount of	during the year	consolidated
Dividend	for every 10	shares (Yuan)	per share	for every 10	cash dividend	of dividend	financial
Year	shares (share)	(tax included)	(Yuan/share)	shares (share)	(tax included)	distribution	statement (%)
2020	0	1.2	0.37	0	888,096,465.00	2,754,422,810.84	32.24
2019	0	1.2	0.38	0	888,096,465.00	2,804,142,210.57	31.67
2018	0	1.3	0.45	0	962,104,503.75	2,704,620,823.07	35.57

(III) Cash Dividend by Share Repurchase Offer in Cash

□Applicable      3Not applicable

(IV) If It Is Profitable and the Parent Recorded Profits Distributable to the Ordinary Shareholders During the Reporting Period, but Has Not Proposed Any Cash Dividend for the Ordinary Shares, It Shall Disclose the Reasons for Non-Distribution as Well as the Use and Future Plans of the Undistributed Profits

□Applicable      3Not applicable

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II. PERFORMANCE OF COMMITMENTS

1. Commitments of the Actual Controller, Shareholders, Related Parties, Acquiring Parties of the Company and the Company and Other Parties Involved During the Reporting Period or Subsisting to the Reporting Period

3Applicable      □Not applicable

						Is there
					Is there a timely
Commitment				Time and term	term for	and strict
background	Commitment type	Commitment party	Summary of the commitment	of the commitment	fulfilment fulfilment
Commitments related	Shares lock-up	China Merchants	Within thirty-six months from the listing	Time of the commitment: Yes	Yes
to material asset		Sinotrans & CSC	date of A shares of the Company, the	28 February 2018;
restructuring			covenantor shall not transfer or entrust	Term of the commitment:
			other to manage the shares issued prior	18 January 2019 -
			to the merger by absorption held directly	17 July 2022
			or indirectly by itself (excluding H shares)
			and the Company shall not repurchase
			such shares. Within six months from the
			listing date of A shares of the Company,
			if the closing prices of the A shares for
			20 consecutive trading days are below
			the issue price, or the closing price as
			at the end of the six-month period after
			listing is below the issue price, the lock-
			up period will be automatically extended
			for six months.
	Others	Sinotrans & CSC	The covenantor shall maintain mutual	Time of commitment:	No	Yes
		China Merchants	independence in terms of personnel,	28 February 2018;
			finance, asset, business and organization	Effective permanently
			in accordance with the provisions of the
			relevant law, regulation and normative
			documents.

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						Is there
					Is there a timely
Commitment				Time and term	term for	and strict
background	Commitment type	Commitment party	Summary of the commitment	of the commitment	fulfilment fulfilment
	Reduction of	Sinotrans & CSC	The covenantor undertakes to avoid and	Time of commitment:	No	Yes
	related-party	China Merchants	reduce related-party transaction with the	28 February 2018;
	transaction		Company. For related-party transactions	Effective permanently
			that are unavoidable or where there are
			sufficient reasons, the covenantor shall
			sign a standard and formal related-party
			transaction agreement, shall perform
			the transaction in accordance with a
			fair and reasonable market price and
			shall fulfil the related-party transaction
			decision-making process and information
			disclosure obligation; the covenantor
			shall not prejudice the legitimate interests
			of the Company and other non-related
			shareholders through related-party
			transaction. The covenantor undertakes
			to procure corporate under its control
			(except the Company) to comply with the
			aforementioned commitment.
	Others	The Company	The covenantor undertakes to accelerate	Time of commitment:	No	Yes
			the development of the principal business	13 April 2018;
			of the Company; to enhance the	Effective permanently
			internal management of the Company
			and cost control; to continuously
			improve corporate governance so as
			to provide institutional safeguard for
			the development of the Company; to
			further improve the profit distribution
			system and strengthen the investor return
			mechanism.
	Others	Sinotrans & CSC	The covenantor undertakes to not go	Time of commitment:	No	Yes
		China Merchants	beyond its power and interfere the	13 April 2018;
			operation management activities of the	Effective permanently
			company and to not impair the interests
			of the company.

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						Is there
					Is there a timely
Commitment				Time and term	term for	and strict
background	Commitment type	Commitment party	Summary of the commitment	of the commitment	fulfilment fulfilment
	Others	All Directors,	The covenantors undertake to perform	Time of commitment:	No	Yes
		Supervisors	their duties faithfully and diligently to	13 April 2018;
		and Senior	protect lawful interests of the Company	Effective permanently
		Management	and all shareholders; not to transfer
			benefits to other entities or individuals
			without compensation or on unfair terms;
			to constrain the consumption if it is
			business- related; not to invest with or
			spend the company's assets outside
			the performance of their duties; that
			the Board shall formulate salary system
			which is in line with the implementation
			of the return remedial measures; that
			if a shareholding incentive policy shall
			be implemented, the conditions for
			exercising the option under the policy to
			be announced shall be in line with the
			implementation of the return remedial
			measures; that if the CSRC promulgates
			new rules for regulating return remedial
			measures and their commitments, the
			covenantors shall issue supplementary
			commitments.
	Others	Sinotrans & CSC	Within three years from the listing date	Time of commitment:	Yes	Yes
		The Company	of A shares of the Company, if the	13 April 2018;
		All Directors,	closing prices of the A shares for 20	Term of the commitment:
		and Senior	consecutive trading days are below the	18 January 2019 -
		Management	latest audited net assets per share of	17 January 2022
			the Company other than due to force
			majeure and malicious speculation of a
			third party, subject to law, regulation,
			normative documents and the listing
			rules of the place of listing and under
			the premise that the shareholding
			will be in compliance with the listing
			requirement, measures including but not
			limited to increase in shareholding of
			the A share by Sinotrans & CSC Group
			and repurchase of the A share by the
			Company will be taken legally to stabilize
			the share price of the Company's A
			share.

