COSCO SHIPPING Development Co., Ltd. - Proxy Solicitation & Information Statement 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOU IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Shipping Container Lines Company Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

This circular does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of China Shipping Container Lines Company Limited.

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(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 02866)

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF 100% OF

CHINA SHIPPING TERMINAL DEVELOPMENT CO., LTD. AND SUBSCRIPTION OF SHARES IN CHINA SHIPPING TERMINAL DEVELOPMENT (H.K.) CO., LTD. AND

PROPOSED AUTHORIZATION TO PROVIDE GUARANTEES TO A WHOLLY-OWNED SUBSIDIARY

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

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A letter from the Board is set out on pages 5 to 16 of this circular. A letter from the Independent Board Committee of the Company is set out on pages 17 to 18 of this circular. A letter from Guotai Junan Capital Limited, the independent financial advisors to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 32 of this circular.

* The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under its Chinese name and the English name “China Shipping Container Lines Company Limited”.

27 November 2013

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
II. SHARE PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
III. PROPOSED AUTHORIZATION FOR THE BOARD TO APPROVE THE
PROVISION OF GUARANTEES TO A WHOLLY-OWNED SUBSIDIARY
OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
IV. EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
V. RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
VI. ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .	17
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	19
APPENDIX I – APPRAISAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . .	33
APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	83

– i –

DEFINITIONS

“associate”

“Board”

“China Shipping Group”

“China Shipping (HK) Holdings”

“China Tong Cheng” or
“Independent Appraiser”
“Closing Date”

“Company”

“connected person”

“Consideration Shares”

“controlling shareholder”

“CSCL HK”

has the meaning ascribed thereto under the Listing Rules

the board of directors of the Company

China Shipping (Group) Company (中國海運(集團)總公司), a PRC state-owned enterprise and the controlling shareholder of the Company

China Shipping (HK) Holdings Co., Ltd., a company incorporated in Hong Kong with limited liability and the immediate holding company of CSTD HK
China Tong Cheng Assets Appraisal Co., Ltd., professional valuer and independent appraiser with respect to the valuation of CSTD and CSTD HK as at 30 June 2013
the date on which CSTD delivers the application materials to the Administration for Industry and Commerce in the PRC for the change of business registration relating to matters such as amendments to articles and change of members to the board of directors or the board of supervisors (if any) in connection with the Transaction
China Shipping Container Lines Company Limited (中海集裝箱運輸股份有限公司), a joint stock limited company incorporated in the PRC, of which 3,751,000,000 H shares are listed on the Stock Exchange and 7,932,125,000 A shares are listed on the Shanghai Stock Exchange
has the meaning ascribed thereto under the Listing Rules
the new shares in the issued share capital of CSTD HK to be issued to the Company under the Share Purchase Agreement
has the meaning ascribed thereto under the Listing Rules

China Shipping Container Lines (Hong Kong) Co., Ltd. (中海集裝箱運輸(香港)有限公司), a limited company incorporated in Hong Kong

– 1 –

DEFINITIONS

“CSTD”

China Shipping Terminal Development Co., Ltd. (中海碼頭發展有限公司), a limited liability company incorporated in the PRC

“CSTD HK”

China Shipping Terminal Development (H.K.) Co., Ltd., a company incorporated in Hong Kong with limited liability
“Directors” the directors of the Company
“EGM”
the extraordinary general meeting of the Company to be held at 9:30 a.m. on Thursday, 12 December 2013 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New District, Shanghai, the People’s Republic of China to consider and, if thought fit, to approve the Share Purchase Agreement and the transactions contemplated thereunder and the Proposed Authorization

“Group”

the Company and its subsidiaries

“HK$”

Hong Kong dollars, the lawful currency of Hong Kong

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee”

a committee of the Board comprising all the independent non-executive Directors, namely, Ms. Zhang Nan, Mr. Teo Siong Seng, Mr. Chen Lishen, Mr. Guan Yimin and Mr. Shi Xin

“Guotai Junan Capital” or

“Independent Financial Adviser”

Guotai Junan Capital Limited, a licensed corporation to carry on type 6 (advising on corporate finance) regulated activity as defined under the SFO, acting as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Transaction

“Independent Shareholders”

the shareholders of the Company except China Shipping Group and its associates

“Latest Practicable Date”

22 November 2013, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

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DEFINITIONS

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

“Model Code”

the Model Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 to the Listing Rules

“MOFCOM” Ministry of Commerce of the PRC (中華人民共和國商務部)

“PRC”

the People’s Republic of China which for the purposes of this circular excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

“Proposed Authorization” the proposed authorization for the Board to approve the provision of guarantees to CSCL HK, a wholly-owned subsidiary of the Company, details of which are set out in this circular

“RMB” Renminbi, the lawful currency of the PRC

“SASAC” State-owned Assets Supervision and Administration Commission of the State Council of the PRC (國務院國有資產監督管理委員會)

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended and supplemented from time to time

“Shareholder(s)” the shareholder(s) of the Company

“Share Purchase Agreement” the share purchase agreement dated 11 October 2013 entered into between the Company, CSTD HK and China Shipping (HK) Holdings regarding the Transaction

“Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiary” has the meaning ascribed thereto under the Listing Rules “Supervisors” the supervisors of the Company

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DEFINITIONS

“Supplemental Agreement”

the supplemental share purchase agreement dated 26 November 2013 entered into between the Company, CSTD HK and China Shipping (HK) Holdings regarding the Transaction

“TEU”

twenty-foot equivalent units, a standard unit of measurement of the volume of a container with a length of 20 feet, height of 8 feet and 6 inches and width of 8 feet

“Transaction”

“Transaction” the sale of 100% equity interest in CSTD by the Company to CSTD HK in exchange for new shares to be issued in the issued share capital of CSTD HK, pursuant to the terms of the Share Purchase Agreement and the Supplemental Agreement “USD” United States dollars, the lawful currency of the United States of America “%” per cent

The exchange rates adopted in this circular for illustration purpose only are HK$1.00 = RMB 0.797 and RMB1.00 = HK$1.255, being the median rate of exchange for RMB and HK$ published by the People’s Bank of China on 28 June 2013.

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LETTER FROM THE BOARD

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 02866)

Executive Directors: Mr. Li Shaode Mr. Xu Lirong Mr. Huang Xiaowen Mr. Zhang Guofa Mr. Zhao Hongzhou

Non-executive Directors: Mr. Wang Daxiong Ms. Su Min Mr. Ding Nong Mr. Chen Jihong Mr. Zhang Rongbiao

Independent non-executive Directors: Ms. Zhang Nan Mr. Teo Siong Seng Mr. Chen Lishen Mr. Guan Yimin Mr. Shi Xin

Legal address in the PRC: Room A-538 International Trade Center China (Shanghai) Pilot Free Trade Zone Shanghai PRC Principal place of business in the PRC: 27th Floor 450 Fu Shan Road Pudong New District Shanghai The PRC Principal place of business in Hong Kong 59/F, One Island East 18 Westlands Road Island East Hong Kong 27 November 2013

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF 100% OF CHINA SHIPPING TERMINAL DEVELOPMENT CO., LTD. AND SUBSCRIPTION OF SHARES IN CHINA SHIPPING TERMINAL DEVELOPMENT (H.K.) CO., LTD. AND PROPOSED AUTHORIZATION TO PROVIDE GUARANTEES TO A WHOLLY-OWNED SUBSIDIARY

* The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under its Chinese name and the English name “China Shipping Container Lines Company Limited”.

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LETTER FROM THE BOARD

I. INTRODUCTION

Reference is made to the Company’s announcements in relation to the Transaction and the Proposed Authorization dated 11 October 2013. The main purpose of this circular is to provide you with, among other things:

(a) further information as is necessary to enable you to make an informed decision on whether to vote for or against the resolutions to be proposed at the EGM relating to (i) details of the terms of the Share Purchase Agreement and the transactions contemplated thereunder; and (ii) the proposed authorization for the Board to approve the provision of guarantees to CSCL HK, a wholly-owned subsidiary of the Company;
(b) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Share Purchase Agreement and the transactions contemplated thereunder;
(c) the letter from the Independent Board Committee to the Independent Shareholders in respect of the Share Purchase Agreement and the transactions contemplated thereunder; and
(d) the relevant approved asset appraisal reports of CSTD and CSTD HK as of 30 June 2013 prepared by the Independent Appraiser.

II. SHARE PURCHASE AGREEMENT AND SUPPLEMENTAL AGREEMENT

A. Background

On 11 October 2013, the Company, CSTD HK and China Shipping (HK) Holdings entered into the Share Purchase Agreement, pursuant to which the Company agreed to sell its 100% equity interest in CSTD to CSTD HK at a consideration equivalent to the valuation result of the appraised net asset value of CSTD as of 30 June 2013 after approval by SASAC which will be settled through the issuance of new shares in CSTD HK to the Company. The Transaction constitutes a connected and discloseable transaction of the Company under the Listing Rules.

Pursuant to SASAC’s request and relevant requirements, the appraised net asset value of CSTD HK as of 30 June 2013 should be approved by China Shipping Group, the ultimate holding company of CSTD HK, instead of SASAC. Accordingly, on 26 November 2013, the Company, CSTD HK and China Shipping (HK) Holdings entered into the Supplemental Agreement to reflect this change.

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LETTER FROM THE BOARD

B. General

(a) Parties

(1) The Company
(2) CSTD HK
(3) China Shipping (HK) Holdings

(b) Disposal of 100% equity interest in CSTD and subscription of shares in CSTD HK

Pursuant to the Share Purchase Agreement, the Company agreed to sell its 100% equity interest in CSTD to CSTD HK at a consideration equivalent to the valuation result of the appraised net asset value of CSTD as of 30 June 2013 after approval by SASAC which will be settled through the issuance of new shares in CSTD HK to the Company. Before approval of the current asset appraisal reports issued by the Independent Appraiser with respect to the valuation of CSTD and CSTD HK as at 30 June 2013, the appraised net asset value of CSTD (as the company only) and CSTD HK (as the company only) as of 30 June 2013 is RMB3,418,357,100 (approximately HK$4,290,038,161) and RMB286,024,000 (approximately HK$358,960,120), respectively. The appraised net asset value of CSTD as of 30 June 2013 as approved by SASAC is RMB3,423,060,400 (approximately HK$4,295,940,802) and the appraised net asset value of CSTD HK as of 30 June 2013 as approved by China Shipping Group is RMB287,694,700 (approximately HK$361,175,900).

In relation to the disposal of 100% equity interest in CSTD to CSTD HK, it has been agreed that the issue price per share to be issued by CSTD HK shall equal to the appraised net asset value of CSTD HK as of 30 June 2013 after approval by China Shipping Group divided by the number of issued shares in CSTD HK as of 30 June 2013; and the number of Consideration Shares shall equal to the appraised net asset value of CSTD as of 30 June 2013 after approval by SASAC divided by the issue price per share of CSTD HK to be issued to the Company (the number of CSTD HK shares to be rounded to the nearest whole number).

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LETTER FROM THE BOARD

amount of new capital to be injected by China Shipping (HK) Holdings into CSTD HK will be increased accordingly such that following completion of the Transaction, the Company and China Shipping (HK) Holdings will hold 49% and 51% shareholding in CSTD HK, respectively. However, there will not be any adjustment to the issue price per Consideration Share.

The amount of capital injection by China Shipping (HK) Holdings will be determined to ensure that following completion of the Transaction, CSTD HK will be held as to 49% and 51% by the Company and China Shipping (HK) Holdings, respectively.

In addition, it is agreed that the Company will assume any profits or losses incurred by CSTD during the period between 30 June 2013 and the Closing Date save for the effect on the appraised value of CSTD as a result of the disposal of assets and equity interest by CSTD during such period and China Shipping (HK) Holdings will assume any profits or losses incurred by CSTD HK during the period between 30 June 2013 and the Closing Date, with the actual amount of such profits or losses to be audited and confirmed by an audit entity to be approved by the parties. Each of CSTD and CSTD HK remains under the control and management of the Company and China Shipping (HK) Holdings respectively during the period from 30 June 2013 and the Closing Date.

(c) Consideration

The relevant asset appraisal report of CSTD has been approved by SASAC on 25 November 2013 and the relevant asset appraisal report of CSTD HK has been approved by China Shipping Group on 26 November 2013. As mentioned in the Company’s announcement dated 26 November 2013, the approved valuation result of the appraised net assets value of CSTD and CSTD HK is RMB3,423,060,400 (approximately HK$4,295,940,802) and RMB287,694,700 (approximately HK$361,175,900), respectively. Accordingly, the final consideration of the Transaction is RMB3,423,060,400 (approximately HK$4,295,940,802), the issue price per Consideration Share to be issued to the Company is RMB1.23 (approximately HK$1.54) and the number of Consideration Shares to be issued to the Company pursuant to the Share Purchase Agreement is 2,782,975,935 new shares in the issued share capital of CSTD HK. The amount of capital injection by China Shipping (HK) Holdings is HK$4,100,352,855, the issue price per share of CSTD HK to be issued to China Shipping (HK) Holdings is HK$1.54 and the number of shares in CSTD HK to be issued to China Shipping (HK) Holdings pursuant to the Share Purchase Agreement is 2,662,566,789 new shares in the issued share capital of CSTD HK.

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LETTER FROM THE BOARD

(d) Conditions Precedent

The Share Purchase Agreement shall become effective upon satisfaction of all of the following conditions:

(i) the Share Purchase Agreement having been duly signed by the parties to the Share Purchase Agreement by their legal representatives or their authorized representatives;
(ii) the creditors of CSTD and any other relevant third parties having given all necessary consents in relation to this Transaction; and
(iii) the parties to the Share Purchase Agreement having taken all actions necessary for the approval of the Share Purchase Agreement and required by all relevant laws, regulations and documents, including but not limited to obtaining all necessary internal approvals (including the approval of the Independent Shareholders as required under the Listing Rules) and regulatory approvals from relevant regulatory authorities including MOFCOM and SASAC.

(e) Completion

Pursuant to the Share Purchase Agreement, China Shipping (HK) Holdings’ capital injection into CSTD HK, the issuance of the Consideration Shares, the issuance of the original duly signed share certificate(s) by CSTD HK to the Company and China Shipping (HK) Holdings and the update of CSTD HK’s register of members to register the Company as one of its shareholders will take place within 30 days after the necessary approval from MOFCOM in relation to the Transaction has been obtained. Separately, CSTD HK will obtain the relevant board approval and update its register of directors in connection with change of its director(s) in relation to the Transaction. Within 30 days of completion of the aforementioned matters, the Company will procure CSTD to deliver the application materials to the Administration for Industry and Commerce in the PRC for the change of business registration relating to matters such as amendments to articles and change of members to the board of directors or the board of supervisors (if any) in connection with the Transaction. If the relevant approval from MOFCOM is not obtained on or before 30 June 2014, the Share Purchase Agreement will terminate automatically. Upon completion of the Transaction, CSTD will cease to be a subsidiary of the Company.

The Company expects to record an one-time gain (before taxation) of approximately RMB870 million as a result of the Transaction. The amount of such expected gain has been calculated with reference to, among other things, the approved appraised net asset value of CSTD and CSTD HK as at 30 June 2013.

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LETTER FROM THE BOARD

C. REASONS FOR AND BENEFITS OF THE TRANSACTION

Currently, CSTD operates container terminals in the PRC while CSTD HK’s investments in various port and port-related companies are mainly located overseas. The Board is of the view that the streamline and consolidation of China Shipping Group’s port businesses and assets into one platform will result in economies of scale as well as a globally integrated port business to be operated by CSTD HK which will be held as to 49% and 51% by the Company and China Shipping (HK) Holding, respectively.

Since the acquisition of CSTD by the Company in 2008, the Company has invested a considerable amount of capital, manpower and resources in CSTD’s container terminal business. As a result, CSTD’s scale of business has enlarged and its operational capabilities have improved. It is expected that continuous investment in terms of capital, manpower and resources will be required for CSTD’s future development and the scale and speed of development in the container terminal business may not reach an optimal level by relying on the Company’s investment alone. In addition, as the Board considers that the Company’s continuous financial contribution to CSTD will limit the development of its principal container transportation business, which also requires a large amount of capital contribution by the Company, the Board is of the view that the Transaction will allow the Company to focus its financial resources on the development of its container transportation business, the core business of the Group. As disclosed in the Company’s 2013 interim report, the Company will implement various measures including (i) increase the proportion of high value-added cargoes such as special and refrigerator containers which will increase the Company’s gross profit; and (ii) adjust and optimize the structure of vessels and put more efforts on disposal of retired vessels. The Company intends to replace the retired vessels with large container ships which will allow the Company to have better cost control and reduce the cost per TEU. The Board believes that the Transaction will allow the Company to focus on its core business and this will have positive effect on the Company with reference to the financial performance of its transportation business in the long term. Upon completion of the Transaction, the port business will receive ample support from China Shipping Group in terms of financial resources, management and operation. The Board is of the view that the inclusion of CSTD’s container terminal business in the PRC and the support from China Shipping Group in various aspects of the enlarged port business in CSTD HK including a cash injection by it through China Shipping (HK) Holdings in the amount of HK$4,100,352,855 following completion of the Transaction will strengthen the competitiveness of the enlarged port business in CSTD HK and enhance its future development because the scale of CSTD HK’s port business will be enlarged and CSTD HK will be able to operate container terminals in both the PRC and overseas. Moreover, CSTD HK will have the synergies and the necessary capital contribution from China Shipping Group for the better management and further development of its port business. The integration and strengthening of CSTD HK’s port business is in the interest of the Company and its shareholders as a whole as the Company will have an indirect interest of 49% in CSTD HK and it expects to benefit from the better operation results of CSTD HK, which is anticipated of CSTD HK after completion of the Transaction.

