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 licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant, or other professional adviser.

If you have sold or transferred all your shares in COSCO SHIPPING Development Co., Ltd.*, you should at once hand this circular, the form of proxy and the reply slip to the purchaser or transferee or to licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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.

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd.[*]

(Formerly known as 中海集裝箱運輸股份有限公司 China Shipping Container Lines Company Limited)

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

(Stock code: 02866)

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS (2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS (4) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS (5) PROPOSED AMENDMENTS TO THE RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING AND (6) SUPPLEMENTAL NOTICE OF EGM

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

==> picture [106 x 46] intentionally omitted <==

Capitalised terms used in this cover shall have the same meanings as those defined in the circular.

A letter from the Board is set out on pages 14 to 35 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 36 to 37 of this circular. A letter from First Shanghai, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 38 to 57 of this circular.

The Original Notice of EGM convening the EGM to be held at 2:30 p.m. on Wednesday, 28 December 2016 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the People’s Republic of China was despatched to the Shareholders on 11 November 2016. The Supplemental Notice of EGM, which contain additional resolutions to be proposed at the EGM, is set out on pages 98 to 104 of this circular.

* 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 “COSCO SHIPPING Development Co., Ltd.”.

13 December 2016

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . .	36
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	38
APPENDIX I – FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . .	58
APPENDIX II – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .	61
APPENDIX III – PROPOSED AMENDED RULES OF PROCEDURE OF
THE SHAREHOLDERS’ GENERAL MEETING. . . . . .	72
SUPPLEMENTAL NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98

– i –

DEFINITIONS

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

“A Share(s)”
the domestic share(s) in the ordinary share capital of the Company with a par value of RMB1.00 each, which are listed on the Shanghai Stock Exchange
“Announcement”
the announcement of the Company dated 5 December 2016 in relation to, among other things, the Continuing Connected Transactions and the renewal of the Florens Finance Financial Services Agreement
“Asset Management Plan”
an asset management plan which certain executive Directors, Supervisor, senior management and employees have voluntarily invested in, the details of which are set out in the announcement of the Company dated 24 November 2016
“associate” has the meaning ascribed to it under the Hong Kong 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 COSCO”
COSCO SHIPPING Holdings Co., Ltd.[#] (中遠海運控股股份有限公司), and formerly known as China COSCO Holdings Company Limited[#] (中國遠洋控股股份有限公司) a joint-stock company incorporated under the laws of the PRC with limited liability, the H shares and A shares of which are listed on the Hong Kong Stock Exchange (Stock Code: 1919) and Shanghai Stock Exchange (Stock Code: 601919), respectively, and a direct non-whollyowned subsidiary of COSCO Company
“China COSCO Group”
China COSCO and its subsidiaries
“China Shipping”

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

“China Shipping Group”

China Shipping and its subsidiaries (excluding the CS Group)

– 1 –

DEFINITIONS

“Company”
“Computershare”
“connected person(s)”
“Continuing Connected Transaction Agreements”
“Continuing Connected Transactions”
“controlling shareholder”
“COSCO Company”
“COSCO Container”

COSCO SHIPPING Development Co., Ltd.* (中遠海運發展股份有限公司) and formerly known as 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, the H Shares and A Shares of which are listed on Main Board of the Hong Kong Stock Exchange (Stock Code: 2866) and the Shanghai Stock Exchange (Stock Code: 601866), respectively

Computershare Hong Kong Investor Services Limited, the Company’s H Share registrar

has the meaning ascribed to it under the Hong Kong Listing Rules
collectively, (i) the Master Vessel Charter Agreement; (ii) the Master Operating Lease Services Agreement; (iii) the Master Finance Lease Services Agreement; (iv) the Master Vessel Services Agreement; (v) the Master Containers Services Agreement; (vi) the Master Financial Services Agreement; (vii) the Master CS Finance Financial Services Agreement; (viii) the Master Factoring Services Agreement; (ix) the Master Insurance Brokerage Services Agreement; (x) the Master General Services Agreement; and (xi) the Master Tenancy Agreement
the continuing connected transactions contemplated under the Continuing Connected Transaction Agreements has the meaning ascribed to it under the Hong Kong Listing Rules
China Ocean Shipping (Group) Company[#] (中國遠洋運輸 (集團)總公司), a state-owned enterprise and the controlling shareholder of China COSCO, and a whollyowned subsidiary of COSCO SHIPPING

COSCO Container Lines Co., Ltd. (中遠集裝箱運輸有限公司), a company incorporated in the PRC with limited liability

– 2 –

DEFINITIONS

“COSCO Finance”
COSCO Finance Co., Ltd.[#] (中遠財務有限責任公司), a company incorporated under the laws of the PRC with limited liability, and an indirect non-wholly owned subsidiary of COSCO Company
“COSCO Group”

COSCO Company and its subsidiaries

“COSCO SHIPPING”
China COSCO SHIPPING Corporation Limited[#] (中國遠洋海運集團有限公司), a Chinese state-owned enterprise and an indirect controlling shareholder of the Company
“COSCO SHIPPING Group”
COSCO SHIPPING, its subsidiaries and/or its associates (excluding the CS Group)
“CS Agency (Bangkok)”
China Shipping (Bangkok) Co. Ltd. (中國海運船務(曼谷) 有限公司)
“CS Agency (Indonesia)” PT Zhonghai Indo Shipping (中國海運船務(印度尼西亞) 有限公司)
“CS Finance Company”
China Shipping Finance Company Limited[#] (中海集團財務有限公司), a limited liability company incorporated under the laws of the PRC, which was owned as to 65% by the Company, and 35% by China Shipping and its associates (excluding the Group) as at the Latest Practicable Date, and a connected subsidiary of the Company
“CS Group”
the Company, its subsidiaries and its associates
“CS Investment”
China Shipping Investment Co. Ltd.[#] (中海集團投資有限公司), a company incorporated under the laws of the PRC with limited liability and a wholly-owned subsidiary of the Company
“CS (Yangpu) Refrigeration”
China Shipping (Yangpu) Refrigeration Storage & Transportation Co., Ltd.[#] (中海(洋浦)冷藏儲運有限公司), a limited liability company incorporated under the laws of the PRC
“CSS”
China Shipping & Sinopec Suppliers Co., Ltd.[#] (中石化中海船舶燃料供應有限公司), a limited liability company incorporated under the laws of the PRC

– 3 –

DEFINITIONS

“Dalian Terminal”
“Directors”
“Dong Fang Continuing Connected Transactions”
“Dong Fang International”
“Drewry”
“EGM”

Dalian Dagang China Shipping Container Terminal Co., Ltd.[#] (大連大港中海集裝箱碼頭有限公司)

the directors of the Company

the continuing connected transactions of the Company following completion of the acquisition of Dong Fang International pursuant to a series of assets lease agreements entered into between Dong Fang International and COSCO Container (a subsidiary of China COSCO) prior to the completion of the acquisition of Florens
Dong Fang International Investment Limited (東方國際投資有限公司), a company incorporated in the British Virgin Islands with limited liability, and a wholly-owned subsidiary of the Company

Drewry Shipping Consultants Ltd., an independent consultant specialized in shipping industry engaged jointly by the Company and China COSCO, as further particularised in the Restructuring Circular

the extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve, among other things, the Relevant Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 and the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting

– 4 –

DEFINITIONS

“Existing Agreements”

“Existing Asset Lease Framework Agreement”
“Existing CS Asset Leasing Master Agreement”
“Existing CS Finance Financial Services Agreement”

collectively, (i) the Existing Master Provision of Chassis Agreement; (ii) the Existing Master Ship Repair Services Agreement; (iii) the Existing First Master IT Services Agreement; (iv) the Existing First Master Container Management Agreement; (v) the Existing Master Provision of Crew Members Agreement; (vi) the Existing Master Liner Services Agreement; (vii) the Existing Revised Master Provision of Containers Agreement; (viii) the Existing Master Depot Services Agreement; (ix) the Existing Master Supply Agreement; (x) the Existing First Master Liner and Cargo Agency Agreement; (xi) the Existing First Master Loading and Unloading Agreement; (xii) the Existing Second Master Loading and Unloading Agreement; (xiii) the Existing Financial Services Framework Agreement; (xiv) the Existing Master Tenancy Agreement; (xv) the Existing Master Purchase Agreement; (xvi) the Existing Master Ground Container Transport Agreement; (xvii) the Existing Master Bareboat Charter Agreement; (xviii) the Existing Master Provision of Products or Services Agreement; (xix) the Existing Financial Services Provision Framework Agreement; (xx) the Existing CS Finance Financial Services Agreement; (xxi) the Existing CS Asset Leasing Master Agreement; (xxii) the Existing CS Vessel Services Master Agreement; and (xxiii) the Florens Finance Financial Services Agreement

the assets lease framework agreement entered into by the Company and China COSCO on 11 December 2015 in relation to the charter and lease of vessels and containers by the Company to China COSCO

the framework agreement dated 30 March 2016 entered into between the Company and China COSCO in relation to provision of asset leasing services by the CS Group to China COSCO and its subsidiaries and/or its associates

the framework agreement dated 30 March 2016 entered into between the CS Finance Company and China COSCO in relation to provision of financial services by CS Finance Company to China COSCO and its subsidiaries and/or its associates

– 5 –

DEFINITIONS

“Existing CS Vessel Services Master Agreement”

the framework agreement dated 30 March 2016 entered into between the Company and China COSCO in relation to provision of vessel services by the CS Group to China COSCO and its subsidiaries and/or its associates

“Existing Financial Services Framework Agreement”
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
“Existing Financial Services Provision Framework Agreement”
the framework agreement dated 11 December 2015 entered into between the Company and China Shipping in relation to provision of relevant financial services by the Group to China Shipping and/or its associates
“Existing First Master Container Management Agreement”
the master container management agreement dated 10 May 2004 entered into between the Company, China Shipping, CS (Yangpu) Refrigeration and Shanghai Puhai
“Existing First Master IT Services Agreement”
the master IT services agreement dated 10 May 2004 entered into between the Company and China Shipping
“Existing First Master Liner and the master liner and cargo agency agreement dated Cargo Agency Agreement” 10 May 2004 entered into between the Company, China Shipping, Shanghai Puhai, CS Agency (Indonesia) and CS Agency (Bangkok)
“Existing First Master Loading and Unloading Agreement”
the master loading and unloading agreement dated 10 May 2004 entered into between the Company, China Shipping, Shanghai Terminal, Zhanjiang Terminal and Dalian Terminal
“Existing Master Bareboat Charter Agreement”
the master bareboat charter agreement dated 10 May 2004 entered into between the Company, China Shipping and Shanghai Puhai
“Existing Master Depot Services the master depot services agreement dated 10 May 2004 Agreement” entered into between the Company, China Shipping, Shanghai Terminal and Zhanjiang Terminal

– 6 –

DEFINITIONS

“Existing Master Ground Container Transport Agreement”
the master ground container transport agreement dated 10 May 2004 entered into between the Company and China Shipping
“Existing Master Liner Services Agreement”
the master liner services agreement dated 10 May 2004 entered into between the Company and China Shipping
“Existing Master Provision of Chassis Agreement”
the master provision of chassis agreement dated 10 May 2004 entered into between the Company and China Shipping
“Existing Master Provision of Crew Members Agreement”
the master provision of crew members agreement dated 10 May 2004 entered into between the Company and China Shipping
“Existing Master Provision of Products or Services Agreement”
the master provision of products or services agreement dated 10 May 2004 entered into between the Company, China Shipping, the relevant connected persons and others
“Existing Master Purchase Agreement”
the master purchase agreement dated 28 June 2013 entered into between the Company and China Shipping
“Existing Master Ship Repair Services Agreement”
the master ship repair services agreement dated 10 May 2004 entered into between the Company and China Shipping
“Existing Master Supply Agreement”
the master supply agreement dated 10 May 2004 entered into between the Company, China Shipping and CSS
“Existing Master Tenancy Agreement”
the master tenancy agreement dated 31 December 2012 entered into between the Company and China Shipping
“Existing Revised Master Provision of Containers Agreement”
the master provision of containers agreement dated 10 April 2007 entered into between the Company and China Shipping, which is based on the original master provision of containers agreement for the manufacture and supply (including sale and/or lease) of containers by the China Shipping Group to the Group
“Existing Second Master Loading the master loading and unloading agreement dated and Unloading Agreement” 10 May 2004 entered into between the Company and West Basin

– 7 –

DEFINITIONS

“Financial Services Agreements”
collectively, the Master Financial Services Agreement and the Master CS Finance Financial Services Agreement
“First Form of Proxy”
the form of proxy of the Company dated 11 November 2016 in respect of the resolution in relation to the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting
“Florens” Florens International Limited (佛羅倫國際有限公司), a company incorporated under the laws of the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company
“Florens Continuing Connected the continuing connected transactions of the Company Transactions” following completion of the acquisition of Florens pursuant to various agreements entered into between the Florens Group and the COSCO Group prior to the completion of the acquisition of Florens
“Florens Finance Financial Services Agreement”
the financial services agreement dated 30 March 2016 entered into between Florens and COSCO Finance
“Florens Group”
Florens and its subsidiaries
“Group” the Company and its subsidiaries
“H Share(s)
the overseas listed foreign shares in the ordinary share capital of the Company with a par value of RMB1.00 each, which are listed on Main Board of the Hong Kong Stock Exchange
“Hong Kong”
Hong Kong Special Administrative Region of the PRC
“Hong Kong Listing Rules”
The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Hong Kong Stock Exchange”
The Stock Exchange of Hong Kong Limited

– 8 –

DEFINITIONS

“Independent Board Committee”

the independent board committee of the Company comprising Mr. Cai Hongping, Mr. Tsang Hing Lun, Ms. Hai Chi Yuet and Mr. Graeme Jack, being all the independent non-executive Directors, which is formed to advise the Independent Shareholders on, among other things, whether the terms and the proposed annual caps for the years ending 31 December 2017, 2018 and 2019 for the Non-exempt Continuing Connected Transactions are fair and reasonable

“Independent Financial Adviser” or “First Shanghai”
First Shanghai Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, which has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in connection to the Non-Exempt Continuing Connected Transactions
“Independent Shareholders”
the Shareholders other than China Shipping and its associates
“Latest Practicable Date”
9 December 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular
“Major and Continuing Connected Transactions”
collectively, (i) provision of loan services by the CS Group under the Master Financial Services Agreement; and (ii) provision of deposit services to the CS Group under the Master CS Finance Financial Services Agreement
“Master Containers Services Agreement”
the master containers services agreement dated 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master CS Finance Financial Services Agreement”
the master financial services agreement dated 5 December 2016 entered into between the Company and CS Finance Company
“Master Factoring Services the master factoring services agreement dated Agreement” 5 December 2016 entered into between the Company and COSCO SHIPPING

– 9 –

DEFINITIONS

“Master Finance Lease Services Agreement”
the master finance lease services agreement dated 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master Financial Services the master financial services agreement dated Agreement” 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master General Services Agreement”
the master general services agreement dated 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master Insurance Brokerage the master insurance brokerage services agreement dated Services Agreement” 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master Operating Lease Services the master operating lease services agreement dated Agreement” 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master Tenancy Agreement”
the master tenancy agreement dated 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master Vessel Charter Agreement”
the master time charter agreement dated 5 December 2016 entered into between the Company and COSCO SHIPPING
“Master Vessel Services Agreement”
the master vessel services agreement dated 5 December 2016 entered into between the Company and COSCO SHIPPING
“Non-Exempt Continuing Connected Transactions”

collectively, (i) provision of services by the CS Group under the Master Vessel Charter Agreement; (ii) provision of services by the CS Group under the Master Operating Lease Services Agreement; (iii) provision of services by the CS Group under the Master Finance Lease Services Agreement; (iv) provision of services to the CS Group under the Master Vessel Services Agreement; (v) provision of products and services by the CS Group under the Master Containers Services Agreement; (vi) provision of loan services by the CS Group under the Master Financial Services Agreement; and (vii) provision of deposit services to the CS Group under the Master CS Finance Financial Services Agreement

– 10 –

DEFINITIONS

“Non-Exempt Continuing Connected Transaction Agreements”
“Original Notice of EGM”
“PBOC”
“percentage ratio(s)”
“PRC”
“Relevant Continuing Connected Transactions”
“Restructuring”
“Restructuring Circular”
“Revised Form of Proxy”
collectively, (i) the Master Vessel Charter Agreement; (ii) the Master Operating Lease Services Agreement; (iii) the Master Finance Lease Services Agreement; (iv) the Master Vessel Services Agreement; (v) the Master Containers Services Agreement; (vi) the Master Financial Services Agreement; and (vii) the Master CS Finance Financial Services Agreement
the notice of the extraordinary general meeting of the Company dated 11 November 2016 in respect of the resolution in relation to the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting
People’s Bank of China (中國人民銀行)
has the meaning ascribed to it under the Hong Kong Listing Rules
the People’s Republic of China
collectively, (i) the Non-Exempt Continuing Connected Transactions; (ii) provision of services by the CS Group under the Master Factoring Agreement; (iii) provision of products and services to the CS Group under the Master Containers Services Agreement; and (iv) provision of deposit services from COSCO Finance to the Florens Group under the Florens Finance Financial Services Agreement
a series of inter-conditional restructuring transactions of the material assets restructuring plan, mainly involving the Group and the China COSCO Group, as disclosed in the announcement of the Company dated 11 December 2015 and the circular of the Company dated 31 December 2015
the circular of the Company dated 31 December 2015 in relation to, among other things, the Restructuring and the Existing Asset Lease Framework Agreement
the revised form of proxy of the Company dated 13 December 2016 in respect of the resolutions in relation to the proposed amendments to the Rules of Procedure of the General Meeting and the Relevant Continuing Connected Transactions

– 11 –

DEFINITIONS

“RMB”

Renminbi, the lawful currency of the PRC

“Rules of Procedures of the the Rules of Procedures of the General Meeting of the Shareholders’ General Company Meeting”
“SASAC”
State-owned Assets Supervision and Administration Commission of the State Council of the PRC (國務院國有資產監督管理委員會)
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended and supplemented form time to time
“Shanghai Listing Rules” the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange
“Shanghai Puhai” Shanghai Puhai Shipping Co., Ltd.[#] (上海浦海航運有限公司), a limited liability company incorporated under the laws of the PRC
“Shanghai Stock Exchange” Shanghai Stock Exchange (上海證券交易所)
“Shanghai Terminal”
Shanghai China Shipping Container Terminal Co., Ltd.[#] (上海港中海集裝箱碼頭有限公司)
“Shanghai Universal”
Shanghai Universal Logistics Equipment Co., Ltd.[#] (上海寰宇物流裝備有限公司), a company incorporated under the laws of the PRC with limited liability and a subsidiary of CS Investment
“Share(s)” A Share(s) and H Share(s)
“Shareholder(s)” holder(s) of the Share(s)
“subsidiary”
has the meaning ascribed to it under the Hong Kong Listing Rules
“Supervisor(s)” supervisor(s) of the Company
“Supplemental Notice of EGM”
the supplemental notice of the extraordinary general meeting of the Company dated 13 December 2016 in respect of the Relevant Resolutions as set out in this circular

– 12 –

DEFINITIONS

“West Basin”	West Basin Container Terminal LLC (洛杉磯西港池碼頭
	有限公司)
“Zhanjiang Terminal”	Zhanjiang China Shipping Container Terminal Co., Ltd.
	(湛江港中海集裝箱碼頭有限公司)
“%”	per cent

# For identification purposes only.

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 “COSCO SHIPPING Development Co., Ltd.”.

– 13 –

LETTER FROM THE BOARD

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd. *

(Formerly known as 中海集裝箱運輸股份有限公司 China Shipping Container Lines Company Limited)

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

(Stock Code: 02866)

Executive Directors Ms. Sun Yueying Mr. Wang Daxiong Mr. Liu Chong Mr. Xu Hui

Non-executive Directors Mr. Feng Boming Mr. Huang Jian Mr. Chen Dong

Independent Non-executive Directors Mr. Cai Hongping Mr. Tsang Hing Lun 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

13 December 2016

To the Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS (2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS (4) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS AND (5) PROPOSED AMENDMENTS TO THE RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

I. INTRODUCTION

Reference is made to the Announcement and the Original Notice of the EGM dated 11 November 2016, in relation to, among other things, the Continuing Connected Transactions and the renewal of the Florens Finance Financial Services Agreement.

– 14 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things:

(a) further details of the (i) Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019; and (ii) the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting;
(b) the letter from the Independent Board Committee to the Independent Shareholders containing its recommendation in respect of the Non-Exempt Continuing Connected Transactions; and
(c) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders containing its recommendation in respect of the Non-Exempt Continuing Connected Transactions.

II. BACKGROUND

Reference is made to the announcements of the Company dated 6 November 2015, 13 December 2015, 30 March 2016 and 13 May 2016, and the circulars of the Company dated 4 December 2015 and 31 December 2015 in relation to, among other things, certain continuing connected transactions between the Group and the China Shipping Group under the Existing Agreements.

The Board has been monitoring the Existing Agreements. In light of (i) the Company’s intention to continue entering into transactions of similar natures from time to time; (ii) the Restructuring of the Group and the China COSCO Group as disclosed in the announcement of the Company dated 11 December 2015 and the Restructuring Circular; (iii) the continuous development of the Group; and (iv) the internal forecasts of forthcoming demand of the Company, the Company has (for itself and on behalf of its subsidiaries and/or associates) entered into the Continuing Connected Transaction Agreements with COSCO SHIPPING (for itself and on behalf of its subsidiaries and/or associates) (except for the Master CS Finance Financial Services Agreement, which was entered into between the Company (for itself and on behalf of its subsidiaries and/or associates) and CS Finance Company) on 5 December 2016.

Reference is also made to the announcements of the Company dated 30 March 2016 and 20 April 2016, in relation to, among other things, the Florens Finance Financial Services Agreement entered into between Florens and COSCO Finance. As the term of the Florens Finance Financial Services Agreement will expire on 31 December 2016, on 5 December 2016, the Board has resolved to renew the term of the Florens Finance Services Agreement for three years.