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						Is there
					Is there a timely
Commitment				Time and term	term for	and strict
background	Commitment type	Commitment party	Summary of the commitment	of the commitment	fulfilment	fulfilment
	Others	The Company	Except in the case of special	Time of commitment:	No	Yes

	circumstances, the Company may	13 April 2018;
	distribute dividend in cash, provided	Effective permanently
	that the Company is profitable in that
	year and the aggregate undistributed
	profit is positive. The profits distributed
	in cash for each year shall not be less
	than 10% of the distributable realized
	profit in that year. In connection with
	the dividend payment, the Board shall
	put forward a policy of differentiated
	cash dividend distribution according
	to the circumstances, pursuant to the
	procedures set forth in the Articles of
	Association. In 2018 to 2020, subject to
	the satisfaction of cash dividend payment
	conditions, the profits distributed in cash
	by the Company in any three consecutive
	years in aggregate shall not be less than
	30% of the average distributable profits
	in such three years.
Avoiding horizontal Sinotrans & CSC	The covenantor shall take effective	Time of commitment:	No	Yes
competition	measures to avoid horizontal competition.	13 April 2018;
	The covenantor has some subsidiaries	Effective permanently
	that are engaged in integrated logistics
	business (the "Excluded Companies"). As
	of the date of this letter of commitment,
	the Excluded Companies have blemishes
	in terms of their asset ownership, subject
	qualification, profitability and other
	aspects, and, therefore, do not meet the
	requirement for injection to the Company.
	The covenantor has signed and fulfilled
	the entrusted management agreement
	with the Company, pursuant to which all
	the Excluded Companies are entrusted
	to the Company for management, so
	as to ensure that there is no substantial
	horizontal competition between the
	covenantor and the Company and its
	subsidiaries.

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						Is there
					Is there a timely
Commitment				Time and term	term for	and strict
background	Commitment type	Commitment party	Summary of the commitment	of the commitment	fulfilment fulfilment
	Avoiding horizontal	China Merchants	The covenantor undertakes to gradually	Time of commitment:	No	Yes
	competition		realize the withdrawal of the Excluded	13 April 2018;
			Companies from integrated logistics	Effective permanently
			business operation so as to thoroughly
			resolve the issue of substantial horizontal
			competition. Except for the companies
			entrusted to the Company, there are no
			competition between the covenantor
			and other companies under its control
			and the Company. The covenantor and
			other companies under its control do
			not, directly or indirectly, engage in any
			business or activity, in any form, that
			competes with or may compete with
			the principal business of the Company.
			During the period where the covenantor
			is the controlling shareholder of the
			Company, if the regulatory body or the
			Company believe that there is substantial
			horizontal competition between the
			covenantor and the Company, the
			covenantor shall offer the Company the
			right of first refusal.
	Resolving defective	Sinotrans & CSC	The covenantor shall fully support	Time of commitment:	No	Yes
	title of lands and		and facilitate the Company and its	13 April 2018;
	other items		subsidiaries to achieve completeness	Effective permanently
			of the certificates of title for assets

including lands and properties. After the completion of the merger by absorption, where the Company suffer actual loss from the ownership problem that exist in the land use rights and property assets held prior to the merger by absorption, or where there are indemnities, penalties, taxes or other fees that arose from the operation of defective land use rights and property assets by the Company and its subsidiaries after the merger by absorption, the covenantor undertakes to fully compensate the Company and its subsidiaries in a timely manner by way of cash within 30 days after the Company determined the actual loss or relevant fees legally.

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				Is there
			Is there a timely
Commitment		Time and term	term for	and strict
background	Commitment type Commitment party Summary of the commitment	of the commitment	fulfilment	fulfilment

Resolving defective	China Merchants	The covenantor shall fully support
title of lands and		and facilitate the Company and its
other items		subsidiaries to achieve completeness
		of the certificates of title for assets
		including lands and properties. After
		the completion of the merger by
		absorption, where the Company and
		its subsidiaries suffer actual loss from
		the ownership problem that exist in the
		land use rights and property assets held
		prior to the merger by absorption, the
		Company and its subsidiaries shall be
		fully compensated in a timely manner by
		way of cash within 180 days after the
		Company and its subsidiaries determined
		the relevant fees legally.
Others	Sinotrans & CSC	After the completion of the merger by
	China Merchants	absorption, if the Company suffers loss
		or assumes any responsibility from
		the payment issue of social insurance
		or housing provident fund prior to the
		merger by absorption, the covenantor
		undertakes to assume the corresponding
		indemnity after determining that loss or
		responsibility legally.
Others	Sinotrans & CSC	The covenantor shall comply with the
	China Merchants	relevant regulations under "The Several
		Provisions on the Reduction of Shares
		Held in a Listed Company by the
		Shareholders, Directors, Supervisors,
		and Senior Executives of the Listed
		Company" issued by the CSRC, the
		"SSE Listing Rules" and the "Detailed
		Implementing Rules of the SSE for
		Shareholding Reduction by Shareholders,
		Directors, Supervisors and Senior
		Management of Listed Companies"
		issued by the SSE.

Time of commitment:	No	Yes
13 April 2018;
Effective permanently

Time of commitment:	No	Yes
13 April 2018;
Effective permanently

Time of the commitment: No	Yes
14 January 2019;
Effective permanently

Note: Please refer to section "Material commitments made by each parties involved in this transaction" of "Report on the merger by absorption through share swap of Sinoair by Sinotrans Limited and related-party transaction (revised)" dated 3 November 2018 published by Sinoair on the SSE website (www.sse.com.cn) for the full text of the commitment listed above.

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1. If the Company Has Made a Profit Forecast as to Its Assets or Projects, and the Reporting Period is within the Profit Estimate Period, the Company's Explanation on whether Its Assets or Projects Meet Its Previous Profit Forecast and the Reasons

□Meet      □Not Meet      3Not applicable

1. Fulfilment of the Performance Commitment and Its Impact on the Goodwill Impairment Test

□Applicable      3Not applicable

1. THE OCCUPANCY OF FUNDS AND THE PROGRESS OF CLEARING ARREARS DURING THE REPORTING PERIOD

□Applicable      3Not applicable

IV. COMPANY'S NOTES ON "NON-STANDARD OPINION AUDIT REPORT" OF ACCOUNTING FIRMS

□Applicable      3Not applicable

1. EXPLANATIONS OF THE COMPANY ON THE REASONS FOR AND EFFECTS OF CHANGES IN THE ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES OF THE COMPANY OR REMEDIES FOR MAJOR ACCOUNTING ERRORS

1. Explanations of the Company on the Reasons for and Effects of Changes in the Accounting Policies and Accounting Estimates

3Applicable      □Not applicable

1. Changes in the Accounting Policies and the Effects

The Ministry of Finance issued the Interpretation of Accounting Standards for Business Enterprises No. 13 (Cai Kuai [2019] No. 21) on 10 December 2019, and Accounting Treatment of Rent Concessions Related to the COVID-19 Pandemic (Cai Kuai [2020] No. 10) on 19 June 2020. The Group has adopted the above interpretations and provisions for the preparation of the 2020 financial statements. The Interpretation of Accounting Standards for Business Enterprises No. 13 has no significant impact on the Group and the Company.