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LETTER FROM THE BOARD

As CSTD will cease to be a subsidiary of the Company upon completion of the Transaction, the financial results of CSTD will no longer be consolidated in the financial statements of the Group and the Company will cease to carry out container terminal and related business. Taking into account that (i) the container terminal and related business carried out by CSTD only accounted for approximately 1.8% of the Group’s total revenue for the year ended 31 December 2012; (ii) the container terminal and related business carried out by CSTD is not the Group’s core business; (iii) the investment income to be received in the future as a result of the Group’s 49% interest in the enlarged CSTD HK should offset or partially offset the decrease in revenue and profit contribution arising from the container terminal and related business operated by CSTD; (iv) the total assets and total liabilities of the Group will slightly decrease and there should be no significant adverse impact on the financial position of the Company as a result of the Transaction; and (v) the Company expects to record a one-time gain (before taxation) of approximately RMB870 million after completion of the Transaction, the Board is of the view that there should be no significant adverse impact on revenue streams, profitability, financial position and operation prospect of the Company upon completion of the Transaction.

Furthermore, following completion of the Transaction, the enlarged CSTD HK will become a sizable international port operator and together with the Company’s international and domestic container marine transportation services, the synergies generated through such consolidation will enhance the Company’s operational efficiency and service capabilities, which will ultimately benefit the shareholders of the Company. The Share Purchase Agreement and the Supplemental Agreement were negotiated and entered into on arm’s length basis and on normal commercial terms. Even though there is a gap between the valuation date of 30 June 2013 and the Closing Date, taking into account the assumption by the Company and China Shipping (HK) Holding with respect to profits or losses incurred by CSTD and CSTD HK respectively during the period between 30 June 2013 and the Closing Date, the actual amount of which will be audited and confirmed by an audit entity to be approved by the parties to the Share Purchase Agreement, the Directors (including the independent non-executive Directors) consider that each of the Share Purchase Agreement and the Supplemental Agreement has been entered into on normal commercial terms, is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The Board considers that the following Directors, namely, Mr. Li Shaode, Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Zhang Guofa, Mr. Zhao Hongzhou, Mr. Wang Daxiong, Ms. Su Min, Mr. Ding Nong, Mr. Chen Jihong and Mr. Zhang Rongbiao, who are also directors or senior managers of China Shipping Group and its subsidiaries, have a material interest in the Transaction. Such directors have abstained from voting on the relevant Board resolutions.

D. IMPLICATIONS UNDER THE LISTING RULES

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LETTER FROM THE BOARD

under the Listing Rules. Since the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the Transaction exceed 5%, the Transaction constitutes a non-exempt connected transaction of the Company and is subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules. In addition, since the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the Transaction exceed 5% but are less than 25%, the Transaction also constitutes a discloseable transaction for the Company under the Listing Rules.

E. GENERAL INFORMATION

(a) Principal Business Activities

(i) The Company

The Company is principally engaged in the operation and management of international and domestic container marine transportation.

(ii) CSTD HK

CSTD HK is an investment holding company which holds investments in various port and port-related companies. Some of these companies operate container terminals in Dalian, Egypt, Seattle (United States) and Taiwan which mainly provide loading, storage and maintenance services. As at the Latest Practicable Date, the container terminals operated by these companies had a total of 17 ports with a container throughput of 12,300,000TEU per year.

(iii) China Shipping (HK) Holdings

China Shipping (HK) Holdings is an investment holding company which holds investments in various companies that are mainly focused on shippingrelated industries.

(iv) CSTD

CSTD is principally engaged in the investment, management and operation of container terminal in the PRC. As at the Latest Practicable Date, CSTD jointly operated and managed 13 container terminal companies which mainly provided loading, storage and maintenance services in major port cities in the PRC such as Dalian, Yantai, Yingkou, Jinzhou, Qinhuangdao, Tianjin, Lianyungang, Shanghai, Ningbo, Guangzhou and Qinzhou and had a total of 46 ports with a container throughput of 27,550,000TEU per year.

(b) Financial Information

According to the audited consolidated financial statements of CSTD for the year ended 31 December 2012 prepared in accordance with China Accounting Standards for Business Enterprises, the consolidated net asset value of CSTD as at

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LETTER FROM THE BOARD

31 December 2012 is RMB3,450 million. The audited consolidated net profits (both before and after taxation) of CSTD for the two years ended 31 December 2011 and 31 December 2012 prepared in accordance with China Accounting Standards for Business Enterprises are set out below:

			For the financial	year ended
			31 December	31 December
			2011	2012
			RMB million	RMB million
Consolidated	profit	before taxation	148	181
Consolidated	profit	after taxation	116	140

According to the audited financial statements of CSTD HK for the year ended 31 December 2012 prepared in accordance with China Accounting Standards for Business Enterprises, the net asset value of CSTD HK as at 31 December 2012 is RMB267 million. The audited net loss (both before and after taxation) of CSTD HK for the two years ended 31 December 2011 and 31 December 2012 prepared in accordance with Hong Kong Financial Reporting Standards are set out below:

		For the financial	year ended
		31 December	31 December
		2011	2012
		RMB million	RMB million
Loss	before taxation	(0.3)	(3.2)
Loss	after taxation	(0.3)	(3.2)

(c) Tax dispute and possible fine on CSTD HK

As mentioned in the asset appraisal report of CSTD HK set out in Appendix I to this circular, CSTD HK is subject to a tax dispute with the Inland Revenue Department of Hong Kong (the “ Inland Revenue Department ”) and Damietta Container Terminal, in which CSTD HK holds 20% equity interest, is subject to a possible fine by the Egyptian Government Authority. The existing board of CSTD HK, its reporting accountants and the independent PRC auditors for the Transaction have confirmed that there is no sufficient evidence to show that CSTD HK will be required to pay tax at the current stage. Accordingly, the existing board of CSTD HK has confirmed that the tax dispute should have no material adverse effect on the financial position of CSTD HK. The existing board of CSTD HK has also confirmed that the impact of the proportionate possible fine on Damietta Container Terminal and the possible effect on the financial position of CSTD HK have already been sufficiently reflected in the relevant audited report and asset appraisal report. Based on (i) confirmation by the existing board of CSTD HK, its reporting accountants and the independent PRC auditors; (ii) the audited report of CSTD HK issued by the independent PRC auditors; (iii) the asset appraisal report of CSTD HK issued by the

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LETTER FROM THE BOARD

Independent Appraiser; and (iv) the Board’s discussion with the independent PRC auditors and the independent appraiser as to the relevant accounting policies and valuation methods adopted when preparing their respective reports, the Board concurs with the view of the existing board of CSTD HK that the audited report of CSTD HK and asset appraisal report on CSTD HK were issued based on expert opinions, and that the tax dispute with the Inland Revenue Department and the possible fine to be imposed by the Egyptian Government Authority on Damietta Container Terminal should not have a material effect and consequence on CSTD HK. Furthermore, taking into account the 49% equity interest to be held by the Company in CSTD HK upon completion of the Transaction, the Board considers that the tax dispute of CSTD HK with the Inland Revenue Department and the possible fine to be imposed by the Egyptian Government Authority on Damietta Container Terminal should not have a material effect and consequence on the Group.

III. PROPOSED AUTHORIZATION FOR THE BOARD TO APPROVE THE PROVISION OF GUARANTEES TO A WHOLLY-OWNED SUBSIDIARY OF THE COMPANY

Reference is made to the Company’s announcement dated 11 October 2013 in relation to the Proposed Authorization. The Board intends to table a resolution at the EGM to authorize the Board to approve the provision of guarantees to CSCL HK, a wholly-owned subsidiary of the Company, details of which are as follows:

(a) Information of CSCL HK:

Registered address: 59/F, One Island East, 18 Westlands Road, Island East, Hong Kong

Legal representative: Zhao Hongzhou

Registered capital: USD1,627.6 million and HKD1 million

Scope of business: International container transportation

Financial status: As at 31 December 2012 (audited figures), CSCL HK’s total assets were USD3,642 million, net assets were USD1,307 million, total current liabilities were USD597 million, total liabilities were USD2,335 million and total bank borrowings were USD1,923 million. Revenue for 2012 was USD2,581 million and net profit was USD149 million.

(b) Amount of guarantees to be provided to CSCL HK: shall not exceed USD1,000,000,000 or its equivalent in RMB in aggregate.

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LETTER FROM THE BOARD

(c) Provision of guarantees by the Company to CSCL HK under the Proposed Authorization shall include the situations where:
(i) the debt to asset ratio of CSCL HK exceeds 70%; and
(ii) the amount of a single guarantee to CSCL HK exceeds 10% of the latest audited net assets of the Company.
(d) It shall be tabled at the general meeting of the Company to authorize the Board to consider and approve the matters in relation to each guarantee within the amount of guarantee limit, including but not limited to the manner, type, term and amount of the guarantee. Apart from obtaining the approval of over 50% of all the Directors, approval by more than two-thirds of the Directors present at the relevant meeting of the Board when considering matters in relation to such guarantee shall also be obtained.
(e) At the time of actual implementation, the Company will perform in accordance with the guarantee agreement to be entered into with the lending bank and comply with the relevant disclosure obligation.
(f) The term of the Proposed Authorization will be for one year with effect from the approval by the Shareholders at the general meeting of the Company.

The Company has not yet entered into any guarantee agreement with any lending bank. The manner, type, term, amount and other details of each guarantee will be determined in accordance with the agreement to be entered into with the bank. The Company will then comply with the approval procedures of the Board and the information disclosure obligation in accordance with relevant requirements in relation to each guarantee.

The Proposed Authorization does not constitute a connected transaction of the Company and is exempted from the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules. Nevertheless, the Company is required under applicable PRC rules and regulations to issue an announcement to disclose details of the Proposed Authorization and obtain the approval of the Shareholders at the general meeting of the Company. For further details of the Proposed Authorization, please refer to the Company’s announcement dated 11 October 2013.

IV. EGM

The EGM will be convened for the purpose of considering and, if thought fit, approving the Transaction and the Proposed Authorization. As at the Latest Practicable Date, China Shipping Group is interested in and controls the voting right in respect of 5,361,837,500 A shares and 184,761,000 H shares in the Company. In accordance with the Listing Rules, China Shipping Group and its associates are required to abstain from voting on the ordinary resolution approving the Transaction at the EGM.

– 15 –

LETTER FROM THE BOARD

V. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee which is set out on pages 17 to 18 of this circular, and the letter from the Independent Financial Adviser which is set out on pages 19 to 32 of this circular.

Having taken into account the advice of the Independent Financial Adviser, the Independent Board Committee considers that the terms of the Share Purchase Agreement and transactions contemplated thereunder are fair and reasonable, on normal commercial terms or on terms no less favourable than those available to or from independent third parties, and shall be entered into in the ordinary and usual course of business of the Company, and that they are in the interests of the Company and its Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution in respect of the Transaction to be proposed at the EGM.

The Board is of the view that the Proposed Authorization in relation to provision of guarantees is in line with the operational development needs of the Company. As the entity to be guaranteed, CSCL HK, is a wholly-owned subsidiary of the Company, the guarantee-related risks can be effectively controlled and prevented and the interest of the Company will not therefore be impaired. The Directors consider that the Proposed Authorization is in the interest of the Company and its Shareholders as a whole. Accordingly, the Directors recommend all Shareholders to vote in favour of the relevant resolution to be proposed at the EGM.

VI. ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

By order of the Board of

China Shipping Container Lines Company Limited Li Shaode

Chairman

– 16 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 02866)

27 November 2013

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF 100% OF

CHINA SHIPPING TERMINAL DEVELOPMENT CO., LTD. AND SUBSCRIPTION OF SHARES IN CHINA SHIPPING TERMINAL DEVELOPMENT (H.K.) CO., LTD.

We refer to the circular dated 27 November 2013 (the “ Circular ”) to the shareholders of China Shipping Container Lines Company Limited (the “ Company ”) of which this letter forms part. Unless otherwise specified, terms defined in the Circular shall have the same meanings when used in this letter.

We have been appointed as members of the Independent Board Committee, which has been established to advise the Independent Shareholders in respect of the Share Purchase Agreement and the transactions contemplated thereunder, details of which are set out in the letter from the Board contained in the Circular. None of us has a material interest in the Transaction.

Guotai Junan Capital has been appointed as the independent financial adviser to advise us in respect of the Transaction. We wish to draw your attention to the letter of advice from Guotai Junan Capital set out on pages 19 to 32 of the Circular.

* The Company is registered as a non-Hong Kong company under Part XI of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) under its Chinese name and the English name “China Shipping Container Lines Company Limited”.

– 17 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

As members of the Independent Board Committee, we have discussed with the management of the Company in relation to the Transaction, and the basis upon which the terms of such Transaction have been determined. We have also taken into account the principal factors and reasons considered by Guotai Junan Capital in forming its opinion in relation to the Transaction, and have discussed with Guotai Junan Capital its letter of advice.

On the basis of the above, we consider, and agree with the view of Guotai Junan Capital, that the terms of the Transaction are fair and reasonable, on normal commercial terms and were entered into in the ordinary and usual course of business of the Company, and that it is in the interests of the Company and its Shareholders as a whole to enter into the Transaction.

Accordingly, we recommend you to vote in favour of the ordinary resolution in respect of the Transaction to be proposed at the EGM.

Yours faithfully, Ms. Zhang Nan, Mr. Teo Siong Seng, Mr. Chen Lishen, Mr. Guan Yimin and Mr. Shi Xin Independent Board Committee

– 18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

==> picture [139 x 41] intentionally omitted <==

27th Floor, Grand Millennium Plaza, 181 Queen’s Road Central Hong Kong 27 November 2013

To the Independent Board Committee and the Independent Shareholders of China Shipping Container Lines Company Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF 100% OF CHINA SHIPPING TERMINAL DEVELOPMENT CO., LTD. AND SUBSCRIPTION OF SHARES IN CHINA SHIPPING TERMINAL DEVELOPMENT (H.K.) CO., LTD.

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Share Purchase Agreement and the Supplemental Agreement. Details of the Share Purchase Agreement, the Supplemental Agreement and the Transaction contemplated thereunder are contained in the “Letter from the Board” of the circular to the shareholders of the Company (the “Shareholders) dated 27 November 2013 (the “Circular”) of which this letter forms part. Unless the context requires otherwise, terms used in this letter shall have the same meanings as the Circular.

CSTD HK is an indirect wholly-owned subsidiary of China Shipping Group, the controlling shareholder of the Company. Accordingly, CSTD HK is a connected person of the Company and the Transaction constitutes a connected transaction of the Company under the Listing Rules. Since the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the Transaction exceed 5%, the Transaction constitutes a non-exempt connected transaction of the Company and is subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules. In addition, since the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the Transaction exceed 5% but are less than 25%, the Transaction also constitutes a discloseable transaction for the Company under the Listing Rules. Accordingly, the Company will convene the EGM on 12 December 2013 to approve the Transaction contemplated under the Share Purchase Agreement by the Independent Shareholders. This letter set out our recommendations as to whether the Share Purchase Agreement is entered in the ordinary and usual course of business of the Company and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interest of the Company and the Shareholders as a whole for the Independent Board Committee’s consideration when making their recommendation to the Independent Shareholders.

– 19 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising all the independent non-executive Directors, namely, Ms. Zhang Nan, Mr. Teo Siong Seng, Mr. Chen Lishen, Mr. Guan Yimin and Mr. Shi Xin, has been formed to make recommendation to the Independent Shareholders as to whether the Share Purchase Agreement is entered in the ordinary and usual course of business of the Company and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interest of the Company and the Shareholders as a whole so far as the Independent Shareholders are concerned.

We, Guotai Junan Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and Independent Shareholders as to whether the Share Purchase Agreement is entered in the ordinary and usual course of business of the Company and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interest of the Company and the Shareholders as a whole so far as the Independent Shareholders are concerned.

BASIS AND ASSUMPTIONS OF OUR ADVICE

In formulating our advice, we have relied on the statements, information, opinions and representations for matters relating to the Company contained in the Circular and the information and representations provided to us by the Company and/or its management staff and/or the Directors. We have assumed that all such statements, information, opinions, and representations for matters relating to the Company contained or referred to in the Circular or otherwise provided or made or given by the Company and/or its management staff and/or the Directors and for which it is/they are responsible were true, accurate and complete at the time they were made and given and continue to be true, accurate and complete as at the date of the Circular. We have assumed that all the opinions and representations for the matters relating to the Company made or provided by the Company and/or its management staff and/or the Directors contained in the Circular have been reasonably made after due and careful enquiry. We have also discussed the appraisal methodology and the bases and assumptions used in the asset appraisal reports with China Tong Cheng Assets Appraisal Co., Ltd. (中通誠資產評估有限公司), the independent appraiser of the Transaction. We have also sought and obtained confirmation from the Company and/or its management staff and/or the Directors that no material facts have been withhold or omitted from the information provided and referred to in the Circular or the reasonableness of the opinions and representations provided to us.

We consider that we have reviewed sufficient information and documents which are currently available to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our recommendation. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Company and/or its management staff and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out an independent verification of the information provided, nor have we conducted an independent investigation into the business, affairs operations, financial position or future prospects of the Group, China Shipping Group, China Shipping (HK) Holdings, CSTD and CSTD HK, or any of their respective subsidiaries and associates.

– 20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our advice and recommendation, we have considered the following principal factors and reasons:

1 Background to the Transaction

1.1 Background

On 11 October 2013, the Company, CSTD HK and China Shipping (HK) Holdings entered into the Share Purchase Agreement, pursuant to which the Company agreed to sell its 100% equity interest in CSTD to CSTD HK at a consideration equivalent to the valuation result of the appraised net asset value of CSTD as of 30 June 2013 after approval by SASAC which will be settled through the issuance of new shares in CSTD HK to the Company. The Transaction constitutes a connected transaction and a discloseable transaction under the Listing Rules.

1.2 Principal activities

(1) The Company

The Company is principally engaged in the operation and management of international and domestic container marine transportation.

(2) CSTD

(3) CSTD HK

CSTD HK is an investment holding company which holds investments in various port and port-related companies which are mainly located overseas. Some of these companies operate container terminals in Dalian, Egypt, Seattle (United States) and Taiwan which mainly provide loading, storage and maintenance services. As at the Latest Practicable Date, the container terminals operated by these companies had a total of 17 ports with a container throughput of 12,300,000TEU per year.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(4) China Shipping (HK) Holdings

China Shipping (HK) Holdings is an investment holding company which holds investments in various companies that are mainly focused on shipping-related industries.