– 15 –

LETTER FROM THE BOARD

III. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

A. General

1. Connected persons

China Shipping is a wholly-owned subsidiary of COSCO SHIPPING. Therefore, COSCO SHIPPING is an associate of China Shipping and an indirect controlling shareholder of the Company. Accordingly, COSCO SHIPPING is a connected person of the Company under the Hong Kong Listing Rules.

CS Finance Company was owned as to 65% by the Company and 35% by China Shipping and its associates (excluding the Group) as at the Latest Practicable Date, and was a connected subsidiary of the Company.

2. General terms

Each of the Non-Exempt Continuing Connected Transaction Agreements contains the following general terms:

(a) the quality of products or services to be provided shall be satisfactory to the recipient;
(b) the price shall be fair and reasonable; and
(c) in respect of the CS Group, the terms of the Non-Exempt Continuing Connected Transaction Agreement are no less favourable than the terms available to or from independent third parties (as the case may be).

3. Implementation agreements

Pursuant to the terms of the Non-Exempt Continuing Connected Transaction Agreements, the CS Group may, from time to time and as necessary, enter into separate implementation agreements for each of the specific transactions contemplated under the Non-Exempt Continuing Connected Transaction Agreements with the COSCO SHIPPING Group.

– 16 –

LETTER FROM THE BOARD

Each implementation agreement shall set out the specific terms and other relevant conditions for the particular transaction, including but not limited to rights and benefits of the parties, coordination of the parties, fees and expenses, payments, use of information, breach of agreement and exclusion of liabilities. Any execution and amendments of such implementation agreements shall not contravene the relevant Non-Exempt Continuing Connected Transaction Agreement.

As the implementation agreements only provide for further elaborations on the transactions contemplated by each of the Non-Exempt Continuing Connected Transaction Agreements, they do not constitute new categories of continuing connected transactions under Chapter 14A of the Hong Kong Listing Rules.

4. Term and termination

The Non-Exempt Continuing Connected Transaction Agreements shall become effective on 1 January 2017, subject to the relevant approvals from the empowered bodies (including the Board) in respect of the annual caps, pursuant to the relevant Non-Exempt Continuing Connected Transaction Agreements, articles of association of the parties, applicable laws, regulations and rules of stock exchanges. The initial term of each of the Non-Exempt Continuing Connected Transaction Agreements shall be three years, and shall expire on 31 December 2019. Subject to compliance of the Hong Kong Listing Rules and Shanghai Listing Rules, and upon the written agreements of the parties, each of the Non-Exempt Continuing Connected Transaction Agreements shall be automatically renewed for a further term of three years upon the expiry of the initial term.

During the term of each of the Non-Exempt Continuing Connected Transaction Agreements, termination of any implementation agreement described above may be effected from time to time by any party to the relevant implementation agreement by providing at least three months’ written notice of termination to the other party.

5. Pricing policy in respect of the Non-Exempt Continuing Connected Transaction Agreements (other than (i) the transactions under the Financial Services Agreements and (ii) the transactions under the Master Vessel Charter Agreement and Master Operating Lease Services Agreement covered by the Existing Asset Lease Framework Agreement)

Each of the Non-Exempt Continuing Connected Transaction Agreements (other than the Financial Services Agreements) provides that the price of the relevant products or services (as the case may be) provided thereunder shall be determined according to:

(a) the state-prescribed prices;
(b) where there is no state-prescribed price, then according to the relevant market prices and based on the principle of fairness and reasonableness; or
(c) where there is no market price, then according to the contracted price.

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For the purpose of each of the Non-Exempt Continuing Connected Transaction Agreements (other than the Financial Services Agreements):

“state-prescribed price” means the price set by the relevant laws, regulations and other governmental regulatory documents issued by the relevant departments of the PRC government;

“market price” means the price at which independent third party may obtain for the same or comparable type of transaction in the ordinary and usual course of business; and

“contracted price” means the relevant cost for that particular transaction plus a profit margin ranging from 0% to 12.25%.

6. Price determination policy in respect of the Non-Exempt Continuing Connected Transaction Agreements (other than (i) the transactions under the Financial Services Agreements and (ii) the transactions under the Master Vessel Charter Agreement and Master Operating Lease Services Agreement covered by the Existing Asset Lease Framework Agreement)

“state-prescribed price”

When determining the state-prescribed price, the CS Group refers to the guidelines for the relevant prices from the relevant authorities or regulators in the PRC, such as price control authorities and industry regulators, if applicable. If a fixed state-prescribed price is available, the Company will apply such fixed price. If a range of state-prescribed price is available, the parties will agree on the price within such range of state-prescribed price. The state-prescribed price is subject to adjustment by the relevant authorities or regulators from time to time, which will be published and is generally publicly available.

“market price”

Procedures and mechanism for determining market price are as follows:

(i) the relevant department of the Company will collect applicable data and market information (including quotes from independent third parties and reference materials from independent third party entities) and prepare draft proposal;
(ii) the relevant department will seek advice (such as conditions of facilities and quality of products or services) from the relevant department and the relevant agents and submit revised proposal for the review of its supervising department;
(iii) the relevant department will then negotiate with transaction counterparties (including the relevant connected persons) based on such reviewed proposal;

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(iv) the CS Group will then enter into implementation agreement based on the results of negotiation; and
(v) the executed implementation agreement will be forwarded to the relevant department of the Company and the relevant agents for recording and implementation.

The details for the pricing policy for each of the Financial Services Agreements are set out in section C of part III of this circular.

The details of the transactions under the Master Vessel Charter Agreement and Master Operating Lease Services Agreement which are covered by the Existing Asset Lease Framework Agreement are set out in section C of part III of this circular.

7. Internal control procedures for the pricing basis of the Non-Exempt Continuing Connected Transaction Agreements

Before entering into any implementation agreements pursuant to the Non-Exempt Continuing Connected Transaction Agreements, the Company will follow the following procedures to ensure the terms offered by the relevant connected parties are no less favourable than those available to or from independent third parties (as the case may be):

(i) the relevant executives of the relevant departments (such as finance department and directorate secretary office) of the Company will review contemporaneous prices and other relevant terms offered by at least two 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; and in case where the offers made by independent third parties are more favourable to the Company, the Company would 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 Non-Exempt Continuing Connected Transaction Agreement will be on normal commercial terms (or better to the CS Group), fair and reasonable, in accordance with the pricing policy of the Company and in the interests of the Company and its Shareholders as a whole.

The relevant departments (such as finance department and directorate secretary office) of the Company will also collect statistics of each of the Non-Exempt Continuing Connected Transaction Agreement on a quarterly basis to ensure the annual caps approved by the Independent Shareholders or as announced are not exceeded.

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LETTER FROM THE BOARD

B. Historical transaction amounts and annual caps

The following tables set out the respective historical transaction amounts and annual caps for transactions with the COSCO SHIPPING Group in respect of the Non-Exempt Continuing Connected Transactions.

		Historical	transaction amounts for the years	transaction amounts for the years
		ended 31	December 2014	and 2015 and the
	Non-Exempt Continuing		nine months ended		Annual	caps for the years ending
	Connected Transaction		30 September 2016		31 December 2017, 2018		and 2019
			(RMB’000)			(RMB’000)
		2014	2015	30 September 2016	2017	2018	2019
(1)	Services provided by the CS	Nil	4,366	3,818,643	7,300,000	8,000,000	8,400,000
	Group under the Master Vessel
	Charter Agreement
(2)	Services provided by the CS	1,180,646	1,166,973	1,141,110	2,000,000	1,800,000	1,800,000
	Group under the Master
	Operating Lease Services
	Agreement
(3)	Services provided by the CS	184,848	129,623	139	1,260,000	1,870,000	2,160,000
	Group under the Master Finance
	Lease Services Agreement
(4)	Services provided to the CS	742,995	872,010	693,743	1,080,000	1,300,000	1,310,000
	Group under the Master Vessel
	Services Agreement
(5)	Products and services provided	460	272	1,159	2,800,000	3,800,000	4,200,000
	by the CS Group under the
	Master Containers Services
	Agreement
(6)	The maximum daily outstanding	5,505,079	5,041,961	3,676,351	17,500,000	17,500,000	17,500,000
	balance of loans (including
	accrued interest and handling
	fee) to be granted to the
	COSCO SHIPPING Group by
	CS Finance Company under the
	Master Financial Services
	Agreement
(7)	The maximum daily outstanding	4,655,293	5,904,140	8,582,850	10,000,000	11,000,000	12,000,000
	balance of deposits (including
	accrued interest and handling
	fee) to be placed by the CS
	Group at CS Finance Company
	under the Master CS Finance
	Financial Services Agreement

Note:

These historical transaction amounts and annual caps have been converted to RMB in this table for ease of reference.

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LETTER FROM THE BOARD

C. Summary of the Non-Exempt Continuing Connected Transactions

Set out below is a summary in respect of each of the Non-Exempt Continuing Connected Transactions.

1. Master Vessel Charter Agreement (services to be provided by the CS Group)

On 5 December 2016, the Company and COSCO SHIPPING entered into the Master Vessel Charter Agreement, pursuant to which the CS Group agreed to charter vessels to the COSCO SHIPPING Group (excluding finance leasing).

In case of leasing of vessels covered by the Existing Asset Lease Framework Agreement, the fees shall be determined in accordance with the pricing policies set out in the Existing Asset Lease Framework Agreement, which was determined with reference to the container shipping asset leasing strategy report prepared by Drewry in 2015, as further described in the Restructuring Circular. The Company will (i) regularly conduct market research to gauge the leasing rates in the vessel leasing market; and (ii) refer to the pricing and estimates on the various types of vessels of the CS Group in the report prepared by Drewry, the summary of which is disclosed in the Restructuring Circular. For the pricing policy of leasing of vessels not covered by the Existing Asset Lease Framework Agreement, please refer to the paragraph headed “Price determination policy in respect of the Non-Exempt Continuing Connected Transaction Agreements (other than (i) the transactions under the Financial Services Agreements and (ii) the transactions under the Master Vessel Charter Agreement and Master Operating Lease Services Agreement covered by the Existing Asset Lease Framework Agreement)” in section A of part III of this circular.

The proposed annual caps for the chartering fees for the vessels to be provided by the CS Group to the COSCO SHIPPING Group under this agreement for the years ending 31 December 2017, 2018 and 2019 are RMB7,300,000,000, RMB8,000,000,000 and RMB8,400,000,000, respectively. In arriving at such annual caps, the Directors have considered the following factors:

(i) the historical transaction amounts (as set out in table A under section B of part III of this circular) for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2016;
(ii) the Company’s transformation from a container liner operator into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing, with shipping financing as core feature;

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(iii) the type and number of vessels expected to be chartered, the respective chartering rate for each type of vessel and the respective period which the vessels are expected to be chartered;
(iv) the estimated market fluctuation in terms of chartering price, demands and exchange rates;
(v) the estimated future needs for vessels chartering services of the COSCO SHIPPING Group; and
(vi) the prevailing market rate of charter of vessel of a similar class.

2. Master Operating Lease Services Agreement (services to be provided by the CS Group)

On 5 December 2016, the Company and COSCO SHIPPING entered into the Master Operating Lease Services Agreement, pursuant to which the CS Group agreed to provide operating lease services to the COSCO SHIPPING Group. Such services include leasing of chassis, containers, electricity generators, and other ancillary facilities and production facilities to be provided by the CS Group to the COSCO SHIPPING Group.

In case of leasing of containers covered by the Existing Asset Lease Framework Agreement, the fees shall be determined in accordance with the pricing policies set out in the Existing Asset Lease Framework Agreement, which was determined with reference to the container shipping asset leasing strategy report prepared by Drewry in 2015, as further described in the Restructuring Circular. Furthermore, the CS Group may be invited to participate in the tendering process of the COSCO SHIPPING Group. For the pricing policy of leasing of containers not covered by the Existing Asset Lease Framework Agreement, please refer to the paragraph headed “Price determination policy in respect of the Non-Exempt Continuing Connected Transaction Agreements (other than (i) the transactions under the Financial Services Agreements and (ii) the transactions under the Master Vessel Charter Agreement and Master Operating Lease Services Agreement covered by the Existing Asset Lease Framework Agreement)” in section A of part III of this circular.

The proposed annual caps for the lease payments, handling fees and expenses for the operating lease services to be provided by the CS Group to the COSCO SHIPPING Group under this agreement for the years ending 31 December 2017, 2018 and 2019 are RMB2,000,000,000, RMB1,800,000,000 and RMB1,800,000,000, respectively. In arriving at such annual caps, the Directors have considered the following factors:

(i) the historical transaction amounts (as set out in table A under section B of part III of this circular) for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2016;

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(ii) the Company’s transformation from a container liner operator into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing, with shipping financing as core feature;
(iii) as disclosed in the announcement of the Company dated 24 March 2016, the acquisition of Florens was completed on 24 March 2016 pursuant to the Restructuring; as disclosed in the announcement dated 28 March 2016, prior to the completion of the acquisition of Florens (upon which Florens became a wholly-owned subsidiary of the Company), the Florens Group had entered into various agreements with the COSCO Group, and the transactions under such agreements (the “ Florens Continuing Connected Transactions ”) have become continuing connected transactions of the Company following completion of the acquisition of Florens;
(iv) as disclosed in the announcement of the Company dated 30 March 2016, prior to the completion of the acquisition of Dong Fang International pursuant to the Restructuring (upon which Dong Fang International will become a whollyowned subsidiary of the Company), Dong Fang International and COSCO Container (a subsidiary of China COSCO) entered into a series of assets lease agreements pursuant to the Restructuring, and the transactions under such agreements (the “ Dong Fang Continuing Connected Transactions ”) will constitute continuing connected transactions of the Company following completion of the acquisition of Dong Fang International; and as at the Latest Practicable Date, the acquisition of Dong Dang International had been completed;
(v) the estimated transaction amounts of the Florens Continuing Connected Transactions and the Dong Fang Continuing Connected Transactions which form part of the transactions under this agreement;
(vi) the expected increase in demand and rental prices (due to general inflation) of chassis, containers, electricity generators, and other ancillary facilities and production facilitates to be leased from the Group to the COSCO SHIPPING Group; and
(vii) the propose annual caps for each of the years ending 31 December 2018 and 2019 of RMB1,800,000,000 representing a decrease of approximately 10% as compared with that for the year ending 31 December 2017, mainly attributable to the expiration of certain existing leases.

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3. Master Finance Lease Services Agreement (services to be provided by the CS Group)

On 5 December 2016, the Company and COSCO SHIPPING entered into the Master Finance Lease Services Agreement, pursuant to which the CS Group agreed to provide finance lease services to the COSCO SHIPPING Group. Such services include finance lease of vessels and facilities, and other ancillary services to be provided by the CS Group to the COSCO SHIPPING Group.

The proposed annual caps for the lease payments, lease interests, handling fees and expenses for the finance lease services to be provided by the CS Group to the COSCO SHIPPING Group under this agreement for the years ending 31 December 2017, 2018 and 2019 are RMB1,260,000,000, RMB1,870,000,000 and RMB2,160,000,000, respectively. In arriving at such annual caps, the Directors have considered the following factors:

(i) the historical transaction amounts (as set out in table A under section B of part III of this circular) for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2016;
(ii) the Company’s transformation from a container liner operator into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing, with shipping financing as core feature;
(iii) the estimated transaction amounts of the Florens Continuing Connected Transactions which form part of the transactions under this agreement;
(iv) the CS Group’s plan in finance lease business development and the estimated scope of business therein;
(v) estimated increase in demand for finance lease services by the COSCO SHIPPING Group;
(vi) the increased capacity of providing finance lease services of the CS Group;
(vii) the interest rate, which shall be no less favourable to the CS Group than those offered to independent third parties; and
(viii) general inflation which affects the lease payments of finance lease.

4. Master Vessel Services Agreement (services to be provided to the CS Group)

On 5 December 2016, the Company and COSCO SHIPPING entered into the Master Vessel Services Agreement, pursuant to which the COSCO SHIPPING Group agreed to provide vessel and other ancillary services to the CS Group, including material merchandising services (such as paint, vessel fuel, lubricants, spare parts and steel), supply of crew members, vessel repair and maintenance services, shipping agent services and other ancillary services.

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The proposed annual caps for the services to be provided by the COSCO SHIPPING Group to the CS Group under this agreement for the years ending 31 December 2017, 2018 and 2019 are RMB1,080,000,000, RMB1,300,000,000 and RMB1,310,000,000, respectively. In arriving at such annual caps, the Directors have considered the following factors:

(i) the historical transaction amounts (as set out in table A under section B of part III of this circular) for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2016;
(ii) as more existing vessels approach their respective inspection and maintenance cycles, the demand by the CS Group in materials, crew members, vessel repair and maintenance services, shipping agent services and other ancillary services is expected to continue to increase;
(iii) according to the CS Group’s plan for vessels delivery, the number of owned vessels of the CS Group will increase, which in turn would require more materials, crew members, vessel repair and maintenance services, shipping agent services and other ancillary services; and
(iv) the prevailing price for the merchandising services, supply of crew members, vessel repair and maintenance services and shipping agent services.

5. Master Containers Services Agreement (products and services to be provided by the CS Group)

On 5 December 2016, the Company and COSCO SHIPPING entered into the Master Containers Services Agreement, pursuant to which the CS Group agreed to provide container and other ancillary services to the COSCO SHIPPING Group. Such services include sale and purchase of containers and containers commissioned manufacturing services.

The proposed annual caps for the container services to be provided by the CS Group to the COSCO SHIPPING Group under this agreement for the years ending 31 December 2017, 2018 and 2019 are RMB2,800,000,000, RMB3,800,000,000 and RMB4,200,000,000, respectively. In arriving at such annual caps, the Directors have considered the following factors:

(i) as disclosed in the Restructuring Circular, the Company acquired CS Investment pursuant to the Restructuring, which is a company incorporated in the PRC principally engaged in container manufacturing and financial investment in certain financial institutions, ports and shipping logistic companies; the provision of products and services by Shanghai Universal, which is a major subsidiary of CS Investment, is expected to constitute a significant portion of the estimated transaction amounts under this agreement;

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(ii) the existing scales of the COSCO SHIPPING Group’s operations;
(iii) the increase in the shipping capacity of the COSCO SHIPPING Group, which is expected to result in annual increase in their cargo volume, and the COSCO SHIPPING Group’s plan to purchase more containers from the CS Group, are expected to increase the demand for the CS Group’s containers commissioned manufacturing services and other ancillary services;
(iv) the prevailing prices for sale and purchase and commissioned manufacturing of containers; and
(v) the estimated market fluctuation in terms of container price, demands and exchange rates.

6. Master Financial Services Agreement (loan services to be provided by the CS Group)

On 5 December 2016, the Company entered into the Master Financial Services Agreement with COSCO SHIPPING, pursuant to which the Company shall procure CS Finance Company to provide the COSCO SHIPPING Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; (iv) foreign exchange services, and (v) other financial services as approved by CBRC.

Under the Master Financial Services Agreement, CS Finance Company shall provide loan services to the COSCO SHIPPING Group at interest rates not lower than (i) the benchmark rates stipulated by PBOC for the same type of loan; or (ii) the rates offered by the major and independent PRC commercial banks in the service location or adjacent areas in the normal course of business for such types of loans.

(i) the historical transaction amounts (as set out in table A under section B of part III of this circular) for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2016;
(ii) the Company’s transformation from a container liner operator into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing, with shipping financing as core feature;
(iii) the existing loans and credit granted by CS Finance Company to the COSCO SHIPPING Group;

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(iv) according to the COSCO SHIPPING Group’s vessel financing projects and business development plan, it is expected that the COSCO SHIPPING Group will have an increase in finance demand; and
(v) the assets and liabilities of the COSCO SHIPPING Group after the Restructuring.

7. Master CS Finance Financial Services Agreement (deposit services to be provided to the CS Group)

On 5 December 2016, the Company entered into the Master CS Finance Financial Services Agreement with CS Finance Company, pursuant to which CS Finance Company shall provide the CS Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; (iv) foreign exchange services, and (v) other financial services as approved by CBRC.

Under the Master CS Finance Financial Services Agreement, CS Finance Company shall provide deposit services to the CS Group at interest rates not lower than (i) the benchmark rates stipulated by PBOC for the same type of deposit; or (ii) the rates offered by the major and independent PRC commercial banks in the service location or adjacent areas in the normal course of business for such types of deposits.

(i) the historical transaction amounts (as set out in table A under section B of part III of this circular) for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2016;
(ii) for the nine months ended 30 September 2016, the daily balance of deposit placed by the CS Group with CS Finance Company exceeded RMB8 billion;
(iii) the Company’s transformation from a container liner operator into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing, with shipping financing as core feature;
(iv) the general expansion of business of CS Finance Company; and
(v) the expected financing demands of the CS Group, including capital injection in subsidiaries, repayment of the maturing corporate bonds and replenishment of working capital.

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

In respect of the Non-Exempt Continuing Connected Transactions other than transactions under the Financial Services Agreements

The Company was established in 1997 as the container shipping arm of China Shipping. Due to the long established and close business relationship between the members of the Group and the China Shipping Group, a number of transactions have been entered into and are to be entered into between the Group and the China Shipping Group, which are individually significant and collectively essential to the core business and operation of container marine transportation of the Group. Moreover, given the background of the Restructuring, the transactions to be entered into with the COSCO SHIPPING Group would further expand the Group’s core business and are in line with the transformation of the Group into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing, with shipping financing as core feature.

In addition, COSCO SHIPPING is a key state-owned enterprise and part of the large shipping conglomerate that operates across different regions, sectors and countries, and the COSCO SHIPPING Group entails well-known marine transportation corporations with outstanding competency in shipping industry and have developed good experience and service systems in respect of the products and services under the continuing connected transactions set out above. The cooperation with the COSCO SHIPPING Group facilitates and supports the growth of the core business of the Group, and enables the Group to fully leverage on their advantages and to achieve better operating performance.