In accordance with the "Accounting Treatment of Rent Concessions Related to the COVID-19 Pandemic", the Group adopts the simplified method for all rent concessions, such as rent reductions and deferred payments, concluded between the Group as a party to a lease contract and a lessor or lessee under an existing lease contract, directly caused by Pandemic, and does not evaluate whether a lease modification has occurred or whether a lease classification has been reevaluated.

In 2020, the Group obtained rent concessions from the lessor as lessee in the amount of RMB17.3303 million, increasing the total profit by RMB17.3303 million. The amount of rent concessions granted by the Group as lessor to the lessee was RMB21.5561 million, decreasing the total profit by RMB21.5561 million. The period of deferred rent payment concessions granted by the Group to the lessee as the lessor shall be 1 to 3 months after the rental payment date agreed in the original lease contract.

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2. Changes in the Accounting Estimates and the Effects

According to the relevant provisions of "Accounting Standard for Business Enterprises No. 4 - Fixed Assets", at the end of each fiscal year, enterprises shall review the estimated useful lives, net residual values and depreciation methods of fixed assets, and if the estimated useful lives and net residual values of fixed assets differ from the original accounting estimates, adjustments shall be made accordingly. In addition, in accordance with the relevant provisions of Notice of the Ministry of Finance and the State Administration of Taxation on improving the enterprise income tax policy for accelerated depreciation of fixed assets (Cai Shui [2014] No. 75), all fixed assets with a unit value of not more than RMB5,000 held by enterprises are allowed to be deducted in the calculation of taxable income by one-time inclusion of current costs, and depreciation shall no longer be calculated over a period of years. In order to better match the depreciable lives of fixed assets with their actual useful lives, to more accurately reflect the depreciation of fixed assets, and thus to more fairly and appropriately reflect the Group's financial position and operating results, and with reference to the common practice of relevant companies in the same industry, the Group, upon approval at the 19th Meeting of the second session of Board held on 31 March 2020, has, from 1 April 2020 onwards, changed the useful life of the housing construction category to 30 years for steel structures, 25 years for steel concrete structures and 20 years for brick concrete structures; changed the useful life of vehicles to 5 years; and changed the fixed asset recognition criteria to RMB5,000. The depreciable lives and fixed asset recognition criteria before and after this change are as follows.

Before change		After change
	Depreciable		Useful life
	life (years)/		(year)/
	amount		Amount
Category/Item	(Yuan)	Category/item	(RMB)
Buildings - production buildings,	40	Buildings - Steel structure	30
Buildings - office buildings		Buildings - Steel concrete structure	25
		Buildings -Brick concrete structure	20
Houses - storage rooms	25	Buildings - Steel structure	30
		Buildings - Steel concrete structure	25
		Buildings - Brick concrete structure	20
Vehicles	6	Vehicles	5
Fixed asset recognition threshold	2,000	Fixed asset recognition threshold	5,000

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According to the provisions of Accounting Standards for Business Enterprises No. 28 - Changes in Accounting Policies and Estimates and Corrections of Errors, the future applicable method is adopted in the aforementioned accounting estimate changes, which has no impact on the financial position and operating results of the Group and the Company in prior years.The impact on total consolidated profit for 2020 is as follows:

	Effect of
	changes in
	accounting
	estimates on
	total profit for
Changes in accounting estimates	the year
Changes of useful life of fixed assets	-39,259,183.02
Total	-39,259,183.02

1. Analysis and Explanation of the Causes and Effects of the Company's Correction of Major Accounting Errors

□Applicable      3Not applicable

(III) Communication with Former Accounting Firms

□Applicable      3Not applicable

(IV) Other notes

□Applicable      3Not applicable

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VI. APPOINTMENT AND DISMISSAL OF AUDITORS

	Unit: Yuan	Currency: RMB
	Current appointment
Name of the onshore accounting firm	ShineWing Certified Public Accountants LLP
Remuneration for the onshore accounting firm	8,600,000
Term of audit by the onshore accounting firm	3
	Name	Remuneration
Accounting firm for internal control audit	ShineWing Certified Public Accountants LLP	1,500,000
Sponsor	CITIC Securities Company Limited,	/
	China Merchants Securities Co., Ltd.

Description of the appointment and dismissal of auditors

3Applicable      □Not applicable

On 1 June 2020, the 2019 annual general meeting was convened, at which the proposal in relation to the re-appoint of external auditor for 2020 was considered and approved, which agreed to re-appoint SHINEWING Certified Public Accountants LLP as the auditor of the Company for financial reports and internal control for the year 2020, with a term of office until the conclusion of the 2020 annual general meeting of the Company. The total audit fee is RMB9.7 million, among which the audit fees for financial reports and internal control are RMB8.2 million and RMB1.5 million, respectively. In addition, due to the acquisition of KLG Group, the scope of the consolidated statement in 2020 has changed, which increased the annual audit fee by RMB400,000.

Change of the Auditors During the Audit Period

□Applicable      3Not applicable

VII. THE SITUATION OF FACING THE RISK OF SUSPENSION OF LISTING

(I) Reasons for Suspension of Listing

□Applicable      3Not applicable

(II) Measures Taken by the Company

□Applicable      3Not applicable

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VIII. SITUATION AND REASONS FOR TERMINATION OF LISTING

□Applicable      3Not applicable

IX. MATTERS RELATED TO BANKRUPTCY REORGANIZATION

□Applicable      3Not applicable

X. MAJOR LITIGATION AND ARBITRATION MATTERS

□The company was involved in major litigation or arbitration proceedings

3The company was not involved in major litigation or arbitration proceedings

XI. PENALTIES AND RECTIFICATION OF LISTED COMPANY, ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, ACTUAL CONTROLLERS AND ACQUIRERS

□Applicable      3Not applicable

XII. EXPLANATION ON THE INTEGRITY OF THE COMPANY AND ITS CONTROLLING SHAREHOLDERS AND ACTUAL CONTROLLERS DURING THE REPORTING PERIOD

□Applicable      3Not applicable

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XIII. THE COMPANY'S EQUITY INCENTIVE SCHEME, EMPLOYEE STOCK OWNERSHIP SCHEME OR OTHER EMPLOYEE INCENTIVES AND THE IMPACT THEREOF

1. Incentives Disclosed in the Temporary Announcements and without Progress or Changes in Subsequent Implementation

3Applicable      □Not applicable

Summary of Events	Enquiry Index

On 31 March 2020, the 19th meeting of the second session of the Board was convened, at which the proposal in relation to the Share Option Incentive Scheme of Sinotrans Limited (revised draft) (《中國外運股份有限公司股票期權 激勵計劃(草案修訂稿)》) and a summary thereof and the Share Option Incentive Scheme of Sinotrans Limited (Phase I) (revised draft) (《中 國外運股份有限公司股票期權激勵計劃(第一期) (草 案 修 訂 稿)》) and a summary thereof were considered and approved.