1.3 Key financial information of the Company

Set forth below are certain key financial information of the Company for the year ended 31 December 2011 and 2012 extracted from the Company’s 2012 annual report, and the six months ended 30 June 2012 and 2013 extracted from the Company’s 2013 interim report, respectively:

	For the year ended	For the year ended	For the year ended	For six months ended	For six months ended
	31 December			30 June
	2011		2012	2012	2013
				(unaudited)	(unaudited)
	RMB million	_RMB _	million	RMB million	RMB million
Revenue	28,246		32,551	15,310	15,851
(Loss)/profit for the year/period	(2,700)		574	(1,253)	(1,254)
Equity attributable to ordinary
equity holders of the parent	26,023		26,529	24,770	25,133

As disclosed in its 2013 interim report, the Company’s performance was affected by a combination of factors, including the world economy and international trade undergoing weak recovery with a slow and sluggish growth, constant depression of the shipping market under the influence of worsening imbalance between supply and demand, weak demand for freight transportation, low freight rate and high operational cost in the first half of 2013. Faced with the severe market environment, the Company responded in a rational manner and actively rose to challenges. The Company held on to the effectiveness-centred approach throughout the period, flexibly adjusted management strategies, adopted effective measures and used its best efforts to improve business operation. On 29 October 2013, the Company published its third quarterly report and recorded a net loss of approximately RMB1,667 million for the nine months ended 30 September 2013 compared with a net loss of approximately RMB245 million for the nine months ended 30 September 2012.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.4 Key financial information of CSTD

Set forth below are certain key financial information of CSTD for the year ended 31 December 2011, 2012 and the six months ended 30 June 2013 respectively, extracted from its audited consolidated financial statements prepared in accordance with China Accounting Standards for Business Enterprises:

			For the
	For	the	six months
	financial year	ended/As at	ended/As at
	31 December	31 December	30 June
	2011	2012	2013
	RMB million	RMB million	RMB million
Revenue	548	582	270
Consolidated profit after taxation	116	140	10
Net assets attributable to the
equity holders of the Company	2,429	2,525	2,537

1.5 Key financial information of CSTD HK

Set forth below are certain key financial information of CSTD HK for the year ended 31 December 2011 prepare in accordance with Hong Kong Financial Reporting Standards, and for the year ended 31 December 2012 and the six months ended 30 June 2013 prepared in accordance with China Accounting Standards for Business Enterprises:

			For the
	For	the	six months
	financial year	ended/As at	ended/As at
	31 December	31 December	30 June
	2011	2012	2013
	RMB million	RMB million	RMB million
Revenue (note)	6.37	–	–
Loss after taxation	(0.3)	(3.2)	(43.0)
Net assets attributable to the
equity holders of the Company	277	267	208

Note: As advised by PRC auditor, in accordance with China Accounting Standards for Business Enterprises, there is no revenue for CSTD HK for the year ended 31 December 2012 and the six months ended 30 June 2013 since CSTD HK is an investment holding company and all investments are accounted for as dividend received from joint ventures.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.6 Reasons for and benefits of the Transaction

Entered into in the ordinary and usual course of business of the Company

As stated in the “Letter from the Board”, since the acquisition of CSTD by the Company in 2008, the Company has invested a considerable amount of capital, manpower and resources in CSTD’s container terminal business. As a result, CSTD’s scale of business has enlarged and its operational capabilities have improved. Prior to completion of the Transaction, the Company holds 100% equity interest in CSTD which is principally engaged in the investment, management and operation of container terminals in the PRC. Upon completion of the Transaction, China Shipping Group’s port businesses and assets (including those of CSTD) will be consolidated under CSTD HK which will be held as to 49% by the Group and 51% by the China Shipping (HK) Holding, respectively. According to the information as set out in the asset appraisal report issued by the Independent Appraiser, as at 30 June 2013, CSTD HK held equity interests in four container port terminals located in Dalian in the PRC, Damietta in Egypt, Seattle in the U.S., Kaohsiung in Taiwan. In addition, CSTD HK also invested in certain shares of Xiamen International Port Development Co., Ltd. and Dalian Port (PDA) Company Limited. Having considered that the Transaction would enable the Company to expand its investments in container port terminals not only in terms of number but also the geographical extend of them, we are of the view that the Share Purchase Agreement was entered into in the ordinary and usual course of business of the Company.

Focus its financial resources on the development of core business

The Board expects that continuous investment in terms of capital, manpower and resources will be required for CSTD’s future development and the scale and speed of development in the container terminal business may not reach an optimal level by relying on the Company’s investment alone. In addition, as the Board considers that the Company’s continuous financial contribution to CSTD will limit the development of the Company’s principal container transportation business, which also requires a large amount of capital contribution by the Company. The Board is also of the view that the Transaction will allow the Company to focus its financial resources on the development of its container transportation business, the core business of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In this respect, we have reviewed the 2012 annual report and 2013 interim report of the Company and list out below the net debt, net gearing ratios and capital expenditure contracted but not provided for as at ended 31 December 2011, 2012, and 30 June 2013 respectively as follows:

	As	at	As at
	31 December	31 December	30 June
	2011	2012	2013
	RMB million	RMB million	RMB million
Net debt	10,891	10,197	12,264
Net gearing ratio	40.5%	37.1%	47.0%
Capital commitment	6,334	4,515	7,489

We noted that the net debt of the Company increased from approximately RMB10,891 million as at 31 December 2011 to approximately RMB12,264 million as at 30 June 2013 while the net gearing ratio increased from 40.5% as at 31 December 2011 to 47.0% as at 30 June 2013. In addition, the Company also had capital commitment contracted but not provided for in relation to vessel construction of approximately RMB7,489 million and operating lease commitments relating to vessel and container of approximately RMB9,879 million as at 30 June 2013. In view of the significant amount of capital and operating lease commitments to be incurred by the Company in relation to its core container marine transportation business and the already increasing net gearing ratio of the Company, any further significant amount of capital injections to CSTD in order to fund its expansion may increase the liquidity risk of the Company and ultimately lead to an increase in its finance cost. In particular that the Company has been facing severe market environment of the shipping industry as stated in earlier part of this letter.

On the other hand, in connection with the Transaction, China Shipping (HK) Holdings agreed to inject new capital into CSTD HK by cash contribution in Hong Kong dollars, in consideration of which CSTD HK will issue new shares to China Shipping (HK) Holdings such that following completion of the Transaction, the Company and China Shipping (HK) Holdings will hold 49% and 51% shareholding in CSTD HK, respectively. Based on the SASAC’s approved asset appraisal report of CSTD and the relevant asset appraisal report of CSTD HK approved by China Shipping Group issued by the Independent Appraiser, the amount of capital contribution from China Shipping (HK) Holdings is HK$4,100,352,855. Thus, upon completion of the Transaction, CSTD HK would have obtained HK$4,100,352,855 cash for funding its expansion plans without having the Company to make any contribution thereby avoiding the increase in liquidity risk of the Group if the Company has to fund such capital injection through additional borrowings. As such, we concur with the Board’s view that the Transaction will allow the Company to focus its financial resources on the development of its container transportation business, the core business of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Future development of the enlarged CSTD HK

As stated in the “Letter from the Board”, upon completion of the Transaction, the container terminal business operated by CSTD HK will receive ample support from China Shipping Group in terms of financial resources, management and operation. We have further discussed with management of the Company and were given the understanding that upon completion of the Transaction, the enlarged CSTD HK will become an international container terminal operator and could better meet the Company’s terminal services needs on an international basis such as loading and uploading, warehousing, and other logistic services for the Group’s international and domestic transportation business, and is expected to improve the Group’s competitive edge. Thus, we concur with the Board’s view that the streamline and consolidation of China Shipping Group’s port businesses and assets into one platform under CSTD HK will result in economies of scale and that CSTD HK will become a sizeable port operator, and together with the Group’s international and domestic container marine transportation services, the synergies generated through such consolidation will enhance the Company’s operational efficiency and service capabilities, which will ultimately benefit the shareholders of the Company.

According to the 2012 annual report and 2013 interim report of the Company, percentage of revenue from overseas major trade districts and shipping lanes and China domestic are as follows:

				For the
	For the			six months
	financial year		ended	ended
	31 December	31	December	30 June
	2011		2012	2013
Overseas	78.0%		81.0%	82.6%
China domestic	22.0%		19.0%	17.4%

	100.0%		100.0%	100.0%

As noted from the above table, the Company derived a substantial portion of its revenue from overseas trade districts and shipping lanes while CSTD HK’s port and port-related companies are mainly located overseas. Thus, taking into consideration the complementary nature of the container transportation business operated by the Group and the container port terminal business operated by the enlarged CSTD HK, we consider that there are grounds for the Board to expect synergies to be generated through such consolidation which will enhance the Group’s service capabilities for its international and domestic container marine transportation services in the future.

Taking into consideration of (i) the enlarged port business of CSTD HK would operate a total of 58 ports located in various container terminals in PRC and overseas with an aggregate container throughput of 35,850,000 TEU per year; (ii)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the cash injection to be made by China Shipping Group in the amount of HK$4,100,352,855 following completion of the Transaction which will strengthen the competitiveness of the enlarged port business in CSTD HK; (iii) the possible enhancement of CSTD benefiting from the operational experience and professional management team of CSTD HK in overseas port business, we concur with the Board’s view in the above respects.

Taking into consideration of the above factors and reasons, we concur with the Directors’ view that the Transaction is in the interests of the Company and the Shareholders as a whole.

2 Terms of the Share Purchase Agreement

2.1 Assets to be Sold

Pursuant to the Share Purchase Agreement, the Company agreed to sale its 100% equity interest in CSTD to CSTD HK. CSTD is principally engaged in the investment, management and operation of container terminals in PRC.

The aggregate through-put of the container terminals is set out in the table below:

								Annual
								Aggregate
						Total	Ports	through-put
As	at	the	Latest	Practicable	Date		46	27,550,000TEU

As at 30 June 2013, CSTD had 38 operating ports and 8 ports are currently under construction. The total annual aggregate container through-put capacity is approximately 27,550,000TEU.

2.2 Shares to be subscribed

Pursuant to the Share Purchase Agreement, the Company will hold 49% shareholding in CSTD HK upon completion of the Transaction.

As at the Latest Practicable Date, the container terminals operated by CSTD HK had a total of 17 ports with a container throughout of 12,300,000 TEU per year.

2.3 Consideration

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In relation to the disposal of 100% equity interest in CSTD to CSTD HK, it has been agreed that the issue price per share to be issued by CSTD HK shall equal to the appraised net asset value of CSTD HK as of 30 June 2013 issued by the Independent Appraiser divided by the number of issued shares in CSTD HK as of 30 June 2013; and the number of Consideration Shares shall equal to the appraised net asset value of CSTD as of 30 June 2013 after approval by SASAC divided by the issue price per share of CSTD HK to be issued to the Company (the number of CSTD HK shares to be rounded to the nearest whole number).

In connection with the sale of 100% equity interest in CSTD to CSTD HK, China Shipping (HK) Holdings agreed to inject new capital into CSTD HK by cash contribution in Hong Kong dollars, in consideration of which CSTD HK will issue new shares to China Shipping (HK) Holdings. The issue price per share in relation to the new shares in CSTD HK to be issued to China Shipping (HK) Holdings will be the same as the issue price per Consideration Share to be issued to the Company. If the Company makes any capital injection into CSTD before the Closing Date (other than an increase in capital through the capitalisation of retained profits), the amount of new capital to be injected by China Shipping (HK) Holdings into CSTD HK will be increased accordingly such that following completion of the Transaction, the Company and China Shipping (HK) Holdings will hold 49% and 51% shareholding in CSTD HK, respectively. However, there will not be any adjustment to the issue price per Consideration Share.

In addition, it has been agreed in the Share Purchase Agreement that the Company will assume any profits or losses incurred by CSTD during the period between 30 June 2013 and the Closing Date save for the effect on the appraised value of CSTD as a result of the disposal of assets and equity interest by CSTD during such period and China Shipping (HK) Holdings will assume any profits or losses incurred by CSTD HK during the period between 30 June 2013 and the Closing Date, with the actual amount of such

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

profits or losses to be audited and confirmed by an audit entity to be approved by the parties. As confirmed by the Company, during the period from 30 June 2013 to the Closing Date, each of CSTD and CSTD HK is still under the control and management of the Company and China Shipping (HK) Holdings, respectively. On the basis of the above, we concur the Board’s view that the consideration so determined is fair and reasonable and in the interest of the shareholders of the Company as a whole.

2.4 Conditions Precedent

The Share Purchase Agreement shall become effective upon satisfaction of all of the following conditions:

(i) the Share Purchase Agreement having been duly signed by the parties to the Share Purchase Agreement by their legal representatives or their authorized representatives;
(ii) the creditors of CSTD and any other relevant third parties having given all necessary consents in relation to this Transaction; and
(iii) the parties to the Share Purchase Agreement having taken all actions necessary for the approval of the Share Purchase Agreement and required by all relevant laws, regulations and documents, including but not limited to obtaining all necessary internal approvals (including the approval of the Independent Shareholders as required under the Listing Rules) and regulatory approvals from relevant regulatory authorities including MOFCOM and SASAC.

2.5 Completion

2.6 Assets appraisal

We have reviewed the asset appraisal reports as contained in Appendix I to this circular and discussed with China Tong Cheng, the Independent Appraiser, to discuss and review the methodology, bases and assumptions adopted in preparing the asset appraisal

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

reports. As stated in the asset appraisal reports the Independent Appraiser adopted asset-based method and assuming the Transaction is under procedure in the open market. The Independent Appraiser considers that the asset based method is the most appropriate appraisal method for the Transaction as (i) the appraisal reports are based on the audited reports issued by independent PRC audited accountant; and (ii) unavailability of relevant market comparables. We understand from the Independent Appraiser that the asset based method is a commonly adopted approach for asset appraisal in relation to valuation of container terminal business.

Based on the website of 中國證券監督委員會 (China Securities Regulatory Commission of the PRC) (the “CSRC”) at http://www.csrc.gov.cn, the Independent Appraiser is one of the 70 qualified asset appraisal firm authorized by the CSRC and 中華人民共和國財政部 (the Ministry of Finance of the PRC) to perform asset appraisal works in the PRC. We are given the understanding that it has possessed sufficient qualifications and experience in valuing assets similar to that of the Transaction for a number of listed companies in the PRC and Hong Kong over the years.

The appraised net asset value was calculated and arrived at based on the asset-based approach and the general industry standards recognized and adopted nationally, which was further verified by the SASAC. As such we consider that the asset-based approach is an appropriate methodology in the appraisal for the Transaction.

We understand that the Independent Appraiser has also carried out inspections, made relevant enquires and searches for the purpose of the appraisal. We have reviewed and discussed with the Independent Appraiser the bases and assumptions adopted for the appraisal of the Transaction. We consider that the assumptions adopted by the Independent Appraiser are fair and reasonable. We also interviewed with the Independent Appraiser as to its experience and qualification, reviewed its terms of engagement, performed work as required under note (1)(d) to the Listing Rule 13.80 in relation to China Tong Cheng and its work as regards the appraisal of the Transaction. In view of the facts that (i) the Independent Appraiser is an independent professional appraiser recognized by CSRC and the Ministry of Finance of the PRC, and (ii) the Independent Appraiser’s past experience on transactions similar to the appraisal in relation to valuation of port business, we are satisfied with the results of our assessment that the Independent Appraiser is qualified and experienced to carry out the appraisal of the Transaction.

Given that (1) the consideration is based on the appraised value of CSTD and CSTD HK as set out in the asset appraisal reports prepared by an independent and duly qualified PRC valuer; and (2) the relevant asset appraisal report of CSTD has been approved by SASAC on 25 November 2013; (3) the relevant asset appraisal report of CSTD HK has been approved by China Shipping Group on 26 November 2013; and (4) the reasons for and benefits of the Transaction set out in this letter, we are of the view that the consideration under the Transaction is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3 Expected financial impact on the Company as a result of the Transaction

3.1 Effect on net asset value

As disclosed in the 2012 annual report and 2013 interim report, the consolidated net assets attributable to the equity holders of the parent as at 31 December 2012 and 30 June 2013 were approximately RMB26,529 million and RMB25,133 million respectively.

Upon completion of the Transaction, CSTD will cease to be a subsidiary of the Company and the financial results and assets and liabilities of CSTD will no longer be consolidated in the financial statements of the Group, instead, the financial results and net assets of CSTD HK (consolidating those of CSTD) will be equity accounted for. As stated in the “Letter from the Board”, taking into account that the total assets and total liabilities of the Group will slightly decrease and there should be no significant adverse impact on the financial position of the Company as a result of the Transaction, we concur with Board’s view in this respect.

3.2 Earnings

Based on the audited financial statement audited by Baker Tilly China Certified Public Accountants, an independent PRC auditor, the net profit of CSTD for six months ended 30 June 2013 was approximately RMB10 million which decreased by approximately RMB41 million for the same period in 2012 based on the unaudited management accounts of CSTD. As advised by the Directors that such decreased was mainly due to the increase in operation cost arising from the commencement of operation of a non-wholly owned subsidiary of the Company since December 2012.

As stated in the “Letter from the Board”, taking into account that (i) the container terminal business and related business carried out by CSTD only accounted for approximately 1.8% of the Group’s total revenue for the year ended 31 December 2012; (ii) the container terminal business and related business carried out by CSTD is not the core business of the Company (iii) upon the completion of the Transaction, the investment income to be received in the future as a result of the Group’s 49% interest in the enlarged CSTD HK should offset or partially offset the 51% decrease in attributable earnings from CSTD, and (iv) the Company expects to record an one-time gain (before taxation) of approximately RMB870 million after completion of the Transaction; the Board is of the view and we concur with them that there should be no significant adverse impact on the revenue stream, profitability and operational prospect of the Company upon completion of the Transaction.

3.3 Working capital

On the basis that (i) the Company had cash and bank balance of approximately RMB7,063 million as at 30 June 2013 as set out in the Company’s interim report in which cash balance of CSTD of approximately RMB227 million will be de-consolidated from financial statements of the Group; (ii) the Transaction will not involve any cash outflow;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

and (iii) the Transaction will alleviate the Group’s capital contribution to CSTD to finance its future expansion, the Board is of the view and we concur with them that there should be no significant adverse impact on the working capital of the Company upon completion of the Transaction.

