COSCO SHIPPING Development Co., Ltd. — Proxy Solicitation & Information Statement 2015

Dec 3, 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR 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)

(1) CONTINUING CONNECTED TRANSACTIONS AND

MAJOR TRANSACTIONS – RENEWED NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

AND

(2) APPOINTMENT OF NEW NON-EXECUTIVE DIRECTORS

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

The EGM of China Shipping Container Lines Company Limited will be held at 2:30 p.m. on Tuesday, 22 December 2015 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the PRC.

If you intend to appoint a proxy to attend the EGM, you are required to complete and return the accompanying proxy form in accordance with the instructions printed thereon. For holder of H Shares, the proxy form should be returned to Computershare Hong Kong Investor Services Limited by hand or by post not less than 24 hours before the time appointed for holding the EGM or any adjourned meeting thereof.

Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or at any adjourned meeting should you so wish, but in such event the instrument appointing a proxy shall be deemed to be revoked.

If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to Directorate Secretary Office of the Company not later than 20 days before the date of the EGM, i.e. no later than Wednesday, 2 December 2015.

• The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “China Shipping Container Lines Company Limited”.

4 December 2015

CONTENTS

	Pages
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .	16
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	18
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . .	33
APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	36

– i –

DEFINITIONS

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

• “associate”

• has the meaning ascribed thereto under the Listing Rules

• “Board”

• the board of directors of the Company

• “CBRC”

• China Banking Regulatory Commission (中國銀行業監督 管理委員會)

• “China Shipping”

• China Shipping (Group) Company (中國海運(集團)總公 司), a wholly PRC state-owned enterprise and the controlling Shareholder of the Company, together with its subsidiaries having an approximately 45.20% shareholding interest in the Company as at the Latest Practicable Date

• “China Shipping Group”

• China Shipping and its subsidiaries (excluding the Group)

• “Company”

• China Shipping Container Lines Company Limited (中海 集裝箱運輸股份有限公司), a joint stock limited company established 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

• “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, which is owned as to 51% by China Shipping as at the Latest Practicable Date

• “CS Finance Company”

• China Shipping Finance Company Limited (中海集團財 務有限責任公司), a limited liability company established by the Company, China Shipping, Guangzhou Maritime Transport (Group) Co. Ltd. (廣州海運(集團)有限公司), China Shipping Development Company Limited and China Shipping (Hainan) Haisheng Shipping and Enterprise Co., Ltd. (中海(海南)海盛船務股份有限公司) in the PRC and owned as to 25%, 25%, 20%, 25% and 5% by each of them, respectively, as of the Latest Practicable Date, which is a connected person of the Company

• “Directors”

the directors of the Company

– 1 –

DEFINITIONS

• “EGM”

• “Financial Services Framework Agreement”

• “Group”

• “Hong Kong”

• “Independent Board Committee”

• “Independent Financial Adviser”

• “Independent Shareholders”

• “Latest Practicable Date”

• “Listing Rules”

• “Model Code”

• the extraordinary general meeting of the Company to be convened at 2:30 p.m. on Thursday, 22 December 2015 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the PRC

• the financial services framework agreement dated 31 December 2009 entered into between the Company and China Shipping, pursuant to which China Shipping shall procure CS Finance Company to provide the Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; and (iv) other financial services as approved by CBRC

• the Company and its subsidiaries

• Hong Kong Special Administrative Region of the PRC

• a committee of the Board comprising all the independent non-executive Directors, namely, Ms. Zhang Nan, Mr. Guan Yimin, Mr. Shi Xin, Ms. Hai Chi Yuet and Mr. Graeme Jack

• Messis Capital Limited, a licensed corporation to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), being the independent financial adviser to the Company in connection with the Renewed NonExempt Continuing Connected Transactions

• the shareholders of the Company except the China Shipping Group and its associates who are legally and/or beneficially interested in the shares of the Company

• 1 December 2015, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

• The Rules Governing the Listing of Securities on the Stock Exchange

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

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DEFINITIONS

• “PBC”

• People’s Bank of China (中國人民銀行)

• “percentage ratio” has the meaning ascribed thereto under the Listing Rules

• “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

• “Renewed Non-Exempt Continuing Connected Transactions”

• the transactions: (i) in respect of maximum daily balance of deposits (including accrued interest and handling fee) to be placed by the Group with CS Finance Company under the Financial Services Framework Agreement; and (ii) in respect of maximum daily outstanding balance of loans (including accrued interest and handling fee) to be granted by CS Finance Company to the Group under the Financial Services Framework Agreement

• “RMB” Renminbi, the lawful currency of the PRC

• “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

• “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

• “US$” or “US dollars” United States dollars, the lawful currency of the United States

• “%” per cent

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LETTER FROM THE BOARD

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

(Stock code: 02866)

Executive Directors: Mr. Zhang Guofa Mr. Huang Xiaowen Mr. Zhao Hongzhou

Non-executive Directors: Ms. Su Min Mr. Ding Nong Mr. Liu Xihan Mr. Yu Zenggang Mr. Chen Jihong

Independent non-executive Directors: Ms. Zhang Nan Mr. Guan Yimin Mr. Shi Xin Ms. Hai Chi Yuet Mr. Graeme Jack

Legal address in the PRC: Room A-538 International Trade Center China (Shanghai) Pilot Free Trade Zone Shanghai The PRC

Principal place of business in the PRC: Maritime Research Building 628 Minsheng Road Pudong New Area Shanghai The PRC

Principal place of business in Hong Kong: 31/F, Tower 2 Kowloon Commerce Centre 51 Kwai Cheong Road, Kwai Chung New Territories, Hong Kong

4 December 2015

To the Shareholders

Dear Sir or Madam,

(1) CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTIONS – RENEWED NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS AND (2) APPOINTMENT OF NEW NON-EXECUTIVE DIRECTORS

I. INTRODUCTION

References are made to the announcements of the Company dated 25 September 2015 and 6 November 2015. The main purpose of this circular is to provide you with, among other things:

1. 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:

   • (a) the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016; and

2. The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “China Shipping Container Lines Company Limited”.

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LETTER FROM THE BOARD

• (b) the appointment of new non-executive Directors as described in this circular;

• the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders relating to the Renewed Non-Exempt Continuing Connected Transactions; and

• the letter of recommendation from the Independent Board Committee to the Independent Shareholders relating to the Renewed Non-Exempt Continuing Connected Transactions.

References are made to the announcements of the Company dated 7 August 2015 and 9 November 2015 in relation to certain material matters contemplated by China Shipping which will involve material asset restructuring of the Company. The Company will perform its disclosure obligations based on the progress of the material asset restructuring in a timely manner. To the extent the material asset restructuring impacts on the continuing connected transactions under the Financial Services Framework Agreement, the Company will reconsider and review such transactions in strict compliance with the Listing Rules and other applicable laws and regulations as and when appropriate.

II. RENEWED NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

A. Background

References are made to the Company’s announcements dated 8 October 2009, 15 December 2009, 20 September 2012 and 6 November 2015 and the circulars to the Shareholders dated 29 October 2009 and 12 November 2012.

The Board has been monitoring the Renewed Non-Exempt Continuing Connected Transactions. In view of the continuous development of the Group and based on the internal forecasts of forthcoming demand, on 6 November 2015, the Board decided to continue the Renewed Non-Exempt Continuing Connected Transactions after 31 December 2015 and proposed their respective proposed annual caps for the year ending 31 December 2016, subject to the approval of the Independent Shareholders by way of an ordinary resolution at the EGM.

B. Principal Terms

As previously disclosed, on 31 December 2009, the Company entered into the Financial Services Framework Agreement with China Shipping, pursuant to which China Shipping shall procure CS Finance Company to provide the Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; and (iv) other financial services as approved by CBRC. The principal terms of the Financial Services Framework Agreement are summarised below.

1. General Terms

The Financial Services Framework Agreement requires in general terms that:

• (a) the quality of products and services to be provided should be satisfactory to the recipient;

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LETTER FROM THE BOARD

• (b) the price at which products and services are to be provided must be fair and reasonable; and

• (c) the terms and conditions on which products and services are to be provided should be no less favourable to the Group than those offered from or to (as appropriate) the relevant connected persons, their subsidiaries and/or associates to or from (as appropriate) independent third parties; and offered from or to (as appropriate) independent third parties to or from (as appropriate) the Group.

2. Price Determination

Under the Financial Services Framework Agreement, CS Finance Company shall accept deposits from the Group at interest rates not lower, and thus no less favourable, than (a) the lower limit of the relevant rates stipulated by PBC for the same type of deposits; (b) the interest rates offered by any independent third parties for the same type of deposits; or (c) the interest rates at which CS Finance Company accepts from any independent third parties for the same type of deposits.

Under the Financial Services Framework Agreement, CS Finance Company shall provide loan to the Group at interest rates not higher, and thus no less favourable, than (a) the relevant rates stipulated by PBC for the same type of loan; (b) the interest rates offered by any independent third parties for the same type of loan; or (c) the interest rates at which CS Finance Company provides to any independent third parties with the same credit rating for the same type of loan.