Finally, the terms and conditions provided by the COSCO SHIPPING Group in relation to the continuing connected transactions set out above are generally more favourable to the Group than those provided by independent third parties to the Group, or those provided by the COSCO SHIPPING Group to independent third parties. The cooperation between the Group and the COSCO SHIPPING Group enables a development of steady relationship between them.

In respect of the transactions under the Master Financial Services Agreement

CS Finance Company is able to provide more efficient financial services to the COSCO SHIPPING Group, as compared to independent third party banks for the reason that CS Finance Company is more familiar with the COSCO SHIPPING Group’s business and is able to provide funds required by the COSCO SHIPPING in a more efficient and timely manner.

In the meantime, CS Finance Company can increase its capital size for the purpose of the development of its financial business and capital operation through absorbing capitals from the COSCO SHIPPING Group and can also increase profits for the Group through providing deposit, loan and foreign exchange services by means of charging loan interests or other fees.

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As the interest rates and other terms of services under the Master Financial Services Agreement provided by CS Finance Company to the COSCO SHIPPING Group shall be no less favourable to CS Finance Company than those offered by or to other independent third parties, CS Finance Company will not provide undue benefit to the COSCO SHIPPING Group through lower cost of financing and other financial service fees.

In respect of the transactions under the Master CS Finance Financial Services Agreement

It is common for large corporate groups 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, which may provide financial services to the COSCO SHIPPING Group and the CS 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 PBOC 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. As such, the Board believes that CS Finance Company has the financial capability in providing the deposit, loan and foreign exchange services under the Master CS Finance Financial Services Agreement, and the credit risk involved in the underlying transactions is low.

The terms and conditions of deposit services, loan services, foreign exchange services and other financial services provided by CS Finance Company under the Master CS Finance Financial Services Agreement are generally more favourable to the CS 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 Master CS Finance Financial Services 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 based 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, foreign exchange services and other financial services if the service quality provided is competitive. With such flexibility under the Master CS Finance Financial Services Agreement, the Group is able to better manage its capital and cashflow position.

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In addition, it is also expected that CS Finance Company will mainly provide deposit services, loan services and foreign exchange services to the Group. 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 as compared to independent third-party banks. In view of the Group’s business transformation and its strong demand for funds, the Group hopes to obtain financial assistance from CS Finance Company, which may help broaden the Group’s financing channels and lower its financing costs.

E. Implications under the Hong Kong Listing Rules

In respect of the proposed annual caps for the years ending 31 December 2017, 2018 and 2019 for the Major and Continuing Connected Transactions, as one or more of the applicable percentage ratios calculated in accordance with the Hong Kong Listing Rules are expected to be more than 25%, such transactions, together with their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019, constitute (i) continuing connected transactions subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules; and (ii) major transactions of the Company and are subject to the reporting, announcement, and independent shareholders’ approval requirements under Chapter 14 of the Hong Kong Listing Rules.

In respect of the proposed annual caps for the years ending 31 December 2017, 2018 and 2019 for the services to be provided by the Group under the Master Finance Lease Services Agreement, as one or more of the applicable percentage ratios calculated in accordance with the Hong Kong Listing Rules are expected to be more than 5%, such transactions, together with their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019, constitute (i) continuing connected transactions subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules; and (ii) discloseable transactions of the Company and are subject to the reporting and announcement requirement under Chapter 14 of the Hong Kong Listing Rules.

In respect of the proposed annual caps for the years ending 31 December 2017, 2018 and 2019 for the Non-Exempt Continuing Connected Transactions (other than (i) the Major and Continuing Connected Transactions and (ii) the services to be provided by the Group under the Master Finance Lease Services Agreement), as one or more of the applicable percentage ratios calculated in accordance with the Hong Kong Listing Rules are expected to be more than 5%, such transactions, together with their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019, are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

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IV. REQUIREMENTS UNDER THE SHANGHAI LISTING RULES

Pursuant to the Shanghai Listing Rules, transaction amounts under all types of related party transactions entered into in the ordinary and usual course of business of the Company and entered into between the Company and the same related party within a 12-month period should be aggregated (save for those which have complied with the relevant approval and/or disclosure procedures), and if the total aggregated transaction amount exceeds 5% of the net asset value of the Group as at the end of the preceding financial year, such related party transactions should be presented to a general meeting for independent shareholders’ approval. As (i) the Non-Exempt Continuing Connected Transactions; (ii) the transactions in respect of the services to be provided by the CS Group under the Master Factoring Agreement; (iii) the transactions in respect of the products and services to be provided to the CS Group under the Master Containers Services Agreement; and (iv) the transactions in respect of the provision of deposit services from COSCO Finance to the Florens Group under the Florens Finance Financial Services Agreement (the “ Relevant Continuing Connected Transactions ”) also constitute related party transactions entered into in the ordinary and usual course of business of the Company under the Shanghai Listing Rules and were all entered into between the CS Group and the COSCO SHIPPING Group, all the proposed annual caps for the Relevant Continuing Connected Transactions shall be aggregated pursuant to the requirements under the Shanghai Listing Rules. It is expected that such aggregated amount for the years ending 31 December 2017, 2018 and 2019 would exceed 5% of the net asset value of the Group as at 31 December 2015. Accordingly, despite that only the Non-Exempt Continuing Connected Transactions and the proposed annual caps thereunder are required to be approved by the Independent Shareholders under the Hong Kong Listing Rules, ordinary resolutions will be proposed at the EGM for the Independent Shareholders to consider and, if thought fit, approve the Relevant Continuing Connected Transactions and their proposed annual caps.

For details of the Relevant Continuing Connected Transactions (other than the NonExempt Continuing Connected Transactions) and their respective annual caps, please refer to the Announcement.

V. GENERAL INFORMATION

A. Information on the Group

The Company is a joint stock company established under the laws of the PRC with limited liability, the H Shares of which are listed on the Main Board of the Hong Kong Stock Exchange and the A Shares of which are listed on the Shanghai Stock Exchange.

The Group is principally engaged in providing integrated financial services with diversified leasing businesses such as vessel leasing, container leasing and non-shipping finance leasing, supply chain finance, shipping insurance, logistic infrastructure investment and other financial assets investment services.

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CS Finance Company is a company incorporated under the laws of the PRC, which was owned as to 65% by the Company, and 35% by China Shipping and its associates (excluding the Group) as at the Latest Practicable Date, and a connected subsidiary of the Company. CS Finance Company is principally engaged in deposit services, credit services, financial and financing consultation, credit verification and related consultation and agency services, settlement, and liquidation.

B. Information on COSCO SHIPPING

COSCO SHIPPING is a company incorporated under the laws of the PRC, and is a state-owned enterprise wholly-owned and controlled by SASAC. The scope of business of COSCO SHIPPING includes international shipping, ancillary business in international maritime transportation, import and export of goods and technologies, international freight agency business, leasing of self-owned vessels, sales of vessels, containers and steel and maritime engineering.

VI. CONFIRMATIONS OF THE BOARD

Ms. Sun Yueying, Mr. Wang Daxiong, Mr. Liu Chong and Mr. Xu Hui, all being executive Directors, hold directorship(s) or act as senior management in China Shipping and/or its associates, and Mr. Feng Boming, Mr. Chen Dong and Mr. Huang Jian, all being non-executive Directors, were nominated by China Shipping to the Board. Accordingly, Ms. Sun Yueying, Mr. Wang Daxiong, Mr. Liu Chong, Mr. Xu Hui, Mr. Feng Boming, Mr. Chen Dong and Mr. Huang Jian have abstained from voting on the relevant Board resolutions approving the Relevant Continuing Connected Transactions. Save as aforementioned, none of the other Directors has a material interest in the Relevant Continuing Connected Transactions, and hence no other Director has abstained from voting on such Board resolutions.

The Board (including the independent non-executive Directors) considers that the terms under the Relevant Continuing Connected Transactions are fair and reasonable, on normal commercial terms, and are/were entered into on in the ordinary and usual course of business of the Company, therefore the Relevant Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

VII. THE PROPOSED AMENDMENTS TO THE RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

An ordinary resolution will be proposed at the EGM to, among other things, approve certain amendments to the Rules of Procedure of the Shareholders’ General Meeting to, among other things, reflect the amendments to the relevant requirements of the Guidance on Articles of Association of Listed Companies (Revised in 2016) (《上市公司章程指引》(2016年修訂)) promulgated by the China Securities Regulatory Commission (China Securities Regulatory Commission Bulletin (2016) No. 23)) (《中國證券監督管理委員會公告(2016) 23號》) on 30 September 2016.

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LETTER FROM THE BOARD

Details of the proposed amended Rules of Procedure of the Shareholders’ General Meeting are set out in Appendix III to this circular.

VIII. EGM

The Company proposes to convene the EGM at 2:30 p.m. on Wednesday, 28 December 2016 at Holiday Inn Shanghai Jinxiu, No. 399 Jinzun Road, Pudong New Area, Shanghai, the PRC.

The EGM will be convened and held for the Independent Shareholders to consider and, if thought fit, to approve (i) the Relevant Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019; and (ii) the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting.

As at the Latest Practicable Date, China Shipping and its associates controlled or were entitled to exercise control over the voting rights in respect of 4,458,195,175 A Shares and 100,944,000 H Shares, representing approximately 39.02% of the total issued share capital of the Company. China Shipping and its associates will be required to abstain from voting on the Shareholders’ resolutions in relation to the Relevant Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019. Save as aforementioned, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no other Shareholder has a material interest in the Relevant Continuing Connected Transactions and therefore no other Shareholder is required to abstain from voting at the EGM for the relevant resolutions.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder has a material interest in the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting and therefore no Shareholder is required to abstain from voting at the EGM for the relevant resolution.

The voting in relation to (i) the Relevant Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019; and (ii) the proposed amendments to the Rules of Procedure of the General Meeting will be conducted by way of poll.

The Original Notice of EGM in respect of the resolution in relation to the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting was despatched to the Shareholder on 11 November 2016, and the Supplemental Notice of EGM containing the resolutions to approve the Relevant Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 are set out on pages 98 to 104 of this circular.

A Shareholder who has not yet lodged the First Form of Proxy in accordance with the instructions printed thereon with Computershare, is requested to complete and return the Revised Form of Proxy in accordance with the instructions printed thereon to Computershare

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LETTER FROM THE BOARD

not less than 24 hours before the time for holding the EGM or any adjournment thereof, if he or she wishes to appoint proxies to attend the EGM on his or her behalf. In this case, the First Form of Proxy should not be lodged to Computershare.

A Shareholder who has already lodged the First Form of Proxy in accordance with the instructions printed thereon with Computershare should note the following:

(i) If no Revised Form of Proxy is lodged with Computershare, the First Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if correctly completed. The proxy appointed under the First Form of Proxy will be entitled to vote in his or her discretion or abstain from voting on any resolutions properly put to the EGM, other than those referred to in the Original Notice of EGM and the First Form of Proxy, including the additional resolutions set out in the Supplemental Notice of EGM.
(ii) If the Revised Form of Proxy is lodged with Computershare in accordance with the instructions printed thereon not less than 24 hours before the time for holding the EGM or any adjournment thereof, the Revised Form of Proxy will revoke and supersede the First Form of Proxy previously lodged by the Shareholder. The Revised Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if correctly completed.
(iii) If the Revised Form of Proxy is lodged after 24 hours before the time for holding the EGM or any adjournment thereof, the Revised Form of Proxy will be deemed invalid. It will not revoke the First Form of Proxy previously lodged by the Shareholder. The First Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if correctly completed. The proxy appointed under the First Form of Proxy will be entitled to vote in his or her discretion or abstain from voting on any resolutions properly put to the EGM, other than those referred to in the Original Notice of EGM and the First Form of Proxy, including the additional resolutions set out in the Supplemental Notice of EGM.

Completion and return of the First Form of Proxy and/or Revised Form of Proxy will not preclude a Shareholder from attending in person and voting at the EGM or any adjournment thereof should he/she so wish.

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 no later than 8 December 2016.

IX. RECOMMENDATION

The Independent Board Committee (comprising all the independent non-executive Directors) has been formed in accordance with Chapter 14A of the Listing Rules to advise the Independent Shareholders on, among other things, whether the terms and the proposed annual

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LETTER FROM THE BOARD

caps for the years ending 31 December 2017, 2018 and 2019 for the Non-exempt Continuing Connected Transactions are fair and reasonable. In addition, the Company has appointed First Shanghai as the Independent Financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

The Independent Board Committee, after considering the advice from the Independent Financial Adviser, considers that the terms under the Non-Exempt Continuing Connected Transactions are fair and reasonable, on normal commercial terms, and are/were entered into on in the ordinary and usual course of business of the Company, therefore the Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 are fair and reasonable and in the interests 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 resolutions to be proposed at the EGM to approve the Non-Exempt Continuing Connected Transactions and their respective proposed annual caps.

The Board also recommends the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve (i) the Relevant Continuing Connected Transactions (other than the Non-Exempt Continuing Connected Transactions) and their respective proposed annual caps; and (ii) the proposed amendments to the Rules of Procedure of the Shareholders’ General Meeting.

X. FURTHER INFORMATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on pages 36 to 37 of this circular, containing its recommendation in respect of of the Non-Exempt Continuing Connected Transactions; and (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 38 to 57 of this circular, containing its recommendation in respect of the Non-Exempt Continuing Connected Transactions; and (iii) the additional information set out in the appendices to this circular.

The Independent Shareholders are advised to read the aforesaid letters and appendices before deciding as to how to vote on the resolutions approving, among other things, the Relevant Continuing Connected Transactions and their respective proposed annual caps.

Yours faithfully, By order of the Board COSCO SHIPPING Development Co., Ltd. Yu Zhen

Joint Company Secretary

Shanghai, the PRC

13 December 2016

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd. *

(Formerly known as 中海集裝箱運輸股份有限公司 China Shipping Container Lines Company Limited)

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

(Stock Code: 02866)

13 December 2016

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS

(2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS AND

(4) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company dated 13 December 2016 (the “ Circular ”), of which this letter forms part. Unless otherwise defined, capitalised terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed as members of the Independent Board Committee to consider the terms of the Non-Exempt Continuing Connected Transactions and advise the Independent Shareholders as to (i) whether the terms under the Non-Exempt Continuing Connected Transactions are fair and reasonable; (ii) whether the Non-Exempt Continuing Connected Transactions are on normal commercial terms, and are/were entered into on in the ordinary and usual course of business of the Company; (iii) whether the Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 are fair and reasonable and in the interests of the Company and the Shareholders as a whole; and (iv) how to vote on the Non-Exempt Continuing Connected Transactions.

In addition, the Company has appointed First Shanghai as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to (i) the “Letter from the Board” set out on pages 14 to 35 of the Circular; and (ii) the “Letter from the Independent Financial Adviser” set out on pages 38 to 57 of the Circular; and (iii) the additional information set out in the appendices of this Circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account, among other things, the principal factors and reasons considered by, and the advice of, the Independent Financial Adviser as set out in the “Letter from the Independent Financial Adviser” in the Circular, we are of the opinion that (i) (the terms under the Non-Exempt Continuing Connected Transactions are fair and reasonable; (ii) the Non-Exempt Continuing Connected Transactions are on normal commercial terms, and are/were entered into on in the ordinary and usual course of business of the Company; (iii) the Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Non-Exempt Continuing Connected Transactions and their respective proposed annual caps.

Yours faithfully, Independent Board Committee Mr. Cai Hongping Mr. Tsang Hing Lun Ms. Hai Chi Yuet Mr. Graeme Jack Independent non-executive Directors

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 “COSCO SHIPPING Development Co., Ltd.”.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from First Shanghai setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 which was prepared for the purpose of inclusion in this circular.

==> picture [147 x 63] intentionally omitted <==

FIRST SHANGHAI CAPITAL LIMITED

19th Floor, Wing On House 71 Des Voeux Road Central Hong Kong

13 December 2016

To the Independent Board Committee and
the Independent Shareholders of COSCO SHIPPING Development Co., Ltd.*

Dear Sir or Madam,

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS (2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS AND

(4) RENEWAL OF 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 Non-Exempt Continuing Connected Transactions and their respective proposed annual caps for the years ending 31 December 2017, 2018 and 2019 (the “ Proposed Caps ”), the details of which are set out in the circular of the Company dated 13 December 2016 (the “ Circular ”), of which this letter forms part. Unless otherwise defined, capitalised terms used herein shall have the same meanings as those defined in the Circular.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group and certain members of the COSCO SHIPPING Group (including but not limited to the China Shipping Group) have been conducting continuing connected transactions pursuant to the Existing Agreements. On 5 December 2016, the Company and COSCO SHIPPING (except for the Master CS Finance Financial Services Agreement, which was entered into with CS Finance Company) entered into the Non-Exempt Continuing Connected Transaction Agreements in respect of the Non-Exempt Continuing Connected Transactions to be carried out between the CS Group and the COSCO SHIPPING Group. The Non-Exempt Continuing Connected Transactions and the Proposed Caps are subject to, among other requirements, approval by the Independent Shareholders at the EGM.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Cai Hongping, Mr. Tsang Hing Lun, Ms. Hai Chi Yuet and Mr. Graeme Jack, has been formed in accordance with Chapter 14A of the Hong Kong Listing Rules to advise the Independent Shareholders on, among other things, whether the terms and the Proposed Caps for the Non-exempt Continuing Connected Transactions are fair and reasonable. We, First Shanghai Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

Apart from our current appointment as the Independent Financial Adviser in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Caps, we did not have any business relationship with the Company within the past two years from the Latest Practicable Date. We consider ourselves independent under Rule 13.84 of the Hong Kong Listing Rules to form our opinion in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Caps.

In putting forth our opinion and recommendation, we have relied on the accuracy of the information and representations included in the Circular and provided to us by the management of the Group, and have assumed that all such information and representations made or referred to in the Circular and provided to us by the management of the Group in all material respects were true at the time they were made and continued to be true up to the Latest Practicable Date. We have also assumed that all statements of belief, opinion and intention made in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Group and have been advised that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

not, however, conducted any independent verification of the information included in the Circular and provided to us by the management of the Group nor have we conducted any form of investigation into the business, affairs or future prospects of the CS Group and the COSCO SHIPPING Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion on the Non-Exempt Continuing Connected Transactions and the Proposed Caps, we have taken into account the following principal factors and reasons:–

1. Background information

1.1 Background information of the Group

According to the annual report of the Company for the year ended 31 December 2015, all the profits/losses from continuing operations of the Group for each of the year ended 31 December 2014 and 2015 were generated from container shipping and related business.

1.2 Background information of COSCO SHIPPING

The scope of business of COSCO SHIPPING includes international shipping, ancillary business in international maritime transportation, import and export of goods and technologies, international freight agency business, leasing of self-owned vessels, sales of vessels, containers and steel and maritime engineering.

1.3 Background information of CS Finance Company

CS Finance Company is principally engaged in deposit services, credit services, financial and financing consultation, credit verification and related consultation and agency services, settlement, and liquidation.

CS Finance Company was set up as a non-bank financial institution in 2009 pursuant to an approval granted by the CBRC. It is operating under the routine supervision and regulation of regulatory authorities including the PBOC and the CBRC.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Background of and reasons for the Non-Exempt Continuing Connected Transactions

2.1 Background of the Non-Exempt Continuing Connected Transactions

The Company was established in 1997 as the container shipping arm of China Shipping. Following the Restructuring as detailed in the Restructuring Circular, certain companies, including but not limited to CS Finance Company, Florens, Dong Fang International and CS Investment had become subsidiaries of the Company. The Group is transforming into an integrated financial services platform with leasing businesses such as vessel leasing, container leasing and non-shipping leasing, with shipping financing as a core feature.

Pursuant to the Existing Agreements, the Group and certain members of the COSCO SHIPPING Group have been conducting continuing connected transactions, which include but not limited to (i) the charter and lease of vessels and containers by the CS Group to the China COSCO Group; and (ii) the provision of financial services by the CS Group, particularly the CS Finance Company, to the China Shipping Group and the China COSCO Group.

On 28 November 2016, the Company and COSCO SHIPPING (except for the Master CS Finance Financial Services Agreement, which was entered into with CS Finance Company) entered into the Non-Exempt Continuing Connected Transaction Agreements in respect of the Non-Exempt Continuing Connected Transactions to be carried out between the CS Group and the COSCO SHIPPING Group. The following table sets out the details of the Non-Exempt Continuing Connected Transactions.

Non-Exempt Continuing

Non-Exempt Continuing	Non-Exempt Continuing
Connected Transaction		Products and/or	Products and/or	Non-Exempt Continuing Connected
Agreements		services providers	services recipients	Transactions
(1)	Master Vessel Charter	CS Group	COSCO SHIPPING	Chartering of Vessels (excluding
	Agreement		Group	finance leasing)
(2)	Master Operating	CS Group	COSCO SHIPPING	Operating lease services including
	Lease Services		Group	leasing of chassis, containers,
	Agreement			electricity generators, and other
				ancillary facilities and production
				facilities
(3)	Master Finance Lease	CS Group	COSCO SHIPPING	Finance lease services including
	Services Agreement		Group	leasing of vessels and facilities,
				and other ancillary services

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Non-Exempt Continuing	Non-Exempt Continuing
Connected Transaction		Products and/or	Products and/or	Non-Exempt Continuing Connected
Agreements		services providers	services recipients	Transactions
(4)	Master Vessel	COSCO SHIPPING	CS Group	Vessel and other ancillary services,
	Services Agreement	Group		including material merchandising
				services (such as paint, vessel fuel,
				lubricants, spare parts and steel),
				supply of crew members, vessel
				repair and maintenance services,
				shipping agent services and other
				ancillary services
(5)	Master Containers	CS Group	COSCO SHIPPING	Container and other ancillary
	Services Agreement		Group	services, including sale and
				purchase of containers and
				containers commissioned
				manufacturing services
(6)	Master Financial	CS Finance Company	COSCO SHIPPING	Loan services
	Services Agreement		Group
(7)	Master CS Finance	CS Finance Company	CS Group	Deposit services
	Financial Services
	Agreement

2.2 Reasons for and benefits of the Non-Exempt Continuing Connected Transactions (other than the transactions under the Financial Services Agreements)

The COSCO SHIPPING Group is a state-owned enterprise entailing well-known marine transportation corporations with outstanding competency in shipping industry and has developed good experience and service systems in respect of the shipping products and services under the Non-Exempt Continuing Connected Transactions.