On 3 April 2020, the Company has received the related notice that the SASAC has approved in principle the implementation of the share option scheme.

On 1 June 2020, the Company has convened the EGM and Class Meetings, at which all the proposals in relation to share option incentive scheme were considered but not passed by more than two-thirds of the shares with voting rights.

For details, please refer to the announcements of the Company dated 31 March 2020 on the websites of the SSE (www.sse.com.cn) and the Hong Kong Stock Exchange (www. hkex.com.hk).

For details, please refer to the announcements of the Company dated 3 April 2020 on the websites of the SSE (www.sse.com.cn) and the Hong Kong Stock Exchange (www.hkex. com.hk).

For details, please refer to the announcements of the Company dated 1 June 2020 on the websites of the SSE (www.sse.com.cn) and the Hong Kong Stock Exchange (www.hkex. com.hk).

1. Incentives Undisclosed in Temporary Announcements or with Progress in Subsequent Implementation

Equity incentives

□Applicable      3Not applicable

Other explanations

□Applicable      3Not applicable

Employee stock ownership scheme

□Applicable      3Not applicable

Other incentives

□Applicable      3Not applicable

88 SINOTRANS LIMITED

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XIV. C O N N E C T E D T R A N S A C T I O N S , M A J O R R E L A T E D P A R T Y TRANSACTIONS

1. Connected Transactions (Disclosed in Accordance with the SEHK Listing Rules)
   1. Continuing Connected Transactions
   Significant related party transactions entered by the Group for the year ended 31 December 2020 are disclosed in Note X to the financial statements.

Some of the above-mentioned related party transactions also constitute connected transactions that required to be disclosed in accordance with Chapter 14A of the SEHK Listing Rules. Among other things, the continuing connected transactions are as follows:

Revenue/Expenses	Note	2020
		RMB Yuan
Transactions with China Merchants Group	1
Provision of transportation and logistics services		1,177,444,946.15
Receiving of transportation and logistics services		1,463,695,336.32
Rental expenses		253,631,124.09
Transaction with China Merchants Property	2
Purchase of goods		5,914,717.08
Transaction with Daojiahui Technology Company	2
Purchase of goods		48,169,958.65
Receiving services from Finance Company	3
Receiving deposit services - maximum daily balance		4,782,890,960.94
Transactions with Connected Non-Wholly-Owned Subsidiaries
of the Company	4
Provision of transportation and logistics services		97,086,697.11
Receiving of transportation and logistics services		88,148,255.93
Entrusted Management Agreement with Sinotrans &
CSC Group	5
Charging entrusted management fees		39,150,943.40

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Note 1: The reason why the transactions with China Merchants Group are deemed as connected transactions is that China Merchants is the actual controller of the Company. On 10 November 2017, the Company entered into the Master Services Agreement with China Merchants in relation to the provision and receiving of transportation and logistics services, the term of which is from 1 January 2018 to 31 December 2020. According to the agreement, the annual cap of the amount of transportation and logistics services provided by the Group to China Merchants Group shall not exceed RMB2,500 million, RMB3,250 million and RMB4,225 million in 2018, 2019 and 2020, respectively; the annual cap of the amount of transportation and logistics services received by the Group from China Merchant Group shall not exceed RMB3,500 million, RMB4,550 million and RMB5,915 million in 2018, 2019 and 2020, respectively. On 10 November 2017, the Company entered into the Master Lease Agreement in respect of property leasing services with China Merchants, the term of which is from 1 January 2018 to 31 December 2020. According to the agreement, the annual cap of the amount of property leased by the Group from China Merchants Group shall not exceed RMB300 million, RMB330 million and RMB363 million in 2018, 2019 and 2020, respectively.

Note 2: The reason why the transaction with China Merchants Property Management Co., Ltd.* (深圳招商物業管 理有限公司, hereinafter referred to as "China Merchants Property") is deemed as a connected transaction is that China Merchants Property is a subsidiary of China Merchants. On 29 October 2018, the Company entered into the Master Purchase Agreement (hereinafter referred to as the "Original Agreement") with China Merchants Property, pursuant to which the Group may purchase the office supplies and equipment from China Merchants Property through an online shopping platform (namely China Merchants Daojiahui) operated by China Merchants Property. The term of the agreement is from 1 July 2018 to 31 December 2020, according to which the total amount of office supplies and equipment purchased by the Group from China Merchants Property shall not exceed RMB121,108,600, RMB212,484,000 and RMB254,980,800 in 2018, 2019 and 2020 respectively.

Due to the business restructuring, the operation of China Merchants Daojiahui was transferred to China Merchants (Shenzhen) Daojiahui Technology Co., Ltd.* (深圳招商到家匯科技有限公司, hereinafter referred

to as "Daojiahui Technology Company"), by China Merchants Property on 1 April 2020, and the China Merchants Daojiahui has been operated by Daojiahui Technology Company since then. In order to monitor and regulate the transactions in relation to the purchase of office supplies and equipment by the Group through the China Merchants Daojiahui from time to time and ensure compliance with the SEHK Listing Rules, on 27 August 2020, the Company entered into the New Master Purchase Agreement with Daojiahui Technology Company, pursuant to which, the Group may purchase the office supplies and equipment from Daojiahui Technology Company through the China Merchants Daojiahui for the period from 1 April 2020 to 31 December 2022. According to the agreement, the total amount of office supplies and equipment purchased by the Group from Daojiahui Technology Company shall not exceed RMB60 million from 1 April 2020 to 31 December 2020, RMB69 million in 2021 and RMB80 million in 2022 respectively. As there has been no new transaction conducted by the Group under the Original Agreement with China Merchants Property and no new transaction amount will be generated under the Original Agreement since 1 April 2020, the original annual cap for the year ended 31 December 2020 under the Original Agreement is no longer

applicable. Daojiahui Technology Company is a wholly-owned subsidiary of China Merchants Property Operation & Service Co., Ltd.* (招商積餘產業運營服務股份有限公司), which is owned as to 51.16% by

CMG, so the transaction with Daojiahui Technology Company constitutes continuing connected transactions of the Company.