4 Company’s future plan to focus on the development of its container transportation business

As stated earlier, the Board is also of the view that the Transaction will allow the Company to focus its financial resources on the development of its container transportation business, the core business of the Group. As advised by the Directors and disclosed in the Company’s 2013 interim report, the Group may implement the following measures: (i) increase the proportion of high value-added cargoes such as special and refrigerator containers which will increase the Company’s gross profit; and (ii) adjust and optimize the structure of vessels and put more efforts on disposal of retired vessels and replace with large container ships which will allow the Company to have better cost control and reduce the cost per TEU. In light of the above, the Board believes that the Transaction to be entered by the Company will have positive effect to the Company with reference to the financial performance of its transportation business in the long term. However, Independent Shareholders should be aware that, while the Company has been taking certain measures and strategies trying to improve its business operation, the shipping market is still under severe environment and there are uncertainties as to the timeliness and effectiveness of the Company’s measures and strategies.

RECOMMENDATION

Taking into consideration the above factors, we consider that the Share Purchase Agreement and the Supplemental Agreement were entered into in the ordinary and usual course of business of the Group and the Transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interest of the Company and the Shareholders as a whole so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend that the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM to approve the Share Purchase Agreement, the Supplemental Agreement and the Transactions contemplated therein.

Yours faithfully, For and on behalf of Guotai Junan Capital Limited Anthony Wong Managing Director

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APPRAISAL REPORTS

APPENDIX I

The following is the text of the asset appraisal report received from China Tong Cheng in connection with the valuation of CSTD as approved by SASAC.

Asset Appraisal Report on

Proposed Transfer by China Shipping Container Lines Company Limited of its 100% Equity Interest in China Shipping Terminal Development Co., Ltd. Zhong Tong Ping Bao Zi [2013] No. 237 Vol. 1 of 1

Disclaimer, Summary, Text and Appendices

China Tong Cheng Assets Appraisal Co. Ltd. 11 November 2013

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APPRAISAL REPORTS

APPENDIX I

Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Summary	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Text
I.	The Principal, the Valued Entity and any Other Appraisal Report Users as
	prescribed in the Engagement Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
II.	Valuation Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
III.	Subject and Scope of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
IV.	Types and Definition of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45
V.	Valuation Base Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
VI.	Basis of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
VII.	Valuation Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
VIII.	Implementation Process and Conditions for the Valuation Procedures . . . .	54
IX.	Valuation Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55
X.	Valuation Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56
XI.	Special Matters Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56
XII.	Restrictions on the Usage of this Report . . . . . . . . . . . . . . . . . . . . . . . . . .	58
XIII.	Appraisal Report Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	59
Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		60

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APPRAISAL REPORTS

APPENDIX I

CERTIFIED ASSET VALUER’S DISCLAIMER

I. We carry out the assets valuation according to the relevant laws and regulations and the asset valuation standards, adhering to the principle of independence, objectiveness and fairness. Based on the information collected in the course of our valuation exercise, the contents stated in the appraisal report are objective, and we assume corresponding legal responsibilities for the reasonableness of the conclusion of the valuation.
II. Lists of assets and liabilities related to the valuation subject have been provided and declared by the principal and the valued entity with their signatures and seals. The principal and related parties shall be responsible for the authenticity, legality and integrity of the necessary data provided by them as well as the appropriate usage of the appraisal report.
III. We do not have or expect to have any interests in the valuation subject mentioned in the appraisal report and we do not have or expect to have any interests in or prejudices against any related parties.
IV. We have carried out on-site investigation on the valuation subject and related assets thereof that are mentioned in the appraisal report. We have paid necessary attention to the legal ownership of the valuation subject and the related assets thereof and verified corresponding materials.
V. Analysis, judgment and conclusions in the appraisal report issued by us are restricted by the assumptions and confining conditions as stated in the appraisal report. Users of this report shall give due consideration to the assumptions, confining conditions, and notes on special matters, as stated in the appraisal report as well as their impacts on the valuation’s conclusions.

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APPRAISAL REPORTS

APPENDIX I

SUMMARY

I. Economic Behavior Corresponding to the Valuation

In accordance with the strategic development plans of China Shipping (Group) Company and China Shipping Container Lines Co., Ltd., China Shipping Container Lines Co., Ltd. intends to transfer the 100% equity interest it holds in China Shipping Terminal Development Co., Ltd.

II. Valuation Purpose

China Shipping Container Lines Co., Ltd. proposes to transfer the 100% equity interest it holds in China Shipping Terminal Development Co., Ltd. As such, the purpose of the Valuation is to provide value reference for such economic behavior.

III. Subject and Scope of Valuation

IV. Value Type

We select market value as the value type in the Valuation in light of the subject and purpose of the Valuation.

V. Valuation Base Date

June 30, 2013

VI. Valuation Method

The valuation method adopted in the Valuation is asset-based approach.

VII. Valuation Conclusions and the Valid Period Thereof

As at the valuation base date (30 June 2013), the appraised value and the carrying value of the entire shareholders’ equity of China Shipping Terminal Development Co., Ltd. were RMB3,423,060,400 and RMB2,386,834,600, respectively, representing an appreciation of RMB1,036,225,800 or 43.41%.

These conclusions serve only the purpose of the valuation on the proposed transfer by China Shipping Container Lines Co., Ltd. of its 100% equity interest in China Shipping Terminal Development Co., Ltd.

The Valuation Conclusions of the Report shall be effective from 30 June 2013 to 29 June

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APPRAISAL REPORTS

APPENDIX I

VIII. Special Matters Affecting the Conclusions of the Valuation

Within the scope of the valuation, China Shipping Zhanjianggang Container Terminal Co., Ltd., a subsidiary of China Shipping Terminal Development Co., Ltd., officially went into liquidation from 1 January 2013. As of the date of this Report, relevant auditing, valuation, liquidation and tax reports have been basically completed. The Company was originally scheduled to complete the liquidation and begin allocating assets among the shareholders on 31 July 2013. However, currently the liquidation process was failed to finish as scheduled due to the impact of compensation claims by two customers for cargo damages, with the amount involved in the two cases totaling about RMB917,000. At present, China Shipping Zhanjianggang Container Terminal Co., Ltd. and its shareholders are actively negotiating with the two claimants. The Valuation is made based on the recoverable asset value that China Shipping Terminal Development Co., Ltd. can achieve in the liquidation report, without considering the impact of such claims on the results of the Valuation.
On 13 September 2013, CSCL, the controlling shareholder of China Shipping Terminal Development Co., Ltd., announced that its holding subsidiary China Shipping Terminal Development Co., Ltd. transferred by way of open tender the 55% equity interest it holds in Lianyungang China Shipping Container Terminal Co., Ltd. and the floor tender price is determined in a reasonable way subject to the appraised value of such equity interest. The valuation of said equity interest, whose base date was confirmed to be 31 July 2013, has been performed by Beijing China Enterprise Appraisals Co., Ltd., who subsequently issued the Appraisal Report on the Proposed Transfer by China Shipping Terminal Development Co., Ltd. of its Equity Interest in Lianyungang China Shipping Container Terminal Co., Ltd. (Zhong Qi Ha Ping Bao Zi [2013] No.1200).

According to the foregoing facts, parties concerned have signed the Shanghai Municipal Property Transaction Contract (Contract No.: G313SH1006945). In this Valuation, the equity interest value on the valuation base date was determined based on the knockdown price confirmed by both parties, net of current profits or losses in July 2013. The impact of other matters on the results of the Valuation had not been taken into account.

As of the valuation base date, Guangzhou Nansha Port Stevedoring Corporation Limited, Lianyungang New Oriental International Terminal Co., Ltd., Jinzhou New Age Container Terminal Co., Ltd., Dalian International Container Terminal Co., Ltd. and Guangxi Qinzhou International Container Terminal Co., Ltd., all of which were subsidiaries of China Shipping Terminal Development Co., Ltd., had not obtained property ownership certificates for the building and premises as set forth in the Valuation Declaration Form. Nonetheless, the aforementioned companies had presented relevant documents evidencing that there had been no disputes over the ownership of the said buildings and premises. Such information as the areas of the buildings and premises shall be subject to the declaration made by respective companies, which has been verified and confirmed by valuers through checking the area as indicated in the relevant surveying and mapping reports and engineering construction drawings, and the impact of the possible inconsistency between the areas declared and the areas to be recorded in the certificates has not been taken into account.

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APPRAISAL REPORTS

APPENDIX I

The inspection center (comprising multi-purpose office rooms, transformer substation buildings, terminal gates, and monitoring rooms) owned by Guangzhou Nansha Port Stevedoring Corporation Limited, a subsidiary of China Shipping Terminal Development Co., Ltd., is now being used by the Frontier Inspection Station of Guangzhou Nansha Bonded Port Area. Due to various limitations, we were unable to carry out on-site investigations. The value of the said inspection center was determined on the basis of the data on engineering budget and settlement provided by Guangzhou Nansha Port Stevedoring Corporation Limited.
Jinzhou New Age Container Terminal Co., Ltd., a subsidiary of China Shipping Terminal Development Co., Ltd., applied for mortgage loans with its self-owned fixed assets from China Construction Bank Corporation, Jinzhou Tianqiao Subbranch and Industrial and Commercial Bank of China, Shanghai Waitan Sub-branch in the amount of RMB380 million and RMB114 million, respectively. We have not taken into account the impact of the aforesaid mortgages on the results of the Valuation.
Our valuers conducted on-site investigations as to the condition of such fixed assets as buildings and premises (structures) and machinery and equipment, made necessary enquiries with relevant management staff and checked relevant usage and maintenance records, but failed to use sophisticated instruments in the examination and investigation due to various limitations. The valuation on hidden works which could not be investigated and observed, including the hydraulic engineering and drainage works of the terminals, was made based on the introduction of relevant management staff and operators and the experience-based judgment of the valuers themselves.
In the absence of sufficient statistical data on relevant market transaction and of the basis for analyzing and assessing the impact of liquidity discount on the value of the valuation subject, we have not taken into account the impact of liquidity discount on the results of the Valuation.
We have not taken into account the relevant income tax arising from the transaction in the Valuation.
As of the valuation base date, subsidiaries of China Shipping Terminal Development Co., Ltd., have not all completed conversion from business tax to VAT. In this valuation, relevant VAT shall not be taken into account for subsidiaries having implemented the above tax reform policy in the process of pricing for valuation, while VAT shall be taken into account subject to the original measurement method for subsidiaries failure to implement the above tax reform policy. Users of the report should pay attention to this.

This summary is extracted from the text of the Appraisal Report. For details of this valuation project and reasonable understanding of the valuation conclusions, please read the full text of the Appraisal Report carefully.

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APPRAISAL REPORTS

APPENDIX I

Appraisal Report on the Proposed Transfer by China Shipping Terminal Development Co., Ltd. of its 100% Equity Interest in China Shipping Terminal Development Co., Ltd.

Asset Appraisal Report

Zhong Tong Ping Bao Zi [2013] No. 237

To China Shipping Container Lines Co., Ltd:

China Tong Cheng Assets Appraisal Co. Ltd. accepted the appointment by the Company to appraise the market value of all rights and interests of shareholders of China Shipping Terminal Development Co., Ltd. (“CSTD”) as at June 30, 2013, as at the valuation base date. The valuation was conducted through necessary valuation procedures in accordance with relevant laws, regulations and asset valuation standards by following the asset-based approach. The asset valuation is hereby reported as follows:

I. THE PRINCIPAL, THE VALUED ENTITY AND ANY OTHER APPRAISAL REPORT USERS AS PRESCRIBED IN THE ENGAGEMENT LETTER

(I) Principal

Company name: China Shipping Container Lines Co., Ltd (hereafter referred to as “CSCL”)

Address: Rm A-538, International Trade Building, Yangshan Bonded Port Area, No. 188, Yesheng Road, Yangshan Bonded Port District, Shanghai

Legal representative: Li Shaode

Registered capital: RMB11,683,125,000.00

Economic nature: Limited Liability Company

Scope of business: ordinary vessel services along domestic coastal areas and the middle and lower reaches of the Yangtze River and feeder liner services for foreign trade lanes in domestic coastal areas, international vessel services (including container liner services), container construction, repair, chartering, vessel chartering, self-owned containers, sales and purchase of vessels for self use, marine management for domestic coastal ordinary vessels (excluding bulk cargo vessels), engineering management and vessel repair, maintenance, sales, chartering, operation, assets management and other vessel management services (operating subject to permit if administrative licensing is required).

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APPENDIX I

APPRAISAL REPORTS

CSCL is a specialized corporation affiliated to China Shipping (Group) Company, involved in container liner services and other relative services as well. CSCL were respectively listed on Hong Kong Stock Exchange in June 2004 and on Shanghai Stock Exchange in December 2007. As at June 2013, CSCL has 155 vessels with a total operating capacity of 620,000TEU, ranking among the world’s top 10 liner companies. More than 80 domestic and international services cover more than 100 countries around the world. In recent years, CSCL successfully built a series of best-service and the company is becoming more competitive. Moreover, more than 300 international agencies of CSCL provide qualified service to client, which fully establishes “network marketing and service integration”.

Companies of CSCL comprise China Shipping Terminal Development Co., Ltd., Shanghai Puhai Shipping Co., Ltd., Universal Shipping (Asia) Co., Ltd., China Shipping Yangshan International Container Storage & Transportation Co., Ltd. and Dalian Vanguard international logistics Co., Ltd.. Various resources from these companies enable CSCL to integrate fleet, port terminals, container truck, storage, railway and airline etc., which in return forms various transportations, including sea-rail joint transportation, sea-air joint transportation, water-water joint transportation and water-land transportation etc. This complete shipping logistics industrial chain is able to provide “door to door” service throughout the shipping process for customers around the world.

(II) Appraised Entities

Name of Appraised Entities: China Shipping Terminal Development Co., Ltd. (“CSTD”)

Address: Room 419, No.670, Dongdaming Road, Hong Kou District, Shanghai

Legal representative: Huang Xiaowen

Registered capital: RMB TWO BILLION THIRTY NINE MILLION SEVEN HUNDRED AND FIVE THOUSAND AND SIXTY FIVE

Type of Company: One-person Limited Liability Company (solely invested by legal person)

Business scope: investments in domestic and international port terminals; storage; finance leases for port facilities and equipment; international trade mainly engaged in port machinery equipment and business consultancy (excluding agency). (Permits are requisite for corporate operations involving administrative permission.)

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APPRAISAL REPORTS

APPENDIX I

1. General information

Incorporated on 21 March 2001, CSTD is a specialised company engaged in investments in and development and operational management of domestic and international port terminals. Subsequent to several changes, the Company’s registered capital is currently RMB2,039,705,064.81 with China Shipping Group holding 100% of its equity and its registration No. is 310115000605862; registration location: Room 419, No.670, Dongdaming Road, Hong Kou District, Shanghai and postal code: 200080; Mr. Huang Xiaowen, the Deputy General Manager of China Shipping and Vice Chairman of CSCL, acts as the chairman, Mr. Zhao Hongzhou, the Managing Director of CSCL, as the Vice Chairman and Mr. Fang Meng as the Managing Director of CSTD.

CSTD has continuously followed its investment and operation principle of “cooperation for mutual benefits and common development”. Leveraging the overall advantages of China Shipping and container transportation, CSTD has actively carried out businesses including investment, development and operation of domestic and international container port terminals and comprehensive terminals through various and flexible ways such as shareholding, equity participation and lease joint venture, and achieved scale development. As at the end of December 2012, the total assets and net assets of CSTD exceeded RMB5.8 billion and RMB3.4 billion respectively. 14 terminal companies located in China’s major coastal ports including Dalian, Yingkou, Jinzhou, Qinhuangdao, Tianjin, Lianyungang, Shanghai, Ningbo, Guangzhou Nansha, Zhanjiang and Qinzhou have been jointly operated and managed by CSTD, four of which are holding companies. At present, CSTD owns a total of 46 container terminals berths with a 13,690-meter frontage and the annual container throughput capacity reaches 27,800,000TEU. In addition, CSTD has also invested in a bulk grain terminal and a project company.

==> picture [350 x 340] intentionally omitted <==

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

China Shipping Terminal Development Co., Ltd.
100% 51% 55% 55% 50% 50% 40% 30% 30% 40% 20% 40% 49% 35% 14% 3.9%
China Shipping Terminal (Shanghai) Co., Ltd. Jinzhou New Age Container Terminal Co., Ltd. Lianyungang China Shipping Container Terminal Co., Ltd. Lianyungang New Oriental International Terminal Co., Ltd Shanghai Port China Shipping Container Terminal Co., Ltd China Shipping Zhanjianggang Container Terminal Co., Ltd Guangzhou Nansha Port Stevedoring Corporation Limited Dalian International Container Terminal Co., Ltd Qinhuangdao Port New Harbour Container Terminal Co., Ltd. Guangxi Qin Zhou International Container Terminal Co., Ltd. Ningbo Mei Shan Bonded Port-Area New Bay Terminal Management Co., Ltd. Yingkou New Age Container Terminal Co., Ltd. Lianyungang Xindongrun Port Stevedoring Co., Ltd. Dalian Dagang China Shipping Container Terminal Co., Ltd Tianjin Five Continents International Container Terminal Co., Ltd. Yantai Port Co., Ltd.
----- End of picture text -----

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APPRAISAL REPORTS

APPENDIX I

2. Organisational structure

==> picture [312 x 297] intentionally omitted <==

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

Board of Directors Board of Supervisors
Managers
General Affairs Department Investment and Development Department Overseas Affairs Department Business Administration & Legal Department Financing Plan Department Organisation & Human Resources Department Supervision & Audit Department
----- End of picture text -----

3. Financial position for recent years

Asset operation of CSTD from 2010 to January-June 2013

				_Unit: _	RMB’0,000
					January-
No.	Items	2010	2011	2012	June 2013
I	Assets and liabilities:
1	Monetary funds	1,641.65	1,317.81	3,896.96	3,881.61
2	Prepayments	0.47	0.00	0.00	102.00
3	Dividends receivable	168.24	127.40	122.80	2,228.65
4	Other receivables	44.37	44.65	100.40	142.09
5	Interests receivable	0.00	0.00	0.00	26.18
6	Total current assets	1,854.73	1,489.86	4,120.16	6,380.53
7	Long-term equity	229,509.41	249,715.07	259,725.29	261,160.73
	investments
8	Fixed assets	53.88	94.85	101.99	118.75
9	Deferred assets	0.00	280.29	223.28	194.78
10	Intangible assets	0.00	16.92	13.16	11.28
11	Total non-current	229,563.29	250,107.13	260,063.72	261,485.54
	assets

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APPRAISAL REPORTS

APPENDIX I

					January-
No.	Items	2010	2011	2012	June 2013
12	Total assets	231,418.02	251,596.99	264,183.88	267,866.07
13	Payables	0.00	31.21	6.98	6.98
14	Wages payable	16.76	26.98	34.18	54.72
15	Tax payable	224.98	16.05	72.62	15.43
16	Other payables	6,010.57	22,075.16	27,110.66	29,105.48
17	Total liabilities	6,252.31	22,149.40	27,224.43	29,182.61
18	Total equity interests	225,165.71	229,447.59	236,959.45	238,683.46
II	Gains and losses:
1	Operating revenue	0.00	0.00	0.00	0.00
2	Operating cost	0.00	0.00	0.00	0.00
3	Administrative	1,256.77	1,601.18	2,009.05	1,061.30
	expenses
4	Financial expenses	-88.35	-21.57	-10.26	-42.89
5	Assets impairment	5.64	8.15	-14.77	0.07
	loss
6	Investment income	13,024.66	5,576.63	8,925.02	2,793.90
7	Non-operating revenue	5.30	456.43	624.57	201.89
8	Non-operating	2.67	5.07	37.36	294.65
	expenditure
9	Total profit	11,853.24	4,440.22	7,528.21	1,682.67
10	Income tax	1,592.78	333.56	38.87	0.00
11	Net profit	10,260.46	4,106.66	7,489.34	1,682.67

As shown in the auditors’ report of CSTD, the auditor has issued an unqualified conclusion on the annual financial report of CSTD in recent years.