3. Term and Termination

The initial term of the Financial Services Framework Agreement is three years, with effect from 31 December 2009. Upon the expiry of such initial term, such agreement shall automatically extend for further terms of three years (subject to compliance of the Listing Rules), unless any relevant party gives to the other party(ies) a written notice of termination at least three months prior to such expiry date. During the term of the Financial Services Framework Agreement, termination of any implementation agreement described below may be effected from time to time by any one of the parties to the relevant implementation agreement providing at least a three months’ written notice of termination to the other party(ies).

4. Implementation Agreements

It is expected that from time to time and as required, individual implementation agreements may be entered into between the Group, China Shipping, and CS Finance Company, and their respective subsidiaries and/or associates, as appropriate. Each implementation agreement will set out the specific products and services requested by the relevant party and any detailed technical and other specifications which may be relevant to those products or services. The implementation agreements may only contain provisions which are in all material respects consistent with the binding principles,

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LETTER FROM THE BOARD

guidelines, terms and conditions in accordance with which such products and services are required to be provided as contained in the Financial Services Framework Agreement. As the implementation agreements are simply further elaborations on the provision of the products and services as contemplated by the Financial Services Framework Agreement, they do not constitute new categories of continuing connected transactions under Chapter 14A of the Listing Rules.

For each of the implementation agreements in respect of the deposit services to be provided to the Group as contemplated under this agreement, such deposit services are provided in accordance with the following pricing principles: (a) the domestic RMB deposits shall be taken at a price based on the benchmark interest rate stipulated by PBC or at the prime rate (the floating upward) within the floating range allowed by such stipulation; and (b) the foreign and domestic US dollars deposits shall be taken at a price based on the prevailing market rates which should be obtained by making inquiries of various banks so that the price determined is not lower than the highest one quoted by such banks.

For each of the implementation agreements in respect of the loan services to be provided to the Group as contemplated under this agreement, such loan services are provided in accordance with the following pricing principles: (a) the domestic RMB loans shall be provided at a price based on the benchmark interest rates stipulated by the PBC or at the prime interest rate (the floating downward) within the floating range allowed by such stipulation; and (b) the foreign and domestic US dollars loans shall be provided at a price based on the prevailing market rates which should be obtained by making inquiries of various banks so that the price determined is not higher than the lowest one quoted by such banks.

5. Internal Control Procedures

Before entering into any implementation agreements, the Company will implement the following procedures to ensure the terms offered by the relevant connected parties are no less favourable than those available from independent third parties:

• (i) the relevant executives of the finance department of the Company will review contemporaneous prices and other relevant terms offered by at least two commercial banks, all being independent third parties, operating at the same or nearby area before the commencement of the relevant transaction, and ensure the terms offered by the relevant connected persons are fair and reasonable and comparable to those offered by independent third parties. In the case where the offers made by independent third parties are more favourable to the Company, the Company may take up those offers; and

• (ii) the supervision department of the Company will periodically review and inspect the process of the relevant continuing connected transactions.

By implementing the above procedures, the Directors consider that the Company has established sufficient internal control measures to ensure the pricing basis of each of the Renewed Non-Exempt Continuing Connected Transactions will be on market terms and on normal commercial terms and will be fair and reasonable to the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

The finance department of the Company will also collect statistics of each of the Renewed Non-Exempt Continuing Connected Transactions on a quarterly basis to ensure the annual caps approved by the Independent Shareholders are not exceeded.

C. Historical Caps, Historical Figures and Future Caps

The following table sets out the historical caps, historical figures and proposed annual cap of each of the Renewed Non-Exempt Continuing Connected Transactions:

							(RMB’000)
		Historical Caps for		**Historical Figures for 2013, **	2014
Transactions under the		2013, 2014 and 2015		and 30 September 2015		Future Caps for 2016
(1)	Financial Services	8,000,000	(2013)	3,741,887	(2013)	6,500,000	(2016)
	Framework Agreement	9,000,000	(2014)	4,194,975	(2014)
	in respect of maximum	10,000,000	(2015)	4,783,426	(as of
	daily balance of			30 September
	deposits (including				2015)
	accrued interest and
	handling fee) to be
	placed by the Group
	with CS Finance
	Company
(2)	Financial Services	5,000,000	(2013)	364,000	(2013)	6,500,000	(2016)
	Framework Agreement	6,000,000	(2014)	1,211,900	(2014)
	in respect of maximum	7,000,000	(2015)	0_(Note (a))_	(as of
	daily outstanding			30 September
	balance of loans				2015)
	(including accrued
	interest and handling
	fee) to be granted by
	CS Finance Company
	to the Group

Note:

• (a) The historical figure of the continuing connected transactions in respect of loan services provided to the Group under the Financial Services Framework Agreement for the nine months ended 30 September 2015 was 0, which was due to that the Company has no demand for loans given that the Company has no projects that require financing during the period.

The proposed annual cap for the transaction amounts for the deposit services to be provided to the Group under this agreement for the year ending 31 December 2016 is RMB6,500,000,000. In arriving at such annual cap, the Directors have considered the following factors:

• (i) The historical figures of the maximum daily balance of deposits (including accrued interest and handling fee) placed by the Group with CS Finance Company (as set out in the above table) for 2013, 2014 and nine months ended 30 September 2015;

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LETTER FROM THE BOARD

• (ii) During the past three years, the daily balance of deposit placed by the Group with CS Finance Company exceeded RMB3 billion, with a maximum balance of RMB3.9 billion according to statistics [(Note][(a)(b))] ;

Notes:

• (a) As disclosed in the table above, the maximum balance for 2014 was approximately RMB4,195 million which occurred in March 2014 and included the deposit amounts placed by CSTD in the amount of approximately RMB344 million. Given that the Company completed the disposal of 100% equity interest in CSTD in June 2014, for the avoidance of doubt, the Company has deducted the portion of CSTD’s deposits from the historical figures for 2014 when determining the annual cap for 2016. On such basis, the maximum balance for 2014 occurred in November of that year with an amount of approximately RMB3,940 million.

• (b) As disclosed in the table above, the maximum balance for the nine months ended 30 September 2015 was approximately RMB4,783 million which occurred in August 2015 and included several deposits in the aggregate amount of approximately US$150 million which were temporarily placed with CS Finance Company upon the expiry of deposit term respectively from other commercial banks and were transferred out after several days. Due to the occasionality and temporariness of such event, for the avoidance of doubt, the Company has decided not to take into account such maximum balance when determining the annual cap for 2016.

• (iii) CS Finance Company was granted with pilot qualification to conduct cross-border transfer of foreign exchange funds by SAFE in December 2012, whereby it may transfer the Group’s foreign exchange funds in Hong Kong to the domestic fund pool at any time via the cross-border channel, and such foreign exchange funds will be immediately accounted as deposit upon their transfer into domestic accounts. According to statistics, the daily balance of the Group’s foreign exchange funds in Hong Kong is approximately US$440 million (equivalent to over RMB2.4 billion); and

• (iv) The aggregation of items (ii) and (iii) above will exceed RMB6 billion, and as such, the proposed annual cap for such transactions is RMB6,500,000,000.

The proposed annual cap for the transaction amounts for the loan services to be provided to the Group under this agreement for the year ending 31 December 2016 is RMB6,500,000,000. In arriving at such annual cap, the Directors have considered the following factors:

• (i) The historical figures of the maximum daily outstanding balance of loans (including accrued interest and handling fee) granted by CS Finance Company to the Group (as set out in Table B under Section C of Part I of this announcement) for 2013, 2014 and nine months ended 30 September 2015;

• (ii) The Group primarily makes settlements in foreign currency, while subject to the foreign exchange control policies of PRC, the Group may need CS Finance Company to provide settlement turnover funds in the amount of approximately US$100 million to US$200 million to satisfy the Group’s need for both onshore and offshore settlement during the operation;

• (iii) According to the Company’s vessel financing projects and business development plan, it is expected that the Group will have a finance demand of approximately RMB4.0 billion to RMB5.2 billion for the year of 2016; and

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LETTER FROM THE BOARD

• (iv) Aggregating items (ii) and (iii) above, the cap for the Group’s loan amounts for 2016 are expected to be RMB6,500,000,000.

D. Reasons for and Benefits of Transactions

It is common for large corporate group in the PRC to set up and maintain a finance company to provide treasury services to the group members as this improves centralized management and utilisation efficiency of group funds, and assists group members in reducing financing costs and investment risks.

CS Finance Company was set up as a non-bank financial institution in 2009 pursuant to the approval granted by CBRC under the Administrative Measures for Enterprises Group Finance Companies to provide financial services to the China Shipping Group and the Group. CS Finance Company has obtained all approvals, permits and licenses necessary for its operations, and is operating under the routine supervision and regulation of regulatory authorities including PBC and CBRC.