Note 3: The reason why the transaction with Finance Company is deemed as a connected transaction is that Finance Company is held as to 51% and 49% by China Merchants and Sinotrans & CSC. On 10 November 2017, the Company entered into the Financial Services Agreement with Finance Company, pursuant to which the Company agreed Finance Compnay can provide deposit services and other financial services for it. The term of the agreement is from 1 January 2018 to 31 December 2020, according to which the daily outstanding balance of the Group's deposit at the Finance Company shall not exceed RMB4 billion for the year 2018, and RMB5 billion for each of the years 2019 and 2020.

90 SINOTRANS LIMITED

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Note 4: The reason why the transactions with three connected non-wholly-owned subsidiaries of the Company, namely Sinotrans Shandong Hongzhi Logistics Co. Ltd* (山東中外運弘志物流有限公司, hereinafter referred

to as "Sinotrans Shandong Hongzhi"), Qingdao Jinyun Air Cargo Freight Forwarding Co. Ltd.* (青島金運 航空貨運代理有限公司, hereinafter referred to as "Qingdao Jinyun Air") and Shanghai Waihong Yishida International Logistics Co. Ltd.* (上海外紅伊勢達國際物流有限公司, hereinafter referred to as "Shanghai

Waihong Yishida"), are deemed as connected transactions is that such non-wholly-owned subsidiaries are held as to more than 10% equity interests by the subsidiaries of Sinotrans & CSC. On 10 November 2017, the Company entered into master services agreements with the above-mentioned connected non-wholly- owned subsidiaries, respectively, in relation to the provision and receipt of the transportation and logistics services (including freight forwarding services, shipping agency, storage and terminal services, trucking transportation, express services, shipping transportation and leasing of containers and other facilities) between members of the Group and the connected non-wholly-owned subsidiaries and their respective subsidiaries and associates, and the term of each agreement is for a period of three years commencing on 1 January 2018 and ending on 31 December 2020. Under each of the agreement, the cap for the provision of transportation and logistics services by the Group for Sinotrans Shandong Hongzhi and its associates shall not exceed RMB200 million, RMB260 million and RMB338 million for each of the years 2018, 2019 and 2020; the cap for the receipt of transportation and logistics services by the Group from Sinotrans Shandong Hongzhi and its associates shall not exceed RMB60 million, RMB78 million and RMB101.4 million for each of the years 2018, 2019 and 2020; the cap for the provision of transportation and logistics services by the Group for Qingdao Jinyun Air and its associates shall not exceed RMB5 million, RMB7.5 million and RMB11.25 million for each of the years 2018, 2019 and 2020; the cap for the receipt of transportation and logistics services by the Group from Qingdao Jinyun Air and its associates shall not exceed RMB7.5 million, RMB11.25 million and RMB16.87 million for each of the years 2018, 2019 and 2020; the cap for the provision of transportation and logistics services by the Group for Shanghai Waihong Yishida and its associates shall not exceed RMB1 million, RMB1 million and RMB1 million for each of the years 2018, 2019 and 2020; the cap for the receipt of transportation and logistics services by the Group from Shanghai Waihong Yishida and its associates shall not exceed RMB2.25 million, RMB2.25 million and RMB2.25 million for each of the years 2018, 2019 and 2020.

For the year 2020, the amounts of transportation and logistics services provided for and received from Sinotrans Shandong Hongzhi and its associates by the Group were RMB96 million and RMB87 million, respectively; the amounts of transportation and logistics services provided for and received from Qingdao Jinyun Air and its associates by the Group were RMB0.5 million and RMB1 million, respectively; and the amounts of transportation and logistics services provided for and received from Shanghai Waihong Yishida and its associates by the Group were RMB0.8 million and RMB0.1 million, respectively;

Note 5: The reason why the transaction with Sinotrans & CSC Group is deemed as a connected transaction is that Sinotrans & CSC is the controlling shareholder of the Company. On 6 May 2019, the Company entered into the new Entrusted Management Agreement with Sinotrans & CSC, pursuant to which the Company shall continue to provide the entrusted management services to Sinotrans & CSC Group for a term of three years from 2019 to 2021, in return for a fixed management fee of RMB15 million per annum and a variable management fee, with the total amount of entrusted management fees being no more than RMB100 million per annum.

1. For details of the abovementioned continuing connected transactions, please refer to the relevant announcements as at the signing date of each agreement published by the Company on the website of SEHK (www.hkex.com.hk). The Company has complied with the disclosure requirements under Chapter 14A of the SEHK Listing Rules in respect of such transactions. In order to comply with the relevant requirements of the SEHK Listing Rules, except for such transactions as purchase of goods and provision of entrusted management services did not reach the standard that requires to be considered at a shareholders' general meeting, the annual caps of the other connected transactions abovementioned for each of the years 2018, 2019 and 2020 (in the case that any of the percentage ratios (other than the profits ratio) in respect of annual caps of such connected transactions exceeds 5% on an annual basis) have been approved by independent Shareholders at the extraordinary meeting convened on 28 December 2017. Given that the relevant continuing connected transaction agreements mentioned above have expired on 31 December 2020, the Company has renewed a new phase of continuing connected transaction agreement with China Merchants, Finance Company and Shandong Sinotrans Hongzhi on 28 October 2020, and the term of the agreements is from 1 January 2021 to 31 December 2023. For details, please refer to the Company's relevant circular disclosed on the website of the SEHK (www.hkex.com.hk) dated 20 November 2020.