(III) Relations between the Principle and the Valued Entity

As shown in relevant legal documents, the Principle China Shipping Container Lines Co., Ltd is the controlling shareholder and holds 100% equity interest of the Valued Entity, China Shipping Terminal Development Co., Ltd..

(IV) Other users of appraisal report

No other users of appraisal report have been specified in the Engagement Letter except for the Principle, the Valued Entity and appraisal report users identified by national laws and regulations.

II. VALUATION PURPOSE

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APPRAISAL REPORTS

APPENDIX I

This behavior has been passed by China Shipping (Group) Company in the Resolutions Adopted by the General Manager Office Meeting (Zhong Hai Ban Gong Hui No. [2013] 21-2 [Zong No. 105]).

III. SUBJECT AND SCOPE OF VALUATION

(I) Contents of the subject and scope of valuation

The valuation subject and scope entrusted is consistent with the valuation subject and scope involved in the economic behavior.

The valuation subject is the 100% equity interest held by China Shipping Container Lines Co., Ltd. in China Shipping Terminal Development Co., Ltd. The scope of the Valuation includes all assets and liabilities declared by China Shipping Terminal Development Co., Ltd. as at the valuation base date. The corresponding accounting statements within the valuation scope have been audited by Baker Tilly China (a special general partnership enterprise), who has subsequently issued an unqualified Audit Report (Tian Zhi Ye Zi [2013] No.499). The details are set forth in the following table:

List of Assets to be Valued

Monetary unit: RMB Yuan

Serial
No.	Items	Amount
1	Monetary funds	38,816,084.65
2	Prepayments	1,020,000.00
3	Dividends receivable	22,286,532.75
4	Interests receivable	261,800.00
5	Other receivables	1,420,852.50
6	Total current assets	63,805,269.90
7	Long-term equity investments	2,611,607,289.16
8	Fixed assets	1,187,463.82
9	Intangible assets	112,800.06
10	Long-term deferred expenses	1,947,783.52
11	Total non-current assets	2,614,855,336.56
12	Total assets	2,678,660,606.46
13	Payables	69,787.75
14	Wages payable	547,247.25
15	Tax payable	154,237.63
16	Other payables	291,054,800.00
17	Total liabilities	291,826,072.63
18	Net assets	2,386,834,533.83

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APPRAISAL REPORTS

APPENDIX I

(II) Condition of major assets

Assets in kind within the scope of the Valuation mainly include such fixed assets as office vehicles and electronic equipment.

1. Transport vehicles

CSTD has a total of 3 office vehicles, all of which are Buick LaCrosse cars bought between 2010 and 2013. At present, all of these cars are with clear ownership and are still running normally and remain in relatively good condition. A specially-assigned person is now responsible for their daily maintenance.

2. Electronic equipment

CSTD has a total of 156 pieces of electronic equipment, mainly including common office equipment such as printers, computers, fax machines and network system. Most of the above equipment was bought between 2010 and 2012. It is verified that most of the equipment, which is under daily maintenance by the equipment department of the Company, is still running normally and remain in good condition.

(III) Intangible assets recorded or unrecorded in the books declared by the Company

It is confirmed that most of intangible assets recorded in the books declared by the Company were NC financial software, while no other unrecorded intangible assets have been declared.

(IV) Off-balance-sheet assets declared by the Company

It is confirmed that CSTD has not declared any off-balance-sheet assets.

(V) Reference of the conclusions of the reports produced by other institutions

None.

IV. TYPES AND DEFINITION OF VALUE

The types of appraised value include market value and other value types. Value types other than market value generally include (but are not limited to) investment value, value in use, liquidation value, residual value and so on. We select market value as the value type in the Valuation in light of the purpose of the Valuation, market conditions as well as the condition of the valuation subject.

Market value refers to the estimated value of the valuation subject in a normal and fair deal made on the valuation base date between a willing buyer and a willing seller wherein both parties act knowledgeably without any compulsion.

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APPRAISAL REPORTS

APPENDIX I

V. VALUATION BASE DATE

The valuation base date of the Valuation is 30 June 2013.

Such date has been determined by the Principal taking into account various considerations, mainly including selecting the proper time required for realizing the economic behavior and fixing the time at the end of an accounting period for clear definition of the valuation scope and accurate and efficient assets checking.

VI. BASIS OF VALUATION

(I) Basis of economic behavior

Resolution made at the GM’s Office Meeting of China Shipping (Group) Company (Zhong Hai Ban Gong Hui [2013] No. 21-2 [Serial No.105])

(II) Basis of laws and regulations

Administration Measures on the Valuation of State-owned Assets (Decree No. 91 of the State Council);
Implementation Rules of Administration Measures on the Valuation of Stateowned Assets (Guo Zi Ban Fa [1992] No.36);
Interim Regulations on Supervision and Administration of Enterprises’ Stateowned Assets (Decree No. 378 of the State Council);
Opinions on the Reform of Administrative Measures of State-owned Assets Valuation to Strengthen the Supervision and Administration of Assets Valuation (Guo Ban Fa [2001] No.102);
Interim Measures on the Administration of the Valuation of Enterprises’ State-owned Assets (Order No.12 of the State-owned Assets Supervision and Administration Commission of the State Council);
Rules on Certain Issues concerning the Administration of State-owned Assets Valuation (Order No.14 of the Ministry of Finance);
Notice of Certain Issues on Strengthening Administration of the Valuation of Enterprises’ State-owned Assets (Guo Zi Wei Chan Quan [2006] No.274)

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APPRAISAL REPORTS

APPENDIX I

(III) Basis of valuation standards

Valuation Standards – Basic Standards and Professional Ethics Standards for Asset Valuation – Basic Standards (Cai Qi [2004] No. 20);
Guiding Opinions on the Attention of Certified Asset Valuers to the Legal Ownership of the Subjects under Valuation (Kuai Xie [2003] No. 18);
Asset Valuation Standards – Enterprise Value (Zhong Ping Xie [2011] No. 227);
Seven asset valuation standards including the Standards for Asset Valuation – Appraisal Report (Zhong Ping Xie [2007] No. 189);
Guidelines for Appraisal Report of Enterprises’ State-owned Assets (Zhong Ping Xie [2008] No. 218);
Guidelines on Quality Control of Appraisal Agencies’ Practices (Zhong Ping Xie [2010] No. 214);
Notice of China Appraisal Society on Modifying the Signature Clause in the Standards for Appraisal Report (Zhong Ping Xie [2011] No. 230).

(IV) Basis of ownership

Copies of vehicle licenses;
Copies of major assets purchase contract.

(V) Basis of pricing

Latest Handbook of Commonly Used Data and Parameters in Asset Valuation (2002 version);
Information on the recent market prices of electronic equipment and vehicles;
Information obtained from on-site investigations.

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VII. VALUATION METHODS

(I) Selection of valuation methods

In accordance with Asset Valuation Standards – Enterprise Value (Zhong Ping Xie [2011] No. 227), certified asset valuers engaged in the appraisal of enterprise’s value shall select one or more basic asset valuation approaches by analyzing the applicability of the three basic approaches of asset valuation, namely, income approach, market approach and asset-based approach, in light of relevant conditions such as the valuation purpose, valuation subject, valuation type and information collection.

Pursuant to the Notice of Certain Issues on Strengthening Administration of the Valuation of Enterprises’ State-owned Assets (Guo Zi Wei Chan Quan [2006] No.274), for valuation of enterprise value-related asset items which is conducted on the premise of on-going operation, in principle two or more methods shall be adopted and presented in the Appraisal Report. Following comprehensive analysis based on the actual circumstances, the conclusions of one of the methods will be selected as the conclusions to be set forth in the Appraisal Report.

Founded in April 2001, CSTD has carried out businesses including operation of domestic and international container port terminals and comprehensive terminals through various ways such as shareholding, equity participation, leasing and joint venture. Instead of obtaining revenues from direct operating activities, CSTD mainly derives profits form the investment gains generated by its subordinate terminal companies and its corporate value is mainly comprised of the value of investments made in foreign countries. Since CSTD is a management holding company, it is difficult to predict its future profits and therefore the income approach shall not be applied.

Moreover, as CSTD is an unlisted company and the public information on comparable enterprises of similar scale in the industry are not available, and there are no suitable companies for reference, the market approach shall not be applied in the Valuation.

(II) Asset-based approach

The asset-based approach used for enterprise valuation refers to a valuation method used to evaluate the value of various assets and liabilities on and off the balance sheet of enterprises in a reasonable manner and determine the value of valuation subject on the basis of the balance sheet as at the valuation base date of the valued entity. When using the asset-based approach for enterprise value appraisal, the value of various assets is calculated by appropriate valuation methods selected subject to the specific conditions of such assets.

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This specific valuation methods used in this valuation are as follows:

1. Current assets

Monetary funds mainly include cash and bank deposits, the appraised value of which is determined by checking and verifying the carrying value in the list of items provided by the enterprise.

The appraised value of prepayments and other receivables is determined subject to the possible amount of each account to be collected by the method of economic content and aging analysis based on the carrying value provided by the enterprise.

The appraised value of dividends receivable is determined by the ultimatelychecked carrying value after verifying the accounting vouchers and tracking the dividends collection as of the valuation inventory date on the basis of reviewing such documents as profit distribution resolution and the Board resolution by the valuers.

The appraised value of interest receivable is determined by checking and verifying the carrying value after reviewing the accounting vouchers on the basis of inspecting relevant loan contracts, interest-bearing manner and interest rates.

2. Long-term equity investments

The valuation range of the current long-term equity investments covered the external long-term equity investment of CSTD. As of the valuation base date, 30 June 2013, there have been 16 items of investments, whose details are as follows:

Serial		Investment	Shareholding
No.	Name of Invested entities	date	proportion
1	China Shipping Container Terminal	08.02	100.00%
	(Shanghai) Co., Ltd.
2	Jinzhou New Age Container	01.09	51.00%
	Terminal Co., Ltd.
3	Lianyungang New Oriental	01.07	55.00%
	Container Terminal Co., Ltd.
4	Lianyungang New Oriental	07.07	55.00%
	International Terminal
	Co., Ltd.
5	Shanghai China Shipping Container	01.08	50.00%
	Terminal Co., Ltd
6	China Shipping Zhanjianggang	01.08	50.00%
	Container Terminal Co., Ltd

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APPRAISAL REPORTS

Serial		Investment	Shareholding
No.	Name of Invested entities	date	proportion
7	Guangzhou Nansha Port	06.03	40.00%
	Stevedoring Corporation Limited
8	Dalian International Container	07.11	30.00%
	Terminal Co., Ltd
9	Qinhuangdao Port New Harbour	07.10	30.00%
	Container Terminal Co., Ltd.
10	Guangxi Qin Zhou International	11.07	40.00%
	Container Terminal Co., Ltd.
11	Ningbo Mei Shan Bonded Port-	11.04	20.00%
	Area New Bay Terminal
	Management Co., Ltd.
12	Yingkou New Age Container	09.05	40.00%
	Terminal Co., Ltd.
13	Lianyungang Xindongrun Port	12.10	49.00%
	Stevedoring Co., Ltd.
14	Dalian Dagang China Shipping	01.11	35.00%
	Container Terminal Co., Ltd
15	Tianjin Five Continents	05.11	14.00%
	International Container Terminal
	Co., Ltd.
16	Yantai Port Co., Ltd.	10.01	3.90%

As for long-term equity investments, the appraisal staff will adopt different approaches in proportion to their shareholdings and in accordance with respective actual situations of each entity.

(1) Long-term equity investments on the basis of continuing operation as a going concern
x The long-term equity invested entities over which the actual control was obtained or significant impact was exerted

For this type of long-term equity invested entities, the appraised value of shareholders’ equity interests in the invested entities on the valuation base date is calculated by overall evaluation through the asset-based approach and income approach selected on the basis of analysing the actual business conditions of the invested entities and is then converted into the assessed value of the long-term equity investments based on the investment shareholding proportion.

y For the long-term equity investments over which the actual control was not obtained, the shareholders’ equity in the accounting statements of the invested entities on the valuation base date is

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converted into the assessed value of the long-term equity investments according to the investment shareholding proportion based on the verification of the authenticity and completeness of their investment amount.

(2) Long-term equity investments in contemplation of (or during) liquidation

x China Shipping Zhanjianggang Container Terminal Co., Ltd.

China Shipping Zhanjianggang Container Terminal Co., Ltd., officially went into liquidation from 1 January 2013. As of the date of this Report, relevant auditing, valuation, liquidation and tax reports have been completed. Considering the fact that the liquidation of China Shipping Zhanjianggang Container Terminal Co., Ltd. has been substantially completed with a few cases of compensation under negotiation, relevant property allocation amount, i.e. the recoverable asset value apportioned to CSTD has been basically determined. The appraised value of the 50% equity interest of China Shipping Zhanjianggang Container Terminal Co., Ltd. held by CSTD was determined by the amount specified in the current liquidation report based on the actual conditions.

y Shanghai China Shipping Container Terminal Co., Ltd.

The business premises of Shanghai China Shipping Container Terminal Co., Ltd. are located on leased land parcel. In view of the structural adjustment to the terminals along both riversides of Huangpu River by Shanghai Municipal Government, the land parcel has been included in demolition and relocation scheme. The company has terminated its terminal operations since 10 August 2013 and intended to go into liquidation. As at the issue date of the report, the aforesaid liquidation procedure has been executed.

Given the foregoing facts, Shanghai China Shipping Container Terminal Co., Ltd. substantively failed to meet the hypothetic premises of continuing operation as a going concern and it was impossible to conduct an overall appraisal on it by income approach or market approach. Therefore, the assets value has been appraised with reasonable appraisal approaches as per their realisable value.

(3) Long-term equity investments intended for sales

On 13 September 2013, CSCL, the controlling shareholder of CSTD, announced that its holding subsidiary CSTD. transferred by way of open tender the 55% equity interest it holds in Lianyungang China Shipping Container Terminal Co., Ltd. and the floor tender price is determined in a reasonable way subject to the appraised value of such equity interest.

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Based on the actual situations above, parties concerned have signed the Shanghai Municipal Property Transaction Contract (Contract No.: G313SH1006945). In this Valuation, the equity interest value on the valuation base date was determined based on the knockdown price confirmed by both parties, net of current profits or losses in July 2013.

3. Fixed assets – machinery equipment

In accordance with the operation standards, the equipment appraisal can be conducted through cost approach, income approach or market approach based on its working conditions and the specific situations of the appraisal.

Due to the fact that most appraised equipment has been put into use for years and the value of equipment is dependent on multi-faceted factors such as service life, maintenance and worn-out conditions and advancement level, the market approach is not applicable in connection with the valuation as it is difficult to find comparable market cases under normal circumstances. In the other hand, as for income approach, it is required to propose a reasonable estimation of the future income of each piece of equipment entrusted in the appraisal. Since corporate incomes are results of multiple factors and it is infeasible to accurately predict the future gains of each piece of equipment, the conditions for performing the appraisal by income approach are hardly satisfying.

Based on the abovementioned statements, assuming the assets are continued to be used according to its current usage, the cost approach would be adopted in this valuation for the fixed assets under equipment category.

The basic formula of the cost approach: Appraised value = Full replacement cost × Newness rate

(1) Determination of full replacement cost

x Vehicles

The full replacement cost is determined by adding vehicle purchase tax, freight cost, license fee and other reasonable costs at the prevailing market price.

y Electronic device

For the electronic device of which prevailing market price is available, the full replacement cost is directly determined based on its analyzed and selected prevailing market price; For the electronic device of which prevailing market price is unavailable, the full replacement cost is determined by selecting the market price of the substitutes with similar function and making corresponding adjustments.

(2) Determination of the newness rate

x For vehicles, the observation method and the useful life method are the primary methods to ascertain the newness rate. The calculation formula is as follows:

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Newness rate = Newness rate under the observation method × 60% + Newness rate under the useful life method × 40%

A. Observation method. The observation method is applied to assess each part of the appraised equipment from a technical perspective, and analyzes factors such as design, manufacturing, usage, wear and tear, maintenance, repair, extensive repairs, and improvement of asset as well as physical life on a consolidated basis. The impacts on the function, efficiency of asset as a result of wear in service and natural deterioration will be assessed by comparing the valuation object with the one in new condition. As such, the newness rate of the appraised equipment would be determined.
B. Theoretical newness rate. Theoretical newness rate shall be determined by lower of the newness rate by useful life method and newness rate by kilometers method. The calculation formula of useful life method is as follows:

Newness rate using the = (Economic useful life-Used life) x 100% useful life method Economic useful life

Economic useful life refers to the term of asset commencing from the date of service to the date of discontinuation when uneconomical.