The Board has checked the continuing validity of the licence of CS Finance Company and looked at various key financial ratios of CS Finance Company including capital adequacy ratio and self-owned fixed assets to total capital ratio when assessing CS Finance Company’s capability for the provision of the financial services. Such key financial ratios reviewed by the Board are all better than the standard stipulated by CBRC for finance companies. Besides, China Shipping has undertaken to CBRC that it will increase the capital of CS Finance Company in case CS Finance Company has difficulty in payment. As such, the Board believes that CS Finance Company has the financial capability in providing the deposits and loan services under the Financial Services Framework Agreement, and the credit risk involved in the underlying transactions is low.

The terms and conditions of deposit services, loan services, settlement services and other financial services provided by CS Finance Company under the Financial Services Framework Agreement are generally more favourable to the Group than those provided by independent third parties, or those provided by CS Finance Company to independent third parties.

Furthermore, the Group is not restricted under the Financial Services Framework Agreement to approach, and in fact may choose, any bank or financial institution to satisfy its financial service needs. Its criteria in making the choice could be made on costs and quality of services. Therefore, the Group may, but is not obliged to, continue to use CS Finance Company’s deposit services, loan services, settlement services and other financial services if the service quality provided is competitive. Having such flexibility afforded under the Financial Services Framework Agreement, the Group is able to better manage its current capital and cashflow position.

In addition, it is also expected that CS Finance Company will mainly provide more efficient deposit services, loan services and settlement services to the Group, as compared to independent third-party banks. As CS Finance Company is familiar with the Group’s business, it is able to provide funds required by the Group in a more efficient and timely way. In view of the depression in marine transportation industry, fund shortage in the market and restrictions on external financing channels, the Group hopes to obtain financial assistance from China Shipping via CS Finance Company, which may help broaden the Group’s financing channels and lower its financing costs.

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LETTER FROM THE BOARD

Moreover, the Company holds 25% equity interest in CS Finance Company, business development of CS Finance Company will also bring certain investment gains for the Company.

E. Implications under the Listing Rules

In respect of the provision of deposit services under the Financial Services Framework Agreement, the applicable percentage ratio is expected to be more than 25% but less than 75%. Therefore, such transactions, together with their proposed annual cap for the year ending 31 December 2016, are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements for continuing connected transactions under Chapter 14A of the Listing Rules. Such transactions also constitute major transactions of the Company under Rule 14.06(3) of the Listing Rules and are subject to the relevant major transaction requirements under Chapter 14 of the Listing Rules.

In respect of the provision of loan services under the Financial Services Framework Agreement, pursuant to Rule 14A.90 of the Listing Rules, such transactions are exempt from all reporting, announcement, annual review and independent shareholders’ approval requirements. However, as the Company is required by the applicable PRC laws and regulations to seek the approval of the Shareholders with respect to such services, relevant resolution will be proposed to the Shareholders for voting at the EGM.

F. General Information

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

China Shipping is a large shipping conglomerate involved in import and export business, trading, coastal and ocean cargo transportation, dry bulk cargo transportation, supply of food for vessels, management of docks and other services in relation to the above, and operates in different regions of the PRC and across the world.

CS Finance Company is principally engaged in deposit, loan, settlement and other related financial services.

G. Opinions of the Board

Mr. Zhang Guofa, Mr. Huang Xiaowen, Mr. Zhao Hongzhou, Ms. Su Min, Mr. Ding Nong, Mr. Liu Xihan, Mr. Yu Zenggang and Mr. Chen Jihong, all being Directors, hold directorship(s) or act as senior management in China Shipping Group and/or its associates and thus have material interests in the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016, have therefore abstained from voting on the relevant board resolution.

The Board (including the independent non-executive Directors) considers that the terms of the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016 are fair and reasonable, on normal commercial terms or on terms no less favourable than those available to or from independent third parties, and are entered into on a continuing and regular basis in the ordinary and usual course of business of the Company, thus continuing the foregoing continuing connected transactions is fair and reasonable and in the best interest of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

An Independent Board Committee has been formed to advise the Independent Shareholders in respect of, among others, the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016. An Independent Financial Adviser has been appointed to advise the Independent Board Committee on the above.

III. APPOINTMENT OF NEW NON-EXECUTIVE DIRECTORS

Reference is made to the announcement of the Company dated 25 September 2015 with respect to the appointment of non-executive Directors. Two ordinary resolutions will be proposed at the EGM to (i) consider and approve the appointment of Mr. Yang Jigui (“ Mr. Yang ”) as a non-executive Director; and (ii) consider and approve the appointment of Mr. Han Jun (“ Mr. Han ”) as a non-executive Director.

Biographical details of Mr. Yang are set out as follows:

Mr. Yang Jigui (楊吉貴) , born in September 1966, aged 49, currently serves as the deputy chief accountant and the general manger of finance department of China Shipping, the director of China Shipping (Hainan) Haisheng Shipping and Enterprise Co., Ltd. and the non-executive director of China Everbright Bank Co., Ltd. He has served successively as: manager of finance department of Guangzhou Marine Transport (Group) Co., Ltd. (“ Guangzhou Maritime Transport ”) Shenzhen Shipping Branch; chief accountant of supply and trade division of Guangzhou Maritime Transport; head of finance department of China Shipping Supply and Trade Co., Ltd.; deputy director of planning and finance department of China Shipping; general manager of planning and finance department of China Shipping; general manager of finance department of China Shipping. In March 2014, Mr. Yang started to work as general manager assistant of China Shipping and general manager of finance department of China Shipping. In July 2015, he started to work as deputy chief accountant and the general manger of finance department of China Shipping. Mr. Yang Jigui successively graduated from Shanghai Maritime University with a major in finance and accounting, and from Tsinghua University with a major in business administration. Mr. Yang holds a bachelor’s degree and a master’s degree and he is recognised as a senior accountant.

Biographical details of Mr. Han are set out as follows:

Mr. Han Jun (韓駿) , born in March 1965, aged 50, currently serves as general manager assistant of China Shipping, managing director and Party secretary of China Shipping Development Co., Ltd. (a company listed on Shanghai Stock Exchange with stock code of 600026, and listed on the Stock Exchange with stock code of 01138), general manager and deputy Party secretary of China Shipping Tanker Company Limited. Mr. Han took his first job in July 1987 and successively held the following positions: mate and Youth League secretary of Dalian Shipping (Group) Company; general manager of Hainan Hailian Shipping Co., Ltd.; head of development department of China Shipping; general manager and deputy chairman of Universal Shipping (Asia) Co., Ltd.; Party secretary for Shenzhen area of China Shipping; deputy president, president and Party secretary of China Shipping (H.K.) Holdings Co., Ltd.; joint work Party committee secretary of China Shipping (H.K.) Holdings Co., Ltd. Mr. Han Jun served as general manager and Party secretary of China Shipping Development Co., Ltd.

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LETTER FROM THE BOARD

(started to work as executive director in May 2013) and general manager and deputy Party secretary of China Shipping Tanker Company Limited from March 2013, and began to hold current positions in August 2015. Mr. Han graduated from Dalian Maritime University with a major in ship steering. Mr. Han holds a bachelor’s degree and a master’s degree of business administration and is recognised as an engineer.

Save as disclosed above, neither Mr. Yang nor Mr. Han has held any other positions in the Company and/or its subsidiaries. Save as disclosed above, so far as the Directors are aware, neither Mr. Yang nor Mr. Han has held any directorships in any listed public companies in the last three years. Furthermore, neither Mr. Yang nor Mr. Han has any relationship with any directors, senior management, substantial shareholders or controlling shareholders of the Company, and neither of them has any interests in the shares of the Company within the meaning of Part XV of the SFO. Subject to the approval by the Shareholders of Mr. Yang’s and Mr. Han’s appointment as non-executive Directors, Mr. Yang and Mr. Han will enter into a service contract respectively with the Company for a term of service running from the date of their appointment until the end of the term of the current session of the Board. Pursuant to such proposed service contract, Mr. Yang and Mr. Han will not receive any remuneration from the Company.

Save as disclosed above, there are no other matters relating to Mr. Yang or Mr. Han that need to be brought to the attention of the Shareholders nor is there any information which is required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules.

IV. EGM

A notice convening the EGM to be held at 2:30 p.m. on Tuesday, 22 December 2015 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the PRC for the Shareholders to consider and, if thought fit, approve (i) the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016 and (ii) the appointment of new non-executive Directors was despatched to the Shareholders on 7 November 2015 pursuant to Rule 19A.39A of the Listing Rules.