The cooperation with the COSCO SHIPPING Group facilitates and supports the growth of the core business of the Group, and enables the Group to fully leverage on their advantages and to achieve better operating performance. The transactions in respect of provision of products and services by the CS Group under the Master Vessel Charter Agreement, the Master Operating Lease Services Agreement, the Master Finance Lease Services Agreement and the Master Containers Services Agreement are revenue in nature to the CS Group, whereas the transactions in respect of procurement of products and services by the CS Group under the Master Vessels Services Agreement support the principal business of the CS Group. These agreements provide the CS Group with the option, but not the obligation, to provide/procure the relevant products and services to/from the COSCO SHIPPING Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After taking into account (i) the principal business of the CS Group and the COSCO SHIPPING Group; (ii) the established cooperative relationship between the CS Group and the COSCO SHIPPING Group, where the CS Group can leverage on the strengths of the COSCO SHIPPING Group to achieve better performance; (iii) the transactions are either revenue in nature or support the principal business of the Group; and (iv) the terms of the transactions are fair and reasonable as discussed below, we are of the view that the Non-Exempt Continuing Connected Transactions (other than transactions under the Financial Services Agreements) are in the ordinary and usual course of business of the Group and are in the interests of the Company and the Shareholders as a whole.

2.3 Reasons for and benefits of the provision of loan services by the CS Group under the Master Financial Services Agreement

Pursuant to the Master Financial Services Agreement, the Company shall procure CS Finance Company to provide the COSCO SHIPPING Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; (iv) foreign exchange services, and (v) other financial services as approved by CBRC.

The provision of loan services is part of the principal business of and generates interest income for CS Finance Company, which is a non-wholly owned subsidiary of the Company.

The Master Financial Services Agreement provides the CS Group with the option, but not the obligation, to provide loans to the COSCO SHIPPING Group on fair and reasonable terms.

After taking into account (i) the provision of loan services is part of the principal business of and generates interest income for CS Finance Company; (ii) the lending rates under the Master Financial Services Agreement are fair and reasonable as discussed below; and (iii) the provision of loan services is part and parcel of the various services under the Master Financial Services Agreement, we are of the view that the provision of loan services by the CS Group under the Master Financial Services Agreement is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole.

2.4 Reasons for and benefits of the procurement of deposit services by the CS Group under the Master CS Finance Financial Services Agreement

Pursuant to the Master CS Finance Financial Services Agreement, CS Finance Company shall provide the CS Group with a range of financial services including (i) deposit services; (ii) loan services; (iii) settlement services; (iv) foreign exchange services, and (v) other financial services as approved by CBRC.

The CS Group deposits its cash at banks and other financial institutions, including but not limited to CS Finance Company, which is a non-wholly owned subsidiary of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Master CS Finance Financial Services Agreement provides the CS Group with the option, but not the obligation, to procure deposit services from CS Finance Company on fair and reasonable terms.

After taking into account (i) CS Finance Company is a non-bank financial institution and is licensed to provide deposit services to the Group; (ii) the depository rates under the Master CS Finance Financial Services Agreement are fair and reasonable as discussed below; (iii) CS Finance Company is expected to provide deposit services to the Group in a more efficient and timely manner as compared to independent third-party banks as CS Finance Company is a non-wholly owned subsidiary of the Company and is more familiar with the Group’s business and financial needs; (iv) the funds deposited with CS Finance Company can be sufficiently safeguarded as CS Finance Company is a subsidiary of the Company and the Group is able to obtain information regarding the business and financial position of CS Finance Company in a timely manner; (v) the Group is not obliged to procure deposit services from CS Finance Company; and (vi) the procurement of deposit services is part and parcel of the various services under the Master CS Finance Financial Services Agreement, we are of the view that the procurement of deposit services by the CS Group under the Master CS Finance Financial Services Agreement is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole.

3. Principal terms and internal control measures in respect of the Non-exempt Continuing Connected Transactions

3.1 Term

3.2 Pricing policy and internal control measures in respect of the Non-Exempt Continuing Connected Transaction Agreements (other than the transactions under the Financial Services Agreements)

Each of the Non-Exempt Continuing Connected Transactions Agreements (other than (i) the Financial Services Agreements; and (ii) the transactions under the Master Vessel Charter Agreement and Master Operating Lease Services Agreement covered by the Existing Asset Lease Framework Agreement) provides that the price of the relevant products or services (as the case may be) provided thereunder shall be determined according to:

(a) the state-prescribed prices;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) where there is no state-prescribed price, then according to the relevant market prices and based on the principle of fairness and reasonableness; or
(c) where there is no market price, then according to the contracted price.

Notes:

“state-prescribed price” means the price set by the relevant laws, regulations and other governmental regulatory documents issued by the relevant departments of the PRC government;
“market price” means the price at which independent third party may obtain for the same or comparable type of transaction in the ordinary and usual course of business; and
“contracted price” means the relevant cost for that particular transaction plus a profit margin ranging from 0% to 12.25%.

In respect of pricing policy of leasing of vessels and containers covered by the Existing Asset Lease Framework Agreement, the fees shall be determined in accordance with the pricing policies set out in the Existing Asset Lease Framework Agreement, which was determined with reference to the container shipping asset leasing strategy report prepared by Drewry in 2015 (the “ Drewry Report ”), as further described in the Restructuring Circular dated 31 December 2015.

We are advised by the management of the Group that the pricing basis adopted under the Non-Exempt Continuing Connected Transaction Agreements (other than (i) the Financial Services Agreements; and (ii) the transactions under the Master Vessel Charter Agreement and Master Operating Lease Services Agreement covered by the Existing Asset Lease Framework Agreement) could vary from case to case given the difference in the nature of the subject transaction, for instance, (i) for products of which prices are determined by the relevant laws, regulations and other governmental regulatory documents issued by the relevant department of the PRC government, state-prescribed price will be adopted in order to comply with relevant governmental requirements; (ii) market price is the prevailing pricing method adopted by the Company as most of the products and services in shipping market are quite standard and usually have readily available market price references; and (iii) in extreme circumstances where the products and services are tailor-made according to client’s specific requirements therefore no market prices for such products and services are available, contracted price with profit margin ranging from 0% to 12.25% would be adopted.

In respect of the internal control measures for the pricing basis for the Non-Exempt Continuing Connected Transactions, we are advised by the management of the Group and noted from the letter from the Board that relevant departments of the Group are responsible for, where applicable to the relevant pricing basis, (i) the collection of applicable data and market information (including quotes from independent third parties and reference materials from independent third party entities) and the preparation of draft proposal; (ii) the review and revision of draft proposal based on, among other things, conditions of facilities and quality of products or services, and through advice from relevant department and agents; (iii) the review of contemporaneous prices and other

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

relevant terms offered by at least two independent third parties operating at the same or nearby area before the commencement of the relevant transaction in order to ensure the terms offered by the relevant connected persons are fair and reasonable and no less favourable than those offered by independent third parties; (iv) the assessment of whether the margins of prices determined on contracted prices are no less favourable than those for transactions conducted with independent third parties; and (v) periodic review and inspection of the process of the Non-Exempt Continuing Connected Transactions.

In respect of our work done, we have reviewed the internal control measures in place as detailed in the letter from the Board and, where applicable, sample documents in connection with each of the aforementioned categories of the Non-Exempt Continuing Connected Transactions) carried out during the past three years. Examples of our review include the following:

for the Master Vessel Charter Agreement and the Master Operating Lease Services Agreement, we have reviewed sample contracts entered into with the COSCO SHIPPING Group and the Drewry Report where we noted that the prices in the sample contracts entered into with the COSCO SHIPPING Group were no less favourable to the Group than the relevant prices stated in the Drewry Report. We have reviewed the website of Drewry and we noted that Drewry is a leading independent provider of research and consulting services to the maritime and shipping industry, and have been employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai;
for the provision of products and services by the CS Group under the Master Finance Lease Services Agreement and the Master Containers Services Agreement, we are advised by the management of the Group that, other than the existing transactions which were entered into prior to the Restructuring and had subsequently became continuing connected transactions upon completion of the Restructuring, the CS Group had not entered into any transaction relevant to the Master Finance Lease Services Agreement and the Master Containers Services Agreement during the past three years with the COSCO SHIPPING Group; and
for the Master Vessel Services Agreement, we have reviewed sample contracts entered into with the COSCO SHIPPING Group and the relevant documents with independent third parties, where we noted that the prices in the sample contracts entered into with the COSCO SHIPPING Group were no less favourable to the Group than the prices stated in the documents with independent third parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After taking into account (i) the pricing terms which are based on either state-prescribed price, market price or contracted price as described in this section; and (ii) the internal control measures of the Group described in this section, we are of the view that the terms of the Non-Exempt Continuing Connected Transactions (other than the transactions under the Financial Services Agreements) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

3.3 Pricing policy and internal control measures in respect of the loan services to be provided by the CS Group under the Master Financial Services Agreement

In respect of the pricing policy under the Master Financial Services Agreement, as stated in the letter from the Board, CS Finance Company shall provide loan services to the COSCO SHIPPING Group at interest rates not lower than (i) the benchmark rates stipulated by PBOC for the same type of loan; or (ii) the rates offered by the major and independent PRC commercial banks in the service location or adjacent areas in the normal course of business for such types of loans.

In respect of the internal control measures for the pricing basis of the loan services provided by CS Finance Company to the COSCO SHIPPING Group under the Master Financial Services Agreement, we are advised by the management of the Group and noted from the letter from the Board that relevant departments of the Group are responsible for (i) the review of contemporaneous prices and other relevant terms offered by at least two independent third parties operating at the same or nearby area before the commencement of the relevant transaction in order to ensure the terms offered by the relevant connected persons are fair and reasonable and no less favourable than those offered from independent third parties; and (ii) periodic review and inspection of the process of the Non-Exempt Continuing Connected Transactions.

In respect of our work done, we have reviewed the internal control measures in place as detailed in the letter from the Board and sample documents in connection with (i) historical loan services provided by CS Finance Company to COSCO SHIPPING Group during the past year; (ii) the relevant benchmark rates stipulated by the PBOC; and (iii) the relevant rates offered by the major and independent PRC commercial banks. We understand that, for our reviewed samples, the interest rates offered by CS Finance Company to COSCO SHIPPING Group were no less favourable to the Group than (i) the benchmark rates stipulated by PBOC for the same type of loan; or (ii) the rates offered by the major and independent PRC commercial banks.

After taking into account (i) the rate of loan services which shall be no less favourable than the benchmark rates stipulated by PBOC or the rates offered by the major and independent PRC commercial banks; and (ii) the internal control measures described above, we are of the view that the terms of the loan services to be provided by the CS Group under the Master Financial Services Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.4 Pricing policy and internal control measures in respect of the deposit services to be provided to the CS Group under the Master CS Finance Financial Services Agreement

In respect of the pricing policy under the CS Finance Financial Services Agreement, as stated in the letter from the Board, CS Finance Company shall provide deposit services to the CS Group at interest rates not lower than (i) the benchmark rates stipulated by PBOC for the same type of deposit; or (ii) the rates offered by the major and independent PRC commercial banks in the service location or adjacent areas in the normal course of business for such types of deposits.

In respect of the internal control measures for the pricing basis of the deposit services provided by CS Finance Company to the CS Group under the Master CS Finance Financial Services Agreement, we are advised by the management of the Group and noted from the letter from the Board that relevant departments of the Group are responsible for the review of the benchmark rates stipulated by PBOC or the rates offered by the major and independent PRC commercial banks in order to ensure the rates offered by CS Finance Company are fair and reasonable and no less favourable than benchmark deposit rates or those offered from independent third parties.

In respect of our work done, we have reviewed the internal control measures in place as detailed in the letter from the Board and have reviewed sample documents in connection with (i) historical deposit services provided by CS Finance Company to the Group during the past year; (ii) the relevant benchmark rates stipulated by the PBOC; and (iii) the relevant rates offered by the major and independent PRC commercial banks. We note that, for our reviewed samples, the interest rates offered by CS Finance Company to the Group were no less favourable to the Group than (i) the benchmark rates stimulated by PBOC; or (ii) the rates offered by major and independent PRC commercial banks.

After taking into account (i) the rate of deposit services which shall be no less favourable than the benchmark rates stipulated by PBOC or the rates offered by the major and independent PRC commercial banks; and (ii) the internal control measures described above, we are of the view that the terms of the deposit services to be provided to the CS Group under the Master CS Finance Financial Services Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Proposed Caps

The following table sets out the historical transaction amounts of the Non-Exempt Continuing Connected Transactions for the years ended 31 December 2014 and 2015 and the nine months ended 30 September 2016 as well as the Proposed Caps for each of the years ending 31 December 2017, 2018 and 2019:

		Historical	transaction amounts for the years	transaction amounts for the years
	Non-Exempt Continuing	ended 31	December 2014 and 2015 and the		Proposed	Caps for the years ending
	Connected Transaction	nine months ended 30 September 2016			31 December 2017, 2018 and 2019
			(RMB’000)			(RMB’000)
		2014	2015	30 September 2016	2017	2018	2019
(1)	Services provided by the CS	Nil	4,366	3,818,643	7,300,000	8,000,000	8,400,000
	Group under the Master Vessel
	Charter Agreement
(2)	Services provided by the CS	1,180,646	1,166,973	1,141,110	2,000,000	1,800,000	1,800,000
	Group under the Master
	Operating Lease Services
	Agreement
(3)	Services provided by the CS	184,848	129,623	139	1,260,000	1,870,000	2,160,000
	Group under the Master
	Finance Lease Services
	Agreement
(4)	Services provided to the CS	742,995	872,010	693,743	1,080,000	1,300,000	1,310,000
	Group under the Master Vessel
	Services Agreement
(5)	Products and services provided	460	272	1,159	2,800,000	3,800,000	4,200,000
	by the CS Group under the
	Master Containers Services
	Agreement
(6)	The maximum daily outstanding	5,505,079	5,041,961	3,676,351	17,500,000	17,500,000	17,500,000
	balance of loans (including
	accrued interest and handling
	fee) to be granted to the
	COSCO SHIPPING Group by
	CS Finance Company under the
	Master Financial Services
	Agreement

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

		Historical	transaction amounts for the years	transaction amounts for the years
	Non-Exempt Continuing	ended 31	December 2014 and 2015 and the		Proposed	Caps for the years ending
	Connected Transaction	nine months ended 30 September 2016			31 December 2017, 2018 and 2019
			(RMB’000)			(RMB’000)
		2014	2015	30 September 2016	2017	2018	2019
(7)	The maximum daily outstanding	4,655,293	5,904,140	8,582,850	10,000,000	11,000,000	12,000,000
	balance of deposits (including
	accrued interest and handling
	fee) to be placed by the CS
	Group at CS Finance Company
	under the Master CS Finance
	Financial Services Agreement

Note:

These historical transaction amounts and Proposed Caps have been converted to RMB in this table for ease of reference.
These historical transaction amounts have included the amounts of existing transactions which became continuing connected transactions as a result of the acquisition transactions under the Restructuring.
4.1 Proposed Caps of the Master Vessel Charter Agreement in respect of services to be provided by the CS Group

The Proposed Caps for the chartering fees for the vessels to be provided by the CS Group to the COSCO SHIPPING Group under the Master Vessel Charter Agreement for the years ending 31 December 2017, 2018 and 2019 are RMB7,300 million, RMB8,000 million and RMB8,400 million, respectively.

We have reviewed the breakdown of the calculation of the Proposed Caps, which have taken into account, among other factors, the existing vessel charter agreements and the business development of the CS Group. We are advised by the management of the Group that (i) the transactions under the Master Vessel Charter Agreement includes the chartering of vessels under the Existing Asset Lease Framework Agreement; (ii) the CS Group has been chartering self-owned and charted-in vessels to China COSCO Group under the Existing Asset Lease Framework Agreement since 1 March 2016; and (iii) the historical transaction amount in respect of vessels chartering under the Existing Asset Lease Framework Agreement for the seven months from 1 March 2016 to 30 September 2016 amounted to approximately US$558.2 million (equivalent to approximately RMB3,795.8 million) and, on a pro rata basis, such transaction amount would be approximately RMB6,507.0 million for the year ending 31 December 2016 (the “ 2016 Pro Rata Existing Vessel Charter Amount ”). We note that (i) the 2016 Pro Rata Existing Vessel Charter Amount represents approximately 89% of the Proposed Cap for the year ending 31 December 2017; and (ii) the Proposed Caps for each of the years ending 31 December 2018 and 2019 represents an annual growth of approximately 10% and 5%, respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After taking into account, in particular, (i) our review of the breakdown of the calculation of the Proposed Caps, which have taken into account the existing vessel charter agreements and the business development of the CS Group; (ii) the 2016 Pro Rata Existing Vessel Charter Amount which represents approximately 89% of the Proposed Cap for the year ending 31 December 2017; (iii) the expected annual growths of the Proposed Caps for each of the years ending 31 December 2018 and 2019 are no more than 10%; and (iv) the continuous business development of the CS Group, we are of the view that the Proposed Caps for the Master Vessel Charter Agreement in respect of services to be provided by the CS Group are fair and reasonable so far as the Independent Shareholders are concerned.

4.2 Proposed Caps of the Master Operating Lease Services Agreement in respect of services to be provided by the CS Group

The Proposed Caps for the lease payments, handling fees and expenses for the operating lease services to be provided by the CS Group to the COSCO SHIPPING Group under the Master Operating Lease Services Agreement for the years ending 31 December 2017, 2018 and 2019 are RMB2,000 million, RMB1,800 million and RMB1,800 million, respectively.

We have reviewed the breakdown of the calculation of the Proposed Caps, which have taken into account, among other factors, (i) the transactions under the Existing Asset Lease Framework Agreement; (ii) the transactions under the Florens Continuing Connected Transactions and the Dong Fang Continuing Connected Transactions (collectively, the “ Florens and Dong Fang Transactions ”); and (iii) the business development of the CS Group.

We are advised by the management of the Group that (i) the transactions under the Master Operating Lease Services Agreement includes the leasing of containers covered by the Existing Asset Lease Framework Agreement; (ii) the CS Group has been leasing containers to the China COSCO Group under the Existing Asset Lease Framework Agreement since 1 March 2016; and (iii) the historical transaction amount in respect of the containers leased under the Existing Asset Lease Framework Agreement for the seven months from 1 March 2016 to 30 September 2016 amounted to approximately US$50.4 million (equivalent to approximately RMB342.7 million); (iv) the historical transaction amount in respect of the containers leased under the Florens and Dong Fang Transactions for the year ended 31 December 2014 and 2015 and the nine months ended 30 September 2016 was approximately US$173.4 million (equivalent to approximately RMB1,179.1 million), US$170.7 million (equivalent to approximately RMB1,160.8 million) and US$78.8 million (equivalent to approximately RMB535.8 million), respectively. We note that, for the nine months ended 30 September 2016, an aggregate of approximately 77% of the historical transaction amount of the Master Operating Lease Services Agreement were contributed by the Existing Asset Lease Framework Agreement and the Florens and Dong Fang Transactions.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that (i) the historical transaction amount of the Master Operating Lease Services Agreement for the nine months ended 30 September 2016 amounted to approximately RMB1,141.1 million and, on a pro rata basis, such transaction amount would be approximately RMB1,521.5 million for the year ending 31 December 2016 (the “ 2016 Pro Rata Operating Lease Amount ”); (ii) the 2016 Pro Rata Operating Lease Amount represents a growth rate of approximately 30% as compared with the historical transaction amount of the Master Operating Lease Services Agreement for the year ended 31 December 2015 (the “ 2016 Growth Rate ”); (iii) the 2016 Pro Rata Operating Lease Amount multiplied by the 2016 Growth Rate results in approximately RMB1,978.0 million, which is comparable with the Proposed Cap for the year ending 31 December 2017; and (iv) the Proposed Caps for each of the years ending 31 December 2018 and 2019 are RMB1,800 million, representing a decrease of approximately 10% as compared with that for the year ending 31 December 2017. We are advised by the management of the Group that such decline is mainly attributable to the expiration of certain existing leases.

After taking into account, in particular, (i) our review of the breakdown of the calculation of the Proposed Caps; (ii) the 2016 Pro Rata Operating Lease Amount multiplied by the 2016 Growth Rate resulting in approximately RMB1,978.0 million, which is around the level of each of the Proposed Caps for the years ending 31 December 2017, 2018 and 2019; (iii) the 2016 Growth Rate being an indicator of the most recent growth trend of the transaction amount; and (iv) the continuous business development of the CS Group, particularly the transformation of the Company from a container liner operator into an integrated financial services platform with leasing businesses following the Restructuring, we are of the view that the Proposed Caps for the Master Operating Lease Services Agreement in respect of services to be provided by the CS Group are fair and reasonable so far as the Independent Shareholders are concerned.

4.3 Proposed Caps of the Master Finance Lease Services Agreement in respect of services to be provided by the CS Group

The Proposed Caps for the lease payments, lease interests, handling fees and expenses for the finance lease services to be provided by the CS Group to the COSCO SHIPPING Group under the Master Finance Lease Services Agreement for the years ending 31 December 2017, 2018 and 2019 are RMB1,260 million, RMB1,870 million and RMB2,160 million, respectively.