The calculation formula of the newness rate by kilometers method is as follows:

(Economic travel kilometers-traveled Newness rate using the = kilometers) x 100% kilometers method Economic travel kilometers

Economic travel kilometers are generally 500,000km based on different types of vehicles.

y For electronic device, the useful life method is mainly adopted in determining the newness rate.
z For equipment in extended service in use, if its precision could meet process requirements or are still suitable for use, the residue ratio is generally no less than 15%;
{ When the newness rate under the observation method and that under the useful life method differs greatly; the relatively reasonable one out of the two may be selected based on experience and judgment after analyzing related reasons.

4. Intangible assets – Other intangible assets

Other intangible assets mainly include NC financial systems software, the appraisal value of which is comprehensively determined by querying the relevant accounting records to recognize their original book value constitution and the truth and rationality of the amortization occurred, inquiring the market price to determine the replacement price as well as considering the future proceeds years.

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5. Long-term deferred expenses

Long-term deferred expenses are mainly renovation costs for office buildings, the appraisal value of which is determined by its carrying value after check, by querying the relevant accounting records to recognize their original book value constitution and the truth and rationality of the amortization occurred.

6. Liabilities

On the basis of verification, the appraisal value of liabilities is determined by the amount of liabilities actually undertaken by the valued entity as at the valuation base date. The liabilities no longer to be undertaken by the valued entity after the valuation purpose has been reached are appraised as zero.

VIII. IMPLEMENTATION PROCESS AND CONDITIONS FOR THE VALUATION PROCEDURES

(I) Acceptance of entrustment

We reached an engagement letter with the principal on the valuation purpose, valuation subject and scope, valuation base date and other basic matters after comprehensive analysis of the principal’s professional competence and independence and evaluation of business risks based on their knowledge to the entrusted assets for valuation upon negotiations with us. Specifically, according to the actual situation, the principal determined the valuation value types, understood the valuation assumptions and limitations that may affect the evaluation business and conclusions and worked out an asset valuation work plan and organize an assessment team.

(II) Asset verification

The valuers guided the valued entity, on the basis of conducting an asset inventory check and preparing valuation information, to verify the assets within the scope of valuation, give the necessary attention to the legal ownership status thereof, and conduct review, check and verification for the valuation information obtained.

(III) Estimations

The valuers select the appropriate valuation methods based on the valuation subject, value types, and data collection and conduct estimations subject to the basis of pricing determined by the valuation information, market research, and market information.

(IV) Issue of report

The valuers summarize, review, analyze, judge, and improve the valuation result to come up with valuation conclusions; prepare an appraisal report and issue the formal report after necessary communications with the principal and related parties in relation to the relevant contents in the appraisal report upon internal audit.

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IX. VALUATION ASSUMPTIONS

This appraisal report and conclusions are based on the following assumptions:

Trading assumptions. Trading assumptions mean that the appraisers conduct valuation based on the simulated market such as trading conditions of the assets to be valued assumed that all the assets to be valued have been in the transaction process.
Open market assumption. Open market assumptions assume that assets to be valued are traded in the open market in order to achieve its market value. Market value of assets is subject to the constraints of the market mechanism and is determined by the market rather than by individual trading. Open market herein refers to welldeveloped and completed market conditions and it is a competitive market featuring voluntary buyers and sellers. In this market, buyers and sellers are equal and they have opportunities and time to access adequate market information. Transactions between buyers and sellers are voluntary, rational, rather than conducted under mandatory or unrestricted conditions.

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X. VALUATION CONCLUSIONS

We conclude from the above valuation, as at the valuation base date (30 June 2013), the carrying values of assets, liabilities, and net assets of CSTD were RMB2,678,660,700, RMB291,826,100, and RMB2,386,834,600, respectively; after the valuation, assets, liabilities and net assets were RMB3,714,886,500, RMB291,826,100 and RMB3,423,060,400, respectively; total assets value increased RMB1,036,225,800 or 38.68% after valuation; net assets value increased RMB1,036,225,800 or 43.41% after valuation. The following table lists the detailed valuation conclusions:

Asset valuation result summary

Valuation base date: 30 June 2013

Valued entity: China Shipping Terminal Development Co., Ltd. Unit: RMB10k

				Increase or
		Carrying	Valuation	decrease in	Value-added
		value	value	value	ratio
Item		A	B	C=B-A	D=C/A×100%
1	Current assets	6,380.53	6,380.53	0.00	0.00%
2	Non-current assets	261,485.54	365,108.12	103,622.58	39.63%
(1)	Long-term equity	261,160.73	364,761.31	103,600.58	39.67%
	investment
(2)	Fixed assets	118.75	132.03	13.28	11.18%
(3)	Intangible assets	11.28	20.00	8.72	77.30%
(4)	Long-term deferred	194.78	194.78	0.00	0.00%
	expenses
3	Total assets	267,866.07	371,488.65	103,622.58	38.68%
4	Current liabilities	29,182.61	29,182.61	0.00	0.00%
5	Total liabilities	29,182.61	29,182.61	0.00	0.00%
6	Net assets	238,683.46	342,306.04	103,622.58	43.41%

XI. SPECIAL MATTERS DESCRIPTION

Within the scope of the valuation, China Shipping Zhanjianggang Container Terminal Co., Ltd., a subsidiary of China Shipping Terminal Development Co., Ltd., officially went into liquidation from 1 January 2013. As of the date of this Report, relevant auditing, valuation, liquidation and tax reports have been basically completed. The Company was originally scheduled to complete the liquidation and begin allocating assets among the shareholders on 31 July 2013. However, currently the liquidation process was failed to finish as scheduled due to the impact of compensation claims by two customers for cargo damages, with the amount involved in the two cases totaling about RMB917,000. At present, China Shipping Zhanjianggang Container Terminal Co., Ltd. and its shareholders are actively

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negotiating with the two claimants. The Valuation is made based on the recoverable asset value that China Shipping Terminal Development Co., Ltd. can achieve in the liquidation report, without considering the impact of such claims on the results of the Valuation.

On 13 September 2013, CSCL, the controlling shareholder of China Shipping Terminal Development Co., Ltd., announced that its holding subsidiary China Shipping Terminal Development Co., Ltd. transferred by way of open tender the 55% equity interest it holds in Lianyungang China Shipping Container Terminal Co., Ltd. and the floor tender price is determined in a reasonable way subject to the appraised value of such equity interest. The valuation of said equity interest, whose base date was confirmed to be 31 July 2013, has been performed by Beijing China Enterprise Appraisals Co., Ltd., who subsequently issued the Appraisal Report on the Proposed Transfer by China Shipping Terminal Development Co., Ltd. of its Equity Interest in Lianyungang China Shipping Container Terminal Co., Ltd. (Zhong Qi Hua Ping Bao Zi [2013] No.1200).

As of the valuation base date, Guangzhou Nansha Port Stevedoring Corporation Limited, Lianyungang New Oriental International Terminal Co., Ltd., Jinzhou New Age Container Terminal Co., Ltd., Dalian International Container Terminal Co., Ltd. and Guangxi Qinzhou International Container Terminal Co., Ltd., all of which were subsidiaries of China Shipping Terminal Development Co., Ltd., had not obtained property ownership certificates for the building and premises as set forth in the Valuation Declaration Form. Nonetheless, the aforementioned companies had presented relevant documents evidencing that there had been no disputes over the ownership of the said buildings and premises. Such information as the areas of the buildings and premises shall be subject to the declaration made by respective companies, which has been verified and confirmed by valuers through checking the area as indicated in the relevant surveying and mapping reports and engineering construction drawings, and the impact of the possible inconsistency between the areas declared and the areas to be recorded in the certificates has not been taken into account.
The inspection center (comprising multi-purpose office rooms, transformer substation buildings, terminal gates, and monitoring rooms) owned by Guangzhou Nansha Port Stevedoring Corporation Limited, a subsidiary of China Shipping Terminal Development Co., Ltd., is now being used by the Frontier Inspection Station of Guangzhou Nansha Bonded Port Area. Due to various limitations, we were unable to carry out on-site investigations. The value of the said inspection center was determined on the basis of the data on engineering budget and settlement provided by Guangzhou Nansha Port Stevedoring Corporation Limited.

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Jinzhou New Age Container Terminal Co., Ltd., a subsidiary of China Shipping Terminal Development Co. Ltd., applied for mortgage loans with its self-owned fixed assets from China Construction Bank Corporation, Jinzhou Tianqiao Subbranch and Industrial and Commercial Bank of China, Shanghai Waitan Sub-branch in the amount of RMB380 million and RMB114 million, respectively. We have not taken into account the impact of the aforesaid mortgages on the results of the Valuation.
Our valuers conducted on-site investigations as to the condition of such fixed assets as buildings and premises (structures) and machinery and equipment, made necessary enquiries with relevant management staff and checked relevant usage and maintenance records, but failed to use sophisticated instruments in the examination and investigation due to various limitations. The valuation on hidden works which could not be investigated and observed, including the hydraulic engineering and drainage works of the terminals, was made based on the introduction of relevant management staff and operators and the experience-based judgment of the valuers themselves.
In the absence of sufficient statistical data on relevant market transaction and of the basis for analyzing and assessing the impact of liquidity discount on the value of the valuation subject, we have not taken into account the impact of liquidity discount on the results of the Valuation.
We have not taken into account the relevant income tax arising from the transaction in the Valuation.
As of the valuation base date, subsidiaries of China Shipping Terminal Development Co., Ltd. have not all completed conversion from business tax to VAT, In this valuation, relevant VAT shall not be taken into account for subsidiaries having implemented the above tax reform policy in the process of pricing for valuation, while VAT shall be taken into account subject to the original measurement method for subsidiaries failure to implement the above tax reform policy. Users of the report should pay attention to this.

XII. RESTRICTIONS ON THE USAGE OF THIS REPORT

(I) This appraisal report is only to be used for the purposes and applications as stated thereof;
(II) This appraisal report is only to be used by the users as stated thereof;
(III) Before any part or all of the contents of this appraisal report is extracted, quoted or disclosed to the public media, the related content shall be reviewed by the valuation agency, unless required by the laws and regulations and otherwise agreed by the relevant parties;
(IV) The valid period of the valuation conclusions disclosed by this report lasts for one year from the valuation base date of 30 June 2013 to 29 June 2014.

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XIII. APPRAISAL REPORT DATE

The appraisal report dated 11 November 2013.

Legal representative (or authorized representative) of the appraisal firm:

Certified asset valuer:

11 November 2013

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Appendices

I. Economic behavior documents corresponding to the valuation purpose;
II. Legal Person Business License of the principal and the valued entity;
III. Supporting Information on Title Ownership of the Valuation Target;
IV. Letter of Undertaking from the Principal and Related Parties;
V. Letter of Undertaking from the Signing Certified Asset Valuer;
VI. Qualification Certificate of the Valuation firm;
VII. Copy of Legal Person Business License of the Valuation firm;

VIII. Qualification Certificate of the Signing Certified Asset Valuer;

IX. Audit Report;
X. Engagement Letter.

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The following is the text of the asset appraisal report received from China Tong Cheng in connection with the valuation of CSTD HK as approved by China Shipping Group.

Asset Appraisal Report

on Entire Shareholders’ Equity of China Shipping Terminal Development (Hong Kong) Co., Ltd. Involved in Reorganization of Asset Businesses of CSTD Zhong Tong Ping Bao Zi [2013] No. 258 Volume One of One

Disclaimer, Summary, Text and Appendices

China Tong Cheng Assets Appraisal Co., Ltd. 11 November 2013

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Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	63
Summary	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	64
Text
I.	Principal, Valued Entity and Other Users of the Report Specified in
	the Engagement Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	67
II.	Valuation Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	70
III.	Subject and Scope of Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	70
IV.	Value Type and Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
V.	Valuation Base Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
VI.	Valuation Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
VII.	Valuation Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73
VIII.	Implementation of the Valuation Procedure . . . . . . . . . . . . . . . . . . . . . . . .	75
IX.	Valuation Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	76
X.	Valuation Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	77
XI.	Special Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	78
XII.	Restrictions on Use of this Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80
XIII.	Appraisal Report Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		82

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CERTIFIED PUBLIC VALUER’S DISCLAIMER

I. We have complied with relevant laws and regulations and standards for asset appraisal and adhere to the principles of independence, objectivity and impartiality in performing the assets valuation services. According to the materials collected by us during the valuation process, the contents of the asset appraisal report (this Report) are objective and we will assume corresponding legal responsibilities for the justification of the valuation conclusion.
II. Lists of assets and liabilities related to the valuation subject are declared, signed and sealed for confirmation by the principal and the valued entity. The principal and related parties are responsible for the authenticity, legality and completeness of the materials provided by them as well as the proper use of this Report.
III. We have no existing or potential interest in the valuation subject under this Report, and we have no existing or potential interest with or bias against the related parties.
IV. We have conducted on-site investigation on the valuation subject under this Report and the related assets. We have paid due attention to the legal ownership of the valuation subject and the related assets and verified the materials related to such legal ownership.
V. The analyses, judgments and conclusions made in this Report are subject to the assumptions and restrictive conditions herein. Users of this Report are required to take into full consideration the assumptions, restrictive conditions and special notes set out herein as well as their impact on the valuation conclusion.

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SUMMARY

I. Economic behavior corresponding to this valuation

CSTD proposes reorganization of asset businesses in accordance with strategic development plans of China Shipping (Group) Company, China Shipping Container Lines Co., Ltd. (CSCL) and China Shipping Terminal Development (Hong Kong) Co., Ltd. As a reorganization platform, China Shipping Terminal Development (Hong Kong) Co., Ltd. plans to accept 100% equity interest held by CSCL in China Shipping Terminal Development Co. Ltd. (CSTD) through issue of shares; meanwhile, China Shipping (H.K.) Holdings Co., Ltd., controlling shareholder of China Shipping Terminal Development (Hong Kong) Co., Ltd., will invest corresponding cash in proportion. This valuation aims to provide reference for determining the value of the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd.

II. Valuation purpose

This valuation aims to provide reference for the economic behavior of determining the value of the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd. involved in reorganization of asset businesses of CSTD.

III. Subject and scope of valuation

This valuation appraises the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd and covers all assets and liabilities declared by China Shipping Terminal Development (Hong Kong) Co., Ltd. as of the valuation base date.

IV. Value type

This valuation adopts market value based on the valuation purpose and valuation subject.

V. Valuation base date

30 June 2013

VI. Valuation method

This valuation adopts asset-based approach.

VII. Valuation conclusion and the valid period

As of the valuation base date (i.e., 30 June 2013), the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd. was appraised to be HK$361,175,900 (equivalent to RMB287,694,700), appreciating by HK$99,810,200 (or 38.19%) vs. the carrying value thereof (HK$261,365,700).

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This valuation conclusion only serves the economic behavior of determining the value of the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd. involved in reorganization of asset businesses of CSTD.

The valuation conclusion of this Report is valid from 30 June 2013 to 29 June 2014.

VIII. Special notes having impact on the valuation conclusion

From 2005 to 2009, China Shipping Terminal Development (Hong Kong) Co., Ltd. appropriately reduced its shareholding in Xiamen Port and Dalian Port due to investment portfolio restructuring. During the tax valuation of 2005-2006, Hong Kong Inland Revenue Department judged the said share trading behavior as tradable investment, requiring China Shipping Terminal Development (Hong Kong) Co., Ltd. to pay profits tax for proceeds from share trading and appreciation parts of the fair value in the preceding years.

China Shipping Terminal Development (Hong Kong) Co., Ltd. claimed that its holding of the aforesaid shares is long-term strategic investment rather than tradable investment for short-term profits and so it does not need to pay any tax for its capital revenue according to Article 14 of Inland Revenue Ordinance. As a result, China Shipping Terminal Development (Hong Kong) Co., Ltd. and Hong Kong Inland Revenue Department had dispute over the said issue. As required by Hong Kong Inland Revenue Department and to avoid possible late fees and fines arising from delayed payment of taxes deemed necessary, China Shipping Terminal Development (Hong Kong) Co., Ltd. bought tax reserve certificates equivalent to HK$30,515,655.00 (stated as advance payments) for proceeds from share disposal and appreciation parts of fair value from 2005 to 2007.

As of the issue date of this Report, Hong Kong Inland Revenue Department had yet to make final decision on the said issue but left it aside as tax dispute. Given the aforesaid fact, this valuation sets aside the impact of the aforesaid circumstance on the appraised value.

China Shipping Terminal Development (Hong Kong) Co., Ltd. held 20% equity interest in Damietta Container Terminal by investment in November 2007. According to franchising rules, Damietta Container Terminal will be given 40-year franchising after commencement of operation before 17 January 2009 (when the first cargo ship arrived).

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Egypt Damietta Container Terminal Company applied for putting off the commencement of operation. Damietta Port Authority asked Egypt Damietta Container Terminal to pay the fine for delay, and Damietta Container Terminal has paid US$6 million. In May 2013, Egypt Damietta Container Terminal discussed the matter with the Egyptian Government authority, which has initially allowed Egypt Damietta Container Terminal to pay a fine of only US$32 million. Egypt Damietta Container Terminal has worked out a schedule of progressive payment within 16 years after commencement of operation. Egypt Damietta Container Terminal has not received any official reply from the Egyptian Government authority as of 30 June 2013.

The Egypt terminal construction has been in extended suspension as Egypt is in political turmoil. The valuers cannot make on-site verification for various reasons. We, via relevant staff of CSTD HK, have verified the legitimacy of investment of the said terminal, and referred to relevant information like articles of association, commencement of works, construction plan, source of capital, and so on. We finally determined the appraised value by multiplying the net asset as shown in the adjusted statements on valuation base date by the CSTD HK stake in the company, without factoring impacts of other matters on the valuation result.