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1. In addition to the aforementioned continuing connected transactions, on 30 December 2020, the Company and Y2T Technology Co., Ltd. (運易通科技有限公司 hereinafter referred to as "Y2T", with its subsidiaries are collectively referred to as "Y2T Group") entered into the Purchase and Sales Framework Agreement, pursuant to which, the Group (excluding Y2T Group) will receive system development and operation maintenance services, logistics and related services provided by Y2T Group and will provide logistics and related services to Y2T Group for a period from 1 January 2021 to 31 December 2023. As at the date of agreement, Y2T was an indirect wholly-owned subsidiary of the Company and proposed to proceed with the capital increase. Upon completion of the capital increase, it is expected that the subsidiary of China Merchants will hold more than 10% voting rights of Y2T. Therefore, upon completion of the capital increase, the transactions contemplated under the aforementioned agreement will constitute continuing connected transactions of the Company, and the proposed annual caps for the transactions contemplated thereunder will become effective concurrently. For details, please refer to the Company's announcement disclosed on the website of the SSE (www.sse.com.cn) and the website of the SEHK (www.hkex.com.hk) dated 30 December 2020.
2. The independent non-executive Directors of the Company have reviewed the continuing connected transactions and confirmed that the transactions were:
3. 1. entered into by members of the Group in the ordinary and usual course of business;
   2. (i) on normal commercial terms; or (ii) on terms no less favorable to the Company than those available to (or from) independent third parties; or (iii) if there are no appropriate comparables for the independent non-executive Directors to confirm items b(i) or b(ii) above, then on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole; and
   3. entered into in accordance with the relevant agreements governing them.
4. The auditor of the Company was engaged to conduct a limited assurance engagement on the Group's continuing connected transactions in accordance with International Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). The auditor has issued an unmodified letter containing their findings and conclusions in respect of the continuing connected transactions by the Group above in accordance with Rule 14A.56 of the SEHK Listing Rules, where:
5. 1. nothing has come to the auditors' attention that causes them to believe that the disclosed continuing connected transactions have not been approved by the Company's Board of Directors.
   2. for transactions involving the provision of goods or services by the Group, nothing has come to the auditors' attention that causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Company.
   3. nothing has come to the auditors' attention that causes them to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions.

92 SINOTRANS LIMITED

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1. with respect to the aggregate amount of each of the continuing connected transactions, nothing has come to the auditors' attention that causes them to believe that the disclosed continuing connected transactions have exceeded the annual cap as set by the Company.

2. Other connected transactions disclosed

1. On 28 October 2020, the Company entered into the underwriting agreement in respect of the underwriting of the first tranche of 2020 RMB receivables asset-backed notes (hereinafter referred to as "RMB ABN") with Huaneng Guicheng Trust Co., Ltd.* (華能貴 誠信託有限公司), Bank of China Limited* (中國銀行股份有限公司) and China Merchants Securities Co., Ltd.* (招 商 證 券 股 份 有 限 公 司, a connected party of the Company, hereinafter referred to as "China Merchants Securities"), pursuant to which the underwriting fees paid to China Merchants Securities by the Company are estimated to be no more than RMB100 thousand; meanwhile, if China Merchants Securities is required to perform its obligations to underwrite the priority products of first tranche of 2020 RMB ABN under the underwriting agreement by way of standby commitment underwriting, the amount to be subscribed by China Merchants Securities is estimated to be no more than RMB142.5 million. As at the date of agreement, China Merchants Securities is a subsidiary of China Merchants, the actual controller of the Company, and therefore is a connected person of the Company. Thus, the foresaid transaction constitutes a connected transaction of the Company under Chapter 14A of the SEHK Listing Rules. As at the date of this Report, the Company has completed the issuance of the first tranche of 2020 RMB ABN.
2. On 23 December 2020, Sinotrans Innovation & Technology Co., Ltd.* (中外運創新科技 有限公司, a wholly-owned subsidiary of the Company, hereinafter referred to as "SIT"), Shenzhen China Merchants Innovation Investment Fund Center (Limited Partnership)* (深圳市招商局創新投資基金中心(有限合夥), hereinafter referred to as "CMII"), Shenzhen Bida Enterprise Consultation Partnership (Limited Partnership)* (深圳必達企業諮詢合夥 企業(有限合夥), hereinafter referred to as "Shenzhen Bida"), and Y2T, the wholly-owned subsidiary of SIT, jointly entered into the capital increase agreement, pursuant to which, the connected person CMII and independent third party Shenzhen Bida agreed to subscribe for the new registered capital of Y2T of RMB50 million and RMB25 million, respectively, in accordance with the terms and conditions of the capital increase agreement. In which, the consideration of the capital increase payable by CMII will be RMB57 million and that payable by Shenzhen Bida is expected to be no more than RMB85.5 million. Upon completion of the capital increase, SIT, CMII and Shenzhen Bida will hold 40%, 40% and 20% equity interests in Y2T, respectively, and Y2T will remain a subsidiary of the Company and its financial results will remain to be included into the consolidated statements of the Company. On the same day, SIT, CMII, Shenzhen Bida and Y2T jointly entered into the shareholders' agreement, pursuant to which, each of the parties agreed upon, among others, the rights of Y2T's shareholders upon completion of the capital increase. Furthermore, SIT and CMII entered into the concerted party agreement on the same day. As at the date of the agreement, both the general partner (executive partner) and limited partner of CMII are subsidiaries of China Merchants, CMII is therefore a connected person of the Company and the above transaction constituted a connected transaction of the company. As at the date of this Report, Y2T has completed the commercial registration of the abovementioned transaction.

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For details, please refer to the relevant announcements of the Company dated 28 October 2020 and 23 December 2020 on the websites of the SSE (www.sse.com.cn)and the Hong Kong Stock Exchange (www.hkex.com.hk).

1. The Related Party Transactions in Relation to the Ordinary Operations (Disclosed in Accordance with the SSE Listing Rules)
   1. Events Disclosed in the Temporary Announcements and without Progress or Changes in Subsequent Implementation
   3Applicable      □Not applicable

Summary of Events	Enquiry Index

On 22 December 2020, the Company held the 2020 second extraordinary general meeting to considered and approved the Proposal on the <2021-2023 Routine Related Party Transaction Framework Agreement> between the Company and 4 related joint ventures, including annual caps for the provision and receiving of transportation and logistics services between the Group and the related joint ventures.

For details, please refer to the announcements of the Company dated 28 October 2020 and 22 December 2020 on the websites of the SSE (www.sse.com.cn) and the Hong Kong Stock Exchange (www.hkex.com.hk).