We have reviewed the breakdown of the calculation of the Proposed Caps, which have taken into account, among other factors, the plan of the provision of finance lease by Florens (which had become a wholly-owned subsidiary of the Company following the Restructuring) to the CS Group in the upcoming years. We are advised by the management of the Group that (i) the lease principal amount under an individual relevant finance lease contract could reach RMB100 million; (ii) Florens intends to enter into more finance lease implementation agreements under the Master Finance Lease Agreement with the COSCO SHIPPING Group considering the expected business expansion and fund demand

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of the container shipping related segment of the COSCO SHIPPING Group; and (iii) in respect of the projected number of finance lease agreements, Florens has been negotiating with 10 members of the COSCO SHIPPING Group regarding finance lease arrangements and may negotiate with even more members of the COSCO SHIPPING Group in the future. We have reviewed relevant sample contracts provided by the management of the Group in relation to finance lease services provided by Florens to the COSCO SHIPPING Group before the completion of the Restructuring, where we noted that the lease principal amount under an individual container shipping related finance lease contract can reach RMB150 million. We have also reviewed the list of companies containing 10 members of the COSCO SHIPPING Group which Florens has been negotiating with in respect of finance lease arrangements as advised by the management of the Group and, based on (i) our aforesaid review; and (ii) the transformation of the Company from a container liner operator into an integrated financial services platform with leasing businesses following the Restructuring as stated in the letter from the Board in the Circular, we understand the CS Group expects to continue to develop and expand its finance lease business.

After taking into account, in particular, (i) our review of the breakdown of the calculation of the Proposed Caps, which have taken into account the plan of the provision of finance lease by Florens; (ii) Florens having become a wholly-owned subsidiary of the Company following the Restructuring; (iii) the transformation of the Company from a container liner operator into an integrated financial services platform with leasing businesses following the Restructuring; (iv) the possible scale of each individual finance lease contract; and (v) the number of members of the COSCO SHIPPING Group which Florens has been negotiating with, we are of the view that the Proposed Caps for the Master Finance Lease Services Agreement in respect of services to be provided by the CS Group are fair and reasonable so far as the Independent Shareholders are concerned.

4.4 Proposed Caps of the Master Vessel Services Agreement in respect of services to be provided to the CS Group

The Proposed Caps for the services to be provided by the COSCO SHIPPING Group to the CS Group under the Master Vessel Services Agreement for the years ending 31 December 2017, 2018 and 2019 are RMB1,080 million, RMB1,300 million and RMB1,310 million, respectively.

We have reviewed the breakdown of the calculation of the Proposed Caps for the Master Vessel Services Agreement, which have taken into account, among other factors, the expected transaction amount with various members of the CS Group. We note that (i) the historical transaction amount for the year ended 31 December 2015 recorded an annual growth of approximately 17% (the “ Latest Financial Year Growth Rate ”); (ii) the historical transaction amount for the nine months ended 30 September 2016 amounted to approximately RMB693.7 million and, on a pro rata basis, such amount would be approximately RMB924.9 million for the year ending 31 December 2016 (the “ 2016 Pro Rata Vessel Services Amount ”); (iii) the Proposed Cap for the year ending 31 December 2017 as compared with the 2016 Pro Rata Vessel Services Amount represents an annual

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

growth of approximately 17%, which is comparable to the Latest Financial Year Growth Rate; (iv) the Proposed Cap for the year ending 31 December 2018 represents an annual growth of approximately 20%, which is comparable with the Latest Financial Year Growth Rate; and (v) the Proposed Cap for the year ending 31 December 2019 basically maintains at the level of that for the year ending 31 December 2018. Given (i) the Latest Financial Year Growth Rate, which was the growth rate historically achieved for the latest full financial year; (ii) the 2016 Pro Rata Vessel Services Amount representing a growth rate of approximately 6% as compared with the historical transaction amount for the year ended 31 December 2015; (iii) the continuous business development of the CS Group; and (iv) the potential fluctuation in transaction amounts, we consider the Latest Financial Year Growth Rate to be an acceptable reference for the purpose of our assessment of the growth of the Proposed Caps.

As stated in the letter from the Board in the Circular, as more existing vessels approach their respective inspection and maintenance cycles, the demand by the CS Group in materials, crew members, vessel repair and maintenance services, shipping agent services and other ancillary services is expected to continue to increase. We have also reviewed the CS Group’s plan for vessel delivery and understand the owned vessels of the CS Group will increase, which in turn would require more materials, crew members, vessel repair and maintenance services, shipping agent services and other ancillary services.

After taking into account, in particular, (i) our review of the breakdown of the calculation of the Proposed Caps; (ii) the annual growth rates of the Proposed Cap for the years ending 31 December 2017 and 2018 are comparable to the Latest Financial Year Growth Rate; and (iii) the continuous business development of the CS Group, we are of the view that the Proposed Caps for the Master Vessel Services Agreement in respect of services to be provided to the CS Group are fair and reasonable so far as the Independent Shareholders are concerned.

4.5 Proposed Caps of the Master Containers Services Agreement in respect of products and services to be provided by the CS Group

The Proposed Caps for the container services to be provided by the CS Group to the COSCO SHIPPING Group under the Master Containers Services Agreement for each of the years ending 31 December 2017, 2018 and 2019 are RMB2,800 million, RMB3,800 million and RMB4,200 million, respectively.

We have reviewed the breakdown of the calculation of the Proposed Caps for the Master Containers Services Agreement, which have taken into account, among other factors, the expected sales volume and selling prices of containers to be sold by the CS Group to the COSCO SHIPPING Group. As stated in the letter from the Board, the Company acquired CS Investment pursuant to the Restructuring, which is a company principally engaged in, among other things, container manufacturing, and the Company intends to procure Shanghai Universal, which is a major subsidiary of CS Investment, to

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

provide containers commissioned manufacturing services to the COSCO SHIPPING Group under the Master Containers Services Agreement. We are advised by the management of the Group that the COSCO SHIPPING Group might, in the upcoming years, procure substantially more containers from the CS Group given the continuous expansion of the COSCO SHIPPING Group. We are also advised by the management of the Group that the Proposed Caps of the Master Containers Services Agreement is calculated mainly based on (i) the expected purchase volume of containers from the COSCO SHIPPING Group for the years ending 31 December 2017, 2018 and 2019; and (ii) the expected selling price per twenty-foot equivalent unit (“ TEU ”, a unit of cargo capacity) for the years ending 31 December 2017, 2018 and 2019.

We have reviewed the interim report of China COSCO for the six months ended 30 June 2016, where we noted the scale of China COSCO’s self-operating container fleets increased significantly with self-operating capacity of approximately 1,610,000 TEU as at 30 June 2016, representing a year-on-year increase of approximately 83%. Having taken into account such scale and growth, we consider the aforementioned expected sales volume to be acceptable for the purpose of determining the Proposed Caps.

We have also reviewed the historical average prices of containers provided by the management of the Group, and we are advised by the management of the Group that the expected selling prices of containers to be sold by the CS Group to the COSCO SHIPPING Group for each of the years ending 31 December 2017, 2018 and 2019 are calculated with reference to the historical average price of containers for the past five years and possible inflation. Having taken into account such historical average price and possible inflation, we consider the expected selling price to be acceptable for the purpose of determining the Proposed Caps.

After taking into account, in particular, our review of the breakdown of the calculation of the Proposed Caps for the Master Containers Services Agreement, including the key factors such as the expected sales volume and the expected selling price, we are of the view that the Proposed Caps for the Master Containers Services Agreement in respect of services to be provided by the CS Group are fair and reasonable so far as the Independent Shareholders are concerned.

4.6 Proposed Caps of the Master Financial Services Agreement in respect of the loan services to be provided by the CS Group

The Proposed Caps for the maximum daily outstanding balance of loans (including accrued interest and handling fee) for the loan services to be provided to the COSCO SHIPPING Group under the Master Financial Services Agreement for each of the years ending 31 December 2017, 2018 and 2019 are RMB17,500 million, RMB17,500 million and RMB17,500 million, respectively.

The Proposed Caps were determined with reference to, among other factors, the possible demand of loan services from the COSCO SHIPPING Group in accordance with its business development plan.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

COSCO SHIPPING Energy Transportation Co., Ltd (1138 HK/600026 CH) (“ COSCO SHIPPING Energy ”) and China COSCO are two of the listed members of the COSCO SHIPPING Group. We have reviewed the interim report of COSCO SHIPPING Energy and China COSCO for the six months ended 30 June 2016, where we noted that their borrowings in aggregate amounted to approximately RMB90,464 million as at 30 June 2016.

After taking into account, in particular, (i) the Proposed Caps which were determined with reference to, among other factors, the possible demand of loan services from the COSCO SHIPPING Group in accordance with its business development plan; (ii) the scale of borrowings of COSCO SHIPPING Energy and China COSCO; and (iii) the provision of loan services being revenue in nature to the Group, we are of the view that the Proposed Caps for the Master Financial Services Agreement in respect of the loan services to be provided by the CS Group are fair and reasonable so far as the Independent Shareholders are concerned.

4.7 Proposed Caps of the Master CS Finance Financial Services Agreement in respect of the deposit services to be provided to the CS Group

The Proposed Caps for the maximum daily outstanding balance of deposits (including accrued interest and handling fee) for the deposit services to be provided to the CS Group under the Master CS Finance Financial Services Agreement for each of the years ending 31 December 2017, 2018 and 2019 are RMB10,000 million, RMB11,000 million and RMB12,000 million, respectively.

We note that the historical amount under the Master CS Finance Financial Services Agreement reached approximately RMB8,582.9 million for the nine months ended 30 September 2016, representing a growth of approximately 45% as compared with that for the year ended 31 December 2015. We have also reviewed the interim report of the Company for the six months ended 30 June 2016, where we noted the cash and cash equivalents of the Group amounted to approximately RMB13,965 million as at 30 June 2016.

After taking into account, in particular, (i) the scale of the historical transaction amount under the Master CS Finance Financial Services Agreement; and (ii) each of the Proposed Caps is less than the cash and cash equivalent of the Group as at 30 June 2016, we are of the view that the Proposed Caps for the CS Finance Financial Services Agreement in respect of deposit services to be provided to the CS Group are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having considered the above, we are of the opinion that the entering into of the Non-Exempt Continuing Connected Transactions Agreements is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole. We are also of the opinion that the terms of the Non-Exempt Continuing Connected Transaction Agreements are on normal commercial terms and, together with the Proposed Caps, are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves advise, the Independent Shareholders to vote in favour of the ordinary resolutions to approve the Non-Exempt Continuing Connected Transactions and the Proposed Caps at the EGM.

		Yours faithfully,
		For and on behalf of
	First	Shanghai Capital Limited
Fanny	Lee	Allen Wang
_Managing _	Director Director

Note: Ms. Fanny Lee and Mr. Allen Wang have been responsible officers of Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) since 2006 and 2014, respectively. Both of them have participated in the provision of independent financial advisory services for various connected transactions involving companies listed in Hong Kong.
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 “COSCO SHIPPING Development Co., Ltd.”.

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FINANCIAL INFORMATION

APPENDIX I

I. 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 of the Group.

The audited consolidated financial statements of the Company for the years ended 31 December 2013, 2014 and 2015 together with the relevant notes to the financial statements of the Company can be found on pages 74 to 189 of the annual report of the Company for the year ended 31 December 2013, pages 83 to 203 of the annual report of the Company for the year ended 31 December 2014 and pages 102 to 201 of the annual report of the Company for the year ended 31 December 2015. Please also see the hyperlinks below to the said annual reports:

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

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

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0429/LTN20160429559.pdf

The unaudited consolidated financial statements of the Company for the periods ended 30 June 2016 together with the relevant notes to the financial statements of the Company can be found on pages 22 to 68 of the interim report of the Company for the period ended 30 June 2016. Please also see the hyperlink below to the said interim report:

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0928/LTN20160928192.pdf

II. STATEMENT OF INDEBTEDNESS

Debt securities and term loans

As at the close of business of 31 October 2016, 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.

Borrowings and indebtedness

As at the close of business of 31 October 2016, 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 RMB93,105 million, comprising secured bank and other loans of approximately RMB10,877 million, unsecured bank and other loans of approximately RMB78,711 million, and RMB bonds of approximately RMB3,457 million.

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FINANCIAL INFORMATION

APPENDIX I

Contingent liabilities

As at the close of business of 31 October 2016, the Group has no material contingent liability or guarantees.

Mortgage and charges

As at the close of business of 31 October 2016, 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 2016.

III. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

After the Restructuring, the Company has focused its business in providing integrated financial services with diversified leasing businesses such as vessel leasing, container leasing and non-shipping finance leasing, supply chain finance, shipping insurance, logistic infrastructure investment and other financial assets investment services.

As a result, the Company will continue to enhance its ability to counter the business cycle of the conventional shipping business through the expansion of its chartering business, container leasing business and shipping related financial services, which is expected to strengthen the stability of the financial condition of the Company and create growth for the benefit of the Company and its Shareholders.

Compared with container liner business, vessels chartering business is less susceptible to seasonality and price fluctuations of the global container shipping market. Charter contracts with a relatively longer chartering term, particularly for vessels with a high shipping capacity, can ensure stable cash flows and funds for purchasing vessels in the future. The Company will also provide customers with one-stop services including ship chartering, container chartering, crew management, vessel management, repair and logistics network.

In addition, the Company is able to provide a full range of shipping services ranging from container shipping, leasing to related financial services, which is expected to generate a great amount of synergy among the business segments through comprehensive services, cross-selling and increased loyalty of the customers. The business of the Company will facilitate intra-group business integration by optimising strategy management and control, achieving synergy among different business segments, and improving overall operating efficiency of the Company. The expanded business of the Company may also interact with the business of other members of the Company and the COSCO Group through the integration of financial services and the industrial segments.

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FINANCIAL INFORMATION

APPENDIX I

Furthermore, the Company will continue to strengthen talent team building, improve corporate governance standard and enhance production safety control. The Company recognizes new changes and new development trends in the world economy and the shipping market, and will fully integrate with the national strategy of “one belt one road,” in particular the building of “the 21st Century Maritime Silk Road.” The Company will actively adapt to the new normal stage of economic development, refine management, pursue innovation and strive for sustainable development.

IV. EFFECT ON THE EARNINGS AND ASSETS AND LIABILITIES OF THE GROUP

The proposed annual caps for the maximum daily outstanding balance of loans (including accrued interest and handling fee) for the loan services to be provided to the COSCO SHIPPING Group under the Master Financial Services Agreement for the years ending 31 December 2017, 2018 and 2019 are RMB17,500,000,000, RMB17,500,000,000 and RMB17,500,000,000, respectively. The relevant interest rates shall be not lower than (i) the benchmark rates stipulated by PBOC for the same type of loan; or (ii) the rates offered by the major and independent PRC commercial banks in the service location or adjacent areas in the normal course of business for such types of loans.

The proposed annual caps for the maximum daily outstanding balance of deposits (including accrued interest and handling fee) for the deposit services to be provided to the CS Group under the Master CS Finance Financial Services Agreement for the years ending 31 December 2017, 2018 and 2019 are RMB10,000,000,000, RMB11,000,000,000 and RMB12,000,000,000, respectively. The relevant interest rates shall not be lower than (i) the benchmark rates stipulated by PBOC for the same type of deposit; or (ii) the rates offered by the major and independent PRC commercial banks in the service location or adjacent areas in the normal course of business for such types of deposits.

It is expected that the provision of loan services by the CS Group under the Master Financial Services Agreement and the provision of deposit services to the CS Group under the Master CS Finance Financial Services Agreement will generate interest income for the Group with the aforementioned interest rates. As the potential interest income to be earned from the services loan and deposit services for the years ending 31 December 2017, 2018 and 2019 are not expected to constitute a significant portion of the Group’s earnings and assets, the Company anticipates that such potential interest income will not have any material impact on the Group’s earnings, assets and liabilities.

V. WORKING CAPITAL

After due and careful enquiry, taking into account the financial resources available to the Group, including internally generated funds and available banking facilities, the Directors are of the opinion that the Group has sufficient working capital for its present requirements for at least 12 months from the date of this circular.

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APPENDIX II

I. 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 Company. 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 document misleading.

II. DISCLOSURE OF INTERESTS

Interests and short positions of Directors, Supervisors and chief executives

Save as disclosed below, 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 Hong Kong 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 Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers adopted by the Company.

					Approximate	Approximate
					percentage of	percentage of
					the relevant	the total issued
				Number of Shares	class of Shares of	share capital of
Name	Position	Class of Shares	Capacity	interested	the Company	the Company
				(Note 1)	(%)	(%)
Wang Daxiong	Director	H Shares	Other	834,677 (L)	0.02	0.01
				(Notes 2 and 3)
Liu Chong	Director	H Shares	Other	1,112,903 (L)	0.03	0.01
				(Notes 2 and 4)
Xu Hui	Director	H Shares	Other	945,968 (L)	0.03	0.01
				(Notes 2 and 5)
Fu Yi	Supervisor	H Shares	Other	556,452 (L)	0.01	0.00
				(Notes 2 and 6)

Notes:

“L” means long position in the shares.
As disclosed in the announcement of the Company dated 24 November 2016, certain executive Directors, Supervisor, senior management and employees of the Company had voluntarily invested, with their own fund, in the Asset Management Plan, pursuant to which the executive Directors, Supervisor, senior management and

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APPENDIX II

employees of the Company had subscribed to the units of the Asset Management Plan and entrusted the manager of the Asset Management Plan to manage the Asset Management Plan, which would invest in the H Shares. The manager of the Asset Management Plan shall be responsible for, among other things, the investment and re-investment of the assets under the Asset Management Plan and shall be entitled to exercise the voting rights and other relevant rights in respect of the H Shares held under the Asset Management Plan. The Company did not participate in the Asset Management Plan, and the Asset Management Plan does not constitute a share option scheme or any type of employee benefit scheme of the Company.

Mr. Wang Daxiong was one of the participants of the Asset Management Plan through which he held approximately 12.10% of the total number of units of the Asset Management Plan as at the Latest Practicable Date. Accordingly, the 834,677 H Shares represented the interests derived from the units subscribed by Mr. Wang Daxiong in the Asset Management Plan as at the Latest Practicable Date. As at the Latest Practicable Date, Mr. Wang Daxiong did not hold any Shares.
Mr. Liu Chong was one of the participants of the Asset Management Plan through which he held approximately 16.13% of the total number of units of the Asset Management Plan as at the Latest Practicable Date. Accordingly, the 1,112,903 H Shares represented the interests derived from the units subscribed by Mr. Liu Chong in the Asset Management Plan as at the Latest Practicable Date. As at the Latest Practicable Date, Mr. Liu Chong did not hold any Shares.
Mr. Xu Hui was one of the participants of the Asset Management Plan through which he held approximately 13.71% of the total number of units of the Asset Management Plan as at the Latest Practicable Date. Accordingly, the 945,968 H Shares represented the interests derived from the units subscribed by Mr. Xu Hui in the Asset Management Plan as at the Latest Practicable Date. As at the Latest Practicable Date, Mr. Xu Hui did not hold any Shares.
Mr. Fu Yi was one of the participants of the Asset Management Plan through which he held approximately 8.06% of the total number of units of the Asset Management Plan as at the Latest Practicable Date. Accordingly, the 556,452 H Shares represented the interests derived from the units subscribed by Mr. Fu Yi in the Asset Management Plan as at the Latest Practicable Date. As at the Latest Practicable Date, Mr. Fu Yi did not hold any Shares.

Positions held by Directors and Supervisors of the Company in substantial Shareholder(s)

As at the Latest Practicable Date:

(i) Ms. Sun Yueying, an executive Director, was also the chief accountant and member of the party leadership group of COSCO SHIPPING;
(ii) Mr. Chen Dong, a non-executive Director, was also a department general manager of COSCO SHIPPING;
(iii) Mr. Huang Jian, an non-executive Director, was also a department general manager of COSCO SHIPPING;
(iv) Mr. Feng Boming, an non-executive Director, was also a department general manager of COSCO SHIPPING;
(v) Mr. Hao Wenyi, a Supervisor, was also a department general manager of COSCO SHIPPING; and
(vi) Mr. Ye Hongjun, a Supervisor, was also the chief legal adviser of COSCO SHIPPING.

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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.

Interests of substantial Shareholders

As at the Latest Practicable Date, so far as was known to the Directors, Supervisors or chief executive(s) of the Company, the interests or short positions of the Shareholders who are entitled to exercise or control 5% or more of the voting power at any general meeting or other persons (other than a Director, Supervisor or chief executive(s) of the Company) in the Shares or underlying shares of the Company which were required to be notified to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO, or which were required to be recorded in the register kept by the Company pursuant to Section 336 of the SFO or which have been notified to the Company and the Hong Kong Stock Exchange were as follow:

				Approximate	Approximate
				percentage of the total	percentage of
				number of the relevant	the issued share
	Class of		Number of Shares	class of Shares of the	capital of the
Name of Shareholder	Shares	Capacity	interested	Company	Company
			(Note 1)	(%)	(%)
China Shipping	A Shares	Beneficial owner	4,458,195,175 (L)	56.20	38.16
			(Note 2)
	H Shares	Beneficial owner	100,944,000 (L)	2.69	0.86
			(Note 3)
COSCO SHIPPING	A Shares	Interest of controlled	4,458,195,175 (L)	56.20	38.16
		corporation	(Note 2)
	H Shares	Interest of controlled	100,944,000 (L)	2.69	0.86
		corporation	(Note 3)
The Northern Trust	H Shares	Approved lending agent	249,945,900 (P)	6.66	2.14
Company (ALA)

Notes:

“L” means long position in the shares; “S” means short position in the shares; and “P” means shares in the lending pool.
Such 4,458,195,175 A Shares represent the same block of Shares.
Such 100,944,000 H Shares represent the same block of Shares and is held by Ocean Fortune Investment Limited, an indirectly wholly-owned subsidiary of China Shipping.