As of the valuation base date, Dalian International Container Terminal Co., Ltd. and Jiangsu Yangtze Petrochemical Co., Ltd. (both are non-controlled subsidiaries of China Shipping Terminal Development (Hong Kong) Co., Ltd.) did not have property ownership certificates for buildings as shown in the Valuation Declaration Form. The said companies made relevant statements that the said buildings are free from any ownership dispute. The floor spaces of the said buildings are subject to the enterprises’ declaration, which has been verified and confirmed by valuers through checking the area as indicated in the relevant surveying and mapping reports and engineering construction drawings, and the influence of the difference between them and the floor spaces set out in the certificates to be issued was not considered.
In this valuation, we did not consider the impact of liquidity discount on the valuation result, for we could not get enough statistics of relevant market transactions and lacked criterion for analyzing and determining the influence of liquidity discount on the value of the valuation subject.
In this Report, the HKD-RMB exchange rate is 0.79655.
As of the valuation base date, Dalian International Container Terminal Co., Ltd., subsidiary of China Shipping Terminal Development (Hong Kong) Co., Ltd., has not completed conversion from business tax to VAT. In the process of pricing for this valuation, relevant VAT shall be taken into account subject to the original measurement method. Users of the report should pay attention to this.

Above is an excerpt of the text of this Report. For more details about this Report and for reasonable understanding of the valuation conclusion, please refer to the text of this Report.

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APPENDIX I

Entire Shareholders’ Equity of China Shipping Terminal Development (Hong Kong) Co., Ltd. Involved in Reorganization of Asset Businesses of CSTD

Asset Appraisal Report

Zhong Tong Ping Bao Zi [2013] No. 258

China Shipping (H.K.) Holdings Co., Ltd.:

China Tong Cheng Assets Appraisal Co. Ltd. accepted your entrustment to appraise the market value of the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd. on 30 June 2013 with asset-based approach in accordance with relevant laws, regulations, standards and principles for asset appraisal, and necessary valuation procedure. The asset valuation is reported as follows:

I. Principal, Valued Entity and Other Users of the Report Specified in the Engagement Letter

(1) The principal

Enterprise name: China Shipping (H.K.) Holdings Co., Ltd.

Domicile: 32/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road, Central, HK

Legal status: Body Corporation

Business nature: Corporation

(2) General information of the valued entity

Enterprise name: China Shipping Terminal Development (Hong Kong) Co., Ltd. (hereafter as “CSTD HK”)

Domicile: 32/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road, Central, HK

Legal status: Body Corporation

Business nature: Corporation

Established in July 2001, CSTD HK is a professional company that specializes in investment, development, operation and management of terminals at home and abroad. As of the valuation base date, the company, with a registered capital of US$30 million, has

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APPRAISAL REPORTS

only one shareholder, China Shipping (H.K.) Holdings Co., Ltd. Businesses of the company include: building, investing in, operating, managing, controlling and monitoring container terminals and freight terminals, vessel chartering, and real estate investment. As of 30 June 2013, the company directly or indirectly invested in 4 container terminals, namely, Dalian international terminal, Egypt Damietta Container Terminal, Seattle Terminal of USA and Kao Ming Terminal of Taiwan. In the meantime, as a strategic investor, the company holds some shares of Xiamen International Port Co., Ltd. and Dalian Port (PDA) Company Limited. As at 31 December 2012, China Shipping Terminal Development (Hong Kong) Co., Ltd. has a total asset of about HK$981,751,800 and a net asset of about HK$329,077,700, and it recorded a loss of about HK$3,960,800 in 2012.

The company mainly made investments in:

==> picture [221 x 255] intentionally omitted <==

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

China Shipping Terminal Development (Hong Kong) Co., Ltd.
20.00% 10.00% 40.00% 33.33% 100.00%
Egypt Damietta Container Terminal Dalian International Container Terminal Co., Ltd. China Shipping Terminal Development (US) Co., Ltd. Cheer Dragon Investment Limited Hong Kong Sea Horse Development Co., Ltd.
----- End of picture text -----

3. Finances in recent years

Asset operations of CSTD HK during 2011-2012

Unit: HK$

SN	Items	2010	2011	2012
I	Assets and Liabilities:
1	Monetary fund	591,342	563,569	422,225
2	Advance payments	3,224,869	3,224,869	3,224,869
3	Dividend receivable	0	0	0
4	Other receivables	53,534,024	61,159,843	63,473,297

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APPRAISAL REPORTS

SN	Items	2010	2011	2012
5	Total current assets	57,350,235	64,948,281	67,120,391
6	Available-for-sale financial	290,923,862	253,138,322	244,139,282
	assets
7	Long-term equity interest	337,870,168	329,374,931	321,663,719
	investment
8	Other current assets	0	0	348,828,390
9	Total non-current assets	628,794,030	582,513,253	914,631,391
10	Total assets	686,144,265	647,461,534	632,923,392
11	Other accounts payable	305,497,706	305,407,511	652,674,096
12	Total current liabilities	305,497,706	305,407,511	652,674,096
13	Foreseeable liabilities	0	0	0
14	Non-current liabilities	0	0	0
15	Total liabilities	305,497,706	305,407,511	652,674,096
16	Total equity interest	380,646,559	342,054,023	329,077,686
II	Gains and losses:
1	Revenue from main	0	0	0
	businesses
2	Cost of main businesses	0	0	0
3	Other revenues	7,205	363,896	736,275
4	Management expenses	1,283,452	669,672	35,488
5	Financial costs	0	0	0
6	Assets impairment loss	0	0	0
7	Investment return	8,991,410	7,994,017	3,033,128
8	Loss of the joint operation	3,281,701	8,052,297	7,694,680
7	Non-operating revenue	0	0	0
8	Non-operating expense	0	0	0
9	Total profits	4,433,462	-364,056	-3,960,765
10	Income tax	0	0	0
11	Net profit	4,433,462	-364,056	-3,960,765

(II) Relation between the principal and the valued entity

The principal is the controlling shareholder of China Shipping Terminal Development (Hong Kong) Co., Ltd, holding 100% equity thereof.

(III) Other users of this Report

Except for the principal, valued entity and users of this Report as stipulated in state laws and regulations, no other users of this Report are specified in the engagement letter.

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II. Valuation Purpose

CSTD proposes reorganization of asset businesses in accordance with strategic development plans of China Shipping (Group) Company, China Shipping Container Lines Co., Ltd. (CSCL) and China Shipping Terminal Development (Hong Kong) Co., Ltd. As a reorganization platform, China Shipping Terminal Development (Hong Kong) Co., Ltd. plans to accept 100% equity interest held by CSCL in CSTD through issue of shares. Meanwhile, China Shipping (H.K.) Holdings Co., Ltd., controlling shareholder of China Shipping Terminal Development (Hong Kong) Co., Ltd., will invest corresponding cash in proportion. This valuation aims to provide reference for determining the value of the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd.

This behavior has been passed by China Shipping (Group) Company in the Resolutions Adopted by the General Manager Office Meeting (Zhong Hai Ban Gong Hui No. [2013] 21-2 [Zong No. 105]).

III. Subject and Scope of Valuation

(I) Content of subject and scope of valuation

The subject and scope of valuation are the same as those involved in the economic behavior.

This valuation appraises the entire shareholders’ equity of China Shipping Terminal Development (Hong Kong) Co., Ltd. and covers all assets and liabilities declared by China Shipping Terminal Development (Hong Kong) Co., Ltd. as of the valuation base date. The accounting statement corresponding to the valuation scope has been audited by Baker Tilly China Certified Public Accountants (LLP), who has issued unqualified audit report (Tian Zhi Ye Zi [2013] No. 500). Specifically:

Details of the assets to be valuated

		Unit: HK$
SN	Items	Amount
1	Total current assets	66,606,166.89
2	Monetary fund	30,761,119.56
3	Advance payments	30,515,655.00
4	Dividend receivable	5,251,824.07
5	Other receivables	77,568.26
6	Total non-current assets	908,964,412.72
7	Available-for-sale financial assets	80,625,600.00
8	Long-term receivables	4,690,175.24
9	Long-term equity interest investment	474,591,467.48
10	Other non-current assets	349,057,170.00
11	Total assets	975,570,579.61
12	Total current liabilities	713,755,915.13
13	Other accounts payable	714,204,976.70
14	Total liabilities	714,204,976.70
15	Net assets	261,365,602.91

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(II) About the main assets

This valuation involves no physical assets.

(III) The recorded or unrecorded intangible assets declared by the enterprise

Upon verification, the enterprise has no recorded intangible assets and it did not declare other unrecorded intangible assets.

(IV) The off-balance-sheet assets declared by the enterprise

Upon verification, no off-balance-sheet asset is declared by the enterprise.

(V) Quotation of report conclusions issued by other agencies

As necessary, this valuation quoted the audit report (Tian Zhi Ye Zi [2013] No. 500) issued by Baker Tilly China Certified Public Accountants (LLP).

IV. Value Type and Definition

Value types include market value and value other than market value. Value types other than market value usually include (but are not limited to) investment value, value in use, liquidation value and residual value. This valuation adopts market value based on the valuation purpose, market conditions and valuation subject.

Market value refers to the estimated value of a certain asset in the normal and fair transaction on the valuation base date when a voluntary buyer and a voluntary seller act with reason and without any coercion.

V. Valuation Base Date

The valuation base date herein is 30 June 2013.

In determining the valuation base date, the principal mainly considered the time satisfactory for the economic behaviors, and chose the end of accounting period so as to specify valuation scope and check the assets accurately and efficiently.

VI. Valuation Basis

(I) Basis of economic behaviors

Resolution of General Manager Office Meeting (China Shipping Office Meeting [2013] No. 21-2 [Total No. 105]) of China Shipping (Group) Company

(II) Basis in laws and regulations

Administrative Measures for State-Owned Assets Assessment (State Council Order No. 91);

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APPENDIX I

Detailed Rules for the Implementation of the Administrative Measures for State-Owned Assets Assessment ([1992] No. 36 of the Office of the National State-Owned Assets Administration Bureau);
Interim Measures for the Supervision and Administration of State-Owned Assets of the Enterprises (State Council Order No. 378);
Opinions on Reforming the Executive Administration on State-Owned Asset Valuation and Strengthening the Regulatory Work on Asset Valuation (Guo Ban Fa [2001] No. 102);
Interim Measures for the Administration of Assessment of State-Owned Assets of Enterprises (Order of the State-owned Assets Supervision and Administration Commission of the State Council No. 12);
Several Issues Concerning the Administration of State-Owned Asset Valuation Provisions (Ministry of Finance Order No. 14);
Notice on Issues Related to the Strengthening of the Administration of Valuation of State-Owned Assets (Guo Zi Wei Chan Quan [2006] No. 274).

(III) Basis in valuation standards

Assets Evaluation Standards – Basic Standards and the Standards of Assets Evaluation Professional Ethics – Basic Standards ([2004] No. 20 of the Ministry of Finance);
Guiding Opinions for Certified Public Valuer on Legal Ownership of Subject under Appraisal ([2003] No. 18 of Chinese Institute of Certified Public Accountants);
Standards for Asset Appraisal – Enterprise Value ([2011] No. 227 of China Appraisal Society);
Seven standards for asset appraisal including the Standards for Asset Appraisal – Valuation Report ([2007] No. 189 of China Appraisal Society);
Guidelines for Valuation Report of. State-owned Assets of Enterprises ([2008] No. 218 of China Appraisal Society);
Guidelines on Business Quality Control of Appraisal Agencies ([2010] No. 214 of China Appraisal Society);
Notice of China Appraisal Society on Revising the Valuation Report Standards in Relation to Signature Terms ([2011] No. 230 of China Appraisal Society).

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(IV) Ownership basis

Long-term investment agreements of main assets and others.

(V) Basis of pricing

Relevant information in Hong Kong H shares capital market;
Audit report provided by entities making long-term equity interest investment;
On-site investigation materials.

VII. Valuation Method

(I) Selection of valuation method

According to Standards for Asset Appraisal – Enterprise Value ([2011] No. 227 of China Appraisal Society), the certified public valuer, when appraising enterprise value, should analyze the applicability of the three basic methods of asset valuation such as income approach, market approach and asset-based approach according to relevant conditions like valuation purpose, valuation subject, value type and data collection and appropriately select one or more basic methods of asset valuation.

According to Notice on Issues Related to the Strengthening of the Administration of Valuation of State-owned Assets (Guo Zi Wei Chan Quan [2006] No. 274), regarding asset valuation projects involving enterprise value and based on going concern, more than two methods should be adopted for valuation in principle and the methods should be set out in the valuation report. After full and comprehensive analysis based on actual condition, one valuation result should be determined for the valuation report.

CSTD HK, established in July 2001, is mainly engaged in operation of container terminals and comprehensive terminals at domestic and overseas ports via investment like equity participation or joint operation. It does not directly conduct businesses or make revenues; its profits primarily come from return on investment in its subordinate terminals; and its value mainly comes from that of external investment. As a management holding company, it is not eligible for earnings projections.

Meanwhile, as CSTD HK is a non-listed company, the public data of the industries and sized enterprises related to the valued entity are unavailable, and there is no appropriate listed enterprise for reference, it is improper to adopt market approach for this valuation.

(II) Asset-based approach

The asset-based approach in valuation of enterprise value is a valuation method by which the values of various assets and liabilities in and off the balance sheet of an enterprise are reasonably valuated based on the balance sheet of the valued entity on the

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APPENDIX I

valuation base date so as to determine the value of the valuation subject. When the asset-based approach is used for appraising enterprise value, the values of all assets are worked out via appropriate valuation method according to specific conditions.

Specific valuation methods involved in this valuation are as follows:

1. Current assets

Monetary fund mainly includes bank deposits. The carrying value after review and verification is determined as the appraised value based on the details of accounts provided by the enterprise.

With regard to advance payments and other receivables, valuation is conducted based on the carrying value provided by the enterprise and analysis of the economic content and aging so as to determine the appraised value as per the recoverable amount of each payment.

Regarding dividend receivable, the valuers, after consulting information such as dividend distribution plan of relevant listed companies, checked accounting vouchers, followed up with the dividend recovery as at the valuation checkup date and finally recognised the carrying value after verification as the appraised value.

2. Available-for-sale financial assets

Available-for-sale financial assets are mainly shares. By consulting relevant account books, the valuers checked the documents bearing number of shares held with external financial transaction institutions and recognised the appraised value based on the checked number of shares held and as per the average share price during the 30 transaction days before the valuation base date.

3. Long-term receivables

Long-term receivables are mainly current accounts receivable from Damietta Container Terminal. According to the details of accounts provided by the enterprise, the valuer checked relevant financial records and account books, spot checked materials such as contracts, and finally recognised the carrying value after verification as the appraised value.

4. Long-term equity interest investment

The long-term equity interest investment within the scope of this valuation involves Hong Kong Sea Horse Development Co., Ltd. as well as CSTD HK’s shareholding enterprises which have no right of control and do not participate in specific daily operation and management. The valuers determined the appraised values of the said enterprises as per the net assets shown in the audited and adjusted statements and in proportion to their shareholdings.

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In particular,

(1) although CSTD HK only holds 10% equity interest in Dalian International Container Terminal Co., Ltd., an overall valuation was conducted on the same valuation base date on Dalian International Container Terminal Co., Ltd. when CSCL transferred its 100% equity interest in CSTD to CSTD HK. Therefore, the 10% equity interest held by CSTD HK in Dalian International Container Terminal Co., Ltd. was determined by multiplying the valuated net assets of Dalian International Container Terminal Co., Ltd. with the shareholding percentage;
(2) Hong Kong Sea Horse Development Co., Ltd. is a company established just before the valuation base date. Upon verification, the company has no tangible assets but investment funds. Therefore, although CSTD HK is a controlling shareholder, the appraised value was determined as per the net assets shown in the audited and adjusted statements and in proportion to its shareholding during valuation.

5. Liabilities

Upon verification, the amount of liabilities the valued entity actually needs to bear on the valuation base date was taken as the appraised value of liabilities. Liabilities that do not need to be borne by the valued entity after valuation purpose is achieved were valuated as nil.

VIII. Implementation of the Valuation Procedure

(I) Acceptance of entrustment

Upon negotiation and communication with the principal, learn the basic information of the assets under valuation, specify the basic valuation items such as valuation purpose and subject, scope of valuation and valuation base date, and determine to accept entrustment and sign an asset valuation engagement letter after comprehensive analysis of professional competence and independence and valuation of business risk. According to specific conditions, determine the type of appraised value, learn the valuation assumptions and limiting conditions that may affect the valuation business and conclusion, formulate a valuation work plan and organise a valuation work team.

(II) Asset verification

Guide the valued entity in checking assets and prepare valuation data so as to conduct verification on the assets within the scope of valuation, pay necessary attention to their legal ownership, review, check and verify the collected valuation data.

(III) Estimations

Select appropriate valuation methods according to relevant conditions like valuation subject, value type and data collection. Conduct market research and collect relevant market information to determine the basis of pricing and make estimations based on the valuation data on hand.

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(IV) Issue of report

Summarize, review, analyze, estimate and improve the valuation results in order to produce valuation conclusions. Write valuation reports and upon internal audit, issue formal valuation reports after necessary communication with the principal and related parties on the relevant contents of the valuation reports.

IX. Valuation Assumptions

The valuation reports and conclusions are based on the following assumptions:

Transaction assumption. It is assumed that all the assets to be valuated are under transaction, the valuer conducts valuation according to the transaction conditions of the assets to be valuated in a simulated market.
Open market assumption. It is assumed that the assets to be valuated are transacted in the open market so as to realize their market values. The market values of assets are restricted by the market mechanism and depend on market climate rather than particular transactions. Open market herein refers to a competitive market with fully developed and perfect conditions and voluntary buyers and sellers, where the buyers and sellers are equal in status and have opportunities and time to get enough market information and the transactions between the buyers and sellers are based on free will and rationality rather than mandatory or unrestricted conditions.