China Shipping is the controlling Shareholder of the Company. Pursuant to Rule 14A.70(12) of the Listing Rules, where independent shareholders’ approval is required with regard to a connected transaction, any shareholder with a material interest in such transaction will not vote on such transaction. Accordingly, the China Shipping Group and its associates shall at the EGM abstain from voting on the Renewed Non-Exempt Continuing Connected Transactions, which must be taken by way of poll as required under the Listing Rules except where the chairman of the EGM, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. As at the Latest Practicable Date, the China Shipping Group and its associates controlled or were entitled to exercise control over the voting rights in respect of 5,280,795,012 A shares in the Company, representing approximately 45.20% of the entire issued share capital of the Company. To the extent that the Company is aware having made all reasonable enquiries, as at the Latest Practicable Date:

• (i) there was no voting trust or other agreement or arrangement or understanding entered into by or binding upon the China Shipping Group;

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LETTER FROM THE BOARD

• (ii) the China Shipping Group were not subject to any obligation or entitlement whereby they had or might have temporarily or permanently passed control over the exercise of the voting right in respect of their shares in the Company to a third party, whether generally or on a case-by-case basis; and

• (iii) it was not expected that there would be any discrepancy between the China Shipping Group’s beneficial shareholding interest in the Company and the number of shares in the Company in respect of which they would control or would be entitled to exercise control over the voting right at the EGM.

As far as the Directors are aware, other than the China Shipping Group and its associates, no other Shareholder has a material interest in the Renewed Non-Exempt Continuing Connected Transactions and has to abstain from voting at the EGM on such resolution.

The Independent Board Committee has been established to advise the Independent Shareholders on the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016. The letter from the Independent Board Committee and its recommendations to the Independent Shareholders is set out on pages 16 to 17 of this circular, and the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 18 to 32 of this circular.

The original proxy form and a reply slip were despatched to the Shareholders on 7 November 2015 for use at the EGM, and the revised proxy form has been despatched to the Shareholders on 4 December 2015. Whether or not you are able to attend the EGM, you are requested to complete, sign and return the proxy form for the EGM in accordance with the instructions printed thereon as soon as possible and in any event not less than 24 hours before the time for holding the EGM or any adjournment thereof (the “ Closing Time ”). Shareholders who intend to attend the EGM are also requested to complete, sign and return the reply slips for the EGM in accordance with the instructions printed thereon as soon as possible and in any event not later than 20 days before the date of the EGM.

The revised proxy form is only for the purpose of illustrating the cumulative voting to be adopted for the ordinary resolutions in respect of the appointment of new non-executive Directors as described in this circular. Any Shareholder who has not yet lodged the proxy form issued by the Company on 7 November 2015 (the “ Original Proxy Form ”) is requested to lodge the revised proxy form if he or she intends to appoint a proxy to attend the meeting on his or her behalf. In this case, the Original Proxy Form should not be lodged.

Any Shareholder who has already lodged the Original Proxy Form should note that: (i) if the revised proxy form is lodged before the Closing Time, the revised proxy form will revoke and supersede the Original Proxy Form previously lodged by the Shareholder. The revised proxy form will be treated as a valid proxy form lodged by the Shareholder, if duly completed; (ii) if no revised proxy form is lodged before the Closing Time, the Original Proxy Form will be treated as a valid proxy form lodged by the Shareholder, if duly completed. The proxy so appointed pursuant to the Original Proxy Form will be entitled to vote in accordance with the instructions previously given by the Shareholder or at his/her discretion (if no such instructions are given) on any resolution properly proposed at the meeting.

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LETTER FROM THE BOARD

V. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee which is set out on pages 16 to 17 of this circular, and the letter from the Independent Financial Adviser which is set out on pages 18 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 Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016 are fair and reasonable, on normal commercial terms or on terms no less favourable than those available to or from independent third parties, and are entered into on a continuing and regular basis in the ordinary and usual course of business of the Company, and that they are in the best interest of the Company and the 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 Renewed Non-Exempt Continuing Connected Transactions to be proposed at the EGM.

The Board (including the independent non-executive Directors) considers that the ordinary resolution in respect of the appointment of new non-executive Directors is in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders should vote in favour of this resolution at the EGM. None of the Directors should abstain from voting on this resolution.

By Order of the Board China Shipping Container Lines Company Limited Yu Zhen

Joint Company Secretary

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock code: 02866)

4 December 2015

To the Independent Shareholders

Dear Sir or Madam,

RENEWED NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS UNDER THE FINANCIAL SERVICES FRAMEWORK AGREEMENT AND THEIR RESPECTIVE PROPOSED ANNUAL CAPS FOR THE YEAR ENDING 31 DECEMBER 2016

We refer to the circular dated 4 December 2015 (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:

• (i) the Renewed Non-Exempt Continuing Connected Transactions under the Financial Services Framework Agreement; and

• (ii) their respective proposed annual caps for the year ending 31 December 2016.

((i) and (ii) collectively, the “ Proposed Transactions ”), 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 Proposed Transactions.

China Shipping is the controlling Shareholder. Therefore, the China Shipping Group and its associates are connected persons of the Company under the Listing Rules. The Proposed Transactions entered into between the Company and the China Shipping Group constitute continuing connected transactions of the Company.

* The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “China Shipping Container Lines Company Limited”.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

In respect of the Proposed Transactions, the highest applicable percentage ratio is expected to be more than 25% but less than 75% under the Listing Rules. Therefore, the Proposed Transactions are subject to the Independent Shareholders’ approval as required under Chapter 14A of the Listing Rules.

Messis Capital Limited has been appointed as the independent financial adviser to advise us in respect of the Proposed Transactions. We wish to draw your attention to the letter of advice from Messis Capital Limited set out on pages 18 to 32 of the Circular.

As members of the Independent Board Committee, we have discussed with the management of the Company in relation to the Proposed Transactions, and the basis upon which the terms of such Proposed Transactions have been determined and the said annual caps have been calculated. We have also taken into account the principal factors and reasons considered by Messis Capital Limited in forming its opinion in relation to the Proposed Transactions, and have discussed with Messis Capital Limited its letter of advice.

On the basis of the above, we consider, and agree with the view of Messis Capital Limited, that the terms of the Proposed Transactions are fair and reasonable, on normal commercial terms or on terms no less favourable than those available to or from independent third parties, and are entered into on a continuing and regular basis in the ordinary and usual course of business of the Company, and that they are in the best interest of the Company and its Shareholders as a whole.

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

Yours faithfully, Ms. Zhang Nan, Mr. Guan Yimin, Mr. Shi Xin, Ms. Hai Chi Yuet and Mr. Graeme Jack

Independent Board Committee

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Messis Capital Limited, the Independent Financial Adviser, for the purpose of inclusion in this circular, to the Independent Board Committee and the Independent Shareholders in respect of the Renewed Non-Exempt Continuing Connected Transactions and the respective proposed annual caps for the year ending 31 December 2016.

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4 December 2015

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

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS AND MAJOR TRANSACTIONS –

RENEWED NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Renewed Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the year ending 31 December 2016, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company to the Shareholders dated 4 December 2015 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

On 31 December 2009, the Company entered into the Financial Services Framework Agreement with China Shipping, pursuant to which China Shipping shall procure CS Finance Company to provide the Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; and (iv) other financial services as approved by CBRC. As set out in the letter from the Board, in view of the continuous development of the Group and based on the internal forecasts of forthcoming demand, the Board decided to continue the Renewed Non-Exempt Continuing Connected Transactions contemplated under the Financial Services Framework Agreement after 31 December 2015 and proposed their respective proposed annual caps for the year ending 31 December 2016, subject to the approval of the Independent Shareholders by way of an ordinary resolution at the EGM. In respect of the provision of deposit services under the Financial Services Framework Agreement, the applicable percentage ratio is expected to be more than 25% but less than 75%. Therefore, such

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

transactions, together with the respective proposed annual cap for the year ending 31 December 2016, are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements for continuing connected transactions under Chapter 14A of the Listing Rules. Such transactions also constitute major transactions of the Company under Rule 14.06(3) of the Listing Rules and are subject to the relevant major transaction requirements under Chapter 14 of the Listing Rules. In respect of the provision of loan services under the Financial Services Framework Agreement, pursuant to Rule 14A.90 of the Listing Rules, such transactions are exempt from all reporting, announcement, annual review and independent shareholders’ approval requirements. However, as the Company is required by the applicable PRC laws and regulations to seek the approval of the Shareholders with respect to such services, relevant resolution will be proposed to the Shareholders for voting at the EGM.

The Independent Board Committee comprising all independent non-executive Directors, namely, Ms. Zhang Nan, Mr. Guan Yimin, Mr. Shi Xin, Ms. Hai Chi Yuet and Mr. Graeme Jack, has been established to advise the Independent Shareholders in relation to the Renewed Non-Exempt Continuing Connected Transactions and the respective proposed annual caps for the year ending 31 December 2016. We, Messis Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

As at the Latest Practicable Date, we did not have any relationship with or interest in the Company and any other parties that could reasonably be regarded as relevant to our independence. Apart from normal professional fees payable to us in connection with this appointment as the Independent Financial Adviser, no arrangement exists whereby we will receive any fees or benefits from the Company. During the past two years, we were appointed as an independent financial adviser for the Company regarding certain continuing connected transactions of the Company, as set out in its announcement dated 30 October 2015. Notwithstanding the above, we are independent from the Company pursuant to Rule 13.84 of the Listing Rules.