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Save as disclosed above, as at the Latest Practicable Date, no other person (other than Directors, Supervisors or chief executive(s) of the Company) had any interests or short positions in any Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or any interests or short positions recorded in the register kept by the Company pursuant to Section 336 of the SFO or any interests or short positions which have been notified to the Company and the Hong Kong Stock Exchange.

III. NO MATERIAL ADVERSE CHANGE

Save and except as disclosed below, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2015, being the date to which the latest audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date:

(i) as disclosed in the interim report of the Group for the six months ended 30 June 2016, which have been prepared in accordance with the Hong Kong Financial Reporting Standards, the Group recorded a loss for the period of approximately RMB806.9 million for the six months ended 30 June 2016 as compared to the restated profit for the period of approximately RMB888.7 million for the corresponding period of 2015, mainly due to the downturn of the shipping market, the Company’s liner operations had suffered significant losses during January to February prior to the completion of the Restructuring. In addition, the Group recorded net current liabilities of approximately RMB19.7 billion as at 30 June 2016 as compared to the restated net current liabilities of approximately RMB9.9 billion as at 31 December 2015. Such increase was mainly due to the completion of the Group’s acquisitions of subsidiaries at a premium during the six months ended 30 June 2016. Further details with respect to the above are set out in the interim report of the Group for the six months ended 30 June 2016; and
(ii) as disclosed in the third quarterly report of the Group for the nine months ended 30 September 2016, which have been prepared in accordance with the Generally Accepted Accounting Principles of the PRC, the Group recorded a net loss of approximately RMB598.4 million for the nine months ended 30 September 2016 as compared to the restated net loss of approximately RMB177.0 million for the corresponding period of 2015, mainly due to the decrease in income from container transportation. In addition, the Group recorded net current liabilities of approximately RMB11.2 billion as at 30 September 2016 as compared to the restated net current liabilities of approximately RMB13.0 billion as at 31 December 2015. Such decrease was mainly due to the increase in cash and bank balances during the nine months ended 30 September 2016. Further details with respect to the above are set out in the announcement of the Company dated 28 October 2016 in respect of the third quarterly report of the Group for the nine months ended 30 September 2016.

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IV. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or the Supervisors had entered into or proposed to enter into any service contract with any member of the Group which does not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

V. 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.

VI. MATERIAL INTERESTS

As at the Latest Practicable Date:

(i) none of the Directors or Supervisors had any direct or indirect interest in any assets which had been, since 31 December 2015 (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
(ii) 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.

VII. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor any of their respective close associates had any interest in other business which competes or may compete, either directly or indirectly, with the business of the Group as if each of them were treated as a controlling shareholder under Rule 8.10 of the Listing Rules.

VIII. EXPERT’S QUALIFICATION AND CONSENT

The following is the qualification of the expert who has given its opinions or advices which are contained in this circular:

Name	Qualification
First Shanghai Capital Limited	A licensed corporation to carry out type 6 (advising
	on corporate finance) regulated activity under the
	SFO

As at the Latest Practicable Date, the above expert had given and had not withdrawn its written consent to the issue of this circular with the inclusion of its letter or opinion and references to its name in the form and context in which they respectively appear.

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As at the Latest Practicable Date, the above expert did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, the above expert did not have any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group, or was proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2015 (being the date to which the latest published audited statements of the Group were made up).

IX. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business) had been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date:

(i) a subscription agreement dated 11 October 2016 entered into between the Company and China Shipping, pursuant to which China Shipping has conditionally agreed to subscribed for, and the Company has conditionally agreed to issue, a number of A Shares for an amount of not less than RMB5 billion and not more than RMB7 billion;
(ii) a subscription agreement dated 5 September 2016 entered into between the Company and Jinan Diesel Engine Company Limited (“ Jinan ”), pursuant to which the Company has conditionally agreed to subscribe for and Jinan has conditionally agreed to allot and issue such number of ordinary shares of RMB1.00 each in the share capital of Jinan, which are listed and traded on the Shanghai Stock Exchange for a total consideration of RMB950,000,000 (Note: details of the agreement were disclosed in the Company’s announcement dated 5 September 2016);
(iii) a subscription agreement dated 18 May 2016 entered into between the Company and Kingray New Materials Science & Technology Co., Ltd. (“ Kingray ”), pursuant to which the Company has conditionally agreed to subscribe for and Kingray has conditionally agreed to allot and issue such number of ordinary shares of RMB1.00 each in the share capital of Kingray, which are listed and traded on the Shanghai Stock Exchange for a total consideration of RMB1,500,000,000 (Note: details of the agreement were disclosed in the Company’s announcement dated 19 May 2016);
(iv) an equity acquisition agreement dated 11 December 2015 entered into between China Shipping Container Lines (Hong Kong) Co., Ltd (“ CSCL HK ”) and China Shipping (Hong Kong) Holdings Co., Limited (“ CS Hong Kong ”), pursuant to which CSCL HK agreed to purchase and CS Hong Kong agreed to sell the entire equity interests in Dong Fang International Investment Limited in the aggregate consideration of RMB2,969.2275 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);

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(v) an equity acquisition agreement dated 11 December 2015 entered into between CSCL HK and COSCO Pacific Limited (“ COSCO Pacific ”), pursuant to which CSCL HK agreed to purchase and COSCO Pacific agreed to sell the entire equity interests in Florens Container Holdings Limited in the aggregate consideration of RMB7,784.4833 million minus applicable pre-closing dividend (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(vi) an equity acquisition agreement dated 11 December 2015 entered into between CSCL HK and CS Hong Kong, pursuant to which CSCL HK agreed to purchase and CS Hong Kong agreed to sell the entire equity interests in each of Helen Insurance Brokers Limited and China Shipping Nauticgreen Holdings Company Limited in the aggregate consideration of RMB1,699.6956 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(vii) an equity acquisition agreement dated 11 December 2015 entered into between the Company and China Shipping, pursuant to which the Company agreed to purchase and China Shipping agreed to sell the entire equity interests in COSCO SHIPPING Leasing in the aggregate consideration of RMB1,995.6070 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(viii) an equity acquisition agreement dated 11 December 2015 entered into among the Company, China Shipping, Shanghai Shipping (Group) Company (“ CS Shanghai ”) and Guangzhou Maritime Transport (Group) Co., Ltd. (“ CS Guangzhou ”), pursuant to which the Company agreed to purchase and China Shipping, CS Shanghai and CS Guangzhou agreed to sell the entire equity interests in CS Investment in the aggregate consideration of RMB3,458.4549 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(ix) an equity acquisition agreement dated 11 December 2015 entered into among the Company, China Shipping and CS Guangzhou, pursuant to which the Company agreed to purchase and China Shipping and CS Guangzhou agreed to sell 40% equity interests in CS Finance Company in the aggregate consideration of RMB510.9866 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(x) a capital increase agreement dated 11 December 2015 entered into among the Company, COSCO Company and several other parties, pursuant to which the Company agreed to make a capital increase in the amount of RMB614.2674 million, among which around RMB340 million will be contributed to the registered capital of COSCO Finance and the remaining shall be used as capital reserve for the future development of COSCO Finance (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);

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(xi) an equity acquisition agreement dated 11 December 2015 entered into between CSCL HK and China COSCO (Hong Kong) Limited (“ COSCO HK ”), pursuant to which CSCL HK agreed to purchase and COSCO HK agreed to sell the entire equity interests in Long Honour Investments Limited in the aggregate consideration of RMB2,770.9726 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(xii) an equity acquisition agreement dated 11 December 2015 entered into between the Company and COSCO Company, pursuant to which the Company agreed to purchase and COSCO Company agreed to sell 13.67% equity interests in China Bohai Bank Co., Ltd. in the aggregate consideration of RMB5,448.0480 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(xiii) an equity sales agreement dated 11 December 2015 entered into among the Company, CS Hong Kong and COSCO Pacific, pursuant to which the Company and CS Hong Kong agreed to sell and COSCO Pacific agreed to acquire the entire equity interests in China Shipping Ports Development Co., Ltd. in the aggregate consideration of RMB7,632.4553 million minus applicable adjustment amounts (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(xiv) an equity sales agreement dated 11 December 2015 entered into between CSCL HK and COSCO Container Lines (Hong Kong) Co., Limited (“ COSCO Container HK ”), pursuant to which CSCL HK agreed to sell and COSCO Container HK agreed to acquire the entire equity interests in China Shipping Container Lines Agency (Hong Kong) Co., Limited in the aggregate consideration of RMB35.6706 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(xv) an equity sales agreement dated 11 December 2015 entered into between CSCL HK and Shanghai Pan Asia Shipping Company Limited (“ Pan Asia Shipping ”), pursuant to which CSCL HK agreed to sell and Pan Asia Shipping agreed to acquire the entire equity interests in Universal Shipping (Asia) Company Limited in the aggregate consideration of RMB124.2913 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);

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(xvi) an equity sales agreement dated 11 December 2015 entered into between the Company and COSCO Container, pursuant to which the Company agreed to sell and COSCO Container agreed to acquire 51% equity interests in Golden Sea Shipping Pte. Ltd. (“ Golden Sea ”) in the aggregate consideration of RMB71.0360 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(xvii) an equity sales agreement dated 11 December 2015 entered into between CSCL HK and China Shipping Regional Holdings Pte. Ltd. (“ CS Regional ”), pursuant to which CSCL HK agreed to sell and CS Regional agreed to acquire 91% equity interests in China Shipping (Singapore) Petroleum Pte. Ltd. in the aggregate consideration of RMB30.6975 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(xviii) an equity sales agreement dated 11 December 2015 entered into between the Company and CS Regional, pursuant to which the Company agreed to sell and CS Regional agreed to acquire 9% equity interests in Golden Sea in the aggregate consideration of RMB12.5358 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015);
(xix) an equity sales agreement dated 11 December 2015 entered into between the Company and China COSCO, pursuant to which the Company agreed to sell and China COSCO agreed to acquire equity interests in several onshore agency and other related business companies in the aggregate consideration of RMB885.6734 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015); and
(xx) an equity sales agreement dated 11 December 2015 entered into among CSCL HK, Pan Asia Shipping and COSCO Container, pursuant to which CSCL HK agreed to sell and COSCO Container agreed to acquire the entire equity interests in China Shipping Container Lines Agency (Shenzhen) Co., Ltd. in the aggregate consideration of RMB15.1741 million, and CSCL HK agreed to sell and Pan Asia Shipping agreed to acquire the entire equity interests in Universal Logistics (Shenzhen) Co., Ltd. in the aggregate consideration of RMB9.0516 million (Note: details of the agreement were disclosed in the Company’s circular dated 31 December 2015).

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X. 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 and including the date of the EGM:

(a) the Master Vessel Charter Agreement;
(b) the Master Operating Lease Services Agreement;
(c) the Master Finance Lease Services Agreement;
(d) the Master Vessel Services Agreement;
(e) the Master Containers Services Agreement;
(f) the Master Financial Services Agreement;
(g) the Master CS Finance Financial Services Agreement;
(h) the Master Factoring Services Agreement;
(i) the Florens Finance Financial Services Agreement;
(j) the letter from the Board, the text of which is set out in the section headed “Letter from the Board” in this circular;
(k) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Board Committee” in this circular;
(l) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Financial Adviser” in this circular;
(m) the written consents referred to in the paragraph headed “Expert’s Qualification and Consent” in this Appendix;
(n) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;
(o) the articles of association of the Company;
(p) the annual reports of the Company for the years ended 31 December 2014 and 2015; and

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(q) this circular.

XI. 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 English text of this circular shall prevail over the Chinese text in case of inconsistency.
(c) The legal address of the Company in the PRC is Room A-538, International Trade Center, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC.
(d) The principal place of business of the Company in the PRC is Maritime Research Building, 628 Minsheng Road, Pudong New Area, Shanghai, the PRC.
(e) The principal place of business of the Company in Hong Kong is 31/F, Tower 2, Kowloon Commerce Centre, 51 Kwai Cheong Road, Kwai Chung, New Territories, Hong Kong.
(f) The Hong Kong H Share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

This English version is for reference only. If there is any discrepancy between the English and Chinese version, the Chinese version should prevail.

Rules of Procedure of Shareholders’ General Meeting of China Shipping Container Lines Company Limited

Chapter 1 General Provisions

Article 1 In order to protect the legitimate rights and interests of the Company, its shareholders and creditors, and to regulate the organisation and conduct of general meetings of the Company, these rules of procedure (the “Rules”) are formulated in accordance with the Company Law of the People’s Republic of China, Rules for General Meetings of Listed Companies issued by China Securities Regulatory Commission, Mandatory Provisions for the Articles of Association of Companies to be Listed Overseas, Guide to Articles of Association of Listed Company, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Listing Rules of Shanghai Stock Exchange, (together the “Listing Rules”), other laws, regulations and regulatory documents, and Articles of Association of China Shipping Container Lines Company Limited (the “Articles of Association”).
Article 2 These Rules apply to the general meetings of the Company and shall be binding on the Company, its shareholders, authorised proxies of the shareholders, directors, supervisors, chief executive officer, general manager, other senior executives, and other relevant personnel present at the meeting.

Chapter 2 General Provisions for the General Meetings

Article 3 The general meeting shall be the authority of power of the Company and shall exercise the following functions and powers in accordance with the law.
Article 4 A general meeting shall exercise the following functions and powers:
(I) to resolve on the operating strategy and investment plans of the Company and to consider and approve material investment plans requiring approval of a general meeting;
(II) to elect and replace directors and to decide on matters relating to the remuneration of directors;
(III) to elect and replace supervisors who are representatives of the shareholders and to decide on matters relating to the remuneration of supervisors;

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APPENDIX III

(IV) to consider and approve directors’ reports;
(V) to consider and approve supervisors’ reports;
(VI) to consider and approve the annual financial budgets and financial statements of the Company;
(VII) to consider and approve the Company’s profit distribution plan and loss recovery plan;
(VIII) to resolve on capital increase or decrease of the Company;
(IX) to resolve matters on merger, division, dissolution, liquidation or transformation of the Company;
(X) to resolve on the issuance of bonds of the Company;
(XI) to resolve on the appointment, removal or non-reappointment of the Company’s accounting firm;
(XII) to amend the Articles of Association;
(XIII) to consider proposals of shareholders representing more than 3% (inclusive) of the voting shares of the Company;
(XIV) to resolve on the Company’s external guarantees which shall be approved by a general meeting pursuant to the Articles of Association;
(XV) to consider the Company’s purchase or sale of major assets within one year with the transaction amount exceeding 30% of the latest audited total assets of the Company;
(XVI) to consider equity incentive scheme;
(XVII) to consider and approve matters relating to the changes in the use of proceeds from share offerings; and
(XVIII)to resolve on other matters which, in accordance with the laws, administrative regulations, Listing Rules, and Articles of Association, must be approved at a general meeting.

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

Article 5 General meetings are classified into annual general meetings and extraordinary general meetings. Annual general meetings shall be convened once a year within 6 months from the end of the preceding accounting year.

Under any of the following circumstances, the Company shall convene an extraordinary general meeting within 2 months from the date upon which the circumstance occurs:

(I) if the number of directors falls short of the quorum stipulated in Company Law or is less than two thirds of the number specified in the Articles of Association;
(II) if the unpaid losses of the Company amounts to one third of the total paid-up share capital of the Company;
(III) if the shareholder or shareholders who, either alone or together holds or hold more than 10% of the Company’s voting shares requests or request in writing to convene an extraordinary general meeting;
(IV) if the Board deems it necessary, or the supervisory committee proposes, to convene an extraordinary general meeting;
(V) Proposed by more than two independent directors; and
(VI) Other circumstances stipulated by laws, administrative regulations, department rules or the Articles of Association.

The amount of shareholding mentioned in (III) above is calculated as of the day when the shareholder(s) in question make(s) the request(s) in writing.

Article 6 The venue of general meetings of the Company shall be the domicile of the Company.

General meetings shall be set up the in a venue and held in the form of an onsite meeting. The Company may use a safe, economical and convenient means to hold the meetings such as, through the internet, or any other means for its shareholders to conveniently participate in such meetings. Shareholders participating in the general meetings by any aforesaid means shall be deemed to have attended the meetings.

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Chapter 3 Procedure to Call for General Meetings

Article 7 The Board shall call general meetings pursuant to the Articles of Association.
Article 8 Independent non-executive directors may propose to the Board to call for an extraordinary general meeting. In relation to the proposal of the independent non-executive director to call for an extraordinary general meeting, the Board shall, within 10 days after receiving the proposal, pursuant to relevant laws, administrative regulations and the Articles of Association, give a written response on the decision on whether to call for such an extraordinary general meeting.

If the Board agrees to call for the extraordinary general meeting, it shall serve a notice of extraordinary general meeting within 5 days after the Board has resolved on such matters. If the Board does not agree to hold such extraordinary general meeting, it shall give the reasons and make an announcement in respect thereof.

Article 9 The supervisory committee shall have the right to propose to the Board to call for an extraordinary general meeting, and shall put forward its proposal to the Board in writing. The Board shall, within 10 days after receiving the proposal, pursuant to relevant laws, administrative regulations and the Articles of Association, give a written response on the decision on whether to call for such extraordinary general meeting.

If the Board agrees to call for the extraordinary general meeting, it shall serve a notice of extraordinary general meeting within 5 days after the Board has resolved on such matters. The consent of the supervisory committee is required if changes are made to the original proposal set forth in the notice of extraordinary general meeting.

If the Board does not agree to hold the extraordinary general meeting or fails to give a written response within 10 days after receiving the proposal, it shall be deemed as unable to perform or failing to perform its duty to call for the extraordinary general meeting, and the supervisory committee may call for and preside over the meeting.

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Article 10 Two or more independent non-executive directors, supervisors, and shareholders who, either alone or together holds or hold more than 10% of the total issued share capital of the Company, may request to call for an extraordinary general meeting, and shall follow the procedure below:
(I) sign one or several written requests in the same format to request the Board to call for an extraordinary general meeting and specify the topics for discussion at the extraordinary general meeting. The Board shall, within 10 days after receiving the proposal, pursuant to relevant laws, administrative regulations and the Articles of Association, give a written response on the decision on whether to call for such an extraordinary general meeting.
(II) If the Board agrees to call for the extraordinary general meeting, it shall serve a notice of extraordinary general meeting within 5 days after the Board has resolved on such matters. The consent of the proposer is required, if changes are made to the original proposal set forth in the notice of extraordinary general meeting.
(III) If the Board does not agree to call for the extraordinary general meeting proposed by independent non-executive directors, it shall provide reasons and make an announcement in respect thereof.
(IV) If the Board does not approve supervisory committee’s proposal to call for the extraordinary general meeting or fails to give a written reply within 10 days after receiving the proposal, it shall be deemed as unable to perform or failing to perform the its duty to call for the extraordinary general meeting, and the supervisory committee may call for and preside over the meeting. The procedure to call for general meetings shall, as far as possible, extend to be the same as the procedure by which the Board calls for general meetings.
(V) If the Board does not approve the shareholders’ proposal to call for the extraordinary general meeting, the shareholders shall propose in writing to the supervisory committee to call for an extraordinary general meeting.

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If the supervisory committee agrees to call for the extraordinary general meeting, it shall serve a notice of such extraordinary general meeting within 5 days after receiving the request. The consent of the proposed shareholder(s) shall be obtained if any changes are made to the original proposal set forth in the notice of extraordinary general meeting.

If the supervisory committee fails to serve the notice of such extraordinary general meeting within the prescribed period, it shall be deemed as failing to call for and preside over the general meeting and the shareholder(s) who, either alone or together holds or hold more than 10% of the total issued share capital of the Company for the past 90 consecutive days may call for and preside over the meeting. The procedure to call for general meetings shall, as far as possible, extent to be the same as the procedure by which the Board calls for general meetings.

Article 11 Where the supervisory committee or shareholders decide to call for a general meeting by themselves, they shall notify the Board in writing and file with the local office of the securities regulatory authority under the State Council and the stock exchange. Prior to the announcement of the resolutions of the general meeting, the shareholding of shareholders who called for the general meeting shall not be less than 10%.

The shareholders calling for the general meeting shall, upon issuing a notice of general meeting and announcing the resolutions thereof, submit the relevant documentation to the local office of the securities regulatory authority under the State Council and the stock exchange.

Article 12 With regards to the general meeting called by the supervisory committee or shareholders on its/their own initiative, the Board and its secretary shall offer cooperation. The Board shall provide the shareholders’ register as of the equity registration date. The Company shall bear the expenses in relation to the general meeting called by the supervisory committee or shareholders on its/their own initiative.

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Chapter 4 Proposals and Notice of General Meetings

Article 13 The content of a proposal shall be determined by the general meeting, shall have definite topics and specific issues for resolution, and shall comply with the relevant provisions of the laws, administrative regulations and the Articles of Association.
Article 14 The method and procedure for nominating directors and supervisors are:
(I) A list of director candidates or non-employee representatives as supervisor candidates may be proposed by the preceding Board or the supervisory committee, must be within the number specified in the Articles of Association and in accordance with the number of the proposed directors or supervisors to be elected; shareholder or shareholders who, either alone or together holds or hold more than 3% of the issued shares of the Company with voting rights may propose director candidates or supervisor candidates to the Board, but the number of persons nominated shall comply with the Articles of Association and shall not be greater than the number of directors or supervisors to be elected.
(II) The nomination committee of the Board or the supervisory committee shall make preliminary examination on the qualifications of the director or supervisor candidates, and submit the qualified candidates to Board or the supervisory committee for consideration. Upon approval by the Board or the supervisory committee, the list of director or supervisor candidates shall be submitted as a written proposal to the general meeting.
(III) The director or supervisor candidates shall, prior to the general meeting, provide written undertakings that they accept the nominations, the information provided is true and adequate, and that they will diligently fulfill the duties as director or supervisor if elected.
(IV) Unless a director or supervisor is elected via the cumulative voting system, the director or supervisor candidates shall be voted on separately at the general meeting.
(V) In the event of a temporary vacancy of director or supervisor, the Board or the supervisory committee shall propose to elect or replace one at the general meeting.

