1.Project Site

The project site is located between #2 and #4 piers of Zhifu Bay Port Area.

2.Project Scope

Under this project, four container berths are to be built up, with the respective tonnage capacity of 20,000 DWT, 30,000 DWT, 50,000 DWT and 70,000 DWT. These four berths are 1,200 m in length, with a storage yard of 1 million square meters. The design traffic capacity is 1.2 million TEU. The alongside water depth is –17.0 m.

3.Project Progress

The Project has been subimited to higher authorities for review and approval. It is expected that all the approval procedures will be completed in the 3rd quarter of 2006.

Up to now the Environment Impact Appraisal and Maritime Impact Appraisal of the project has been accomplished. By the end of 2007, two berths will be built up and put into operation. While the other two berths will be completed in the second half of 2008.

4.Traffic Analysis

Since 2005, YantaiPort has witness a fast growth in container traffic. The container throughput was 291,000 TEU in 2004 and 602,000 TEU in 2005, with a high growth rate. It is forecasted that the container throughput will be 3 million TEU in 2010 and 10 million TEU in 2020.

5.Distribution and Transportation Conditions

Railway:The inner-port railway, connecting with the national railway network through Lancun-Yantai railway, possesses an outstanding transport capacity. Meanwhile two additional railway lines (i.e. Dezhou-Longkou-Yantai and Huanghua-Longkou-Yantai) are under construction and will be fully completed for operation in 2008.

Road: The total length of the road within the jurisdication of Yantai is amounted to be 6,561.3 km, and the dense of road network is 47.7 km per million square kilometers.

6.Investment and Economic Analysis

The total investment of the project is estimated to be RMB 2.57 billion yuan. The Ecomomic Internal Return Ration of the project is evaluated as 18.18%, and the FIRR (after tax) turns out to be 9.39%. The investment recovery period is anticipated to be 10.65 years (including the construction period).

7.Cooperation Partners

For the purpose of this project, we are willing to cooperate with the famous shipping companies, logistic service providers, terminal operators and investment companies all over the world.

8.Cooperation Mode

A limited company shall be established by relevant parties for the construction and operation of the terminals.

9.Preferential Policies

According to the Catalogue for the Guidance of Foreign Investment Industries issued by the State Government, this project shall be included in the Catalogue of Encouraged Foreign Investment Industries. Foreign-funded enterprises which are engaged in the construction of public dock facilities of ports and scheduled to operate for a period of over 15 years shall, upon approval by relevant taxation administrations, be exempt form enterprise income tax for the first to the fifth profit-making years, and will be subject to a 50% reduction of enterprise income tax form the sixth to the tenth years.

In case a foreign-funded enterprise that is encouraged by the state to develop imports self-use equipment, it will be exempted from duties and value added tax. When a foreign invested enterprise procures domestically manufactured equipment and when the value of such purchase is within the total amount of investment, the full amount of value-added tax on such domestic equipment will be refunded and regarded as a creditable amount in business income tax.

Since the project site is within the jurisdiction of Yantai Economic & Technological Development Zone (YETDZ), in addition to the relevant preferential policies formulated by the State Government, the project will be granted more preferential treatments, which are stipulated for the national level Economic & Technological Development Zones, in terms of taxation, land utilization and infrastructure facilities.

To promote the development of WesternYantaiPort, Yantai Municipal Government has formulated a series of preferential policies in respect of the utilization of land and sea area as well as the construction of infrastructure.

10.Supporting Facilities & Conditions

In the existing port area, there are developed supporting facilities such as water supply, power supply, fire fighting and telecommunication systems.

11.Contact

For any further questions and information, please contact us at:

Strategic Planning Dept.

Yantai Port Group Co., Ltd.

155 Beima Road, Yantai 264000

Tel.:0086-535-6742151, 6743527

Fax:0086-535-6742151

E-mail:liushaoli@yantaiport.com.cn

       alexsun1970@yahoo.com.cn