BASIS OF OUR ADVICE AND RECOMMENDATIONS

In arriving at our recommendations, we have relied on the statements, information and representations contained in the Circular and the information and representations provided to us by the management of the Company. We have assumed that all information and representations contained or referred to in the Circular and all information and representations which have been provided by the management of the Company are true and accurate at the time they were made and will continue to be accurate as at the date of the despatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Company.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed by them in the Circular have been arrived at after due and careful consideration and there are no other material facts not contained

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

in the Circular, the omission of which would make any such statement made by them that contained in the Circular misleading in all material respects. We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any material facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps 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 opinion. We have not, however, carried out any independent verification of the information provided by the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group and any parties to the Financial Services Framework Agreement.

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Renewed Non-Exempt Continuing Connected Transactions and the respective proposed annual caps for the year ending 31 December 2016. Except for its inclusion in the Circular, this letter is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendations to the Independent Board Committee and the Independent Shareholders, we have considered the following principal factors and reasons:

1. Background information

• 1.1 Background information of the Renewed Non-Exempt Continuing Connected Transactions

On 31 December 2009, the Company entered into the Financial Services Framework Agreement with China Shipping, pursuant to which China Shipping shall procure CS Finance Company to provide the Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; and (iv) other financial services as approved by CBRC. The Renewed Non-Exempt Continuing Connected Transactions comprise of the transactions in respect of (i) maximum daily balance of deposits (including accrued interest and handling fee) to be placed by the Group with CS Finance Company under the Financial Services Framework Agreement; and (ii) maximum daily outstanding balance of loans (including accrued interest and handling fee) to be granted by CS Finance Company to the Group under the Financial Services Framework Agreement. Further background information in relation to the Renewed Non-Exempt Continuing Connected Transactions are set out in the Company’s announcements dated 8 October 2009, 15 December 2009, 20 September 2012 and 6 November 2015 and circulars dated 29 October 2009 and 12 November 2012.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The initial term of the Financial Services Framework Agreement is three years, with effect from 31 December 2009. Upon the expiry of such initial term, the Financial Services Framework Agreement shall automatically extend for further terms of three years (subject to compliance of the Listing Rules), unless any relevant party gives to the other party(ies) a written notice of termination at least three months prior to such expiry date. The existing term of the Financial Services Framework Agreement will be expired by 31 December 2015 and the Company proposes to extend for a further term of three years.

1.2 Background information of the Group

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

The table below sets out the key financial information of the Group for the two years ended 31 December 2014 and the six months ended 30 June 2015 as extracted from the Company’s annual report for the year ended 31 December 2014 (the “ Annual Report ”) and the interim report of the Company for the six months ended 30 June 2015 (the “ Interim Report ”), respectively.

		**For **	the six
	**months **		ended/	For the year ended/
	As at 30 June			**As at 31 **	December
			2015	2014	2013
		(Unaudited)		(Audited)	(Audited)
			(RMB	(RMB	(RMB
		million)		million)	million)
Revenue			15,991	36,077	33,917
Profit/(Loss) for the year
attributable to owners of parent			11	1,044	(2,610)
Cash and cash equivalent			8,005	9,356	9,014
Long-term and short-term
borrowings			22,745	22,154	18,937
Total assets			54,112	53,541	50,817
Total liabilities			29,216	28,664	26,599
Net assets			24,895	24,877	24,218

The revenue of the Group increased by approximately RMB2.2 billion from approximately RMB33.9 billion for the year ended 31 December 2013 to approximately RMB36.1 billion for the year ended 31 December 2014, representing an increase of approximately 6.4%. According to the Annual Report, the increase in revenue was primarily as a result of a combination of influence of (i) the decrease in cargo volume of domestic trade lanes due to the change in marketing strategy of the Company of abandoning some low-value customers, partially offset by the increase in cargo volume of international trade lanes; and (ii) the increase in freight rates due to the recovery of and increased demand in international trade lanes in 2014.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the Annual Report, during the year ended 31 December 2014, the net cash generated from the Group’s operating activities and new bank loan amounted to approximately RMB2.7 billion and approximately RMB11.6 billion, respectively. Besides, as shown in the table above, the Group’s cash and cash equivalent amounted to approximately RMB9.0 billion, RMB9.4 billion and RMB8.0 billion as at 31 December 2013 and 31 December 2014 and 30 June 2015, representing approximately 17.7%, 17.5% and 14.8% of the Group’s total assets, respectively. The long-term and short-term borrowings of the Group represented a majority of its total liabilities of which amounted to approximately RMB18.9 billion, RMB22.2 billion and RMB22.7 billion as at 31 December 2013 and 31 December 2014 and 30 June 2015, respectively. In addition, as advised by the Directors, the Group has regular needs for payment and receipts in foreign currencies. Therefore, financial services including deposit and loan services are essential in the Group’s operation.

1.3 Background information of China Shipping

China Shipping is the controlling shareholder of the Company. As set out in the Letter from the Board, China Shipping is a large shipping conglomerate involved in import and export business, trading, coastal and ocean cargo transportation, dry bulk cargo transportation, supply of food for vessels, management of docks and other services in relation to the above, and operates in different regions of the PRC and across the world. According to the Company’s announcement dated 6 November 2015, for the year ended and as at 31 December 2014, the unaudited consolidated financial information of China Shipping is as follows: total assets, equity attributable to shareholders, total operating income and profit attributable to shareholders were RMB205,882 million, RMB55,621 million, RMB83,027 million and RMB608 million, respectively, and its debt to asset ratio was 58.54%.

1.4 Background information of CS Finance Company

CS Finance Company is a limited liability company established by the Company, China Shipping, Guangzhou Maritime Transport (Group) Co. Ltd. (廣州海運 (集團) 有限公司), China Shipping Development Company Limited and China Shipping (Hainan) Haisheng Shipping and Enterprise Co., Ltd. (中海 (海南) 海盛船務股份有限公司) in the PRC and a non-banking financial institution with a financial licence issued by the CBRC. The Company holds 25% shareholding interest in CS Finance Company as at the Latest Practicable Date.

CS Finance Company is principally engaged in the provision of deposit, loan, settlement and other related financial services. According to the information provided by the Company, CS Finance Company recorded a revenue of approximately RMB409 million and net profit of approximately RMB213 million for the year ended 31 December 2014, respectively and net assets of approximately RMB1,082 million as at 31 December 2014.

As advised by the Directors, CS Finance Company is governed by the Administrative Measures for Enterprises Group Finance Companies (企業集團財務公司管理辦法) (the “ Administrative Measures ”). Financial institutions governed under the Administrative Measures are required to submit their financial statements and audited report to the CBRC annually and comply with certain financial ratio requirements as set out in the Administrative Measures from time to time.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The table below sets out the key financial ratio requirements of the Administrative Measures and the respective financial ratios of CS Finance Company as at 31 December 2013 and 31 December 2014 as provided by the management of the Company:

		**Financial **	ratio of
		**CS Finance **	Company
		As at	**As **	at
		31 December	31 December
Financial ratio	Requirements	2013	2014
		(%)	(%)
Capital adequacy ratio	Not less than 10%	14.48	16.73
Inter-financial institution	Not more than 100%	0		0
borrowing balances to
total capital ratio
Total amount of outstanding	Not more than 100%	0		0
guarantees to total capital
ratio
Short-term securities investment	Not more than 40%	0		0
to total capital ratio
Long-term investment to	Not more than 30%	0		0
total capital ratio
Self-owned fixed assets to	Not more than 20%	0.42	0.30
total capital ratio

As shown in the table above, we note that CS Finance Company complied with the relevant financial ratio requirements as set out in the Administrative Measures as at 31 December 2013 and 31 December 2014. In particular, (i) the capital adequacy ratios of CS Finance Company were higher than the minimum required ratio of 10%; (ii) CS Finance Company recorded no inter-financial institution borrowing, outstanding guarantees, short-term securities investments and long-term investment as at 31 December 2013 and 2014 and therefore had little exposures on contingent liabilities or investment losses; and (iii) the self-owned fixed assets to total capital ratios were far below the required limit of 20%.