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Article 15 Where the Company convenes a general meeting, a written notice shall be given between a period of 45 to 50 days prior to the date of the meeting to notify all the shareholders in the shareholders’ register of the issues to be considered at the meeting, and the date and venue of the meeting. Any shareholder intending to attend the meeting shall serve to the Company a written reply showing his/her intention to attend at least 20 days before the meeting.
Article 16 Where the Company convenes a general meeting, the Board, the Supervisory Committee and shareholder or shareholders who, either alone or together holds or hold more than 3% of the issued shares of the Company shall have the right to make a new proposal in writing, and the Company shall place the said proposal on the agenda of the said general meeting if the said proposal falls within the functions and powers of general meetings.

Shareholder or shareholders who, either alone or together holds or hold more than 3% of the issued shares of the Company may submit a written provisional proposal to the convener 10 days before a general meeting is convened. The convener shall serve a supplementary notice of general meeting within 2 days upon receipt of the proposal.

Save as specified in the preceding paragraph, the convener shall not change the proposal set out in the notice of general meeting or add any new proposal after the said notice is served.

Proposals not set out in the notice of general meeting or not complying with the Rules shall not be voted on or resolved at the general meeting.

Article 17 The Company shall, based on the written replies received from shareholders 20 days prior to the date of the general meeting, calculate the number of voting shares held by shareholders intending to attend the meeting. Where the number of voting shares represented by shareholders intending to attend the meeting amounts to more than half of the Company’s voting shares, the Company may convene the general meeting; if not, the Company shall, within 5 days, notify shareholders again of the issues to be considered, date and venue of the meeting in the an announcement. The Company may then convene the general meeting after such announcement. The relevant announcement shall be published on the designated newspapers.

Article 18 The notice of a general meeting shall meet the following requirements:

(I) is in written form;
(II) specifies the venue, date and duration of the meeting;
(III) states the matters to be discussed at the meeting;

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(IV) provides the shareholders with such information and explanation as necessary for them to make informed decisions in connection with the matters to be discussed; this principle includes (but is not limited to) where a proposal is made to merge the Company, to repurchase shares of the Company, to reorganise its share capital or to make any other reorganisation of the Company, the detailed conditions of the proposed transaction shall be provided together with the contracts (if any), and the reason and effect of any such proposal shall also be properly explained;
(V) contains a disclosure of the nature and extent of the material interests of any director, supervisor, chief executive officer, general manager or other senior executive in the proposed transaction and the effect which the proposed transaction will have on them in their capacity as shareholders if it is different from the effect on interests of the shareholders of the same class;
(VI) contains the full text of any special resolutions to be proposed at the meeting;
(VII) contains a clear statement that a shareholder entitled to attend and vote at such meeting is entitled to appoint one or more proxies to attend and vote at such meeting on his behalf and that such proxy need not be a shareholder;
(VIII) specifies the time and venue for serving the form of proxy for the voting proxy for the meeting;
(IX) specifies the equity registration date of shareholders entitled to attend the general meeting;
(X) specifies the name and telephone number of the coordinator of the meeting.

Notices or supplementary notices of general meetings shall adequately and completely disclose the specific contents of all proposals, as well as all the information or explanations which are necessary for the shareholders to make a reasonable judgment in respect of the issues to be discussed. Where the opinions of an independent non-executive director are required on the matters to be discussed, such opinions and reasons thereof shall be disclosed when the notices or supplementary notices of general meetings are served.

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Article 19 If the election of the proposed directors or supervisors is to be discussed at a general meeting, the notice of meeting shall adequately disclose the detailed information of the director or supervisor candidates, which information shall at least include:
(I) personal particulars, including academic qualifications, work experiences, and concurrent positions;
(II) whether the candidate has any connections with the Company, its controlling shareholders and effective controllers;
(III) the amount of shares of the Company that the candidate holds; and
(IV) whether the candidate has been punished by the China Securities Regulatory Administration or any other relevant authority or the reprimand by the stock exchange.

Unless a director or supervisor is elected via the cumulative voting system, each director or supervisor candidate shall be proposed via a single motion.

Article 20 The notice of a general meeting shall be delivered to shareholders (whether or not they are entitled to vote at the general meeting) by hand or by pre-paid mail to their addresses as recorded in the shareholders’ register. For holders of domestic shares, the notice of meeting may be issued in the form of public announcement.

Public announcement referred to in the preceding paragraph shall be published in one or more newspaper(s) designated by the securities regulatory authority under the State Council during the period between 45 days to 50 days prior to the date of the meeting. Once the announcement is made, holders of domestic shares shall be deemed to have received the notice of the relevant general meeting.

Article 21 The accidental omission to give notice of meeting to, or the non-receipt of notice of meeting by, any person entitled to receive notice shall not invalidate the meeting and the resolutions adopted at the meeting.
Article 22 The notice of general meeting shall specify the time and venue of the meeting and the equity registration date. The equity registration date shall not be changed once confirmed.
Article 23 After the notice of general meeting is issued, the same meeting shall not be postponed or cancelled and the proposals set out in the notice shall not be cancelled without proper reasons. In the case of any postponement or cancellation of the meeting, the convener shall make an announcement and give the reasons thereof at least 2 workdays prior to the date on which the meeting is originally scheduled.

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Chapter 5 Procedure to convene General Meetings

Article 24 The Board or any other convener shall take necessary measures to ensure the proper order of the general meetings. The Board or any other convener shall take measures to stop any acts that may disturb the general meetings, seeking trouble or infringing upon the legitimate rights and interests of shareholders, and shall report such act to the relevant authority for investigation and treatment.
Article 25 Any shareholder entitled to attend and vote at a general meeting of the Company shall be entitled to appoint one or more persons (who need not be a shareholder or shareholders) as his or her proxies to attend and vote on his or her behalf. The said proxy may exercise the following rights as granted by the said shareholder:
(I) shareholder’s right to speak at the general meeting;
(II) to severally or jointly request to vote by poll; and
(III) to exercise the right to vote by a show of hands or by poll. Where there is more than one proxy, the said proxies shall vote by poll.

If the shareholder is a recognised clearing house (or agent thereof) as defined in Securities and Futures (Clearing Houses) Ordinance (Chapter 420), the said shareholder may authorise one or more persons as he or she deems appropriate to act on his or her behalf at any general meetings or class meetings; however, where several persons are authorised, the form of proxy shall specify the number and classes of shares which relates to the said persons. The persons authorised may exercise rights on behalf of the recognised clearing house (or agent thereof) as if the said persons were the personal shareholders of the Company.

Article 26 Any proxy attending a general meeting on behalf of a shareholder shall present his identity certificate and form of proxy signed by the principal or the principal’s legal representative, which form of proxy shall specify the date of issue. The legal representative of a corporate shareholder attending the meeting shall present his own identity certificate, identity certificate as the legal representative, share certificate or other confirmation documents, enabling the Company to confirm the capacity of the corporate shareholder; the shareholder’s proxy attending the meeting shall present his own identity certificate, form of proxy bearing the signature of the legal representative and the corporate seal, shareholding certificate, or other confirmation documents, enabling the Company to confirm the capacity of the shareholder’s proxy.

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Article 27 The Board, independent non-executive directors and qualified shareholders may collect voting rights from shareholders of the listed company at a general meeting. The public collection of the voting rights of shareholders of the listed company shall comply with the provisions of the relevant regulatory authority and the stock exchange with which the company is listed. The Company shall not impose any minimum shareholdings limitation for collecting voting rights.
Article 28 The form of proxy shall be in writing, and signed by or on behalf of the agent appointed by him in writing, if the appointer is a legal person, it shall be under seal by or on behalf of the attorney duly authorised.
Article 29 An individual shareholder attending a general meeting in person shall present his identity card or other identity certificate or share certificate; a proxy attending a general meeting on behalf of an individual shareholder shall present his or her identity card, form of proxy and share certificate of the shareholder.

For a legal person shareholder, its legal representative or a proxy appointed shall attend the meeting. The legal representative attending the meeting shall present his identity card or valid certificate and share certificate bearing evidence of his or her qualifications as the legal representative; a proxy attending the meeting on behalf of the legal representative shall present his or her identity card and a written form of proxy issued by the legal representative of the legal person shareholder and share certificate.

Article 30 The form of proxy issued by a shareholder to appoint a proxy to attend a general meeting shall specify:
(I) the name of the proxy;
(II) whether or not the proxy has any voting rights;
(III) direction to vote for or against or abstain from voting on each and every issue included in the agenda of the general meeting;
(IV) the date of issue and validity period of the form of proxy (if applicable); and
(V) signature (or seal) of the appointing shareholder. If the appointing shareholder is a domestic legal person shareholder, the corporate seal of the legal personal shall be affixed (if applicable).

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Article 31 Any format issued to a shareholder by the Board or convener for appointing a proxy shall provide the shareholder with the flexibility to instruct the proxy to vote for or against, and give directives on each of the resolutions to be decided at the meeting. Such a format shall contain a statement that, if the form of proxy does not specify any directions, the proxy may vote as he or she thinks fit.
Article 32 The form of proxy for voting shall be deposited at the place of domicile of the Company or such other place as specified in the notice of general meeting at least 24 hours prior to the meeting at which the proxy is authorised to vote or 24 hours before the scheduled voting time. Where such a form of proxy is signed by a person authorised by the principal, the form of proxy authorising signature or other authorisation documents shall be notarised. The notarised form of proxy and other authorisation documents shall, together with the form of proxy, be deposited at the Company’s place of domicile or at such other place as specified in the notice of general meeting.
Where the principle is a legal person, its legal representative or a person authorised by the Board or other decision making body shall attend the general meeting of the Company.
Article 33 Attendants’ register shall be prepared by the Company, which register shall state the names (or names of entities), identity certificate number and the address of the attendees, the number of voting shares held or represented, names of the proxies (or names of entities) and other matters.
Article 34 A vote given in accordance with the terms of the form of proxy shall be valid notwithstanding the previous death or loss of capacity of the appointing shareholder or revocation of the form of proxy or revocation of the authority to the appoint the proxy, or the shares in respect of which the proxy is given have been transferred, provided that no written notice of such death, loss of capacity, revocation or transfer has been received by the Company before the commencement of the general meeting which the proxy relates to.
Article 35 The convener and the lawyer appointed by the Company shall jointly verify the validity of the shareholders’ qualifications based on the shareholders’ register provided by the securities registration and clearing institution, and shall register the names of the shareholders as well as the amount of their voting shares. The registration for a general meeting shall be completed before the chairman announces the number of shareholders and proxies that attend the meeting and the total amount of their voting shares.
Article 36 All the directors, supervisors and secretary of the Board shall attend general meetings of the Company, and the chief executive officer, general manager and other senior executives shall be present at the meetings without voting rights.

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Article 37 General meetings shall be chaired by the chairman; where the chairman cannot or does not fulfill the duty thereof, the vice chairman shall preside; where even the vice chairman cannot or does not fulfill the duty thereof, more than half of the directors may elect a director to chair the meeting.

A general meeting convened by the supervisory committee itself shall be chaired by the chief supervisor. If the chief supervisor cannot or does not fulfill the duty thereof, more than half of the supervisors may elect a supervisor to convene and preside over the meetings.

A general meeting convened by the shareholders themselves shall be chaired by a representative elected by the convener.

When a general meeting is held and the Chairman violates the Rules, which makes it difficult for the general meeting to continue, a person may be elected at the general meeting to act as the Chairman, subject to the approval of more than half of the attending shareholders having the voting rights.

Article 38 The Company shall formulate the Rules to set out the procedure for convening and voting procedure of general meetings, covering notification, registration, consideration of proposal, voting, counting of ballots, announcement of voting result, formation of resolution, meeting minutes and signing thereof and announcement, and the principle and contents of authorisation of the Board on general meetings. The Rules are set out as appendix to the Articles of Association and shall be formulated by the Board and approved at the general meeting.
Article 39 The Board and the supervisory committee shall report their work in the preceding year at the annual general meeting. Every independent non-executive director shall also present his or her work reports.
Article 40 Directors, supervisors and senior executives shall make explanations in relation to the inquiries and suggestions made by shareholders at general meetings.
Article 41 The Chairman shall, prior to voting, declare the number of attending shareholders and their proxies as well as the total number of their voting shares, and the number of attending shareholders and their proxies and the total number of their voting shares shall be as recorded in the meeting’s register.
Article 42 Minutes of a general meeting shall be kept by the secretary of the Board. The minutes of the meeting shall specify:
(I) the date, place and agenda of the meeting, and the name of the convener;
(II) the names of the chairman, and the directors, supervisors, chief executive officer, general managers and other senior executives attending or present at the meeting;

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(III) the number of voting shares held by the attending holders of domestic shares (including proxies thereof) and holders of overseas listed foreign shares (including proxies thereof), and the percentage of the said shares representing the proportion of the total issued shares of the Company;
(IV) the consideration process of each proposal, summaries of speeches, and the voting results of holders of domestic shares and overseas listed foreign shares in relation to each proposal;
(V) details of the inquiries or suggestions of the shareholders, and the corresponding response or explanations;
(VI) the names of the lawyer, counting officer and monitoring officer; and
(VII) other contents that shall be recorded in the minutes in accordance with the Articles of Association.
Article 43 The convener shall ensure the meeting minutes are true, accurate and complete. The attending directors, supervisors, secretary of the Board, convener or representative thereof, and chairman shall sign the minutes of the meeting. The minutes of the meeting, the signed attendance record of the shareholders on the spot and the form of proxy for attending proxy, the valid information relating to the voting over network or by other means shall be kept for at least 10 years.
Article 44 The convener shall ensure the general meeting is held continuously until final resolutions are arrived at. If the general meeting is terminated or fails to reach any resolution due to force majeure or for other special reasons, immediate action shall be taken to resume the general meeting as soon as possible or directly terminate the general meeting and make a relevant announcement. At the same time, the convener shall report to the local office of the securities regulatory authority under the State Council and the stock exchange.

Chapter 6 Voting and Resolutions of General Meetings

Article 45 Shareholders (including proxies thereof) shall exercise their voting rights as per the voting shares they represent. Each share carries the right to one vote. However, the Company has no voting right for the shares it holds, and such part of shares shall be excluded from the total number of voting shares represented by the shareholders attending the general meeting. Where material issues affecting the interests of small and medium investors are being considered at the general meeting, the votes by small and medium investors shall be counted separately to the extent technically feasible. The separate counting results shall be publicly disclosed in a timely manner. The controlling shareholder and actual controller of the Company shall not limit or hinder small and medium investors from exercising their voting rights in

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accordance with laws, and shall not damage the legitimate rights and interests of the Company and small and medium investors.

Article 46 Resolutions of a general meeting shall be divided into ordinary resolutions and special resolutions.

Ordinary resolutions shall be passed by votes representing more than one half of the voting rights held by shareholders (including proxies thereof) attending the general meeting.

Special resolutions shall be passed by votes representing more than two thirds of voting rights held by shareholders (including proxies thereof) attending the general meeting.

Article 47 The following issues shall be approved by ordinary resolutions at a general meeting:

(I) work reports of the Board and the supervisory committee;
(II) profit distribution plan and loss recovery plan formulated by the Board;
(III) appointment and dismissal of the members of the Board and the supervisory committee (excluding employee supervisors), their remunerations and the method of payment thereof;
(IV) annual budgets, final accounts, balance sheets, income statements, and other financial statements of the Company;
(V) annual reports of the Company;
(VI) other issues except for those required to be passed by special resolutions pursuant to relevant laws, administrative regulations or the Articles of Association.

Article 48 The following issues shall be approved by special resolutions at a general meeting:

(I) increase or reduce in the registered capital of the Company and the issue of shares of any class, warrants and other similar securities;
(II) issue of bonds of the Company;
(III) division, merger, transformation, dissolution and liquidation of the Company;
(IV) amendment to the Articles of Association;

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(V) equity incentive scheme;
(VI) the Company’s purchase or disposal of major assets within one year with the aggregated transaction amount exceeding 30% of the latest audited total assets of the Company;
(VII) any other issue specified in the Articles of Association and confirmed by an ordinary resolution at a general meeting that it may have material impact on the Company and accordingly shall be approved by special resolutions.
Article 49 The Board, independent non-executive directors and qualified shareholders may collect voting rights from shareholders of the Company at a general meeting. The voting rights shall be collected with nil consideration, subject to adequate disclosure of relevant information to the persons from whom the said voting rights are collected.
Article 50 The Company shall not enter into any contract with anyone other than a director, chief executive officer, general manager or other senior executive to have the management of all or significant part of the Company’s business entrusted to that person, unless otherwise approved by the shareholders at a general meeting by way of a special resolution.
Article 51 Connected shareholders shall not vote on any connected transaction under consideration at the general meeting. The voting shares they represent shall not be counted towards the total number of valid votes; the voting result of non-connected shareholders shall be adequately disclosed in the announcement of the resolutions at the general meeting. The relevant announcement shall be published on the designated newspapers and periodicals.

Pursuant to Company Law, other laws and administrative regulations, or Listing Rules, if any shareholders must abstain from voting on any resolution or is restricted to declaring only affirmative vote or only dissenting vote on any resolution, then any vote declared by the said shareholder (or proxy thereof) voted in violation to the relevant provision or restriction shall not be counted in the total number of valid votes.

Article 52 The Company may provide convenience for shareholders to attend general meetings by any means including the use of modern technology means such as online voting platform, provided that the general meeting shall be held legally and validly.

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Article 53 List of nominations of director or supervisor candidates is submitted by way of proposal at general meetings.

Resolutions in respect of the election of directors or supervisors may be passed by way of cumulative voting pursuant to the Articles of Association and the Rules.

Cumulative voting mentioned in the preceding paragraph means that when directors or supervisors are being elected at a general meeting, each share has the same voting rights as the number of director or supervisor candidates, and the shareholders’ voting rights may be used in a centralised manner. The Board shall provide the shareholders with the brief biographies and background information of the director or supervisor candidates.

Article 54 Except for the cumulative voting system, the general meeting shall resolve on all the proposals separately; in the event of several proposals for the same issue, such proposals shall be voted on and resolved in the order of time at which they are submitted. Unless the general meeting is adjourned or no resolution can be made for special reasons such as force majeure, voting of such proposals shall not be set aside or refused at the general meeting.
Article 55 No amendment shall be made to a proposal when it is considered at a general meeting, otherwise, the relevant amendment shall be deemed as a new proposal and shall not be voted on at the general meeting.
Article 56 Voting at general meetings shall be conducted by show of hands save as otherwise specified in the Listing Rules or the following persons request to have the vote to be taken by poll, before or after a show of hands:
(I) chairman of the meeting;
(II) at least two shareholders with voting rights or proxies thereof; or
(III) shareholder(s) (including proxies thereof) who, either alone or together holds or hold more than 10% of shares with voting rights at the meeting.

Save as otherwise specified in Listing Rules or anybody request to have the vote to be taken by poll, the chairman shall announce the result of voting by a show of hands on the proposals, which result shall be recorded in the minutes as final evidence, without specifying the number or percentage voted for or against the resolutions adopted at the meeting.

The request for voting by poll may be revoked by the person tendering the request.

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Article 57 If the issue required to be voted by ballot relates to election of presider or termination of meeting, voting by ballot shall be conducted immediately; in respect of other issues required to be voted by ballot, the presider may decide the time of voting by ballot, and the meeting may proceed to consider other issue, and the voting results shall be deemed as resolutions passed at the said meeting.
Article 58 The same voting right can only be exercised in one form: onsite, over the network, or otherwise. Where the same voting right is exercised more than once, the voting result of the first time shall prevail.
Article 59 In voting, shareholders (including proxies thereof) entitled to two or more votes do not necessary need to cast for or against in all of their the voting shares.
Article 60 When proposals are voted on at the general meeting, two shareholders’ representatives shall be appointed to count, and monitor counting of, the ballots. Where any shareholder has interests in any issue considered, the said shareholder or proxy thereof shall not participate in counting and monitoring of ballots.

When proposals are voted on at the general meeting, the lawyer, shareholders’ representative and supervisors’ representative shall be jointly responsible for the counting and monitoring of the ballots and announce the voting results at the venue.

Shareholders or proxies thereof voting over the network or otherwise shall have the right to check their voting results via the corresponding voting system.

Article 61 The chairman shall be responsible for determining whether a resolution has been passed pursuant to voting results. His decision, which shall be final and conclusive, shall be announced at the meeting. The voting result shall be recorded in the minutes of the meeting.
Article 62 Before the voting results are announced, the relevant parties including the Company, counting officer, monitoring officer, major shareholders and network service provider involved at the venue, over the network or otherwise shall fulfill the confidentiality obligation.
Article 63 A shareholder attending a general meeting shall express one of the following opinions on any proposal to be voted on: for, against or abstain.

Blank, incorrectly filled in, illegible or uncast votes shall be deemed as the voters’ waiver of their voting rights, and the voting results representing the shares held by such voters shall be counted as “abstentions”.

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Article 64 If the chairman has any doubt as to the result of a resolution which has been put to vote at the general meeting, he or she may count the ballots. If the chairman does not count the ballots, any shareholder who is present in person or by proxy and who objects to the result announced by the chairman may, immediately after the declaration of the voting result, demand that the ballots to be counted and the chairman shall count have the ballots immediately.
Article 65 If ballots are counted at a general meeting, the counting result shall be recorded in the meeting minutes.
Meeting minutes, together with the shareholders’ signature register and form of proxy of the attending proxies, shall be kept at the place of domicile of the Company.
Article 66 The shareholders may have free-of-charge access to copies of the meeting minutes during the office hours of the Company. If any shareholders request for copies of the relevant meeting minutes, the Company shall send out the said copies within 7 days after receipt of reasonable expenses.
Article 67 In convening a general meeting, the Company shall engage a lawyer to attend the general meeting and provide legal opinions and announce the same on the following issues:
(I) whether the convening and procedure of the general meeting complies with the laws, administrative regulations and the Articles of Association;
(II) whether the attendants and convener of the meeting are eligible;
(III) whether the voting procedures and results of the meeting are valid; and
(IV) legal opinions on other issues upon request by the Company.
Article 68 Resolutions of the general meeting shall be announced in due time. The announcement shall specify the number of attending shareholders and their proxies, the total number of voting shares they represent and the proportion of these shares to the total number of the voting shares of the Company, the voting method, the voting results for every proposal and the details of each of the resolutions passed.
Article 69 Where a proposal has not been passed or the resolutions of the preceding general meeting have been changed at the current general meeting, special mention shall be made in the announcement of the resolutions of the general meeting.
Article 70 Where a proposal on election of directors or supervisors is passed at the general meeting, the directors elect or supervisors elect shall take office after the meeting.