2. Events Disclosed in the Temporary Announcements but with Progress or Changes in Subsequent Implementation

3Applicable      □Not applicable

1. On 10 November 2017, the Company entered into a Master Services Agreement with China Merchants, the term of which is from 1 January 2018 to 31 December 2020. According to the agreement, the annual cap of the amount of transportation and logistics services provided by the Group to China Merchants Group shall be RMB2,500 million, RMB3,250 million and RMB4,225 million in 2018, 2019 and 2020, respectively; the annual cap of the amount of transportation and logistics services received by the Group from China Merchant Group shall be RMB3,500 million, RMB4,550 million and RMB5,915 million in 2018, 2019 and 2020, respectively. In 2020, the transportation and logistics services provided by the Group to China Merchants Group amounted to RMB1,177 million, while the transportation and logistics services received from China Merchants Group was RMB1,464 million.

94 SINOTRANS LIMITED

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1. On 10 November 2017, the Company entered into a Master Lease Agreement with China Merchants, the term of which is from 1 January 2018 to 31 December 2020. According to the agreement, the annual cap of the amount of property leased by the Group from China Merchants Group shall be RMB300 million, RMB330 million and RMB363 million in 2018, 2019 and 2020, respectively. In 2020, the expenses of the Group in respect of leasing of properties from China Merchants Group was RMB254 million.
2. On 10 November 2017, the Company entered into a Financial Services Agreement with the Finance Company, the term of which is from 1 January 2018 to 31 December 2020. According to the agreement, the daily outstanding balance of the Group's deposit at the Finance Company shall not exceed RMB4 billion for the year of 2018, and RMB5 billion for the year of 2019 and 2020 respectively. In 2020, the Group's daily maximum deposit balance at the Finance Company was RMB4.783 billion.
   The aforesaid continuing related party transactions (1)-(3) have been considered and approved at the extraordinary general meeting convened on 28 December 2017. For details, please refer to the announcements dated 10 November 2017 and 28 December 2017 published by the Company on the website of Hong Kong Stock Exchange (www. hkex.com.hk).
3. On 7 March 2019, the Company convened the 2019 first extraordinary general meeting, at which the proposal in relation to the continuing related party transaction with China Merchants Bank was considered and approved. According to the proposal, no limit will be imposed on the loan issued by China Merchants Bank, and the annual cap of deposit is RMB3,500 million and RMB4,000 million in 2019 and 2020, respectively. As at 31 December 2020, the Group's deposit balance at China Merchants Bank was RMB451 million. For details, please refer to relevant announcements dated 21 January 2019 published by the Company on the websites of SSE (www.sse.com.cn).

In view of the all above-mentioned continuing related party transactions (1)-(4) have expired at the end of 2020, the Company has renewed/updated the above-mentioned continuing related party transactions with related parties on 28 October 2020 (the term of the new related party transaction is from 1 January 2021 to 31 December 2023), which have been considered and approved by the Company's 2020 second extraordinary general meeting held on 22 December 2020. For details, please refer to the Company's announcements on the website of the SSE (www.sse.com.cn) and the website of the SEHK (www.hkex.com.hk) on 28 October 2020 and 22 December 2020.

3. Events Not Disclosed in the Temporary Announcements

□Applicable      3Not applicable

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Chapter 6

Significant Matters

1. Related Party Transactions from Acquisition and Disposal of Assets or Equity Interests
2. 1. Events Disclosed in the Temporary Announcements and without Progress or Changes in Subsequent Implementation
      □Applicable      3Not applicable
   2. Events Disclosed in the Temporary Announcements but with Progress or Changes in Subsequent Implementation
      □Applicable      3Not applicable
   3. Events Not Disclosed in the Temporary Announcements
      □Applicable      3Not applicable
   4. The Performance Achievements during the Reporting Period Shall be Disclosed if Undertakings on Performance Is Involved
      □Applicable      3Not applicable

(IV) Material Related Party Transactions involving Joint External Investments

1. 1. Events Disclosed in the Temporary Announcements and without Progress or Changes in Subsequent Implementation
      □Applicable      3Not applicable
   2. Events Disclosed in the Temporary Announcements but with Progress or Changes in Subsequent Implementation
      □Applicable      3Not applicable
   3. Events Not Disclosed in the Temporary Announcements
      □Applicable      3Not applicable
2. Claims and Liabilities between Related Parties
3. 1. Events Disclosed in the Temporary Announcements and with No Progress or Changes in Subsequent Implementation
      □Applicable      3Not applicable
   2. Events Disclosed in the Temporary Announcements but with Progress or Changes in Subsequent Implementation
      □Applicable      3Not applicable

96 SINOTRANS LIMITED

Chapter 6

Significant Matters

3. Events Not Disclosed in the Temporary Announcements

3Applicable      □Not applicable

				Unit: Yuan  Currency: RMB
	Capital provided to related parties	Capital provided by related parties to the Company
		Amount of the			Amount of the
Related parties	Opening balance	transaction	Closing balance	Opening balance	transaction	Closing balance
Other companies controlled by the same parent
company and ultimate controlling party	4,045,419,176.57	895,962,796.70	4,941,381,973.27	1,520,357,418.90	-769,104,395.33	751,253,023.57
Associates and joint ventures	691,389,828.43	-8,074,327.75	683,315,500.68	185,559,688.88	417,370,722.18	602,930,411.06
Other related parties	7,746,417.75	-7,734,869.66	11,548.09	29,817,972.36	-29,317,421.04	500,551.32
Total	4,744,555,422.75	880,153,599.29	5,624,709,022.04	1,735,735,080.14	-381,051,094.19	1,354,683,985.95
Reasons for related debts and liabilities	Proceeds in dealings with related companies
The impact of related debts and liabilities on	Related debts and liabilities are conducted based on the time agreed under the contract or agreement in accordance with the financial
the Company	settlement process and have no material effect on the operation results and financial position of the Company.

(VI) Others

□Applicable      3Not applicable

XV. MATERIAL CONTRACTS AND PERFORMANCE

1. Trust, Contracting and Leasing
2. 1. Trust
      □Applicable      3Not applicable
   2. Contracting
      □Applicable      3Not applicable
   3. Leasing
      □Applicable      3Not applicable

(1) In addition to the above guarantees, the Company and its non-wholly-ownedsubsidiaries provide guarantees for the credit lines applied for by companies within the scope of the consolidated statements. As at 31 December 2020, the total credit guarantees were RMB5,734 million.