Based on the above, having considered that (i) it is the principal business of CS Finance Company to provide financial services including the deposits services and loan services; (ii) CS Finance Company is a licensed financial institution and governed by the CBRC under the Administrative Measures; and (iii) CS Finance Company complied with relevant financial ratio requirements of the Administrative Measures and had demonstrated healthy financial positions as at 31 December 2013 and 2014, we concur with the Directors’ view that CS Finance Company is one of the eligible financial institutions for the provision of financial services (including deposit services and loan services) to the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for and benefits of the Renewed Non-Exempt Continuing Connected Transactions

As set out in the Letter from the Board, it is common for large corporate group in the PRC to set up and maintain a finance company to provide treasury services to the group members as this improves centralised management and utilisation efficiency of group funds, and assists group members in reducing financing costs and investment risks. CS Finance Company was set up as a non-bank financial institution in 2009 pursuant to the approval granted by CBRC under the Administrative Measures to provide financial services to the China Shipping Group and the Group. CS Finance Company is operating under the routine supervision and regulation of regulatory authorities including PBC and CBRC. The Board has checked the continuing validity of the licence of CS Finance Company and looked at various key financial ratios of CS Finance Company including capital adequacy ratio and self-owned fixed assets to total capital ratio when assessing CS Finance Company’s capability for the provision of the financial services. Such key financial ratios reviewed by the Board are all better than the standard stipulated by CBRC for finance companies. Besides, China Shipping has undertaken to CBRC that it will increase the capital of CS Finance Company in case CS Finance Company has difficulty in payment. As such, the Board believes that CS Finance Company has the financial capability in providing the deposits and loan services under the Financial Services Framework Agreement, and the credit risk involved in the underlying transactions is low.

As further set out in the Letter from the Board, the Group will benefit from the Renewed Non-Exempt Continuing Connected Transactions as follows:

The terms and conditions of deposit services and loan services provided by CS Finance Company under the Financial Services Framework Agreement are generally more favourable to the Group than those provided by independent third parties, or those provided by CS Finance Company to independent third parties.

Furthermore, the Group is not restricted under the Financial Services Framework Agreement to approach, and in fact may choose, any bank or financial institution to satisfy its financial service needs. Its criteria in making the choice could be made on costs and quality of services. Therefore, the Group may, but is not obliged to, continue to use CS Finance Company’s deposit services and loan services if the service quality provided is competitive. Having such flexibility afforded under the Financial Services Framework Agreement, the Group is able to better manage its current capital and cashflow position.

In addition, it is also expected that CS Finance Company will mainly provide more efficient deposit services and loan services to the Group, as compared to independent third-party banks. As CS Finance Company is familiar with the Group’s business, it is able to provide funds required by the Group in a more efficient and timely way. In view of the depression in marine transportation industry, fund shortage in the market and restrictions on external financing channels, the Group hopes to obtain financial assistance from China Shipping via CS Finance Company, which may help broaden the Group’s financing channels and lower its financing costs.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Moreover, the Company holds 25% equity interest in CS Finance Company, business development of CS Finance Company will also bring certain investment gains for the Company.

Apart from the above, as advised by the Directors, China Shipping had undertaken to the CBRC that it will increase the capital of CS Finance Company if CS Finance Company has difficulty in payment. According to the Company’s announcement dated 6 November 2015, China Shipping has a registered capital of approximately RMB6.9 billion. China Shipping’s unaudited equity attributable to shareholders as at 31 December 2014 was approximately RMB55.6 billion. Given the strong financial background of China Shipping and its aforesaid undertaking to increase the capital of CS Finance Company, the Directors are of the view that the Group’s interest is sufficiently safeguarded should the Group make deposits with CS Finance Company pursuant to the terms of the Financial Services Framework Agreement.

In view of the above, in particular, (i) the Group can generally enjoy more favourable terms (in particular the interest rates under the deposit services and the loan services); (ii) the Group can enjoy flexibility to satisfy its financial service needs as the Group is not obliged to engage CS Finance Company to provide the deposit services nor the loan services under the Financial Services Framework Agreement, such that the Group can select the appropriate provider for deposit services and loan services as and when the Directors consider fit; (iii) CS Finance Company is expected to provide more efficient deposit services and loan services to the Group as compared to independent third-party banks as it is familiar with the Group’s business; (iv) the Company can share the profit of CS Finance Company through its 25% shareholding interest at CS Finance Company; and (v) the interests of the Group can be sufficiently safeguarded with the undertaking given by China Shipping, we concur with the view of the Directors that the entering into of the Renewed Non-Exempt Continuing Connected Transactions contemplated under the Financial Services Framework Agreement is in the interest of the Company and its shareholders as a whole.

3. Principal terms of the Renewed Non-Exempt Continuing Connected Transactions

Deposit services

Under the Financial Services Framework Agreement, CS Finance Company shall accept deposits from the Group at interest rates not lower, and thus no less favourable, than (a) the lower limit of the relevant rates stipulated by PBC for the same type of deposits; (b) the interest rates offered by any independent third parties for the same type of deposits; or (c) the interest rate at which CS Finance Company accepts from any independent third parties for the same type of deposits.

For each of the implementation agreements in respect of the deposit services to be provided to the Group as contemplated under the Financial Services Framework Agreement, such deposit services are provided in accordance with the following pricing principles: (a) the domestic RMB deposits shall be taken at a price based on the benchmark interest rate stipulated by PBC or at the prime rate (the floating upward) within the floating range allowed by such stipulation; and (b) the foreign and domestic US dollars deposits shall be taken at a price based on the prevailing market rates which should be obtained by making inquiries of various banks so that the price determined is not lower than the highest one quoted by such banks.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have reviewed, on a sampling basis, the interest rates of the historical deposit services offered by CS Finance Company and by third-party financial institutions to the Group during the period from 1 January 2013 to 30 September 2015 (the “ Historical Period ”) and the relevant deposit interest rates published by the PBC. During the Historical Period, we are advised by the Directors that there were 20 transactions of deposits services provided by CS finance Company to the Group. We have obtained and reviewed 8 samples and compared the interest rates of these samples with the benchmark interest rates stipulated by PBC for the same type of deposits during the same period. We are also given to understand that there were 5 transactions of deposit services from third-party financial institutions to the Group for the same type of deposits as the said samples, we have obtained and reviewed the interest rates of 4 samples out of the 5 transactions. Based on our review, we noted that the deposit interest rates offered by CS Finance Company were no less favourable than those stipulated by PBC and offered by third-party financial institutions to the Group for the same type of deposits during the same PBC benchmark interest rate period.

Loan services

Under the Financial Services Framework Agreement, CS Finance Company shall provide loan to the Group at interest rates not higher, and thus no less favourable, than (a) the relevant rates stipulated by PBC for the same type of loan; (b) the interest rates offered by any independent third parties for the same type of loan; or (c) the interest rates at which CS Finance Company provides to any independent third parties with the same credit rating for the same type of loan.

For each of the implementation agreements in respect of the loan services to be provided to the Group as contemplated under the Financial Services Framework Agreement, such loan services are provided in accordance with the following pricing principles: (a) the domestic RMB loans shall be provided at a price based on the benchmark interest rates stipulated by the PBC or at the prime interest rate (the floating downward) within the floating range allowed by such stipulation; and (b) the foreign and domestic US dollars loans shall be provided at a price based on the prevailing market rates which should be obtained by making inquiries of various banks so that the price determined is not higher than the lowest one quoted by such banks.

We have reviewed, on a sampling basis, the loan interest rates offered by CS Finance Company and by third-party financial institutions to the Group during the Historical Period and the relevant loan interest rates published by the PBC. We are given to understand that there were 4 transactions of loan services offered by CS Finance Company to the Group during the Historical Period and we have compared these 4 transactions with the benchmark interest rates stipulated by PBC for the same type of loan during the same period. We have identified 2 transactions offered by third-party financial institutions to the Group for same type of loans during the Historical Period and we have reviewed the interest rates of these 2 loan services. Based on our review, we noted that the loan interest rates offered by CS Finance Company to the Group were no less favourable than those stipulated by PBC and offered by third-party financial institutions to the Group for same type of loans.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the above, in particular that (i) the interest rates to be enjoyed from the deposit services and the loan services under the Financial Services Framework Agreement will be no less favourable than those offered by any independent third parties for the same type of deposits or loans; and (ii) the Group has its discretion to use the deposit services and the loan services, we are of the view that the Renewed Non-Exempt Continuing Connected Transactions contemplated under the Financial Services Framework Agreement are on normal commercial terms, fair and reasonable so far as the Company and the Independent Shareholders are concerned.