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APPENDIX I

X. Valuation Conclusion

Based on the above-mentioned valuation, on the valuation base date (30 June 2013), the carrying values of the assets, liabilities and net assets at CSTD HK were HK$975,570,700, HK$714,205,000 and HK$261,365,700, respectively; after the valuation, the carrying values of the assets, liabilities and net assets were HK$1,075,380,900, HK$714,205,000 and HK$361,175,900, respectively; after the valuation, the total assets and net assets both appreciated HK$99,810,200, representing an appreciation rate of 10.23% and 38.19%, respectively. Refer to the following table for details of the valuation conclusion:

Table of Asset Valuation Results

Valuation base date: 30 June 2013

Valued	entity: China Shipping Terminal	Development			Unit: HK$’0,000
	(Hong Kong) Co., Ltd.
		Carrying	Appraised	Increase/	Appreciation
		value	value	decrease	rate
Items		A	B	C=B-A	D=C/Ax100%
1	Current assets	6,660.62	6,660.62	0.00	0.00%
2	Non-current assets	90,896.45	100,877.47	9,981.02	10.98%
(1)	Available-for-sale financial	8,062.56	9,016.85	954.29	11.84%
	assets
(2)	Long-term receivables	469.02	469.02	0.00	0.00%
(3)	Long-term equity interest	47,459.15	56,485.88	9,026.73	19.02%
	investment
(4)	Other non-current assets	34,905.72	34,905.72	0.00	0.00%
3	Total assets	97,557.07	107,538.09	9,981.02	10.23%
4	Current liabilities	71,420.50	71,420.50	0.00	0.00%
5	Total liabilities	71,420.50	71,420.50	0.00	0.00%
6	Net assets	26,136.57	36,117.59	9,981.02	38.19%

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APPENDIX I

Refer to the following table for the valuation conclusion in RMB at the exchange rate of HK$1 = RMB0.79655 on the valuation base date:

Table of Asset Valuation Results

Valuation base date: 30 June 2013

Valued entity: China Shipping Terminal Development (Hong Kong) Co., Ltd.

Unit: RMB’0,000

	(Hong Kong) Co., Ltd.
		Carrying	Appraised	Increase/	Appreciation
		value	value	decrease	rate
Items		A	B	C=B-A	D=C/Ax100%
1	Current assets	5,305.51	5,305.51	0.00	0.00%
2	Non-current assets	72,403.56	80,353.96	7,950.40	10.98%
(1)	Available-for-sale financial	6,422.23	7,182.38	760.15	11.84%
	assets
(2)	Long-term receivables	373.60	373.60	0.00	0.00%
(3)	Long-term equity interest	37,803.58	44,993.83	7,190.25	19.02%
	investment
(4)	Other non-current assets	27,804.15	27,804.15	0.00	0.00%
3	Total assets	77,709.07	85,659.47	7,950.40	10.23%
4	Current liabilities	56,890.00	56,890.00	0.00	0.00%
5	Total liabilities	56,890.00	56,890.00	0.00	0.00%
6	Net assets	20,819.07	28,769.47	7,950.40	38.19%

XI. SPECIAL NOTES

From 2005 to 2009, China Shipping Terminal Development (Hong Kong) Co., Ltd. appropriately reduced its shareholding in Xiamen Port and Dalian Port due to investment portfolio restructuring. During the tax valuation of 2005-2006, Hong Kong Inland Revenue Department judged the said share trading behavior as tradable investment, requiring China Shipping Terminal Development (Hong Kong) Co., Ltd. to pay profits tax for proceeds from share trading and appreciation parts of the fair value in the preceding years.

China Shipping Terminal Development (Hong Kong) Co., Ltd. claimed that its holding of the aforesaid shares is long-term strategic investment rather than tradable investment for short-term profits and so it does not need to pay any tax for its capital revenue according to Article 14 of Inland Revenue Ordinance. As a result, China Shipping Terminal Development (Hong Kong) Co., Ltd. and Hong Kong Inland Revenue Department had dispute over the said issue. As required by Inland Revenue Department and to avoid possible late fees and fines arising from delayed payment of taxes deemed necessary, China Shipping Terminal Development (Hong Kong) Co., Ltd. bought tax reserve certificates equivalent to HK$30,515,655.00 (stated as advance payments) for proceeds from share disposal and appreciation parts of fair value from 2005 to 2007.

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APPENDIX I

China Shipping Terminal Development (Hong Kong) Co., Ltd. held 20% equity interest in Egypt Damietta Container Terminal by investment in November 2007. According to franchising rules, Egypt Damietta Container Terminal will be given 40-year franchising after commencement of operation before 17 January 2009 (when the first cargo ship arrived).

In the second half of 2008, due to changes of macro-economic environment like inflating fuel prices, significant US dollar depreciation, rising prices of building materials and substantial inflation in Egypt caused by global financial crisis, the project construction was seriously affected, making the project unable to start operation as scheduled. Meanwhile, the license issued by the Egyptian Government to Egypt Damietta Container Terminal Company also expired in January 2013. Egypt Damietta Container Terminal Company applied for putting off the commencement of operation. Damietta Port Authority asked Egypt Damietta Container Terminal to pay the fine for delay, and Egypt Damietta Container Terminal has paid US$6 million. In May 2013, Egypt Damietta Container Terminal discussed the matter with the Egyptian Government authority, which has initially allowed Egypt Damietta Container Terminal to pay a fine of only US$32 million. Damietta Container Terminal has worked out a schedule of progressive payment within 16 years after commencement of operation. Damietta Container Terminal has not received any official reply from the Egyptian Government authority as of 30 June 2013.

The Egypt terminal construction has been in extended suspension as Egypt is in political turmoil. The valuers cannot make on-site verification for various reasons. We, via relevant staff of CSTD HK, have verified the legitimacy of investment of the said terminal, and referred to relevant information like articles of association, commencement of works, construction plan, source of capital, and so on. We finally determined the appraised value by multiplying the net asset as shown in the adjusted statements on valuation base date by the CSTD HK’s stake in the company, without factoring impacts of other matters on the valuation result.

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APPENDIX I

As of the valuation base date, Dalian International Container Terminal Co., Ltd. and Jiangsu Yangtze Petrochemical Co., Ltd. (both are non-controlled subsidiaries of China Shipping Terminal Development (Hong Kong) Co., Ltd.) did not have property ownership certificates for buildings as shown in the Valuation Declaration Form. The said companies made relevant statements that the said buildings are free from any ownership dispute. The floor spaces of the said buildings are subject to the enterprises’ declaration, which has been verified and confirmed by valuers through checking the area as indicated in the relevant surveying and mapping reports and engineering construction drawings, and the influence of the difference between them and the floor spaces set out in the certificates to be issued was not considered.
In this valuation, we did not consider the impact of liquidity discount on the valuation result, for we could not get enough statistics of relevant market transactions and lacked criterion for analyzing and determining the influence of liquidity discount on the value of the valuation subject.
In this Report, the HKD-RMB exchange rate is 0.79655.
As of the valuation base date, Dalian International Container Terminal Co., Ltd., subsidiary of China Shipping Terminal Development (Hong Kong) Co., Ltd., has not completed conversion from business tax to VAT. In the process of pricing for this valuation, relevant VAT shall be taken into account subject to the original measurement method. Users of the report should pay attention to this.

XII. RESTRICTIONS ON USE OF THIS REPORT

(I) This Report shall only be used for the valuation purpose set out in this Report.
(II) This Report shall only be used by users of this Report set out in this Report.
(III) Any extract, quote or disclosure on any public media of this Report, in whole or in part, shall be subject to the review of the appraisal agency, save as otherwise specified by laws, regulations and related parties.
(IV) The valuation conclusion shall be valid for one year, namely from 30 June 2013 (the valuation base date) to 29 June 2014.

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XIII. APPRAISAL REPORT DATE

The appraisal report date is 11 November 2013.

Legal representative (or authorized representative) of the appraisal agency:

Certified public valuer:

11 November 2013

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APPRAISAL REPORTS

APPENDIX I

Appendices

I. Documents of economic behavior corresponding to the valuation purpose;
II. Corporate business license of the principal and the valued entity;
III. Commitment letter of the principal and related parties;
IV. Commitment letter of signatory certified public valuer;
V. Qualification certificate of appraisal agency;
VI. Copy of corporate business license of appraisal agency;
VII. Qualification certificate of signatory certified public valuer;
VIII. Audit report;
IX. Engagement Letter.

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GENERAL INFORMATION

APPENDIX II

1 RESPONSIBILITY STATEMENT

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

2 INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVES IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests or short positions of the Directors, Supervisors or chief executive(s) of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors, Supervisors or chief executive(s) is taken or deemed to have under such provisions of the SFO) or which was required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which was otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:

(i) Interest in the shares of the Company

Number of underlying Capacity in Percentage H shares which underlying in the issued Name interested in H shares were held H share capital Director Teo Siong Seng 200,000 Beneficial owner 0.005% (L)

– (L) long position

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GENERAL INFORMATION

APPENDIX II

(ii) Interest in the shares of the Company under the H Share Share Appreciation Rights Scheme

In accordance with the “Resolution Regarding Adoption and Approval of the H Share Share Appreciation Rights Scheme and Implementation Methods” passed at the Company’s second Special General Meeting in 2005 held on 12 October 2005, the Company implemented a H share share appreciation rights scheme (the “ Share Appreciation Rights Scheme ”) as its appropriate incentive policy. Details of the original Share Appreciation Rights Scheme were set out in the Company’s circular dated 26 August 2005 and each amended Share Appreciation Rights Scheme was tabled at the annual general meetings of the Company held on 20 June 2006, 26 June 2007 and 26 June 2008. The interests in H Shares of the Company held by the Directors and Supervisors of the Company under the Share Appreciation Rights Scheme as at the Latest Practicable Date are disclosed below.

	Number of
	underlying	Capacity in	Percentage
	H shares	which underlying	in the issued
Name	interested in	H shares were held	H share capital
Directors
Li Shaode	3,382,100	Beneficial owner	0.090% (L)
Huang Xiaowen	3,334,050	Beneficial owner	0.089% (L)
Zhang Guofa	2,218,050	Beneficial owner	0.059% (L)
Zhao Hongzhou	2,604,000	Beneficial owner	0.069% (L)
Wang Daxiong	1,240,000	Beneficial owner	0.033% (L)
Supervisors
Tu Shiming	246,450	Beneficial owner	0.007% (L)
Wang Xiuping	1,395,000	Beneficial owner	0.037% (L)

– (L) long position

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, Supervisors or chief executive(s) of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors, Supervisors or chief executive(s) is taken or deemed to have under such provisions of the SFO) or which was required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which was otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code adopted by the Company.

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GENERAL INFORMATION

APPENDIX II

3 POSITIONS HELD BY DIRECTORS AND SUPERVISORS OF THE COMPANY IN SUBSTANTIAL SHAREHOLDER(S)

As at the Latest Practicable Date:

(a) Xu Lirong, an executive director, is also the chairman and secretary to the Party Committee of China Shipping Group;
(b) Zhang Guofa, an executive director, is also the director, general manager and member of the Party Committee of China Shipping Group;
(c) Huang Xiaowen, an executive director, is also the deputy general manager and member of the Party Committee of China Shipping Group;
(d) Wang Daxiong, a non-executive director, is also the deputy general manager and member of the Party Committee of China Shipping Group;
(e) Su Min, a non-executive director, is also the chief financial officer and member of the Party Committee of China Shipping Group; and
(f) Ding Nong, a non-executive director, is also the deputy general manager and member of the Party Committee of China Shipping Group.

Save as disclosed above, none of the Directors or Supervisors of the Company was, as at the Latest Practicable Date, a director or employee of a company which had an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

4 SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or Supervisors of the Company had any existing or proposed service contract with any member of the Group which would not expire or was not determinable by the Group within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX II

5 DIRECTORS’ AND SUPERVISORS’ INTERESTS

As at the Latest Practicable Date:

(a) none of the Directors or Supervisors had any direct or indirect interest in any assets which had been, since 31 December 2012 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; and
(b) none of the Directors or Supervisors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

6 NO MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2012 (being the date to which the latest published audited accounts of the Company were made up).

7 COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and any of their associate(s) had interest in a business which competes or may compete with the business of the Group, or may have any conflicts of interest with the Group pursuant to Rule 8.10 of the Listing Rules.

8 CONSENT OF EXPERTS

(a) The following is the qualification of the professional advisers who have given their opinion or advice which is contained in this circular:

Name		Qualification
China	Tong Cheng Assets Appraisal	Professional valuer
Co.,	Ltd.
Guotai	Junan Capital Limited	a licensed corporation to carry out
		type 6 (advising on corporate finance)
		regulated activities under the SFO

(b) Each of China Tong Cheng and Guotai Junan Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which it appears.

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GENERAL INFORMATION

APPENDIX II

(c) As at the Latest Practicable Date, each of China Tong Cheng and Guotai Junan Capital neither had any shareholding in any member of the Group nor had any right (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any securities in any member of the Group.
(d) As at the Latest Practicable Date, each of China Tong Cheng and Guotai Junan Capital did not have any direct or indirect interest in any assets which had been, since 31 December 2012 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

9 MISCELLANEOUS

(a) The secretary of the Company is Mr. Ye Yumang (“ Mr. Ye ”). Mr. Ye is currently the Company Secretary of the Company and the General Manager of the Directorate Secretary Office of the Company, as well as a senior economist. From 1989 to 1996, he engaged in vessel technique and administrative matters in Shanghai Shipping (Group) Company. From May 1995 to August 1995, Mr. Ye was the assistant company secretary of China Shipping Development Company Limited (“ CSDC ”). From August 1995 to April 2000, he was the joint company secretary of CSDC. From April 2000 to March 2003, he was the company secretary for CSDC. Mr. Ye graduated from Shanghai Maritime University in 1989, with a Master’s degree in mechanical engineering. In March 2007, Mr. Ye got his master’s degree in EMBA from the Shanghai Finance & Economy University. Mr. Ye became a fellow of the Hong Kong Institute of Chartered Secretaries in November 2008. In April 2013, Mr. Ye was granted the Senior Board Secretary Award and Outstanding Board Secretary for 2011-2012 by the Listed Companies Association of Shanghai. Mr. Ye joined the Company in November 2002.
(b) The legal address in the PRC of the Company is Room A-538, International Trade Center, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC and the principal place of business in the PRC of the Company is 27th Floor, 450 Fu Shan Lu, Pudong New District, Shanghai, the PRC. The Hong Kong H Share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) The English text of this circular shall prevail over their respective Chinese text in case of inconsistency.

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GENERAL INFORMATION

APPENDIX II

10 DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at 59/F, One Island East, 18 Westlands Road, Island East, Hong Kong from the date of this circular up to 12 December 2013 (both days inclusive):

(a) the letter of advice dated 27 November 2013 from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 19 to 32 of this circular;
(b) the written consent issued by each of the experts as referred to in the paragraph headed “Consent of Experts” in this Appendix;
(c) the letter of recommendation dated 27 November 2013 from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 17 to 18 of this circular;
(d) the Share Purchase Agreement;
(e) the annual reports of the Company for the two years ended 31 December 2011 and 2012; and
(f) this circular.

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AI assistant

COSCO SHIPPING Development Co., Ltd. — Proxy Solicitation & Information Statement 2013

50782_rns_2013-11-26_699a1a0a-4f2e-4b8c-8b42-99accb081ee7.pdf

(Stock code: 02866)

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF 100% OF

CHINA SHIPPING TERMINAL DEVELOPMENT CO., LTD. AND SUBSCRIPTION OF SHARES IN CHINA SHIPPING TERMINAL DEVELOPMENT (H.K.) CO., LTD. AND

PROPOSED AUTHORIZATION TO PROVIDE GUARANTEES TO A WHOLLY-OWNED SUBSIDIARY

CONTENTS

DEFINITIONS

“associate”

“Board”

“Company”

“connected person”

“controlling shareholder”

DEFINITIONS

“CSTD HK”

“Group”

“Guotai Junan Capital” or

“Independent Shareholders”

“Latest Practicable Date”

DEFINITIONS

“Model Code”

DEFINITIONS

“Supplemental Agreement”

“TEU”

“Transaction”

(Stock code: 02866)

To the Shareholders

I. INTRODUCTION

II. SHARE PURCHASE AGREEMENT AND SUPPLEMENTAL AGREEMENT

A. Background

B. General

(a) Parties

(b) Disposal of 100% equity interest in CSTD and subscription of shares in CSTD HK

(c) Consideration

(d) Conditions Precedent

(e) Completion

C. REASONS FOR AND BENEFITS OF THE TRANSACTION

LETTER FROM THE BOARD

D. IMPLICATIONS UNDER THE LISTING RULES

LETTER FROM THE BOARD

E. GENERAL INFORMATION

(a) Principal Business Activities

(i) The Company

(ii) CSTD HK

(iii) China Shipping (HK) Holdings

(iv) CSTD

(b) Financial Information

LETTER FROM THE BOARD

(c) Tax dispute and possible fine on CSTD HK

LETTER FROM THE BOARD

III. PROPOSED AUTHORIZATION FOR THE BOARD TO APPROVE THE PROVISION OF GUARANTEES TO A WHOLLY-OWNED SUBSIDIARY OF THE COMPANY

IV. EGM

V. RECOMMENDATION

VI. ADDITIONAL INFORMATION

(Stock code: 02866)

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF 100% OF

CHINA SHIPPING TERMINAL DEVELOPMENT CO., LTD. AND SUBSCRIPTION OF SHARES IN CHINA SHIPPING TERMINAL DEVELOPMENT (H.K.) CO., LTD.

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF 100% OF CHINA SHIPPING TERMINAL DEVELOPMENT CO., LTD. AND SUBSCRIPTION OF SHARES IN CHINA SHIPPING TERMINAL DEVELOPMENT (H.K.) CO., LTD.

INTRODUCTION

THE INDEPENDENT BOARD COMMITTEE

BASIS AND ASSUMPTIONS OF OUR ADVICE

PRINCIPAL FACTORS AND REASONS CONSIDERED

1 Background to the Transaction

1.1 Background

1.2 Principal activities

(1) The Company

(2) CSTD

(3) CSTD HK

(4) China Shipping (HK) Holdings

1.3 Key financial information of the Company

1.4 Key financial information of CSTD

1.5 Key financial information of CSTD HK

1.6 Reasons for and benefits of the Transaction

Future development of the enlarged CSTD HK

2 Terms of the Share Purchase Agreement

2.1 Assets to be Sold

2.2 Shares to be subscribed

2.3 Consideration

2.4 Conditions Precedent

COSCO SHIPPING Development Co., Ltd. Proxy Solicitation & Information Statement 2013