(2) Ningbo Shipping Agency Co., Ltd., a subsidiary of the Group, provides payment guarantee on port handling and tally charges to MEGA TREND Shipping Limited and BAL Container Line Co., Ltd. at the request of port. All of the above guarantees have provided counter guarantee measures. As at 31 December 2020, the balance of guarantees was RMB267,637.36.

ANNUAL REPORT 2020

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Significant Matters

(II) Guarantee

3Applicable

□Not applicable

Unit: Yuan  Currency: RMB

External guarantee of the Company (excluding those provided to subsidiaries)

Relation

between the

Date of the

Whether

guarantors

guarantee

the

Guarantee

and the

The

The

(the date

Guarantee

Guarantee

guarantee

Is the

Guarantee

Is counter

provided to

listed

guaranteed

guaranteed

of the

beginning

maturity

Type of

has been

guarantee

overdue

guarantee

the related

Related

Guarantors

company

party

amount

agreement)

date

date

guarantee

fulfilled

overdue

amount

available

parties

relationships

Sinotrans South

Subsidiaries

Shenzhen

98,184,899.10

1 July

1 July

1 July

Financing

No

No

-

No

Yes

Associates

China Company

Haixing Harbor

2019

2019

2037

guarantee/

ventures

Limited

Development

Joint liability

Co., Ltd.

guarantee

Sinotrans

Subsidiaries

Dongguan

8,109,500.00

27 August

27 August

9 January

Financing

No

No

-

No

Yes

Joint

South China

Humen Port

2015

2015

2023

guarantee/

ventures

Company

International

General

Limited

Container

guarantee

Terminal

Co., Ltd.

Sinotrans Bulk

Subsidiaries

Sinotrans

10,882,711.86

6 June

1 July

30 June

Financing

No

No

-

No

Yes

Joint

Logistics

Sarens

2016

2016

2021

guarantee/

ventures

Company

Logistics

General

Limited

Company

guarantee

Total guaranteed amount during the Reporting Period (excluding guarantees provided to subsidiaries)

-

Balance of total guarantees as at the end of the Reporting Period (A) (excluding guarantees provided to subsidiaries)

117,444,748.32

Guarantees provided by the Company and its subsidiaries to subsidiaries

Total guaranteed amount to subsidiaries during the Reporting Period

Total guaranteed balance to subsidiaries as at the end of the Reporting Period (B)

7,192,346,261.54

Total guarantees (including guarantees to subsidiaries) provided by the Company

Total guaranteed amount (A+B)

7,309,791,009.86

Total guaranteed amount as a percentage of the net asset value of the Company (%)

22.67

Of which:

Guaranteed amount provided for shareholders, parties which have de facto control and their related parties (C)

-

Debt guaranteed amount provided directly or indirectly to parties with gearing ratio exceeding 70% (D)

6,259,496,127.86

Total guaranteed amount in excess of 50% of net asset value (E)

-

Total guaranteed amount of the above three items (C+D+E)

6,259,496,127.86

Statement on the contingent joint liability in connection with unexpired guarantees

Details of guarantee

98 SINOTRANS LIMITED

Chapter 6

Significant Matters

1. Entrustment of Asset Management
2. 1. Entrusted wealth management
   2. 1. Overall entrusted wealth management
         □Applicable      3Not applicable
         Other circumstances
         □Applicable      3Not applicable
      2. Single item entrusted wealth management
         □Applicable      3Not applicable
         Other circumstances
         □Applicable      3Not applicable
      3. Provision for impairment losses of entrusted wealth management
         □Applicable      3Not applicable
   3. Entrusted Loan
   4. 1. Overall Entrusted Loan
         □Applicable      3Not applicable
         Other circumstances
         □Applicable      3Not applicable
      2. Single Entrusted Loan
         □Applicable      3Not applicable
         Other circumstances
         □Applicable      3Not applicable
      3. Impairment provision for the entrusted loan
         □Applicable      3Not applicable
   5. Other circumstances
      □Applicable      3Not applicable

(IV) Other Material Contracts

□Applicable      3Not applicable

ANNUAL REPORT 2020

99

Chapter 6

Significant Matters

XVI. STATEMENT OF OTHER MATERIAL MATTERS

3Applicable      □Not applicable

On 31 May 2018, the proposal on merger of Sinoair by absorption through share swap was considered and approved at the Company's 2018 extraordinary general meeting and the class general meeting. For details, please refer to the circular disclosed by the Company on the website of the SEHK on 18 April 2018. On 8 October 2018, the merger by absorption through share swap was unconditionally approved by the CSRC. As at 10 January 2019, the Company has completed the issuance of 1,351,637,231 RMB ordinary shares (A shares), and public investors of ordinary shares of Sinoair have exchanged the 353,600,322 A shares of Sinoair for 1,351,637,231 A shares of the Company at a ratio of 1:3.8225, and the issuing price is RMB5.24 per share (adjusted). On 18 January 2019, A shares (total 5,255,916,875 shares) of the Company were listed on SSE. As at the date of this report, the Company has completed the business registration of the registered capital change. At present, the Company is carrying forward the relevant legal procedures for the cancellation of the corporate qualification of Sinoair and the transfer of all its assets and liabilities to the Group.

XVII.WORK IN PERFORMING SOCIAL RESPONSIBILITY

(I) Details of Poverty Alleviation Carried Out by Listed Companies

3Applicable      □Not applicable

1. Targeted poverty alleviation plan

3Applicable      □Not applicable

The year 2020 is a determining year for building a moderately prosperous society in an all- round way. Under the overall arrangement of China Merchants, Sinotrans continuously focused on the goal of "ensuring that rural poor people are free from worries over food and clothing and have access to compulsory education, basic medical services and safe housing", combined the tasks of poverty alleviation in poor counties, with China Merchants Group Foundation as a professional unified platform for public welfare, fully developed the targeted poverty alleviation, mainly improved the education and medical care of poor people in poor areas, promoted the construction of industrial brands, and constantly consolidated the foundation for poverty alleviation of the poor people and poor areas. In 2020, Qichun County in Hubei, Yecheng County in Xinjiang, Shache County in Xinjiang and Weining County in Guizhou declared the lifting out of poverty. In these four counties, there were 900,000 persons lifted out of poverty. Substantive results have been achieved in poverty alleviation.