4. Proposed annual caps

Set out below are the historical figures and annual caps for the Historical Period and the proposed annual caps for the year ending 31 December 2016 for the Renewed Non-Exempt Continuing Connected Transactions under the Financial Services Framework Agreement (“ Table A ”):

						Future
	**Historical caps **	for	**Historical **	figures for		caps for
	**2013, 2014 and **	2015	the Historical Period			2016
	(RMB’000)		(RMB’000)			(RMB’000)
Deposit services:
Maximum daily balance	8,000,000	(2013)	3,741,887		(2013)	6,500,000
of deposits (including	9,000,000	(2014)	4,194,975		(2014)	(“Proposed
accrued interest and	10,000,000	(2015)	4,783,426		(as of	Deposit
handling fee) to be				30 September		Cap”)
placed by the Group					2015)
with CS Finance
Company
Loan services:
Maximum daily	5,000,000	(2013)	364,000		(2013)	6,500,000
outstanding balance	6,000,000	(2014)	1,211,900		(2014)	(“Proposed
of loans (including	7,000,000	(2015)	0_(Note _	(a))	(as of	Loan
accrued interest and				30 September		Cap”)
handling fee) to be					2015)
granted by CS
Finance Company to
the Group

Note:

(a) The historical figure of the continuing connected transactions in respect of loan services provided to the Group under the Financial Services Framework Agreement for the nine months ended 30 September 2015 was 0, which was due to that the Company has no demand for loans given that the Company has no projects that require financing during the period.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Deposit services

As set out in the Letter from the Board, the Directors have considered the following factors in arriving at the Proposed Deposit Cap:

• (i) The historical figures of the maximum daily balance of deposits (including accrued interest and handling fee) placed by the Group with CS Finance Company during the Historical Period;

• (ii) During the past three years, the daily balance of deposit placed by the Group with CS Finance Company exceeded RMB3 billion, with a maximum balance of RMB3.9 billion according to statistics [(Note][(a)(b))] ;

Notes:

• (a) As disclosed in Table A, the maximum balance for 2014 was approximately RMB4,195 million which occurred in March 2014 and included the deposit amounts placed by CSTD in the amount of approximately RMB344 million. Given that the Company completed the disposal of 100% equity interest in CSTD in June 2014, for the avoidance of doubt, the Company has deducted the portion of CSTD’s deposits from the historical figures for 2014 when determining the annual cap for 2016. On such basis, the maximum balance for 2014 occurred in November of that year with an amount of approximately RMB3,940 million.

• (b) As disclosed in Table A, the maximum balance for the nine months ended 30 September 2015 was approximately RMB4,783 million which occurred in August 2015 and included several deposits in the aggregate amount of approximately US$150 million which were temporarily placed with CS Finance Company upon the expiry of deposit term respectively from other commercial banks and were transferred out after several days. Due to the occasionality and temporariness of such event, for the avoidance of doubt, the Company has decided not to take into account such maximum balance when determining the annual cap for 2016.

• (iii) CS Finance Company was granted with pilot qualification to conduct cross-border transfer of foreign exchange funds by SAFE in December 2012, whereby it may transfer the Group’s foreign exchange funds in Hong Kong to the domestic fund pool at any time via the cross-border channel, and such foreign exchange funds will be immediately accounted as deposit upon their transfer into domestic accounts. According to statistics, the daily balance of the Group’s foreign exchange funds in Hong Kong is approximately US$440 million (equivalent to over RMB2.4 billion); and

• (iv) The aggregation of items (ii) and (iii) above will exceed RMB6 billion, and as such, the Proposed Deposit Cap is RMB6.5 billion.

Based on the above and as advised by the Directors, we note that the aggregate of the maximum balance of deposit placed by the Group with CS Finance Company during the past three years (excluding CSTD’s deposits and temporary deposits) of RMB3.9 billion and the daily balance of the Group’s foreign exchange funds in Hong Kong for the year ended 31 December 2014 of approximately US$440 million (equivalent to over RMB2.4 billion) is approximately RMB6.3 billion, representing approximately 96.9% of the Proposed Deposit Cap.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in Table A, the maximum daily balance of deposits (including accrued interest and handling fee) placed by the Group with CS Finance Company during the Historical Period were approximately RMB4.8 billion, representing approximately 73.9% of the Proposed Deposit Cap.

We also note that as at 31 December 2013, 31 December 2014 and 30 June 2015, the cash and cash equivalent position of the Group were approximately RMB9.0 billion, RMB9.4 billion, RMB8.0 billion, respectively.

Having considered that, in particular, (i) the aggregate of the maximum balance of deposit placed by the Group with CS Finance Company during the past three years (excluding CSTD’s deposits and temporarily deposits) and the daily balance of the Group’s foreign exchange funds in Hong Kong for the year ended 31 December 2014 represents approximately 96.9% of the Proposed Deposit Cap; (ii) the maximum daily balance of deposits (including accrued interest and handling fee) placed by the Group with CS Finance Company during the Historical Period represents approximately 73.9% of the Proposed Deposit Cap; and (iii) the Group’s cash and cash equivalent positions as at 31 December 2013, 31 December 2014 and 30 June 2015 are well above the Proposed Deposit Cap, we consider that the Proposed Deposit Cap is fair and reasonable so far as the Independent Shareholders are concerned.

Loan services

As set out in the Letter from the Board, the Directors have considered the following factors in arriving at the Proposed Loan Cap:

• (i) The historical figures of the maximum daily outstanding balance of loans (including accrued interest and handling fee) granted by CS Finance Company to the Group during the Historical Period;

• (ii) The Group primarily makes settlements in foreign currency, while subject to the foreign exchange control policies of PRC, the Group may need CS Finance Company to provide settlement turnover funds in the amount of approximately US$100 million to US$200 million to satisfy the Group’s need for both onshore and offshore settlement during the operation;

• (iii) According to the Company’s vessel financing projects and business development plan, it is expected that the Group will have a finance demand of approximately RMB4.0 billion to RMB5.2 billion for the year of 2016; and

• (iv) Aggregating items (ii) and (iii) above, the cap for the Group’s loan amounts for 2016 are expected to be RMB6.5 billion.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the above, we note that the aggregate of (i) the expected maximum settlement turnover funds required by the Group of US$200 million (equivalent to approximately RMB1.3 billion) and (ii) the expected maximum finance demand for the Company’s vessel financing projects and business development plan for the year of 2016 of RMB5.2 billion is approximately RMB6.5 billion, representing the Proposed Loan Cap.

As shown in Table A, the maximum daily outstanding balance of loans (including accrued interest and handling fee) granted by CS Finance Company to the Group during the Historical Period was approximately RMB1.2 billion, representing approximately 18.5% of the Proposed Loan Cap.

We also note that as at 31 December 2013, 31 December 2014 and 30 June 2015, the Group’s long-term and short-term borrowings amounted to approximately RMB18.9 billion, RMB22.2 billion and RMB22.7 billion, respectively.

Although the maximum daily outstanding balance of loans (including accrued interest and handling fee) granted by CS Finance Company to the Group during the Historical Period only represents approximately 18.5% of the Proposed Loan Cap, having considered that, in particular, (i) the aggregate of the expected maximum settlement turnover funds required by the Group and the expected maximum finance demand for the Company’s vessel financing projects and business development plan for the year of 2016 represents the Proposed Loan Cap; and (ii) the Group’s long-term and short-term borrowings as at 31 December 2013, 31 December 2014 and 30 June 2015 are well above the Proposed Loan Cap, we consider that the Proposed Loan Cap is fair and reasonable so far as the Independent Shareholders are concerned.

5. Internal control procedures of the Company

As set out in the Letter from the Board, before entering into any implementation agreements, the Company will implement the following procedures to ensure the terms offered by the relevant connected parties are no less favourable than those available from independent third parties:

• (i) the relevant executives of the finance department of the Company will review contemporaneous prices and other relevant terms offered by at least two commercial banks, all being independent third parties, operating at the same or nearby area before the commencement of the relevant transaction, and ensure the terms offered by the relevant connected persons are fair and reasonable and comparable to those offered by independent third parties. In the case where the offers made by independent third parties are more favourable to the Company, the Company may take up those offers; and

• (ii) the supervision department of the Company will periodically review and inspect the process of the relevant continuing connected transactions.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The finance department of the Company will also collect statistics of each of the Renewed Non-Exempt Continuing Connected Transactions on a quarterly basis to ensure the annual caps approved by the Independent Shareholders or as announced are not exceeded.

Having considered the Company’s internal control procedures, in particular that (i) a variety of personnel in the finance department and the supervision department of the Company will be involved in the review process to ensure the terms offered by the relevant connected persons are fair and reasonable and comparable to those offered by independent third parties and the annual caps approved by the Independent Shareholders or as announced are not exceeded; and (ii) the terms offered by at least two independent third parties operating at the same or nearby area will be compared with the terms offered by the relevant connected persons, we concur with the Directors’ view that the Company’s internal control procedures are adequate to ensure that the individual transactions of the Renewed Non-Exempt Continuing Connected Transactions will be conducted within the Financial Services Framework Agreement.

RECOMMENDATION

Having taken into account the above-mentioned principal factors and reasons, in particular:

• the background information of the Renewed Non-Exempt Continuing Connected Transactions, the Group, China Shipping and CS Finance Company as set out under the section headed “1. Background information”;

• the reasons for and benefits of the entering into the Renewed Non-Exempt Continuing Connected Transactions contemplated under the Financial Services Framework Agreement as set out under the section headed “2. Reasons for and benefits of the Renewed Non-Exempt Continuing Connected Transactions”;

• the principal terms of the Renewed Non-Exempt Continuing Connected Transactions contemplated under the Financial Services Framework Agreement as set out under the section headed “3. Principal terms of the Renewed Non-Exempt Continuing Connected Transactions”;

• the basis for determining the Proposed Deposit Cap and the Proposed Loan Cap as set out under the section headed “4. Proposed annual caps”; and

• the internal control procedures of the Company as set out under the section headed “5. Internal control procedures of the Company”,

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

we consider that the entering into of the Renewed Non-Exempt Continuing Connected Transactions under the Financial Services Framework Agreement is in the ordinary and usual course of business of the Group and in the interests of the Company and its shareholders as a whole. We are also of the view that the terms of the Renewed Non-Exempt Continuing Connected Transactions under the Financial Services Framework Agreement (including the Proposed Deposit Cap and the Proposed Loan Cap) are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the resolution to be proposed at the EGM to approve the Renewed Non-Exempt Continuing Connected Transactions contemplated under the Financial Services Framework Agreement (including the Proposed Deposit Cap and the Proposed Loan Cap).