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

Chapter 7 Special Voting Procedures for Class Shareholders

Article 71 Holders of different classes of shares are class shareholders.

Class shareholders shall enjoy rights and fulfill obligations pursuant to the laws, administrative regulations and the Articles of Association.

Article 72 Any proposed change or annulment by the Company to the rights of class shareholders shall not come into effect unless approved by special resolutions at a general meeting and a separate general meeting convened by the class shareholders so affected in accordance with the Rules.
Article 73 The following circumstances shall be deemed as change or cancellation of the rights of a certain class shareholder:
(I) to increase or decrease the number of shares of the said class, or to increase or decrease the number of shares of a class having voting rights, distribution rights or other privileges equal to or more than those of the shares of the said class, unless the holders of domestic shares of the Company as specified in the Articles of Association transfer their shares to overseas investors and the said shares are listed overseas;
(II) to change all or part of the shares of the said class into another class or to change all or part of the shares of another class into shares of the said class or grant the right to make the said change, unless the holders of domestic shares of the Company as specified in the Articles of Association transfer their shares to overseas investors and the said shares are listed overseas;
(III) to cancel or reduce rights to accrued dividends or cumulative dividends attached to shares of the said class;
(IV) to reduce or cancel rights attached to the shares of the said class to preferentially receive dividends or to receive distributions of assets in a liquidation of the Company;
(V) to add, cancel or reduce share conversion rights, options, voting rights, transfer rights, pre-emptive placing rights, or rights to acquire securities of the Company attached to the shares of the said class;
(VI) to cancel or reduce rights to receive payments made by the Company in a particular currency attached to the shares of the said class;
(VII) to create a new class of shares with voting rights, distribution rights or other privileges equal or superior to those of the shares of the said class;

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

(VIII) to restrict the transfer or ownership of the shares of the said class or to impose additional restrictions;
(IX) to issue rights to subscribe for, or to convert into, shares of the said class or another class;
(X) to increase the rights and privileges of the shares of another class;
(XI) to restructure the Company in such a way as to cause the shareholders of different classes to bear liabilities disproportionately during the restructuring; and
(XII) to amend or cancel any clauses of the Rules.
Article 74 Where issues specified in (II) to (VIII), (XI) to (XII) are involved, the affected class shareholders, whether or not they are entitled to vote at general meetings originally, shall have the right to vote at class meetings. However, interested shareholder(s) shall not be entitled to vote at such class meetings.

Interested shareholders as mentioned herein refer to:

(I) in the event of a repurchase of shares by the Company by way of a general offer to the all shareholders of the Company or by way of public transactions on a stock exchange pursuant to the Articles of Association, an “interested shareholder” is a controlling shareholder as defined in the Articles of Association;
(II) in the event of a repurchase of shares by the Company by an off-market agreement pursuant to the Articles of Association, an “interested shareholder” is a shareholder related to the agreement; and
(III) in the event of reorganisation of the Company, an “interested shareholder” is a shareholder who assumes a relatively less proportion of obligation than that of any other shareholder of that class or who has an interest different from that of any other shareholders of that class.
Article 75 Resolutions of a class meeting shall be approved by votes representing more than two-thirds of the voting rights of shareholders of that class present at the meeting who, in accordance with the Rules, are entitled to vote at the meeting.

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

Article 76 Where the Company convenes a class meeting, a written notice shall be given 45 days prior to the date of the meeting to notify all the shareholders of the said class in the shareholders’ register of the issues to be considered at the meeting, and the date and venue of the meeting. Any shareholder intends to attend the meeting shall serve to the Company a written reply showing his intention to attend at least 20 days before the meeting.

The Company may convene a class meeting if the shares with voting rights at the meeting represented by the shareholders intending to attend the meeting are more than half of the total shares of the said class with voting rights at the meeting, otherwise, the Company shall, within 5 days and in the form of public announcement, notify the shareholders again of the issues to be considered, date and venue of the meeting.

The Company may convene a class meeting after public announcement. The relevant announcement shall be published on the designated newspapers and periodicals.

Article 77 The notice of a class meeting shall be served only to the shareholders with the right to vote at the said meeting. Class meetings shall follow a procedure most similar to those for the general meetings, and the provisions in the Articles of Association concerning the procedure for general meetings shall apply to class meetings.
Article 78 Apart from holders of other classes of shares, holders of domestic shares and overseas listed foreign shares are deemed as shareholders of different classes. Special voting procedures for class shareholders shall not apply in the following circumstances:
(I) with the approval by a special resolution at a general meeting, the Company issues and plans to issue, on one or more occasions, a total number of shares not exceeding 20% of each of its existing issued domestic shares and overseas listed foreign shares in every 12 months;
(II) the Company’s plan to issue domestic shares and overseas listed foreign shares at the time of its establishment is completed within 15 months from the date of approval of the securities regulatory authority under the State Council.

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

Chapter 8 Matters Subsequent to the General Meeting and Announcement

Article 79 The Board shall strictly comply with the requirements of the securities regulatory authorities and the stock exchange on which the Company’s shares are listed in relation to the disclosure of information. It shall ensure that issues examined or resolutions passed at the Board meeting that are discloseable are disclosed fully, accurately and in a timely manner on the designated media. Information relating to significant issues of the Company must be reported immediately to the stock exchange on which the Company’s shares are listed, and shall file with the relevant regulatory authority.
Article 80 Resolutions of the general meeting shall be announced in a timely manner. The announcement shall specify the number of attending shareholders and their proxies, the total number of voting shares they represent and the proportion of these shares to the total number of the voting shares of the Company, the voting method, the voting results for every proposal and the details of each of the resolutions passed. The announcement shall include separate statistics of the attendance and voting of holders of domestic shares and foreign shares.

If a proposal for meeting has not been passed or the resolutions of the preceding general meeting have been changed at the present general meeting, the Board shall provide explanations in the announcement of the resolutions of the general meeting.

The announcement of the resolutions of the general meeting shall be published on the designated newspapers and periodicals.

Article 81 The board of directors’ office shall be responsible for keeping such written information as the register of attendees, powers of attorney, voting statistics sheet, minutes of the meeting, lawyers’ legal opinions, and announcement of resolutions.

Chapter 9 Authorisation to be Granted to the Board at a General Meeting

Article 82 A general meeting may authorise the Board by a resolution.

Article 83 Issues which, in accordance with the laws, administrative regulations, department rules, the provisions of the local securities regulatory authority and the Articles of Association, are required to be approved by the general meeting must only be considered at the general meeting so as to protect the decision-making power of the shareholders of the Company on the said issues. In necessary, reasonable and lawful circumstances, the general meeting may authorised the Board to decide specific issues relating to matters to be resolved at the general meeting which cannot or need not be decided immediately at the general meeting.

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

With regards to the authorisation to be granted at a general meeting to the Board, if the issue is within the scope of the ordinary resolution, it shall be passed by votes representing more than one half of the voting rights held by the shareholders (including proxies thereof) present at the meeting; and if it is within the scope of the special resolution, it shall be passed by votes representing more than two thirds of the voting rights held by the shareholders (including proxies thereof) present at the meeting. The contents of the authorisation shall be specific and detailed.

Article 84 The Board shall adequately consider and study the issue authorized before making a decision thereon, and shall if necessary consult an intermediary in order to make well-informed decision.

In making a decision on the authorised issue, the Board shall fulfill the obligation of information disclosure and submit to the supervision of the shareholders and the supervisory committee of the Company as well as the relevant securities regulatory authority.

Chapter 10 Execution of Resolutions at the General Meetings

Article 85 After the plans for profit distribution and conversion of capital reserve into share capital are adopted at the general meeting, the Board shall execute the specific plans within two months.
Article 86 The Board shall report at the general meeting in relation to the execution of issues which shall be conducted by the Board in accordance with the resolutions of the preceding general meetings; where the resolutions of the general meeting cannot be executed, the Board shall provide the reasons.
Article 87 Resolutions of a general meeting that run contrary to laws and administrative regulations shall be void.

If the meeting convening procedure and voting method of the general meeting or Board meeting run against the laws and administrative regulations or the Articles of Association or if the content of any resolution runs against the Articles of Association, the shareholders shall have the right to request the people’s court to cancel the said procedure, method or resolution within 60 days after adoption of the resolution.

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PROPOSED AMENDED RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

APPENDIX III

Chapter 11 Supplementary Provisions

Article 88 Where any matter is not covered herein or where these Rules conflict with the laws, regulations, and other relevant regulatory documents, the latter shall prevail.
Article 89 Announcements or notices as mentioned in the Rules refer to publications of relevant information on the newspapers and periodicals designated by the securities regulatory authority. If an announcement or notice is too long, the listed company may select to disclose a summary of the relevant contents on the newspapers and periodicals designated by the securities regulatory authority, but the full text shall be published on the website designated by the securities regulatory authority.
Supplementary notices of general meeting as mentioned in the Rules shall be announced on the same newspapers and periodicals on which the notices of meeting are announced.
Article 90 The phrases “more than” and “within” as mentioned in these Rules are inclusive while “exceeding” and “less than” are exclusive.
Article 91 The Rules are adopted by a resolution at the general meeting, and shall be an appendix to the Articles of Association and shall come into effect at the same time as the amendments to the Articles of Association which the Company adopted for the issuance of A shares.
Article 92 In respect of amendment to the Rules, the Board shall propose an amendment draft and submit the same to the general meeting for consideration.
Article 93 The Rules shall be subject to the interpretation of the Board of the Company.

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SUPPLEMENTAL NOTICE OF EGM

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd. *

(Formerly known as 中海集裝箱運輸股份有限公司 China Shipping Container Lines Company Limited) (A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 02866)

SUPPLEMENTAL NOTICE OF EXTRAORDINARY GENERAL MEETING

Reference is made to the notice of extraordinary general meeting (the “ Original Notice of EGM ”) dated 11 November 2016 which sets out the details of the extraordinary general meeting (the “ EGM ”) of COSCO SHIPPING Development Co., Ltd. (the “ Company ”) to be held at 2:30 p.m. on Wednesday, 28 December 2016 (or at any adjournment thereof) at Holiday Inn Shanghai Jinxiu, No.399 Jinzun Road, Pudong New Area, Shanghai, the People’s Republic of China (the “ PRC ”), and the resolution to be proposed at the EGM for Shareholders’ approval. Unless otherwise defined, capitalised terms used in this supplemental notice shall have the same meanings as those defined in the circular of the Company dated 13 December 2016 (the “ Circular* ”).

SUPPLEMENTAL NOTICE IS HEREBY GIVEN that the EGM, which will be held as originally scheduled, will consider and, if thought fit, pass the following resolutions as ordinary resolutions of the Company, in additional to the resolution set out in the Original Notice of EGM:

ORDINARY RESOLUTIONS

To consider and approve the resolutions in relation to the Relevant Continuing Connected Transactions, the details of which are set out in the Circular:
2.1 “ THAT :
(a) the form and substance of the Master Vessel Charter Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the expected amount receivable from the COSCO SHIPPING Group under the Master Vessel Charter Agreement be and are hereby approved, confirmed and ratified in all respects; and

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SUPPLEMENTAL NOTICE OF EGM

(c) the execution of the Master Vessel Charter Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Vessel Charter Agreement and the transactions contemplated thereunder.
2.2 “ THAT :
(a) the form and substance of the Master Operating Lease Services Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the expected amount receivable from the COSCO SHIPPING Group under the Master Operating Lease Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master Operating Lease Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Operating Lease Services Agreement and the transactions contemplated thereunder.

2.3 “ THAT :

(a) the form and substance of the Master Finance Lease Services Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the expected amount receivable from the COSCO SHIPPING Group under the Master Finance Lease Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master Finance Lease Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Finance Lease Services Agreement and the transactions contemplated thereunder.

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SUPPLEMENTAL NOTICE OF EGM

2.4 “ THAT :

(a) the form and substance of the Master Factoring Services Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the expected amount receivable from the COSCO SHIPPING Group under the Master Factoring Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master Factoring Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Factoring Services Agreement and the transactions contemplated thereunder.

2.5 “ THAT :

(a) the form and substance of the Master Vessel Services Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the expected amount payable to the COSCO SHIPPING Group under the Master Vessel Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master Vessel Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Vessel Services Agreement and the transactions contemplated thereunder.

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SUPPLEMENTAL NOTICE OF EGM

2.6 “ THAT :

(a) the form and substance of the Master Containers Services Agreement and the provision of products and services by the CS Group under contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the expected amount receivable from the COSCO SHIPPING Group under the Master Containers Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master Containers Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Containers Services Agreement and the provision of products and services by the CS Group contemplated thereunder.

2.7 “ THAT :

(a) the form and substance of the Master Containers Services Agreement and the provision of products and services to the CS Group contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the expected amount payable to the COSCO SHIPPING Group under the Master Containers Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master Containers Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Containers Services Agreement and the provision of products and services to the CS Group contemplated thereunder.

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SUPPLEMENTAL NOTICE OF EGM

2.8 “ THAT :

(a) the form and substance of the Master Financial Services Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the maximum daily outstanding balance of loans (including accrued interest and handling fee) to be granted to the COSCO SHIPPING Group by CS Finance Company in respect of the loan services to be provided by the CS Group under the Master Financial Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master Financial Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master Financial Services Agreement and the transactions contemplated thereunder.
2.9 “ THAT :
(a) the form and substance of the Florens Finance Financial Services Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the maximum daily outstanding balance of deposits (including accrued interest and handling fee) to be placed by Florens Group at COSCO Finance in respect of the deposit services to be provided to the Floren Group under the Florens Finance Financial Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Florens Finance Financial Services Agreement and the transactions contemplated thereunder.

2.10 “ THAT :

(a) the form and substance of the Master CS Finance Financial Services Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;

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SUPPLEMENTAL NOTICE OF EGM

(b) the proposed annual caps for each years ending 31 December 2017, 2018 and 2019, being the maximum daily outstanding balance of deposits (including accrued interest and handling fee) to be placed by the CS Group at CS Finance Company in respect of the deposit services to be provided to the CS Group under the Master CS Finance Financial Services Agreement be and are hereby approved, confirmed and ratified in all respects; and
(c) the execution of the Master CS Finance Financial Services Agreement by any Director be and is hereby approved, confirmed and ratified in all respects, and any one Director be and is hereby authorised to do all such acts and things and execute and deliver all such documents, deeds or instruments and take all such steps as the Director in his or her sole opinion and absolute discretion may consider necessary, appropriate or desirable to implement or give effect to the Master CS Finance Financial Services Agreement and the transactions contemplated thereunder.

By order of the Board of COSCO SHIPPING Development Co., Ltd. Yu Zhen

Joint Company Secretary

Shanghai, the PRC

13 December 2016

Notes:

Save for the inclusion of the additional proposed resolutions, there are no other changes to the resolution set out in the Original Notice of EGM. For details of the other resolution to be considered at the EGM, closure of the register of H Shares members of the Company (the “ Register of Members ”), eligibility for attending the EGM, registration procedures for attending the EGM, appointment of proxy, method of voting and other relevant matters, please refer to the Original Notice of EGM.
Since the form of proxy dated 11 November 2016 (the “ First Form of Proxy ”) sent together with the Original Notice of EGM does not contain the additional proposed resolutions as set out in this Supplemental Notice of EGM, a revised form of proxy (the “ Revised Form of Proxy ”) has been prepared and is enclosed with this Supplemental Notice of EGM.
A Shareholder who has not yet lodged the First Form of Proxy in accordance with the instructions printed thereon with Computershare, the Company’s H Share registrar, is requested to complete and return the enclosed Revised Form of Proxy in accordance with the instructions printed thereon to Computershare not less than 24 hours before the time for holding the EGM or any adjournment thereof, if he or she wishes to appoint proxies to attend the EGM on his or her behalf. In this case, the First Form of Proxy should not be lodged to Computershare.

The address of Computershare is as follows: Shops 1712-1716, 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong

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SUPPLEMENTAL NOTICE OF EGM

A Shareholder who has already lodged the First Form of Proxy in accordance with the instructions printed thereon with Computershare should note the following:
(i) If no Revised Form of Proxy is lodged with Computershare, the First Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if correctly completed. The proxy appointed under the First Form of Proxy will be entitled to vote in his or her discretion or abstain from voting on any resolutions properly put to the EGM, other than those referred to in the Original Notice of EGM and the First Form of Proxy, including the additional resolutions set out in this Supplemental Notice of EGM.
(ii) If the Revised Form of Proxy is lodged with Computershare in accordance with the instructions printed thereon not less than 24 hours before the time for holding the EGM or any adjournment thereof, the Revised Form of Proxy will revoke and supersede the First Form of Proxy previously lodged by the Shareholder. The Revised Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if correctly completed.
(iii) If the Revised Form of Proxy is lodged after 24 hours before the time for holding the EGM or any adjournment thereof, the Revised Form of Proxy will be deemed invalid. It will not revoke the First Form of Proxy previously lodged by the Shareholder. The First Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if correctly completed. The proxy appointed under the First Form of Proxy will be entitled to vote in his or her discretion or abstain from voting on any resolutions properly put to the EGM, other than those referred to in the Original Notice of EGM and the First Form of Proxy, including the additional resolutions set out in this Supplemental Notice of EGM.
Completion and return of the First Form of Proxy and/or Revised Form of Proxy will not preclude a Shareholder from attending in person and voting at the EGM or any adjournment thereof should he/she so wish.
The reply slip sent to the Shareholders on 11 November 2016 will be treated as a valid reply slip for the EGM.

The Board of the Company as at the date of this notice comprises Ms. Sun Yueying, Mr. Wang Daxiong, Mr. Liu Chong and Mr. Xu Hui, being executive Directors, Mr. Feng Boming, Mr. Huang Jian and Mr. Chen Dong, being non-executive Directors, and Mr. Cai Hongping, Mr. Tsang Hing Lun, Ms. Hai Chi Yuet and Mr. Graeme Jack, being independent non-executive Directors.

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 “COSCO SHIPPING Development Co., Ltd.”.

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AI assistant

COSCO SHIPPING Development Co., Ltd. — Proxy Solicitation & Information Statement 2016

50782_rns_2016-12-13_92c93737-62f2-4191-836e-15d42708d4ea.pdf

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd.[*]

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS (2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS (4) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS (5) PROPOSED AMENDMENTS TO THE RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING AND (6) SUPPLEMENTAL NOTICE OF EGM

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

“Existing Agreements”

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd. *

(Stock Code: 02866)

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS (2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS (4) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS AND (5) PROPOSED AMENDMENTS TO THE RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

I. INTRODUCTION

II. BACKGROUND

III. NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

A. General

1. Connected persons

2. General terms

3. Implementation agreements

LETTER FROM THE BOARD

4. Term and termination

“state-prescribed price”

“market price”

B. Historical transaction amounts and annual caps

C. Summary of the Non-Exempt Continuing Connected Transactions

1. Master Vessel Charter Agreement (services to be provided by the CS Group)

4. Master Vessel Services Agreement (services to be provided to the CS Group)

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

In respect of the Non-Exempt Continuing Connected Transactions other than transactions under the Financial Services Agreements

In respect of the transactions under the Master Financial Services Agreement

LETTER FROM THE BOARD

In respect of the transactions under the Master CS Finance Financial Services Agreement

E. Implications under the Hong Kong Listing Rules

IV. REQUIREMENTS UNDER THE SHANGHAI LISTING RULES

V. GENERAL INFORMATION

A. Information on the Group

B. Information on COSCO SHIPPING

VI. CONFIRMATIONS OF THE BOARD

VII. THE PROPOSED AMENDMENTS TO THE RULES OF PROCEDURE OF THE SHAREHOLDERS’ GENERAL MEETING

VIII. EGM

IX. RECOMMENDATION

X. FURTHER INFORMATION

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd. *

(Stock Code: 02866)

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS

(2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS AND

(4) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

FIRST SHANGHAI CAPITAL LIMITED

(1) MAJOR AND CONTINUING CONNECTED TRANSACTIONS (2) DISCLOSEABLE AND CONTINUING CONNECTED TRANSACTIONS

(3) CONTINUING CONNECTED TRANSACTIONS AND

(4) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information

1.1 Background information of the Group

1.2 Background information of COSCO SHIPPING

1.3 Background information of CS Finance Company

2. Background of and reasons for the Non-Exempt Continuing Connected Transactions

2.1 Background of the Non-Exempt Continuing Connected Transactions

2.3 Reasons for and benefits of the provision of loan services by the CS Group under the Master Financial Services Agreement

2.4 Reasons for and benefits of the procurement of deposit services by the CS Group under the Master CS Finance Financial Services Agreement

3. Principal terms and internal control measures in respect of the Non-exempt Continuing Connected Transactions

3.1 Term

3.2 Pricing policy and internal control measures in respect of the Non-Exempt Continuing Connected Transaction Agreements (other than the transactions under the Financial Services Agreements)

3.3 Pricing policy and internal control measures in respect of the loan services to be provided by the CS Group under the Master Financial Services Agreement

4. Proposed Caps

4.2 Proposed Caps of the Master Operating Lease Services Agreement in respect of services to be provided by the CS Group

4.3 Proposed Caps of the Master Finance Lease Services Agreement in respect of services to be provided by the CS Group

COSCO SHIPPING Development Co., Ltd. Proxy Solicitation & Information Statement 2016