Yours faithfully, For and on behalf of Messis Capital Limited

Vincent Cheung Director

Mr. Vincent Cheung is a licensed person registered with the Securities and Futures Commission and regarded as a responsible officer of Messis Capital Limited to carry out type 6 (advising on corporate finance) regulated activities under the SFO and has over 8 years of experience in corporate finance industry.

Note: In this letter, currency conversion has been made at the rate of USD1.00 to RMB6.3459.

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. THREE-YEAR FINANCIAL INFORMATION OF THE GROUP

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

The audited consolidated financial statements of the Company for the years ended 31 December 2012, 2013 and 2014 together with the relevant notes to the financial statements of the Company can be found on pages 71 to 175 of the annual report of the Company for the year ended 31 December 2012, pages 74 to 189 of the annual report of the Company for the year ended 31 December 2013 and pages 83 to 203 of the annual report of the Company for the year ended 31 December 2014. Please also see below the hyperlinks to the said annual reports:

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0429/LTN20130429381.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0429/LTN20140429324.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0429/LTN20150429201.pdf

The unaudited consolidated financial statements of the Company for the periods ended 30 June 2013, 2014 and 2015 together with the relevant notes to the financial statements of the Company can be found on pages 15 to 44 of the interim report of the Company for the period ended 30 June 2013, pages 16 to 44 of the interim report of the Company for the period ended 30 June 2014 and pages 20 to 52 of the interim report of the Company for the period ended 30 June 2015. Please also see below the hyperlinks to the said interim reports:

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0926/LTN20130926158.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0926/LTN20140926257.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0924/LTN20150924236.pdf

2. STATEMENT OF INDEBTEDNESS

Debt Securities and Term Loans

As at the close of business of 31 October 2015, save as disclosed in respect of the borrowings and indebtedness of the Group below, the Group has no debt securities issued or outstanding, or authorised or otherwise created but unissued, and no term loans, distinguishing between guaranteed, unguaranteed, secured (whether the security is provided by the Company or by independent third parties) or unsecured.

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Borrowings and Indebtedness

As at the close of business of 31 October 2015, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group has outstanding borrowings and indebtedness of approximately RMB28,288,460,272.98, comprising secured bank loans of approximately RMB9,938,662,265.72, unsecured bank loans of approximately RMB16,537,920,312.44, finance leases obligations of approximately RMB16,058,403.76 and RMB bonds of approximately RMB1,795,819,291.06.

Contingent Liabilities

As at the close of business of 31 October 2015, the Group has no material contingent liability or guarantees.

Mortgage and Charges

As at the close of business of 31 October 2015, the Group’s general banking facilities and the above outstanding secured borrowings were secured by the Group’s property, plant and equipment and certain bank deposits.

Save as aforesaid or as otherwise mentioned herein and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, bank loans and overdrafts or other similar borrowings or indebtedness, liabilities under acceptance (other than normal trade bills) or acceptance credits or hire purchase commitments, guarantees or other material contingent liabilities as at the close of business on 31 October 2015.

3. WORKING CAPITAL

Taking into account the terms of the transactions in respect of the deposit services provided to the Group under the Financial Services Framework Agreement and the financial resources available to the Group, including the internally generated funds and the available banking facilities, the Directors are of the opinion that the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

4. FINANCIAL AND TRADING PROSPECTS

Due to the imbalance between shipping capacity supply and demand, the container transportation market as a whole remained sluggish in the first three quarters of 2015. Freight rates for Asia-Europe trade lanes hit record low levels under the impact of new shipping capacity put into market amid a weak economic growth momentum in the Eurozone. On the other side, benefiting from steadily growing demand boosted by the stable recovery of the U.S. economy, coupled with the impact of the U.S. West Coast port strike, freight rates for Trans-Pacific trade lanes stayed at stable levels. Meanwhile, freight rates for Asia Pacific trade lanes underwent volatility under the gradual upgrade of shipping capacity. It is expected that

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

some time in the future, international trade still will not be cheerful. With the massive influx of new shipping capacity, shipping market will face even more uncertainties. The shipping industry is gradually developing towards scale expansion, intensive operation and supply chain integration. Thresholds of market entry and service standards will continue to rise along with the increasing scale of container liners, innovations in large vessel operations and in service concepts.

5. MATERIAL ADVERSE CHANGE

The Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest published audited accounts of the Company have been made up.

6. EFFECT ON THE EARNINGS AND ASSET AND LIABILITIES OF THE GROUP

In respect of the Financial Services Framework Agreement, (1) deposits to be placed by the Group through the deposit services will generate interest income for the Company; and (2) loans to be obtained by the Group through the loan services will result in an increase in the scale of assets and liabilities of the Company.

– 35 –

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, 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.

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

As at the Latest Practicable Date:

• (a) Zhang Guofa, an executive Director, is also the director, general manager and member of the Party Committee of China Shipping;

• (b) Huang Xiaowen, an executive Director, is also the deputy general manager and member of the Party Committee of China Shipping;

• (c) Ding Nong, a non-executive Director, is also the deputy general manager and member of the Party Committee of China Shipping;

• (d) Yu Zenggang, a non-executive Director, is also the deputy general manager and member of the Party Committee of China Shipping;

• (e) Xu Wenrong, a Supervisor, is also the leader of the discipline inspection team and member of the Party Committee of China Shipping; and

• (f) Ye Hongjun, a Supervisor, is also the chief legal adviser of China Shipping.

– 36 –

GENERAL INFORMATION

APPENDIX II

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).

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 2014 (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 2014 (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.

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GENERAL INFORMATION

APPENDIX II

8. CONSENT OF EXPERT

• (a) The Independent Financial Adviser, which is a licensed corporation to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, 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 they respectively appear.

• (b) As at the Latest Practicable Date, the Independent Financial Adviser 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.

• (c) As at the Latest Practicable Date, the Independent Financial Adviser did not have any direct or indirect interest in any assets which had been, since 31 December 2014 (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. LITIGATION

As at the Latest Practicable Date, no litigation or claims of material importance was known to the Directors to be pending or threatened against any member of the Group.

10. MATERIAL CONTRACTS

Save for the following material contracts, the Group has not entered into any material contract (not being contracts entered into in the ordinary course of business of the Group) within the two years immediately preceding the date of this circular:

• (a) an equity transfer agreement dated 3 January 2014 entered into between the Company and China Shipping Logistics Co., Ltd., pursuant to which the Company agreed to sell 100% equity interest in Shanghai China Shipping International Container Storage and Transportation Co., Ltd. to China Shipping Logistics Co., Ltd. in the aggregate consideration of RMB305,411,200.38 (Note: details of the agreement were disclosed in the Company’s announcement dated 6 January 2014); and

• (b) an equity transfer agreement dated 3 January 2014 entered into between the Company and China Shipping Investment Co., Ltd., pursuant to which the Company agreed to sell 100% equity interest in Shanghai Zhengjin Industrials Co., Ltd. to China Shipping Investment Co., Ltd. in the aggregate consideration of RMB372,723,032.33 (Note: details of the agreement were disclosed in the Company’s announcement dated 6 January 2014).

– 38 –

GENERAL INFORMATION

APPENDIX II

11. MISCELLANEOUS

• (a) The joint company secretaries of the Company are Mr. Yu Zhen (“ Mr. Yu ”) and Ms. Ng Sau Mei (“ Ms. Ng ”). Mr. Yu is a certified public accountant (CPA) of the PRC and a mid level accountant. Ms. Ng is an associate member of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators in United Kingdom.

• (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 Maritime Research Building, 628 Minsheng Road, Pudong New Area, Shanghai, the PRC. The Hong Kong H Share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at 17M Floor, 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.

12. 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 31/F, Tower 2, Kowloon Commerce Centre, 51 Kwai Cheong Road, Kwai Chung, New Territories, Hong Kong from the date of this circular up to 22 December 2015 (both days inclusive):

• (a) the Financial Services Framework Agreement;

• (b) the letter of advice dated 4 December 2015 from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 18 to 32 of this circular;

• (c) the written consent issued by the Independent Financial Adviser to the Company as referred to in the paragraph headed “Consent of Expert” in this Appendix;

• (d) the letter of recommendation dated 4 December 2015 from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 16 to 17 of this circular;

• (e) the annual reports of the Company for the two years ended 31 December 2013 and 2014;

• (f) the articles of association of the Company;

• (g) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix II; and

• (h) this circular.

– 39 –